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Sage sees recurring revenue accelerate after cloud investment

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By Paul Sandle

LONDON (Reuters) -British software company Sage Group forecast growth of 8% to 9% in its organic recurring revenue this year and an expansion in its margin, driven by demand for its cloud offer.

Chief Executive Steve Hare said Sage, which provides accounting and payroll software to small and medium-sized businesses, was now focused on growth.

"Having reshaped and invested significantly in the group over the last three years, we are now focused on growing the business in absolute terms, both organically and through acquisitions," he said on Wednesday.

Shares in Sage, which have risen 8% in the last 12 months, were trading up 2.2% at 745 pence in early deals.

Analysts at Jefferies said the guidance for recurring revenue growth was ahead of consensus, which stood at 7.6%, but was "readily achievable".

Sage reported a 10% drop in full-year organic operating profit to 343 million pounds ($461 million) for the year to end-September as investment in its cloud offer squeezed its margin to 19.3% from 22% a year ago.

Organic recurring revenue grew 5.4%, slightly ahead of a market consensus of 5.2%, driven by growth in Sage Business Cloud of 19%.

Hare said after building its cloud platform, Sage could now increase its functionality for specific customer segments, such as a construction company or a real estate agent.

($1 = 0.7433 pounds)

(Editing by Kate Holton)

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