Sage shares fall after trading update

Sage Group HQ in Newcastle

Shares of Newcastle-based software giant Sage Group fell more than 6% after investors were left underwhelmed with its trading update for the three months to December 31.

Heavy investment in sales training — resulting in the delay of some revenue — and underperformance at Sage’s business on France weighed on sentiment.

Sage shares fell about 6.5% to around 768p to give Sage a current stock market value of around £8.3 billion, according to Bloomberg data.

Sage said group “organic” revenue increased 6.3% for the first three months of the year.

“Organic recurring revenue grew by 7%, underpinned by software subscription growth of 26%,” said Sage.

“Organic software and software related services (SSRS) revenue increased by 4% reflecting continuing strong performance in training and services and Enterprise Management (formerly Sage X3), offset by a decline in other licences.”

Sage said its North America business performed strongly “reflecting continuing progress made by management across the US, Canada and Sage Intacct and as Sage Business Cloud revenues start to contribute significantly in this highly cloud-adoptive region.”

However, the firm added: “France continues to significantly underperform relative to the rest of the group, weighing on both organic revenue and recurring revenue growth with recovery expected in the second half of the year, as previously indicated.”

Sage chief financial officer Steve Hare said: “Q1 results are in line with our expectations.

“As we outlined at the time of the full year results, we have invested heavily in sales training in Q1 to set up the business for success, particularly in Sage Business Cloud, resulting in the delay of some revenue into Q2.

“Quarterly phasing of organic revenue growth is therefore expected to be similar to prior financial years.

“We expect acceleration throughout the year including a stronger Q2 and we reiterate our full year guidance of around 8% organic revenue growth and around 27.5% organic operating margin for FY18.”