Sage Group Plc · LSE:SGE
Sage — The Sage Group — FY2007 Earnings Presentation
41 slides from Sage's earnings presentation, November 2007
Slide 1: Results for the year ended 30 September 2007
Results for the year ended 30 September 2007
Slide 2: Results to 30 September 2007
Results to 30 September 2007 Overview of the year Financial and regional review Business review and outlook Questions 2
Slide 3: Highlights of the year
Highlights of the year • Successful year – Good growth driving strong cash flow • Solid growth across the Group – UK, Mainland Europe and Rest of World reported excellent results – North America mixed performance, but profitable and still growing • Six principal acquisitions made to November 2007 •
Slide 4: Financial highlights
Financial highlights Full year to 30 September 2007 Revenue £1,157.6m 30%* EBITA† £283.2m 20%* Operating cash flow/EBITA 112% Adjusted earnings per share^ 13.34p 13% Dividend per share 7.00p 95% *At constant exchange rates †Earnings before interest, tax, amortisation of intangible fixed assets and p
Slide 5: Double digit growth in adjusted earnings per share
Double digit growth in adjusted earnings per share *EPS after neutralisation of foreign 14.00 exchange movements +13%* EPS 1994-2004 under UK GAAP +20% EPS 2005-2007 under IFRS 12.00 +13% +21% 10.00 EPS (pence) +11% 8.00 6.00 4.00 2.00 0.00 2003 2004 2005 2006 2007 5
Slide 6: Active and focused acquisition strategy
Active and focused acquisition strategy Enterprise Company Industry specialism Country value Protx Payment processing services UK £20.7m Snowdrop HR and payroll UK £17.2m KCS* HR and payroll UK £20.0m Treasury and cash France, Spain, XRT £26.3m management South America Pro-Concept Accounting: mid-ma
Slide 7: Financial review
Financial review
Slide 8: Total revenue
Total revenue • 30% increase in total Organic Non-core Acquisitions / disposals revenues • 7% organic growth £1,200m • 26% contribution from £1,100m +30% 2006/2007 acquisitions £1,000m 302 £900m 92 27 • Non-core 2% of revenues £800m 27 £700m £600m £500m £400m 773 +7% 829 £300m £200m £100m £0m £m at
Slide 9: Revenue sources
Revenue sources Total revenue Organic revenue Software Software related services Other services growth £1,200m £1,100m 102 9% +7% £1,000m £900m 29 3% £800m £700m 712 Software £600m related 555 services £500m £400m 62% 61% +9% £300m 344 £200m 308 Software £100m +4% 35% 30% £0m 2006 2007 £m at constan
Slide 10: EBITA margin
EBITA† margin • EBITA† margin 24% 30% (2006: 26%) 0% -3% 0% • Excluding principal 2006 25% acquisitions margin 20% maintained • Dilution effects principally 15% 27% 27% 24% the result of Emdeon 10% acquisition 5% 0% FY06 excl FY07 excl Verus Emdeon Adonix FY07 acqn acqn actual †Earnings before inter
Slide 11: Cash flow and net debt
Cash flow and net debt £m £m £m Cash flow from EBITA 283.2 317.1 Net debt 30/09/06 (593.6) operations Depreciation / amortisation 21.8 Interest (31.0) Free cash flow 182.1 Acquisitions Loss on disposal 1.8 Tax (66.1) (95.3) /disposal Stock compensation 8.8 Net capex (37.9) Dividends (49.0) Working c
Slide 12: Regional review
Regional review
Slide 13: Organic revenue growth trends
Organic revenue growth trends % growth on prior year at constant exchange rates 2006 2007 20% 15% 10% 5% 7% 7% 5% 10% 6% 4% 17% 17% 7% 7% 0% UK Mainland North Rest of World Total Europe America 13
Slide 14: UK
UK • Total revenue growth +10% • Organic revenue +7% – Successful launch of 1st integrated product suites – Strong growth in HR and payroll £204m £224m products – Excellent growth in CRM products • 3 acquisitions completed – Protx – Snowdrop 37% 37% margin margin – KCS (completed after the year-end)
Slide 15: Mainland Europe
Mainland Europe • Total revenue growth +18% • Organic revenue +10% – France +6% – Germany/Switzerland +8% – Spain +19% £296m £349m – Poland +21% • 2 principal acquisitions completed – Pro-Concept – XRT 22% 23% • EBITA margin 23% (2006: 22%) margin margin – Strong contribution from Spain and Germany/
Slide 16: North America
North America • Total revenue growth +54% • Organic revenue +4% • Small Business Division +3% – Impacted by Peachtree upgrade and ACT! corporate licences £329m £508m • Mid-Market Division +4% – Improvement in H2 to 5% – Good H2 performances from Timberline, Nonprofit, ACCPAC and in CRM • Reorganisat
Slide 17: North American relative organic revenue growth
North American relative organic revenue growth % growth on prior year at constant exchange rates H1 FY07 H2 FY07 FY07 5% 5% 0% 3% 3% 5% 4% 4% 3% 4% 0% Small Business Mid-Market Division Total North America Division 17
Slide 18: North America EBITA margin
North America EBITA† margin • EBITA† margin 20% (2006: 24%) 30% – Net dilutive effects of 2006 acquisitions, principally +2% -5% Healthcare (Emdeon) 25% • Improvement in Healthcare 20% margins to 7% 15% • Investment required in 2008 to drive sustained organic growth in 10% 23% 23% 20% North America
Slide 19: Rest of World
Rest of World • Total revenue growth +21% • Organic revenue +17% – South Africa +20% – Australia +15% £63m £76m – Strong growth in both licence and support contracts – Expansion of HR and payroll offering • Acquisition of Creative – Leading HR and payroll supplier in 26% 26% Singapore and Malaysia m
Slide 20: Business review and outlook
Business review and outlook
Slide 21: Sage's guiding principles drive performance
Sage’s guiding principles drive performance Simplicity Agility Innovation Integrity Trust 21
Slide 22: North America's growth
North America’s growth Historic revenue and EBITA 500 Revenue £m EBITA £m 400 300 200 100 0 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 22
Slide 23: North America strategic goals 2008
North America strategic goals 2008 • Continue to leverage strong brand portfolio – Peachtree, ACCPAC, ACT!, Simply, SalesLogix, MAS, Timberline • Focus on driving organic revenue growth • Improve the customer experience in sales and service support – “Help our customers manage their businesses bette
Slide 24: Sage Healthcare Division (formerly Emdeon)
Sage Healthcare Division (formerly Emdeon) • Financial performance – Revenue growth 1%, EBITA margin 7% Network Systems 29% Services – Improving trends in systems sales and reduction in 35% installation backlog Other Support – Revenue enhancement initiatives delayed by 4% 32% management changes, imp
Slide 25: Sage Payment Solutions Division (formerly Verus)
Sage Payment Solutions Division (formerly Verus) • Strong performance over the year – Revenue growth +14% – Margins improved to 42% • Integration into Sage products well advanced – Sage Healthcare and Peachtree completed – MAS integration completed by Q1 FY08 – Simply, ACCPAC, Timberline next priori
Slide 26: Strategic initiatives in other regions
Strategic initiatives in other regions UK • Taking the lead in product suites solutions • Successful expansion of product offering into HR and +7% organic payroll, CRM growth • Continual innovation in service offering • France: mid-market reorganisation/Sage 100 driving Mainland Europe growth +10% o
Slide 27: Competitive landscape
Competitive landscape Entry-level Mid-market Enterprise Customer base* Sage 5,500,000 Intuit 3,800,000 Microsoft 270,000 SAP 33,400 Oracle 275,000 Exact 180,000 MYOB 500,000 NetSuite 5,400 SF.com 38,100 * Mixture of Sage Forecasts and market statistics 27
Slide 28: Support contracts
Support contracts thousands 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Sept 03 Sept 04 Sept 05 Sept 06 Sept 07 UK Mainland Europe North America Rest of World 28
Slide 29: Continued growth in annual combined contracts
Continued growth in annual combined contracts 2000 2007 Combined support contract revenue Combined support 59% contract revenue 20% Standard support Standard support contract revenue contract revenue 80% 41% At constant exchange rates 29
Slide 30: Hybrid technology model evolving
Hybrid technology model evolving Web Future Software as a Service Current desktop solutions Greater functionality Customisation Transitional hybrid model Secure, on-premise Sage 50 Accounts Professional Online Accpac ERP SageCRM.com 30
Slide 31: Changing shape of our customer base
Changing shape of our customer base 2000 2007 4% 4% 4% 6% 12% 48% 30% 92% Accounting Industry-specific CRM HR and Payroll Payment processing 31
Slide 32: Outlook
Outlook • Another successful year – scale of our business substantially increased • All our regions well-positioned for further growth – Three regions reported excellent and sustainable results – Clear strategy and objectives set for improving North America • Financial strength and stable cash flows
Slide 33: Questions
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Slide 34: Supplementary information
Supplementary information
Slide 35: Organic revenue growth
Organic revenue growth 2006 2007 Growth £m £m % TOTAL REPORTED 935.6 1,157.6 24% Impact of retranslation to 2007 exchange rates (43.2) - TOTAL EXCLUDING FOREX 892.4 1,157.6 30% less 2007 acquisitions - (11.8) (Protx, Pro-Concept, Snowdrop, Creative, XRT) less 2007 disposals (7.0) (6.4) (Hardware div
Slide 36: Operating profit by region
Operating profit by region £m 2007 UK Mainland North Rest of TOTAL Europe America World EBITA pre share-based payment 85.4 82.6 103.5 20.5 292.0 Share-based payment (2.8) (2.0) (3.5) (0.5) (8.8) Earnings before interest, tax and net 82.6 80.6 100.0 20.0 283.2 amortisation (EBITA) Amortisation of acq
Slide 37: UK
UK Revenues Customers* Software £91.7m New customers 40,000 Software related services £128.8m Other services £3.6m Total customers 741,000 Total £224.1m Profit Support contracts EBITA £82.6m New support contracts 12,000 EBITA margin 37% Total support contracts 363,000 * Excluding ACT! 37
Slide 38: Mainland Europe
Mainland Europe Revenues Customers* Software £101.1m New customers 87,000 Software related services £248.0m Total £349.1m Total customers 1,502,000 Profit Support contracts EBITA £80.6m New support contracts 53,000 EBITA margin 23% Total support contracts 569,000 * Excluding ACT! 38
Slide 39: North America
North America Revenues Customers* Software £121.6m New customers 147,000 Software related services £288.3m Other £98.2m Total customers 2,871,000 Total £508.1m Profit Support contracts EBITA £100.0m New support contracts (2,000) EBITA margin 20% Total support contracts 598,000 * Excluding ACT! 39
Slide 40: North American new operating divisions
North American new operating divisions Business Management Small Business and Mid- Division Market accounting, ERP, CRM 45% FY07 revenue Industry and Industry-specific solutions and Specialised Solutions human resource management Division 15% FY07 revenue Sage Healthcare Emdeon Practice Services Div
Slide 41: Rest of World
Rest of World Revenues Customers* Software £29.2m New customers 45,000 Software related services £47.1m Total £76.3m Total customers 442,000 Profit Support contracts EBITA £20.0m New support contracts 27,000 EBITA margin 26% Total support contracts 119,000 * Excluding ACT! 41