Thursday, 8 May 2008

Sage continues to bore...

Sage's results for six months to 31st Mar 08 showed a 9% revenue rise to £640.4m equivalent to an 8% organic growth in its core business. (ie before the acquisitions of KCS Global Holdings and Tekton Group in the period) PBT and EPS both rose by 9% - thus continuing Sage's unbroken 20+ year earnings growth record - an amazing achievement. This all translated into excellent cash conversion of 123% of EDITDA.

Sage enjoyed a 12% increase in its subscription revenues which now represent 59% of total revenues. This is what underpins Sage's performance and makes earnings so 'predictable' or Boring (as we have so repeatedly commented!) Sage has retention rates of over 80% from its 1.7m customer base. That is the REAL asset behind Sage.

But the performance was not uniform. UK (revenues up 12% to £120.2m) , Mainland Europe (revenues up 17% to £229.4m. France up 9%, Spain up 30% but Germany declined 4% mainly because it had performed exceptionally well in the previous comparable period) and RoW (up 16% to £42.3m) did pretty well.

But the US suffered a minor revenue decline (£248.5m plays £249m last time) This was due to reduced revenues from the troubled Healthcare operations. The appointment of a CEO to head Healthcare is expected "in the near future". Organic growth in North America, excluding Healthcare, was a quite acceptable 5%. Best performance came from their Industry & Specialised Solutions Division - up 6%.

Initial impressions, after just a few minutes reading the announcement, is that these results look good excluding US Healthcare. I'll comment more later.

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