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The Sage Group plc Interim Management Statement

The Sage Group plc (“Sage”) is today issuing its Interim Management Statement, which covers the period from 1 April 2014 to date.

Financial performance

For the first nine months of the year, Group organic revenue has increased by 4.7%, with growth of 4.3% in the third quarter. Performance in the fourth quarter is expected to be stronger than the third quarter and the business remains on course to achieve the 6% organic revenue growth target in 2015.

A strong performance from subscription helped to drive good organic recurring revenue growth of 7.2% for the quarter, which represents a continuation of the level of growth highlighted in the first half results. Subscription revenue increased by 24.5% in the third quarter.

The growth in recurring revenue was achieved despite a weaker performance in payments, particularly in North America, where market-wide pricing pressure has contributed to revenue contraction during the quarter. We remain cautious on the outlook for payments growth in the fourth quarter.

Software and software-related services (“SSRS”) revenue declined by 3.4% in the quarter, reflecting continued weakness in the mid-market in Europe, where it has been more difficult to predict the timing of when prospective deals will close.

Guidance for operating profit margin remains unchanged.

Guy Berruyer, Chief Executive Officer, commented:

“The performance of the business continues to be solid and the overall growth trajectory is on track. Recurring revenue growth of 7%, driven by a strong subscription performance, demonstrates our business has momentum, and we remain confident of achieving our target of 6% organic revenue growth in 2015.”

Foreign exchange

Exchange rate headwinds continued to be a feature in the third quarter, reflecting the strength of sterling relative to a number of currencies in territories in which Sage operates, most notably, the Euro, the US Dollar, the South African Rand, the Australian Dollar and the Brazilian Real.

Financial position

The Group's operating cash generation remains strong. During the period, the Group paid an ordinary dividend to shareholders of £45m. The share buyback programme has also continued and, since 1 April 2014, a further 8.7m shares have been repurchased for a consideration of £33m. Net debt at 30 June 2014, was £345m (£361m as at 31 March 2014).

Acquisitions

On 21 July 2014, as previously reported, the Group announced the acquisition of Exact Software Deutschland GmbH (“Exact Lohn”), the German payroll business of Exact Holding N.V, for a cash consideration of €16.25m (£12.87m*). This important in-fill acquisition strengthens Sage's payroll business in Germany, positioning Sage as one of the two leading players in this segment in Germany.

*Translated at £1 = Euro 1.2627.

Management will be hosting an analyst conference call to discuss the Interim Management Statement at 08:30am London time; dial-in number +44(0)20 3427 1903, pin code: 3662793. A replay of the call will also be available for one week after the event: Tel: +44 (0)20 3427 0598, pin code: 3662793.

Enquiries
The Sage Group plc +44(0) 191 294 3068
Guy Berruyer, Chief Executive Officer
Steve Hare, Chief Financial Officer
Murdo Montgomery, Investor Relations

Tulchan Communications +44(0) 20 7353 4200
David Shriver
Jonathan Sibun

About The Sage Group plc
We provide small and medium sized organisations with a range of easy-to-use, secure and efficient business management software and services - from accounting and payroll, to enterprise resource planning, customer relationship management and payments. Our customers receive continuous advice and support through our global network of local experts to help them solve their business problems, giving them the confidence to achieve their business ambitions. Formed in 1981, Sage was floated on the London Stock Exchange in 1989 and entered the FTSE 100 in 1999. Sage has over 6 million customers and more than 12,700 employees in 24 countries covering the UK & Ireland, mainland Europe, North America, South Africa, Australia, Asia and Brazil. For further information please visit www.sage.com