Sage confident it can ride storm of economic volatility

Software giant Sage yesterday claimed it was well-placed to ride economic volatility despite the pressures on its largely small and medium-sized enterprise (SME) customer base.

Group chief executive Guy Berruyer admitted that Sage’s recent sales of its latest accountancy software had been more variable and there had been “a little slack” in Spain.

“But we have not seen sharp declines as we did three years ago,” Berruyer added, as he unveiled an 8 per cent rise in the company’s full-year pre‑tax profits to £352.6 million on revenues up 4 per cent at £1.33 billion.

As a sign of confidence amid the economic uncertainty, Newcastle‑based Sage – after which the famous Sage Gateshead conference centre was named – posted a 25 per cent leap in the total dividend to 9.75p in the year to end‑September. It was 7.8p a year ago.

In September, the group made a loss of between $60m (£38m) and $70m on the $320m sale of its American healthcare arm to Vista Equity Partners and is also returning those proceeds to shareholders.

But finance director Paul Harrison said that, despite this special capital return to investors and the hoisted dividend, the business had firepower for bolt‑on acquisitions.

“There are a number of acquisition opportunities that we continue to evaluate, most of them modest,” Harrison said.

With more than six million customers worldwide using its accountancy, retail and payroll products, the group is heavily exposed to the fortunes of the SME sector. Sage said competition was tough for software sales, but that it had added 261,000 customers in the year, compared with 252,000 a year earlier.

Berruyer, chief executive since October 2010, warned there were “clearly significant macro‑economic concerns that may impact SMEs, particularly in the eurozone”.

But he added that Sage’s strengths – including leading market positions and financial robustness – “position us well to deal with the ups and downs of the economic cycle”.

He also welcomed the Chancellor’s decision to underwrite £20bn of loans to small businesses struggling for credit.

The group’s UK and Ireland business posted a 5 per cent in underlying revenues on the back of new products such as its Sage 50 mobile phone application and its SageOne accounting software.

Shares in the FTSE 100‑quoted company closed up more than 5 per cent, or 15.1p, at 290.1p.

Julian Yates, an analyst at Investec Securities, said, despite profits coming in slightly ahead of estimates, the software sector outlook looked tough.

“With the indications that SMEs are finding the current environment becoming more challenging, we would expect sales growth to moderate slightly,” Yates said.

However, broker Canaccord Genuity, which rates Sage’s stock a “buy”, said the dividend hike, in particular, was a “major sign that management remains entirely comfortable with the group’s performance in current times”.