Warren Wilson
Sage: Steady as she goes
Consistent with expectations - that was the word on Monday from Sage in an interim management statement on its financial results for the quarter that ended 31 December, 2007. The business management software vendor, which serves some 5.5m small and medium-sized companies worldwide, did not release its actual results. It said only that it had performed as predicted last November when it reported preliminary numbers for the fiscal year ending 30 September, 2007.Comment: Performing to expectations is good news because it means no new problems arose during the period. Then again, the company didn't post any nice surprises either, which means that the sluggish segments - its North America segment, and its recently acquired healthcare unit - remained that way.North America, Sage's largest market, achieved only a 'modest' improvement on last year's organic revenue growth, which totalled just 4% (down from 6% the year before) despite overall revenue growth of 54%. The company is still searching for a new CEO for North America.Meanwhile, Sage Healthcare, formed when Sage bought Emdeon in August 2006, apparently didn't improve on the 1% revenue increase it posted for fiscal 2007, an anaemic result it blamed on management changes that dampened sales growth. On Monday, the company said that Sage Healthcare 'continued to refocus its business' and that it expects revenue growth will improve in the medium term. More positively, Sage claimed 'good' growth across mainland Europe, its second-largest market, although organic growth was somewhat slower than it had been. (The company posted organic growth of 10% in mainland Europe last year.) Performance in the UK was also 'good' in the most recent quarter, following a modest 7% organic growth last year.Cash flow in the quarter was strong, and net debt stood at £505m at the end of December, down about 14% from a year earlier. Sage also said it had completed its previously announced £20m acquisition of KCS (human resources and payroll software in the UK) and taken a majority stake in XRT (treasury and cash management in Europe) for £40m.Overall, Sage's consistency makes it a relatively safe bet. Its large customer base and steady revenue stream (much of which comes from recurring maintenance fees) give it stability - in other words, it doesn't often pop big surprises. Its move into healthcare was an important step to diversify revenues in the face of stiffening competition from the likes of Microsoft and Netsuite, and one that is likely to pay off over time, though clearly not immediately. Another key move will be to expand its lineup of Software-as-a-Service offerings (currently Sage 50 Accounts Professional Online, Accpac ERP and SageCRM.com). Sage has signalled its intent to do this, so we expect more announcements on this front relatively soon.
