Sage shares take a hammering as sales forecasts revised down

SHARES IN Sage Group tanked on Friday as the software firm revised down its forecast for annual sales following a poor first half.

The company said its organic revenue growth in the first six months of the year came in below management’s expectations, reflecting “inconsistent operational execution”.

Sage booked organic revenue growth of 6.3 per cent in the 26 weeks to March, down from last year’s 7.4 per cent, as it was hit by a decline in recurring revenue and contract licence slippage in enterprise. Growth in Northern Europe and the Africa and Middle East regions was below its expectations and Sage lowered its full-year guidance to 7 per cent organic revenue growth, down from 8 per cent. Boss Stephen Kelly, said: “Growth in half one 2018 was lower than our expectations as the pace of execution has been slower than we planned. “The revised revenue guidance targets for full-year 2018 reflect both the performance in half one, but also our diligence in ensuring that we focus on recurring revenue to drive sustainable acceleration.”

Shares tumbled 17 per cent in morning trade to 552p as investors digested the news.

Recurring revenue growth fell from 11.1 per cent to 6.4 per cent in the period while software subscription increased 25.3 per cent, a slowdown on last year’s 30.7 per cent.

However, Sage maintained guidance for a full-year 27.5 per cent organic operating margin, adding that its rolling mid-term expectation remains that organic revenue growth will reach 10 per cent on a “sustainable basis”.