SOFTWARE group Sage said it was reaping the benefits of overseas acquisitions as it announced a 20 per cent rise in yearly profits to £181m.

Sage, which is the last surviving technology group in the FTSE 100 index, said the companies it bought in the US, South Africa and Spain had made strong early contributions.

It also reported an encouraging start to this financial year and said it was confident about next year.

Sage, which employs nearly 8,000 people worldwide, including 1,850 in the UK, sells software solutions and other services for small and medium-sized enterprises (SMEs).

It has been acquiring companies to increase turnover at a time when many customers are tightening new technology budgets.

The profits rise was in line with forecasts set out by Sage in October and also followed a six per cent increase in revenues from core products.

Timberline, which sells software to the US construction and property sectors, contributed revenues of £33.8m in its first year of ownership. Spanish small business specialist SP, bought in November last year, contributed £23.9m and accounting vendor ACCPAC posted revenues of £34.2m. Softline, which operates in South Africa and Australia, contributed revenues of £39.1m.

Sage, which is based in Newcastle, said the acquisitions had been integrated swiftly and effectively into the group.

During the period, Sage added 269,000 customers to its core business and gained another 903,000 from new companies, bringing its total number of clients to 4.4 million.

It said that SMEs were continuing to demand more from their IT systems in the face of challenging market conditions and rising regulation.

A spokesman said: "When purchasing either support or additional software, SMEs are demonstrating a clear preference to retain their relationship with their current vendors."

Turnover rose by 29 per cent to £687.6m during the year, while operating profits were 24 per cent higher at £185.6m.