Sage blamed the strong pound and restructuring costs at its French subsidiary for lower than expected interim figures.
The Newcastle-based accountancy software vendor produced first half profits 20 per cent higher than last year, on flat sales up just two per cent on the same period last year. Pre-tax profits were #19.3 million and turnover was #73.6 million, for the six months to 31 March.
The company said profits had been cut by #1.1 million and sales cut by #5.5 million because of the rise in sterling.
Restructuring and retraining costs at French subsidiary Saari and Sybel, now combined with the parent company and rebranded Sage France, cost a further #2.5 million.
In the UK, a switch away from direct selling at the high end in favour of value added resellers also caused a dip in revenues. Sage said the sales fall will reverse in the long term, as dealers pick up higher value sales.
The results include one month?s contribution from KHK, Sage's recent German acquisition. Net borrowings jumped to #37.8 million from #8.9 million, principally because of a #40 million medium term loan taken out to pay for KHK. The company said the borrowing facility was underpinned by strong operating cash flows, which grew to #19.8 million, against #16.8 million last time. It intends to introduce Sage-style licensing to Germany. Currently KHK sell multiple licences to dealers, rather than single licenses to end users.
Operating profits at Sage US grew 16 per cent over the period. The company said the Timeslips unit showed satisfactory sales and profit increases, while Telemagic is now operating profitably and "beginning to show promise".
Daceasy recorded a sales decline but improved operating margins to 24 per cent through efficiency improvements and by generating more sales from the existing user base.
Sage recorded improvements in turnover and margin at both UK operating subsidiaries, Sagesoft and Multisoft. Chairman David Goldman said the reorganisation of Sagesoft into primary sales and user base divisions had improved sales growth. "Sales to the existing user base now exceed 60 per cent of Sagesoft's total revenues," he said.
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