Optimism for Sage but travel agents expect loss

Nov 30 2009 By Iain Laing, The Journal

AN insight into the mood of the UK consumer will emerge this week when leading firms from the holiday and pub sectors report results.

And in the North East, all eyes will be on Newcastle-based accountancy software giant Sage when it posts full-year results on Wednesday.

The only tech company in the FTSE 100 is expected to reveal a 12% rise in pre-tax profits, despite “challenging” market conditions.

Consensus forecasts of a £306m surplus come after resilient trading in UK and European markets and a restructuring of its North American arm, which is gradually bearing fruit.

Self-help measures from the company have also included a clampdown on costs, which identified almost £50m in savings at the half-year stage.

The firm cut 700 jobs – including 200 at its headquarters in Newcastle Great Park – in the first half, representing around 5% of its 14,500- strong global workforce.

The company has almost six million customers worldwide but was hit earlier in the year by customers deferring spending decisions. 

But its first-half results showed a  17% climb in half-year revenues, with the company hoping future revenues would be driven by products   catering for SMEs which are finding it increasingly tough to balance their books.

The company also saw a 40% surge in demand for online payment software Sage Pay Go as companies look for new revenue streams on the internet.

While software sales have suffered, this has been partially offset by growth in subscription revenues such as support services to customers.

Panmure Gordon analyst George O’Connor said: “Sage is likely to describe the market as challenging but with pockets of growth – the US profit recovery, subscription sales, and in niche areas like UK HR software.

“The results will showcase Sage’s global reach, enviable customer set, strong business model and new technology initiatives.”

Tour operators Thomas Cook and Thomson parent TUI Travel report full-year figures today and tomorrow  amid growing concerns over the outlook for holiday firms with the weak pound and the recession. TUI, which also owns First Choice, said in September that winter sales were down 13% as the trend for customers to book trips nearer the time of departure continued.

However, it added that the decline in its UK market was in line with expectations and that capacity reductions meant it had 12% fewer holidays left to sell.

Analysts predict the company will report adjusted full-year profits of £299m, down from  £309.3m a year earlier. TUI is expected to post underlying profits of £360m, up from £320m.

Pub and brewing groups Greene King and Marston’s have both been strong performers, despite recession, although clouds are gathering on the horizon for the sector next year. All Bar One owner Mitchells & Butlers reported encouraging recent sales growth and a “small upturn” in consumer confidence this week, but warned of the potential threat from tax hikes and higher unemployment into next year. M&B is expected to post a 2% fall in pre-tax profits to £59.2m.

But Greene King has traded strongly and is expected to post revenues up £123m for the group – 3% ahead of the previous year.

Pedigree brewer Marston’s has seen sales rise lately, boosted by its budget food offering.

The group’s pubs served 23 million meals during the year at an average spend per head of £5.94. Analysts expect profits of £70.4m for the year to September, down from £85m.