24th Jun 2015 12:25
LONDON (Alliance News) - Sage Group PLC on Wednesday said the next two to three years are set to be transitional period for the company and said it is planning to cut its general and administrative costs in order to reallocate funds to its investment plans.
In a statement issued ahead of its Capital Markets Day, the FTSE 100 software company said it intends to shift to a new set of key performance indicators in coming years, focused on attracting new customers to its product range and improving the "quality and sustainability" of its revenue by shifting to a focus on annualised revenue and by growing its subscriber base.
It will also focus on improving its contract renewal rate and will be making investments in its customer-facing activities, with the latter to be funded by a reduction in general and administrative costs as a percentage of its total revenue.
"The next two to three years are a transitional period for Sage as we improve the quality of revenue and shift investment materially to drive sustainable growth," said Stephen Kelly, Sage's chief executive. "As we do this, we expect to maintain annual organic revenue growth of 6% and operating profit margin of 28%, in-line with our plans for 2015. Beyond the transition period, we expect revenue growth to accelerate and the operating margin to expand."
The plans follow from statement made by Kelly in the group's half-year results, published in May. At the time, Kelly said Sage had benefited from a number of positives in second quarter of its financial year which are unlikely to recur in the second half, meaning the group held its expectations despite a rise in pretax profit and revenue.
"We have already started making changes to facilitate and underpin our longer-term growth plans. These changes are being carefully introduced to ensure minimum risk to the business," Kelly said in May.
Revenue in the first half was boosted by a strong performance from subscriptions, and a temporary acceleration of growth in software and software-related services, although this was offset by weaker performances in other segments of the business including its Enterprise Europe division, and its Payments and Small Medium Business segments in North America.
Sage shares were down 3.0% to 532.50 pence Wednesday, the worst performer in the FTSE 100.
By Sam Unsted; [email protected]; @SamUAtAlliance
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