Member Article

Profits up at Sage as group focusses on ‘longer-term growth plans’

Newcastle-headquartered Sage Group has reported pleasing financial results for the first half of 2015, allowing the business software and services company to ‘remain on track to meet financial targets this year’.

The company, which reported a strong start to 2015 earlier this year, revealed a 6.5% increase in revenue to £699m, up from £657m last year. Moreover, pretax profits rose by 4.9% to £173m, up from £165m

Sage measured an organic recurring revenue growth of 8% in-line with management expectations, with 29% software subscription revenue growth the primary driver. Recurring revenue now accounts for 73% of Group organic revenue, up 1% on last year.

Increased organic operating margin reflects improved operating leverage from organic growth and disciplined cost management and supports the 28% operating profit margin target for the year.

However, weaker performance in parts of the business, particularly Enterprise Europe and payments and the Small and medium sized business segment in North America, have lead to the company assuming a cautious outlook for these areas.

Stephen Kelly, Chief Executive Officer, said: “We have delivered a good first half performance and remain on track to meet our financial targets this year. Recurring revenue growth of 8% demonstrates the strength of our business and the quality of our customer relationships.

“The business also enjoyed a number of benefits in the second quarter which, though encouraging, are unlikely to recur in the second half, and so our expectations for the current year remain unchanged.”

Now, the group is looking to introduce changes to further develop its long term strategy. Stephen continued: “We have already started making changes to facilitate and underpin our longer-term growth plans. These changes are being carefully introduced to ensure minimum risk to the business.

“These include organisational and product improvements which will help drive sustainable, profitable growth and build on Sage’s existing strengths. We are at the start of this journey which will take a couple of years to fully implement.”

With thoughts firmly fixed on the future, Stephen added: “Looking ahead, we have a significant opportunity to strengthen the valuable relationships we have as a trusted partner to millions of Small & Medium Businesses, and to build new ones.

“The changes we are making will allow us to be even more instrumental in our goal of supporting the success of Small & Medium Businesses globally. We look forward to providing more details on these initiatives at our Capital Markets Day in June.”