Stephen Kelly quits Sage, sending share price tumbling
Sage chief executive Stephen Kelly has agreed to step down from his position after discussions with the board.
Kelly, who joined the accounting software firm in 2014, has vacated his director and chief executive roles effective immediately on the back of lower-than-expected growth.
Read more: Deustche Bank advises investors to sell Sage stock
The company revealed earlier this month that hitting full-year guidance depends on closing a number of deals in September.
Chief financial officer Steve Hare has taken on the additional role of chief operating officer on an interim basis, with “full executive authority” to run Sage while the board searches for a successor to Kelly.
It is looking for a candidate who can add scale to Sage’s processes, as it competes with larger rivals like Microsoft and SAP on offering businesses cloud-based accounting packages, as well as other back office software.
Share prices tumbled more than six per cent on the news to £6.03 in early morning trading.
Kelly said he was “immensely proud” of his achievements at Sage.
“I joined a fragmented organisation with minimal presence in the cloud,” he said, adding that he led a “major cultural transformation” to put Sage on the path to sell cloud software, and delivering shareholder dividends of double the average of the FTSE 100.
“It has been an honour to build a world-class management team, to serve my colleagues and inspire in them my overriding passion of customer obsession,” he said. “I look forward to Sage’s continued growth and success.”
Chairman Donald Brydon credited Kelly for some “very heavy lifting” since joining, putting it on a path to become a leader in the software-as-a-service space, a strategy he said the board is sticking to.
However, investors have told Morning Wire that the firm is struggling to migrate customers from on-premise software to take advantage of its cloud offerings, despite 56 per cent year-on-year cloud growth in its latest financial results.
“Kelly achieved much during his time at Sage, but entered a company that was behind the pack in terms of moving its products from the PC to the cloud,” Steve Clayton, fund manager of Hargreave Lansdown Select Funds, which holds shares in the firm, told Morning Wire
“Sage is better positioned today than it was then, but profit growth has been held back whilst the business reorganised.”
He said Kelly’s departure has hit shares hard due to a lack of transparency about the reasons behind the decision, calling the recent trading update evidence of “an uncertain situation”.
The news comes after Deutsche Bank advised investors to sell their shares in Sage earlier this month, saying its mid-market offering faced pressure from entry-level rivals like Xero and bigger players with more developed platforms, such as SAP and Microsoft.