Sage raises organic recurring revenue growth forecast to 11%

Sage, a British provider of software to small and medium-sized companies, upgraded its full-year organic recurring revenue growth forecast to around 11% on Wednesday after it saw a strong uptake of cloud services in its first half.

It had previously expected growth to be above the 9.4% level achieved in its last financial year.

Shares in Sage, which provides software for accounting, payroll and other business processes, rose 4% to a 16-month high of 858 pence on Wednesday, topping the FTSE 100 index.

Chief Executive Steve Hare said growth was coming from the cloud services it has developed in recent years, with customers in North America, Britain and Europe and Africa contributing.

“We’re seeing small and mid-size businesses looking to digitally transform their own businesses,” he said in an interview.

Revenue from Sage Business Cloud grew 29% in the six months to end-March, he said, with penetration rising 10 percentage points to 82%.

Underlying operating profit increased by 14% to 227 million pounds ($287 million) in the period, with its margin increasing by 60 basis points to 20.8%, the company said.

Hare said Sage was excited about the possibilities of generative AI.

“We already have significant AI built into our products,” he said. “But this next generation of generative AI is very exciting in terms of the ability for us to deliver more productivity to our customers and also benefit from it ourselves within Sage.” Reuters