December 3, 2008 10:14 am

Europe helps Sage buck slowdown

Strong demand in mainland Europe has helped Sage Group, Britain’s largest software maker, buck a slowdown in customer demand in the UK and North America.

Newcastle-based Sage, which has more than five million customers worldwide using its business and accounting software, said that growth in revenues from its support and maintenance services would compensate for weakness in new software sales.

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“Whilst we are still early in our new financial year, growth in subscription revenues has continued to offset weakness in software revenues,” said Paul Walker, chief executive.

“Although we remain cautious in our outlook, we expect demand for our customer support to continue, which combined with tight cost control and our strong geographic market positions, will allow us to weather these turbulent times.”

About 70 per cent of the company’s revenues come from services based on recurring maintenance of the group’s software.

Pre-tax profit for the year ending in September rose 8 per cent to £241m on revenues that gained 11.9 per cent to £1.3bn.

Basic earnings per share grew 7.4 per cent from 11.85p to 12.73p, and Sage raised its full-year dividend by 3 per cent from 7p to 7.21p.

The worst performing unit of the group was Sage Healthcare, where revenues fell by 11 per cent. The division makes software for doctors’ surgeries in North America, and has performed poorly since Sage acquired it in 2006 after buying Florida-based Emdeon Practice Services for £297m.

In the UK, revenues grew by 10 per cent to £245.7m, although much of this was due to acquisitions. Organic revenue growth in the UK was 3 per cent. Meanwhile, revenues in North America, where Sage makes almost 40 per cent of its annual turnover, slid 2.9 per cent to £501m.

However, in mainland Europe (excluding Britain and Ireland), which accounts for approximately a third of group turnover, revenues jumped 15 per cent to £456m. Revenues in the rest of the world grew by 16 per cent to £91.1m.

Sage completed three acquisitions during the year. In October 2007 it bought KCS a provider of human resources and payroll software for £20.2m. In March of this year, Sage paid £19.8m for Tekton, a maker of software for building construction companies. In July, the company also paid £11.2m for Eurowin, a maker of software for small and medium-sized Spanish businesses.

Shares in Sage Group were down 1.4 per cent or 2.2p at 155.6p on Wednesday morning.

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