By Erica Billingham
LONDON (Reuters UK) - Sage Group (SGE), Britain's biggest software company, posted first-half underlying profit above analysts' forecasts and said it was confident for the full year, boosting its shares in brisk trading.
Sage, which sells business management software and services to small and medium-sized businesses worldwide, was the biggest gainer on the FTSE 100 index , with its shares up 6.8 percent to 225-1/4 pence by 12:36 p.m. in above-average volume.
Newcastle-based Sage said on Thursday adjusted pretax profit for the six months ended March 31 rose 9 percent to 138 million pounds, as strong performances in Europe and the UK offset weakness in the U.S..
That was above the 130.2 million pound average forecast from six analysts in a Reuters Estimates poll and compared with 126.3 million a year earlier.
DISAPPOINTING U.S.
Sage said its businesses in the UK and Europe showed good revenue and profit growth, but performance in the United States, another key market, was hit by problems at its healthcare division which is being restructured.
Group revenue rose 9 percent to 640.4 million pounds, but revenue in the U.S. was flat. Sage Healthcare represents 11 percent of total group revenue.
"The U.S. has been disappointing with organic growth looking to be low single digit compared to our 5 percent forecast," Landsbanki analyst Kevin Ashton said in a note to clients. He has a "hold" rating on the stock.
Sage Chief Executive Paul Walker said the economy was tough in the U.S. but the company was making progress to improve the healthcare division.
"We will see the results of what we're doing in financial year 2009," he said.
Sage, whose main product is accounting software, said organic revenue growth, excluding Sage Healthcare, was 8 percent with 5 percent growth overall. Subscription revenue grew 12 percent.
Walker said in a statement the results demonstrated the resilience of Sage's subscription-based business model.
"Almost 60 percent of our revenues are derived from subscription contracts, allowing us to grow our business through periods of challenging economic conditions," he said.
"The predictability of our revenue streams and the high degree of recurring subscription revenues, combined with our geographically diverse customer base, give us confidence for the full year."
The company, which made two acquisitions in the UK in the first half, also said it is looking for opportunities in emerging markets.
(Editing by Louise Ireland)
