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1. Company Snapshot

1.a. Company Description

The Sage Group plc, together with its subsidiaries, provides technology solutions and services for small and medium businesses in North America, Northern Europe, and internationally.It offers cloud native solutions, such as Sage Intacct, a cloud accounting software products and financial management solutions; Sage People, a cloud HR and people management solution; Sage Accounting, a solution for small businesses, accountants, and bookkeepers to remotely manage customer data, accounts, and people; Sage Payroll, a cloud-based payroll solution; and Sage HR, a HR management solution.The company also provides cloud connected and hybrid solutions, including Sage X3, a business management solution; and Sage 50cloud and Sage 200cloud that provides a range of cloud connected accounting solutions.


The company was founded in 1981 and is based in Newcastle upon Tyne, the United Kingdom.

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1.b. Last Insights on SGE

The recent 3-month performance of The Sage Group plc was negatively impacted by the impending departure of Chief Financial Officer Jonathan Howell, who will step down in December 2025. This transition, coupled with the announcement of Jacqui Cartin as his successor, may create uncertainty and disrupt the company's financial planning process. Additionally, the company's recent partnership with Tractics, while potentially beneficial in the long term, may not have had a significant short-term impact on revenue growth.

1.c. Company Highlights

2. Sage Delivers Robust First-Half 2025 Results, Driven by Cloud Growth and Operational Efficiency

Sage reported strong financial performance in its first-half 2025 results, with total revenue increasing 9% year-over-year, driven by a 10% rise in recurring revenue. Annual Recurring Revenue (ARR) grew 11% to £2.5 billion, underscoring the company's success in its subscription-based model. Operating profit margin improved 140 basis points to 23.2%, while earnings per share (EPS) rose 17% to 20.8 pence. The interim dividend also saw a 7% increase to 7.45 pence, reflecting the company's commitment to returning value to shareholders. Steve Hare, CEO, noted, "Customer behavior has remained stable over the past six weeks, giving us confidence to reiterate our full-year guidance."

Publication Date: May -17

📋 Highlights
  • Strong Revenue Growth: Total revenue grew 9%, with recurring revenue up 10% and ARR increasing 11% to £2.5 billion.
  • Improved Profitability: Operating profit margin expanded by 140 basis points to 23.2%, with EPS rising 17% to 20.8 pence.
  • Cloud Revenue Growth: Cloud revenue surged 13%, driven by Sage Business Cloud and Sage Intacct.
  • Regional Performance: North America grew 11%, UKIA 9%, and Europe 8%, showcasing robust regional execution.
  • Sage Copilot Adoption: Sage Copilot, now available to 40,000 UK customers, saw 25% adoption with plans to expand to Europe.

Cloud Revenue and Regional Performance

Cloud revenue was a standout performer, growing 13% year-over-year, with Sage Business Cloud and Sage Intacct contributing significantly to this growth. Regional performance was equally impressive, with North America leading the way at 11% growth, followed by the UKIA region at 9% and Europe at 8%. The success of Sage Copilot, launched over a year ago, has further enhanced customer productivity, with adoption rates reaching 25% among UK customers. Management announced plans to expand Sage Copilot to Europe and introduce agentic AI agents, which will perform specific tasks with human oversight, leveraging audit trails and domain-specific language models.

Margin Expansion and Strategic Investments

Jonathan Howell, CFO, highlighted that margins are expected to improve slightly in the second half, with a focus on balancing growth and profitability. The company's strategic investments in innovation and customer value have paid off, with Sage Distribution Manufacturing and Operations (SDMO) and updated X3 products positioning Sage as a leader in these areas. Intacct continues to grow strongly in the UK, with ARR growth of 60%, and is gaining traction in the US, particularly in manufacturing and distribution.

Capital Allocation and Competitive Positioning

Adam Wood's inquiry about share buybacks was addressed by Jonathan Howell, who emphasized that Sage's leverage remains within the guided range of 1 to 2 times net debt-to-EBITDA. The £200 million buyback aligns with the company's capital allocation priorities, which include growth, dividends, and returning surplus capital. Steve Hare also noted that Intuit's Enterprise Suite has had no competitive impact, as Intuit focuses on retaining existing customers rather than acquiring new ones.

Valuation and Outlook

Despite Sage's strong performance, its valuation metrics suggest a premium, with a P/E ratio of 38.45 and an EV/EBITDA of 22.53. The company's dividend yield of 1.64% and free cash flow yield of 3.97% provide some comfort, but investors may question whether the growth outlook justifies the current multiples. Analysts estimate next year's revenue growth at 8.6%, slightly below the current year's guidance of 9%. Actual EPS came in at 0.2047, slightly below the consensus estimate of 0.2062, but the company's confidence in its organic growth and strategic initiatives suggests continued momentum.

3. NewsRoom

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How Recent Analyst Shifts Are Changing the Story Behind Sage Group’s Valuation

Dec -02

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Sage Group (LON:SGE) Is Increasing Its Dividend To £0.144

Nov -30

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Construction Management Software Business Analysis Report 2025: A $3.5 Billion Market by 2030 Featuring Autodesk, Bentley Systems, Oracle, PlanGrid, Sage Group, Trimble

Nov -25

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The Sage Group plc (LON:SGE) Just Released Its Annual Earnings: Here's What Analysts Think

Nov -22

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Sage Group (The) PLC (SGGEF) (FY 2025) Earnings Call Highlights: Strong Financial Performance ...

Nov -19

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Sage Group Launches $394 Million Buyback After Profit, Revenue Rise

Nov -19

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Sage Group (SGPYY) Upgraded to Strong Buy: Here's What You Should Know

Oct -22

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UK stocks spooked by new Trump threat of fresh tariffs on China

Oct -10

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.55%)

6. Segments

Software Subscription

Expected Growth: 10%

Sage Group's 10% software subscription growth driven by increasing adoption of cloud-based accounting solutions, expansion into new markets, and strategic partnerships. Growing demand for digital transformation, automation, and data analytics in SMEs also fuels growth. Additionally, Sage's investment in AI-powered products and customer-centric approach enhance user experience, driving subscription renewals and new sales.

Other Recurring

Expected Growth: 8%

The 8% growth in Other Recurring revenue from The Sage Group plc is driven by increasing adoption of cloud-based accounting solutions, expansion into new markets, and strategic partnerships. Additionally, the company's focus on subscription-based models, cross-selling, and upselling of value-added services contribute to the growth.

Other

Expected Growth: 7%

The Sage Group plc's 'Other' segment growth is driven by increasing adoption of cloud-based services, expansion into new markets, and strategic partnerships. Additionally, the company's focus on innovation, customer experience, and digital transformation initiatives contribute to its growth. Furthermore, the rising demand for accounting and business management solutions among small and medium-sized businesses also supports the segment's growth.

7. Detailed Products

Sage 50cloud

A cloud-based accounting and business management solution for small to medium-sized businesses

Sage 100cloud

A cloud-based ERP system for medium-sized businesses, offering advanced financial management and operational capabilities

Sage 300cloud

A cloud-based ERP system for larger businesses, offering advanced financial management, operational, and supply chain capabilities

Sage X3

A comprehensive ERP system for large and complex businesses, offering advanced financial management, operational, and supply chain capabilities

Sage Payroll

A payroll processing solution for businesses of all sizes, offering automated payroll processing and compliance

Sage HR

A human capital management solution for businesses of all sizes, offering HR management, time-off management, and performance management

Sage Intacct

A cloud-based financial management solution for businesses of all sizes, offering advanced financial management and accounting capabilities

8. The Sage Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The Sage Group plc is medium due to the presence of alternative accounting software providers, but Sage's strong brand recognition and customer loyalty mitigate this threat.

Bargaining Power Of Customers

The bargaining power of customers is low for The Sage Group plc due to the company's diverse customer base and the lack of concentration among its customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low for The Sage Group plc due to the company's ability to negotiate favorable terms with its suppliers and the availability of alternative suppliers.

Threat Of New Entrants

The threat of new entrants is high for The Sage Group plc due to the relatively low barriers to entry in the accounting software market and the presence of innovative startups.

Intensity Of Rivalry

The intensity of rivalry is high for The Sage Group plc due to the presence of established competitors such as Intuit and Xero, and the ongoing competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 45.72%
Debt Cost 4.68%
Equity Weight 54.28%
Equity Cost 6.87%
WACC 5.87%
Leverage 84.22%

11. Quality Control: The Sage Group plc passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Sage

A-Score: 5.2/10

Value: 0.9

Growth: 5.3

Quality: 7.1

Yield: 3.1

Momentum: 6.5

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Sportradar

A-Score: 4.8/10

Value: 1.3

Growth: 8.0

Quality: 6.8

Yield: 0.0

Momentum: 9.5

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
ATOSS Software

A-Score: 4.6/10

Value: 0.0

Growth: 8.9

Quality: 9.4

Yield: 3.1

Momentum: 2.0

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Qt

A-Score: 3.8/10

Value: 3.2

Growth: 9.6

Quality: 8.8

Yield: 0.0

Momentum: 0.5

Volatility: 1.0

1-Year Total Return ->

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Stock-Card
SoftwareONE

A-Score: 3.2/10

Value: 6.0

Growth: 1.2

Quality: 4.5

Yield: 5.6

Momentum: 0.5

Volatility: 1.7

1-Year Total Return ->

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Stock-Card
Monday

A-Score: 2.8/10

Value: 2.2

Growth: 9.1

Quality: 4.5

Yield: 0.0

Momentum: 0.5

Volatility: 0.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

10.7$

Current Price

10.7$

Potential

-0.00%

Expected Cash-Flows