Strong 1H25 Results and a positive outlook reaffirming the full year guidance of revenue growth of 9% plus. However, the shares dropped to close at 1230.50p, 49p down c.4%. So, why has Mr Market reacted so negatively?
The Analysts picked-up that there was a deceleration in growth in Q2 – this of course fits with what you might expect due to the political/macro climate – especially in the US that constitutes 46% of SGE’s total revenue. SGE CFO Jonathan Howell defended the guidance despite repeated questions delving into the detail. Nevertheless, my reading is that the Analysts weren’t persuaded, and they think SGE will fall short of the full year guidance.
So, who is right? Who knows? There is plenty of uncertainty currently, so we’ll see just how resilient SGE is.
Hit or Miss, there are in these results some persisting positive trends:
Underlying the top-line 9% revenue growth is the annualised Annual Recurring Revenue growth at 11%, and the cloud native product growth of 22%. As these business segments grow their contribution the top-line growth will accelerate. Key to this is the roll-out of Sage Intacct, their mid-sector product, that has been an excellent performer in the US and again delivered 21% growth. In the UK Intacct grew 60%, albeit off a smaller base, and is starting to impact the numbers. The reception in other territories has also been positive – so we appear to have a strong medium-term growth story developing nicely.
Another feature of these results that has been ignored is the widening margins – hitting an underlying op profit margin of 23.2% improving 1.4% - ahead of expectations. On a statutory basis, that delivered +18% Op Profit and +19% eps growth.
So, glass half-full or half-empty? IMHO, there may be some bumps in the road ahead, but these were a very strong set of results revealing a continuing accelerating growth trajectory.
