Sage Group finals bring focus on Britain’s SMEs during the pandemic

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The Sage Group PLC (LON:SGE) is set to report final results on Friday, having last updated the market in July when it reported “more challenging trading conditions” due to coronavirus but that this had eased off as the third quarter progressed.

More challenging trading had led to a reduction in customer acquisition and a slight increase in customer churn, although revenues were still up 6.5% in the quarter as the SME-focused accounting software company continues to move customers from legacy software and software related services (SSRS) to its newer cloud-based products.

Having guided for 7-8% growth in recurring revenues in the year, this implied a broad range of 2-5% growth was needed in the fourth quarter.

The market is presently estimating 7.5% growth in recurring revenues for the year, with total group sales growth of 2.9% to GBP1.88bn and SSRS down 24% for the quarter and the year.

On the outlook for the next financial year, City analysts are forecasting 4.1% recurring revenue growth within total growth of 2.1% to GBP1.91bn, implying SSRS down 19%.

Analysts at UBS said that with extended government support programmes to SMEs, they believe guidance for a “low-to-mid single digit” or perhaps 3-5% recurring revenue growth may be given, “although are more cautious in our own model (+1.0%)”.

“We think the key question is what margin Sage expects,” the analysts added, with the current market forecast at 22.0%.

Significant announcements expected on Friday November 20:

Finals: Sage Group PLC (LON:SGE)

Interims: Argentex Group PLC (LON:AGFX)

Economic data: UK retail sales, UK GfK consumer confidence

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