It has not been a good few months for the FTSE 100’s Tyneside constituents.

After the travails of Northern Rock, Geordie civic pride was dealt another blow yesterday by setbacks at Sage Group, the accountancy software house that gave its name to the curvy glass and steel concert venue that dominates the Gateshead waterfront.

Its woes are somewhat less severe than those of its banking sector neighbour, but their ultimate source is the same: America.

Shares in Sage fell more than 8 per cent in initial trading on the firing of the chief executive and finance director of its US operations.

Their offence is that revenues in America, which accounts for 44 per cent of turnover, continue to lag the rest of the group, up 4 per cent in the year to September 30, against 7 per cent for the whole.

Given that Sage’s management has previously stated that it believes growth of 10 per cent in the US is achievable, the scale of that shortfall is significant.

Through the acquisition of Emdeon and Verus, Sage has doubled the size of its US business in the space of a year, so some form of indigestion might be expected.

But the causes of its sluggishness across the Atlantic appear only partly deal-related.

Rather, the company has suffered from cannibalisation of sales between competing products, the delayed launch of its latest mid-market customer relationship management system and its exposure to a faltering US construction sector through its Timberline division.

Whatever the explanation, those difficulties served only to exacerbate long-standing fears that the likes of Microsoft and Intuit are too potent for Sage on their home turf.

Paul Walker, the chief executive of Sage, who is assuming direct responsibility for the US unit until replacements are found, should be applauded for taking decisive action.

The reorganisation of the US business into four discrete operations — announced in May but effective only this month — should also help.

And the extent of the problems in the US, where Sage has more than two million small business customers, should not be overstated: the fact that US sales in the first half were also running 4 per cent ahead indicates that business is flat, rather than deteriorating.

Further, operating profit margins remain stable at 20 per cent.

That Sage’s shares closed down just over 3 per cent suggests that the stock market had taken some of those strengths on board.

At 243¼p, Sage sits at a below-sector 15 times 2008 earnings, an undemanding multiple given forecast earnings growth of 16 per cent this year and 10 per cent next. Hold on.

Cookson Group

The last time that Cookson Group, the FTSE 250 engineer, tapped equity markets, it was under rather different circumstances.

Whereas Cookson’s rights issue of five years ago was a rescue measure to stave off insolvency — it was tellingly struck at a steep discount and lacked an underwriter — yesterday’s £153 million fundraising was priced at more than three times the level of its predecessor.

Better still, at 825p it was conducted at a modest premium to Wednesday’s close.

But then Cookson’s £497 million acquisition of Foseco — which the placing helped to finance, alongside a restructured debt facility — has much to commend it.

In buying the maker of dissolvable components used by foundries and steelmakers, it is removing a competitor, cementing its position as a world leader in refractory products and promising to deliver substantial cost savings: £9 million in the first year after completion, rising to £18 million thereafter.

The deal also offers substantial scope for cross-selling, with Cookson pushing its foundry products through Foseco’s sales network and vice versa for Foseco’s steel products.

There are complexities. The deal requires antitrust clearance in the US and Europe, and to avoid possible snags Cookson plans to offload its new charge’s carbon-bonded ceramics business.

However, given that this accounts for only 5 per cent of Foseco’s sales, its loss should not hurt. The bigger picture is that Cookson has raised its exposure to end-markets — such as aerospace and heavy transportation — that continue to grow strongly.

With Foseco set to boost 2009 earnings by 9 per cent, Cookson, at 840p, should be bought.

Northgate IS

It has not taken long for the mid-cap software and IT services group to demonstrate the merits of its purchase of the Belgian firm Arinso.

Two months after the deal’s close, Northgate Information Solutions’s latest possession has won one of the biggest contracts in its history: a seven-year deal that will see Arinso supply its human resources system to the confectionery division of Cadbury Schweppes.

Terms were not disclosed, but the deal is thought to be worth about £40 million.

Its importance should not be overplayed.

That the contract did not warrant an official Stock Exchange announcement implies that its impact is already factored into earnings forecasts.

But coming hard on the heels of last month’s ten-year tie-up with Agilent Technologies, and confirmation that the integration of Arinso is running ahead of plan, it provides welcome reassurance.

With Northgate’s shares sitting 7 per cent below their level when the acquisition was announced, encouragement is badly needed.

At a headline £250 million and 20 times 2008 earnings, the deal was both big and dilutive in the short term and has left Northgate with £420 million of debt.

But it also takes the company into higher growth overseas markets and enables it to sell a wider range of software. An analysts’ visit to Belgium next month is likely to help sentiment on Arinso.

In the interim, at 76¾p, Northgate’s rating of 12 times current-year forecasts looks too low. Hold.

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