Shares of Newcastle-based accounting software giant Sage Group rose about 4% on Friday after the firm said it expects “organic recurring revenue growth for FY21 to be towards the top end of our guidance range.”
The positive outlook came as Sage published results for the six months ended March 31, 2021, showing first-half revenue slipped 4% to £937 million and profit before tax fell 31% to £190 million.
Interim dividend rose 2% to 6.05p.
“In H1 21 the group achieved organic recurring revenue growth of 4.4% to £811m, and organic total revenue growth of 1% to £890m,” said Sage.
“The increase in recurring revenue, underpinned by an 11% rise in software subscription revenue to £608m, was driven by growth from new and existing customers, principally in North America, Northern Europe and France.
“As a result of our continued focus on growing software subscription revenues, subscription penetration increased to 68%, up 5 percentage points versus H1 20 and up 3 percentage points versus FY20.
“Other revenue (SSRS and processing) decreased by 21%, in line with our strategy to transition to subscription revenue and away from licence sales and professional services implementations.”
In its outlook, Sage said: “Following a strong performance in the first half, we now expect organic recurring revenue growth for FY21 to be towards the top end of our guidance range of 3% to 5%.
“We also expect other revenue (SSRS and processing) to continue to decline, in line with our strategy.
“As previously communicated, organic operating margin is expected to be up to three percentage points below FY20, reflecting the additional strategic investment we are making in the business.
“Looking beyond FY21, we expect margins to trend upwards over time, as this additional investment drives recurring revenue growth and operating efficiencies.”
Sage Group CEO Steve Hare said: “Sage performed strongly in the first half against tough comparators, with continued recurring revenue growth and increasing levels of new customer acquisition, principally in cloud native solutions.
“Our deep sense of purpose and experience of supporting small and medium-sized businesses through change has equipped us well to play a vital role throughout the pandemic, and I am proud of the way our colleagues around the world have shown dedication to our customers and partners.
“We believe that small and medium-sized businesses will lead the recovery, and I am confident that our strategic investment in Sage Business Cloud will continue to accelerate growth, as customers become stronger and more digitally-enabled.”