Monday, 4 August 2008

Sage continues its 'Boring' way

OK, I know I've banged on about Holway's two 'Boring Award' holders - Capita and Sage - for nearly twenty years now, but I am now convinced that Boring companies actually thrive in times of economic downturn. Last week we saw Capita report some really excellent H1 results with an equally bullish outlook statement. Today, it was Sage's turn to issue their IMS for the 9 months to 30th June 08. As CEO Paul Walker said, "Sage shows resilience in uncertain and challenging markets". Paul Pindar at Capita uses similar - maybe even more positive - words. You can read Sage's IMS in full here. It looks like all their businesses - with the exception of the US Healthcare Division which still hasn't found a CEO - have performed well and Paul Walker seems confident that they will meet analyst expectations for the year to 30th Sept 08 (Consensus is revenues £1,296m, EBITA £310m and PBT (pre-amortisation) £280m)

At first sight Capita and Sage seem to have little in common; Software v BPO, Global v UK-centric. However, other than both having a Holway Boring Award, they do have many similarities:

- long standing and experienced management.

- market leader in their respective sectors

- significant recurring contracted revenue with high predictability for the period ahead.

- excellent cash conversion.
- resilience to economic downturn. Maybe, even benefits from it.

- reluctance (and attendant high cost) of customers to change established suppliers.

- stick-to-the-knitting business model which even simple analysts can understand!

Holway's Boring Awards are all about 'boring consistency'. No surprises, just damned good performance. The fact that neither Capita or Sage has ever reported an earnings reversal since their respective IPOs in 1989 (and probably before if I had the financial record) is truly remarkable and, indeed, unique amongst any of the FTSE100 companies as far as I know. And, such Boring performance has created great rewards for shareholders too as Sage and Capita are the all-time best performers in Holway's share charts over the last 20 years.

We need Boring performers even more in the turbulent times that lie ahead.

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