Final Results

Sage Group PLC
5 December 2001



Embargoed for release, Wednesday 5 December 2001



SAGE PRE-TAX PROFIT UP 12% TO £121.3 MILLION FOR YEAR ENDED 30 SEPTEMBER 2001


The Sage Group plc (Sage), a leading supplier of business management software
solutions and related services for small to medium-sized enterprises (SMEs),
announces its unaudited results for the year ended 30 September 2001.



Highlights

*     Turnover increased by 17% to £484.1m (2000: £412.2m)

*     Pre-tax profit increased 12% to £121.3m (2000: £108.7m)

*     Earnings per share up 11% to 6.59p (2000: 5.92p)

*     Dividends for the year raised 10% to 0.425p (2000: 0.386p)

*     Operating cash flow up 14% to £119.6m (2000: £105.0m)

*     Acquisition of Interact Commerce Corporation (Interact) for £189m,
      May 2001

*     248,000 new customers added (excluding Interact), bringing the
      total to 2.8m (2000: 2.5m)

*     Support contracts increased 15% to 897,000 (2000: 779,000)

*     Geographical analysis
                                     2001                      2000

£m                         Turnover Operating profit Turnover Operating profit

UK                            148.8             56.3    132.1             55.0
Mainland Europe               102.5             26.3     98.2             22.6
US                            209.2             45.6    195.0             36.8
                              460.5            128.2    425.3            114.4
Impact of foreign exchange        -                -   (13.1)            (2.5)
*
Acquisition - US               23.6              0.2        -                -
                              484.1            128.4    412.2            111.9



*Foreign currency results for the year ended 30 September 2000 have been
retranslated at current year exchange rates to facilitate comparison of
results, in the table above and in the operational review below.



Michael Jackson, Chairman, commented: 'Our businesses have continued to win
significant numbers of new customers  -  nearly a quarter of a million - this
year. Throughout the Group we continue to find new ways of selling more
products and services to existing customers. Our strategy of marketing an
ever-expanding product and service offering to an ever-increasing customer
base remains our clear focus. As in the past, we will continue to grow our
business both organically and through acquisition.



Notwithstanding the current economic climate, we believe that the strength of
our brands, the breadth of our product offering, the resilience of our channel
and the sheer scale of our customer base provide us with a platform for
sustained long-term growth.  Therefore we look forward to 2002 with confidence
'.



Enquiries:
The Sage Group plc      0191 255 3000     Financial Dynamics     020 7831 3113
Paul Walker, Chief Executive              Giles Sanderson / Harriet Keen
Paul Harrison, Finance Director
Phil Branston, Investor Relations



Notes to editors:

The Sage Group plc is a leading international supplier of business management
software solutions and related products and services for small to medium-sized
enterprises.  Formed in 1981, the Group was floated on the London Stock
Exchange in 1989 and now employs over 5,000 people worldwide in its
market-leading companies throughout Europe and the US.





Introduction

In what was a challenging economic environment for our industry, we are
pleased to report, for the year ended 30 September 2001, revenue growth of
17%, pre-tax profit growth of 12% and earnings per share growth of 11%.



During the year, we attracted 248,000 new customers to Sage, increasing the
size of our installed base by 10% to 2.8 million customers. This increase
excludes more than 3 million users acquired with Interact Commerce Corporation
(Interact). Our installed base revenues, from selling products and services to
our customers, increased by 21% and continued to drive growth, contributing
68% of total revenues (2000: 64%).



Last year we set out our intention to become a provider of business management
software solutions for small to medium-sized enterprises (SMEs) in our chosen
geographic markets.  This year we have taken a number of important steps
towards achieving this objective. Most importantly, we have broadened our
range of products not only through internal development activity but also
through a number of significant acquisitions. This broadening of our offering
has provided us with the means to sell more products and services both to new
and existing customers. In addition, we are progressively expanding our
portfolio of e-business products and services.



All of our operating companies have continued to focus this year on attracting
new customers to Sage. The expansion of our product offering together with
innovative channel marketing programmes have stimulated new licence revenues
in the year. Our success in recruiting new customers to Sage, particularly at
the entry-level, provides, over the longer term, a potent source of new leads
for our mid-market businesses.



A broader range of products also provides further opportunities to sell more
customer support contracts.  This activity forms the core of our installed
base business model, with support contracts alone contributing 45% of total
revenues in the year.  The penetration rate of support contracts against
registered customers improved over the year.



The close relationship we have with our customers allows us to address two
types of opportunity to sell extra software and services: first, migrating
customers to higher-value accounting software, and second, cross-selling
additional business management software products and services, in areas such
as payroll, customer relationship management (CRM) and e-business.



Whilst the contribution of our e-business revenues is not significant, there
are encouraging signs that SMEs are evaluating more closely the benefits that
e-business products and services could bring to their businesses.  They look
to Sage for guidance in this area, to which end we have hosted over 2,000
seminars worldwide designed to demystify e-business and explain the benefits
it offers SMEs. In the long-term we remain convinced that e-business will be a
stimulus for growth.



Each of the acquisitions we have made this year is consistent with our twin
objectives of broadening our product portfolio and growing our customer base.
The acquisition of Interact brought us market-leading CRM products in ACT! and
SalesLogix, and in excess of 3 million users.  Other smaller acquisitions
added to our range of business management software solutions. In France, we
acquired Fasset, a leading provider of fixed asset management software and,
after the year-end, a majority holding in Coala, whose products and services
address the needs of professional accountancy practices.  In the US, we
acquired Haitek, which supplies manufacturing software, Platinum for Windows,
which offers finance and distribution software and Micro Information Products
(MIP), whose solutions target the large US 'not-for-profit' sector which
includes schools, colleges, local government, charities and religious
organisations.



Our focus on meeting the particular needs of our customers with a compelling
range of products, distributed through our value-added reseller (VAR) channel
and underpinned by the provision of insightful customer support inspires
customer loyalty and, we believe, continues to differentiate Sage from its
competitors.



Financials

Turnover grew 17% to £484.1m. Operating profit rose by 15% to £128.4m (2000: £
111.9m). Pre-tax profit grew 12% to £121.3m (2000: £108.7m). As in previous
years, operating cash flow closely reflected operating profit, and rose 14% to
£119.6m. Deferred revenues from support contracts grew to £112.8m (30
September 2000: £98.1m).



The proposed final dividend is 0.282p per share, making a total of 0.425p
(2000: 0.386p), an increase of 10%. Subject to shareholder approval, this will
be paid on 8 March 2002.



Following the acquisition of Interact, financed through a loan facility, the
Group had net debt of £190.9m at 30 September 2001.



Operational review



UK

Continued progress has been made both in developing the existing offering and
in addressing new opportunities. Revenues grew by 13% and 46,000 new customers
were attracted during the year. Operating margins have declined slightly this
year due to a combination of factors. First, in the mid-market, despite a
healthy pipeline, closure of sales has proved difficult, leading to lower
revenues and margins. Second, we have continued to invest in our e-business
products and services in anticipation of future demand. Third, acquisition of
lower margin businesses during the year has had a dilutive effect.



We are focusing increasing attention on those of our customers who are showing
signs of outgrowing their entry-level software and encouraging them to upgrade
to more powerful mid-market business management software solutions. This will
be an important source of new revenue for our mid-market business.



A number of channel marketing programmes have been introduced, providing UK
VARs with greater incentives to focus on new licence sales. The initial
results from the second half have been encouraging, with increasing numbers of
VARs generating increased volumes of new business. Improved VAR accreditation
and training will allow VARs to work more closely with Sage in serving our
customers.



Installed base revenues continue to grow strongly. The customer division has
been successful both in selling support contracts and in further improving the
quality of customer service. 69,000 support contracts were added in the year.
Cross-selling additional products and services to existing customers gathered
momentum, particularly to those of our customers with support contracts, who
tend to be more willing buyers of additional products and services.



Acquisitions during the year expanded the product range and brought many new
customers into the business. TAS Software, acquired in February 2001, added
25,000 entry-level accounting customers.



Sage in the UK now offers a broad range of business management software
solutions, which we are confident will produce significant growth in future
revenues.



Mainland Europe

In France, revenues increased by 4% but this disguises a strong performance in
the second half, when revenues increased 27% over the prior year. In addition,
we gained 55,000 new entry-level customers.



There has been some stimulus to revenues from the full adoption of the Euro in
France. Extra demand has been evident not only in new software licence
business, but also in take-up of support contracts in preparation for the
changeover period.



In France we now have an expanded range of business management software
solutions for the entry-level market including not only enhanced core
accounting products but also newly developed products for key
industry-specific markets such as retail, healthcare and construction.
Marketing these additional products and services to our installed base of
380,000 entry-level customers will provide further opportunities for revenue
growth.



We have maintained a strong focus on improving support contract revenues.
Incentivising VARs to encourage customers to take up support contracts at the
time of the initial purchase of a new software licence has helped to increase
the number of support contracts to 254,000.



Acquisitions have extended the business management software offering beyond
the accounting core.  The Fasset suite of fixed asset management applications
(1,300 customers) was acquired in August. After the year-end, the acquisition
of Coala (3,100 customers) expanded Sage's presence in the French professional
accountants' market.



In Germany, as in France, there has been some stimulus to revenues from the
full adoption of the Euro. We have continued to make improvements to the
quality of our customer service as well as to operating efficiencies with the
result that, whereas the business was loss-making two years ago, it achieved
operating margins of 23% this year (2000: 10%), despite revenues growing by
only 5%. The core OfficeLine product is well established as a market leader in
its segment, while users of the legacy product ClassicLine have benefited from
ongoing modernisation of the product.



Growth in Mainland Europe will be driven by continuing improvements to our
primary and installed base business models, as well as by the continuing
expansion of our product offering.



US

In the US, in contrast to our competitors, we have a product offering that
covers the market from entry-level to mid-market. The experienced central US
management team has helped the individual operating companies to work more
closely together, and the considerable incremental installed base
opportunities that exist in the US are starting to be realised. Acquisitions
are being used to build the business management software solutions offering
whilst at the same time expanding the customer base.



Market conditions have been challenging and were exacerbated by disruption
following September's terrorist attacks. The market for new licence sales was
especially tough, but despite this our US businesses maintained their market
share and the installed base business performed strongly so that revenues
(excluding Interact) grew 7% over the prior year.



At the entry-level Peachtree attracted 71,000 new customers and successfully
pursued a strategy of migrating customers onto new versions, additional
modules, and higher-value support contracts, which has resulted in its
operating margin increasing to 23% (2000: 14%). The ability to mine the
Peachtree customer base for sales leads to mid-market products provides us
with a unique opportunity in the US market. The first signs of the success of
this are evident in that 26% of new licence unit sales of the mid-market
offering, MAS90 were generated from the Peachtree customer base.



Best Software offers business management software solutions outside the
accounting core. It has focused its business objectives on its market-leading
FAS (Fixed Asset) and Abra (Human Resources) applications and has
de-emphasised its non-core products. The resulting efficiencies have improved
operating margins to 21% (2000: 14%). Best is now well-placed to address the
substantial opportunity to cross-sell its products to the large installed base
in the US.



Acquisitions in the US have added complementary customer bases in
strategically important industry-specific markets. Haitek, acquired in March,
added a manufacturing module which enhances the mid-market Enterprise Suite
offering. MIP, acquired in September with 5,000 customers, established a
presence in, and an opportunity to consolidate, the fast-growing non-profit
sector. In addition, the acquisition of Platinum For Windows in June added
6,000 mid-market accounting customers.



Our US businesses are focused not only on driving growth through new customer
acquisition but also on maximising the significant installed base opportunity
in the US market. We will continue to benefit from the competitive advantage
we have in covering all segments of the SME market.



Interact

The acquisition of Interact in May 2001 for £189m marked a significant step in
our strategy to offer SMEs a comprehensive suite of business management
software solutions, by establishing for the first time an offering in the CRM
market.  The two Interact products, ACT! and SalesLogix, address different
needs in the marketplace.  ACT! is a product used by 3 million salespeople
worldwide which helps the user manage individual contacts very efficiently.
SalesLogix is a comprehensive CRM suite enabling an entire organisation to
automate sales, marketing and customer service activities.  Both products are
being actively marketed to SMEs in all our markets.



In the contact management field ACT! is a bestseller with few competitors.
SalesLogix, a more expensive solution, operates in a more competitive market
and has suffered this year from a difficult trading environment in the
mid-market.  In addition, SalesLogix experienced some sales deferrals in
September.  Following a detailed review of the product positioning for
SalesLogix, we have refocused the product offering to be more compelling to
the SME market as a whole rather than just the upper end of the mid-market.
The product repositioning, a simplified pricing structure and the launch of a
number of innovative channel marketing campaigns are expected to stimulate
revenue growth.



ACT! and SalesLogix have an estimated user base of more than 3 million.
Historically, however, Interact has done very little to sell additional
products and services to this substantial installed base.  We are developing a
range of installed base marketing campaigns to the Interact customer base,
focusing in the first instance on support contracts as well as
industry-specific versions of ACT! and SalesLogix.  We expect this installed
base activity to lead to a significant increase in revenues for Interact.



Our research confirms that there is strong demand from existing Sage customers
for CRM solutions that are tightly integrated to our core accounting products.
  Over the last few months, we have invested considerable time and effort in
building an efficient software integration tool that will allow rich
integration between ACT! and Sage accounting software products.  The ACT!
integration tool is now complete which means that Sage operating companies are
able to launch new integrated versions of ACT!  In the UK, for example, the
launch of Sage Contact Manager powered by ACT! is planned for March 2002.



The integration tool that will allow seamless integration between SalesLogix
and our accounting products will be completed during calendar 2002.  In the
meantime our channel partners have access to a number of development toolkits
which facilitate  integration between SalesLogix and our accounting products.
Links, for example, between SalesLogix and our mainstream accounting products
in the US, MAS90 and Sage Enterprise, already exist and are being actively
marketed to our customer base.



Drawing on our experience of integrating acquisitions and improving their
operating performance, we are confident of maximising the strategic CRM
opportunity represented by Interact, not only as a stand-alone business, but
also as a provider of important additional products to sell to our installed
bases around the world.



People

The success of our business is due in large part to the effort, creativity and
ingenuity of our people. In the year under review, our people once again made
critical contributions right across the organisation with the overall
objective of serving our customers more effectively. We continue to nurture
the talent of our employees and are investing in training, succession planning
and career development programmes throughout the Group.



Outlook

Our businesses have continued to win significant numbers of new customers -
nearly a quarter of a million - this year. Throughout the Group we continue to
find new ways of selling more products and services to existing customers. Our
strategy of marketing an ever-expanding product and service offering to an
ever-increasing customer base remains our clear focus. As in the past, we will
continue to grow our business both organically and through acquisition.



Notwithstanding the current economic climate, we believe that the strength of
our brands, the breadth of our product offering, the resilience of our channel
and the sheer scale of our customer base, provide us with a platform for
sustained long-term growth.  Therefore we look forward to 2002 with
confidence.




CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 September 2001


                              Continuing operations             2001       2000
                                          Acquisitions         Total      Total
                              (unaudited)  (unaudited)   (unaudited)  (audited)
                                    £'000        £'000         £'000      £'000

Turnover                          460,582       23,555       484,137    412,153


Cost of sales                    (49,694)      (1,037)      (50,731)   (43,066)

Gross profit                      410,888       22,518       433,406    369,087

Selling and administrative      (282,658)     (22,367)     (305,025)  (257,205)
expenses

Operating profit                  128,230          151       128,381    111,882

Interest receivable                                            3,192      3,139
Interest payable and similar                                (10,256)    (6,273)
charges

Profit on ordinary                                           121,317    108,748
activities before taxation

Taxation on profit on                                       (37,609)   (34,799)
ordinary activities

Profit on ordinary                                            83,708     73,949
activities after taxation


Equity minority interest                                          32         71

Profit for the financial                                      83,740     74,020
year


Equity dividends                                             (5,515)     (4,898)


Amount transferred to                                        78,225      69,122
reserves


Earnings per share (pence) -                                   6.59p       5.92p
basic


Dividend per share (pence)                                    0.425p      0.386p



CONSOLIDATED BALANCE SHEET
As at 30 September 2001

                                                                2001       2000
                                                         (unaudited)   (audited)
                                                               £'000      £'000
Fixed assets
Intangible assets                                            836,329    540,422
Tangible assets                                               51,208     46,504
                                                             887,537    586,926
Current assets
Stocks                                                         2,308      2,489
Debtors                                                       95,248     85,369
Cash at bank and in hand                                      42,764     66,417
                                                             140,320    154,275

Creditors: amounts falling due within one year             (138,479)  (110,178)

Net current assets                                             1,841     44,097

Total assets less current liabilities                        889,378    631,023

Creditors: amounts falling due after more than one year    (237,585)   (78,472)

Deferred income                                            (112,809)   (98,066)


Equity minority interest                                        (62)       (94)



                                                             538,922    454,391
Capital and reserves
Called up equity share capital                                12,725     12,680
Share premium account                                        437,671    432,690
Merger reserve                                                61,111     61,111
Profit and loss account                                       27,415   (52,090)


Equity shareholders' funds                                   538,922    454,391




CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 30 September 2001
                                                                2001       2000
                                                         (unaudited)   (audited)
                                                               £'000      £'000

Profit for the financial year                                 83,740     74,020
Translation of foreign currency net investments and

related borrowings                                             3,463    (2,963)
Total recognised gains and losses relating to the year        87,203     71,057




CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2001


                                                                 2001      2000
                                                          (unaudited)  (audited)
                                                                £'000     £'000


Net cash inflow from operating activities                     119,576   104,998

Returns on investments and servicing of finance
   Interest received                                            3,302     3,029
   Interest paid                                              (9,023)   (5,531)
   Issue cost of loans                                        (1,877)         -
   Interest element of finance lease rental payments            (415)     (261)

Net cash outflow from returns on investments and
servicing of finance                                          (8,013)   (2,763)

Taxation
   Corporation tax paid                                      (23,184)  (34,266)

Capital expenditure
   Payments to acquire tangible fixed assets                 (11,619)  (17,786)
   Receipts from sales of tangible fixed assets                 4,865       389


Net cash outflow from capital expenditure                     (6,754)  (17,397)

Acquisitions and disposals
  Purchase of subsidiary undertakings:
  Net cash consideration - current year acquisitions        (218,474) (329,756)
                         - prior year acquisitions           (11,781)     (672)


Net cash outflow from acquisitions and disposals            (230,255) (330,428)

Equity dividends paid                                         (5,182)   (4,490)

Cash outflow before financing and management of liquid      (153,812) (284,346)
resources

Management of liquid resources

   Decrease in short term deposits                             11,212    29,785

Financing
   Shares issued                                                2,381   298,450
   Share issue costs                                                -   (7,614)
   Movement in loan funding                                   130,906     2,464
   Repayment of capital element of finance leases             (2,758)   (5,271)

Net cash inflow from financing                                130,529   288,029

(Decrease)/increase in cash in the year                      (12,071)    33,468



NOTES


1.                   Geographical analysis


                               2001                           2000
                     Turnover   Operating profit   Turnover  Operating profit
                                      (unaudited)                   (audited)
                  (unaudited)                     (audited)
                        £'000               £'000     £'000             £'000


UK                    148,839              56,316   132,124            54,965
France                 74,103              21,859    71,440            20,615
Germany/               28,451               4,473    26,754             1,982
Switzerland
US                    209,189              45,582   195,019            36,786
                      460,582             128,230   425,337           114,348
Impact of foreign           -                   -  (13,184)           (2,466)
exchange*
Acquisition - US       23,555                 151         -                 -
                      484,137             128,381   412,153           111,882



*      Foreign currency results for the year ended 30 September 2000 have been
retranslated at current year exchange rates to facilitate the comparison of
results.


2.             Analysis of change in net debt (inclusive of finance leases)


                           At 1 Cash flow Acquisitions Other Exchange     At 30
                        October                              Movement September
                           2000                                            2001
                          £'000     £'000        £'000 £'000    £'000     £'000

Net cash at bank and     54,825  (12,071)            -     -        -    42,754
in hand
Short term deposits      11,190  (11,212)            -     -       22         -
Debt                   (86,802) (126,271)     (24,973) (490)    4,835 (233,701)
                       (20,787) (149,554)     (24,973) (490)    4,857 (190,947)




3.       Taxation



The taxation charge for the year comprises:

                                                        2001               2000
                                                       £'000              £'000

UK taxation                                           22,303             18,433
Overseas taxation                                     15,306             16,366
                                                      37,609             34,799


4.       The unaudited financial information set out above does not constitute
the Company's statutory accounts for the year ended 30 September 2001.
Statutory accounts to 30 September 2000 have been delivered to the Registrar
of Companies and those to 30 September 2001 will be delivered in due course.
The Group's results for the year ended 30 September 2000 have been extracted
from those statutory accounts.  The Auditors' Report on the accounts to 30
September 2000 was unqualified and did not contain a statement under Section
237 of the Companies Act 1985.



5.       The calculation of earnings per share is based on earnings of £83.7m
(2000: £74.0m) and on 1,270,533,875 ordinary 1p shares (2000: 1,250,052,239)
being the weighted average number of shares in issue during the year.



6.       Subject to shareholders' approval, the final dividend of 0.282 pence
per share will be paid on 8 March 2002 to shareholders on the register at the
close of business on 8 February 2002.



7.       The annual report and accounts will be posted to shareholders shortly
and thereafter copies will be available from the Secretary, The Sage Group
plc, Sage House, Benton Park Road, Newcastle upon Tyne, NE7 7LZ.