Broker snap: Marginal earnings growth expected at Sage

8th May 2012 11:29

Merchant Securities has maintained its hold rating and 300p target price for business software firm Sage Group ahead of its interim results tomorrow.For the six months to March 31st 2012, the broker is forecasting revenue to fall from £723m (underlying organic) to £678m year-on-year and adjusted earnings before interest and tax (EBIT) to improve from £183m to £184m, compared with consensus estimates of £685m and £180m, respectively. "Our figures represent only marginal EBIT growth, and the consensus forecast for a decline looks conservative," said analyst Roger Phillips.The broker says that "offsetting factors" in Wednesday's figures are likely to be from weakness in Europe, with France (accounting for around 36% of group revenue) being the real risk."On the other hand, Sage has built something of a long track record of outperforming margin estimates and FY12 should be no different. The flat EBIT margin profile looks conservative and we note the 50 basis points of 'unexpected' margin upside delivered last year," Phillips said.BC