ii view: UK techie Sage makes strong start to 2026

First-quarter trading update to 31 December

• Total revenues up 10% to £674 million

Guidance:

• Continues to expect full-year adjusted sales growth of at least 9%
• Continues to expect operating profit margins to trend upwards

Chief Financial Officer Jacqui Cartin said:

"We are investing in innovation across our AI-powered platform, helping small and mid-sized businesses solve their day-to-day challenges and work more productively.”

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ii round-up:

Sage Group (The) (LSE:SGE) today detailed an acceleration in sales growth, with the accounting, HR and payroll solutions software provider reiterating expectations for a rise in annual sales of at least 9%.

First-quarter adjusted sales to late December climbed 10% to £674 million, improving on a gain of 9.6% in the prior fourth quarter. The City had forecast around 9.3%. 

Shares in the FTSE 100 company rose 3% in early UK trading having come into this latest news down by 15% in 2025. That’s similar to US rival and owner of QuickBooks, Intuit Inc (NASDAQ:INTU), and in contrast to a one-fifth rise for the FTSE 100 index over last year. 

Sage’s accounting, payroll solutions and HR software is used by millions of small and medium-sized enterprises (SMEs) around the world. 

Sales in North America led the way, with the number stripped of acquisitions and adjusted for currency moves, climbing 12% to £304 million.

In its next biggest region, combining the UK & Ireland with Africa and Asia Pacific (UKIA), adjusted sales rose 10% to £194 million. Finally, sales in Europe rose 7% to £176 million. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares, increasing its expected full-year adjusted sales growth estimate to 9.3% from a previous 9% and raising its year-ahead earnings per share forecast by 0.3%. 

First-half results are scheduled for 21 May. 

ii view:

Sage sees its mission as knocking down barriers by digitising business processes with customers, suppliers, employees, banks and governments. The Newcastle headquartered company estimates its addressable and growing market to be worth in the region of £39 billion. Competitors include both Microsoft Corp (NASDAQ:MSFT) and SAP SE (XETRA:SAP). 

Geographically, North America generated most sales last year at 45%. That was followed by the UKIA region at 29%, with France, Iberia and Central Europe the balance at 26% of sales.  

For investors, the introduction of trade tariffs in the US is likely to have raised costs for many of its SMEs and their customers, making business and even survival that bit harder. Similarly, in the UK, a previous increase in employee related taxes has done the same here. The longer-term impact of AI on the world of accounting is yet to play out, while competition away from accounting software is not to be ignored with the likes of Workday Inc Class A (NASDAQ:WDAY) and partners such as Kainos Group (LSE:KNOS) pushing hard. 

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On the upside, management continues to forecast growth in sales and the profit margin over the current financial year. Investment in AI tools is being made. A diversity of both product and geographical region exists, while more than 20 years of consecutive annual dividend increases leaves the shares on a forecast dividend yield of around 2%.

In all, and despite ongoing risks, this well-managed UK software company continues to justify its place in many diversified investor portfolios.

Positives: 

• Product and geographical diversity
• Progressive dividend policy

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Strong hold