Sage Group plc · LSE:SGE
Sage — H1 2006 Earnings Presentation
32 slides from Sage's earnings presentation, 2006
Slide 1: Results for the six months ended 31 March 2006
Results for the six months ended 31 March 2006
Slide 2: Financial review
Financial review
Slide 3: Financial highlights
Financial highlights Six months ended 31 March 2006 Revenue £455.9m 18%* Earnings before interest, tax and net amortisation £123.1m 22%* Cash flow from operations £153.9m 17% Pre-tax profit £113.7m 19% Earnings per share 6.10p 19% Dividend per share 1.08p 17% *At constant exchange rates Six months e
Slide 4: Organic revenue growth
Organic revenue growth Organic Non-core Acquisitions • Consistent growth rate £500m / disposals over last 2 years 63 £400m 10 13 • Excludes strong 15 contribution from 2005 £300m and 2006 acquisitions +5% £200m 380 Ï 361 £100m £0m 2005 H1 2006 H1 £m at constant exchange rates Six months ended 31 Mar
Slide 5: Revenue sources
Revenue sources Total revenue Organic revenue £500m Software Services +5% £400m Services £300m 294 +7% 238 £200m 65% 62% Software £100m 148 162 +2% 38% 35% £0m 2005 H1 2006 H1 £m at constant exchange rates Six months ended 31 March 2006 5
Slide 6: Earnings growth
Earnings growth 2005 H1 2006 H1 % • EBITA is best underlying £m £m growth measure EBITA pre share-based payment 104.8 127.3 21% Share-based payment (3.6) (4.2) • Amortisation and Earnings before interest, tax 101.2 123.1 22% capitalisation effects and net amortisation (EBITA) excluded Amortisation o
Slide 7: UK
UK • Organic revenue +4% – strong licence sales of core accounts products – support: new sales and £100m £96m renewals focus • EBITA margin increased to 37% (2005: 36%) 36% 37% – cost efficiencies in margin margin accountants’ division – investments in customer 2005 H1 2006 H1 service Revenue EBITA
Slide 8: Mainland Europe
Mainland Europe • Organic revenue +6% – increased support sales – further migration to premium support services – payroll legislation focus shifted from software to services £153m £173m £205m £100m • Strong revenue growth in newer businesses – Spain +11% organically – Adonix acquisition +13% 22% 22%
Slide 9: North America
North America • Small business: organic revenue +7% – migration to premium products – adoption of premium support services • Mid-market: organic £170m revenue +2% £161m £279m £316m – product release schedule focused on H2 – support retention and reactivation focus • 4% overall organic revenue 24% 24
Slide 10: Rest of World
Rest of World • Organic revenue +14% – strong accounts and payroll licence sales – support adoption continuing to increase – growing payroll services revenues £33m £29m • EBITA margin improved to 27% (2005: 18%) – revenue growth 27% 18% margin – investment in services and product margin development
Slide 11: Acquisitions
Acquisitions 2006 2005 Verus Adonix Logic Control +21% +13% +7% £5m £6m £16m £18m £16m £17m Revenue Ï Ï Ï £m at constant 2005 H1 2006 H1 2005 H1 2006 H1 2005 H1 2006 H1 exchange rates US France Spain February 2006 November 2005 July 2005 Enterprise value Enterprise value Enterprise value £184.6m £74
Slide 12: Cash flow and net debt
Cash flow and net debt £m £m £m Cash flow from EBITA 123.1 153.9 Net debt 30/09/05 (106.9) operations Depreciation / 13.3 Interest (4.8) Free cash flow 93.9 amortisation Profit on disposal (2.7) Treasury shares (13.3) Working capital (24.1) Tax (30.0) Acquisitions/disposal (243.4) change Deferred in
Slide 13: Business review
Business review
Slide 14: Review
Review Consistent organic Services revenues grew 7%* organically revenue growth Software revenues impacted by release cycle CRM: fastest growing CRM organic revenue growth 9%* product Newer regions High revenue growth in new territories acquired in 2003 successfully adopted and 2004 Sage model Recen
Slide 15: Revenue growth
Revenue growth Small business Revenue mix y Increased licence sales from Software Services new customers Small £79m £96m y Further adoption of additional business 17% of revenue 21% of revenue support levels Mid-market Mid-market £83m £198m • Light product release schedule 18% of revenue 44% of reve
Slide 16: Products
Products Product development New analysis, integration and industry features programme New products to extend our market reach Premium products taking High growth from premium versions of existing products more of sales mix Furthered partnerships with software components Technology suppliers Six mon
Slide 17: CRM
CRM Complete set of CRM Sage CRM and Sage CRM.com adopted by resellers as a product choices significant part of sales mix Leverage ACT! brand Strong growth in corporate sales and workgroups product Strengthen services Strong support revenue growth across all CRM products businesses Six months ended
Slide 18: Services
Services Add value to customer Increased adoption of “premium” support support contracts Secure recurring Sales focus: new sales, renewals revenue with improved customer service Support / upgrade combined plans Incremental revenue Range of payroll services including outsourcing from new services Six
Slide 19: Acquisitions: Adonix, France
Acquisitions Adonix, France Revenue breakdown • Advanced solutions for the mid- market Industry- specific 27% • Industry-specific solutions for real ERP 45% estate and manufacturing Fixed Assets y For more complex businesses, to 28% automate most business processes y Strong growth since acquisition
Slide 20: Acquisitions: Verus, US
Acquisitions Verus, US Card Card • Merchant services provider Merchant Verus Processor Issuer – credit / debit card and cheque services Card validity Credit Credit availability Debit • Growing market Connects availability Funds customer to Verus – sustained growth in retail sales Transaction from ca
Slide 21: Competitive achievements
Competitive achievements •Customer base growth: •Strong adoption of advanced +285,000 products •Loyal customers adopting •Closer to industry communities, locally-developed e.g. accountants premium versions •Higher support retention Small Mid- business market New CRM services •Merchant services •Corp
Slide 22: Outlook for the rest of 2006
Outlook for the rest of 2006 Product Premium products for small businesses H2 programme releases More industry-specific versions and integration Service More support services improvements More processing services: payroll and merchant Further strong contributions from recent acquisitions Acquisition
Slide 23: Supplementary information
Supplementary information
Slide 24: Organic revenue growth
Organic revenue growth 2005 H1 2006 H1 % £m £m growth TOTAL REPORTED 372.9 455.9 22% impact of retranslation to H1 FY06 exchange rates 12.7 - TOTAL EXCLUDING FOREX 385.6 455.9 18% less 2006 acquisitions - (24.5) (Adonix, Verus) less 2006 disposal (2.6) (1.6) (CPASoftware) less 2005 acquisitions (7.5
Slide 25: IFRS adjustments by region
IFRS adjustments by region £m 2006 H1 UK Mainland North Rest of TOTAL Europe America World EBITA pre share-based payment 37.6 35.5 44.9 9.3 127.3 Share-based payment (1.2) (1.0) (1.8) (0.2) (4.2) Earnings before interest, tax 36.4 34.5 43.1 9.1 123.1 and net amortisation (EBITA) Amortisation of acqu
Slide 26: Accounting, Verticals and CRM
Accounting, Verticals and CRM 2006 H1 2005 H1 £m % of revenue £m % of revenue Accounting 355.6 78% 298.3 77% Verticals 66.7 15% 56.3 15% CRM 33.6 7% 31.0 8% TOTAL 455.9 100% 385.6 100% Six months ended 31 March 2006 26
Slide 27: Revenue mix by region
Revenue mix by region UK* North America 30% 11% 17% 18% 38% 21% 16% 49% GROUP Small business Mid-market * Premium versions of small business accounts products reclassed as mid-market Software 17% 18% 35% Services 21% 44% 65% Mainland Europe Rest of World 38% 62% 8% 24% 16% 21% 15% 53% 14% 49% Six mo
Slide 28: Support contracts
Support contracts thousands 1,600 Rest of World 1,400 1,200 North America 1,000 800 600 Mainland Europe 400 200 UK 0 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Six months ended 31 March 2006 28
Slide 29: UK
UK Revenues Customers* Software £40.8m New customers 27,000 Services £58.7m Total £99.5m Total customers 684,000 Profit Support contracts EBITA £36.4m New support contracts 3,000 EBITA margin 37% Total support contracts 324,000 * Excluding ACT! Six months ended 31 March 2006 29
Slide 30: Mainland Europe
Mainland Europe Revenues Customers* Software £49.5m New customers 70,000 Services £103.3m Total £152.8m Total customers 1,373,000 Profit Support contracts EBITA £34.1m New support contracts 52,000 EBITA margin 22% Total support contracts 513,000 * Excluding ACT! Six months ended 31 March 2006 30
Slide 31: North America
North America Revenues Customers* Software £59.1m New customers 171,000 Services £111.2m Total £170.3m Total customers 2,642,000 Profit Support contracts EBITA £40.7m** New support contracts 84,000 EBITA margin 24%** Total support contracts 556,000 ** Excluding gain on sale of £2.7m * Excluding ACT!
Slide 32: Rest of World
Rest of World Revenues Customers* Software £12.2m New customers 17,000 Services £21.1m Total £33.3m Total customers 269,000 Profit Support contracts EBITA £9.1m New support contracts 4,000 EBITA margin 27% Total support contracts 81,000 * Excluding ACT! Six months ended 31 March 2006 32