Sage revenue momentum continues but payments provides caution

23rd Jul 2014 08:15

- 4.3% organic revenue growth in Q3- 4.7% organic revenue growth YTD- Subscriptions strong, payments weakSage has revealed its organic revenue growth slowed slightly to 4.3% in the third quarter, but that it expects growth to be much stronger in the final three months of its financial year.However, while an extremely strong subscriptions revenues drove growth, a weaker performance from payments in North America and software in Europe were causes of concern, along with continued exchange rate headwinds that were noted due to sterling's strength.Breaking with its own self-imposed convention of only providing qualitative interim statements, the Newcastle-based accounting software company said organic revenue increased by 4.7% in the first nine months of the year and that the business remained on course to achieve its 6% organic revenue growth target in 2015.Guidance for operating profit margin remains unchanged, while cash generation remains strong and the share buyback programme continued.Chief Executive Guy Berruyer said: "The performance of the business continues to be solid and the overall growth trajectory is on track. "Recurring revenue growth of 7%, driven by a strong subscription performance, demonstrates our business has momentum." The quarter benefitted from a 24.5% rise in subscription revenue that helped to drive this good organic recurring revenue growth and continue from where Sage left off in the first half. The growth in recurring revenue was achieved despite a weaker performance in payments, particularly in North America, where market-wide pricing pressure has contributed to revenue contraction during the quarter. "We remain cautious on the outlook for payments growth in the fourth quarter," the company said. Software and software-related services revenue also declined by 3.4% in the quarter, reflecting continued weakness in the mid-market in Europe, where Sage said it had been more difficult to predict the timing of when prospective deals will close. Shares in Sage were up and down in early trade, sitting down 1.1% at 376.8p at 08:20 after spiking earlier.OH