Sage knocked back by cuts to tech investment across Europe
SOFTWARE firm Sage said yesterday its first-half revenue growth slowed, missing forecasts and sending shares down sharply as its small business customers in Europe faced tough trading conditions.
The company, which provides accounting and other business tools for more than 6m small and medium-sized enterprises, met market expectations with a two per cent rise in first-half underlying profit to £176.1m.
Underlying revenues rose two per cent to £661.2m down from five per cent growth a year ago.
Chief executive Guy Berruyer said its customers were feeling the pinch of weak economic growth in Europe.
Spain was worst hit, he said, with 23 per cent of businesses employing between 10 and 100 people closing down since the start of the downturn, while France was also at risk of recession.
“We believe France is a risk, but right now we don’t see it at all where we are in Spain,” he told reporters.
Shares in Sage fell to a five-month low as analysts questioned the group’s strategy for growth. The stock closed down 5.5 per cent at 263p.
Peel Hunt analyst Paul Morland, who has a “sell” recommendation on the stock, said that while Sage was a good business, its years of high growth would be hard to recapture.
“As its mix continues to shift away from software and towards subscriptions, visibility will improve but at the expense of growth and profit,” he said.
Chief financial officer Paul Harrison said second-half growth would pick up as comparatives became easier, and the group was “comfortable” with analysts’ forecasts for three to 3.5 per cent sales growth for the year.