Sage ‘resilient’ in challenging conditions

Sage Group on Monday said the geographic spread and diversity of the 5.7m small and medium-sized businesses that buy its software was helping it to “show resilience in uncertain and challenging markets”.

Paul Walker, chief executive, said, “we remain cautious on the economic outlook” but he said results for the first nine months of Sage’s financial year, to the end of June, were consistent with its expectations.

The group said it expected the full-year result would be in line too. The consensus of analysts’ forecasts for the year to September 30 is for revenues of £1.296bn, earnings before interest, tax and amortisation of £310m and pre-tax and amortisation profits of £280m.

At the half year Sage reported a 9 per cent increase in sales and pre-tax profits up 13 per cent to £122.6m.

The group said its US healthcare business, which has been a cause for concern to investors, was “focused on driving operational improvements to meet medium-term objectives in margin and revenue improvement.”

The division, which contributes 11 per cent of group revenues, suffered a 10 per cent fall in revenues in the first half of the year.

Sage is expected to hire a new chief executive for the division shortly, following the appointment of a new head for the whole North American operation in March. The group said the rest of the North American business had achieved a “satisfactory performance in challenging market conditions”.

In the UK, Sage reported a “solid performance despite the uncertain market conditions”, the group said.

Markets are more benign in other regions, with mainland Europe performing strongly, with Germany and Switzerland accelerating growth. The Spanish business, which increased sales by 30 per cent in the first half, had slowed but the French subsidiary was performing well.

The group’s businesses in other parts of the world, including Australia and South Africa, “recorded strong organic growth,” it said.

Cashflow had been “strong” Sage said, and net debt at the end of June was £532m, down from £556m at the end of March.

Shares in Sage rose in early trading on Monday, adding 2.2 per cent or 4.35p to 202¼p, as some investors regarded the statement as reassuring.

George O’Connor, analyst at Panmure Gordon, said the “steady as she goes” statement reiterated the company’s “confidence in the outllok for the year”.

However, some analysts detected a hint of greater caution. Roger Phillips, who covers the stock at Evolution Securities, said: ”The tone of the statement has worsened from the interim results.”

He said Sage’s remarks on the challenging market conditions in the US “is probably the first time we have seen Sage explicitly state this, despite how obvious it may seem.”

Full-year figures are due on December 3.

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