Sage Group Remains Fairly Valued as First-Half Result Meets Expectations

We have maintained our fair value estimate for narrow-moat-rated Sage Group at GBX 630 per share following its first-half financial result. Sage’s income statement continues to be somewhat distorted by the combination of strong revenue growth from its relatively new cloud-based software products but declining revenue from its legacy on-premise software products. Management maintained guidance that fiscal 2022 organic recurring revenue growth would be between 8% and 9%, which is in line with our forecasts. It also said the organic operating margin would trend up in fiscal 2022 and beyond, which is also in line with our expectations that margins will improve following the recent business divestment program, and as cloud software grows as a proportion of total revenue.