UPDATE 2-UK software Sage says France will hinder growth

Wed Dec 5, 2012 6:01am EST

Related Topics

* FY results broadly in line

* Says France, Spain will be a drag on growth in 2013

* Shares down 2 pct

By Paul Sandle

LONDON, Dec 5 (Reuters) - British software company Sage Group said tough conditions for small businesses in France and Spain would drag on growth in 2013.

The company, whose software is used by more than 6 million small businesses to run payroll and accounts, said underlying revenue edged up 2 percent to 1.3 billion pounds ($2.1 billion), half the growth rate recorded in 2011, in the year to end-September.

France, Spain and Italy are among the biggest drags on the euro zone economy, which is in its second recession since 2009.

The number of people out of work in France is at a more than 14-year high, and the country's economy has been virtually stagnant since grinding to a halt at the end of last year. Unemployment in Spain hit a a record high of 25 percent in the third quarter.

Higher sales of services, such as IT support, helped adjusted pretax profit rise 4 percent to 356.3 million pounds, beating analysts' expectations.

Chief Financial Officer Paul Harrison said revenue growth had improved to 3 percent in the second half, and he expected it remain at that level in 2013.

"Within that we do expect to see the U.S. and North America continuing to tick up a little, but we are pretty cautious about Europe and in particular Southern Europe, where we saw a slowdown in France, which is one of our largest businesses," he told reporters on Wednesday.

Shares in Sage were down 2 percent at 304.85 pence by 1055 GMT, giving up almost all of its two-week run up.

George O'Connor, an analyst at Panmure Gordon, said revenue was a little weaker and profit was a little better than his expectations, but that overall Sage was struggling to grow.

"A faltering economic backdrop, coupled with a very wide product array means that 'growth' should continue to elude it - and the miss of note was to revenue expectations," he said.

Sage is paying a final dividend 6.67 pence per share, taking the total payout for the year to 10.15 pence, up 4 percent.

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