Sage's revenue miss spooks investors

Software vendor blames 'inconsistent operational execution' as sales fall short of expectations

Sage's share price fell almost 19 per cent today after the vendor revealed it had fallen short of revenue growth expectations.

In a trading update, the accountancy software vendor said its organic revenue growth for the six months ending 31 March 2018 was 6.3 per cent, down from 7.4 per cent in the same period last year.

Recurring revenue growth was down to 6.4 per cent, from 11.1 per cent in H1 2017.

The vendor has now brought down its revenue growth estimate for the full year to seven per cent, from eight per cent.

Sage's share price fell as much as 18.6 per cent when the London Stock Exchange opened this morning.

"Growth in H1 2018 was lower than our expectations as the pace of execution has been slower than we planned," said Sage CEO Stephen Kelly.

"The revised revenue guidance targets for FY18 reflect both the performance in H1 2018, but also our diligence in ensuring that we focus on recurring revenue to drive sustainable acceleration throughout the rest of FY18 as a platform into FY19."

Recurring revenue growth has been hit hardest, the trading update said, down from 11.1 per cent in H1 2017 to 6.4 per cent this year, which it attributed to "inconsistent operational execution".

Software and services growth declined 0.2 percentage points, which Sage blamed on "slippages" in enterprise licensing contracts in the US, Africa and the Middle East. However the vendor expects some of this to be rectified in the second half of the year.

The North America market performed well, at double-digit growth, but the EMEA region disappointed.

Sage is set to publish its full H1 results on 2 May.