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 2021.
Financial performance
| Organic Revenue Mix[1] | Q1 22 | Q1 21 | Growth | |
| Revenue by Category | ||||
| Recurring Revenue | £429m | £398m | +£31m | +8% |
| Other Revenue (SSRS[2] & Processing) | £29m | £37m | -£8m | -22% |
| Organic Total Revenue | £458m | £435m | +£23m | +5% |
| Portfolio View of Recurring Revenue | ||||
| Future Sage Business Cloud opportunity | £394m | £357m | +£37m | +10% |
| of which Sage Business Cloud | £280m | £232m | +£48m | +21% |
| Non-Sage Business Cloud | £35m | £41m | -£6m | -15% |
| Recurring Revenue | £429m | £398m | +£31m | +8% |
Recurring revenue grew by 8% to £429m, underpinned by a 21% rise in Sage Business Cloud revenue to £280m, with continued strength in new customer acquisition. Software subscription revenue grew by 13% to £336m (Q1 21: £296m), increasing subscription penetration to 73% (Q1 21: 68%).
Regionally, North America achieved growth in recurring revenue of 11% to £174m (Q1 21: £157m) reflecting further strength in Sage Intacct, together with growth in cloud connected products. In Northern Europe, recurring revenue increased by 7% to £102m (Q1 21: £96m), driven by accelerating growth in cloud native solutions including Sage Accounting and Sage Intacct. In International, recurring revenue increased by 5% to £152m (Q1 21: £145m), with growth across Sage Business Cloud supported by further progress in migrations.
In terms of the portfolio view of recurring revenue, the Future Sage Business Cloud opportunity (products within, or to be migrated to, Sage Business Cloud) grew 10% to £394m. This was driven by strong growth in cloud native revenue of 44% to £90m (Q1 21: £62m) primarily through new customer acquisition, as well as further growth in the cloud connected portfolio. Sage Business Cloud penetration increased to 71% (Q1 21: 65%).
Other revenue (SSRS and processing) decreased by 22% to £29m, in line with our strategy to transition away from licence sales and professional services implementations.
Total Group revenue increased by 5% to £458m.
On 17 January 2021, Sage completed the previously announced acquisition of Brightpearl, a cloud native multichannel retail management system for the retail and ecommerce vertical. The acquisition accelerates our strategy for growth, including scaling Sage Intacct, broadening the value proposition for mid-sized businesses and expanding Sage’s digital network.
Foreign exchange
Sterling strengthened in the quarter against the US dollar and Euro, leading to an exchange rate headwind.
Analyst and investor conference call
Jonathan Howell will host a conference call at 8.30am UK time, which can be accessed via the following link https://edge.media-server.com/mmc/p/44qb4uyo. The call may also be accessed using the dial-in number 0800 279 6619 (United Kingdom) or +44 (0) 20 7192 8338 (International) and pin code 4589027.
Jonathan Howell, Chief Financial Officer, commented:
“Sage has made a strong start to the year, accelerating growth in line with expectations. Sage Business Cloud has performed particularly well, driven by continued growth in both cloud native and cloud connected solutions, as we execute on our strategy to be the trusted network for small and mid-sized businesses. Accordingly, we reiterate our guidance for the full year, as set out in our FY21 results announcement.”
