Sage have just reported earnings for the year which included flat growth year over year with profit increasing 14%. EBITA margin increased to 25%.
Along with the earnings release they’ve also announced that Sue Swenson, CEO Sage North America, will be leaving in 2011 to be replaced by Sage France’s Pascal Houillon.
Sue came to Sage in May 2008 after a career that included running multiple telcoms including T-Mobile. Here departure follows the loss in October 2010 of Jodi Uecker-Rust as President of Sage Business Solutions (one of Sage NA’s most important divisionis)
More troubling is the North America business unit which has been led by Sue Swenson. The revenue growth in North America, Sage’s largest business unit, fell by 4% (EBITA / Operating Profit was on par with the rest of the business with 15% growth).
Below are the relevant North American Earnings Explanations from Sage’s Recent Unaudited September 2010 Report:
North America
Total revenues in North America contracted 4%* to £549.9m (2009: £575.8m*). Organic revenues contracted 3%* (2009: 8%* contraction) with an organic contraction of 2%* in the second half of the year. Organic subscription revenues declined 2%* (2009: 2%* contraction), while organic software and software-related services revenues fell 9%* (2009: 23%* contraction). In the second half of the year, organic software and software-related services revenues contracted by 4%*, against a contraction of 13%* for the first half of the year.
The business environment for SMEs in North America remains challenging, although we did see some improvement in confidence over the year. Within our North American business we have seen progress across a range of initiatives such as premium support and renewals, cross-sell of payments into our ERP base, the launch of several connected solutions, continued increase in our customer satisfaction and brand awareness scores, and the reinvigoration of our channel partners.
Sage Business Solutions, our largest US division, declined organically by 3%* in the year, and by 1%* in the second half of the year. However, we did see good growth in the second half of the year in certain key products such as Simply, ACCPAC and Sage ERP X3. Our mid-market ERP products are well positioned in the market, with a number of compelling releases planned for 2011. Whilst the US entry-level market remains cautious, we have had success in building our position in the Accountants channel, and Peachtree Business Care premium support contracts now account for almost 50% of Peachtree subscription revenue. Our CRM and construction vertical businesses continued to experience relatively weaker demand for new software, whilst our not for profit business grew strongly. We have launched a number of connected services targeting these markets, for example e-marketing (linked to our CRM solutions) and e-philanthropy for non-profit organisations, and these are showing early positive signs.
Sage Payment Solutions Division saw growth in the number of merchants and spend volumes, but a continued competitive pricing environment. Revenues were therefore flat* in the year. We have diversified our revenue mix by targeting mid-market businesses, which have a longer average customer life than small businesses. With a flexible platform for integration into other Sage products, cross-sell revenues into the Sage base increased by over 70%* to £7.8m, and this remains a substantial future opportunity.
Sage Healthcare Division has continued to see growth in the Intergy product, and a contraction of the Medical Manager product giving an overall contraction of 5%* on an organic basis. We have made significant progress on our customer service, and we continue to see good customer wins for Intergy, although the impact of the American Recovery and Reinvestment Act (“ARRA”) funding is not expected to have an effect until April 2011 onward. To benefit from ARRA, users have to demonstrate meaningful use of Healthcare IT, so we were pleased that in October 2010 Intergy was certified for meeting the requirements for meaningful use. We have launched a new version of Medical Manager in the year which has been very well received by our customers. Our focus remains on serving our Medical Manager customers better, building our brand in the market and positioning Intergy to benefit from ARRA. Sage Healthcare Division’s EBITA† margin showed continued improvement to 20% (2009: 17%*).
The EBITA† margin was 22% (2009: 18%*). The prior year margin excluding restructuring charges was 20%*.
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