Sage group on track to meet financial targets after strong first half to the year

Software giant's revenue grows 6.5% and pre-tax profits 4.9% as business cements reputation as trusted partner to SMEs

Stephen Kelly, CEO of Sage
Stephen Kelly, CEO of Sage

SAGE Group PLC has reported a strong first half to the year but will not rest on its laurels as it seeks to grow as a ‘champion of SMEs’, its chief executive has said.

Results for the six months ended March 31, 2015, show the Newcastle-based business software provider grew revenue 6.5%, compared to the same period the year before, rising from £657m to £699m.

Pre-tax profits, meanwhile, hit £173m, up 4.9% from £165m.

Chief executive Stephen Kelly said: “We have delivered a good first half performance and remain on track to meet our financial targets this year.

“Recurring revenue growth of 8% demonstrates the strength of our business and the quality of our customer relationships.

“The business also enjoyed a number of benefits in the second quarter, which, though encouraging, are unlikely to recur in the second, and so our expectations remain unchanged.”

During the half-year, software subscription revenue - a major focus for Sage - grew 29%, with the number of paying subscriptions for Sage One, the company’s global cloud solution for smaller businesses, hitting 115,000, up from 86,000 the year before.

Overall, there were 555,0000 software subscription contracts active, with annual value of £260m, up from £224m in the same period in 2014.

Sage ERP X3, a global solution for enterprise businesses, meanwhile, grew organic revenue by a total of 10%.

Sage acknowledged there had been weaker performances in some parts of the business, leading a more cautious outlook in those areas.

However, the company is the midst of a longer-term growth strategy, which it is now executing at an increased pace.

During the period, the senior management was strengthened and changes were made to the organisation model, with the marketing, finance, HR, IT, facilities, procurement and legal departments being established as global functions to replace the local structure that have existed historically.

A global agreement has also been reached with Salesforce, which Mr Kelly described as “an important change in moving to using world-class collaboration and productivity tools across the business”.

“We have already started making changes to facilitate and underpin our longer-term growth plans,” he said. “These changes are being carefully introduced to ensure minimum risk to the business.

“These include organisational and product improvements which will help drive sustainable, profitable growth and build on Sage’s existing strengths.

“We are at the start of this journey, which will take a couple of years to fully implement.”

Mr Kelly added that Sage now had a “significant opportunity” to strengthen the relationships it had built as a “trusted partner to millions of small and medium business”.

Customer feedback had consistently reinforced the importance of its products to such enterprises.

However, the business would not be complacent, recognising the need to innovate in a market with an increasing number of competitors.

He said. “Everyone is talking about the Northern Powerhouse and Sage is a real example of that.

“We are number one in the UK by a significant margin, so its important for the North East and globally. We want to play a significant role as champion of SMEs.”

An ordinary dividend of 4.45p per share is proposed, up 8% from 4.12p in the first half the 2014 financial year.

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