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The Sage Group disappoints with organic revenue growth

Published: 08:36 24 Jan 2018 GMT

Sage Group display at trade fair
Net debt as at 31 December 2017 was £794mln, versus £813mln three months earlier

Accountancy software giant The Sage Group PLC (LON:SGE) has work to do to hit its full-year organic revenue guidance after a slow start.

Group organic revenue growth in the final three months of 2017 – the first quarter of Sage’s fiscal year – was 6.3%, compared to management’s guidance of expected growth of around 8% for the year. Growth was underpinned by software subscription growth of 26%.

Organic software and software-related services (SSRS) revenue increased by 4% year-on-year reflecting continuing strong performance in training and services and Enterprise Management (formerly Sage X3), offset by a decline in other licences, Sage said.

Uneven growth

North America put in a good shift but France continues to significantly underperform in comparison to the rest of the group.

Steve Hare, Sage’s chief financial officer, said the results were in line with its expectations.

“As we outlined at the time of the full year results, we have invested heavily in sales training in Q1 to set up the business for success, particularly in Sage Business Cloud, resulting in the delay of some revenue into Q2. Quarterly phasing of organic revenue growth is therefore expected to be similar to prior financial years,” Hare said.

“We expect acceleration throughout the year including a stronger Q2 and we reiterate our full year guidance of around 8% organic revenue growth and around 27.5% organic operating margin for FY18,” he added.

“Sage has reported 6.3% organic revenue growth (versus 5.1% in Q1 FY17 and 6.6% in FY17A). While this is below the unchanged FY2018 guidance of around 8% due to a delay of some revenue into Q2, the quarterly phasing of organic revenue growth is expected to be similar to last year and FY2018 guidance on organic revenue growth and operating margin is unchanged at around 8% and 27.5% respectively,” noted Shore Capital, which has retained its ‘buy’ stance based on the potential for an acceleration of organic revenue growth through the current year and beyond.

“Implicit in today’s statement and unchanged guidance is that organic revenue growth will accelerate through the year, potentially reaching 8-10% during H2 FY18,” Shore said.

Shares in Sage were down 4.0% at 788.2p in early deals.

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