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11 December 2009 ,
Written by Dhruv Tanwar
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The largest FTSE listed software company Sage has said that it expects revenues to be flat in 2010 as it does not expect its small business customers to display any signs of recovery.
In a statement released earlier this month, Sage cief executive Paul Walker commented that the strength Sage's business model had helped it navigate through the economic downturn, offering the growth in Sage's recurring subscription revenues that compensated for weaker demand for software and software-related services revenues as proof.
“We have managed our cost base to reflect the current market conditions, and at the same time invested for future growth. Our cash generation remains strong, and reflecting this, we are proposing to increase our final dividend by 3%,” he said. “Conditions stabilised in the second half of the year with SMEs still investing in value-adding business management products and services. However, at this stage, we are not yet seeing a general recovery in our markets. Therefore, we will continue to manage our cost base prudently whilst ensuring the business is well positioned to take advantage of the future economic upturn.”
Newcastle-based Sage has around 6.1 million customers, most of whom are small and medium-sized and as such the fortunes of the company are seen as a bellwether of small business sentiment. Sage's software sales fell 16 percent as its small business customers, reeling from the impact of the economic downturn, held off buying new licences. In its unaudited preliminary results for the year ended 30 September 2009, Sage said that its support contract renewal rates maintained at 81%, while it added 245,000 customers added in the year. It witnessed an organic revenue contraction of 5%in challenging markets, while it logged an overall organic subscription revenue growth of 2%. Subscription revenues made up 65% of total revenue.
Sage reported that its focus on cost savings continued, with an EBITA margin including restructuring costs was 22%, which excluding restructuring costs was 24%. The company invested in R&D to the tune of £174.6m and posted a operating cash flow of £357.6m. |
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