Sage 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

Four things we learned from AAT Annual Conference

Making Tax Digital Four things we learned from AAT Annual Conference

3d Emma Smith, Managing Editor
Making Tax Digital webinar: It’s time to prepare

Making Tax Digital Making Tax Digital webinar: It’s time to prepare

4d Emma Smith, Managing Editor
Technology is the future for accountants, but not without risk

Technology Technology is the future for accountants, but not without risk

5d Adam Harper, AAT
Making Tax Digital: a great and much-needed step towards digitsation

Making Tax Digital Making Tax Digital: a great and much-needed step towards digitsation

6d Lucy Skoulding, Reporter
Four tech updates from Accountex 2018

Technology Four tech updates from Accountex 2018

2w Emma Smith, Managing Editor
Making Tax Digital delays – are other policies at risk?

Making Tax Digital Making Tax Digital delays – are other policies at risk?

3w Androulla Soteri, MHA MacIntyre Hudson
Is predictive analytics the end of the annual audit?

Audit Is predictive analytics the end of the annual audit?

4w Martin Herron, MHA MacIntyre Hudson
Cybersecurity webinar: how protected are you and your data?

Security Cybersecurity webinar: how protected are you and your data?

1m Emma Smith, Managing Editor