Sage Group (LSE:SGE) posted stronger-than-expected FY25 results on Wednesday, with revenue matching market forecasts and EBIT coming in 2% ahead of consensus.
The UK-based business software provider — known for its ERP and accounting solutions for small and mid-sized companies — also unveiled a new £300 million share buyback. The figures imply an EBIT margin of 23.9%, compared with the consensus estimate of 23.5%.
Organic recurring revenue grew 9.4%, a slight improvement from the 9.3% rate reported for the first nine months and broadly aligned with expectations. Organic ARR, described by management as the primary engine of future revenue, increased 9.9%. Analysts at Jefferies noted that the third-quarter figure was “below 10%” but signalled stabilisation given the tough comparison with a strong fourth quarter in 2024.
One soft spot in the update was NCA, which slipped to £185 million from a recent trend of around £190 million — a point Jefferies expects will draw attention in the earnings call.
Looking ahead, Sage expects organic revenue growth of 9% or more in FY26, ahead of the 8.7% projected by analysts. The guidance also points to further margin expansion, leading Jefferies analysts Charles Brennan, Philipp Adam, and Hannes Leitner to argue that the FY26 consensus margin forecast of 24% appears cautious.
“With mild upward pressure on forecasts and a cautious investors-set-up, the shares would normally rally,” the analysts said. “But we have not seen many Software companies sustain gains, even on better-than-expected results.”
Sage, headquartered in Newcastle, serves roughly three million customers through a global network of over 30,000 value-added resellers and 40,000 accounting firms.
Jefferies reaffirmed its “buy” rating on the stock with a target price of 1,320p, implying a 23% upside compared with Tuesday’s closing level of 1,076p.
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