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Sage Share Price Falls Sharply on Profit Warning

Practice Stock Trading
Updated: 20 November 2020

Shares of Sage Group PLC (LON: SGE) fell more than 13% on Friday after warning that high cloud investments are likely to drag on the company’s profit margins.

The developer said it generated £1.77 billion in sales for its full-year ending September 30, which is 3.7% higher compared to a year ago. Organic revenue recorded a growth of 8.5% while operating profit fell 3.7% to £391 million.

A final dividend of 11.32p is confirmed after a rise in profits.

However, shares fell sharply after the developer said it plans to increase investments in its cloud business. This is likely to drag on the profit margin and remove £60 million from annual earnings.

“We think it's important we continue to invest through this cycle,” CEO Steve Hare said.

The company remains cautious as far as the forward-looking guidance is concerned.

“We're just a bit cautious in the short term, which is why we are guiding to 3-5% recurring revenue growth (this year),” added Hare.

Sage share price falls sharply on a profit warning November 2020

Sage share price fell more than 13% to trade below the 600p mark for the first time since April.

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