Sage turns in strong third quarter performance

Software company Sage said on Thursday that it had performed “strongly” in the first nine months of the year, as momentum continued to strengthen.

The FTSE 100 firm said recurring revenue increased 5% year-on-year to £1,220m for the three quarters to 30 June, supported by software subscription growth of 11% to £920m.

As a result, subscription penetration increased to 69%, from 64% at the same time last year.

Regionally, Sage said North America achieved recurring revenue growth of 7% to £475m, which it put down to a “good performance” from Sage Intacct, with continued strength in new customer acquisition.

In Northern Europe, recurring revenue increased 4% to £292m, driven by accelerating growth in cloud native solutions including Sage Accounting, together with further growth in Sage 50 cloud connected.

It said that in its International geography, recurring revenue grew 4% to £454m, with “particular strength” in cloud-connected products, together with growth in cloud native solutions.

In terms of the portfolio view of revenue, the company said the ‘Future Sage Business Cloud Opportunity’, which includes all products within, or to be migrated to, the Sage Business Cloud, increased 7% to £1.1bn.

That was underpinned by “strong growth” in cloud native recurring revenue of 32% to £205m, primarily through new customer acquisition, and supported by migrations to both cloud-native and cloud-connected solutions.

Sage Business Cloud penetration increased to 66%, from 60% a year ago.

In the third quarter, recurring revenue grew by 6.1% to £409m, which Sage said was mainly driven by an acceleration in the growth of cloud-native revenue, up 37% to £74m, together with continued growth in cloud-connected.

That growth was strengthened by the group's programme of additional strategic investment in sales, marketing and innovation.

Other revenue, from SSRS and processing, decreased 18% to £109m in the first nine months of the year, and by 9% to £31m in the third quarter, in line with the company’s strategy to transition away from licence sales and low-margin professional services implementations.

Total group revenue was 2.6% firmer year-on-year at £1.33bn for the first nine months of the year, and by 5.0% to £440m in the third quarter specifically.

Group net debt totalled £160m as at 30 June, widening from £96m on 31 March, with cash and available liquidity standing at £1.3bn.

Looking ahead, Sage said that following a “strong” third quarter performance, it now expected full-year recurring revenue growth to be “slightly above” its previous guidance range of 3% to 5%.

The group's guidance across other metrics remained unchanged.

“The performance of the group in the first nine months of the year demonstrates continued delivery against our strategy,” said chief financial officer Jonathan Howell.

“Sage's growth is accelerating, driven by increasing demand for Sage Business Cloud solutions, particularly in cloud native, as we support customers in their digital transformation.

“Through our additional strategic investment, we are building strong foundations to drive further sustainable growth and support the long-term success of the group.”

At 0826 BST, shares in the Sage Group were down 0.59% at 693.08p.