Sage Group PLC Trading and COVID-19 Update (8162I)
06 Aprile 2020 - 8:00AM
UK Regulatory
TIDMSGE
RNS Number : 8162I
Sage Group PLC
06 April 2020
Trading and COVID-19 update
6 April 2020
The Sage Group ("Sage" or the "Group") today issues an update on
trading for the six months to 31 March 2020, and on the impact of
the global COVID-19 pandemic on its business.
Group focus
Sage's response to the COVID-19 pandemic has been to ensure the
health and wellbeing of our colleagues, to continue serving and
supporting our customers, partners and accountants, and to remain
focused on our SaaS transition strategy. Our business operations
have continued with minimal disruption to date, thanks to the
ongoing dedication and commitment of our colleagues, most of whom
are now working from home. We have put in place a range of measures
to help customers, including offering practical advice and quick
access to expert support. The impact of COVID-19 remains highly
uncertain, and we are closely monitoring developments in order to
adapt our response accordingly.
Trading update for the six months to 31 March 2020
Growth in organic recurring revenue, which represents around 90%
of Group sales, was ahead of full year guidance, supported by
strong momentum in our core markets. Other revenue (SSRS and
processing), representing around 10% of Group sales, declined in
line with the Group's strategy, although the decrease accelerated
towards the end of March as a result of COVID-19 impacting licence
sales and professional services implementations.
COVID-19 future impact and outlook
Sage is a resilient business supported by high-quality recurring
revenues and a diversified customer base of small and medium
businesses. However, the sharp downturn in global economic activity
caused by the spread of COVID-19 is expected to have a broad impact
on businesses generally, and as a result Sage anticipates being
affected in the following areas:
-- customers deferring purchase decisions, leading to a slowdown
in new customer acquisition, licence sales and professional
services implementations; and
-- a higher business failure rate leading to an increase in churn.
It is too early to quantify with confidence the impact on Sage's
financial performance for the full financial year to 30 September.
However the Board now believes it is likely that organic recurring
revenue growth will be below the previously guided range of 8% to
9%, and that the decline in other revenue (SSRS and processing)
will accelerate significantly in the second half, with some
associated impact on margin. We will provide a further update at
our interim results.
Sage has identified and is implementing a range of mitigating
actions to manage costs and cash in the near-term, while continuing
to invest in the long-term success of the business.
The Group remains confident in its strategy to transition to
subscription and the cloud. The current disruption supports the
adoption by businesses of cloud-based solutions that provide
resilience and enable flexible working practices. Despite the
near-term uncertainties, we believe our investment into Sage
Business Cloud, together with our focus on customer and colleague
success, leave Sage well-positioned for the longer-term SaaS
opportunity.
Financial strength
The Group has a strong balance sheet, with approximately GBP1.3
billion of cash and available liquidity as at 31 March 2020. This
includes around GBP900 million of cash and cash equivalents, and
more than GBP400 million of undrawn facilities under the Group's
Revolving Credit Facility which expires in February 2025. Net debt
to EBITDA as at 31 March 2020 is expected to be well below 1.0x.
Maturities within the next 18 months comprise $150 million (GBP121
million) of the Group's US private placement loan notes in May
2020, and the Group's GBP200 million syndicated Term Loan in
September 2021.
To further support the Group's financial strength, the Board has
now decided to cancel the GBP250 million share buy-back programme,
which was suspended on 18 March 2020 after GBP6 million of shares
had been purchased.
Interim results
The Group intends to publish its interim results on Wednesday 13
May 2020.
Enquiries
The Sage Group plc +44 (0) 191 294 3457
Jonathan Howell, CFO
James Sandford, VP Investor Relations
Amy Lawson, EVP Communications
FTI Consulting +44 (0) 20 3727 1000
Charles Palmer
Dwight Burden
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END
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