Sage's "decent set of figures" provide reassurance, says Westhouse

3rd Dec 2014 10:21

Westhouse Securities has reiterated it 'add' recommendation and 467p target price for Sage Group after the accountancy software firm reported a "decent set of figures" in its annual report on Wednesday.Revenues came in at £1.31bn in the year to 30 September, up 4.9% on organically but down 5% on a statutory basis. This was slightly below the consensus forecast of £1.32bn.However, Westhouse analyst Gareth Evans said margins were "holding up well".The organic operating margin rose by 40 basis points to 27.5%, helping adjusted earnings per share to increase 8.2% to 22.7p, ahead of the consensus estimate of 22.5p."Crucially, new chief executive Stephen Kelly has re-committed to the targets for the fiscal year ending 2015 of 6% organic growth and operating margin of 28% on the basis of good renewals and growing subscription levels," Evans said."The margin figure is less important, in our view, as investors accept Sage's ability to generate solid margin, but are currently questioning the group's long-term growth outlook. Validation on both fronts, along with some upbeat commentary from the incoming chief executive is clearly a relief."Westhouse didn't make any changes to its forecasts following the results, but Evans said the figures provided a "degree of reassurance following management change and a period of frustration over perceived lack of clarity and delivery"."We hope that today might mark a turning point in a number of ways," he added.The stock was up 3.5% at 417.2p by 10:32.