Sage acquires US merchant services provider, Verus
Verus is a leading provider of merchant services in North America. Merchant services support retail, business to business and e-commerce businesses in processing customer transactions through credit cards, debit cards and cheques. Verus has a customer base of 101,000 small and medium-sized merchants in the US, including speciality retailers, petrol stations, restaurants, property managers and motor dealerships. Verus revenues come from services fees linked to processed sales transactions.
Payment processing services are becoming an increasingly important business process requirement for North American SMEs, not only in managing payments to employees through payroll services, but also in managing transactions with customers through merchant services such as those provided by Verus. The market for merchant services is growing strongly, underpinned by growth in the US retail sector, wider adoption of e-commerce by customers and increased use of credit and debit cards. Verus will form the core of Sage’s North American Merchant Services Division, complementing Sage’s existing North American Payroll Services.
Verus has grown rapidly organically, following a series of acquisitions in 2002 and 2003. Revenue for the year ended 31 December 2005 was approximately £36 million* (2004: £29m*), representing growth of approximately 26% on the prior year. Operating profit before depreciation and amortisation was approximately £12 million* (2004: £4m*), having grown strongly during the year as a result of the significant revenue growth and a consistent operating cost base. At 31 December 2005, Verus had gross assets of approximately £14 million*.
Verus services include point of sale transaction processing and customer validity checks. This process includes a validation on each transaction’s risk so that individual sales can be queried if appearing unusual. To complete each transaction, Verus transfers cash directly from the card- or cheque-issuing bank to the merchant’s bank. The merchant also receives statements and analysis, which can be used as inputs to accounting software.
Within the Sage customer base, trials have shown a clear demand for linking payment processing services with accounting software, so that dual data entry is eliminated and data quality is ensured. To realise this additional long-term revenue opportunity, Sage will enhance the value of Verus services by integrating them with Sage accounting software.
Paul Walker, Sage Chief Executive, commented, “Acquiring Verus expands our business management solutions into a new and growing market, where SMEs are showing clear demand for more automation of their business processes. For our existing customers, Verus will provide merchant payment services that can be linked to their existing Sage accounting software. For new customers, these new payment services, in addition to our payroll services and customer relationship management products, further broaden the appeal of Sage solutions beyond pure accounting”.
*All financial information calculated on the basis of £1 = $1.77. 2005 figures are unaudited.
A conference call to discuss this announcement will be held at 9.30am today. The dial-in number is +44 208 3223 183. Presentation material, to be referred to during the call, will be available at www.sage.com/investors/verus from 9:15am.
The Sage Group plc +44 (0) 191 294 3068
Paul Walker, Chief Executive
Paul Harrison, Finance Director
Phil Branston, Investor Relations
Tulchan +44 (0) 20 7353 4200
Julie Foster, Kirstie Hamilton
Notes to editors
The Sage Group plc is a leading international supplier of accounting and business management software solutions and related products and services for small to medium-sized enterprises. Formed in 1981, Sage was floated on the London Stock Exchange in 1989 and the Group now employs over 10,000 people worldwide.