Shares Of Sage Rise Amidst Progress On Journey Into The Clouds

Advertisment

This morning, the share price of Sage rose as it released new evidence that its transition to the cloud is going well underway.

The accounting software company observed group organic revenue increase by 7.6 percent to £465 million for the three months to the end of December, sending its shares up by 7.4 percent to 636.8p in early morning trading.

The growth was kindled by the recurring revenue from the cloud subscription products of Sage, which rose by 10.5 percent to £387 million at the expense of its traditional software revenue, which dropped by 5.8 percent to £65 million.

The decline reflected the managed drop in traditional software licences as its customers switch to over-the-air software updates that are delivered via the cloud.

Steve Hare, the chief executive of the company, said that the growth emphasises the strength of the new direction of Sage. Hare moved from his position as CFO in the wake of the departure of Stephen Kelly, the former boss of the firm, last August.

He added: “We have been encouraged by the strong start to the financial year 2019, reflecting the renewed focus on high-quality subscription and recurring revenue as we continue the journey to becoming a great software-as-a-service business.”

He cotniniued: “Looking ahead we reiterate our full year guidance for FY19 as outlined at the FY18 results announcement.”

Sage urged Kelly to step down from his position at the end of summer after revealing that it is required to sign a number of last-minute deals to meet its guidance for 2018.

Some analysts said that the firm has struggled to migrate customers from traditional software licences to Sage Business Cloud subscriptions.

However, the performance in the UK and Ireland showed some signs of recovery with sales increasing by nearly six percent to £96 million over the period, while North America increased by 10.4 percent to £154 million.

In France, the sales picked up by nearly six percent to £69 million. It was driven by recurring revenue.

The update comes days after the announcement of the company of the sale of its payroll arm to iSolved HCM as it attempts to streamline its operations.