Sage Grows Sales and Profit in First Half

The enterprise software purveyor experienced a dose of sales weakness in North American market, but international sales carried the day.


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Posted on May 08, 2008

British enterprise software vendor Sage Group continued to benefit from its push into service-enabled software, as it reported that revenue and EBITA for the first half of fiscal 2008 both rose by 9%, to £640.5 million and £138 million, respectively.

Operating margins for the six months ended March 31, 2008, registered a healthy 24%, which CEO Paul Walker attributed, in part, to the company’s emphasis on selling on-demand software subscriptions that provide customers with ongoing business support and product upgrades. The company received about 60% of its revenue from subscription contracts in the half, Walker said. CFO Paul Harrison added that such “recurring revenue” grew by 11%, while non-recurring software sales grew by 3%.

The upbeat report overcame a gloomy first half for Sage Software, the company’s North American division, where sales stagnated at £248. 5 million compared with £249 million in the same period a year earlier, and EBITA dropped 7% to £43.5 million. Sage blamed the decline on difficulties in the healthcare division, which the company is restructuring. Sage Software, the largest unit under the Sage umbrella, welcomed a new CEO this March, and officials are intent on getting the North American division back onto a solid growth track.

Meanwhile, the parent company reported strong growth in other geographic markets, and noted that mainland Europe became the leading contributor to profits, with 35% of EBITA and 36% of revenue, buoyed in part by converting euro sales into the weaker pound sterling. Mainland Europe represented Sage’s strongest gain, as sales and EBITA both jumped 17%, to £229.4 million and £53.9 million, respectively.

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