Execs at Britains biggest tech firm Sage were in bullish mood today despite conceding the last six months “had not gone to plan”.
Around £1.5bn has been wiped from Sages market value since mid-January as investors took a dim view of a dip in its revenue growth. But lets just underline one thing here: Sages top line isnt shrinking; its revenue just isnt increasing at an ever-faster rate.
Across the Atlantic, Silicon Valleys finest woo investors with rocketing revenues. Tesla, for example, is expected to report around $3bn (£2.2bn) of first-quarter revenue tonight. But this comes at a cost to the loss-making firm – to be precise: an expected three-month cash burn of $1bn.
Sage finance chief Steve Hare told City A.M. today “you need a lot of conviction” to back the likes of Tesla. Its something of an “all or nothing” trade, unlike backing the “strong fundamentals” of Sage, he said.
Read more: Tech giant Sage demands "accountability" after jettisoning 30 execs
Drawing parallels with Apple, Sage is swimming in cash. Until yesterday, it was feared iPhone sales could be on the wane; despite its cash coffers bursting at the seams. Meanwhile, almost all (99 per cent) of Sage's first-half profits were converted into cash. The Newcastle-based firm is throwing off almost half a billion pounds each year. This has allowed it to grow its dividend every year since 2001 – something not many of Britains blue-chip index can lay claim to.
Revenue growth is the natural focus for tech investors. But they would be wise not to be overly critical of Sages sagging growth. It's a cliche, but investors will do well to remember: "Revenue is vanity, profit is sanity, but cash is reality".
Read more: Almost £1bn has just been wiped off the value of the UK's biggest tech firm
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