UK accounting software company Sage Group Plc continues to impress investors and the shares leapt 6% to 1,432.5 pence after a 24.6% boost in income following a rise of almost 26% in revenues for the first six months. Sage’s $263m purchase of US financial software specialist State of the Art Inc (SOTA) only provided one month’s contribution to the current figures. But the potential in world’s largest market accounts for a fair portion of the premium in its share price. Sage is unusual in that what it exports is not accounting software – an impossible task given the vastly different standards. It has been steadily acquiring accounting software companies in Europe and applying to them a business model that has brought it margins of 42% in the UK. Given that this is twice the level of that in its overseas operations the potential is vast. The company, which operates at the low-end of the market, is anxious to dispel fears that its US operations could be vulnerable to a move downmarket by the high-end vendors such as SAP, Peoplesoft and Baan. While SOTA has an Acuity product in the vulnerable middle market for companies with 101-500 employees, this sector only accounts for 100,000 customers compared with the eight million who need entry and low-end systems. Sage has already reorganized SOTA marketing operation and begun the task of squeezing more revenue from its customer base. Equally SOTA, which invested heavily in technology, will provide expertise which can be applied more widely in the group. Further acquisitions are under consideration with Spain a target market. One key to leveraging the customer base for more income is support contracts and 50,000 have been added in the past six months to take the total to 312,000. Sage is looking forward to a satisfactory outcome for the full year.
