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Friday 13 April 2018

Sage warns on revenues

sageSage Group this morning issued a revenue warning citing "inconsistent operational execution” over the last six months. At the time of writing Sage’s share price has fallen 12% today on top of the 16% decline since the beginning of the year. 

Organic revenue growth for H1 18 was 6.3% (H1 17: 7.4%) impacted by two main factors: a decline in recurring revenue growth to 6.4% in H1 18 (H1 17: 11.1%) and contract licence slippage in the enterprise segment. Contract slippages appear to be related to sales execution issues in the African and Middle Eastern business whilst the decline in recurring revenue growth is being felt in Northern Europe (which covers the UK).

Sage has revised down FY18 revenue guidance from around 8% organic growth to around 7%. Guidance for organic operating margin of 27.5% remains unchanged reflecting the impact of existing cost reduction measures already creating efficiencies in the back office.

Management stressed that it believes the overall market opportunity for Sage, as outlined at its recent Capital Markets Day (CMD) 2018, remains unchanged. This set out the company’s goals to 2020 and you can read our takeaways on that here. Clearly however, the plan has not got off to the best of starts and even if the market opportunity remains unchanged whether and how today’s announcement delays things remains to be seen.

Elsewhere in the update Sage stressed some of the positives of H1 notably the growth of Sage Business Cloud, with ARR of over £335m, growing at 57%, double digit growth in North America and overall organic operating margin of 24.5% in line with expectations.

Sage’s Management promised more details on the issues and an outline of plans to address them when the H1 18 results are announced on 2nd May.

Posted by Marc Hardwick at '09:19' - Tagged: software  

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