Sage – Pray you remain ‘Boring’

(By Richard Holway 5.00pm 4th May 09) Sage and Capita are the only two companies we track that still have the coveted ‘Holway Boring Award’. They have never suffered an earnings reversal since their IPOs in 1989. A quite remarkable performance.

But if you had read this weekend’s papers you might have thought that this was about to end. Cost cutting Sage to axe 1000 jobs in the Sunday Times was a typical example. In fact, Sage’s job cuts, to save c£50m a year, look prudent in today’s environment. Indeed, given the job cuts by almost every other global tech company we follow, they look modest and maybe a bit late.

Sage’s interim results are due on 6th May. Their revenue is underpinned by on-going support and maintenance contracts (c60% of revenues). I guess if a sizeable number of these SME goes broke, these might be in jeopardy. But I can’t see that. Indeed, redundancies spur new ventures. The newly self-employed all need accounting systems! Also, in these times, SMEs abandon plans to jump ship to another supplier; so retention and upgrades do even better too. Cazanove are suggesting revenues up from £1.3b to £1.45m and profits up from £299.8m to £321.5m in the year to Sept 09. Let’s hope this also results in increased EPS to safeguard that Boring Award.

Don’t you just love being Boring?