Sage Group Plc · LSE:SGE
Sage — FY2015 Earnings Presentation
38 slides from Sage's earnings presentation, November 2015
Slide 1: Sage Group plc Preliminary Results for the year ending 30 September 2015
Sage Group plc Preliminary Results for the year ending 30 September 2015
Slide 2: Agenda
Agenda: • Executive summary Stephen Kelly • CFO review of the year Chief Executive Officer • Progress • Outlook • Q&A 1
Slide 3: Safe harbor statement
Safe harbor statement The following presentation is being made only to, and is only directed the Company, or industry results, to be materially different from any at, persons to whom such presentation may lawfully be communicated future results, performance or achievements expressed or implied by (“
Slide 4: Summary
Summary Financial New Transformation Momentum Strong targets achieved chapter underway building business model 3
Slide 5: Steve Hare, Chief Financial Officer
Steve Hare Chief Financial Officer 4
Slide 6: Financial targets achieved
FY15 FY14 Change Financial Organic revenue £1,357m £1,272m +6.7% targets • Recurring revenue £1,010m £930m +8.5% achieved • Processing revenue N/A N/A Momentum created • SSRS revenue £348m £341m +1.9% for sustainable growth Organic operating profit £383m £349m +9.6% Organic operating profit 28.2% 27
Slide 7: Financial targets achieved
Previous basis Revised basis FY15 FY14 Change FY15 FY14 Change Financial Organic revenue £1,357m £1,272m +6.7% £1,400m £1,321m +6.0% targets • Recurring revenue £1,010m £930m +8.5% £953m £874m +9.0% achieved • Processing revenue N/A N/A £161m £158m +1.7% Momentum created • SSRS revenue £348m £341m +
Slide 8: Transition to subscription
Separate Deferral and Transition to Previous Referral presentation Revised FY15 re- Change basis Commissions of basis classification processing subscription Recurring revenue £1,010m £55m Deferral and Processing revenue - - reclassification of upfront payments SSRS revenue £348m (£58m) Organic reven
Slide 9: Transition to subscription
Subscription Customer evolution – transition to Transition to Licence Maintenance subscription to use and Support subscription Perpetual Maintenance licence and Support 8
Slide 10: Referral commissions
Separate Deferral and Previous Referral presentation Revised Referral FY15 re- Change basis Commissions of basis classification processing commissions Recurring revenue £1,010m £46m Gross-up of referral Processing revenue - - commissions SSRS revenue £348m - Organic revenue £1,357m £46m 9
Slide 11: Referral commission
Independent Sales Organisation (“ISO”) Referral commission Customer Sage 10
Slide 12: Processing revenue
Deferral and Separate Previous Referral Revised FY15 re- presentation Change basis Commissions basis Processing classification of processing revenue Recurring revenue £1,010m (£158m) Processing revenue - £161m Separate presentation SSRS revenue £348m (£3m) Organic revenue £1,357m - 11
Slide 13: Impact of revenue reporting changes
Deferral and Separate Impact of FY15 Previous basis re- classification Referral Commissions presentation of processing Revised basis Change revenue Recurring revenue £1,010m £55m £46m (£158m) £953m (£57m) reporting Processing revenue - - - £161m £161m £161m changes SSRS revenue £348m (£58m) - (£3m)
Slide 14: Financial targets achieved
Previous basis Revised basis FY15 FY14 Change FY15 FY14 Change Financial Organic revenue £1,357m £1,272m +6.7% £1,400m £1,321m +6.0% targets • Recurring revenue £1,010m £930m +8.5% £953m £874m +9.0% achieved • Processing revenue N/A N/A £161m £158m +1.7% Momentum created • SSRS revenue £348m £341m +
Slide 15: Financial progress
FY15 FY14 Change Organic revenue 1,400 1,321 +6% Non-organic revenue 36 - Underlying revenue 1,436 1,321 +9% Financial Underlying Operating profit 380 350 +8% progress Underlying profit after tax 268 250 +11% Key organic revenue growth movements Underlying Earnings per share 25.00p 22.19p +12.6% Not
Slide 16: Strong cash metrics
Underlying cash flow Underlying Opening net debt £380m from operating £403m operating profit £437m activities Depreciation/ Free cash flow £296m £29m Interest (£18m) Amortisation M&A (£98m) Share-based Strong cash (£9m) payments Tax paid (£85m) Net share buy-back (£12m) Working and metrics Capital a
Slide 17: Revenue categories
FY14 FY15 +29% Software subscription Revenue +9% categories Other +1% recurring Processing +2% SSRS -1% 16
Slide 18: Investing for growth
1450 1400 1350 Investing 1300 for growth 1250 1200 FY14 Growth products Heritage products FY15 • Improved features Global products Growth • Core product modernisation • Cloud 87% 91% R&D S&M 17
Slide 19: Software subscriber growth
340 Software 320 subscriber 300 growth 280 260 ASB revenue bridge 240 220 200 FY14 France Sage 50 UK Sage 50 US & Accountants Sage One Other FY15 Accounting & (Payroll & Canada Payroll Accounts) 18
Slide 20: Regional overview
Europe North America Regional overview International 19
Slide 21: Europe
Europe What went well 31% UKI subscription Recurring Mix growth • Increased functionality 75% FY14: 73% and cloud enablement • Sage 50 Accounts & Payroll 22% France subscription growth • Ciel cloud enablement • Sage Paie i7 upgrade Revenue FY15 FY14 Growth Focus 1% Enterprise contraction Recurring 5
Slide 22: North America
North America What went well 8% Sage 50 revenue growth • Launched Sage Drive in Canada • 5 fold increase in subscription revenue Recurring Mix across NA Sage X3 growth of 19% 58% FY14: 55% Focus 1% Payments Processing contraction Revenue FY15 FY14 Growth • ISO channel Recurring 260 238 +9.0% • Cross
Slide 23: International
International Revenue FY15 FY14 Growth What went well Recurring 133 117 +13.7% 33% growth in Sage X3 Recurring Mix Sage One launches • Malaysia, Brazil and 65% Processing 8 7 +18.1% FY14: 65% SSRS 64 57 +12.7% Australia One-off SSRS growth in Total 205 181 +13.6% Malaysia • £3.5m added in licence sa
Slide 24: Capacity for growth
19% G&A 139 sites baseline Capacity for growth £50m annualised savings 2 year payback 23
Slide 25: Summary
Summary Targets achieved Momentum building Strong cash flow 24
Slide 26: Stephen Kelly, Chief Executive Officer
Stephen Kelly Chief Executive Officer 25
Slide 27: From Invention to Re-imagination
From Invention to Re-imagination PC Era Payroll Payments & HR The Golden Triangle Sage invented business software for computers Accounting Global reach | Tradition of innovation | Trusted 26
Slide 28: Progress
Progress Putting our customers at the heart of everything we do to provide exceptional experiences. Our culture, underpinning the Outpacing market growth entire strategy and defining what to gain market share and it means to work at Sage. realise our ambition to be the market leader. Building a glob
Slide 29: Momentum building
Momentum building • Renewal rates up to 84% • 690,000 software subscription contracts • UKI Sage Pay and Sage Accounting cross sell growth at 160% Customers for life 28
Slide 30: Momentum building: Sage One subscriptions
Momentum building • Sage One 100% growth to 173,000 paying subscriptions • 11% Sage X3 revenue growth • New digital marketing capability with CBC launches in Atlanta and Dublin Sage One subscriptions 200 150 Thousands 100 Winning in the market 50 0 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 UK Global 29
Slide 31: Momentum building
Momentum building • Sage Live launched to market in 26 weeks • Sage Impact created in 51 days • Over 200 enhancements across our growth products Payroll Payments & HR The Golden Triangle Revolutionise business Accounting 30
Slide 32: Momentum building
Momentum building • £20m re-invested for growth • Scalable process, systems and capability • Major recruitment of senior talent Top 100 Leaders: 24 New joiners Capacity for growth 14 Promotions 31
Slide 33: Momentum building: One Sage
Momentum building • Aligned goals, compensation and bonus • Common organisational design • Shared values One Sage 32
Slide 34: Progress
Progress Putting our customers at the heart of everything we do to provide exceptional experiences. Our culture, underpinning the Outpacing market growth entire strategy and defining what to gain market share and it means to work at Sage. realise our ambition to be the market leader. Building a glob
Slide 35: Outlook
Outlook Organic Organic revenue operating growth at least margin at least 6% 27% Long-term sustainable growth Improving quality of the margin Continuous focus on strong cash conversion 34
Slide 36: Summary
Summary Financial New Transformation Momentum Strong targets achieved chapter underway building business model 35
Slide 37: Q&A
sage Q&A
Slide 38: Financial targets achieved with momentum for sustainable growth
Financial targets achieved with momentum for sustainable growth