Results for the six months ended 31 March 2018 #SageResults
Safe harbour The following presentation is being made only to, and is only directed at, persons to whom predicting customer behaviour; customers may not respond as we expected to our such presentation may lawfully be communicated (“relevant persons”). Any person who is sales and marketing activities; the competitive environment; our ability to adapt to not a relevant person should not act or rely on this presentation or any of its contents. technological change; business interruption or failure of our systems architecture and Information in the following presentation relating to the price at which relevant investments communication systems; problems with implementing upgrades to our applications have been bought or sold in the past or the yield on such investments cannot be relied and supporting information technology infrastructure; any failure to properly use and upon as a guide to the future performance of such investments. protect personal customer information and data; our ability to manage and maintain third party business partnerships; increased regulation of our businesses; any failure • This presentation does not constitute an offering of securities or otherwise constitute to process transactions effectively; any failure to adequately protect against potential an invitation or inducement to any person to underwrite, subscribe for or otherwise fraudulent activities; any significant quality problems or delays; the global macro- acquire securities in The Sage Group plc (the “Company”) or any company which is a economic environment; our inability to attract, retain and develop talented people; our subsidiary of the Company ability to repurchase shares; our inability to adequately protect our intellectual property rights; disruptions, expenses and risks associated with any acquisitions and • The release, publication or distribution of this presentation in certain jurisdictions may divestitures; amortisation of acquired intangible assets and impairment charges; our be restricted by law, and therefore persons in such jurisdictions into which this use of debt to finance acquisitions or other activities; and the cost of, and potential presentation is released, published or distributed should inform themselves about, and adverse results in, litigation involving intellectual property, competition authority, observe, such restrictions. shareholder and other matters. These forward-looking statements speak only as at the date of this presentation. Except as required by the Financial Conduct Authority, or • Certain statements contained in this presentation constitute forward-looking by law, the Company expressly excludes any obligation to update or revise publicly statements. All statements other than statements of historical facts included in this any forward-looking statement, whether as a result of new information, future events, presentation, including, without limitation, those regarding the Company’s financial or otherwise. Nothing in the foregoing is intended to or shall exclude any liability for, or condition, business strategy, plans and objectives, are forward-looking statements. remedy in respect of, fraudulent misrepresentation. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, • Rounding “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or As a result of rounding throughout this document, it is possible that tables may not comparable terminology. Such forward-looking statements involve known and cast and change percentages may not calculate precisely. • unknown risks, uncertainties and other factors, which may cause the actual results, Terminology performance or achievements of the Company, or industry results, to be materially Unless stated otherwise all references to revenue are organic. • different from any future results, performance or achievements expressed or implied Materiality by such forward-looking statements. Such forward-looking statements are based on Only figures over £1m are considered to be material for the purposes of this numerous assumptions regarding the Company’s present and future business presentation. strategies and the environment in which the Company will operate in the future. Such risks, uncertainties and other factors include, among others: Inherent difficulty in Sage Group plc Interim Results 2018 2 #SageResults
Stephen Kelly @SKellyCEO Chief Executive Officer • Welcome • H2 18 delivery plan • CFO review • Strategy • Outlook • Q&A Sage Group plc Interim Results 2018 3 #SageResults
H2 18 Delivery Plan 2 1 3 Enterprise Subscription Leadership Management Sage Group plc Interim Results 2018 4 #SageResults
FY18 Outlook Around 27.5% Around 7% organic organic revenue operating growth margin Sage Group plc Interim Results 2018 5 #SageResults
Steve Hare @SteveHareCFO Chief Financial Officer Sage Group plc Interim Results 2018 6 #SageResults
H1 18 summary 1 2 3 Strong Focus on Confidence in underlying subscription FY18 guidance business Sage Group plc Interim Results 2018 7 #SageResults
Financial summary H1 18 H1 17 Growth Organic 1 revenue £908m £854m 6.3% Sage Business Cloud revenue £164m £100m 64% Sage Business Cloud ARR 1 £336m £215m 57% Underlying 1 operating profit margin 2 % 24.5% 25.3% (0.8%) 1 See appendix for definitions 2 In FY18, there is no difference between organic and underlying operating margin Sage Group plc Interim Results 2018 8 #SageResults
Financial summary H1 18 H1 17 Change Underlying operating profit margin 1 % 24.5% 25.3% (0.8%) Underlying basic EPS 2 14.25p 14.12p 0.9% Underlying adjusted EPS 2 14.25p 12.33p 15.5% Non-GAAP EBITDA 3 margin% 26.9% 27.5% (0.6%) 1 In FY18, there is no difference between organic and underlying operating margin 2 See appendix for definitions 3 Non-GAAP EBITDA is based on the underlying operating profit, adjusted for underlying amortisation, depreciation and share-based payment charges Sage Group plc Interim Results 2018 9 #SageResults
Strong capital metrics Underlying operating Underlying cash flow £222m £221m Opening net debt (£813m) profit from operating activities Depreciation/ Free cash flow £157m amortisation/impairment/ £17m Net interest paid (£12m) profit on disposal M&A (£8m) Share-based payments £5m Income tax paid (£29m) Ordinary (£110m) dividends Net changes in working (£5m) Non-recurring items (£21m) capital Exchange movement on £31m net debt Net capital expenditure (£18m) Exchange movements (£2m) M&A related items (£1m) Underlying cash flow Free cash flow £157m Closing net debt (£744m) £221m from operating activities Key Metrics: Free cashflow as a % of Underlying cash Net debt leverage 1 17% 1.4:1 99% revenue conversion 1 1 See appendix for definitions Sage Group plc Interim Results 2018 10 #SageResults
Revenue categories +6% 78% Recurring mix H1 17: 78% Software +25% subscription +6% Recurring revenue Other 44% recurring -11% +7% SSRS Software subscription penetration +2% Processing H1 17: 37% H1 17 H1 18 Sage Group plc Interim Results 2018 11 #SageResults
Impact of subscription model Licence contract Subscription contract Customer ARR H2 18 Revenue H2 18 Revenue acquired £500k £250k April 1st £1.1m £500k £40k September 1st £1.0m Sage Group plc Interim Results 2018 12 #SageResults
H2 18 Sources of growth Cloud Enterprise Progress in connected Management France Sage Group plc Interim Results 2018 13 #SageResults
Software subscriber growth Growth in ASB of £187m to £820m in H1 18 30% 800 62 750 36 700 89 ASB (£m) 820 650 600 633 550 500 H1 17 Cloud connected Cloud native Desktop H1 18 Sage Group plc Interim Results 2018 14 #SageResults
Regional overview Europe North America International Sage Group plc Interim Results 2018 15 #SageResults
Europe 40% 77% H1 18 revenue growth • Northern Europe: Software • Revenue 4%; flat recurring subscription • Sage Accounting revenue 54% penetration H1 17: 36% • Sage People ARR 70% Recurring mix • France: revenue and recurring both 1% H1 17: 78% • Central Europe: revenue 11%; recurring 12% • Iberia: revenue 7% Revenue H1 18 H1 17 Growth Focus for H2 18 Recurring £377m £368m +2% • Subscription in the UK • Continuing progress in France Processing £19m £20m -3% SSRS £97m £83m +17% Total £493m £471m +5% Sage Group plc Interim Results 2018 16 #SageResults
North America 42% 82% H1 18 revenue growth • North America: software subscription 51% Software • USA: cloud connected revenue 89% subscription • Canada: double digit revenue and recurring growth penetration H1 17: 31% • Intacct: continued momentum, 31% ARR growth Recurring mix H1 17: 80% Revenue H1 18 H1 17 Growth Focus for H2 18 Recurring £230m £203m +13% • Continued migration to cloud connected • Enterprise Management acceleration Processing £16m £15m +3% • Continued momentum of Sage Intacct SSRS £36m £37m -2% Total £282m £255m +10% Sage Group plc Interim Results 2018 17 #SageResults
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