Shares in Sage Group (LON:SGE) have been in demand today as investors cheered a positive set of first-quarter results. Issuing a trading update for the three months ended December 31, the accounting software group revealed a 6.6 percent increase in organic revenue.
The growth was driven by recurring revenue, where organic growth was 10 percent in the quarter, helped by a 36 percent improvement in software subscription revenue. This offset a 5.3 percent decline in organic revenue from software and software-related services business -- an expected fall as Sage transitions its focus to subscription relationship rather than one-off sales. Payment processing revenue rose 5.4 percent in the quarter, helped by the inclusion of Sage Payroll Solutions, which was acquired last year.
Chief financial officer Steve Hare said that the quarterly performance demonstrated continued momentum and was in line with the group’s expectations. Looking ahead, he stated that Sage remained on track to deliver at least six percent organic revenue growth and 27 percent operating margin for the full year.
The upbeat trading update has sent Sage’s share price to the top of the FTSE 100 leaderboard today. As 13:10 GMT, the stock stood 5.55 percent up at 599.00p, while the benchmark index was 0.07 percent lower at 5,905.89 points.
Panmure Gordon has reiterated its 'hold' recommendation and target price on the shares of 594p. Analyst George O´Connor was quoted as saying in a research note sent to clients this morning that while Sage had reaffirmed its guidance and there was an up-tick in organic revenue and net debt in the first quarter, the company had made no comment on the US, where there had been at least one high-profile departure in the period.