Sage Group PLC (LON:SGE) has agreed to sell its US-based payroll outsourcing business Sage Payroll Solutions to iSolved HCM, LLC for around £78mln.
The FTSE 100-listed accounting software firm said the disposal is part of its strategy, as set out in its November 2018 results, to focus on sUBScription software solutions that are in or have a pathway to the Sage Business Cloud.
READ: Sage under pressure as UBS chops its price target once again
iSolved is a portfolio company of Accel-KKR and a provider of human capital management solutions.
Sage said the sale will see £73mln payable in cash on completion, subject to a customary debt and working capital adjustment, while the remaining £5mln represents contingent consideration.
The group added that it expects to report a statutory profit on disposal of approximately £23mln on completion, with the disposal proceeds to be invested for growth and used to reduce net debt.
For the year ended 30 September 2018, Sage Payroll Solutions had revenue of £38mln and operating loss of £1mln.
The firm said, subject to certain conditions, completion of the disposal is expected to occur within the next three months.
Shares higher; Q1 update awaited
In afternoon trading, shares in Sage were 1.6% higher at 601.20p.
Sage is due to provide a first-quarter update on Thursday, 17 January, which will give the firm a chance to introduce its new CFO, Jonathan Howell, to investors.
In a preview, UBS said it reckons Sages faces “relatively easy comparatives” from last year.
“Recurring revenues exited 2018 with 7.2% growth in Q4 and was 7.0% in Q1 last year, so the comparative is not too hard, although [software-related services] was decent at +4% in Q1 last year,” the Swiss bank’s analysts said.