Sage H1 profit grows but Covid starting to dent customer acquisition

Accounting software company Sage reported a jump in half-year profit on Wednesday thanks to strong growth in software subscription revenue, but said business began to be impacted by the coronavirus outbreak towards the end of March.

In the six months to the end of March, pre-tax profit rose 40% to £275m on revenue of £975m, up 2% on the first half of last year. Recurring revenue growth, underpinned by a 26% increase in software subscription revenue to £582m, was driven principally by North America and Northern Europe, Sage said.

The dividend per share was lifted 2.5% to 5.93p.

Sage did however warn that it started to feel the effects of the pandemic from late March, with new customer acquisition in April roughly half the level previously expected. "We have also seen a slight increase in customer churn," it added.

Sage that while it performed "well" in the first half, it is too early to quantify with confidence the impact of the coronavirus pandemic on its financial performance for the full year. The company said it continues to expect, as announced in the 6 April trading update, that organic recurring revenue growth will be below the previously guided range of 8% to 9%, and that the decline in other revenue will accelerate "significantly" in the second half, with an associated impact on margin.

Chief executive officer Steve Hare said: "Sage has had a strong first half, sustaining last year's growth momentum as we continue to focus on recurring revenue growth, and making good progress in strategic execution.

"Despite the near-term uncertainties, I believe our continuing investment into Sage Business Cloud, together with our focus on customers, colleagues and innovation, form a strong base for the future performance of Sage."