Profit falls 31% at software group Sage

Profit has tumbled by nearly a third in the last half-year at software giant Sage, but it also expects to reach the upper end of forecasts this year.

The business said that pre-tax profit dropped 31% to £190 million in the six months to the end of March. Revenue also dropped, by 4% to £937 million.

However, the business pointed to its organic recurring revenue, a separate measure which essentially catches subscriptions. This rose 4.4% to £811 million over the period.

“Sage performed strongly in the first half against tough comparators, with continued recurring revenue growth and increasing levels of new customer acquisition, principally in cloud native solutions,” said chief executive Steve Hare.

These signs now mean that Sage thinks organic recurring revenue looks set to register growth towards the top end of its previous 3% to 5% guidance.

It also expects a drop in other types of one-off revenues, reflecting the company’s plan to move towards a more subscription-based model which can allow it to lock in recurring sales for many years.

Mr Hare said that the company sees a way out of the economic disaster brought by the pandemic through its small customers.

“Our deep sense of purpose and experience of supporting small and medium-sized businesses through change has equipped us well to play a vital role throughout the pandemic, and I am proud of the way our colleagues around the world have shown dedication to our customers and partners,” he said.

“We believe that small and medium-sized businesses will lead the recovery, and I am confident that our strategic investment in Sage Business Cloud will continue to accelerate growth, as customers become stronger and more digitally-enabled.”

Shares in the company rose by more than 3% on Friday morning following the update.