Sage slides as it cuts full-year revenue growth guidance

Sage Group tumbled on Friday as it cut its full-year guidance to reflect "inconsistent operational execution".

In an update for the six months to the end of March 2018, the software company said it now expects around 7% organic revenue growth for FY18, down from previous guidance of 8%. Guidance for the organic operating margin was unchanged at 27.5%.

Organic revenue growth and subscription growth was lower than management expectations due to inconsistent operational execution. Sage reported organic revenue growth of 6.3% for the period, down from 7.4% growth in the first half of the previous year, as it took a hit from a drop in recurring revenue growth and contract licence slippage in the enterprise segment.

Meanwhile, software subscription growth came in at 25.3%, down from 30.6% in the same period a year ago, but software and software-related services growth was 7.1% compared to a decline of 7.3%.

Sage’s rolling mid-term guidance remains that organic revenue growth will reach 10% on a sustainable basis and organic operating margins will be at least 27%. The company said further cost savings of 500 basis points will be delivered over this period and either reinvested for growth or realised as an increase to operating margin. Over the long-term, the group aims to achieve organic operating margins of at least 30%.

Chief executive officer Stephen Kelly said: "Growth in H1 18 was lower than our expectations as the pace of execution has been slower than we planned. The market opportunity as outlined at capital markets day 2018 remains unchanged.

“The revised revenue guidance targets for FY18 reflect both the performance in H1 18, but also our diligence in ensuring that we focus on recurring revenue to drive sustainable acceleration throughout the rest of FY18 as a platform into FY19. We will provide a further update on our plans at our H1 18 results announcement on 2 May 2018."

At 0850 BST, the shares were down 15% to 570p.