Terry Smith and Nick Train suffer as Sage shares slide 15%

Shares in British software firm Sage, owned by a slew of big shareholders including Terry Smith and Nick Train, have taken a major hit after the group missed its revenue growth target.

The software group confirmed that organic revenue growth was “below management’s expectations” over the six months to 31 March, thanks to a decline in recurring revenue and lukewarm subscription growth.

Organic revenue grew by 6.4% over the period, compared with 7.4% in the first half of last year, while recurring revenue growth nearly halved, falling from 11.1% to 6.4%.

Although its North American operations delivered double-digit growth, this was offset by poorer performance in Northern Europe and Africa Middle East, which the firm said was down to “inconsistent execution”.

This prompted the software firm to revise its full year earnings guidance by 1%, from 8% organic revenue growth to 7%. Organic operating margins would remain constant at 27.5%, it said.

Its shares opened more than 15% lower at 570.6p as the market opened on Friday, down substantially from their closing price of 672p. Year-to-date, shares in the British software company are down 26%.

Sage’s lower earnings guidance was sour news for the group’s star-studded crop of major shareholders, which includes some of the UK’s biggest investors like Smith of Fundsmith and Train of Lindsell Train.

The tech company makes up a decent weighting in Train’s Lindsell Train UK Equity fund, comprising 3.69% of the portfolio. His Finsbury Growth & Income Trust has a more modest holding of 0.93%.

However, Smith (pictured) has the highest concentration of shares in one fund. Whereas Standard Life Aberdeen’s position is spread out over multiple portfolios, with 3.59% in Standard Life Investments funds and the rest in vehicles belonging to Aberdeen Asset Management, Smith’s entire 4.95% stake is in his Fundsmith Equity Fund.

SLA currently has the largest stake in the FTSE 100 tech firm, owning 7.84% of the business or around 85 million shares. Blackrock and Lindsell Train are the second and third largest shareholders, with a 6.57% and 5.27% stake respectively.

Six largest Sage shareholders

Standard Life Aberdeen7.84%
Blackrock6.57%
Lindsell Train5.27%
Fundsmith4.95%
Fidelity Investments4.41%
Aviva4%

 

Commenting on the trading update, Stephen Kelly, CEO of Sage admitted to shareholders that “growth in H1 18 was lower than our expectations as the pace of execution has been slower than we planned.”

“The revised revenue guidance targets for FY18 reflect both the performance in H1 18, but also our diligence in ensuring that we focus on recurring revenue to drive sustainable acceleration throughout the rest of FY18 as a platform into FY19,” he explained.

Sage said it will provide further updates on its plans at its H1 18 results announcement on 2 May.

 

 

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