Subscriptions and contract retention rise Sage reports that its transformation remains on track and progress has been made in FY16 with a targeted organic operating margin of 27.2% (FY15: 26.5%) achieved for the full year. Revenue rose 9.3% to £1.57bn, with a slight rise in operating profit.
Phase one of the transformation is now complete, it says as it moves to a recurring revenue model:; general and administrative (G&A) expense as a proportion of revenue has reduced to 16.5% (FY15: 18.7%). The annualised savings of £51m secured within G&A which are being reinvested into go-to-market functions of sales and marketing, with an exceptional cost of £110m recognised in FY16 (£76m of which is associated to G&A savings);
Phase two of the transformation begins in FY17 with “increased focus on new customer acquisition through innovative new product launches and continued user experience improvements, Sage One paying subscriptions rose 81% to 313,000 subscriptions. 54% increase in Sage One revenue in the year; X3 revenue growth of 18% in the year and an increase in paying customers of 25%.
Stephen Kelly (above), Chief Executive Officer said: "FY16 saw Sage continue to deliver on the commitment made at our June 2015 Capital Markets Day to perform and transform. The organic revenue growth of 6% is driven by higher quality recurring revenue, which grew at the fastest rate in a decade. The strategy is working – with customers embracing closer relationships with Sage, evidenced by a 46% increase in the number of subscription contracts and a contract retention rate of 86%. "