2 December 2003 Sage, the accounting software supplier, has shrugged off intensifying competition from Microsoft to post increased revenues and profitability.

The Newcastle, England-based company, which focuses on the small and medium-sized business (SMB) sector increasingly targeted by Microsoft, reported full-year revenues up 4% to £560.3 million and pre-tax profits up 12% to £151 million in the year to the end of September.

Revenue growth was largely driven by upgrades, as cautious customers opted to retain and augment their existing software applications rather than replace them with new products. Sales of support packages also rose strongly, up by 8%. This is because many of Sage’s customers have few or no IT staff.

Acquisitive Sage has diversified in recent years to offer a range of enterprise software modules, such as customer relationship management (CRM) and contact management, around its core accounting software. In October, it acquired Spain’s Grupo SP for £49.1 million and in November, South Africa’s Softline for £54.9 million. More purchases are planned.

However, Microsoft has Sage in its sights as it bids to build a new business unit around enterprise applications software, starting in accounting and CRM for the mid-market and small businesses with its Great Plains and Navision acquisitions.

At the same time, Sage is also facing competition from a resurgent application service provider (ASP) sector, led by Salesforce.com and NetSuite, which promises to deliver such software as a hosted service over the Internet for a flat-rate monthly charge.

Nevertheless, chairman Michael Jackson said that trading in the current year had so far proved promising, in part thanks to the new acquisitions. The company now boasts 3.6 million customers, added Jackson.