Sage Group plc · LSE:SGE
Sage — H1 2007 Earnings Presentation
35 slides from Sage's earnings presentation, May 2007
Slide 1: Results for the six months ended 31 March 2007
Results for the six months ended 31 March 2007
Slide 2: Agenda
Agenda Highlights Financial and regional review Business review and outlook 2
Slide 3: Highlights
Highlights • Solid start to the year – Results in line with expectations • Forecast organic revenue growth of 7% for H1 achieved • Strong performance by established product lines – Line 50 (UK) up 11% – Peachtree (US) up 10% – Line 100 (France) up 9% – Pastel Accounting (South Africa) up 18% • Integ
Slide 4: Financial highlights
Financial highlights Six months ended 31 March 2007 Revenue £574.7m 34%* Earnings before interest, tax and net £138.6m 22%* amortisation+ Operating cash flow/EBITA 114% Adjusted earnings per share^ 6.48p 11% Dividend per share 1.27p 18% *At constant exchange rates +Earnings before interest, tax, amo
Slide 5: Financial review
Financial review
Slide 6: Organic revenue growth
Organic revenue growth Organic Non-core Acquisitions • Organic growth in line / disposals with expectations, sustaining trend of FY 2006 £600m +7% 143 • Excludes contribution £500m +5% from 2006 and 2007 26 13 acquisitions £400m 14 • Acquisitions consolidated £300m into organic growth after full yea
Slide 7: Revenue sources
Revenue sources Total revenue Organic revenue £600m growth 50 9% +7% £500m 6 1% Software £400m 353 related services £300m 272 64% 61% +9% £200m £100m 152 172 Software +5% 35% 30% £0m H1 2006 Mix H1 2007 Mix Software Software related services Other services £m at constant exchange rates 7
Slide 8: Growth in combined software/support services revenue
Growth in combined software/support services revenue H1 2006 H1 2007 Organic revenue growth of combined contracts = 12%* Combined support Combined support contract revenue contract revenue 53% 54% Standard support Standard support contract revenue contract revenue 47% 46% *At constant exchange rates
Slide 9: EBITA margin
EBITA margin • EBITA+ margin 24% (H1 2006: 30% +1% -3% 26%*) 25% -1% 20% • Excluding principal 2006 acquisitions margin improved 15% 26% 27% 24% 10% • Dilution effects principally a 5% result of Emdeon acquisition 0% H1 FY06+ H1 FY07 Verus Emdeon Adonix H1 FY07 excl acqn headline +Earnings before in
Slide 10: Update on principal FY06 acquisitions
Update on principal FY06 acquisitions Payment Solutions Healthcare Adonix (Verus) (Emdeon) H1 2007 H1 2007 H1 2007 79.6 21.5 20.8 8.1 4.0 4.0 Revenue EBITA Revenue EBITA Revenue EBITA France US US November 2005 February 2006 September 2006 Enterprise value £75m Enterprise value £172m Enterprise valu
Slide 11: Cash flow and net debt
Cash flow and net debt £m £m £m Cash flow from EBITA 138.6 157.6 Net debt 30/09/06 (593.6) operations Depreciation / Interest / issue 11.2 (16.1) Free cash flow 71.4 amortisation costs Stock compensation 4.5 Tax (37.6) Acquisitions (33.0) Working capital (35.5) Dividends (32.5) Net capex (16.5) chan
Slide 12: Regional review
Regional review
Slide 13: Improved organic revenue growth over H1 2006
Improved organic revenue growth over H1 2006 % growth on prior period at constant exchange rates H1 2006 H1 2007 20% 15% 10% 5% 4% 7% 6% 8% 4% 4% 14% 23% 5% 7% 0% UK Mainland North Rest of World Group Europe America FY 2006 7% 5% 6% 17% 7% 13
Slide 14: UK
UK • Organic revenue +7% • Strong growth in established products – Line 50 up 11% £100m £108m – Payroll up 9% – Line 100 / MMS up 10% • Gradual roll-out of suite strategy – Sage 200, Sage 1000 and Sage 50 CIS 37% 37% (construction) all launched margin margin – Hosted product for accountancy practice
Slide 15: Mainland Europe
Mainland Europe • Organic revenue +8% – Spain +16% – France +3% – Germany/Switzerland +11% – Poland +11% £150m £177m • Strong performance again in Spain and Poland • Good results in Germany and Switzerland 22% 23% due to tax changes margin margin • Integration of 2006 acquisitions H1 2006 H1 2007 pr
Slide 16: North America
North America • Organic revenue +4% • Small Business Division +5% – Good performance by the Peachtree product line - Success of Peachtree Quantum £254m • Mid-Market Division +3% £152m – Challenges with MAS 90 and SalesLogix • Maintenance and service revenues strong 24% 19% across major product lines
Slide 17: Rest of World
Rest of World • Organic revenue +23% – Strong performances from South African accounting and payroll products – Australian core payroll products again strong £28m £36m – Growing presence in Asian markets • EBITA margin 27% (H1 2006: 28%) – FY06 acquisitions margin dilutive (China) 28% 27% margin mar
Slide 18: Business review and outlook
Business review and outlook
Slide 19: Strong start to 2007
Strong start to 2007 • Focus in H1 on our core business – Organic business reported strong growth in most of our regions – Integration of 2006 acquisitions progressing well • Sharpening our customer focus in product development, sales procedures and service innovation – 2010 5-year strategy plan – U
Slide 20: Changing revenue mix of our products
Changing revenue mix of our products H1 2006 H1 2007 7% 1% 4% 6% 13% 11% 51% 15% 64% 28% Accounting Industry-specific Payroll/HR CRM Payment processing 20
Slide 21: Acquisitions 2007 - £44.5m paid in cash
Acquisitions 2007 - £44.5m paid in cash ProConcept ERP 9.5 7.5 1.9 1.1 0.8 Revenue* EBITA* Revenue* EBITA* Revenue* EBITA* UK UK Switzerland November 2006 May 2007 April 2007 Payment solutions HR and payroll ERP precision engineering Enterprise value £20m Enterprise value £17m Enterprise value £7.5m
Slide 22: Strong regional businesses with global reach
Strong regional businesses with global reach UK & Ireland Mainland Europe North America Africa, Australia, Asia Market leader in UK & Market leader in France, Strong #2 at entry level Market leader in South Africa, Ireland Spain and Poland Australia and Malaysia Smaller local competitors Germany fra
Slide 23: Sage Healthcare Division – first six months
Sage Healthcare Division – first six months • Achievements – Added significant strength to the senior management team – A stand-alone business – substantially reduced dependency on Emdeon Corp – Re-branded business – Re-engagement with channel – Started overhaul of professional services • Products a
Slide 24: Strategy for North America
Strategy for North America • Two years of rapid growth in the size of our North American business • Successful businesses, but overall organic growth lagging Group average • Need to sharpen customer focus of our businesses by addressing our customer needs, not product lines – Customer led, not produ
Slide 25: North American new operating divisions
North American new operating divisions Small Business and Mid- Business Management Market accounting, ERP, CRM Division Industry-specific solutions and Industry and human resource management Specialised Solutions Division Emdeon Practice Services Healthcare Division Verus Payment Solutions Division
Slide 26: Objectives and outlook for 2007
Objectives and outlook for 2007 • Good start to 2007 with organic businesses performing well • Integration of acquisitions into existing product portfolio progressing well and in line with expectations • Reorganisation of North America – Focus on improving customer focus and organic growth • Competi
Slide 27: Supplementary information
Supplementary information
Slide 28: Organic revenue growth
Organic revenue growth H1 H1 2006 2007 Growth £m £m % TOTAL REPORTED 455.9 574.7 26% Impact of retranslation to H1 2007 exchange rates (26.2) - TOTAL EXCLUDING FOREX 429.7 574.7 34% less 2007 acquisition - (1.5) (Protx) less 2006 acquisitions (24.4) (141.7) (Adonix, Verus, UBS, Master Builder, Elit,
Slide 29: Operating profit by region
Operating profit by region £m H1 2007 UK Mainland North Rest of TOTAL Europe America World EBITA pre share-based payment 41.3 42.6 49.4 9.8 143.1 Share-based payment (1.3) (1.1) (1.9) (0.2) (4.5) Earnings before interest, tax and net 40.0 41.5 47.5 9.6 138.6 amortisation (EBITA) Amortisation of acqu
Slide 30: Revenue mix by region
Revenue mix by region UK* North America 30% 10% 10% 13% 40% 20% 11% 66% GROUP* Small business Mid-market * Premium versions of small business accounts products reclassed as mid- market Software 13% 17% 30% Services 17% 53% 70% Mainland Europe Rest of World 30% 70% 7% 24% 15% 22% 13% 56% 13% 50% 30
Slide 31: Support contracts
Support contracts thousands 1,600 1,400 1,200 1,000 800 600 400 200 0 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 UK Mainland Europe North America Rest of World 31
Slide 32: UK
UK Revenues Customers* Software £43.3m New customers 30,000 Services £64.2m Total £107.5m Total customers 731,000 Profit Support contracts EBITA £40.0m New support contracts 7,000 EBITA margin 37% Total support contracts 358,000 * Excluding ACT! 32
Slide 33: Mainland Europe
Mainland Europe Revenues Customers* Software £55.7m New customers 41,000 Services £121.6m Total £177.3m Total customers 1,456,000 Profit Support contracts EBITA £41.5m New support contracts 21,000 EBITA margin 23% Total support contracts 537,000 * Excluding ACT! 33
Slide 34: North America
North America Revenues Customers* Software £59.5m New customers 71,000 Services £194.6m Total £254.1m Total customers 2,795,000 Profit Support contracts** EBITA £47.5m New support contracts (7,000) EBITA margin 19% Total support contracts 593,000 * Excluding ACT! ** Includes ACT! 34
Slide 35: Rest of World
Rest of World Revenues Customers* Software £13.7m New customers 13,000 Services £22.1m Total £35.8m Total customers 410,000 Profit Support contracts EBITA £9.6m New support contracts 7,000 EBITA margin 27% Total support contracts 99,000 * Excluding ACT! 35