Interim Results

Sage Group PLC
9 May 2001








For release: Wednesday 9 May 2001 - 7.00am





 Sage pre-tax profit up 10% to £59.2 million for six months to 31 March 2001



The Sage Group plc (Sage), a leading supplier of business management software
solutions and related services for small to medium-sized enterprises,
announces its unaudited results for the six months ended 31 March 2001.



Key points:



*       Turnover increased by 13% to £229.6m (2000: £202.5m)

*       Pre-tax profit up 10% to £59.2m (2000: £54.0m)

*       Earnings per share up 8% to 3.214p  (2000: 2.987p)

*       Dividend for the half year raised 10% to 0.143p per share (2000:
        0.130p)

*       Operating cash flow of £66.6m (2000: £66.7m)

*       Acquisition of Interact Commerce Corporation for £183m completed on 3
        May 2001

*       2.7m registered customers at 31 March 2001 (2000: 2.3m)

*       Support contracts at 31 March 2001 totalled 831,000 (2000: 754,000)

*       Geographical analysis:


Six months ended 31 March            2001                      2000
£m                         Turnover Operating profit Turnover Operating profit

UK                             71.4             28.3     65.1             26.6
Mainland Europe                51.6             11.6     55.9             14.0
US                            106.6             20.2     89.8             16.6

                              _____            _____    _____            _____
                              229.6             60.1    210.8             57.2
Impact of foreign exchange*       -                -    (8.3)            (1.5)

                              _____            _____    _____            _____
                              229.6             60.1    202.5             55.7

                              _____            _____    _____            _____



*    Foreign currency results for the period ended 31 March 2000 have been
retranslated at current period exchange rates to facilitate the comparison of
results, in the table above and in the operational review below.



Chairman's Statement



Chairman, Michael Jackson said: 'Our businesses have made sound progress
during the period. Whilst broadening our product portfolio and attracting more
customers, we continue to improve underlying profitability.



Our second quarter showed an encouraging improvement in revenue growth which
continued into April.  Whilst not immune to the US slowdown, we believe we
will deliver satisfactory results for the full year.'



Enquiries


The Sage Group plc                                        0191 255 3000

Paul Walker, Chief Executive
Paul Harrison, Finance Director
Phil Branston, Investor Relations
Web-site address:  http://www.sage.com

Financial Dynamics                                        020 7831 3113

Giles Sanderson/Emma Rutherford



Introduction



We are pleased to announce another period of growth for Sage, with turnover
increasing by 13% and pre-tax profit up 10%.  These results have been achieved
during a period when new licence revenues have been significantly lower than
in the comparable period last year when, particularly in the first quarter of
that period, IT spending was at its peak in advance of the Year 2000.
However, a core strength of the business is that we have been able to continue
to grow revenues from our 2.7 million existing customers. These revenues
contributed 65% of total revenues and provided the Group with a sound
financial base.



Small and medium-sized businesses ('SMEs') continue to adopt a cautious
attitude to e-business. As we have consistently maintained, we do not expect
to see this change significantly in the short-term. However, there is an
increasing awareness of the benefits of e-business, stimulated partly by our
communication campaigns. We continue therefore to invest in the development of
e-business products and services which will be to the long-term benefit of the
Group.



In addition, we were pleased to announce in March the proposed acquisition of
Interact Commerce Corporation ('Interact') which brings to the Group a strong
portfolio of customer relationship management ('CRM') software products, an
established channel and a large customer base. This acquisition, completed on
3 May, represents a significant step forward in our long term strategic
objective which is to provide our customers with a comprehensive range of
business management software products and services.



Results, dividends and finance



In the six months to 31 March 2001, we increased turnover by 13% to £229.6m
(2000: £202.5m).   Operating profit rose by 8% to £60.1m (2000: £55.7m), and
pre-tax profit improved 10% to £59.2m (2000: £54.0m).  Earnings per share
increased by 8% to 3.214p (2000: 2.987p).



The interim dividend is being raised 10% to 0.143p per share (2000: 0.130p)
payable on 19 June 2001 to shareholders on the register at close of business
on 18 May 2001.



Sage continues to be highly cash generative, with operating profit of £60.1m
translating to operating cash flow of £66.6m in the period.  After interest,
tax and dividends, this gave free cash flow of £48.2m, contributing to a net
cash position of £12.4m at 31 March 2001 (30 September 2000: net debt of £
20.8m).



The £183m purchase of Interact, after the period end, was financed under a new
£353m loan facility which replaces the Group's existing £95m facility.





Operational review



UK



In recent years the UK business has pursued a strategy of channel expansion,
in particular through developing closer relationships with the accountants'
community, as well as broadening its product range. These have provided a
sound base for revenue growth of 10% in the period.



The entry-level division performed particularly well, recruiting 37,000 new
customers in the period.  In addition, its product range grew further with the
acquisition in February of TAS Software Limited for a total consideration of £
9.7m, which added another 20,000 active customers to the business. The
mid-market division also grew revenues and market share.



We have been building a significant business selling products and services to
the accountants' community. As well as acting as important influencers,
accountants increasingly resell Sage products. As customers or resellers, over
20% of new software sales were attributable to this community during this
period.



Educating both new and existing customers forms an important part of our
investment in e-business. The recently launched 'e-business in action'
campaign, designed to stimulate interest in web-based applications, has been
well received with more than 1,500 people attending 45 seminars held so far.





Mainland Europe



In France, new licence revenues were significantly lower than in the
comparable period last year when the favourable Year 2000 effect was
particularly evident in the first quarter. However, we have seen a marked
improvement in Sage France in the second quarter where we have seen growth in
primary revenues which has continued into April. The continued improvement in
our French business is reflected in independent research which confirms that
we gained market share in the period whilst maintaining a strong relationship
with our channel partners and the accountants' community.



Our German business continues to progress well. Even in a tough market we are
seeing the benefits of the restructuring efforts applied to this business over
the last three years which have resulted in Sage KHK's operating margin
growing to 21% (2000: 6%).





US



The performance of our US business was affected by challenging first quarter
comparatives and an uncertain economic outlook. However, strong upgrade and
support sales offset pressures on new licence revenues.



Our US revenues benefited from a full period's contribution from Best
Software, Inc., acquired in February 2000, which generated revenues of £30.7m
(2000: £9.0m).



Peachtree, our entry-level division, attracted 47,000 new customers in the
period. Whilst new licence sales were lower than in the comparable period this
was more than compensated by installed base revenue growth.  With its strong
focus on its core products and existing customers, Peachtree's operating
margin rose to 21% (2000: 15%).



Overall, mid-market revenues at Sage Software, Inc. were 8% down against the
strong comparative period. The decrease in new licence revenues was offset by
significant growth in support revenues through greater penetration of
maintenance contracts into the user base.



Our efforts to migrate customers up through our product range have been
successful. For example, the migration of customers from Peachtree to our
mid-market offering, MAS90, has been accelerated by the launch of co-branded
products. Customers migrating from Peachtree to MAS90 accounted for 24% of all
primary units sold by Sage Software, Inc..



Best Software, Inc., our fixed assets and human resource solutions business,
delivered significantly improved results in the US, benefiting from the
decision taken last year to focus on core products targeted at the SME
community.





Acquisition of Interact Commerce Corporation



The acquisition of Interact marks a significant development in our strategy of
offering SMEs a comprehensive suite of business management software solutions.
Our customers and channel partners have expressed strong demand for a wider
range of products from Sage, feedback which is supported by independent market
research.



This research indicated that CRM is a relevant offering for SMEs with 75% of
entry-level customers intending to purchase a CRM solution over the next few
years. Our research showed that on average only 10% of Sage customers
currently have CRM software.



This research also demonstrated that the most critical factor affecting an
SME's decision to purchase a CRM product is the extent to which it integrates
with the underlying accounting software.  Owning both the CRM and accounting
software enables us to ensure that integration is seamless.  This, combined
with our traditional strengths in customer service, positions us well to
market CRM solutions successfully to our 2.7 million customers.



Interact is a leading supplier of CRM software with two product ranges,
targeting entry level and mid-market customers.  At the entry level, ACT! is a
leading contact management and salesforce automation package, whilst
SalesLogix  provides comprehensive CRM functionality, including sales,
marketing, e-commerce and support, to mid-market customers who require a more
sophisticated CRM software solution.



It is our intention that Interact will continue to develop its own business in
the wider CRM market. Over the next six months we will be developing a common
protocol to tightly integrate Interact's CRM products with our accounting
products, to ensure we maximise the significant revenue opportunity of selling
Interact's products to our large customer base.





Outlook statement



Our businesses have made sound progress during the period. Whilst broadening
our product portfolio and attracting more customers, we continue to improve
underlying profitability.



Our second quarter showed an encouraging improvement in revenue growth which
continued into April.  Whilst not immune to the US slowdown, we believe we
will deliver satisfactory results for the full year.


CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months ended 31 March 2001


                                                 Six months ended    Year ended
                                                         31 March  30 September
                                                      (Unaudited)     (Audited)
                                                    2001     2000          2000
                                                   £'000    £'000         £'000

Turnover                                         229,649  202,528       412,153

                                                  ______   ______        ______

Operating profit                                  60,143   55,728       111,882

Net interest payable                               (987)  (1,736)       (3,134)

                                                   _____    _____         _____

Profit on ordinary activities before taxation     59,156   53,992       108,748

Taxation on profit on ordinary activities       (18,339) (17,277)      (34,799)

                                                   _____    _____         _____

Profit on ordinary activities after taxation      40,817   36,715        73,949

Equity minority interest                            (24)      104            71

Profit for the financial period                   40,793   36,819        74,020

Equity dividends                                 (1,819)  (1,646)       (4,898)

                                                   _____    _____         _____
Amount transferred to reserves                    38,974   35,173        69,122

                                                   _____    _____         _____

Earnings per share (pence) - basic                3.214p   2.987p        5.921p

                                                   _____    _____         _____

Earnings per share (pence) - fully diluted        3.180p   2.937p        5.817p

                                                   _____    _____         _____

Net dividend per share (pence)                    0.143p   0.130p        0.386p

                                                   _____    _____         _____





STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES

For the six months ended 31 March 2001


                                                           Six months      Year
                                                                ended     ended

                                                             31 March        30
                                                                      September

                                                          (Unaudited) (Audited)

                                                           2001  2000      2000

                                                          £'000 £'000     £'000



Profit attributable to shareholders                      40,793 36,819    74,020



Currency translation of foreign currency net investments (2,147) 1,126   (2,963)
and related borrowings

                                                          _____  ____     _____

Total recognised gains and losses relating to the period 38,646 37,945    71,057

                                                          _____ _____     _____



CONSOLIDATED BALANCE SHEET

As at 31 March 2001


                                                          31 March 30 September
                                                              2001         2000
                                                       (Unaudited)    (Audited)
                                                             £'000        £'000

Fixed assets

Tangible                                                    46,578       46,504
Intangible                                                 556,412      540,422

                                                             _____        _____
                                                           602,990      586,926

                                                             _____        _____

Current assets

Stocks                                                       2,260        2,489
Debtors                                                     94,007       85,369
Cash at bank and in hand                                   101,091       66,417

                                                             _____        _____
                                                           197,358      154,275

Creditors: amounts falling due within one year           (115,432)    (110,178)

                                                             _____        _____

Net current assets                                          81,926       44,097

                                                             _____        _____

Total assets less current liabilities                      684,916      631,023

Creditors:  amounts falling due after more than one       (80,202)     (78,472)
year

Deferred income                                          (111,727)     (98,066)

Equity minority interest                                     (118)         (94)
                                                             _____        _____
                                                           492,869      454,391

                                                             _____        _____

Capital and reserves

Called up equity share capital                              12,707       12,680
Share premium account                                      436,468      432,690
Merger reserve                                              61,111       61,111
Profit and loss account                                   (17,417)     (52,090)
                                                             _____        _____
Equity shareholders' funds                                 492,869      454,391

                                                             _____        _____










CONSOLIDATED SUMMARY CASH FLOW STATEMENT

For the six months ended 31 March 2001


                                                   Six months ended  Year ended
                                                           31 March          30
                                                                      September
                                                        (Unaudited)   (Audited)
                                                      2001     2000        2000
                                                     £'000    £'000       £'000


Net cash inflow from operating activities           66,555   66,706     104,998



Net interest, dividends and tax paid               (18,376) (21,854)    (41,519)



Net expenditure on fixed assets                    (5,360) (10,102)    (17,397)



Net cash consideration on purchase of subsidiary   (8,454) (298,132)   (330,428)
undertakings



Net movement in short term deposits                  1,745  (7,961)      29,785



Net movement in loan funding                         (783)    1,992     (2,807)



Shares issued                                        1,306  290,264     290,836

                                                     _____    _____       _____

Increase in net cash                                36,633   20,913      33,468

                                                     _____    _____       _____



Analysis of change in net cash



At beginning of period                              54,825   21,357      21,357



Net cash movement                                   36,633   20,913      33,468

                                                     _____    _____       _____

At end of period                                    91,458   42,270      54,825

                                                     _____    _____       _____


NOTES



1.    Geographical analysis
                                                 Six months ended    Year ended
                                                        31 March*  30 September
                                                    2001     2000          2000
                                                   £'000    £'000         £'000

Turnover           UK                             71,440   65,085       132,124
                   France                         37,018   42,085        71,497
                   Germany/Switzerland            14,631   13,833        26,595
                   US                            106,560   89,812       181,937
                                                   _____    _____         _____
                                                 229,649  210,815       412,153
                   Impact of foreign exchange          -  (8,287)             -
                                                   _____    _____         _____
                   Total                         229,649  202,528       412,153

                                                   _____    _____         _____


Operating profit   UK                             28,352   26,630        54,965
                   France                          9,512   13,226        20,631
                   Germany/Switzerland             2,048      809         1,997
                   US                             20,231   16,545        34,289
                                                   _____    _____         _____
                                                  60,143   57,210       111,882
                   Impact of foreign exchange          -  (1,482)             -
                                                   _____    _____         _____
                   Total                          60,143   55,728       111,882

                                                   _____    _____         _____

*  Foreign currency results for the period ended 31 March 2000 have been
retranslated at exchange rates used for the period ended 31 March 2001 to
facilitate the comparison of results.



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


                           At 1   Cash Acquisitions        Exchange At 31 March
                        October   flow               movement/other        2001
                           2000
                          £'000  £'000        £'000           £'000       £'000

Net cash at bank         54,825 36,633            -               -      91,458
and in hand
Short term deposits      11,190 (1,745)            -              44       9,489
Debt                   (86,802)  1,156         (14)         (2,872)    (88,532)

                         ______ ______       ______          ______      ______
                       (20,787) 36,044         (14)         (2,828)       12,41

                         ______ ______       ______          ______      ______



3.      Taxation



The taxation charge for the period comprises:
                                        Six months ended             Year ended
                                                31 March           30 September
                                        2001        2000                   2000
                                       £'000       £'000                  £'000

UK taxation                           10,918       8,583                 18,433
Overseas taxation                      7,421       8,694                 16,366

                                       _____       _____                  _____
                                      18,339      17,277                 34,799

                                       _____       _____                  _____



4.      The unaudited financial information set out above does not constitute
the Company's statutory accounts for the period ended 31 March 2001. The
accounting policies used as a basis for this interim results announcement are
consistent with the Company's statutory accounts for the year ended 30
September 2000 which have been delivered to the Registrar of Companies.  The
Group 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.  Accounts to 30 September 2001 will be
delivered in due course.



5.      The calculation of basic earnings per ordinary share is based on
earnings of £40.8 million (2000: £36.8 million) being profit for the period,
and on 1,269,100,859 ordinary 1p shares (2000: 1,232,595,754) being the
weighted average number of ordinary shares in issue during the period.  The
diluted earnings per ordinary share is based on profit for the period of £40.8
million (2000: £36.8 million) and on 1,282,691,501 ordinary 1p shares (2000:
1,253,705,810).



6.    The interim dividend of 0.143 pence per share will be paid on 19 June
2001 to shareholders on the register at the close of business on 18 May 2001.