Stronger pound takes sheen off solid quarter for Sage

Accounting and financial software company Sage Group reported a robust financial performance in the December quarter on Thursday, with total revenue rising 10% year-on-year to £573m, although it said a stronger pound was having an impact on its performance.

The firm said its core Sage Business Cloud offering contributed substantially to that growth, with revenue growing 15% to £454m.

Looking at its regional revenue performance, North America saw a 13% revenue boost to £259m, driven by the continued growth of Sage Intacct, Sage 50 cloud, and Sage 200 cloud.

The UK and Ireland (UKIA) region saw an 8% increase in revenue to £162m, primarily attributed to the success of cloud-native solutions, including Sage Intacct, Sage Accounting, and Sage Payroll, in addition to growth in Sage 50 cloud.

Meanwhile, Europe also saw positive momentum, with a 7% rise in revenue to £152m.

Sage Business Cloud stood out among the company’s products, experiencing 18% revenue growth to £454m.

That was fuelled by a 25% increase in cloud-native revenue to £174m, primarily driven by new customer acquisition, along with growth in cloud-connected revenue from both new and existing customers.

The company also reported a substantial increase in recurring revenue, rising 11% to £554m.

Software subscription revenue recorded a notable growth of 14%, reaching £466m, up from £409m in the same quarter of the prior year.

That resulted in a subscription penetration rate of 81%, compared to 78% in the first three months of the 2023 financial year.

However, the company faced challenges due to exchange rate fluctuations, as sterling strengthened against the dollar and other international currencies in comparison to the prior period, resulting in an exchange rate headwind.

At 0918 GMT, shares in the Sage Group were down 2.55% at 1,126p.

Reporting by Josh White for Sharecast.com.