(Adds CEO comments, analyst reaction, shares)
By Paul Sandle
LONDON, May 14 (Reuters) - British software company Sage
reported a better than expected 4.4% rise in organic
recurring revenue in the six months to end-March and said it now
expected growth for the year to be towards the top end of its 3%
to 5% range.
The company, which provides software to small and medium
sized businesses, is increasing investment in subscription
products based in the cloud, squeezing margins in the current
year by 3 percentage points.
Chief Executive Steve Hare said recurring revenue for Sage
Business Cloud increased 18% year-on-year.
"The second quarter was our fastest quarter of sequential
ARR (annualized recurring revenue) growth since 2019," he said
in an interview.
"So I think we can see the kind of optimism and confidence
coming through from our customers, and also their desire to
really now invest in technology."
Shares in Sage, which have risen 1% in the last 12 months,
were trading 3% higher in early deals, topping the FTSE 100
index.
The results and the confident tone from management prompted
JP Morgan-Cazenove to upgrade its recommendation to "neutral"
from "underweight".
"We believe the margin has been de-risked and revenue growth
is likely to accelerate from here as COVID impacts diminish
throughout the year," they said.
Sage said its organic recurring revenue increased to 811
million pounds ($1.14 billion), offset by a 21% decrease in
other revenue.
Its organic margin decreased to 20.2% from 23.2% in the same
period a year ago, resulting in organic operating profit
declining 12% to 180 million pounds.
($1 = 0.7121 pounds)
(Reporting by Paul Sandle; editing by Costas Pitas and Jane
Merriman)