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
Organic revenue growth
£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%
At constant exchange rates.
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%
Organic revenue growth
At constant exchange rates.
£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%
Organic revenue growth
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%
Organic revenue growth
At constant exchange rates.
£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
Capturing the technology opportunity Technological innovation
20
Sage One
Start-up and
small businesses
1 – 25
employees
Capturing the technology opportunity Technological innovation
21
Hybrid cloud
Small to medium
sized businesses
10 – 200
employees
Capturing the technology opportunity Technological innovation
22
Sage ERP X3
Mid-market
businesses
100 – 500
employees
Capturing the technology opportunity Technological innovation
23
Sage
Payments
Sage
Payments
Capturing the technology opportunity Technological innovation
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
Capturing the technology opportunity Commercial success
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
At constant exchange rates.
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
Capturing the technology opportunity Commercial success
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
At constant exchange rates.
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.
At constant exchange rates.
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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