Sage remains on track to hit growth targets

In an interim management statement, the Newcastle headquartered company reported revenue increased by 4.7% over the first nine months of the year

The Sage Group HQ at Great Park, Newcastle
The Sage Group HQ at Great Park, Newcastle

Software giant, The Sage Group plc, says it is on track to hit ambitious growth targets.

In an interim management statement, the Newcastle headquartered company reported revenue increased by 4.7%, over the first nine months of the year.

During the third quarter - from April 1 to date - the group achieved 4.3% revenue growth.

Performance in the fourth quarter was expected to be stronger and that the business remained on course to achieve the 6% organic revenue growth target set for 2015.

Strong performance across the firm’s subscription business helped to drive organic recurring revenue growth of 7.2% for the quarter.

Pricing pressures created a weaker performance in Sage’s payments business, particularly in North America, and the company said it remained cautious on the outlook for payments growth in the fourth quarter.

Chief executive Guy Berruyer said: “The performance of the business continues to be solid and the overall growth trajectory is on track.

“Recurring revenue growth of 7%, driven by a strong subscription performance, demonstrates our business has momentum, and we remain confident of achieving our target of 6% organic revenue growth in 2015.”

Guy Berruyer, Chief Exec of Sage Group
Guy Berruyer, Chief Exec of Sage Group
 

The results follow news this week of Gosforth-based Sage’s acquisition of German payroll outfit, Exact Software Deutschland GmbH, in a deal worth €16.25m (£12.87m).

Exact Software Deutschland is the payroll business of Dutch software firm Exact Holding NV.

Sage said the move – made by its German subsidiary Sage Software GmbH – represents a transformative acquisition for its payroll business in Germany, increasing payroll revenue to approximately €30m (£23.7m) as well as establishing Sage as one of the two leading players in this segment in Germany.

Exact’s Lohn product provides payroll solutions ranging from payroll software products to full business process outsourcing solutions. In 2013, the firm reported revenue of €10.5m (£8.3m).

It serves approximately 3,400 small to medium-sized businesses in Germany, with strong representation in the manufacturing, services and construction sectors.

Exact Lohn is to be integrated into Sage’s German business.

Alvaro Ramirez, chief executive officer of Sage Europe said: “We are excited about the growth opportunity that the combination of Sage and Exact Lohn creates for our German business.

“Exact Lohn strengthens our existing payroll and HCM capability, creating a market leading position in Germany.

“The acquisition significantly increases our payroll customer base and provides opportunity for us to drive growth through our enlarged customer base.”

The deal requires approval from the German Federal Cartel Office and is expected to close in the third quarter of 2014.

The Sage Group’s operating cash generation also remains strong. During the period, it paid an ordinary dividend to shareholders of £45m.

It has likewise continued with its share buyback programme and, since April 1, a further 8.7m shares have been repurchased for a consideration of £33m.

Net debt at June 20 was £345m, compared to £361m at March 31.

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