Sage Group plc · LSE:SGE
Sage — The Sage Group — H1 2008 Earnings Presentation
31 slides from Sage's earnings presentation, May 2008
Slide 1: Interim results 6 months ended 31 March 2008
Interim results 6 months ended 31 March 2008 Paul Walker, Chief Executive Paul Harrison, Group Finance Director
Slide 2: Results to 31 March 2008
Results to 31 March 2008 • 6 month review • Financial and regional review • Business review and outlook • Questions 2 The Sage Group plc: Results for period ended 31 March 2008
Slide 3: 6 month highlights
6 month highlights • Good start to the year - 8% organic growth, excluding Sage Healthcare Division - 5% organic growth, including Sage Healthcare Division • Growth across our business - Mainland Europe and Rest of World reported excellent results - 42% of our business growing organically at 11% - U
Slide 4: Financial highlights
Financial highlights Half year to 31 March 2008 Revenue £640.4m y 9%* Adjusted pre-tax profit^ £138.0m y 9% Adjusted earnings per share^ 7.30p y 9% Operating cash flow/EBITA 123% Rebased dividend per share 2.43p y 91% *At constant exchange rates ^Stated prior to amortisation of intangible fixed asse
Slide 5: Proven resilience of our business model
Proven resilience of our business model £m EBITA Cash flow Full year Half year 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 H1 2008 5 The Sage Group plc: Results for period ended 31 March 2008
Slide 6: Active acquisition strategy
Active acquisition strategy • Two acquisitions made in the period for £40.1m - KCS, leading UK HR and payroll supplier - Tekton, leading UK supplier of construction software • Acquisitions remain integral to our growth strategy - Range of opportunities in various geographies being pursued - Broadeni
Slide 7: Financial review
Financial review Paul Harrison, Group Finance Director
Slide 8: Revenue sources
Revenue sources Total revenue +9% Organic revenue growth Group organic growth incl Sage Healthcare +5% £600m £500m 260 Group organic growth excl Sage Healthcare +8% 249 42% 41% £400m Software and software-related services £300m Licence, Training +3% Professional services Business forms, Hardware 380
Slide 9: Cash flow and net debt
Cash flow and net debt £m £m £m Cash flow from Net debt 1 October EBITA 152.4 187.4 (509.7) operations 2007 Depreciation / amortisation 10.5 Interest / issue costs (14.5) Free cash flow 141.8 Stock compensation 3.8 Tax (31.1) Acquisitions (58.6) Working capital change (35.9) Net capex (18.9) Deferre
Slide 10: Strong balance sheet
Strong balance sheet • £850m bank facilities in place Balance sheet Mar Sept - £650m expiring 4 August 2011 £m 2008 2007 - £200m expiring 13 January 2011 Goodwill & intangibles 1,917.3 1,767.6 • Net debt / EBITDA: 1.75 Property, plant & equipment 135.3 130.5 Net deferred tax (4.3) (5.9) - Covenant <
Slide 11: Regional review
Regional review Paul Harrison, Group Finance Director
Slide 12: Regional profile
Regional profile Revenue H1 08 H1 07 EBITA EBITA revenue revenue margin H1 08 % of Mix % of H1 08 H1 08 £m Group change Group £m % UK 120.2 19% y 18% 44.9 37% Mainland Europe 229.4 36% y 33% 53.9 24% North America 248.5 39% z 43% 43.6 18% 37% Rest of World 42.3 6% 6% 37% 10.0 24% margin margin Total
Slide 13: UK
UK • 12% growth in total revenues £120m • 5% growth in organic revenues - Strong growth in integrated product suites - Continued move to premium support £80m £120m £107m - Compares to strong H1 07 boosted by change in legislation in construction industry • 2 acquisitions completed £40m - KCS – HR an
Slide 14: Mainland Europe
Mainland Europe • 17% growth in total revenues 1.1 14.0 • 10% growth in organic revenues 9.5 (1.8) £200m 11.0 - France +9% - Spain +30% £160m - Germany/Switzerland -4% £195.6m £229.4m - Poland +21% £120m • France growth strong £80m - Strong performance at entry-level - Good growth in premium support
Slide 15: North America
North America • Flat growth in total revenues £249m £249m - H1 08: £249m (H1 07: £249m) £240m - Due to revenue contraction in Sage Healthcare £200m • 5% organic revenue growth (excl Sage Healthcare) £160m - Business Management Division (BMD) +3% - Industry & Specialised Solutions Division (ISSD) +6%
Slide 16: Sage Healthcare Division
Sage Healthcare Division • 11% of Group revenues H1 08 H1 07 Var Var • Reduction in margin due to £m £m £m % declining revenue Total revenue 69.3 77.1 (7.8) -10% - Non-revenue generating costs taken out of the business Cost of sales (19.3) (22.6) 3.3 15% • Progress on operational improvements Gross
Slide 17: Rest of World
Rest of World • 16% growth in total revenues £40m • 13% growth in organic revenues - South Africa +17% £30m - Australia +10% £37m £42m • Strong growth in both licence and support £20m contracts • Expansion of HR and payroll offering £10m • Acquisition of Creative in prior year 27% 24% - Leading HR a
Slide 18: Business review and outlook
Business review and outlook Paul Walker, Chief Executive
Slide 19: Strength of Sage's business model
Strength of Sage’s business model • Nearly 60% of revenues are 70% Subscription revenue as % subscription of total revenue - growing organically at 11% 65% • 62% of customers on premium Full year Half year 60% contracts - Combined software and support 55% - Higher value, higher margin 50% • c80% ave
Slide 20: Living, breathing business
Living, breathing business • Strong, dynamic customer relationships • Support is an essential business tool for our customers • 36,000 calls taken daily 20 The Sage Group plc: Results for period ended 31 March 2008
Slide 21: High degree of operational margin control
High degree of operational margin control 30% Full year Half year 25% 20% % of revenue 15% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 H1 08 Core Group margins have remained stable over time 21 The Sage Group plc: Results for period ended 31 March 2008
Slide 22: North America update
North America update • New president and CEO appointed in March - Strong leadership skills - Focus on product strategy and customer connectivity - Strategic vision to lead business forward • Results of investment in the business beginning to show results - Support response levels improved - Sales te
Slide 23: Sage Healthcare update
Sage Healthcare update • Focusing on re-engaging existing customer base - Planned update of Medical Manager to be introduced later in the calendar year - Electronic health records (EHR) module also planned • Customer experience overall improving, particularly in support • Improved relationship with
Slide 24: Outlook for 2008
Outlook for 2008 • Good start to 2008 • Financially strong and defensive company in uncertain markets - High degree of recurring earnings tied to subscription business model • Stable margins - strongly controlled cost base - Increased dividend sustained by strong cash flows • Results of investment i
Slide 25: Supplementary Information
Supplementary Information
Slide 26: Revenue sources
Revenue sources Total revenue Organic revenue growth Group organic growth incl Sage Healthcare +5%* £600m £500m 260 249 42% 41% £400m Software and software-related services £300m Licence, Training flat* Professional services Business forms, Hardware 380 £200m 340 Subscription revenues 58% 59% Premiu
Slide 27: UK revenues
UK Revenues Subscription £77.5m Software and software-related services £42.7m Total £120.2m Profit EBITA £44.9m EBITA margin 37% Customers* New customers 24,000 Total customers 765,000 Support contracts New support contracts (6,000) Total support contracts 357,000 27 The Sage Group plc: Results for
Slide 28: Mainland Europe
Mainland Europe Revenues Subscription £112.1m Software and software-related services £117.3m Total £229.4m Profit EBITA £53.9m EBITA margin 24% Customers* New customers 52,000 Total customers 1,554,000 Support contracts New support contracts 31,000 Total support contracts 600,000 28 The Sage Group p
Slide 29: North America
North America Revenues BMD ISSD PSD SHD Total Subscription £70.9m £29.4m £22.9m £50.5m £173.7m Software and software-related services £46.2m £9.8m - £18.8m £74.8m Total £117.1m £39.2m £22.9m £69.3m £248.5m Profit EBITA £43.6m EBITA margin 18% Customers* New customers 33,000 Total customers 2,904,000
Slide 30: North American operating divisions
North American operating divisions Small Business and Mid-Market Business Management Division 47% H1 08 revenue accounting, ERP, CRM Industry & Specialised Industry-specific solutions and Solutions Division human resource management 16% H1 08 revenue Sage Healthcare Division Emdeon Practice Services
Slide 31: Rest of World
Rest of World Revenues Subscription £17.2m Software and software-related services £25.1m Total £42.3m Profit EBITA £10.0m EBITA margin 24% Customers* New customers 24,000 Total customers 466,000 Support contracts New support contracts 16,000 Total support contracts 135,000 31 The Sage Group plc: Res