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
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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


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Sage Group plc results for the six months ended 31 March 2017

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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

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Stephen Kelly

Chief Executive Officer

@SKellyCEO Agenda:

  • Summary
  • CFO review
  • Progress
  • Outlook
  • Q&A

03 Sage Group plc interim results 2017

#SageResults

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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

#SageResults

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Steve Hare

Chief Financial Officer

@SteveHareCFO 05 Sage Group plc interim results 2017

#SageResults

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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

#SageResults

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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%

07 Sage Group plc interim results 2017

#SageResults

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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

#SageResults

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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%

Sage Group plc interim results 2017

#SageResults

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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

#SageResults

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Regional overview

11

Northern Europe North America Central & Southern Europe International

Sage Group plc interim results 2017

#SageResults

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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

Sage Group plc interim results 2017

#SageResults

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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

Sage Group plc interim results 2017

#SageResults

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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

Sage Group plc interim results 2017

#SageResults

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Financial Discipline

Annual savings secured in H1 17 Headcount £21m Other £7m Total savings £28m

15

Total exceptional costs (£19m)

Sage Group plc interim results 2017

#SageResults

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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%

Sage Group plc interim results 2017

#SageResults

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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

#SageResults

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Stephen Kelly

Chief Executive Officer

@SKellyCEO 18 Sage Group plc interim results 2017

#SageResults

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Commitment to The Golden Triangle

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Golden Triangle

Payments and Banking People and Payroll Accounting

Sage Group plc interim results 2017

#SageResults

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One Sage Customers for Life Winning in the Market Capacity for Growth Revolutionise Business

20 Sage Group plc interim results 2017

#SageResults

Strategic Pillars

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21

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

#SageResults

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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

#SageResults

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23

Revolutionise business

Strategic alliances

Sage Group plc interim results 2017

#SageResults

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Customers for Life

840k 1,240k H1 16 H1 17

Software subscriptions

84% 86% H1 16 H1 17

Renewal Rates

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Subscription On plan Off plan

H1 16 H1 17

Subscription On plan Off plan

Transition to subscription

Sage Group plc interim results 2017

#SageResults

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Customers for Life – Sage 50c

Sage 50c revenue growth +25% Cloud enabled contracts >110k

H1 17

Sage Group plc interim results 2017

#SageResults

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Winning in the Market

26 Start Up Scale Up Enterprise

Sage Group plc interim results 2017

#SageResults

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Product

USA UK & Ireland France Spain Germany Canada Brazil RSA Australia

Winning in the Market

27

H1 16

Sage Group plc interim results 2017

#SageResults

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Winning in the Market

28 Product

USA UK & Ireland France Spain Germany Canada Brazil RSA Australia

FY 17

Sage Group plc interim results 2017

#SageResults

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Capacity for Growth

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Efficient Capital Allocation Financial discipline

Profitable growth

Sage Group plc interim results 2017

#SageResults

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One Sage

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Communication of strategy and values Sage Foundation Colleague engagement

Sage Group plc interim results 2017

#SageResults

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Further Acceleration

Growth Drivers

FY17

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C4L C4L NCA NCA M&A NCA M&A M&A

Sage Group plc interim results 2017

#SageResults

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FY17 Outlook

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Revenue growth Operating margin Exceptional charge not expected to exceed

Sage Group plc interim results 2017

#SageResults

£75m

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H1 17 Summary

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The strategy is working Strong foundations and road map for accelerating growth Q2 momentum continuing into H2

Sage Group plc interim results 2017

#SageResults

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Q&A

#

#SageResults 34 Sage Group plc interim results 2017

#SageResults

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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

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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