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Sage surges as software subscription momentum continues

Recurring revenue in the three months to 31 December was up 10.7% compared to the first quarter the year before

The Sage Group plc -

The Sage Group plc (LON:SGE) shares neared a six-month high as it reported a continuing improvement in recurring revenue from cloud software and a decline of sales from its traditional business.

Total group revenue rose 6.7% in the three months to 31 December, the first quarter of the FTSE 100 group’s financial year, speeding up from the 5.6% growth seen in its past full year.

READ: Sage profits slip as it perseveres with shift to recurring revenue

Recurring revenue of £410mln in the quarter was up 10.7% compared to the first quarter the year before, as Sage Business Cloud software subscription (SaaS) surged 24.8% to £286mln. Last year, organic recurring revenue grew 10.8%, with SaaS sales up 29.4%.

Sage said it was continuing to focus on migrating existing customers to its subscription model and the cloud, as well as attracting new customers.

Sales of traditional software and software-related services (SSRS) declined 15.8% to £55mln, reflecting the ongoing "managed decline" and "de-prioritisation" as part of the focus on subscription.

Chief financial officer Jonathan Howell said it was “a strong first quarter as expected” that “sustained last year's growth momentum”. Looking ahead, we reiterate our guidance for the full year, as outlined in the FY19 results announcement."

On the outlook, Howell reiterated guidance for recurring revenue growth of 8-9% for the year.

Sage shares rose 4% to 766.02p in early trading on Wednesday, their highest level since last July. 

Quick facts: The Sage Group plc

Price: 738.2 GBX

LSE:SGE
Market: LSE
Market Cap: £8.06 billion
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