UK recession rattles Sage's cage as revenue growth flattens

The Sage Group is keeping close tabs on the UK economy amid fears of the "exposed risk of a renewed recession".

The mid-market British accounting software maker hit out after posting first half revenues of £661.2m, up 2 per cent for the period ended 31 March excluding results of the disposed US healthcare biz.

Sales included a 5 per cent hike in subscription-based products to £451.4m and a 4 per cent decline in standalone software and software related revenues (SSRS) to £221.7m.

The firm kept a tight grip on costs, reporting EBITA of £180.9m, up 1 per cent and pre-tax profits of £176.1m, up 2 per cent.

Customer acquisition slowed, with 129,000 new accounts brought on board in H1 compared to 131,000 a year ago, and Sage had an 81 per cent renewal rate on support contracts, unchanged on the same period in 2011.

CEO Guy Berruyer said the top line numbers reflected the "switch to subscription revenues" and reflected the "challenging economic conditions, particularly in Europe".

Highest growing areas included the payments business which grew 10 per cent and the Sage ERP X3 range, up 3 per cent, the firm said.

Sage is trying to play catchup in the cloud market and last week struck a deal with Microsoft to use the Azure platform to develop the Sage 200 line for UK SMEs.

It claimed to have doubled the customer base for its Sage One software-as-a-service range in the last six months and is preparing to launch SaaS in the US imminently.

Revenues in Europe were up 1 per cent to £400m, with Spain "worst hit", and the French market "uncertain and deteriorating" in contrast to the stronger UK and German country operations, the firm said.

Sales were flat in North America at £199m, and leaped 11 per cent in Africa, Australia, the Middle East and Asia to £74m.

Berruyer said Sage had adopted a "more disciplined and rigorous approach to resource allocation, prioritisation and execution" in higher growth areas but held concerns about the short-term future.

"The macroeconomic environment remains a considerable headwind for a number of our European markets, and we remain watchful of the outlook for the economic climates in France and the UK in particular, as they remain exposed to the risk of renewed recession," he said. ®