Sage share price: H1 revenue, profit rise

The Sage Group Plc (LON:SGE) updated investors with its first half results for the six months ended March 31 today. Following are the highlights of the company’s statement.

**Highlights from Sage’s report:**
‒ Organic recurring revenue growth of 8% in-line with management expectations, with 29% software subscription revenue growth the primary driver. Recurring revenue now accounts for 73% of Group organic revenue (H1 2014: 72%);
‒ Organic SSRS revenue growth of 2% was stronger than expected, due to certain one-offs, including a regulatory change in Malaysia, which contributed approximately 50 basis points to Group organic revenue growth;
‒ Increased organic operating margin reflects improved operating leverage from organic growth and disciplined cost management and supports the 28% operating profit margin target for the year;
‒ Weaker performance in parts of the business, particularly Enterprise Europe and payments and the Small and medium sized business (“SMB”) segment in North America, leads to a cautious outlook for these areas;
‒ Sage ERP X3, our global solution for enterprise businesses, grew organic revenue by 10% (H1 2014: 7%);
‒ The number of paying subscriptions for Sage One, our global cloud solution for smaller businesses, increased to 115,000* (FY 2014: 86,000; H1 2014: 59,000); and
‒ The move to a subscription model continues with over 550,000 software subscription contracts and an annualised subscription value of £260m (FY 2014: £224m).

Stephen Kelly, Chief Executive Officer, 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 half, and so our expectations for the current year remain unchanged.

We have already started making changes to facilitate and underpin our longer-term growth plans. 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.

Looking ahead, we have a significant opportunity to strengthen the valuable relationships we have as a trusted partner to millions of Small & Medium Businesses, and to build new ones. The changes we are making will allow us to be even more instrumental in our goal of supporting the success of Small & Medium Businesses globally. We look forward to providing more details on these initiatives at our Capital Markets Day in June.”
As of 07:44 BST, Wednesday, 06 May, The Sage Group plc share price is 496.50p.