David Bradshaw
Sage confirms a good first-half FY 2005
Sage Group released detailed results today for its half-year to 31 March 2005, in line with the preliminary announcement last month. Total revenue was £382m (up from £333m in the same half-year in 2004), operating profit was £103m (£90m) and net profits is £70m (£60m). Sage's operating margin dropped very slightly from 27.1% in 1H 2004 to 27% in 1H 2005. However Sage is still raising its interim dividend to 0.922p per share (2004: 0.611p)The UK is actually Sage's smallest major market, with revenue of £97m (1H 2004: £91m) and operating margin of 38% (down from 40% in 1H 2004) in this half year. Sage's largest market is North America, with revenue of £155m (£129 last year) and operating margin of 24% (up from 23%). Sage now has a major position in mainland Europe with revenue of £101m (versus £90 in 1H 2004) and operating margin of 24% (up from 23%). Revenue from the rest of the World was £28m (versus £17m) with 20% operating margin (up from 15%).By sector, Sage had software revenues of £145m and service revenues of £237m. Sage says that its organic growth was 6% excluding the currency effects that depressed the value of its North American earnings. Sage says it now has 4.5m customers, an increase of 149k over a year ago. Curiously, these numbers exclude CRM customers. Comment: These results show that Sage is continuing to earn its status as a reliable (or "boring" as we put it) UK software company. The organic growth looks good, though not spectacular. The operating margins have gone up in North America and mainland Europe but down in the UK - Sage has not yet offered a reason for this.Sage is getting further into the outsourcing market, having introduced payroll outsourcing in the US. We know of other outsourcing initiatives not yet announced that will take Sage further. We believe this is an important area to be in as software customers increasingly want choice and offering these service extend Sage's addressable market. It is also going to be important in combating SAP, the 'gorilla' in the overall business-software market that is now targeting Sage's core SME markets.Sage is hosting an earnings conference this morning, and if these produce any nuggets we will write more about Sage tomorrow.
