Sage Group PLC (LON:SGE) has reiterated that it expects organic recurring revenue growth to be below its previously guided range of 8-9% despite a relatively strong performance in its first half.
For the six months to 31 March, the FTSE 100 enterprise software specialist reported an organic operating profit of £213mln, up 3% year-on-year, while organic recurring revenue rose 10.3% to £826mln.
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The company said the recurring revenue growth reflected its focus on attracting new customers and migrating its existing clients to subscription and its Sage Business Cloud products, with particular strength in northern Europe and North America.
However, despite the strong performance Sage said post-period it had now started to see the “broader effects of the sharp economic downturn” caused by the coronavirus pandemic, with some of its customers deferring purchase decisions leading to a slowdown in customer acquisition.
In April, the company said new customer acquisition was “roughly half the level previously expected” and that it had also seen a slight increase in customer churn.
As a result of the uncertainty, Sage said it is “too early to quantify with confidence” the impact of the pandemic on its performance for the full year, adding that it expected a decline in revenues from SSRS and processing to “accelerate significantly in the second half, with an associated impact on margin”.
However, Sage chief executive Steve Hare said “despite the near-term uncertainties, I believe our continuing investment into Sage Business Cloud, together with our focus on customers, colleagues and innovation, form a strong base for the future performance of Sage".
In a note on Wednesday, analysts at Shore Capital said the firm had delivered “a decent first-half performance” that was in line with expectations, however, they noted that the tone of the outlook commentary “reflects a lot of near-term uncertainties”.
Sage shares rose 1.3% to 663.4p in early deals.