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Britain's Sage sees more margin growth after 8% rise in profit

By Paul Sandle

LONDON (Reuters) -British business software company Sage Group said its margin would continue to improve this year as it expands its cloud services after it reported a 8% rise in annual organic operating profit, sending it to the top of the FTSE 100 index.

Shares in the group, which provides accountancy and payroll software to millions of small businesses, rose more than 6% in early trading, reflecting the company's confident outlook.

Chief Executive Steve Hare said Sage, which has invested heavily in its cloud services, finished its year with annualised recurring revenue of more than 2 billion pounds ($2.38 billion)and growing momentum.

"We're very committed to scaling the business both in terms of revenue and earnings," he said in an interview on Wednesday, adding that the company would not make any more disposals.

Organic recurring revenue growth this year would be ahead of the 9% level achieved last year, helped by demand for cloud services, he said, and its operating profit margin would continue to improve after rising 40 basis points to 19.9%.

Analysts on average expect the margin to increase to 20.5% this year, a level Hare said he was happy with.

He said that while Sage was mindful of economic uncertainties, small and mid-sized businesses were under-invested in digital solutions that could automate tasks such as payment services, compliance and tax returns.

"Increasingly what small and mid-sized businesses are seeing is that by investing more into technology and into automation, it makes them more competitive and more efficient," he said.

Sage reported organic operating profit of 383 million pounds and total revenue of 1.95 billion pounds for the 12 months to end-September.

($1 = 0.8399 pounds)

(Reporting by Paul Sandle; editing by Sarah Young and Louise Heavens)