Sage Share Discussion Threads

[maddox] 02/8/2022 09:24

Thought I’d have a look at the Brokers Analysts recommendations and see how things have changed on November last year:

Strong Buy........7...(5)
Buy...............0...(1)
Neutral...........9...(8)
Sell..............1...(3)
Strong Sell.......2...(4) Brackets are the scores as at Nov 2021.
.................19..(21)
Source: Share.com

Their views have improved on a year ago with more Strong Buys and a decline in the Sell and Strong Sells. So, a clear positive shift in Analyst sentiment.

[maddox] 02/8/2022 09:08

Agreed, Strong trading update for 3Q today with guidance lifted to top-end of range, suggesting a continuing revenue growth acceleration. Also, positive comments on new customer acquisition (NCA)and underlying growth of Cloud-Native Products particularly. Clearly, the economic climate has deteriorated but Sage are not seeing any impact as yet:

Jonathan Howell, Chief Financial Officer, commented:

"Sage has performed strongly in the first nine months of the year, with momentum continuing to build, as more businesses choose Sage Business Cloud solutions to support their digital transformation. As a result, we now expect organic recurring revenue growth for FY22 to be towards the top end of our guidance range of 8% to 9%. While we are mindful of broader macroeconomic trends, I am confident that continued delivery against our strategic priorities will ensure Sage remains well-positioned for the future."

So all good, and good momentum going into the last quarter of their financial year.
Sage has the opportunity to demonstrate the quality of its SaaS Cloud business through the business cycle.

Regards Maddox

[nhb001] 02/8/2022 09:03

Another strong update. I just listened to the investor presentation. The management sound more and more positive. One of the most interesting comments made by the CFO was that Sage are still seeing a wave of small & medium companies digitising their back office processes & Sage are benefiting from that trend. That wave is very strong and so far outweighing any other macro economic factors. Nice to have that continuing trend confirmed.

[nhb001] 12/7/2022 12:45

Plus there are a few shorters of Sage who will need to buy back at some point.

[maddox] 12/7/2022 11:39

The change in economic backdrop - inflation and interest rate rise impact. These changes cause a reappraisal of individual stocks as well as a devaluation of the market as a whole. It takes a while for this to take its course but eventually some stocks will be displaced to become laggards and new leaders will take their place.

Sage is well placed to become a leader. Essentially Tech but selling a non-discretionary product with an economic moat and thus pricing power. These are attractive characteristics for a tougher trading environment. If SGE can bring the underlying growth through, from beneath the legacy drag, then this could bring new investors on board. Once the market turns there will be a lot of cash looking for a new home.

[gswredland] 11/7/2022 15:15

Looking a bit stronger of late!

[maddox] 13/5/2022 10:50

Results 1H22 - Strong underlying performance, as always, masked by the transformation, planned wind-down of services revenue and disposals (removing revenue). The tone is increasingly confident with a rebranding and relaunch of the Sage Brand.

So, looking through the statutory numbers to underlying performance the highlights are:

>> Organic Revenue up 5%

>> Organic Recurring Revenue up 8% (Annualised Recurring Revenue(ARR) up 10%)

>> Subscription penetration 74% (68%)

>> Business Cloud penetration 72% (65%)

>> Renewal by value 100% (97%)

>> Underlying cash conversion 120%

>> Underlying Op Margin 19.6 (20.4%)

The Op Margin reflects increased marketing spend and product development with the guidance that it will widen again in H2.

The key positives are the new customer acquisition (+£150m of ARR) driven by the Cloud Native products up 43% (ARR). Of this new customers comprised 75% and re-activations of 25% with Intacct again the star product delivering +31% recurring revenue in the competitive North American Market.

They have finally completed the disposal programme and the declining legacy services revenue is becoming less significant - so the optics should start to improve. Clearly, the global economic outlook isn't looking good but the trend to digitisation and Sage's resilience suggests they will continue to progress. The re-instatement of the progressive dividend policy should help support the share price.

[maddox] 04/4/2022 16:25

Hi topvest,

Your post suggests that Intuit and Sage are going head-to-head over the same part of the market. Intuit has been indeed very successful and ahead of Sage in transition to the Cloud - it has c. 3.5x greater sales; growing at c. 17%; a 25% operating margin; and trades on a p/e 60. Sage has an 18% operating margin; growing at c. 5%; and on a p/e 26. So, question is which is the better investment? Arguably, Intuit looks more attractive. However, Sage has been divesting revenue and if Sage achieves its transition then it may emulate Intuit's growth, margin and valuation.

Sage is building strength in the mid-market rolling-out Intacct, this webinar is well worth a look:



BTW the current advertising spree is probably due to the compulsory digital VAT reporting - now being introduced for all firms by HMRC. The looser here will probably be Excel.

Regards Maddox

[topvest] 30/3/2022 09:58

Sage appear to be losing the battle with Intuit (owns Quickbooks). Just an observation, but Intuit is now worth c10x Sage even after its share price taking a pounding in the last few months. Quickbooks appear to be spending a great deal more on advertising their product. Any thoughts?

[p1nkfish] 28/1/2022 10:25

Almost on purpose.

[nhb001] 28/1/2022 10:11

It finished on the 24th. Immaculate timing.

[p1nkfish] 28/1/2022 09:34

Buyback stopped?

[maddox] 27/1/2022 11:39

Mr Market goes through these gyrations - nothing specific to SGE as far as I can see - just gives an opportunity to buy at better prices. But if anyone can offer things that we should be concerned about please flag-up?

[nhb001] 27/1/2022 10:46

Well that was brutal. I think the market just moved the goalposts.

[maddox] 26/1/2022 09:07

Yes, positive update, implied growth in Annual Recurring Revenue (ARR) from 7% in last Qtr Q4 to 8% in Q1. So, the uptick in growth in H2 momentum is continuing driven primarily by the +44% Cloud Native products and new customer acquisition. The operating margin is starting to widen and expecting this to continue.

Top line figs reflect the transition away from legacy products, licence billing and services revenue. The impact of which will shrink over time.

[nhb001] 26/1/2022 07:54

Continued good progress reported today in the Q1 trading statement. I noticed that a Canadian pension fund has recently gone short. That makes a total of nearly 1.5% of the companies stock that will have to be bought back at some point. Although I suppose that's counter balanced by the end of the buy back program.

[wad collector] 12/1/2022 10:44

When you look at the strong share price performance in 2021 , it almost exactly mirrors the weak 2018 performance. So are going to see a continuing saw-tooth pattern with a plunge to £6 in 2022? Hopefully not...

[maddox] 03/1/2022 17:39

Taking the 31 Dec close 852.6p and a twelve month view (582p) we have seen a 270.6p share price rise or 46.49%. Add-in the 17.37p of dividends received in the period and that makes for a 49.47% total return. Then on 13 Jan we will qualify for the 11.63p dividend - paid 10 Feb. So a very good performance but what of the future?

Sage's SaaS transformation has yet to deliver. When it does we should see strong organic growth and widening margins. That's a heady mix that will justify a higher rating - but on better fundamentals than we have currently - so Sage is a solid hold for me. But price targets ain't my thing.

Wishing all holders a Happy and prosperous New Year!

Maddox

[nhb001] 03/1/2022 13:57

Happy new year everyone.

I was wondering what people's targets are for SGE. Paul Hill (a professional investor who posts on LinkedIn & Twitter) who was invested in SGE has recently sold since it hit his target at £8.20. I find timing sells harder than timing buys (not uncommon I think) so I was curious what others views are on SGE.

My current view is to let this run as the market seems to be rerating it now. Also, see Maddox's comments about broker targets being less than the current price.

Also, as someone whose career was in software (including IBM) I have long wondered if the market really understands (yet) the possible benefits of a company moving to SaaS delivery. As well as the cost savings for vendors and consumers (less O/S & DB flavours to test & support, less installation and maintenance costs for consumers) there are also the more ephemeral advantages of access to customer data on the SaaS platform itself and the possibilities to monetise this with analytics & AI by the vendor.

Am I being too optimistic?

Best wishes.

[p1nkfish] 27/12/2021 19:00

If it breaks out on demand > average, fantastic.

[maddox] 27/12/2021 17:37

Hi p1nkfish,

Well we'll soon see. I understand the interpretation of the reducing volume is that it reflects a lack of sellers - the MMs then have to move the price up to entice some to sell to satisfy buyer demand. It's indicative of a potential breakout.

However, happy to be corrected on this by a Trader.

[p1nkfish] 27/12/2021 12:50

Sharp price increase on increased volume is better.