December

Sage Announces 2009 Earnings

Posted By: Wayne Schulz - Contact the author

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The numbers are just arriving overnight from UK and it’s really tough to tell whether they mean a heck of a lot given this crappy economy.

The US had a 10% revenue decline (net earnings seem ok and have been kept afloat via cost cuts) with a 20% EBITA.

Most interesting is the commentary in Sage’s regulatory filing which indicates they’ll be going after the support area with renewed vigor. This is something VARS who’d been paying attention already figured out in August when Sage appeared to outsource nearly their entire maintenance and support area.

The company taking over the North America support and renewal effort, ServiceSource, appears by their web site to be largely a commission based services (support/maintenance) renewal company raising speculation from multiple partners that Sage’s renewal efforts could become increasingly aggressive.

Since most VARS make the lions share of their money from service and support, any move by a vendor to cut off this revenue stream would likely not be greeted with open arms by the VAR consulting channel.

My read on this (between the lines) is that we will see Sage re-doubling their efforts almost immediately to sign users to added telephone support agreements in addition to software maintenance agreements.

Personally I think that’s a tougher road for Sage US to travel as their marketing of support puts them directly into competition with their channel.

I LOVE the part about re-invigorating the channel….selling support against them certainly would do that!

Here’s the wording from the Sage UK site:

http://www.investors.sage.com/news/regulatory_announcements/?id=55685

North America

Total revenues in North America contracted 10%* to £576.4m (2008: £637.3m*), reflecting the difficult economic conditions. Organic revenue contracted 8%*. Organic subscription revenues declined 2%*, while organic software and software-related services revenues declined 23%*.

Phase 1 of the changes to our North American business has been successfully completed with the new management team in place and an appropriate reduction of the cost base. Operational improvements planned in Phase 2 are underway including reinvigoration of the channel, growth in premium support offers and several product launches. We are making good progress in these areas and have seen increases in customer satisfaction scores across our product lines.

Sage North America is organised into 3 divisions, Sage Business Solutions Division (“SBS”), Sage Payment Solutions Division and Sage Healthcare Division. SBS declined organically 11%*, the downturn particularly impacting our mid-market accounting products, CRM products and Sage Timberline Office which serves the construction industry. Our entry-level accounting products (Peachtree and Simply) delivered resilient performances with continued growth of Peachtree Quantum. Non-Profit Solutions performed well in the challenging market conditions and grew modestly. Sage Payment Solutions Division saw a 15% increase in the number of merchants served but lower volume per merchant leading to a fall in revenue of 4%*. Payments revenue from cross-sell to our existing customers grew, from a small base, by over 100%* in the year and we regard this as a substantial future opportunity for Sage.

Sage Healthcare Division has improved its EBITA† margin in the year to 17% (2008: 8%*). We have improved customer service levels and so reduced customer losses in our Medical Manager base. Although Healthcare revenues declined overall by 5%*, revenue from the Intergy product line, including Electronic Health Records (“EHR”) capability, grew by 13%* to £71.2m. Intergy, with its accredited, market-leading EHR solution, is well positioned to benefit from incentives within the American Recovery and Reinvestment Act for the adoption of EHR.

The EBITA† margin of Sage North America, including restructuring charges of £10.7m incurred in the year, was 18% (2008:18%*). Excluding restructuring charges, it was 20%.

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About Wayne Schulz

Wayne is a Sr Consultant who has worked with Sage MAS 90 and MAS 200 since 1986. He provides technical support to companies located throughout the United States on all versions of MAS90 and MAS200. Contact him on Twitter or Facebook or email wayne@s-consult.com. Review a list of all Schulz Consulting Prior MAS90 News Post Archives here. The views expressed on this site are solely those of the author and do not reflect the opinion or position of any other person or company. We are NOT in the business of providing tax, accounting or audit advice and you are advised to consult with your tax professional in such matters and not to rely on any information here as authoritative tax, technology or accounting advice.

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