Sage's focus on training sees slower start to year

Sage, the accounting software developer, increased sales slightly below target in the first three months of its financial year as it invested "heavily" in sales training to allow sales to accelerate in coming months.

Organic revenue grew 6.3% in the three months ended 31 December, but the FTSE 100-listed group remained confident of hitting its 8% full year target, with recurring revenue rising 7% in the quarter, underpinned by software subscription growth of 26%.

Chief financial officer Steve Hare said the results were in line with management's expectations, as set out at the time of November's annual results, capping two-year metamorphosis of the business into a cloud software provide, with all its products wrapped up under the Sage Business Cloud label and increasingly sold on a subscription basis.

As this regime continues to ramp up, Sage invested heavily in sales training in the first quarter, "to set up the business for success, particularly in Sage Business Cloud", said Hare, resulting in the delay of some revenue into the second quarter.

"Quarterly phasing of organic revenue growth is therefore expected to be similar to prior financial years.

"We expect acceleration throughout the year including a stronger Q2 and we reiterate our full year guidance of around 8% organic revenue growth and around 27.5% organic operating margin for FY18."

Organic software and software related services revenue grew 4% in the quarter, which was said to be due to strong performance in training and services and Sage X3, which has been rebranded Enterprise Management, offset by a decline in other licences.

Sales in North America were strong as Sage Business Cloud revenues were said to "start to contribute significantly in this highly cloud-adoptive region".

France, rarely a place for rapid adoption of change, continued to significantly underperform the rest of the group and weighed on both organic revenue and recurring revenue growth. Sage expects a French recovery in the second half of the year.

Hare and co are scheduled to share their plans to drive further acceleration in revenue growth at a capital markets day on 25 January.