Feeds

Sage: more acquisitions ahead

Must buy to maintain growth

  • alert
  • submit to reddit

Beginner's guide to SSL certificates

While Sage's H1 results seem strong, if the three acquisitions it has made since last September are stripped out, organic revenue growth was only three per cent. Flat results from existing operations in its North American business should be a particular concern.

As well as a decline in the value of the dollar, Sage also suffered from late delivery of an upgrade to its SalesLogix CRM software. This resulted in a decline in revenue, although now it is out on the market, sales have begun to recover.

However, Sage's largely SME (small and medium-sized businesses) customer base looks to the company for IT support rather more than software upgrades. On a constant currency basis, services revenue increased 29 per cent to £207.8m and now accounts for 62 per cent of revenue.

On the same basis, software revenue rose by a less impressive 15 per cent to £124.7m, representing 38 per cent of group revenue. This has always been the strength of Sage's business model. It sells applications for modest sums and, because its customers lack the IT infrastructure of larger companies, then offers a services contract which provides an ongoing revenue stream. Sage needs to buy to keep on growing. Four acquisitions over the past eight months have added 903,000 customers. With £116.5m it is not short of resources. Finance director Paul Harrison said the balance sheet could easily take on a further £350m of debt.

"It wouldn't be a surprise if in the next six months or year, we did some more acquisitions to strengthen either an industry specific area, or move into new geographic markets," said chief executive Paul Walker.

The company invests 27 per cent of software revenue in product development and it is focusing on developing industry-specific products for vertical sectors where it has large numbers of customers such as manufacturing, construction and real estate, not-for-profit, and professional accountants.

Sage may need to pay particular attention to its North American operations where, but for its acquisitions, revenue was virtually flat at £136.3m. The company has not been able to match the dynamism of competitor Intuit and there is always the danger that Microsoft might be able to turn Great Plains into a formidable operator.

Source: ComputerWire/Datamonitor

Related stories

Sage results solid
Sage interim profits jump
Sage buys ACCPAC for $110m
Sage profits, customers jump

Beginner's guide to SSL certificates

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.