Europe drags on Sage revenues

Business software group Sage says a strategic switch to subscription revenues, plus difficulties in Europe, have constrained growth in the six months to the end of March.

Despite those headwinds, the company delivered underlying revenue growth of 2%, with turnover hitting £661.2m against £649m at the same point in 2011 (the figures exclude the Sage Healthcare division, which was sold in November).

Importantly for the Chief Executive, Frenchman Guy Berruyer, organic revenues have also grown by 2%; he has long targeted growth that does not rely on acquisitions.

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Pre-tax profits were £176.1m, 2% ahead of the first half of 2011 while the margin on earnings before interest, tax, depreciation and amortisation (EBITDA) was 27% - exactly the same as last year.

The interim dividend has been boosted by 30% to 3.48p per share.

The group will be concerned by some of its regions. Revenue growth in Europe was just 1% versus the 5% seen last year, with the total coming in at £400.1m. In Spain, "macro headwinds" saw turnover decrease by a painful 8%.

In the US, revenues were flat at £199m although organic revenues climbed 1% (against 4% last year).

Over the course of the last six months Sage has added 129,000 paying customers, down from the 131,000 seen last year, while the renewal rate on support contracts has been maintained at 81%.

Guy Berruyer, Chief Executive, commented: "Revenue performance in the period reflects the strategic switch to subscription revenues, which has exceeded our expectations. It also reflects the challenging economic conditions, particularly in Europe, and we remain watchful of the broader business environment in this region. Nevertheless, we have delivered a resilient financial and operational performance."

BS