Sage set to report revenues surge

Accountancy software group Sage today said growth in all of its major markets was expected to drive a 20% improvement in annual profits to £181m (€260.2m).

In a trading update ahead of its full-year results, Sage said revenues surged 29% to around £688m (€989.1m) after reaping the benefits of recent acquisitions.

Sage – the last surviving technology group in the Footsie – has bought companies in the United States, South Africa and Spain as part of a strategy to hike turnover at a time when many customers are tightening budgets for new technology.

Revenues from core products are expected to have grown by 6% during the year to September 30 after stripping out the impact of acquisitions.

The group, which employs around 5,500 people worldwide including 1,500 staff in the UK, sells software solutions and other services for small and medium-sized enterprises (SMEs).

Although shares improved more than 2% today, as investors welcomed numbers that were a touch above the market consensus, analysts were cool on the group’s prospects for future growth.

Investec analyst Gareth Evans said: “We believe that Sage has begun to run out of ‘easy’ or ‘obvious’ geographic expansion which can be undertaken at relatively low risk.”

Newcastle-based Sage has opted to consolidate in its existing markets by buying new businesses rather than entering new territories, he said.

“We believe that this strategy is fundamentally more risky and less attractive than Sage’s acquisitive growth throughout the 1990s and 2000/1,” Mr Evans added.

Timberline, which sells software to the US construction and property sectors, contributed revenues of approximately £34m (€48.9m) in its first full year of ownership.

Coupled with £34m (€48.9m) from ACCPAC, which Sage acquired in March, this ensured revenues in North America climbed 30% at constant exchange rates to around £287m (€412.6m).

But growth was slower in the UK where revenues rose by 9% to £186m (€267.3m) and operating margins were maintained when analysts had looked for an improvement.

In mainland Europe, revenues climbed 22% to £170m (€244.3m) – led by the acquisition of SP in Spain in October.

The newly-formed rest-of-the-world division, which includes two new acquisitions in South Africa and Asia Pacific, generated turnover of around £45m (€64.7m).