The Channel logo

News

By | Drew Cullen 9th May 2006 10:01

Sage sales leap in H1

Buys yet another business

Sage, the UK's biggest software group, has turned in a good first half, with pre-tax profits up 19 per cent to £113.7m (2005: £95.8m) on sales up 18 per cent to £455.9m (2005: £385.6m). Organic growth - i.e. sales with new acquisitions stripped out - was five per cent.

Claims by many analysts that the company would buckle under pressure from Microsoft's entry a few years ago into the business apps market, now look overly pessimistic. The two companies may bump into each other from time to time in mid-market accounts, but they operate in largely different customer niches.

Sage has built an efficient cash-generating machine by targeting small and medium-sized businesses with its accountancy and business apps software. These days, the UK accounts for just a quarter of turnover - it claims five million businesses worldwide at the end of March as customers.

However, Sage's balance sheet remains a thing of controversy - saved from the ignominy of negative equity only by the company's decision not to amortise goodwill from acquisitions. Goodwill currently stands at £1,275.4m, up from £995.7m in 2005, contributing to shareholders' equity of £957.3m.

Sage robustly defends its policy on goodwill arising from acquisitions - the company instead takes an impairment charge if it thinks the acquisitions are worth less than it paid. The company's position is not exactly conservative but it is logically sound - a successful software vendor is typically valued at a huge premium over the value of its net assets. And that value - contained in the customer base, the intellectual property and the brand - implied in the premium does not vanish simply because it has been bought by another company.

Sage's appetite for acquisitions shows no signs of letting-up; yesterday, for instance it splashed out $6m for Master Builder, an app for the US construction industry previously owned by Intuit. ®

alert Send corrections

Opinion

Chris Mellor

How long before Blue Big HQ pulls the plug on the whole thing?

Chris Mellor

Drives nails forged with Red Hat iron into VCE's coffin
Sleep Cycle iOS app screenshot

Trevor Pott

Forget big-spending globo biz: it's about the consumer... and he's desperate for a nap

Features

Windows 8.1 Update  Storeapps Taskbar
Chinese Buffet self-service
Chopping down the phone tree to scrump low-hanging fruit
An original member of the System/360 family announced in 1964, the Model 50 was the most powerful unit in the medium price range.
Big Blue's big $5bn bet adjusted, modified, reduced, back for more
Microsoft CEO Satya Nadella
Redmond needs to discover the mathematics of trust