Sage Group, the Newcastle-based accounting software giant for SMEs, said its total revenue increased 10% to £540 million in the three months ended December 31, 2022.

The FTSE 100 firm, which sells accounting, financial, HR and payroll technology, said in a trading update that recurring revenue increased by 12% to £517 million, underpinned by a 31% rise in Sage Business Cloud revenue to £390 million.

Software subscription revenue grew 18% to £422 million (Q1 22: £357m), resulting in subscription penetration of 78% (Q1 22: 73%).

“In terms of recurring revenue by portfolio, the Future Sage Business Cloud Opportunity (products within, or to be migrated to, Sage Business Cloud) grew by 14% to £479m,” said the firm.

“This was driven by 45% growth in cloud native recurring revenue (35% on an organic basis) to £141m (Q1 22: £98m) primarily through new customer acquisition, as well as further growth in cloud connected supported by migrations.

“Sage Business Cloud penetration increased to 81% (Q1 22: 71%), enabling more customers to connect to Sage’s digital network.

“Other revenue (SSRS) decreased by 29% to £23m, in line with our strategy to transition away from licence sales and professional services implementations.”

Sage Group chief financial officer Jonathan Howell said: “Sage has made a strong start to the year, in line with our expectations, as Sage Business Cloud solutions help more customers improve their productivity and resilience.

“While we are mindful of the current macroeconomic environment, we remain confident in our strategy for delivering efficient growth and we reiterate our guidance for the full year, as set out in our FY22 results announcement.”