23rd Jul 2020 09:01
(Alliance News) - Sage Group PLC on Thursday reported solid growth for the first nine months with recurring revenue expected to grow a good amount for the financial year.
The accounting software firm said it expects recurring revenue in the financial year ending September 30 to grow by 7% to 8%, with a organic operating margin of 22%.
Sage Group's total organic revenue saw an increase of 4.1% to GBP1.40 billion in the first nine months ending June 30 from GBP1.34 billion, with a 1.1% increase in revenue for the third quarter to GBP460 million from GBP455 million a year before.
Chief Financial Officer Jonathan Howell said: "Sage has achieved good results in the first nine months, continuing to deliver against our strategy, in line with our vision to become a great SaaS company."
Recurring revenue for the nine months ending June 30 increased 9.0%. This was driven by a software subscription growth of 23% to GBP885 million, compared to prior year's nine-month result of GBP722 million.
The Newcastle Upon Tyne-based company saw particular growth in North America, where recurring revenue grew 11% to GBP474 million from GBP426 million in the prior year, as well as in the UK and Ireland, where recurring revenue also grew by 11% to GBP281 million from GBP254 million year on year.
Recurring revenue in the third quarter grew 6.5% to GBP421 million from GBP395 million prior year. This reflects a resilient performance against the background of challenging trading conditions due to Covid-19. While this led to a reduction in new customer acquisition and a slight increase in customer churn, trading performance gradually improved as the quarter progressed, Sage said.
The company saw a reduction of SQL server reporting services and processing revenue by 24% to GBP148 million for the first nine months. However it said this is in line with its strategy to transition to subscription revenue and away from licence sales and professional services implementations.
In spite of the good growth, Sage said it will remain cautious, given the continuing economic uncertainties and the risks to its small and medium business customers as government support schemes come to an end.
"We are confident that our sustained investment in Sage Business Cloud throughout the economic cycle will form a strong base for the long-term success of Sage," Howell said.
The stock was up 3.9% at 734.80 pence each on Thursday morning in London.
By Greg Roxburgh; [email protected]
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