UPDATE 1-Sage CEO to retire, says software group's growth on track

Thu May 8, 2014 6:34am EDT

Related Topics

* Guy Burruyer to step down by end-March 2015

* H1 operating profit up 8.9 pct

* Shares down 6 pct (Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, May 8 (Reuters) - Sage Group Chief Executive Guy Berruyer said on Thursday he would retire by March next year, sending the British software company's shares down more than 6 percent.

Berruyer said that by the time he retires the company would be on track to to grow organic revenue by 6 percent, the best rate during his four years in charge.

But Investec analyst Julian Yates said the retirement was unexpected and may raise questions over the 2015 targets.

"We still remain cautious about the group hitting its 6 percent organic growth target, while necessary investment in the business is likely to cramp margin expansion," he said.

Shares in Sage, which have risen by 52 percent since Berruyer took over in October 2010, fell to five-month lows after Berruyer announced his departure along with half-year results that were just shy of analysts expectations.

Shares were trading down 5.5 percent at 399 pence at 1024 GMT, the worst performing stock in the FTSE 100.

"I am signaling I am going to retire but I'm not leaving now," Berruyer said in an interview on Thursday. He said he would be 64 next year and he had many other ambitions to fulfill, including climbing Mont Blanc.

"We now have some momentum in the business," he said. "Some of our technology initiatives are staring to pay off, and they will continue beyond 2015, and that has led us to affirm our 6 percent organic revenue growth target for 2015."

Berruyer has focused on growing subscriptions from the group's more than six million small- and medium-sized business customers, countering a tough environment for software sales to new enterprises, particularly in Europe.

Sage, which sells software to run accounts and payroll, said organic revenue grew 4.9 percent in the six months to end-March to 657 million pounds ($1.11 billion).

Organic operating profit rose 8.9 percent to 180 million pounds, compared with expectations of 184.3 million pounds, although margins were in line at 27.4 percent, 100 basis points up on a year ago.

"The recurring part of our business is going very well, with 7 percent organic revenue growth, and that's a very solid basis for our future," Berruyer said, adding that 72 percent of the group's revenue was now recurring. ($1 = 0.5894 British Pounds) (Editing by Kate Holton and Susan Thomas)

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