Newcastle’s Sage Group reports strong growth

Newcastle’s The Sage Group plc, the business management software and services provider, has reported strong growth in their interim management statement.

For the first nine months of the year, Group organic revenue has increased by 4.7%, with growth of 4.3% in the third quarter.

Performance in the fourth quarter is expected to be stronger than the third quarter and the business remains on course to achieve the group’s 6% organic revenue growth target in 2015.

A strong performance from subscription helped to drive good organic recurring revenue growth of 7.2% for the quarter, which represents a continuation of the level of growth highlighted in the first half results. Subscription revenue increased by 24.5% in the third quarter.

The growth in recurring revenue was achieved despite a weaker performance in payments, particularly in North America, where market-wide pricing pressure has contributed to revenue contraction during the quarter.

The group said they remain cautious on the outlook for payments growth in the fourth quarter.

Software and software-related services (SSRS) revenue declined by 3.4% in the quarter, reflecting continued weakness in the mid-market in Europe, where it has been more difficult to predict the timing of when prospective deals will close.

Guidance for operating profit margin remains unchanged.

Guy Berruyer, CEO, commented: “The performance of the business continues to be solid and the overall growth trajectory is on track. Recurring revenue growth of 7%, driven by a strong subscription performance, demonstrates our business has momentum, and we remain confident of achieving our target of 6% organic revenue growth in 2015.”

The Group’s operating cash generation remains strong. During the period, the Group paid an ordinary dividend to shareholders of £45 million.

The share buyback programme has also continued and, since 1 April 2014, a further 8.7m shares have been repurchased for a consideration of £33 million. Net debt at 30 June 2014, was £345 million (£361 million as at 31 March 2014).

On 21 July 2014, as previously reported, the Group announced the acquisition of Exact Software Deutschland GmbH, the German payroll business of Exact Holding N.V, for a cash consideration of €16.25m (£12.87 million).

This important in-fill acquisition strengthens Sage’s payroll business in Germany, positioning Sage as one of the two leading players in this segment in Germany.