Sage Group Plc’s profit growth slowed this year, as predicted, dragged down by a US operation that has undergone major changes. The group, which in July was forecasting results up on last year but down on market predictions, (CI No 2,237), saw positive but not that positive – returns for the year ending September 30. […]
Sage Group Plc’s profit growth slowed this year, as predicted, dragged down by a US operation that has undergone major changes. The group, which in July was forecasting results up on last year but down on market predictions, (CI No 2,237), saw positive but not that positive – returns for the year ending September 30. Net profit jumped 4.6% to UKP4.6m, on turnover that climbed 51.3% to UKP41.3m. On a geographic basis, the problems are obvious – operating profits for the UK rose 30.3% to UKP8.7m, while profits for the US as a whole plunged 88% to UKP215,000. The US operation consists of two companies; DacEasy and Remote Control International, the latter acquired late last year, which produces the sales automation package Telemagic. DacEasy’s main problem was the lack of a decent Windows product – the group underestimated the time and effort involved in converting its UK-developed Windows product, Sterling +2, for use in the US. DacEasy Accounting for Windows emerges this week across the pond, and launches into a market that the company admits has been quicker to accept Windows than the UK was.
It’s rather unfortunate, then, that the UK had the Windows product long before the US and that sales of Sterling +2 account for 15.2% of product sales as it is. US chief executive Kevin Howe tried to re-engineer the firm’s sales strategy and make the mature MS-DOS product more attractive by directly marketing it and putting together aggressive bundling deals. In the process, he had to ditch his entire sales management team and recruit a new one which believed in it. Meanwhile Remote Control International made a UKP1m operating loss with the Telemagic product. Now the Windows version of Telemagic, which has been shipping for a couple of weeks in the US, will be available in the UK in the spring. Other developments in North and South America include the establishment of a South American subsidiary of DacEasy, which replaces three small distribution operations already marketing in that part of the world. Early next year, Howe may also call in an equity trigger with his Canadian publishing partner DacEasy Canada. This very quick, low-risk acquisition of a negotiated amount of equity will come as a result of previous funding from DacEasy US in the form of negated royalties from DacEasy Canada. In other parts of the world, the company’s French CIEL subsidiary clawed in UKP600,000 profit on UKP4.8m sales, while the Yorkshire-based Dataform stationary company made UKP3.6m profit on UKP500,000 sales. The group’s business from maintenance has increased by 41% to UKP7.8m, with one in five registered customers buying maintenance contracts. Software sales have increased by 23%. Overall, the group’s turnover grew more than it has in any year for at least the past four years, although pre-tax profit growth was the lowest in a long time – in the period 1991-92 it was 34.8%. The company is now hoping to put its US troubles behind it and get back on track for next year, and has upped its dividend by 10% to 9.9 pence. Future plans for the Newcastle-upon-Tyne company include moving into Germany and Spain, probably via acquisition. The fact that these are flat markets at present is seen more as an opportunity by the company, and after this year’s acquisitions, it still has UKP4.5m of cash to play with.