Sage Group Plc · LSE:SGE
Sage — The Sage Group — H1 2013 Earnings Presentation
34 slides from Sage's earnings presentation, May 2013
Slide 1: Focus and innovation delivering results
Focus and innovation delivering results The Sage Group plc Results for the half year ended 31 March 2013
Slide 2: Overview
Overview Guy Berruyer Chief Executive Officer 2
Slide 3: Financial highlights
Financial highlights A good performance Organic Proposed revenue £200m 145,000 new growth of special customers 3% dividend Delivery on 6% increase 74% of 1x net debt to in underlying contracts are EBITDA PBT premium target At constant exchange rates 3
Slide 4: Strategic highlights
Strategic highlights Delivering on our drivers of growth Focus on growth opportunities and disposals of non-core products Winning new small businesses with Sage One Launching cloud versions of major ERP products Continued international success with Sage ERP X3 Leveraging cross-sell opportu
Slide 5: Financial Overview
Financial Overview Paul Harrison Chief Financial Officer 5
Slide 6: Revenue sources
Revenue sources Strong growth in recurring revenues Total revenue 3% £213m Organic £220m revenue 33% 30% growth SSRS Recurring Revenue 6% £495m Organic 67% £446m 70% 3% recurring Organic SSRS* revenue revenue growth contraction H112 H113 *Software and software-related services At constant exchange r
Slide 7: Revenue trends
Revenue trends Shift to recurring revenue continues Recurring revenue SSRS Total 8% 6% 6% 6% 5% 4% 3% 2% 2% 2% 0% -2% -3% -4% -4% -5% H112 FY12 H113 -6% At constant exchange rates 7
Slide 8: Regional review
Regional review Robust performance in variable market conditions 8
Slide 9: Europe
Europe A good performance in difficult markets Revenue mix Organic revenue growth by country H113 H112 FY12 France 8% 3% France -1% 1% Flat UK 10% 34% Spain UK & Ireland 5% 4% 4% Germany Spain -4% -8% -7% 13% Sage Pay Germany -1% 7% 5% Others 32% Sage Pay 32% 23% 25% Europe 2% 1% 1% Regional highlig
Slide 10: Americas
Americas Continuing to build momentum Organic revenue growth Regional highlights Total revenue £230.3m (H1 2012: £200.0m), H113 H112 FY12 organic recurring revenue growth of 7% 4% 1% 2% and organic SSRS contraction of 4% Proportion of contracts Strong demand for premium support which are premium
Slide 11: AAMEA
AAMEA African markets continued to drive growth Revenue mix Organic revenue growth by country/region H113 H112 FY12 11% South Africa 14% 15% 16% South Africa Australia 2% 8% 7% Australia 30% Asia 1% 11% 4% Asia 59% AAMEA 9% 12% 12% Regional highlights Total revenue £74.6m (H1 2012: £69.2m), organi
Slide 12: Profitability
Profitability Margin discipline continues 28.3% 28.2% 27.0% Margin discipline across all 26.8% 26.9% regions 25.7% 24.8% Supports reinvestment in 24.7% growth Europe Americas AAMEA Group H112 H113 At constant exchange rates 12
Slide 13: Cash flow
Cash flow Strong cash generation continues £m £m £m EBITA 190.9 Cash flow from 208.9 Net debt (161.5) operations 1 October 2012 Acquisition costs (0.1) Interest (5.3) Free cash flow 158.7 Dep’n/amort’n/profit on 15.9 Tax (41.8) Acquisitions (9.3) disposal Share-based payments 2.8 Net capex (3.1) Dis
Slide 14: Capital structure
Capital structure Meeting our leverage target What we are doing Special dividend of £200m £200m • EGM in June Delivers on our through cycle gearing target of 1x net debt £960m £500m to EBITDA Almost £1 billion returned to £260m shareholders since October 2011 Delivers on our commitment Share
Slide 15: Capital structure
Capital structure Our rigorous approach to capital allocation remains Growth Increasing EPS + Increasing dividend Strong cash flow + Returns of surplus capital 15
Slide 16: Financial KPIs
Financial KPIs Measuring success KPI Measure H113 H112 Financial performance Growth Organic# revenue growth 3% 2% Margin EBITA†/Revenue 27% 27% Profitability Underlying* EPS growth 15% 2% Cash generation Net cash from operations/EBITA† 112%^ 115%^ Financial strength Net debt/EBITDA against stated ta
Slide 17: Our goal
Our goal Accelerating growth Cornerstones of our growth strategy 17
Slide 18: Focusing our business
Focusing our business Enabling growth through focus What we are doing: Optimising the portfolio Reallocating investment Non-core disposals Disposal of non-integrated CRM products Sage ACT! and Sage SalesLogix Disposal of five vertical products • C&I, ATL and Automotive in France, Aytos in Sp
Slide 19: Focusing our business
Focusing our business Enabling growth through focus What we are doing: Optimising the portfolio Reallocating investment Reallocating investment Core products categorised as Invest/Harvest/Sunset Re-allocation of resources to Invest products • Invest R&D expenditure: 41% (FY12: 35%) • Invest
Slide 20: Our goal
Our goal Accelerating growth Cornerstones of our growth strategy 20
Slide 21: Cloud solution for each core segment
Capturing the technology opportunity Cloud solution for each core segment Start-up and Small and medium Mid-market small businesses sized businesses businesses Sage One Hybrid cloud Sage ERP X3 1 – 20 10 – 200 100 – 500 employees employees employees 21
Slide 22: Technology Advisory Group
Capturing the technology opportunity Technology Advisory Group External, independent industry leaders and internal Sage experts Rajat Taneja • Chair of TAG • CTO of Electronic Arts • Formerly of Microsoft Alex Gounares • CEO of Concurix Corp. • Formerly of AOL • Advisor to Bill Gates at Microsof
Slide 23: Sage One
Capturing the technology opportunity Sage One The model is scaling well Good momentum with adoption Start-up and Four-fold increase in Sage One small businesses subscriptions to 11,500 and clear momentum in UKI Increasing the addressable market Sage One • Accelerating launches into Germany 1 – 2
Slide 24: Hybrid cloud
Capturing the technology opportunity Hybrid cloud Bringing our main products for the SMB segment to the cloud On track for commercial launch Small and medium sized businesses Upcoming launch of cloud versions of Sage 200 and Sage Murano Development work enables: Hybrid cloud • accelerated launch
Slide 25: Sage ERP X3
Capturing the technology opportunity Sage ERP X3 Compelling offering for the mid-market customer Mid-market Successful product on a global scale businesses Improved performance during the period • 8% organic revenue growth with Sage ERP X3 26% organic revenue growth outside of France 100 – 500 emp
Slide 26: Sage ERP X3
Capturing the technology opportunity Sage ERP X3 Compelling offering for the mid-market customer Successful product on a global scale % of X3 revenue outside of France Improved performance during the 50% period • 8% organic revenue growth with 40% 26% organic revenue growth outside of France 30% •
Slide 27: Payments
Capturing the technology opportunity Payments Integration with core accounting application is our USP Strong performance continues across Sage’s payments businesses Leveraging the cross-sell opportunity in North America • 18% organic growth in cross-sell revenue in North America • Over 12,000 cust
Slide 28: Premium support remains a core strength
The benefits of subscription Premium support remains a core strength of Sage 10% organic revenue growth in premium contracts 74% of contracts now premium in nature 81% renewal rate on contracts At constant exchange rates 28
Slide 29: Subscription pricing is the emerging phase
The benefits of subscription Subscription pricing is the emerging phase Significant growth opportunity for Sage Organic annualised value of subscriber base of £95m • Measured transition • Alongside existing traditional license offering Launched a number of subscription pricing options in North A
Slide 30: Strategic KPIs
Strategic KPIs Commercial appeal of our products and services drives 145,000 new customers in the period KPI Measure H113 FY12 Capturing the technology opportunity Number of Sage One paying subscriptionsᵝ 11,500 6,190 Adoption of cloud products Number of hybrid cloud paying subscriptionsᵝ 500 115 Mi
Slide 31: Summary
Summary Our strategy is clear, our focus on execution is resolute and we have momentum We have delivered significant returns to shareholders whilst investing for growth We are confident we will deliver on our financial and strategic goals 31
Slide 32: Questions?
Questions? 32
Slide 33: Appendix Supplementary Information
Appendix Supplementary Information 33
Slide 34: Segmental analysis
Segmental analysis Half year ended 31 March 2013 Europe Americas AAMEA Group Recurring revenue £271.3m £181.6m £42.2m £495.1m SSRS revenue £131.8m £48.7m £32.4m £213.0m Total revenue £403.2m £230.3m £74.6m £708.1m Organic# revenue growth +2% +4% +9% +3% EBITA† £113.9m £57.0m £20.0m £190.9m EBITA† ma