Like, subscribe and comment: Sage takes a breath as cloud sales bounce

'Encouraging' numbers as it switches from licensing to subs push

Shape-shifting accounting software biz Sage issued a trading update this morning and the good news - for investors at least - is that it didn't contain any nasty surprises, but did highlight a bounce in cloud sales.

After a less than vintage year for the company that saw it part with CEO Stephen Kelly following operational missteps that dragged down sales, and led to missed forecasts, things appear to be more stable.

For Q1 of fiscal '19 ended 31 December 2018, organic revenue jumped 7.6 per cent to £465m, which Sage said "reflects growth in products within, or to be migrated too, Sage Business Cloud of 9.3 per cent to £380m and a slight increase of 0.6 per cent to £85m in products with no current path to the Sage Business Cloud".

Sage is battling cloud native upstarts and so converting as many of its number crunching customers to the services model has been imperative - getting there is easier said than done.

Within the group sales, recurring revenue was up 10.5 per cent to £387m, "underpinned" by software subscription growth of 27.7 per cent to £237m, continuing the uplift seen at the close of the previous financial year.

Classic on-premise software and service related sales declined 5.8 per cent to £65m, "reflecting the managed decline in licenses as the business transitions to subscription".

Geographically, North America ops turned over £154m in sales, up 10.4 per cent, fuelled by cloud connected stuff and Sage Intact, the US seller of financial manager wares. The UK and Ireland division showed stronger signs of life by growing 5.9 per cent to £96m. France was up 5.8 per cent to £69m. Other regions trading output was said to be in line.

The latest CEO to take control of Sage, Steve Hare, who was previously the company’s CFO, said late last year the business had addressed the causes of the "inconsistent execution" that slowed recurring revenue gains in Britain and caused a slide in its Business Cloud Enterprise Management (formerly X3 ERP) numbers.

Hare said today:

"We have been encouraged by the strong start to FY19, reflecting renewed focus on high-quality subscription and recurring revenue as we continue the journey to becoming a great SaaS business." ®