Sage leaps on IBM Net tie-up

SHARES IN Sage, the accountancy software group, leapt 10 per cent yesterday when the company announced a partnership with IBM designed to lure its two million small business customers on to the Internet.

The shares surged from 2,037.5p to 2,252.5p as the company turned in first-half profits of pounds 35.5m, beating the top expectations by 10 per cent.

The biggest boost came as the group increased profit margins at its French division. Margins there jumped from 21 to 28 per cent of turnover as Sage persuaded customers to pay up front for technical help throughout the year. Earnings per share jumped 40 per cent to 20.58p.

Sage said it had agreed to link with IBM to provide a free "template and tool-kit" for small businesses needing help in setting up and maintaining websites. In the US 15 per cent of Sage's software customers have websites, and only 3 per cent in the UK.

In two years Sage will begin to use the free service to sell its paid- for Web-based services. IBM will supply technical software back-up.

Sage is estimated to have 70 per cent of the UK market for accountancy software and has been expanding abroad.

Analysts are upgrading forecasts by up to 10 per cent, but they said Sage's rating, at 56 times projected earnings for the year to September, was extremely high.