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Sage, the UK’s second-biggest technology company, has reported full-year revenues that beat management targets and says it is on the hunt for acquisitions.
The accounting software company has undergone a strategic overhaul to encourage more customers — typically small and medium-sized businesses — to web-based accounting systems that offer recurring subscription revenue after coming under pressure from rivals such as Salesforce, Xero and NetSuite.
In July, the Newcastle-based group announced its largest acquisition with the purchase of Intacct, the US cloud software group, for $850m.
On Wednesday, Stephen Kelly, chief executive, told the Financial Times that the company will look for more deals.
“This year marks the completion of the transformation of Sage outlined at the June 2015 capital markets day,” Mr Kelly said. “We now have the leadership, organisational alignment, brand and comprehensive suite of cloud solutions to accelerate momentum in our markets.”
Sage increased organic revenues by 6.6 per cent to £1.7bn in the year to September 30, ahead of its previous target of at least 6 per cent annual organic revenue growth. The figure excluded sales from its underperforming North American payments business, which it sold in June.
Mr Kelly said he expected organic growth next year to be higher at 8 per cent with an organic operating margin of 27.5 per cent after Sage begins to reap the benefits from its recent acquisitions, which also include the purchase in March of UK-based cloud provider Fairsale.
Once the biggest provider of software for small businesses, Sage was the fastest-growing UK-listed stock in the 1990s but has faced increasing competition from start-ups as businesses attempt to upgrade their IT systems.
Mr Kelly, who took over as chief executive in 2014, has focused on shifting customers to subscription-based services rather than one-off purchases.
Steve Clayton, analyst at Hargreaves Lansdown, said the company would need to maintain that growth in subscription services and improve its presence in the US, which he called “this year’s weak spot”.
However, analysts say growth will depend on the company’s ability to keep adding customers.
Organic operating profits, the best measure of Sage’s core profitability, increased 10.3 per cent to £475m this year.
Shares were up just over 1 per cent at £7.85 in afternoon trading in London.