Acquisitions boost Sage

Sage saw a 30% increase in revenues for the year to 30th September, boosted by acquisitions and restructuring in the group's US division.

Morningstar.co.uk Editors 28 November, 2007 | 5:43PM
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The group also surprised the market with a 95% boost to its dividend pay out for the full year. It will pay a total dividend of 7p, up from 3.59p last year.

Revenues rose from £892.6m to £1,158m. Pre-tax profits were up 14% to £251.3m.

The North American region saw the strongest growth on the back of its 2006 acquisitions. Total revenues grew 54% to £508.1m, while organic revenue was up 4% for the year. Of the acquisitions, the greatest contribution was from Verus, now Sage Payment Solutions Division, which generated revenue growth of 14% on a like for like basis.

Elsewhere in North America, the small business division grew 3% with its Peachtree Quantum brand showing improved profits. The mid-market division had organic growth of 4%. New releases of existing software were well received. Revenues from ACT! were disappointing, failing to keep up with the previous year.

The US business has undergone a reorganisation. It now has four divisions: Business management; industry specific solutions; Sage healthcare and Sage payment solutions division. The group has also reorganised senior management and expects to announce a new chief executive for the region in the first half of 2008.

The UK was solid, with revenues up 10% to £224.1m and organic growth of 7%. Sage 50, the core product, grew 7%. The group also launched new products in HR and payroll during the year. The two acquisitions – payment solutions company Protx and HR/payroll services group Snowdrop also performed in line with expectations.

In mainland Europe, the group delivered 18% growth overall, bringing total revenues to £349.1m. Organic growth was 10%. Spain was the strongest area, delivering 19% growth. Germany reaped the benefits of some strategic investment, while France improved performance in line with expectations. The group bought accounting solutions group Pro-concept in Switzerland and treasury management group XRT in France over the period.

The emerging market business grew strongly from a relatively small base, rising to £76.3m from £63m last year. South Africa and Australia both saw good demand.

Shares rose almost 10% to 213p as the market welcomed the increased dividend. The group trades on 12.8x earnings, low for its sector. Organic revenue growth is dull, but its acquisition programme appears to be performing well. It has taken on a lot of debt to fund these acquisitions, but does not yet appear over-geared. This could be a long-term buying opportunity, but investors may want to let the personnel changes in the US bed down before buying.

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