Sage sounds cautious note as profit dips
ACCOUNTANCY software giant Sage yesterday said times are still tough for small businesses as it reported a two per cent drop in annual profits.
“Conditions have stabilised in the second half but at this stage it is too early to predict economic recovery,” chief executive Paul Walker said yesterday.
“We know there is a lot of pent-up demand out there. We know they will continue to spend on services, but we need to see SMEs small and medium-sized enterprises become more confident before they start buying software again.”
Sage, which sells serves nearly 6m customers, posted a pre-tax profit of £308m for the year, down two per cent on last year. Sales of new software, which accounts for around a third of its business, fell 16 per cent.
But the company said existing customers were continuing to invest in Sage business management products. Subscription revenues, from ongoing service and maintenance contracts, grew two per cent over year.
Sage also said it was encouraged by a contract renewal rate of 81 per cent, and announced it had won 245,000 new customers in the year.
The company has tried to ride out the downturn by cutting about 1,000 jobs, taking out five per cent of its 2008 cost base.
Shares in the company rose nearly three per cent to close at 221p.
Panmure Gordon analyst George O’Connor said: “Despite a difficult economy there were 245,000 customers added. Sage says that it is not seeing a general recovery in the market – in common with other companies, it is not calling the turn – but pleasingly does not describe the market as challenging.”