Sage regains top-line momentum

Crucial to that transformation - a word used 19 times in the results release - is the migration of customers to a subscription-based model, which will help increase the proportion of recurring revenue, or what chief executive Stephen Kelly describes as "customers for life". Software subscriptions rose 31 per cent, which pulled overall recurring revenue up by more than a fifth. Such turnover now makes up more than three-quarters of the overall top line.

There is further evidence of Sage's quality further down the income statement. The half-year operating margin is stable at 25 per cent and management expects this will once again rise to 27 per cent by the year-end. Operating profit rose a tenth to £229m, and 104 per cent converted into operating cash flow.

Acquisitions have helped Sage deploy some of its cash. In the period, it bought Fairsail - now rebranded as Sage People - which enhances the group's payroll software offering, and cloud accounting business Compass. Meanwhile, the group has put its North American Payments business - which was flagged as struggling at the full-year stage - up for sale. Stripping out results from this division further flatters these numbers.

Overall, half-year revenue was up 6.4 per cent on what management describes as an "organic" basis, driven by strong demand for new cloud accounting products Sage One and Sage Live in Northern Europe. Management expects this growth rate to continue for the remainder of the year and, with currency still playing in the group's favour, broker Numis thinks this will translate to a 19 per cent increase in pre-tax profit to £480m, giving adjusted EPS of 32.6p (from £405m and 27.9p in FY2016).