Software firm Sage finds trouble across pond

The UK’s biggest software company upset the stock market with an apparent slowdown in growth at the end of last year and the possible sale of a troubled US business.

Shares in Sage Group ended down 34½ p at 599p after a trading update for its first quarter showed organic revenue growth, its main measure of performance, up by just 5.1 per cent. Sage, which specialises in providing software to small and medium-sized firms to manage their payroll and other administrative needs, had promised at least 6 per cent growth for the financial year.

The Newcastle-upon-Tyne-based company said it was “evaluating strategic options”, including a potential sale of its US payments business, which both provides software to manage payroll and administers the work. This does not fit Sage’s operating model, which is mainly to supply software.

To give an idea of the drag from the US, the company said that without this, revenues in the quarter would have been up by 5.9 per cent.

Steve Hare, chief financial officer, said that Sage was sticking with its 6 per cent or more target for this year and margins maintained at 27 per cent but this would be more weighted to the second half of the year.

Some analysts expressed concern. The team at Numis Securities noted: “Quarterly volatility at Sage is nothing new. The first quarter is not a particularly good guide for the full year but we think this is modestly disappointing.”