Sage, Newcastle software giant, ups Q1 to £447m

Shares of Newcastle-based software giant Sage Group rose about 5% on Thursday after it published a trading update for the three months ended December 31, 2020, showing first-quarter revenue edged 1.4% higher to £447 million.

Sage’s software helps businesses manage their accounts, payroll and other processes.

Recurring revenue increased 4.7% to £408 million, supported by software subscription growth of 11.3% to £303 million.

Sage reiterated its guidance for the full year, and said its balance sheet at December 31 remained strong, with cash and available liquidity of £1.2 billion and net debt of £129 million.

“Regionally, North America achieved growth in recurring revenue of 6.4% to £160m (Q1 20: £150m) driven principally by a good performance from Sage Intacct,” said Sage.

“In Northern Europe recurring revenue increased by 3.3% to £96m (Q1 20: £93m), reflecting mainly momentum in cloud connected, together with growth in cloud native solutions.

“Performance in other regions was largely in line with expectations.

“In terms of the portfolio view of recurring revenue, the Future Sage Business Cloud Opportunity (products within, or to be migrated to, Sage Business Cloud) grew by 6.2% to £366m.

“This was underpinned by strong growth in cloud native revenue of 26.7% to £63m (Q1 20: £50m), primarily through new customer acquisition, and further growth in cloud connected.

“Sage Business Cloud penetration increased to 64% (FY20: 61%).

“In line with our plans to drive further growth in recurring revenue, we are progressively increasing investment in product development and sales and marketing during FY21, with a particular focus on cloud native solutions.

“As previously indicated, we may flex the level of this investment during the course of the year, in response to trading conditions.

“Other revenue (SSRS and processing) decreased by 24.0% to £39m, a similar rate of decline to that seen in FY20.

“This reduction is in line with Sage’s strategy to transition away from licence sales and professional services revenue, and to increase the Group’s focus on subscription revenue.

“Total group revenue increased by 1.4% to £447m.

“In line with our strategy to create a simpler and more focused business, Sage announced in December that it has agreed to sell Sage Poland to Mid Europa Partners for £66m, and Sage’s business in Asia and Australia (excluding global products) to The Access Group for £95m.

“These businesses were classified as held for sale and excluded from Sage’s organic numbers at the FY20 year end.”

Sage chief financial officer said: “We have continued to deliver against our strategy in the first quarter, growing recurring revenue in line with our plan for the year, supported by good demand for Sage Business Cloud solutions.

“Accordingly, we reiterate our guidance for the full year, as set out in our FY20 results announcement.

“While the pandemic increases uncertainty in the near term, we continue to expect that our investment in Sage Business Cloud will drive the growth and long-term success of Sage.”

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