Subscribers boost gives accounting software giant Sage profit spike of 16%

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The FTSE 100 software developer Sage coaxed more of its customers on to subscription deals, sending profits up 16 per cent.

The Newcastle-based company, which develops accountancy and payroll software for small businesses, reported revenues rising from £899 million to £957 million in the six months to the end of March.

Recurring revenues grew 10.2 per cent over the period to £779 million and now represent 83 per cent of group turnover. Subscription revenue made increased from £380 million to £485 million, 52 per cent of recurring revenues.

Operating profits rose 13 per cent to £210 million over the first half of its financial year and pre-tax earnings increased by 16 per cent to £198 million. The results were in line with expectations.

Sage, founded in 1981, initially sold CD-roms with bookkeeping software. It used to charge customers an annual licence fee but has over recent years tried to move them to subscriptions. The shift is designed to provide more predictable revenue streams but it has proved turbulent. The company cut growth forecasts twice last year, ousted its chief executive and promoted Steve Hare, its finance director, to the top job.

The company has a market value of £8 billion, about £1.5 billion larger than Micro Focus, Britain’s only other FTSE 100 software company. It has come under pressure from a range of new competitors, including Xero and Salesforce, offering payroll and bookkeeping services over the cloud.

This morning Sage said that recurring revenues grew 10.2 per cent over the period to £779 million and now represent 83 per cent of turnover.

In North America, its largest division, sales grew by 20 per cent. In northern Europe, which includes Britain, they rose 4 per cent.

The company said that full-year organic recurring revenue growth would be at the “top end or slightly exceed” its previous forecast for a rise of between 8 per cent and 9 per cent. Full-year turnover would remain unchanged and the company maintained its organic operating profit margin guidance of between 23 per cent and 25 per cent growth.

The company lifted its half-time dividend from 5.65p to 5.79p.

Mr Hare, 58, said that he had been “encouraged by the strong start” to the financial year. “We will continue to focus on driving high-quality recurring and subscription revenue in the second half of the year,” he added.

The company has appointed a new independent director. John Bates is chief executive of Eggplant, which specialises in AI-powered software test automation.


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