TechnologySage set to make more acquisitions

Sage set to make more acquisitions

Sage is set to generate solid organic growth and still has a bit of money to spare to add to its acquisition shopping basket

‘Short but sweet enough,’ was one metaphor analysts used last week to
describe the very brief trading statement accounting released by software group
Sage.

Like the accountant clients it serves, the FTSE 100 company cut the fluff
with a succinct update confirming that interim revenues, operating profits and
pre-tax profits were all on track to reach £444m, £115m and £111m respectively.

The news was well received by analysts, who said that Sage was set to
generate solid organic growth and still had a bit of money to spare to add to
its already overflowing acquisition shopping basket.

Analysts at Credit Suisse said Sage’s update followed a period of busy
acquisition activity, but added that the Newcastle-based group was still in line
to generate organic growth of around 6%.

The Credit Suisse research team saw more room on Sage’s balance sheet for
further acquisitions. Recently the group has forked out to buy Adonix and Verus
and pursue Norwegian rival Visma.

‘The Visma acquisition will, we believe, move the balance sheet to around
three times debt to EBITDA. Given the recurring nature of much of Sage’s revenue
we believe that four to five times debt to EBITDA could easily be supported. As
a result, at the bottom end of that range we believe that there is still around
another £200m to £250m of capacity for acquisitions,’ the analysts said in a
research note.

Graham Brown from Cheuvreux was also upbeat on Sage and said the time was
ripe to buy the stock on the cheap. ‘The shares have underperformed the UK
market by 5% in the year to date despite seeing the evidence (the Visma
acquisition) to support a 4% upgrade. We believe that further earnings enhancing
deals are a prospect for the current year,’ Brown wrote in a note.

Related Articles

Why technology is killing time-based pay

Technology Why technology is killing time-based pay

1w Receipt Bank | Sponsored
KPMG makes senior appointments in cyber security team

Big Four KPMG makes senior appointments in cyber security team

2w Alia Shoaib, Reporter
Man vs The Machine: AI in accountancy

Technology Man vs The Machine: AI in accountancy

3w AJ Chambers Recruitment
5 ways to adapt your accounting services for millennial clients

Accounting Firms 5 ways to adapt your accounting services for millennial clients

4w Receipt Bank | Sponsored
GDPR: How legitimate are your legitimate interests?

Regulation GDPR: How legitimate are your legitimate interests?

1m Ian Singer, PKF Littlejohn
Viewpoint: Making Tax Digital is not all doom and gloom

Making Tax Digital Viewpoint: Making Tax Digital is not all doom and gloom

1m Brian Palmer, AAT
Treasury cracks down on Bitcoin amid tax evasion concerns

Regulation Treasury cracks down on Bitcoin amid tax evasion concerns

2m Alia Shoaib, Reporter
AVADO wins award for online ACCA courses

Career AVADO wins award for online ACCA courses

2m Alia Shoaib, Reporter