(Reuters) - British software maker Sage warned it would not meet its full-year sales target after a disappointing first half it blamed on “execution issues” and weak UK subscription sales, sending its shares down as much as 20 percent on Friday.
In an unscheduled statement, the company said it now expected organic revenue growth for the year to end-September to be about 7 percent, lower than its previous forecast of about 8 percent rise for the year to September.
Sage’s shares, which were down almost 12 percent at 0930 GMT, were on track for their biggest intraday percentage fall in around 25 years and were the biggest drag on the UK blue chip index.
Sage’s small-business customer base in Britain has been hit by economic uncertainty as the UK negotiates the terms of its exit from the European Union in a year’s time.
“Growth in (first half 2018) was lower than our expectations as the pace of execution has been slower than we planned,” Chief Executive Stephen Kelly said in a statement, adding that the firm would provide an update when it publishes interim results on May 2.
Sage supplies accounting, payroll and human-resources software to millions of small businesses, which it has been trying to migrate to cloud-based subscription services from packaged software, like most of its competitors.
But much of its growth has come through acquisitions in recent years to help offset a difficult multi-year transition to delivering accounting and other software via the cloud.
Sage said organic revenue growth, which strips out the effect of acquisitions, slowed to 6.3 percent for the six months to March 31 from the 7.4 percent growth in the year-ago period.
Software subscription growth fell to 25.3 percent from 30.7 percent a year earlier, while recurring revenue growth slowed to 6.4 percent from 11.1 percent.
Sage said both were below its expectations, with Northern Europe, Africa and the Middle East performing poorly.
The company reiterated its rolling mid-term guidance of organic revenue growth of 10 percent.
Investors have grown impatient with its failure to deliver a promised growth acceleration. Analysts at Investec said the company could likely sustain organic revenue growth of just 5-6, and that attempts to accelerate beyond this were “questionable”.
Reporting by Radhika Rukmangadhan in Bengaluru and Eric Auchard in London; Editing by Amrutha Gayathri/Keith Weir