Spotlight – Sage eyes wise buys

Spare a thought for Sage Group finance director Aidan Hughes, who is due to reveal the Newcastle-based accountancy software house’s interim results on Tuesday 11 May.

Accommodating even one acquisition is enough of a headache, but Hughes has had to integrate and consolidate results from three other purchases in the past six months: US retail software company Peachtree; tax specialist Taxsoft; and Tetra, the Maidenhead-based developer of mid-range C/S3 business software.

Sage splashed out more than £176m to purchase the three companies in a burst of activity between January and March. If the acquisitions perform as they did in the corresponding period last year, they will add £35m to the company’s half-year turnover and £3.6m to its profit – equivalent to 38% and 14% increases on Sage’s 1998 interims.

Recently, the group reported that profit margins at State of the Art, the US-based subsidiary it acquired during 1998, had risen from 12% to 20% in less than 12 months.

Handling acquisitions is nothing new for Hughes, and he will no doubt be rewarded by the rapidly climbing value of his share options. His boss, Sage Group managing director Graham Wylie, is already rated the 123rd richest person in the UK, according to the Sunday Times ‘Rich List’.

The downside for Hughes is that the Taxsoft, Tetra and Peachtree acquisitions during this period coincided with the introduction of FRS 10 ‘Goodwill and Intangible Assets’.

According to Hughes, the new standard fails to cater for the needs of high-growth, high-technology industries.

‘Recognising and valuing goodwill is difficult in emerging industries like technology, where it can be very hard for us to apply an arbitrary cut-off point,’ he told Accountancy Age in February.

Readers should also keep an eye out for references to former Taxsoft executives Robin and Charles Cooke-Hurle among Sage’s exceptional items.

The brothers sold the company they founded to Sage for £10.8m in cash, but decided to leave ‘amicably’ last month.

Hughes would not divulge the size of their severance packages, but the group’s interim results just might.

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