Broker snap: Revenue trends at Sage disappoint, says Merchant Securities

9th May 2012 10:22

Sage's interim results were broadly in line with expectations but raised some questions over revenue growth, according to Merchant Securities which has reiterated its hold recommendation and 300p target price for the stock this morning.The business software provider reported that adjusted earnings before interest, tax and amortisation (EBITA) came in at £181m (up 1% on an underlying basis), above the consensus estimate of £180m and slightly under the £184m Merchant forecast.However, the broker says that revenue trends are "slightly disappointing" with £673m delivered overall, compared with consensus predictions of £684m (Merchant: £678m). "This implies 2% organic growth, versus general market expectations of 3%+ for FY12. North America was the most surprising region with a flat revenue performance, while Europe was slightly softer than expectations due to weakness in both France and Spain," said analyst Roger Phillips."These results are likely to be taken slightly negatively overall, due to the evident lack of growth. Recurring revenues have grown, and so the underlying strength of the business remains intact," he said.Nevertheless, Phillips did not that weakness post-results could present a buying opportunity, in spite of the broker's neutral recommendation.By 11:03 on Wednesday, shares had dropped 4.57% to 265.5p.BC