Sage defies the US downturn

REPEAT orders from America's 'mom and pop' businesses have helped software group Sage defy the economic gloom engulfing the technology sector.

Although the 11 September terrorist attacks aggravated an already-difficult American market for securing new business, the Newcastle-based group's existing 1.3m small business customers provided a solid stream of repeat sales of their accounting software packages. The US market is key for the group, contributing 48% of its sales in the year to 30 September.

Like-for-like sales grew 7% in the US and chief executive Paul Walker said the group had maintained margins and its market share at about 11%. He said concerns that Microsoft, which bought Sage rival Great Plains Software for $1.1bn (£775m) last year, was becoming a major threat were so far unfounded.

'Pricing in America hasn't been the issue - it has been more cautious buying by the consumer. We can't be complacent when people like Microsoft come into the market, but competition is certainly not being felt on the ground,' Walker said. 'It will be interesting to see where Microsoft take Great Plains because they are up in the mid-sized market and inevitably suffering because that market is more difficult.'

Group pre-tax profits rose 12% to £121.3m on sales up 17% to £484m. Sage won a net 248,000 new customers in the year, taking its customer base to 2.8m. Earnings per share grew 11% to 6.59p.

Operating profits were up 15% to £128m and the dividend rises 10% to 0.425p. With the group making relatively optimistic noises about its prospects in 2002, the shares advanced 25 1/2p to 258 1/2p. Acquisitions made only a modest £151,000 contribution to profits but provided sales of £24m.

'We have a good pipeline and good sales leads and although people are a bit more cautious about making the final decision, there is business to be done,' Walker said.

One weak spot was declining margins in Britain, where investment in e-business solutions took its toll and closing deals with mid-sized companies proved difficult. Even so, UK sales rose 13% as repeat orders underpinned results. Walker is looking for bolt-on acquisitions in Spain and Italy.

Contributions from purchases designed to bolster Sage's US businesses will start to have a full impact for the first time in the current year. The purchase of Interact last summer has taken net debt to £190.9m.