Sage (SGE) waited until after market-close to issue both a trading update and the news that it will acquire Intacct – a provider of cloud financial management solutions in North America. The market did not react well, with Sage’s shares falling 5 per cent in early trading on Wednesday before partially recovering. This decline perhaps reflected the high price paid for Intacct, at $850m (£654m). Equally, investors might have balked at the weaker organic growth of 5.6 per cent reported for the third quarter, compared with 6.3 per cent during the second quarter. That said, management reiterated its full-year guidance of 6 per cent organic growth, with an underlying operating margin of no less than 27 per cent.
France was an area of weakness for Sage, with flat performance. The software provider’s overall recurring revenue growth rate for the nine months to end of June was 9.3 per cent, less than the 10.1 per cent growth during the same period a year earlier. North America helped to drive growth and management sees the acquisition of Intacct as supportive of this. For analysts at Numis, such an acquisition might be transformational for Sage, which would have found it almost impossible to develop a solution like Intacct’s on its own.
Analysts at Numis are forecasting pre-tax profits of £426m for the 12 months to December 2017, giving EPS of 28.9p (from £405m and 27.9p in 2016).
