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Sage profits grow 11% in 2011

1st Dec 2011
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Sage reported an 11% increase in pre-tax profits to £330.8m on a turnover of £1.3bn for the year to 30 September, but warned of future uncertainty among its small and medium-sized clients.

While the headline profit figure reached double figures - an important psychological target for Sage and its investors - the FTSE100-listed accounting software giant achieved 4% organic growth both worldwide, and in its UK and Ireland business. Profitability was maintained by internal focus and investments in boosting profit margins, and favourable tax settlements also helped.

Chief executive Guy Berruyer attributed Sage’s successful period to a new management structure, the sale of the loss making US Sage Healthcare division and enhancements to its product portfolio.

In the UK, Berruyer commented, “We saw several significant launches in the year including Sage 50 Mobile, and Sage One which has now passed 1,000 paying customers. Sage ERP X3 grew rapidly in the UK off a small base. Our Accountants’ Division has continued to perform well with good demand for a new tiered offering as well as our iXBRL compliant product.”

The results showed “concrete progress” after his first year at the helm, but Berruyer admitted he was “concerned” for next year.

“As we look forward, there are clearly significant macro-economic concerns which may impact SMEs, particularly in the eurozone, and our customers are telling us through our Sage Business Index that they see the outlook remaining uncertain,” he said.

“However, the strengths of our business position us well to deal with the ups and downs of the economic cycle. Given the current economic uncertainty, we will continue to manage the business prudently, whilst pursuing the significant longer term opportunities we have in our markets.”

The past financial year was notable because for once Sage didn’t acquire another company. But even without this traditional mechanism for growing its revenue and user base, it still added 261,000 new software customers over the period. Just after the end of the financial year, Sage reverted to type and bought Alechemex

Berruyer said Sage would maintain a cautious approach toward acquisitions in the future: “We do have a pipeline of acquisitions but not doing an acquisition is not a failure. We acquire to support our strategy, not as a strategy in itself,” he said. “It is a question of where to invest our cash flow, in returning cash to shareholders or in M&A.”

On a good day all round for the London exchange, investors welcomed the results, with Sage's share price rising 5.5% at 290.1p on the day of the announcement. 

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