Sage share price tanks as results disappoint

The Sage Group’s (LON:SGE) share price has posted a hefty fall this Thursday as the company posted a fall in software licensing revenue for the first nine months of its financial year. The company further warned on its organic operating profit margin.

As of 14:54 BST, Sage’s share price had given up 10.09 percent to 734.20p, underperforming the broader UK market, with the benchmark FTSE 100 index standing 0.51 percent lower at 7,463.24 points. The group’s shares have added more than 13 percent to their value over the past year, as compared with about a 2.2-percent fall in the Footsie.

Sage posts nine-month results

Sage announced in a statement that its total revenue had increased 5.3 percent to £476 million in the third quarter of its financial year and 5.9 percent to £1.5 billion over a nine-month period. The company, however, noted that the revenue growth in the first nine months of the year had partly been assisted by tailwinds from the weaker comparator in the prior year and new regulations on digital tax submissions. The group meanwhile revealed that its software and software related services revenue had dropped 15.5 percent to £159 million, partly on account of underperformance in X3 licences and services.

“We expect full year FY19 recurring revenue growth to slightly exceed guidance of 8-9% and the combined decline in SSRS and processing revenue to be slightly greater than the decline seen in the first nine months of the year,” Sage’s CFO Jonathan Howell commented in the statement, adding that the company also expects its organic operating profit margin to be at the lower end of its guided range of between 23 percent and 25 percent.

Analysts weigh in on company

“Sage was priced for upgrades going into today’s update which have not materialised due to declining legacy business,” said Shore Capital analyst Martin O’Sullivan, as quoted by Proactive Investors.

Shore Capital reaffirmed the company as a ‘buy,’ without specifying a target on the Sage share price. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average valuation of 645.50p.