Sage plc (SGPYY) , a U.K. enterprise software company, briefly topped the FTSE 100 Wednesday after reporting robust revenue growth and higher operating profit margins, setting expectations for sustained momentum for the coming year.
Sage shares rose as much as 1.1% in early London trading before paring gains to change hands 0.63% higher at 678 pence each, extending the year-to-date advance to 12.34%.
The Newcastle-based company, which offers software for accounting, HR, and business management, said revenue advanced 6.1% to £1.57 billion ($1.96 billion) for the year ended September 30. Operating profit margin expanded to 27.2% from 26.5%.
Sage attributed revenue growth to a 32.3% jump in subscriptions, accelerating from a 28.9% increase in the previous year, reflecting the company's transition from SSRS. Subscription contracts surged 46% to over 1 million, while the retention rate advanced to 86% from 84%. Revenue growth accelerated in Europe, Africa, and Brazil and remained consistent in North America, but slowed in Asia due to a one-off regulatory change.
"The organic revenue growth of 6% is driven by higher quality recurring revenue, which grew at the fastest rate in a decade," said CEO Stephen Kelly. "The strategy is working - with customers embracing closer relationships with Sage, evidenced by a 46% increase in the number of subscription contracts and a contract retention rate of 86%.
For 2017, the company forecasts revenue growth of at least 6% and operating margin of at least 27%.