Sage Group plc (LON:SGE), the leader in accounting, financial, HR and payroll technology for small and mid-sized businesses, has issued a trading update for the three months ended 31 December 2022[1].
Jonathan Howell, Chief Financial Officer, commented:
“Sage has made a strong start to the year, in line with our expectations, as Sage Business Cloud solutions help more customers improve their productivity and resilience. While we are mindful of the current macroeconomic environment, we remain confident in our strategy for delivering efficient growth and we reiterate our guidance for the full year, as set out in our FY22 results announcement.”
| Underlying Revenue Performance[2] | Q1 23 | Q1 22 | % Growth | Organic % Growth |
| Revenue by Category | ||||
| Recurring Revenue | £517m | £460m | +12% | +12% |
| Other Revenue (SSRS[3]) | £23m | £33m | -29% | -27% |
| Total Revenue | £540m | £493m | +10% | +9% |
| Recurring Revenue by Region | ||||
| North America | £235m | £198m | +18% | +16% |
| UKIA | £151m | £135m | +12% | +10% |
| Europe | £131m | £127m | +3% | +6% |
| Recurring Revenue by Portfolio | ||||
| Future Sage Business Cloud Opportunity | £479m | £422m | +14% | +13% |
| of which Sage Business Cloud | £390m | £298m | +31% | +28% |
| Non-Sage Business Cloud | £38m | £38m | 0% | +1% |
Recurring revenue increased by 12% to £517m, underpinned by a 31% rise in Sage Business Cloud revenue to £390m. Software subscription revenue grew by 18% to £422m (Q1 22: £357m), resulting in subscription penetration of 78% (Q1 22: 73%).
Regionally, in North America recurring revenue increased by 18% to £235m, with a strong performance from Sage Intacct alongside growth in cloud connected products. In the UKIA region, recurring revenue grew by 12% to £151m, driven by continued success in cloud native solutions including Sage Intacct and Sage Accounting, together with growth in Sage 50 cloud connected. In Europe, recurring revenue increased by 3% to £131m, with growth across the Sage Business Cloud portfolio partly offset by the disposal of the Swiss business in FY22. Organic recurring revenue growth, which excludes the disposal impact, was 6%.
In terms of recurring revenue by portfolio, the Future Sage Business Cloud Opportunity (products within, or to be migrated to, Sage Business Cloud) grew by 14% to £479m. This was driven by 45% growth in cloud native recurring revenue (35% on an organic basis) to £141m (Q1 22: £98m) primarily through new customer acquisition, as well as further growth in cloud connected supported by migrations. Sage Business Cloud penetration increased to 81% (Q1 22: 71%), enabling more customers to connect to Sage’s digital network.
Other revenue (SSRS) decreased by 29% to £23m, in line with our strategy to transition away from licence sales and professional services implementations.
Total revenue increased by 10% to £540m. On an organic basis (excluding the impact of M&A), total revenue growth was 9%.
Foreign exchange
Sterling has weakened against the US Dollar and the Euro, leading to an exchange rate tailwind.
Analyst and investor conference call
Sage Group CFO Jonathan Howell will host a webcast and conference call today at 8.30am UK time. The webcast can be accessed via the following link: https://edge.media-server.com/mmc/p/vjzkrh3f. To join the conference call, please register via: https://register.vevent.com/register/BI5f4628e0a0484ad5935bb75b71c977a2.
