SGGEF - Sage Group: Poor FY20 And Margin Reset Indicate Ongoing Struggles
- Sage's FY20 results last Friday were poor, and the FY21 margin reset surprised investors, sending shares down 13.4% that day.
- We find the way management reports performance potentially misleading, and underlying figures are more consistent with a struggling business.
- “Renewal by Value” has stagnated, “organic” growth has been falling, and the underlying EBIT has shrunk by 20% since FY18.
- At 599.4p, shares are trading at a 21.3x P/E; the dividend represents a 2.9% yield and is targeted to grow only "in real terms".
- With Sage seemingly continuing to fall behind competitors, this is not cheap enough. We would avoid this stock.
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Sage Group: Poor FY20 And Margin Reset Indicate Ongoing Struggles