Sage surges on UBS upgrade, though concerns remain

Accountancy and payroll software company Sage Group was on the receiving end of an upgrade to 'neutral' from UBS on Wednesday.

The Swiss bank felt the recent purchase of cloud software business Intacct was a sage move.

The recent acquisition of Intacct, while coming at a cost of $850m was the reason for the Swiss bank's change of heart, saying the purchase of business should add 170 basis points to group growth, but could potentially harm margins by as much as 240 basis points.

Analyst Michael Briest was still concerned with Sage's lack of investment in its research and development department, saying "less than 10%" of revenues were being diverted to the wing.

"The margin targets it has set itself means we do not expect this to change and balance sheet led catch-ups (such as Intacct) may well recur," said Briest.

As of 1445 BST, shares crept up 3.44% to 706.50p.