16 May 2024
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Strong performance driven by innovation

Steve Hare, Chief Executive Officer, commented:
"Sage performed well in the first half of the year, delivering broad-based revenue growth and significant margin expansion. Demand for our solutions remains robust, with small and mid-sized businesses continuing to trust Sage to automate their accounting, HR and payroll workflows.

"We are resolutely focused on innovation, as both a source of near-term competitive advantage and a foundation for our long-term success. We continue to introduce new AI-powered products and services that deliver enhanced productivity and insights, driving value for both existing and new customers.

"As we look forward, despite the ongoing macroeconomic uncertainty, I am confident that Sage's proven strategy, underpinned by continued investment, will enable us to deliver further efficient growth."

_{Please note that tables may not cast and change percentages may not calculate precisely due to rounding.}

Financial highlights

• Underlying total revenue increased by 10% to £1,152m, reflecting continued robust demand for our solutions and services.
• Underlying operating profit increased by 18% to £254m, with margin increasing by 160 basis points to 22.0% driven by operating efficiencies as we scale the business.
• EBITDA increased by 14% to £299m, with margin increasing by 100 basis points to 25.9%.
• Statutory operating profit increased by 38% to £215m reflecting growth in underlying operating profit together with lower restructuring and M&A-related charges.
• Underlying basic EPS increased by 23% to 18.2p.
• Strong underlying cash conversion of 127%, reflecting continued growth in subscription revenue and good working capital management.
• Robust balance sheet, with £1.1bn of cash and available liquidity, and net debt to EBITDA of 1.4x.
• Interim dividend up 6% to 6.95p, in line with our progressive policy.
  

Strategic and operational highlights

• Underlying annualised recurring revenue (ARR) up 11% to £2,253m, reflecting growth across all regions balanced between new and existing customers.
• Renewal rate by value of 102%, ahead of last year (H1 23: 101%), reflecting increased sales to existing customers and continued good retention rates.
• Sage Business Cloud revenue increased by 18% to £915m (H1 23: £777m), including cloud native revenue growth of 25% to £353m (H1 23: £283m).
• Subscription penetration increased to 81% (H1 23: 79%) driven by growth in subscription revenue of 14% to £937m (H1 23: £826m).
• Strong strategic progress as we further expand our global cloud solutions across the Group and deepen our vertical-specific capabilities, complemented by the acquisition of Bridgetown Software.
• We continue to scale the Sage Network to power innovative features and services, including the recent introduction of Sage Copilot, our generative AI-powered digital assistant.
  

Outlook

Looking ahead, we expect organic total revenue growth for full year FY24 to be broadly in line with the first half. We continue to expect operating margins to trend upwards in FY24 and beyond, as we focus on efficiently scaling the Group.

About Sage

Sage exists to knock down barriers so everyone can thrive, starting with the millions of small and mid-sized businesses (SMBs) served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis.

A presentation for investors and analysts will be held at 8.30am UK time. The webcast can be accessed via sage.com/investors or directly via the following link: https://edge.media-server.com/mmc/p/qbfs84ws. To join the conference call, please register via https://register.vevent.com/register/BI638ccf3d921a442e9fb8c03003087535.

¹See Appendix 1 for full definitions and guidance on the usage of the Alternative Performance Measures.

² To aid comparability, underlying and organic measures for the prior period have been retranslated at current period exchange rates and exclude recurring and non-recurring items, while organic measures also adjust for the impact of acquisitions and disposals. A reconciliation of underlying and organic measures to statutory measures is set out on pages 6 and 7. Underlying and organic measures are defined in Appendix 1.

All references to revenue, profit and margin are on an underlying basis unless otherwise stated.