Profits up for Sage as it buys stake in software firm

ACCOUNTING SOFTWARE business Sage has recording higher-than-expected revenues as it restructures its business to compete with cloud-based software firms.

The FTSE 100 company reported a 6% increase in organic revenues from £703m to £747m in results six months ended 31 March 2016. However, operating profit dropped 15.1% compared to the same period last year, from £179m to £152m.

Sage put this down to ‘planned investments’, but said it expects to meet the full year operating margin guidance of at least 27% in the second half of the year.

Sage, which is in the middle of a product transformation following increased competition from cloud-based accounting service firms Xero and Intuit, reported a 100% increase in year-on-year paying subscriptions for Sage One, its cloud solution for small businesses.

It also reported software subscription growth of 35.5% in line with its ‘planned transition’.

Stephen Kelly, Sage’s chief executive officer since 2014, said the figures represent a ‘good start’ to the financial year, but admits that ‘there is still much to do in the transformation’.

“In this phase of the transformation, we have been very focussed on improving the capability of our management and creating a culture where customer obsession and innovation becomes a way of life at Sage.”

Sage also announced this week that it has purchased over 20% of privately-owned software developer Fairsale, for a reported figure of £10m.

Fairsail will become the cloud HCM platform of choice to accompany Sage’s X3 business management solution which serves midsize enterprise businesses worldwide. As part of the deal, Sage will also make a minority investment and take a seat on the board.

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