Sage Group's FY18 results saw an improved second half to demonstrate progress after the poor first six months, which lead to the company looking for a new CEO to help accelerate cloud sales growth.
There was 6.8% organic revenue growth for the year, reaching £1.82bn, and underlying operating profits from continuing operations were up 9% to £504m. There was also an improvement in recurring revenue growth, with the full 12 months seeing this metric improve 6.7% to £1.4bn. Recurring sales now represent 79% of total revenue.
Within the recurring revenue segment, the subscription component saw healthy growth of 25.2% to £839m.
Steve Hare, new Sage CEO (pictured), said: “Sage has shown stronger performance in the second half of FY18. The renewed focus on high-quality subscription and recurring revenue has generated momentum as we exited the year. As CEO I will put customers, colleagues and innovation at the heart of everything we do to accelerate the transition to becoming a great SaaS business.
“That means investing further resources in Sage Business Cloud, a continued commitment to customer success and a culture which values individuals and promotes collaboration. Increased investment in these areas will lead to an acceleration in high-quality sustainable recurring revenue growth.”
Hare plans to increase R&D around Sage Business Cloud, invest internally to improve customer and employee experience, and simplify the company's product offering. The move is expected to incur £60m in operating expenses in FY19, along with a drop in the operating margin to 23%-25%, compared to 27.8% in FY18.
News of these costs were probably the cause of a 5% dip in the company's share price today, but at least the company can't be accused of inaction when it comes to trying to grow its cloud business, much of it supported by service providers.
