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Sage leaves revenue guidance unchanged as SaaS growth offsets decline in legacy business

The group said its full-year outlook shows continuing confidence in recurring revenue growth for the remainder of the fiscal year
Sage display at an exhibition
Underlying cash conversion clocked in at 151% - now that's some nifty accountancy!

Accounting software giant Sage Group PLC (LON:SGE) expects full-year organic revenue growth to be at the top-end or even ro exceed its guidance range.

The company had previously indicated it expected organic revenue growth to be around 8-9% in the current financial year.

READ Sage reiterates guidance after strong start to fiscal year

On the down side, it expects software and software related services (SSRS) and processing revenue to be at the lower end or below the guided range of flat to mid-single digit percentage decline.

Overall, expectations for full-year total revenue remain unchanged and the group has maintained its organic operating profit margin guidance of 23-25%.

As expected, the second quarter of its fiscal year, which runs to the end of September, saw a slowdown in its organic revenue growth from the first quarter.

Organic total revenue growth in the six months to the end of March was up 6.2% to £941mln from £886mln the year before but this was less than the 7.6% growth rate seen in the first quarter. Organic recurring revenue rose 10.2% to £779mln from £707mln the year before, representing a slight deterioration from the first quarter growth rate of 10.5%.

Plain old vanilla revenue - i.e. the top-line number the company is required to report under statutory requirements - was £957mln, up 6.4% from £899mln the year before. Annualised recurring revenue in the period rose 10.2% to £1.55bn, up from £1.40bn the year before.

The organic operating profit margin in the first half eased by 1.9 percentage points to 22.7%, down from 24.6% the year before. Profit before tax rose to £198mln from £171mln in the corresponding period a year earlier.

The interim dividend has been nudged up 2.5% to 5.79p from 5.65p the previous year.

"We are encouraged by the strong start to FY19. Sage's vision is to become a great SaaS company and by focusing on customers, colleagues and innovation we are starting to see evidence of successful strategic execution. This is reflected in the strong performance in high quality recurring revenue, underpinned by subscription in the first half of the year. We will continue to focus on driving high-quality recurring and subscription revenue in the second half of the year," said Steve Hare, the FTSE 2100-listed firm's chief executive officer.

In early trading, shares in Sage Group were 4.4% lower at 705.20p.

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