Britain's Sage feels sales hit from crisis, but hikes dividend

LONDON (Reuters) - Sage Group's SGE.L sales to new customers in April were roughly half the level expected as it felt the effects of a sharp economic downturn caused by the coronavirus pandemic.

The supplier of software to small and medium sized firms said on Wednesday its organic revenue growth rose 5.7% to 935 million pounds ($1.15 billion) and organic operating profit was up 3% to 213 million pounds for the six months to end-March.

Sage said it still expected recurring revenue to grow in the full year, but it would not be at the 8% to 9% it had previously targeted. Organic recurring revenue rose by a better-than-expected 10.3% in the first half.

“We don’t know what the level of new customer acquisition will be and also we don’t know what the level of existing customer churn will be because of the potential business failures,” Chief Executive Steve Hare said.

Sage bucked a trend among major companies of cutting dividends by raising its half-year payout by 2.5% to 5.93 pence a share.

The company’s balance sheet had been strengthened by the proceeds of a disposal and the cancellation of a share buyback.

“We have the financial resources,” Hare told Reuters. “We are not making use of any government support schemes, we are not furloughing any of our people and I think it’s important that we continue to support all of our stakeholders.”

Hare said Sage was offering support to some customers who were struggling to pay monthly subscriptions after their own revenues were wiped out by lockdown measures.

“We are having lots of conversations with our customers,” he said. “On a case-by-case basis we are offering some payment forgiveness short-term, it is very much a targeted approach.”

Sage shares were up 3% at 675 pence at 0900 GMT

Reporting by Paul Sandle; Editing by Louise Heavens and Alexander Smith