New Sage boss inherits lift in operating profit to £360m as software subscriptions increase

Newcastle-based software giants Sage grew organic revenues to £1,306m on the back of increased software subscriptions and up-selling of support to customers

Sage, at the Great Park, Gosforth
Sage, at the Great Park, Gosforth.

New Sage boss Stephen Kelly said the firm’s 6.7% rise in full-year organic operating profits to £360m represents a “great set of results”.

Mr Kelly, who joined the FTSE100 giants in November from the civil service, said the inherited results - which include increased revenues of £1,306m - were confirmation of the firm’s model and strategy.

The former government chief operating officer revealed that within the first few weeks of his new role he had taken questions from Sage staff at the firm’s Great Park headquarters in Gosforth, which he described as “jaw dropping”.

Mr Kelly had also hosted lunch with a group of North East firms, which he said had reaffirmed his faith in Sage’s SME customer base.

He said: “Some 60% of job creation has come from SMEs. It’s by no means a land of milk and honey out there, but those North East businesses we met told us we did a job great for them as they looked to grow.”

Since early November Mr Kelly has visited Sage operations in ten cities across the world, meeting some 5,000 staff. He said a visit to the firm’s French business had prompted good ideas about how to develop Sage’s mid market product lines.

The latest results showed a 5% rise in organic revenue from £1,246m to £1,306m on the back of increased software subscriptions and up-selling of support to customers.

European operating profit was up 6% to £204m, while operating profit in the Americas was up 8% to £106m.

Revealing its full-year results against a background of growing cloud services presence, the firm said it was confident of meeting 2015 targets.

Sage recruited some 290 people to its Newcastle operation in the last year, and Mr Kelly confirmed it was still looking to grow its workforce - commending the calibre of graduates emanating from North East universities.

Detail in the results showed customer subscription renewal rates edged up marginally from 82% to 83% during the year, which the firm said was good news for predictability of revenues. It now values its subscribership at £220m.

Sage One, the firm’s cloud-based accounts solution aimed at small businesses, was said to be well established in the market as subscriptions reached 86,000 globally - a 150% increase on last year.

The global roll-out of the service continued as take-up in continental Europe was low and behind expectation in North America.

Chief financial officer Steve Hare allayed fears this could cause a problem for Sage, which has continually pushed cloud technology as the future of its business.

Mr Hare said: “The take-up in different countries is really down to culture there. Cloud is well established in internet-orientated markets such as the UK.

“In continental Europe – take Germany for example – the adoption of cloud services has been much slower and desktop is still the norm.”

In his first major address to Sage shareholders, Mr Kelly thanked his predecessor Guy Berruyer as he inherited an “encouraging set of results”.

He added: “I reconfirm the Board’s financial targets for 2015 and recognise the 2014 results as an important milestone on the path to meeting them.

“Our financial performance demonstrates the strength of Sage’s global business and the quality of relationships it has with millions of SME customers worldwide.”

Sage’s share price rose 4% on news of the results.

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