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Sage enjoys revenue rise

2/02/2016 by Sharon Shahzad


Despite experiencing an international slowdown, Sage has revealed that its revenue has risen. The UK-based accounting software group said that growth had slowed outside Europe; however, this had not dampened local revenue, with everything on track to meet its 2016 targets.

Sage is currently undergoing a major revamp as the organisation moves away from traditional on-premise products and towards cloud solutions. Having become chief executive in November 2014, Stephen Kelly set out key targets, including wanting to boost operating margin by at least 27 per cent and organic revenue growth by 6 per cent. On 27th January the firm revealed the three months leading to the end of 2015 had seen a 6.6 per cent rise in organic revenues; however, it was quick to warn that while the “group’s performance was led by good growth in Europe, [it was] balanced by a slower performance in the international region. Growth in Africa has remained strong but was slower in some other geographies.”

As Sage’s fiscal year results for 2014 were released in December, it was explained that more than half of the organisation’s total revenues stem from European business. One-third of revenues, meanwhile, come from North American business. Chief Financial Officer Steve Hare said the figures are largely “in line with expectations,” adding: “Our business transformation is on track and we are focused on its execution to realise our long-term plan for sustainable and improved quality growth.”

Sage was traditionally tasked with installing solution in its clients’ officers rather than offering solutions via the cloud; however, nimbler start-ups have encroached on its territory, with Intuit, NetSuite and Xero all taking a chunk of business by providing simply web and cloud-based options.

Looking to the future, Mr Kelly continues to argue that the following two years are a transitional period for Sage, after which the company should note faster growth. His comments come after some analysts have noted that the organisation’s current targets are rather conservative and, in fact, the business should have higher ambitions. To counter these remarks, Sage has said that for those looking at its long-term health, recurring revenues should play a large part, particularly as it moves clients from the traditional practice of paying licence fees to subscription payment models.

In the first quarter of 2015, for example, there was a 10.4 per cent rise in recurring revenues as a result of more firms taking on subscriptions; however, organic software revenues dropped by 5.3 per cent overall “as a reflection of the planned transition to subscription relationships and therefore less upfront revenue from new licences and upgrades.”

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