Sage trades in line as recurring revenue grows

Sage said it traded in line with expectations in the first quarter as the business software group's recurring revenue grew strongly.

Total revenue rose 1.4% to £447m in the three months to the end of December from a year earlier as recurring revenue increased 4.7% to £408m.

Other revenue fell 24% to £39m as Sage shifted away from licence sales towards subscriptions. Revenue from subscriptions increased to 68% in the quarter compared with 65% for all of the previous year.

Sage shares rose 5.7% to 605.6pat 08:56 GMT and were the biggest gainers in the FTSE 100 index. The shares have fallen 17% in the past year.

Recurring revenue rose 6.4% to £160m in North America and in Northern Europe recurring revenue rose 3.3% to £96m. Cloud native revenue rose 26.7% to £63m.

Sage Chief Financial Officer Jonathan Howell said: "We have continued to deliver against our strategy in the first quarter, growing recurring revenue in line with our plan for the year, supported by good demand for Sage Business Cloud solutions. Accordingly, we reiterate our guidance for the full year, as set out in our FY20 results announcement."

The FTSE 100 group said it was increasing investment in products, sales and marketing to build recurring revenue with a focus on the cloud. Sage said it may "flex" investment during the year according to trading conditions.

Shore Capital analyst Martin O'Sullivan, who rates Sage shares as 'hold', said: "While today’s trading update is broadly neutral in terms of the full year outlook, which may actually be incrementally positive for the stock after recent declines, to turn buyer around current levels we would need greater confidence in a sustained acceleration of organic revenue growth."