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Sage sails through challenging market conditions

Recent reports on interim update (26th January 2010) from Sage indicated that its first quarter trading was on par with expectations. Despite the demanding market conditions, the passive software-services and software markets were counterbalanced by a growth in subscriptions at the accountancy software firm.

The subscription revenue derived from  payment processing and its maintenance, health insurance claims and customer support contracts had proved to be consistent even during the economic recession.

Though the United States have been vulnerable to the downturn and the support contract growth may diminish because of weak software sales, Sage is well placed to meet any market recovery, thanks to its geographically diverse and large customer base, said  Paul Walker,the Chief Executive.

There has been continued competition from other U.S heavyweights like Microsoft & Oracle and German's SAP, but the group is comfortably placed in its banking contracts and committed financing facilities until 2011.Sage's 815 million pounds facilities mature in the year 2011.It had drawn just 460.9 million pounds, nearly half the facility, till September 30 during the interim period.

The group which capitalizes on the sale of software for business management to around  six million small businesses or more ,signaled a debt pay-down and ignited news that it would soon resume to make acquisitions.

Sage fell deep into debt in the year 2006 on various acquisitions including that of Verus ,the business catering to merchant servicest  and the healthcare group Emdeon.It spent 617.5 million pounds in the process, as its presence  in North America were widely expanded.

The net debt has been reduced to 392 million pounds from a whopping 439 million pounds during the three months period to December 31,due to continued cash generation by the group supplying to medium and small sized companies.

According to  George O'Connor,a Panmure Gordon analyst, with the debts paid, mergers and acquisitions would return to the agenda very soon

The crisis faced by small businesses around the world due to the economic downturn had its effect on Sage too. The group failed to complete any acquisition in 2009, compared to the 8 acquisitions made in the year 2006, 5 in the year 2007 and 3 in the year 2008.

With shares remaining  at 237.7 p, analysts predict the full year revenue to be around 1.42 billion pounds and the pretax profit to be around 322.8 million pounds.

The shares remained constant at 237.7p