Sage passes the £1bn sales mark with ease

Nov 29 2007 By Graeme King, The Journal

SOFTWARE firm Sage saw its share price leap nearly 10% yesterday after it posted a 14% rise in profits, and nearly doubled its annual dividend payout.

The Newcastle company posted pre-tax profits of £251.3m for the year to September 30, and decided to reward its investors with a dividend of 7p a share, up 95% on last year.

The increase surprised the City and caused the company’s share price to reach 213p during the day’s trading, up from 193.7p when the stock market opened.

Sage also reached and comfortably surpassed the billion pound sales mark, with annual turnover up 30% to £1.157bn.

Analysts also appreciated positive comments on Sage’s future prospects with all the company’s geographical regions performing in line with expectations. Sage, which employs around 13,900 people with 1,400 at its North-East headquarters, now supplies its accounting and other business management software to around 5.5million customers worldwide.

UK revenues rose by 10% to £224.1m, with the figure 7% higher when excluding the impact of two acquisitions made during the year.

The North American arm of Sage generated the biggest sales figure for the group, with a series of acquisitions lifting revenues by 54% to £508.1m though organic growth, excluding the effect of acquisitions, was just 4% and thus behind other regions.

The company is currently seeking a new chief executive in the US after ridding itself of two senior managers after the sales rise did not meet target. It said yesterday the change of management team would allow it to achieve "the full potential" of its North American business.

Chief executive Paul Walker said: "These are good results and I think there has been a little bit of relief from the market. £1bn shows the scale of the business we have got. Clearly having around £1.2bn of revenues shows the size of our customer base, and our scale as a North-East based business."

Finance director Paul Harrison explained Sage’s thinking on increasing its dividend payment. He said: "We’ve always been a hugely cash generative business, and at the same time, we have not got a lot of debt on our balance sheet, so it seemed sensible to us to return a little more cash to shareholders. And we can continue on unaffected in our acquisition strategy."

Sage parted company with chairman Sir Julian Horn-Smith earlier this year, after he had been in the job only eight months. A lack of chemistry between chairman and his board colleagues was blamed for the unexpected departure.

So is Mr Walker happier with his board’s relationship with new chairman Tony Hobson? He said: "There is excellent chemistry between us.

"We are both Sheffield United supporters, so there is chemistry there."

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Highlights

• For year to September 30

• Turnover up 30% to £1.157bn

• Pre-tax profits up 14% to £251,3m

• Dividend up 95% to 7p