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Investing.com -- Sage Group (LON:SGE) on Wednesday reported better-than-feared FY25 results with revenues in-line with consensus expectations while EBIT beat estimates by 2%.
The UK-based applications software company, which provides enterprise resource planning and accounting software to small and midsize businesses, also announced a new £300 million buyback program. The results implied EBIT margins of 23.9% versus company-compiled consensus at 23.5%.
Organic recurring revenue growth came in at 9.4%, a slight uptick from 9.3% in the first nine months and consistent with consensus at 9.3%.
Organic ARR growth, described as the key driver of future revenues, reached 9.9%. The third quarter number was "below 10%" but represented stabilization given the strength of fourth quarter 2024 comparisons, according to analysts at Jefferies.
The company faced one setback as the NCA component dipped to £185 million from recent trends at £190 million, which the analysts indicated would be a focus of the earnings call.
Sage guided to organic revenue growth of 9% or above for FY26, compared to consensus estimates of 8.7%.
The guidance includes continued growth in margins, making FY26 consensus margins of 24% appear conservative, according to Jefferies analysts Charles Brennan, Philipp Adam, and Hannes Leitner.
"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."
The Newcastle-headquartered company serves approximately three million customers through a network of more than 30,000 value-added resellers and 40,000 accountancy practices worldwide.
Jefferies maintained its “buy” rating on Sage with a price target of 1,320p, representing a 23% upside from the prior trading day’s closing price of 1,076p.