Sage Group PLC (LON:SGE) said the level of customer churn among its small and medium sized business clientele has been “lower than expected” during the disruption caused by the coronavirus pandemic as it updated the first nine months of its financial year.
For the period ended June 30, the software group reported revenues of £1.4bn, up 4.1% year-on-year, with a 9% expansion of recurring revenues underpinned by 22.6% growth in its software subscriptions as the company focused on migrating existing clients and attracting new customers to its business cloud offering.
READ: Sage Group retains lower guidance despite growth in first half
Recurring revenue growth was driven principally by North America and Northern Europe, which grew 11.3% and 10.6% respectively and reflected new cloud connected contracts and “good momentum carried into the period”. The growth also helped offset a 24.2% decline in its other revenue streams to £148mln.
For the third quarter specifically, Sage reported 6.5% revenue growth despite the “more challenging trading conditions” due to coronavirus, which led to a reduction in customer acquisition and a slight increase in customer churn, although the firm said its trading had “gradually improved” as the quarter progressed.
Looking ahead, the firm said given its “resilient performance” in the third quarter it expects recurring revenue growth for the full year to be between 7-8%, although the decline in other revenues is expected to continue. Sage also said it remained cautious given the economic uncertainty and the risk to its small and medium business customers as government support schemes were wound down.
"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 [software as a service] company”, said chief financial officer Jonathan Howell.
“Despite the disruption caused by [coronavirus], our colleagues have performed exceptionally, providing strong support both to each other and to our customers. 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", he added.
Sage shares rose 1.3% to 716.2p in early deals on Thursday.