Sage sounds cautious note as profit dips

ACCOUNTANCY software giant Sage yesterday said times are still tough for small businesses as it reported a two per cent drop in annual profits.<br /><br />&ldquo;Conditions have stabilised in the second half but at this stage it is too early to predict economic recovery,&rdquo; chief executive Paul Walker said yesterday.<br /><br />&ldquo;We know there is a lot of pent-up demand out there. We know they will continue to spend on services, but we need to see SMEs small and medium-sized enterprises become more confident before they start buying software again.&rdquo;<br /><br />Sage, which sells serves nearly 6m customers, posted a pre-tax profit of &pound;308m for the year, down two per cent on last year. Sales of new software, which accounts for around a third of its business, fell 16 per cent.<br /><br />But the company said existing customers were continuing to invest in Sage business management products. Subscription revenues, from ongoing service and maintenance contracts, grew two per cent over year.<br /><br />Sage also said it was encouraged by a contract renewal rate of 81 per cent, and announced it had won 245,000 new customers in the year.<br /><br />The company has tried to ride out the downturn by cutting about 1,000 jobs, taking out five per cent of its 2008 cost base.<br /><br />Shares in the company rose nearly three per cent to close at 221p. <br /><br />Panmure Gordon analyst George O&rsquo;Connor said: &ldquo;Despite a difficult economy there were 245,000 customers added. Sage says that it is not seeing a general recovery in the market &ndash; in common with other companies, it is not calling the turn &ndash; but pleasingly does not describe the market as challenging.&rdquo;