the sage group plc results for the year ended 30 september .../media/group/files/investors/... ·...

Strategy is working, growth is accelerating

The Sage Group plc

Results for the year ended 30 September 2013

2

Overview Guy Berruyer Chief Executive Officer

Financial highlights A strong performance

3 At constant exchange rates.

Organic

revenue

growth

doubled to

4%

Acceleration

in H2 growth

to 5%

EBITA

margins

maintained

Over £1bn

returned in

2 years

Organic

new

customer

adds of

256,000

82%

contract

renewal rate

Financial performance Financial discipline Commercial success

Organic revenue is underlying revenue excluding the contribution of current and prior year acquisitions and disposals. Underlying revenue neutralises the impact of foreign exchange in prior year figures.

Underlying operating profit (EBITA) excludes amortisation of acquired intangible assets, acquisition-related items, goodwill impairment, fair value adjustments and exceptional items. The impact of foreign exchange is neutralised in

prior year figures.

Strategic highlights

Sage One – more customers, more markets and more partners

Hybrid cloud – Sage ERP Online launched

Sage ERP X3 – delivered on double-digit growth target

Connected services – strong performance in North America with integrated

payments

Customer satisfaction – improving Net Promoter Score (NPS) across our

markets

4

5

Financial overview Darren Fisher Acting Chief Financial Officer

Financial KPIs Measuring success

KPI

Measure

FY13 FY12

Financial performance

Growth Organic revenue growth1 4% 2%

EBITA margin EBITA/Underlying revenue2 27% 27%

Profitability Underlying basic EPS growth3 12% -2%

Cash generation Underlying cash conversion4 112% 106%

Financial strength

Balance sheet Net debt/EBITDA5 against stated target 1.0:1 0.4:1

Interest cover6 24x 33x

6

1Organic revenue is underlying revenue excluding the contribution of current and prior year acquisitions and disposals. Underlying revenue neutralises the impact of foreign exchange in prior year figures. 2Underlying operating profit (EBITA) excludes amortisation of acquired intangible assets, acquisition-related items, goodwill impairment, fair value adjustments and exceptional items. The impact of foreign exchange is neutralised in prior year

figures. 3Underlying basic earnings per share excludes amortisation of acquired intangible assets, acquisition-related items, goodwill impairment, fair value adjustments, exceptional items, and imputed interest with all adjustments net of tax. The impact

of foreign exchange is neutralised in prior year figures. 4Underlying cash conversion is calculated as cash flows from operating activities, adjusted for cash acquisition-related items and cash exceptional items of £1.9m, divided by underlying operating profit (EBITA). 5 EBITDA is EBITA adjusted for depreciation. 6Interest cover is operating profit for the year adjusted for exceptional items, expressed as a multiple of finance costs less imputed interest for the same year.

Revenue sources Strong acceleration in growth

7

Revenue mix

69% 71%

31% 29%

2012 2013

SSRS

Recurring

4%

organic

revenue

growth

6%

organic

recurring

revenue

growth

Flat organic

SSRS* revenue

*Software and software-related services.

At constant exchange rates.

Revenue trends Good performances across the businesses

8

Europe

Americas

AAMEA

Group

SSRS revenue

Organic revenue growth

£241.7m

-2%

£90.7m

2%

£67.6m

7%

£400.0m

-

Recurring revenue


£535.2m

5%

£357.5m

7%

£83.4m

11%

£976.1m

6%

Total revenue £776.9m £448.2m £151.0m £1,376.1m

Organic revenue growth 2% 6% 9% 4%


FY13 revenue

Europe An improved performance in H2

9

Regional highlights

Stand-out performance from UKI, capitalising on legislative change

France and Germany return to growth in H2

Spain showing signs of stabilisation

Price increase in late FY12 driving Sage Pay performance

33%

33%

13%

11%

3% 7% France

UK & Ireland

Spain

Germany

Sage Pay

Others

Revenue mix

H1 H2 FY

France -1% 1% -

UK & Ireland 5% 5% 5%

Spain -4% -1% -2%

Germany -1% 3% 1%

Sage Pay 32% 18% 25%

Europe 2% 3% 2%



£776.9m

Americas Strong acceleration in growth

10 At constant exchange rates.

H1 H2 FY

Sage Business

Solutions

5% 8% 6%

Sage Payment

Solutions

3% 5% 4%

Brazil n/a n/a n/a

Americas 4% 7% 6%


73%

16%

11% Software &support

SagePaymentSolutions

Brazil

Regional highlights

Strong upselling of premium support contracts

Stand-out growth from Sage ERP X3

Continued momentum with connected services

Brazil performed well despite slowdown in economy

Revenue of £49.0m, EBITA of £12.2m

Revenue mix

£448.2m

AAMEA African markets continued to drive growth

11

Regional highlights

South Africa delivered strong growth of 14%

Wider African market now an important part of South African business:

22% organic growth

13% of South African revenue

Stand-out performance from Sage ERP X3

Slowdown in Australia due to sluggish economy

58% 30%

12%

South Africa

Australia

Asia

Revenue mix

H1 H2 FY

South Africa 14% 14% 14%

Australia 2% -1% 1%

Asia 1% 21% 11%

AAMEA 9% 10% 9%



£151.0m

Profitability Margin discipline maintained

12 At constant exchange rates

EBITA margin

28.2%

25.8%

27.0% 27.3%

28.3%

25.7%

26.9%

27.3%

Europe Americas AAMEA Group

FY12 FY13

Margins maintained

Cost discipline across all

regions

Reinvesting in growth

Organic investment increased

Cash flow Strong cash generation continues

£m £m £m

EBITA 375.8 Cash flow from

operations

417.4 Net debt

1 October 2012

(161.5)

Exceptional items (2.4) Interest (11.2) FCF 268.6

Depreciation/amortisation/

profit on disposal

32.9

Tax (118.6) Acquisitions (20.7)

Share-based payments 2.9 Net capex (19.0) Disposals 81.4

Working capital change 2.4 Ordinary dividends (122.1)

Exchange mvt/other (3.2) Special dividend (198.7)

Share buyback (251.0)

Exchange movement 13.0

Other 6.7

Cash flow from

operations

417.4 Free cash flow (“FCF”) 268.6 Net debt

30 September 2013

(384.3)

Underlying cash

conversion1

112% Interest cover2 24x FCF ordinary dividend

cover

2.2x

13 1Underlying cash conversion is calculated as cash flows from operating activities, adjusted for cash acquisition-related items and cash exceptional items of £1.9m, divided by underlying operating profit (EBITA). 2Interest cover is operating profit for the year adjusted for exceptional items, expressed as a multiple of finance costs less imputed interest for the same year.

Capital allocation Focus on shareholder value

14

Increasing

EPS

Strong

cash flow

Growth

Increasing

dividend

Returns of

surplus

capital

+

+

15

Strategic review Guy Berruyer Chief Executive Officer

Our goal Accelerating growth

16

Strategy is working, growth is accelerating

Focusing our business Strategy of greater focus is working

17

35%

42%

50% 49%

0%

10%

20%

30%

40%

50%

60%

R&D S&M

% of total spend on Invest products

FY12 FY13

Portfolio is self-funding

investment in growth

32% increase in R&D and

S&M spend on Invest

products in last 12 months

6% increase in total R&D and

S&M investment

Capturing the technology opportunity Investing for growth

18

Commercial success

Customer satisfaction

Technological innovation

Capturing the technology opportunity Technological innovation

19

Sage One

Start-up and

small businesses

1 – 25

employees

Hybrid cloud

Small to medium

sized businesses

10 – 200

employees

Sage ERP X3

Mid-market

businesses

100 – 500

employees

Sage

Payments

Sage

Mobility


20

Sage One

Start-up and

small businesses

1 – 25

employees


21

Hybrid cloud

Small to medium

sized businesses

10 – 200

employees


22

Sage ERP X3

Mid-market

businesses

100 – 500

employees


23

Sage

Payments

Sage

Payments


24

Sage

Mobility

Sage

Mobility

Capturing the technology opportunity Commercial success

25

Success in the UK

Over 21,000 paying subscriptions in

the UK

Over 5,000 accountants using

Accountants Edition in the UK

Slower progress in North America

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

FY11 H112 FY12 H113 FY13

Sage One paying subscriptions

Sage One


26

Strong performance this year

12% underlying revenue growth

Over 500 new customers

With more to come …

275 partners certified worldwide, and

we’re selectively adding more

30%

40%

50%

FY09 FY10 FY11 FY12 FY13

% of X3 revenue outside of France


Sage ERP X3

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

FY11 H112 FY12 H113 FY13

Payments cross sell customer count


27

Integrated connected services

Greater value for customers

Greater value for Sage

Payments integration cross-sell

20% growth in integrated payments

revenue

$30m cross-sell revenue in North

America that did not exist 4 years ago


Sage Payments

28

Capturing the technology opportunity Customer satisfaction

The benefits of subscription Already making a difference

29

The subscription model offers multiple levers to grow

Confidence in achieving 6% organic revenue growth

Historic long term average growth of 3%

Strategic actions

Invest products

Core portfolio

High growth markets

Supports margin commitment

30

Hist.averagegrowth

Investproducts

Coreportfolio

Highgrowthmarkets

2015target

Illustrative bridge to 6%

Strategy is working,

growth is accelerating

31

Questions?

32

33

Appendix

Supplementary information

Strategic KPIs

KPI

Measure

FY13 FY12

Focusing our business

Resource optimisation

R&D %: split by ‘Invest’, ‘Harvest’ and ‘Sunset’ 50:43:07 35:53:12

S&M %: split by ‘Invest’, ‘Harvest’ and ‘Sunset’ 49:46:05 42:49:09

Capturing the technology opportunity

Adoption of cloud products Number of Sage One paying subscriptions 22,400 6,190

Number of hybrid cloud paying subscriptions 750 115

Mid-market Sage ERP X3 underlying1 revenue growth 12% 5%

Integration of payments Number of customers adopting integrated payments

solutions

13,800 9,700

The benefits of subscription

Customer adoption Organic2 annualised value of software subscriber revenue £108m £85m

Customers

Loyalty Renewal rate 82% 81%

34 1 Underlying revenue neutralises the impact of foreign exchange in prior year figures. 2Organic revenue is underlying revenue excluding the contribution of current and prior year acquisitions and disposals.


Segmental analysis Year ended 30 September 2013

35 1Organic revenue is underlying revenue excluding the contribution of current and prior year acquisitions and disposals. Underlying revenue neutralises the impact of foreign exchange in prior year figures. 2Underlying operating profit (EBITA) excludes amortisation of acquired intangible assets, acquisition-related items, goodwill impairment, fair value adjustments and exceptional items. The impact of foreign exchange is neutralised in

prior year figures.

Europe

Americas

AAMEA

Group

Recurring revenue £535.2m £357.5m £83.4m £976.1m

SSRS revenue £241.7m £90.7m £67.6m £400.0m

Total revenue £776.9m £448.2m £151.0m £1,376.1m

Organic1 revenue growth +2% +6% +9% +4%

EBITA2 £220.2m £115.0m £40.6m £375.8m

EBITA2 margin +28% +26% +27% +27%

Opening contracts 1,115,000 687,000 191,000 1,993,000

Non-core disposals (25,000) (30,000) - (55,000)

Restated opening position 1,090,000 657,000 191,000 1,938,000

New contracts 29,000 1,000 21,000 51,000

Total contracts 1,119,000 658,000 212,000 1,989,000

Dividends Year ended 30 September 2013

Pre-share consolidation Post-share consolidation

Interim Final Total Interim Final Total

2012 ordinary dividend 3.48p 6.67p 10.15p 3.66p 7.02p 10.68p

2013 ordinary dividend 3.69p 7.07p 10.76p 3.88p 7.44p 11.32p

Growth 6% 6% 6% 6% 6% 6%

2013 special dividend n/a n/a 17.10p n/a n/a 17.99p

Total 2013 dividend 3.69p 7.07p 27.86p 3.88p 7.44p 29.31p

36

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