Sage closes half-year with clean sheet

The fact that Sage plummeted into a £75m net loss in H1 (to 31st March) ought not frighten the horses. This was solely due to the £180m hit from the disposal of 'non core' products, notably ACT! and SalesLogix which Sage acquired in 2001 for £227m and sold a few months ago for £93m (see here). Here endeth that very painful lesson.

This is one of the few times I think you can genuinely assume that a disposal will not adversely affect the underlying business, which is otherwise in reasonable shape given the immensity of the transition that CEO Guy Berruyer is leading it through.

While prior management eschewed 'The Cloud', Berruyer has embraced it. The painfully late Sage One SaaS product for start-ups and small businesses is ramping up and a new version will be 'soft launched' in the UK 'in the summer'. Meanwhile Sage will be rolling out Microsoft Azure-platformed versions of its core Sage 200 mid-market ERP product starting in June. 'Cloud compatible' versions of Sage 100 and Sage 300 will be rolled out in other markets starting late in the year.

Meanwhile Berruyer is accelerating Sage's move towards subscription pricing. Recurring revenues now represent 70% of the total, though of course much of this is from support charges. There is a delicate margin balance involved in such a transition, especially with SaaS which is invariably loss-making. But Sage seems to be managing it well, holding EBITA margins steady at 27%.

In this context the 5% revenue growth to £708m (3% organic) is a 'result', especially as Europe remains weak. And there was good news for investors, who will be getting a 17p per share special dividend on top of a 3.7p interim div (up 6% yoy). 'Boring' Sage may be, but you can't knock the cash!