Sage 'loses' US chiefs after sales slowdown

BRITAIN’S biggest software firm Sage yesterday said it would be losing its US managers after sales were slower than expected.

BRITAIN’S biggest software firm Sage yesterday said it would be losing its US managers after sales were slower than expected.

The Newcastle-based company, with 5.4 million mostly small business customers, said that results for the year would be in line with expectations, with pre-tax profits up 18%.

But the accounting and sales software specialist saw its share price drop by more than 3% yesterday to 243.25p after it revealed that revenues in the US, which make up nearly half the total, were up just 4%.

And now the managers of the US business were leaving with immediate effect as although the figures were up they were down from 6% last year and behind the group total of 7%.

Finance director Paul Harrison said: “We had expected better growth in the second half of the year (in North America).”

Sage declined to comment on why the division had fallen short of its hopes, but said the competitive landscape had not changed significantly and that Ron Verni and Jim Eckstaedt, the chief executive and finance director of its North American unit respectively, had left the company.

Group chief executive Paul Walker said that after a reorganisation of the North American business into four operating units in May, the company was looking for new leaders with experience of running a divisionalised business rather than people used to day-to-day management. In the meantime the US businesses will report directly to him.

Seymour Pierce analysts were concerned. “Having announced a reorganisation in the first half, further change is now required. Investors should remain very cautious,” they wrote in a research note, keeping an “underperform” rating on Sage shares.

The company’s share price fall was the largest on the FTSE 100 index and values the firm at around £3.2bn. The stock has underperformed the UK software and computer services sector by 13% this year.

Sage’s pre-tax profits of £283m in the year to September 30 compared with analysts’ average forecast of £287m, on revenues up 30% to £1.158bn.

Landsbanki analysts said: “The US has been a perennial bugbear for Sage. Once again the concern that Sage is losing market share to Microsoft and, to a lesser extent, to Intuit will resurface.

Paul Walker said Sage had not been affected by the recent turmoil in global financial markets and that most of its customers, as small businesses, had not either.

He said Sage was continuing to look for acquisitions in new and existing markets and that the difficulty private equity firms were facing in raising money for deals could make it easier for trade buyers.

The company’s statement said that revenue in the UK had grown by 7%, in mainland Europe by 10% and in the rest of the world by 17%.

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The Sage story

Back in the early eighties a company was born in a Newcastle printing works which initially sold handfuls of print related and basic accounting software. Over 25 years later the firm employs over 10,000 people worldwide and sells hundred of thousands of copies of its software every year. We open the archives to look at the changing fortunes of the North-East giant in recent years.

September 2001: Sage loses £150m as markets are pounded

NORTH–EAST software giant Sage had £150m wiped off its value as the stock market began the week with another battering. Sage suffered a 6.4pc drop in its share price as poor economic news from across the globe continued to worry investors. At one point, the FTSE index of Britain’s biggest 100 companies plunged below the psychologically important 5,000 mark for the first time since October 1998.

September 2001: Sage buys US firm for £14m

SOFTWARE giant Sage has snapped up an American company for almost £14m. Gosforth-based Sage has bought Micro Information Products (MIP), a software company which makes applications for charities, local government and community groups. Sage said the buy meant it could offer more products to its customers in the US where the company’s Peachtree and Timeslips applications were well-known. The move follows recent buys including, in the UK, Hartley, CSM and Apex.

October 2001: 30 top jobs under threat

UP to 30 top managers’ jobs are under threat at one of the North-East’s biggest plcs as it revamps its operation in a bid to improve the bottom line. Software giant Sage confirmed the cuts yesterday, saying it needed to improve efficiency, while insisting that it has experienced “rapid growth”. The threatened cuts come after a dramatic fall in the company’s share price as investors lose confidence in the technology sector. But yesterday the Newcastle business, which employs more than 3,500 staff worldwide, remained bullish about its future.

January 2002: Sage chief on the rich list with £320m

SAGE managing director Graham Wylie has seen his wealth grow over the last 12 months, despite his company’s stockmarket troubles. According to the Sunday Express rich list, Mr Wylie is worth £320m up from last year’s total of £235m. That makes him the 75th richest person in the country, well behind the richest person – Formula One supremo Bernie Ecclestone who is estimated to be worth £3.2bn.

April 2002: Managers axed as Sage copes with fast growth

SOFTWARE giant Sage has axed managers at its Newcastle headquarters in a shake-up it says is needed to cope with rapid growth. The company announced in November that it was considering cutting up to 30 senior posts between its offices in Newcastle and Kent.

October 2003: Ex-director sells 5pc of Sage to raise £116m

SAGE founder Graham Wylie yesterday raised £116m after selling off a 5pc stake in the Newcastle-based company he set up more than 20 years ago. It is the 43-year-old tycoon’s second big sale of Sage shares this year and the first since he stepped down as managing director in May. Mr Wylie, who founded Sage in 1981, sold 4.9 million shares in March, pocketing £7.1m, and yesterday’s sale means he now only owns around 3pc of the accountancy software company.

May 2004: IT group goes on growing

SAGE founder Graham Wylie’s fast growing IT services group yesterday made its second Scottish acquisition in a week. Technology Services Group has bought Glasgow-based ISI Systems for an undisclosed sum, seven days after making its first push north of the border with the acquisition of Edinburgh-based Nordic Data. ISI Systems, which also has an office in Aberdeen, is the group’s sixth addition to its network since it launched last October. It adds 30 staff to TSG’s 120-strong workforce and means the group now has 5,500 customers.

January 2005: Sage snaps up Swiss firm

SOFTWARE giant Sage took a trip to the January sales yesterday, snapping up a Swiss company in a
£10.7m deal. The Newcastle-based group has bought Lucerne-based business management software specialist Simultan in the first of what is likely to be a series of acquisitions for Sage in 2005.

January 2006: £184m Sage deal signals shift into new market

SOFTWARE giant Sage has signalled a move into new markets with the acquisition of a US payment processing company for £184m. The Newcastle-based group has its sights set on expanding its range of small business services after buying Nashville-based Verus Financial Management in a deal described by one investment house as “a smart move into a growing market”. Sage has already widened its product portfolio from accounting software to cover payroll processing and other back office operations.

April 2007: Sage in Swiss swoop

SOFTWARE giant Sage has announced another acquisition – a Swiss company called Pro-Concept –
for £7.5m. The Newcastle-based plc has bought Pro-Concept, which is the largest mid-
market ERP (enterprise resource planning) software vendor in French-speaking Switzerland. It is a company which specialises in applications for the public sector and the watch/precision mechanics industry.

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