Sage Group’s profits take a tumble but share price up on recurring revs spike
Software giant Sage Group’s pre-tax profits sank 31 per cent to £190m in the first half of its financial year, as it wired investment towards its cloud software and took a hit from a fall in disposals.
The group’s revenue also fell by 4 per cent to £937m, in the six months to the end of March, Sage told investors today.
But its measure of organic recurring revenue grew by 4.4 per cent, which aligned with the group’s previous shareholder forecast of between three and five per cent.
Shares were up 3.21 per cent this morning, resting at 643.6p per share.
Underlying profits fell only by around 11-12 per cent.
“Sage performed strongly in the first half against tough comparators, with continued recurring revenue growth and increasing levels of new customer acquisition, principally in cloud-native solutions,” CEO Steve Hare said.
Sage’s Business Cloud saw recurring revenue grow by 18 per cent, while recurring revenue from all cloud-native solutions rose by 30 per cent to £130m in the first half of last year.
Cloud-connected recurring revenue lifted 14 per cent overall to £345m, thanks to growth in its Sage 50 and Sage 200 franchises.
The software giant now seeks to boost its cloud software in its Northern Europe and North America markets, which rake in almost two-thirds of its recurring revenue.
“We believe that small and medium-sized businesses will lead the recovery, and I am confident that our strategic investment in Sage Business Cloud will continue to accelerate growth, as customers become stronger and more digitally-enabled,” the CEO added.
Despite pre-tax profits tumble, the group’s results were largely in line with expectations, with an organic operating margin of 20.2 per cent.
Hare said: “Our deep sense of purpose and experience of supporting small and medium-sized businesses through change has equipped us well to play a vital role throughout the pandemic.”