Slide 1: Sage Full Year Results 2020
Sage Full Year Results 2020 20 November 2020 #SageResults #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020
Slide 2: Safe Harbour
Safe Harbour The following presentation is being made only to, and is only directed at, persons to whom such in the future. Such risks, uncertainties and other factors include, among others: Inherent difficulty presentation may lawfully be communicated (“relevant persons”). Any person who is not a r
Slide 3: Steve Hare, CEO
Steve Hare, CEO Overview Financial review Strategic progress & outlook Q&A #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 3
Slide 4: Our purpose
Our purpose Our purpose is to transform the way people think and work, so their organisations can thrive. #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 4
Slide 5: Key messages
Key messages Business Strategic Confidence performance execution #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 5
Slide 6: Jonathan Howell, CFO
Jonathan Howell, CFO Overview Financial review Strategic progress & outlook Q&A #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 6
Slide 7: Significant progress since FY18
Significant progress since FY18 FY18 FY20 Subscription penetration 45% 65% Sage Business Cloud penetration 31% 61% #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 7
Slide 8: FY20 Financial highlights
FY20 Financial highlights High quality On-target Strong cash Resilient recurring margin revenue growth conversion balance sheet 8.5% 22.1% 123% £1.2bn1 1 Cash and available liquidity as at 30 September 2020 #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc
Slide 9: P&L summary
P&L summary FY20 FY19 Change £m £m % Total Organic Revenue £1,768m £1,705m +3.7% Recurring revenue £1,592m £1,468m +8.5% Organic operating profit £391m £406m -3.7% Organic operating profit margin % 22.1% 23.8% -1.7 ppts Underlying operating profit £411m £441m -6.7% Underlying operating profit margin
Slide 10: Phasing of growth
Phasing of growth H1 20 H2 20 £m £m Recurring revenue £787m £805m Year-on-year growth +10% +7% Sequential growth +5% +2% ARR £1,590m £1,611m Year-on-year growth +10% +5% Sequential growth +4% +1% Organic operating profit £206m £185m #SageResults © 2020 The Sage Group plc, or its licensors. All right
Slide 11: Revenue categories
Revenue categories Recurring revenue penetration £1,768m +3.7% 90% Software Software subscription £947m £1,141m +21% subscription £1,592m penetration +8.5% 65% Recurring revenue Other recurring £521m £451m -13% Renewal Other (SSRS and by value processing) £237m £176m -26% 99% FY19 FY20 #SageResults
Slide 12: Portfolio view of recurring revenue
Portfolio view of recurring revenue £1,592m +8.5% £222m +29% Cloud native £172m Sage Business Cloud Cloud connected £480m £636m +33% penetration +10% 61% Future Sage Business £900m Cloud To be migrated £634m £557m -12% opportunity Non-Sage Business Cloud £182m £177m -2% FY19 FY20 #SageResults © 2020
Slide 13: Regional overview
Regional overview #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 13
Slide 14: North America
North America FY20 performance 61% Sage Intacct 71% Software subscription • Recurring revenue growth of 26% penetration FY19: 56% • Strength from both new customer acquisition and Sage Business Cloud existing customers penetration FY19: 66% US (excluding Sage Intacct) Organic Revenue by Category FY2
Slide 15: Northern Europe
Northern Europe FY20 performance 85% Recurring revenue growth of 9% 82% Software subscription • Sage Business Cloud penetration now at 82% penetration FY19: 70% • Reflecting continued success in cloud connected Sage Business Cloud accounting and payroll solutions penetration FY19: 67% • Cloud native
Slide 16: Central and Southern Europe
Central and Southern Europe FY20 performance 55% France 40% Software subscription • 4% recurring revenue growth penetration FY19: 46% • Growth driven by strong performance in cloud Sage Business Cloud connected solutions penetration FY19: 27% • Accelerating growth in cloud native solutions Organic R
Slide 17: International
International FY20 performance 62% 11% recurring revenue growth 14% Software subscription • Continued strong performance in local products penetration and Sage Accounting in Africa & Middle East FY19: 53% Sage Business Cloud • Growth in cloud native solutions, principally Sage penetration Intacct an
Slide 18: Strong cash flow and financial position
Strong cash flow and financial position Underlying cash Cash and liquidity Free cashflow conversion £1.2bn £382m 123% Net debt Net debt leverage £151m 0.3x See appendix for definitions #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 202
Slide 19: Capital allocation
Capital allocation To become a great SaaS company for customers and colleagues alike 1 2 3 4 Organic M&A and portfolio Maintain the ordinary Additional investment rationalisation dividend in real terms returns Strong and stable financial position Broad range of 1.0x – 2.0x net debt to EBITDA over th
Slide 20: Summary
Summary High quality On target Strong cash Resilient recurring margin conversion balance sheet revenue growth 8.5% 22.1% 123% £1.2bn1 1 Cash and available liquidity as at 30 September 2020 #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results
Slide 21: Steve Hare, CEO
Steve Hare, CEO Overview Financial review Strategic progress & outlook Q&A #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 21
Slide 22: Our Purpose, Vision and Strategy
Our Purpose, Vision and Strategy Purpose To transform the way people think and work so their organizations can thrive Vision To become a great SaaS company for customers and colleagues alike Strategic Lenses Customer Success Colleague Success Innovation Values and Behaviours We do the right thing St
Slide 23: Focus and simplification
Focus and simplification Revenue mix (as reported) Cloud native 8% 13% • We have delivered on our 2018 priority to Cloud connected 13% shift the business mix 37% • Cloud connected has been driven by To be migrated 60% migrations 38% • Cloud native has been driven by new customer acquisition Non-Sage
Slide 24: Strategic progress scorecard
Strategic progress scorecard We have delivered on our 2018 priorities, and are clear on our future focus Delivery on our 2018 priorities Strategic lenses Future focus Customer success Investment and focus on small and medium Customer experience, Start with the customer needs customer Colleague succe
Slide 25: Sage Business Cloud portfolio
Sage Business Cloud portfolio Cloud Connected Cloud Native Accounting & Financials People & Payroll Sage X3 Sage Intacct Sage People Sage 200 Cloud MEDIUM Sage 50 Cloud CakeHR Sage Accounting Sage 50 Payroll Sage Payroll SMALL Sage Service Fabric #SageResults © 2020 The Sage Group plc, or its licens
Slide 26: Sage Business Cloud vision
Sage Business Cloud vision Enabling digital connections #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 26
Slide 27: Customer context
Customer context Only 17% of small businesses were planning 67% of small businesses now want to invest to invest in digital technology pre-COVID more in technology 73% have invested in digital technology in the Roobba Furniture last six months DPR Motorsport #SageResults © 2020 The Sage Group plc, o
Slide 28: Strategic priorities for FY21 and beyond
Strategic priorities for FY21 and beyond Sage Business Cloud Winning in our Embedding SaaS powered by Cloud Native target markets capability & culture • Leverage our cloud portfolio • Defend and grow Northern • People (talent) and process Europe small • Supporting customers in • Culture – customer c
Slide 29: Outlook
Outlook Against the uncertain economic backdrop, for FY21 we currently expect: • Organic recurring revenue growth in the region of 3-5%, weighted towards the second half • Other revenue (SSRS and processing) to continue to decline in line with strategy • Organic operating margin up to three percenta
Slide 30: Key messages
Key messages Business Strategic Confidence performance execution #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 30
Slide 31: Q&A
Q&A #SageResults #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 31
Slide 32: Appendix: Strategic KPIs
Appendix Strategic KPIs ARR Subscription Sage Business Renewal penetration Cloud penetration by value 4.8% 65% 61% 99% #SageResults © 2020 The Sage Group plc, or its licensors. All rights reserved. Sage Group plc Full Year Results 2020 32
Slide 33: Appendix: Building ARR
Appendix Building ARR Opening ARR1 100% £1.54bn Churn Migration, upsell & cross-sell Existing customers Renewal by value 99% £1.52bn Reactivations New customer acquisition New customers Closing ARR 105% £1.61bn 1. As at the end of the comparative period (30 September 2019) #SageResults © 2020 The Sa
Slide 34: Appendix: Balance sheet strength
Appendix Balance sheet strength Net debt Cash and Cash and cash Undrawn leverage ratio available liquidity equivalents facilities 0.3x £1.2bn £848m £398m Debt facilities: • Syndicated multi-currency Revolving Credit Facility of £692m, expiring in February 2025, with £294m (FY19: £45m) drawn as at 30
Slide 35: Appendix: Cashflow reconciliation
Appendix Cashflow reconciliation Underlying cash flow from operating Underlying operating profit £411m £505m activities Depreciation and £56m Non-recurring items (£4m) amortisation Share-based payments £29m Net interest paid (£26m) Net changes in working capital £45m Income tax paid (£93m) Net capit
Slide 36: Appendix: Bridge to assets held for sale and disposals
Appendix Bridge to assets held for sale and disposals ARR Recurring revenue Total revenue Operating profit £m FY20 Growth FY20 Growth FY20 Growth FY20 Growth Organic 1,611 +4.8% 1,592 +8.5% 1,768 +3.7% 391 22.1% Central & Southern Europe1 41 41 46 8 International2 41 41 52 7 Organic (incl. assets he
Slide 37: Glossary
Glossary Measure/Description Underlying (revenue and profit) measures Underlying measures are adjusted to exclude items which would distort the understanding of the performance for the year or comparability between periods: • Recurring items include purchase price adjustments including amortisation
Slide 38: Glossary
Glossary Measure/Description Free cash flow Free Cash Flow is Cash Flow from Operating Activities minus non-recurring cash items, interest paid, tax paid and adjusted for profit and loss foreign exchange movements. % Subscription Penetration Organic software subscription revenue as a percentage of o
Slide 39: Glossary – Revenue types
Glossary – Revenue types Measure/Description Revenue Type Description Recurring revenue Recurring revenue is revenue earned from customers for the provision of a good or service over a contractual term, with the customer being unable to Subscription contracts continue to benefit from the full functi
Slide 40: Thank you
Thank you © 2020 The Sage Group plc or its licensors. Sage, Sage logos, Sage product and service names mentioned herein are the trademarks of The Sage Group plc or its licensors. All other trademarks are the property of their respective owners.