Sage Group Plc · LSE:SGE
Sage — Investor Day (February 2005)
73 slides from Sage's investor day presentation, February 2005
Slide 1: Mainland Europe Analyst Day
Mainland Europe Analyst Day February 2005
Slide 2: Mainland Europe
Mainland Europe Guy Berruyer
Slide 3: Mainland Europe revenue and operating profit
Mainland Europe Revenue Operating profit y Organic revenue +5% £170.2m y Operating margin excluding £139.6m acquisitions +4pp to 26% y SP acquisition (Spain) contributed 24% 19% margin £24m revenue at 23% operating margin margin 2003 2004 At constant exchange rates 2 Year ended 30 September 2004
Slide 4: Mainland Europe
Mainland Europe y How do we run the business in Europe? – diversity of initiatives – local competitors have more impact than Microsoft or SAP – high and consistent level of senior management expertise – progressive improvements to acquisitions for long-term growth y Acquisition strategy in Europe –
Slide 5: Switzerland
Switzerland y Acquisition strategy – November 1999 Sesam acquisition creates first market presence – 2000-2001 Difficult post-Y2K era – January 2002 New Managing Director – April 2003 Winware acquisition – January 2005 Simultan acquisition y Revenue over £15m (annualised) in a country with a populat
Slide 6: Financial history
Financial history Switzerland 10 9 8 7.7 Revenue £m 7.0 7 6 5.6 5.1 5 4.9 4 3 2 1 0 2 2000 2001 2002 2003 2004 Operating 1.0 Profit £m 1 0.7 0.0 0 -0.4 -1 -1.0 -2 At constant exchange rates 5
Slide 7: Germany Poland
sage Germany Poland Peter Dewald
Slide 8: History and background
History and background 7
Slide 9: Financial history
Financial history Germany 40 37.6 38.5 Revenue £m 30 28.8 26.8 24.4 20.7 20 10 0 1999 2000 2001 2002 2003 2004 15 Operating Profit £m 10 7.3 6.0 6.3 4.9 5 2.5 0 -1.8 At constant exchange rates -5 8
Slide 10: Sage Germany
Sage Germany y Customers 232,000 y Support contracts 65,000 y Resellers 400 y Employees 460 y 3 acquisitions since 2002 – Gandke & Schubert – Primus – Bauknecht MRP 9 Year ended 30 September 2004
Slide 11: Leader in a fragmented market
Leader in a fragmented market y Leader by revenue in the <100 employee segment y Leader in mid-market customers – Sage 57,000 – Navision 7,000 – SAP Business One 650 – 100 other vendors y 2nd in small business customers – Lexware c500,000 – Sage 175,000 – Datev 40,000 tax advisors (end customers unk
Slide 12: Four Market Segments
Four Market Segments Small Small Enterprises Enterprises SMEs SMEs Handcraft Handcraft vertical vertical Human Human Resources Resources 1–10 1–10 employees employees 10–200 10–200 employees employees 1–50 1–50 employees employees 1–1,000 1–1,000 employees employees PC-Kaufmann PC-Kaufmann Classic C
Slide 13: Customer and reseller feedback
Customer and reseller feedback customer feedback in product development reseller feedback to improve marketing support 12
Slide 14: Customer and reseller feedback
Customer and reseller feedback A competitive asset y In a competitive market we differentiate through our local approach y Customer and channel relationships critical to improving performance after our initial acquisition in Germany y Feedback gathered through continuous surveys of customers and res
Slide 15: Product Satisfaction
Product Satisfaction 2004 Customer Survey y Most products have improved their rating 100 2003 90 2004 y Surveys indicate areas for 80 67 69 68 70 70 64 65 62 57 59 improvement in Office Line 60 % 50 53 – business Intelligence features 40 30 – performance optimisation 20 10 – usability: free buttons,
Slide 16: Product Satisfaction evaluation
Product Satisfaction evaluation Classic Line y Shows areas of improvement and where action is needed 69 OVERALL 65 +5% y Improvement 77 Legal Changes 81 – process oriented documentation Manual & Help 61 56 +4% – improved code reliability 75 Reliability (testing) 71 2004 y Need for action Functional
Slide 17: Reseller Partner Survey
Reseller Partner Survey y Continuous improvement in reseller satisfaction 1=Worst 6=Best 6 y Value-added resellers 5 2002 2003 2004 ("solution centres") are 4 3.7 most satisfied 3.2 3.4 3.1 3.3 3.4 3.3 3.4 2.9 3 y Result of sustained 2 improvements 1 – lead generation 0 – key account management Solu
Slide 18: Reseller satisfaction
Reseller satisfaction Marketing support % growth from prior year y Example of improvement OVERALL 6.1 initiative: marketing Website 3.8 listing y Value-added resellers Roadshow 1.2 are more satisfied with marketing efforts Reseller events 7.3 Incentive 1.6 programme 0 1 2 3 4 5 6 7 8 9 10 17
Slide 19: Poland
Poland 18
Slide 20: Poland
Poland Largest of the new EC economies Country Businesses GDP 2003 £bn Poland 1,417,000 140 120 Czech Republic 742,000 100 Romania 300,000 80 60 Lithuania 58,000 40 20 Hungary 56,000 0 Slovakia 37,000 a ic ry a ia ria ia d ia ia ni i an l an on ga ak tv en ub ga ua La l om ov un t ov Po ep ul Es th
Slide 21: Symfonia acquisition
Symfonia acquisition y Leading brand for business management software – over 35,000 customers y Products for 1-250 employee 5 Symfonia revenue £m 4.4 businesses 4 3.3 3.2 – Start 3 2.5 – Premium 2 – Forte 1 y 500 reseller partners 0 2001 2002 2003 2004 y Close relationships with At constant exchange
Slide 22: Growth strategy
Growth strategy Poland y Symfonia as basis for further expansion of Sage Poland activities y Aggressive entry into low end market y Significant opportunities with Forte high-end solution y Potential to sell support 21
Slide 23: Growth Strategy
Growth Strategy Germany and Eastern Europe • Developed Sage Germany into a full-range vendor, able to win new customers against Microsoft and SAP – 2,000 new mid-market customers in 2004 • Maintain and improve customer and reseller satisfaction – no resellers lost to Microsoft or SAP • Development o
Slide 24: France
France Pascal Houillon
Slide 25: History and background
History and background 24
Slide 26: Sage in France
Sage in France y Customers 677,000 y Support contracts 273,000 y Resellers 5,000 y Chartered accountants 2,800 y Employees 1,300 25 Year ended 30 September 2004
Slide 27: Financial history
Financial history France Revenue 120 100.2 £m 100 95.7 95.0 78.6 81.5 80 73.5 60 40 20 0 50 1999 2000 2001 2002 2003 2004 Operating 40 Profit £m 30 26.3 26.3 24.1 21.9 22.7 19.7 20 10 0 At constant exchange rates 26
Slide 28: Mid-market business
Mid-market business y 135,000 active customers, 2 principal products Line 100 – for businesses with 20 - 100 employees – 110,000 active customers – largest competitor: Cegid Sage 1000 – for businesses with 100 – 2,000 employees – 10,000 active customers with > 100 employees, including 1,200 Sage 100
Slide 29: Chartered Accountancy business
Chartered Accountancy business y 12,000 firms, 17,000 chartered accountants, 85,000 employees y Regulated industry y Exclusivity in two activities – financial statement preparation, contractual audit engagements, book-keeping services – the statutory audit y SME influencers y Business built around a
Slide 30: Mid-market business
Mid-market business launching a new “enterprise” product 29
Slide 31: Customer requirements
Customer requirements y Need for support – to make the best use of their software – advice and guidance on continually evolving business regulation – constant update (legal and business) y Technology as a means not an end – integration with existing technology in use – implementing Sage solution wit
Slide 32: Supported solutions
Supported solutions y Business expertise – incorporates French legal and social security changes – best business practices – uses French accounting and business rules y Vertical solutions – “flavours”: Services, Distribution, Industry – specialised for Construction, Transport y Low cost – integratio
Slide 33: Sage 1000 Enterprise: market position
Sage 1000 Enterprise: market position • Market: Businesses with more than 100 employees – Best of Breed 43% of market: Sage is the leader CRM – ERP 57% of market: Sage is 4th Payroll & HR ranked E-commerce Logistics Portal & Distribution @HR y Established Technology – customers have been using Sage
Slide 34: Sage 1000 Enterprise: up-sell potential
Sage 1000 Enterprise: up-sell potential y Product – Sage 1000 financial suite launched in 2001 – expanded Sage 1000 Enterprise launched in 2003 with deep features for distribution and services markets y Installed base – 1,200 Sage 1000 customers so far – 6,000 customers will migrate from Line 500 to
Slide 35: Growth Strategy
Growth Strategy y New business opportunities – higher end of mid-market is fragmented – mid-market businesses’ information systems are old y Sage Mid-market customer base opportunities – through acquisitions we have built a large mid-market customer base that we can upgrade – we have a customer base
Slide 36: Chartered accountancy business
Chartered accountancy business strengthening market position whilst becoming profitable 35
Slide 37: Market share–profitability relationship
Market share–profitability relationship Return on Investment U U U U UU U U U U U y US studies on specific U UU U U U U U U industries U U U U U U U U U U U U U U U y Strong correlation UU U U U U U U U U U U U U U U y Two distinct groups of U businesses Market Share The challenge is to move from on
Slide 38: Management changes to increase focus
Management changes to increase focus y Increase company efficiency – share and explain the strategy to employees – identify key people and laggards – implement appropriate metrics better than our competitors y Best practice sharing – encourage management to look at other Sage subsidiaries – investin
Slide 39: Systematic approach to customer base
Systematic approach to customer base y Long-term value – attracting new clients is very expensive – the customer life cycle concept offers long-term recurring revenues y Satisfied installed base creates its own value – influence and advocacy – spreading know-how on Sage products y Channel effect: –
Slide 40: Systematic approach to customer base
Systematic approach to customer base Organisational improvements y Differentiate new business and installed base approaches y Developed “installed base” marketing department – installed base offers and marketing campaigns – installed base telesales team y Invested in support services – hot line – CR
Slide 41: Sage Coala
Sage Coala 3 year achievements £m 2001 2004 pre-acquisition year Software 2.7 2.5 Support 2.9 6.9 Other services 0.9 1.6 Hardware 1.7 0.0 Other 1.2 0.0 Revenue 9.5 11.1 Operating profit 0.4 2.0 Accountant customers 1,700 2,800 40
Slide 42: Growth Strategy
Growth Strategy y Gain new clients – two main competitors merged last December: Cegid and CCMX – increased marketing and sales investment – gained market share over the last 3 years y Existing clients – cross-sell and up-sell campaigns – premium support contracts y New services – dynamic link betwee
Slide 43: France Small Business
France Small Business Antoine Henry
Slide 44: History and background
History and background 43
Slide 45: Ciel
Ciel y Subsidiary of Sage since 1992 y 400,000 active small business customers y A powerful brand:1 million licences sold cumulatively y 127,000 support contracts y 300 employees 44 Year ended 30 September 2004
Slide 46: Product and Service portfolio
Product and Service portfolio Price (Euros) Software products (31% revenues) Accounting, invoicing, payroll Millesime 199 Evolution 399 Services (69% revenues) Hot Line, Product updates, etc Privilege Premier Millesime 215 335 Evolution 330 470 45
Slide 47: Innovation in new products
Innovation in new products Ciel Professionnel Indépendant Ciel Devis Factures Ciel Saisie Comptable 46
Slide 48: Professionals
Professionals y 600,000 businesses in France y Have to produce a specific tax return file (2035) y Need a simple product: basic accounting for “sole traders” y Need an integrated solution: accounting, invoicing, customer relationship, agenda, etc… 47
Slide 49: Ciel Professionnel Indépendant
The answer Ciel Professionnel Indépendant y Launched in 2000 y 20,000 units sold in 4 years y Still no competitor in the market 48
Slide 50: Small businesses in France
Small businesses in France 3 million businesses (excluding “professional” sector) Without accounting software With accounting software – 1 million – 1.5 million with a PC – 0.5 million without a PC 49
Slide 51: 1.5 million businesses to convince
1.5 million businesses to convince y With a PC, without accounting software y Who are they ? – very small businesses, craftsmen, professional people …in all industry sectors – not experts in computers or book-keeping – 100% dedicated to their job 50
Slide 52: 1.5 million businesses to convince
1.5 million businesses to convince y How do they do their quotes and invoices? – use word processing software – or a spreadsheet y How do they do their book-keeping? – outsource book-keeping to a chartered accountant by sending data • Copies of invoices, bank statements • Accounting books • Spreadsh
Slide 53: Quotes and Invoices
Quotes and Invoices What do they want for their quotes & invoices? • A tool as simple as a word processing • Automatically calculates (total, VAT, …) and files (customers, quotes, invoices, …) • Saves time 52
Slide 54: Ciel Devis Factures
The answer Ciel Devis Factures 53
Slide 55: Ciel Devis Factures
Ciel Devis Factures y 13,000 units sold in 2 1/2 years y No. 2 best selling product after Ciel Comptabilité (accounting) 54
Slide 56: Book-keeping
Book-keeping What do they want for their book-keeping? • To optimise the recording of the accounts • But without the time or wish to do real book-keeping • Exchange with their chartered accountant Ö Facilitate Ö Rationalise the exchange Ö Make secure 55
Slide 57: Ciel Saisie Comptable
The answer Ciel Saisie Comptable 56
Slide 58: Ciel Saisie Comptable
The answer Ciel Saisie Comptable y A new concept: Software + Web- based service y Price: 99 Euros (including 1 year support and data transfer service) 57
Slide 59: New service offerings: Premium Support
New service offerings Premium Support 58
Slide 60: New Contrat Premier
New Contrat Premier y Before 2001, Ciel had the Contrat Privilège – based on the Sage UK support business with Direct Marketing and Telesales y In 2001, Ciel launched the Contrat Premier, 50% more expensive – dedicated hotline team – quarterly social/fiscal newsletter – e-back up service from the Sa
Slide 61: Growth Strategy
Growth Strategy y 224,000 new business start-ups in 2004. Ciel is well positioned to attract these new users y These small businesses represent the growth potential for our more sophisticated products – Ciel Devis Factures to Ciel Gestion Commerciale – Ciel Saisie Comptable to Ciel Comptabilité – Ci
Slide 62: Spain
Spain Alvaro Rarrirez
Slide 63: History and background
History and background 62
Slide 64: SP history
SP history Transition from owner-managed to Sage subsidiary • Small Business market: < 50 Revenue (£m) 24.8 employee businesses 25 22.4 22.4 20.4 20 • Founded in 1982: 23 years of 17.5 history 15 • October 2003: SP joins Sage 10 Group 5 - one of the co-founders and owners is now CEO of the subsidiar
Slide 65: Why have the entrepreneurs stayed?
Why have the entrepreneurs stayed? • Sage is a company with a high degree of autonomy, where entrepreneurs are encouraged to grow and help the Group as a whole • More prospects and possibilities at a professional and personal level • Experience can be shared and performance compared 64
Slide 66: Product and Service portfolio
Product and Service portfolio Software products (26% revenues) Accounting, invoicing, payroll Price (Euros) Professional 199 Elite 699 Line 100 3,000 Services (74% revenues) Hot Line, Product updates, etc Price Professional 199 Elite 599 Line 100 1,000 65
Slide 67: Market Place
Market Place 2.7m businesses > 1,000 employees Corporate 1,000 200–1,000 employees Large 4,000 50-200 employees Line 100 20,000 Medium Line 100 6–49 employees 280,000 SME Elite 1-5 employees Elite 1.0m (0.6m with registered accounts) Micro-SME Professional Professional 0 employees 1.4m (0.4m with re
Slide 68: Market position
Market position < 50 employees Customers 250,000 215,000 200,000 150,000 100,000 50,000 20-30,000* 18-22,000* 15-20,000* 8-12,000* 6-10,000* 0 SP Logic Control A3 Golden Soft Dimoni ISLA Soft *Sage estimates 67
Slide 69: Meeting Challenges for continued growth
Meeting Challenges for continued growth y Sharing knowledge, expertise and best practice between Sage Group and SP to improve the offer for our customers – example: “Premier” support contract y Identifying customer segments which can benefit from buying new SP products – example: at least 10% of 40,
Slide 70: Migration strategy
Migration strategy support software 69
Slide 71: Support sales trends
Support sales trends y 63,000 contracts Support Contracts 70,000 63,000 60,000 57,700 52,700 50,000 44,200 y Attachment Rate 30% 40,000 36,200 30,000 20,000 10,000 y Renewal Rate 80% 0 2000 2001 2002 2003 2004 70
Slide 72: Migration to mid-market products
Migration to mid-market products y Our competitive advantage – product: Line 100 – mid-market expertise – leading brand in Spain – customer base as a source of migrations y None of our competitors has these 3 advantages together y We do 71
Slide 73: Growth Strategy
Growth Strategy y Seek out new clients that will buy our products so that we can turn these products into support contracts that will then lead to recurring revenues y Encourage the customer base to upgrade their products and services in order to assist their growth and at the same time improve Aver