Sage share price rallies as group reports software subscription growth

Shares in The Sage Group (LON:SGE) have soared in London this morning as the software specialist posted a rise in revenue for the first quarter of its financial year, underpinned by growth in subscriptions. The update comes after the company, which is transitioning to a subscription-based model, revealed earlier this week that it had inked a deal to sell its US payrolls business.

As of 09:46 GMT, Sage’s share price had jumped 5.70 percent to 626.80p. The shares are outperforming the broader UK market, with the benchmark FTSE 100 index having fallen into negative territory and currently standing 0.48 percent lower at 6,829.51 points.

Sage posts Q1 results

The Sage Group announced in a statement this morning that its organic revenue had increased 7.6 percent to £465 million for the three months ended December 31. The software specialist’s recurring revenue meanwhile rose 10.5 percent to £387 million, underpinned by software subscription growth of 27.7 percent to £237 million, assisted by softer comparators and with the company continuing to focus on subscription. Software and software related services meanwhile dipped by 5.8 percent to £65 million reflecting the managed decline in licences.

“We have been encouraged by the strong start to FY19, reflecting the renewed focus on high-quality subscription and recurring revenue as we continue the journey to becoming a great SaaS [software as a service] business,” Sage’s chief executive Steve Hare commented in the statement, adding that the company reiterated its full-year guidance.

Analyst ratings update

Shore Capital reiterated its ‘buy’ rating on The Sage Group today, without specifying a price target of the shares. According to MarketBeat, the blue-chip software specialist currently has a consensus ‘hold’ rating and an average valuation of 628.33p.

As of 09:54 GMT, Thursday, 17 January, The Sage Group plc share price is 626.80p.