Sage Group plc results for the six months ended 31 March 2017
Sage Group plc results for the six months ended 31 March 2017 Safe - - PowerPoint PPT Presentation
Sage Group plc results for the six months ended 31 March 2017 Safe - - PowerPoint PPT Presentation
Sage Group plc results for the six months ended 31 March 2017 Safe harbour The following presentation is being made only to, and is only directed at, persons to whom business strategies and the environment in which the Company will such
The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is no t a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought
- r sold in the past or the yield on such investments cannot be relied upon as a guide to the
future performance of such investments.
- This presentation does not constitute an offering of securities or otherwise constitute an
invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in The Sage Group plc (the “Company”) or any company which is a subsidiary o f the Company. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investment s cannot be relied upon as a guide to the future performance of such investments.
- The release, publication, distribution or this presentation in certain jurisdictions may be
restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions.
- Certain statements contained in this presentation constitute forward-looking statements. A
ll statements other than statements of historical facts included in this presentation, including , without limitation, those regarding the Company’s financial condition, business strategy, plans and objectives, are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking stateme n t s are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will
- perate in the future. Such risks, uncertainties and other factors include, among others:
Inherent difficulty in predicting customer behaviour; customers may not respond as we expected to our sales and marketing activities; the competitive environment; our ability to adapt to technological change; business interruption or failure of our systems architecture and communication systems; problems with implementing upgrades to our application s a n d supporting information technology infrastructure; any failure to properly use and protect personal customer information and data; our ability to manage and maintain third party business partnerships; increased regulation of our businesses; any failure to process transactions effectively; any failure to adequately protect against potential fraudulent activities; any significant quality problems or delays; the global macro-economic environment; our inability to attract, retain and develop talented people; our ability to repurchase shares; our inability to adequately protect our intellectual property rights; disruptions, expenses and risks associated with any acquisitions and divestitures; amortisation of acquired intangible assets and impairment charges; our use of debt to finance acquisitions or other activities; and the cost of, and potential adverse results in, litigation involving intellectual property, competition authority, 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 by law, the Company expressly excludes any obligation to update or revise publicly any forward-looking statement, whet h e r as a result of new information, future events, or otherwise. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation.
- Rounding
As a result of rounding throughout this document, it is possible that tables may not cast and change percentages may not calculate precisely.
- Materiality
Only figures over £1m are considered to be material for the purposes of this presentation.
02
Safe harbour
Sage Group plc interim results 2017
#SageResults
Stephen Kelly
Chief Executive Officer
@SKellyCEO Agenda:
- Summary
- CFO review
- Progress
- Outlook
- Q&A
03 Sage Group plc interim results 2017
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H1 17 Summary
04
The strategy is working Strong foundations and road map for accelerating growth Q2 momentum continuing into H2
Sage Group plc interim results 2017
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Steve Hare
Chief Financial Officer
@SteveHareCFO 05 Sage Group plc interim results 2017
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Organic and underlying revenue
Operating Profit Margin % H1 17 % H1 16 % Change Organic 25.2% 25.6%
- 40bps
Underlying 25.1% 25.5%
- 40bps
06
Revenue H1 17 £m H1 16 £m Growth Organic* £838m £787m +6.4% Inorganic adjustments £74m £76m Underlying* £912m £863m +5.7%
*See appendix for definitions
Sage Group plc interim results 2017
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Financial summary
H1 17 H1 16 Change Organic revenue £838m £787m +6.4% Organic operating profit £211m £201m +5.0% Organic Margin % 25.2% 25.6%
- 40bps
Underlying EPS 14.5p 14.2p +2.0% Organic operating profit £211m £201m +5.0% Share based payments £5m £6m Underlying depreciation and amortisation £17m £15m Non-GAAP EBITDA £233m £222m +5.4% Non-GAAP EBITDA margin 27.9% 28.2% Reconciliation to Non-GAAP EBITDA: Non-recurring items (exceptional costs) (£19m) (£29m) Recurring items (£12m) (£8m) Statutory Operating Profit £180m £137m +32%
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Free cash flow £166m M&A (£87m) Ordinary dividends (£101m) Exchange movement
- n debt
(£15m) Interest (£10m) Tax paid (£39m) Exceptional costs (£23m) Depreciation/ amortisation £17m Share-based payments £5m Change in working capital and deferred income £2m Net CAPEX (£15m) Underlying
- perating profit
£229m Underlying cash flow from
- perating activities
£238m Free cash flow £166m Underlying cash flow from
- perating activities
£238m Opening net debt (£397m) Closing net debt (£434m)
Strong capital metrics
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Free cash flow as % of revenue 18% Cash conversion 104% Net leverage 0.9x Key Metrics: Sage Group plc interim results 2017
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+10%
H1 17 H1 16
Recurring Revenue
+31%
- 3%
- 8%
+6%
Other recurring SSRS Processing Software subscription
Revenue categories
09
+11%
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Software subscriber growth
Software subscriber growth
Growth in ASB of £82m to £618m over last 6 months
10 £m
15%
536 618 13 34 22 2 11
450 470 490 510 530 550 570 590 610 630 Sep-16 Sage One Sage 50 Sage 200 Sage X3 Other Mar-17 Sage Group plc interim results 2017
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Regional overview
11
Northern Europe North America Central & Southern Europe International
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What went well
- Every major European country excl. France
growing above the group revenue growth rate
- Northern Europe revenue growth of 8%, driven by:
- Strong performance from Sage 50
Accounts, achieving 30% recurring revenue growth
- X3 - 34% growth
- Central Europe: 8% revenue growth
- Iberia: 8% revenue growth
Areas for improvement
- France
- Monetising new products
- Phase out first year premium
Europe
12 Recurring Mix
78%
H1 16: 75%
Revenue H1 17 £m H1 16 £m Growth Recurring £361m £329m +10% Processing £20m £18m +11% SSRS £81m £90m
- 10%
Total £462m £437m +6%
35%
H1 16: 31% Subscription penetration
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What went well
- USA: X3 grew by 25%
- USA: triple digit software subscription growth in
Sage 50c & 200c
- Canada: 9% growth, driven by Sage 50c and 200c
Areas for improvement
- USA subscription growth
- USA focus on top 30 partners
North America
13 Recurring Mix
78%
H1 16: 76%
Revenue H1 17 £m H1 16 £m Growth Recurring £187m £174m +7% Processing £17m £16m +4% SSRS £37m £40m
- 7%
Total £241m £230m +5%
22%
H1 16: 12% Subscription penetration
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What went well
- Brazil: 23% revenue growth, double digit recurring
revenue growth
- Africa: 14% X3 growth, 64% growth in Sage One
revenue
- Middle East: growing by 23%, with strong Sage X3
growth
- Australia: 8% growth, with strong recurring revenue
growth
Areas for improvement
- South East Asia: focus on C4L
International
14 Recurring Mix
73%
H1 16: 72%
Revenue H1 17 £m H1 16 £m Growth Recurring £99m £86m +16% Processing £7m £5m +36% SSRS £29m £29m
- %
Total £135m £120m +13%
55%
H1 16: 51% Subscription penetration
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Financial Discipline
Annual savings secured in H1 17 Headcount £21m Other £7m Total savings £28m
15
Total exceptional costs (£19m)
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Organic operating profit margin: 12 month snapshot
16
15.0% 17.0% 19.0% 21.0% 23.0% 25.0% 27.0% Mar-16 Product Development Go to Market G&A Mar-17
25.6%
- 0.5%
- 4.4%
4.5% 25.2%
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Focus on financial discipline Strong foundations and road map for accelerating growth Q2 momentum continuing into H2
H1 17 Summary
17 Sage Group plc interim results 2017
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Stephen Kelly
Chief Executive Officer
@SKellyCEO 18 Sage Group plc interim results 2017
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Commitment to The Golden Triangle
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Golden Triangle
Payments and Banking People and Payroll Accounting
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One Sage Customers for Life Winning in the Market Capacity for Growth Revolutionise Business
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Strategic Pillars
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Revolutionise business
In-the-moment accounting Powerful business apps Easy-to-use technology Invisible admin More insights into
- ur data
Sage Group plc interim results 2017
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Revolutionise business
Cloud-first, mobile led AI powered, enabling invisible admin Real time access to financial health Intuitive dashboards Open API – Complete cloud solution
Sage Group plc interim results 2017
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Revolutionise business
Strategic alliances
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Customers for Life
840k 1,240k H1 16 H1 17
Software subscriptions
84% 86% H1 16 H1 17
Renewal Rates
24
Subscription On plan Off plan
H1 16 H1 17
Subscription On plan Off plan
Transition to subscription
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Customers for Life – Sage 50c
Sage 50c revenue growth +25% Cloud enabled contracts >110k
H1 17
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Winning in the Market
26 Start Up Scale Up Enterprise
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Product
USA UK & Ireland France Spain Germany Canada Brazil RSA Australia
Winning in the Market
27
H1 16
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Winning in the Market
28 Product
USA UK & Ireland France Spain Germany Canada Brazil RSA Australia
FY 17
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Capacity for Growth
29
Efficient Capital Allocation Financial discipline
Profitable growth
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One Sage
30
Communication of strategy and values Sage Foundation Colleague engagement
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Further Acceleration
Growth Drivers
FY17
31
C4L C4L NCA NCA M&A NCA M&A M&A
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FY17 Outlook
32
Revenue growth Operating margin Exceptional charge not expected to exceed
Sage Group plc interim results 2017
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£75m
H1 17 Summary
33
The strategy is working Strong foundations and road map for accelerating growth Q2 momentum continuing into H2
Sage Group plc interim results 2017
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Q&A
#
#SageResults 34 Sage Group plc interim results 2017
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Processing revenue is revenue earned from customers for the processing of payments or where Sage colleagues process our customers’ payroll. Recurring revenue is revenue earned from customers for the provision of a good or service, where risks and rewards are transferred to the customer over the term of a contract, with the customer being unable to continue to benefit from the full functionality of the good or service without on-going payments. Recurring revenue includes both software subscription revenue and maintenance and service revenue. Subscription revenue is revenue earned from customers for the provision of a good or service, where the risk and rewards are transferred to the customer over the term of a contract. In the event that the customer stops paying, they lose the legal right to use the software and the Company has the ability to restrict the use of the product or service (also known as ‘Pay to play’). SSRS revenue is for goods or services where the entire benefit is passed to the customer at the point of delivery. It comprises revenue for software or upgrades sold on a perpetual license basis and software related services, including hardware sales, professional services and training.
Processing revenue Recurring revenue Software subscription revenue Software and software related services (“SSRS”)
Measure /Description
Glossary - revenue
Organic revenue neutralises the impact of foreign exchange in prior period figures and excludes the contribution from current and prior period acquisitions, disposals and assets held for sale.
Organic revenue
Underlying revenue neutralises the impact of foreign exchange in prior period figures but includes the contribution from current and prior period acquisitions, disposals and assets held for sale.
Underlying revenue
Annual recurring revenue (ARR) is the value of all components of recurring revenue, annualised for the ensuing year.
Annual recurring revenue
Annual Contact Value (ACV) is the value of bookings that will be generated over the ensuing year under a given contract or contracts.
Annual contract value
Prior period underlying measures are retranslated at the current year exchange rates to neutralise the effect of currency fluctuations. Underlying operating profit excludes: Recurring items: – Amortisation of acquired intangible assets – M&A activity-related items – Fair value adjustments on non-debt-related financial instruments and foreign currency movements on intercompany debt balances; and – Non-recurring items that management judge are one-off or non-operational Underlying profit before tax excludes: – All the items above; and – Imputed interest – Fair value adjustments on debt-related financial instruments. Underlying profit after tax and earnings per share excludes: – All the items above net of tax. In addition to the adjustments made for underlying measures, organic measures exclude the contribution from acquisitions, discontinued
- perations, disposals and assets held for sale of standalone businesses in the current and prior period. Acquisitions and disposals which
- ccurred close to the start of the opening comparative period where the contribution impact would be immaterial or not adjusted.
Underlying cash conversion is underlying cash flow from operating activities divided by underlying operating profit. Underlying cash flow from operating activities is statutory cash flow from operating activities less net capital expenditure and adjusted for movements on foreign exchange rates and non-recurring cash items. Where prior period underlying measures are included without retranslation at current period exchange rates, they are labelled as underlying (as reported). Underlying measures allow management and investors to compare performance without the potentially distorting effects of foreign exchange movements, one-off items or non-operational items. By including part-period contributions from acquisitions, disposals and products held for sale in the current and/or prior periods, the impact of M&A decisions on earnings per share growth can be evaluated. Organic measures allow management and investors to understand the like-for-like performance of the business. Underlying cash conversion informs management and investors about the cash operating cycle of the business and how efficiently
- perating profit is converted into cash.
This measure is used to report comparative figures for external reporting purposes where it would not be appropriate to
- retranslate. For instance, on the face of primary financial
statements.
Underlying Organic Underlying cash conversion Underlying (as reported)
Measure /Description Why we use it
Glossary – profit and cash flow
The net value of cash less borrowings expressed as a multiple of rolling 12-month EBITDA. EBITDA is defined as earnings before interest, tax, depreciation, amortisation of acquired intangible assets, acquisition-related items, fair value adjustments and non-recurring items that management judge to be one-off or non-operational.
Net debt leverage