Home Business Insights & Advice How one large FTSE company is going through Covid-19

How one large FTSE company is going through Covid-19

by John Saunders
19th Aug 20 11:17 am

The Covid-19 global pandemic brought up countless questions in many fields. Governments worldwide are struggling to help businesses stay afloat and continue with their work after the pandemic is over. Meanwhile, the world’s economy is shaken at its core, though some companies have a spike in sales.

Large companies that sell supplies to help battle the coronavirus or allow employees with the means to work from their homes are thriving. While some businesses have permanently locked their company doors, others used this opportunity to grow further. Although some Financial Times Stock Exchange (FTSE) 100 companies that sell adequate software solutions or hygiene products are thriving, others aren’t doing very well. They can only blame the microorganism responsible for such a drastic outcome.

Rising FTSE 100 companies and their numbers in 2020

The FTSE 100 group said that from October 2019 up until the end of March 2020, the recurring organic revenue was way ahead of the expected guidance. Organic revenue makes an astounding 90% of sales, and its growth until the end of September 2020 will fall shorter than the expected 8% to 9%. However, other revenues fell pretty short and will continue to fall because of the accelerated decline over the global coronavirus pandemic.

Some FTSE 100 companies that are doing good:

Unilever hygiene products

Unilever’s boost of 7.9% came from its hygiene products thanks to Covid-19, taking Unilever at the top of London’s FTSE 100. The Anglo-Dutch company known for products like Domestos cleaner and Dove soap had increased its hand-sanitizer capacities by 600 times. Moreover, the company rolled out its hygiene brand “Lifebuoy” to more than 50 worldwide markets

The company’s bi-annual revenue report came after June 30, and it was EUR€25.71 billion. The numbers went down by 1.6% compared to the same period in 2019, which had EUR€26.13 billion. However, the pre-tax profit went up 4.1%, making an additional EUR€4.53 billion compared to last year’s EUR€4.35 billion.

Sage Group’s sales are on the rise

Sage Group, a member of the FTSE100 group, stated that the downturn in the global economy would lead clients to defer from purchases. In case it happens, it’ll bring a significant blow that will cause many small businesses to fail, making the sales drop and the churn rates among clients to increase.

Sage, on the other hand, is one of several companies from the FTSE 100 group that managed to go upwards thanks to the coronavirus global pandemic. The company offers Enterprise Resource Planning (financial accounting), and Customer Relationship Management software. Thanks to these two top-rated cloud-based programs, Sage Group managed to stay afloat and drastically increase sales mainly across Northern Europe and North America.

Sage’s liquidity is around GBP£900 million of cash and various cash equivalents. Add GBP£400 million of undrawn credits under Sage’s revolving facility that expires in five years, and you’ll see that the Sage Group’s total liquidity is well over GBP£1.3 billion. Moreover, Sage’s net debt, at the beginning of this fiscal quarter, is estimated to be well below their current earnings.

The software subscription sales grew for a staggering 23% in the nine months ending June 30, 2020, meaning the recurring revenue has increased by 9%. This growth translates to GBP£885 million, while the results from the same period last year were GBP£722 million. Sage’s laser-sharp focus on attracting new and migrating existing customers to Sage Business Cloud allowed them to grow when many others fell short.

Sage Group expects additional growth by 7% to 8% of recurring revenue, and an organic operating margin of 22% in the financial year that’ll end on September 30. Additionally, Sage expects a 1.1% revenue increase in the third quarter.

The buyback program

The Sage company stated that their resilience is backed by diversified small and medium business customer databases and high-quality recurring revenues. However, they expect a broad impact on business because of the global economy’s sharp downturn caused by the spread of Covid-19.

Besides, Sage explained that their balance sheet is strong. However, for them to be able to support its financial strength, they’d need to cancel their plans of buying back GPB£250 million worth of their shares. Sage Group suspended the buyback program mid-March after buying off GPB£6 million worth of shares. By canceling the shares buyback program, the accounting software company is not eager to fully admit their business satisfaction. Even though their numbers are substantial, the Covid-19 crisis predictions for the second bi-annual report are also good.

Sage Group helped FTSE 100 move higher

Jonathan Howell, the Chief Financial Officer at Sage, said that the company achieved excellent results during the last nine months and that they’ll continue to deliver the same results to complement the vision of becoming an incredible SaaS company.

Thanks to Unilever and Sage Group, the FTSE 100 group managed to move 0.23% higher. The 0.23% jump occurred closely after the trading began, which helped mirror the gains seen in stock markets all over Europe.

However, the accounting software company saw a significant reduction of 24% in revenue for SQL server reporting services, losing them a staggering GBP£148 million in the last nine months. The company explained that this loss was expected to happen because of the strategy to transition away from professional services implementation and license sales to subscription revenue.

Sage Group won’t allow itself to become reluctant, as they intend to stay cautious regardless of their remarkable growth. There are plenty of risks and economic uncertainties that can hit any of their customers, regardless if they’re a small or medium business. Therefore, being cautious is of utmost importance.

The company is confident that its investments in Sage Business Cloud throughout the entire economic cycle will create a strong foundation for its success in the long-run. Moreover, the overall progress promises an excellent thing for the company’s future, and they intend to keep it that way.

Final thoughts

Even though the coronavirus global pandemic has hit millions of businesses and companies worldwide, including some FTSE 100 companies, Sage Group and a small number of others thrive. Companies like Sage have experienced a significant revenue increase since March 2020, and they predict an even more significant increase by the end of September 2020. These several successful FTSE 100 companies nudged the entire FTSE 100 group upwards, bringing less than a quarter percent of the group’s overall increase in the market.

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