Sage shows its wisdom

Sage's software subscription revenues leapt 29 per cent, sending organic recurring revenue up 8 per cent to almost £500m. The group also grew the subscriber base for Sage One, its cloud solution for smaller businesses, by more than a third to 115,000. That fuelled a 16 per cent rise in the annualised value of its subscriptions to £260m.

Non-recurring software and service revenues rose about 2 per cent to £183m. That reflected several one-off gains, including new goods and sales tax legislation in Malaysia that left local businesses scrambling to become compliant. Management expects a second-half slowdown.

Underlying sales and operating profits rose in all three of Sage's regions. The division covering Africa, Australia, the Middle East and Asia proved particularly buoyant, with profits up by a quarter at £22m. Sales growth in Europe - the biggest region - also accelerated from 3 to 5 per cent. That was partly due to strong demand for Sage 50 Payroll and Accounts, Sage One and Sage 200 in the UK and Ireland, which drove up subscription revenues.

Less encouragingly, the group's global enterprise solution, Sage ERP x3, underperformed in the French mid-market. Moreover, tepid demand from enterprises in Europe and small- and mid-sized businesses in North America is keeping management cautious.

As part of its longer-term growth strategy, Sage made several organisational and product changes. For example, it replaced local functions such as marketing, finance and IT with global departments. Sage's chiefs in Europe and the Americas both resigned, too. It inked a global deal with Salesforce to use the US cloud-computing titan's platform to improve collaboration and productivity across the business. And it shelled out $158m (£98m) for US payroll and human resources specialist PayChoice, which should entrench Sage's foothold in the key US payroll market.

Broker Panmure Gordon expects pre-tax profit of £359m, giving EPS of 24p (from £330m and 22.7p in 2014).