Sage to sell Brazilian operations

The subsidiary is considered to be outside the firm's strategic focus; the sale is expected to complete by September 2020
Written by Angelica Mari, Contributing Writer

UK software firm Sage will dispose of its Brazilian business, the company has stated in its annual accounts for 2019.

The company, which sells enterprise resource planning systems for mid market firms, has decided to sell its Brazilian business at the end of 2019 as it is deemed to be outside of Sage's core strategic focus.

According to the firm's report for its fiscal 2019, the management decided to exit Brazil after a strategic review, which concluded that "the region largely sells solutions which have no path to Sage Business Cloud." The sale of the company's Brazilian businesses is expected to be finalized before 30 September 2020.

In a statement, the company, which has been focusing on moving to a subscription model, said the sale follows the company's overall strategy to focus on specific regions and global products.

"Sage is working in partnership with the management of Sage Brazil to identify a new owner for the company, which will continue to drive its growth strategy," it said.

"Meanwhile, Sage continues committed to the success of Sage Brazil and all our business functions continue to operate normally, serving our clients with the same dedication," the statement noted.

The latest accounts report noted there are tax losses carried forward in respect of the Brazilian business, generating a potential net tax asset of £13 million ($16.8 million). However, the firm noted there is "sufficient supporting evidence of future profitability" for the operations in the Latin American country.

There was also a write-down of net assets of £19 million ($ 24.6 million) in relation to the Brazil operations, comprising £14 million impairment of assets and a £5 million ($6.4 million) provision for selling and administrative costs related to the sale. According to the company, this is planned to reduce the carrying financial burden of the business and so that the group can get a fair value on the sale.

The International operations at Sage delivered recurring revenue growth of 8% to £156 million ($202 million) in 2019, and total revenue growth of 4% to £207 million ($268 million) in 2019. Penetration of subscription-based offerings is now 57%, up from 54% in the prior year, and Sage Business Cloud penetration in the region is 9%, up from 7% in the prior year, but this excludes the revenues of the Brazilian business.

Sage's key area of focus is increasing recurring revenue and uptake of its product suite Sage Business Cloud. In its 2019 results, the company reported a decline in pre-tax profit of £361 million ($467.1 million), compared with £398 million ($517 million) in fiscal 2018. It also reported revenue growth of 3.1%, underpinned by over £1 billion ($1.2 billion) in subscriptions.

The company expects to obtain a capital return of £250 million with the Sage Pay, which is also up for sale, as well as revenue growth between 8% and 9% in 2020.

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