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Sage maintains double-digit growth in Africa

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 03 Dec 2015
Ivan Epstein, president of Sage International, says he is pleased with double-digit growth coming out of Africa.
Ivan Epstein, president of Sage International, says he is pleased with double-digit growth coming out of Africa.

Software firm Sage maintained a double-digit growth financial performance in its African operations but had investors confused by changes to how it reported its revenue for the previous financial year.

The British integrated accounting, payroll and payment systems company saw organic revenue of £92 million (R1.9 billion) for its African business, which represents sustained organic growth of 16% for the 12 months to September. This was up from 15% growth last year and was supported by double-digit organic growth in processing and recurring revenue.

Organic revenue grew 14% in Sage's international business in general, which is made up of Brazil, Australia, the Middle East, Asia and Africa.

Sage says the enterprise market in Africa continues to perform well, with all key products delivering double-digit growth.

"The contribution of revenue from sales outside of South Africa supported the result, representing 15% of total Africa revenue and growing 22% organically."

"We are pleased to have met the group financial targets set three years ago and to be showing strong momentum with our global transformation programme," according to Ivan Epstein, president of Sage International.

He says the company is pleased with the solid organic growth seen across the international region, including a robust performance in Africa, and he looks forward to sustained progress across the region in the next financial year.

Revenue changes

The group's organic revenue grew by its target of 6% and the company believes it will equal or better the performance in its new financial year.

However, Reuters reports investors were confused by the changes Sage made to the way it booked its revenue, leading to a lower forecast for profitability and knocking its shares.

Sage Group reported full-year organic revenue of £1.36 billion (R29 billion) and operating profit of £383 million (R8.2 billion) after it improved its profit margin by 70 basis points to 28%, in line with its guidance.

The group saw increased organic recurring revenue of 9%, with software subscription being the primary driver. Software subscription contracts grew to over 690 000 in the last year and achieved 28% growth in the annualised value of the software subscriber base.

The company says under its revised revenue definition, it would target an operating margin of 27% this year.

"We've called out some changes in the way we record revenue, which results in slightly higher revenue, but the profitability remains the same," FD Steve Hare told reporters.

"At some point over the course of the next few years, you will start to see that operating margin increasing."

Sage, which supplies millions of small businesses with accounting and other software, has been simplifying its product range, and improving its sales and customer support operations under the leadership of Stephen Kelly, who joined just over a year ago.

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