Sage shares fall as CEO leaves; CFO to run firm

Steve Hare

Shares of Newcastle-based software giant Sage Group, the UK’s largest listed tech company, fell about 7% after it said its CEO Stephen Kelly will leave the company.

Sage said in May that around 30 senior executives had left the firm after a trading update in April revealed that first half organic revenue growth results “were below management’s expectations, reflecting inconsistent operational execution.”

Sage has appointed chief financial officer Steve Hare to the additional post of chief operating officer on an interim basis. 

“In his position as CFO and interim COO, Steve Hare will have full executive authority to run the business until the appointment of the new CEO,” said Sage.

Sage shares fell 7% to around 599p to give the Newcastle firm a current stock market value of just under £7 billion.

“Sage Group plc announces today that the board and Stephen Kelly, chief executive officer, have come to an agreement and Stephen has stepped down as a director and CEO,” said Sage.

“He will remain available to the group until he leaves on 31st May 2019.

“The board has initiated a process to find a new CEO …

“The group remains focused on completing its evolution to a SaaS business, driven by Sage Business Cloud and providing outstanding customer experience, with greater prioritisation on accelerating the operational execution required to realise the significant opportunity available to Sage.

“In seeking a new CEO, the board is particularly focused on finding an executive practiced in embedding sustainable processes at scale for the next phase of the Sage journey to capture the significant opportunities ahead.”

Jefferies analysts wrote in a note: “While the shares might react negatively to the announcement of CEO Stephen Kelly stepping down, we believe the board’s decision to appoint CFO Steve Hare as the interim COO is positive.”

Sage chairman Donald Brydon said: “Stephen has much to be proud of in the very heavy lifting he has led as the group is transformed. 

“He energised the group, drove change with relentless focus on customers, and under his leadership the strategy to become a leading SaaS business has been defined. 

“The board remains fully supportive of the overall strategy. We wish Stephen well in the next phase of his life.”

Kelly said: “I joined Sage four years ago and am immensely proud of the extraordinary change that I have had the privilege to lead. 

“I joined a fragmented organisation with minimal presence in the cloud. 

“The major cultural transformation has created Sage Business Cloud which has now grown to £386m of annualised recurring revenue (ARR) from a standing start and has driven total shareholder return for Sage of over twice that of the FTSE100 during my tenure. 

“I am proud of my role in positioning Sage as a champion of entrepreneurs and a voice of business heroes. 

“In addition, the Sage Foundation is living proof that companies can make a difference across their communities. 

“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.

“I look forward to Sage’s continued growth and success.”

Sage said it continues to trade in line with previous full year full-year 2018 guidance “of around 7% organic revenue growth and around 27.5% organic operating margin. “

The firm added: “As indicated when the group provided its Q3 trading update earlier this month, achieving guidance depends on closing a number of Enterprise Management opportunities in September. 

“The group will announce its FY18 full year results on 21 November 2018.”