Sage, Newcastle tech giant, ups H1 revenue to £975m

Sage Group CEO Steve Hare

Newcastle-based software giant Sage Group, the UK’s largest listed tech company, said on Wednesday its first-half revenue edged 1.9% higher to £975 million and operating profit rose 37.9% to £289 million.

In its results for the six months ended March 31, 2020, Sage said it would increase its interim dividend 2.5% to 5.93p “reflecting strong business performance and cash generation in the first half, and in line with policy of maintaining the dividend in real terms.”

However, Sage also warned: “In April trading … new customer acquisition was roughly half the level previously expected. 

“We have also seen a slight increase in customer churn.”

Sage shares rose about 2% to around 670p to give the firm a current stock market value of around £7 billion.

Sage said “at this point” it does not intend to make any redundancies in response to the coronavirus crisis and does not intend to furlough any staff or make use of government support programmes.

In its outlook, Sage said: “While the group has performed well in the first half, it is too early to quantify with confidence the impact of the pandemic on Sage’s financial performance for the full year. 

“We continue to expect, as we indicated in our trading update on 6 April, that organic recurring revenue growth will be below the previously guided range of 8% to 9%, and that the decline in other revenue (SSRS and processing) will accelerate significantly in the second half, with an associated impact on margin.”

Sage Group CEO Steve Hare said: “Sage has had a strong first half, sustaining last year’s growth momentum as we continue to focus on recurring revenue growth, and making good progress in strategic execution.

“Our key priority has been the health and wellbeing of our colleagues and our service to customers.

“I am proud of how colleagues have reacted, and how they have supported each other and our customers.

“Despite the near-term uncertainties, I believe our continuing investment into Sage Business Cloud, together with our focus on customers, colleagues and innovation, form a strong base for the future performance of Sage.”

Neil Shah, head of research for Edison Investment Research, said: “Despite new customer acquisition being around half the level forecast for April, the Newcastle-headquartered Sage Group has had a strong first half, with operating profits up 37.9 per cent to £289m from £210m.

“However, as the Sage’s customer base is largely comprised of small and medium enterprises, it’s difficult to see how the software provider will carry the momentum generated at the end of 2019 through the rest of the financial year.

“With the news that the UK economy has contracted by 2% in Q120, up to a third of the country’s SMEs are forecast to go under as a result of a lock-down slowdown.

“Reflecting the strong likelihood that customer acquisition and revenue growth will continue to drop, the company’s share price is expected to drop to around its 52-week low in the coming period. 

“Yet, although tough times lie ahead in the short term at least, Sage Group does have a strong cash position to weather the downturn.”