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Growth eludes Sage

RESULTS: Despite some positive signs, growth at accounting software group Sage has largely stalled - leaving the share price rating looking too demanding
December 5, 2012

Full-year growth at accounting software specialist Sage (SGE) may have largely stalled, but there was still some encouraging signs. Sage's cash generation still looks good, for example - operating cash flow fell just 5 per cent in the year to £383.8m versus £405m last year, while organic subscription revenue grew 6 per cent in the period to £922.7m.

IC TIP: Sell at 305p

A stronger second-half performance in North America also helped maintain the cash profit margin at above 25 per cent at the Americas division. The AAMEA (Africa, Australia, Middle East and Asia) unit, meanwhile, delivered organic sales growth of 12 per cent - although business there generates just 11 per cent of group sales. However, amidst tough economic condition, sales of software and software-related services, generated from licence fees, dropped 5 per cent organically in the period to £417.5m. The 'mid-market' accounted for most of the losses, with business in France and Spain looking the hardest hit. Indeed, the European operation, which generates 58 per cent of group sales, saw underlying cash profits squeezed by 1 per cent to £219m.

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