Sage Group Plc · LSE:SGE
Sage — The Sage Group — FY2014 Earnings Presentation
24 slides from Sage's earnings presentation, November 2014
Slide 1: Momentum with revenue growth, subscription growth and cloud adoption
Momentum with revenue growth, subscription growth and cloud adoption The Sage Group plc Results for the year ended 30 September 2014
Slide 2: Stephen Kelly, Chief Executive Officer
Stephen Kelly Chief Executive Officer 2
Slide 3: FY14 overview – Steve Hare, Chief Financial Officer
FY14 overview Steve Hare Chief Financial Officer 3
Slide 4: Highlights: On track to deliver 2015 financial targets
Highlights On track to deliver 2015 financial targets Organic Organic Recurring recurring revenue revenue revenue growth represents growth increased to 73% of total increased to 5% revenue 7% Organic operating Underlying 7% increase profit margin basic EPS in dividend increased to growth of 8% per s
Slide 5: Highlights: Subscription and cloud momentum
Highlights Subscription and cloud momentum Software Sage One 29% growth in subscription paying annualised value contracts subscriptions up of software increased to 150% to subscriber base over 450,000 86,000 Hybrid cloud 14% growth in 7% organic paying integrated revenue growth subscriptions payment
Slide 6: Revenue growth: Software subscription the primary driver
Revenue growth Software subscription the primary driver Key organic revenue growth movements 2013 to 2014 1,376 1,307 £m 1,246 2013 Foreign Non-core 2013 organic SSRS Software Maintenance Payments Other Non-organic 2014 statutory exchange disposals revenue subscription and support recurring statutor
Slide 7: Group operating profit margin
Group operating profit margin Good progress towards 28% target 40bps increase in organic margin driven by improved operating leverage and reduction of non-core product overheads 3.4% 2.9% 0.1% 0.2% 27.5% 27.3% 27.1% 2013 underlying Foreign Non-core 2013 organic Revenue growth Cost growth 2014 organi
Slide 8: Europe
Europe A good performance driven by subscription Regional highlights Revenue bridge (£m) Marked increase in organic revenue 777 growth to 4% (2013: 2%) Recurring revenue growth of 7% (2013: 5%) highlights the underlying strength of this performance 750 4% France and UKI primary drivers of this
Slide 9: Americas
Americas Solid growth, in-line with Group performance Regional highlights Revenue bridge (£m) 6% recurring revenue growth reflects 448 premium support up-sell in NA and subscription growth in Brazil North America growth of 4% (2013: 6%) reflects continued weakness in 5% 412 payments Good perfo
Slide 10: AAMEA
AAMEA South Africa drives double-digit AAMEA growth Revenue bridge (£m) Regional highlights 151 South Africa increased organic revenue growth to 16% (2013: 14%), 144 despite slowdown in wider economy 12% Strong performance by mid-market and wider African market supported growth 129 Solid 6% or
Slide 11: Resource and capital allocation
Resource and capital allocation Investing in our best growth opportunities % of total spend on Invest products* • R&D and S&M reallocation towards Invest product portfolio has continued: 65% 62% 57% 17% increase in R&D and 55% 52% 52% S&M spend on Invest products versus prior period 45% 35% 25% R&
Slide 12: Cash flow: Strong cash generation continues
Cash flow Strong cash generation continues £m £m £m Underlying operating Statutory cash flow from Opening net debt 360 382 (384) profit (A) operating activities 1 October 2013 Depreciation/amortisation/pr 28 Net interest (19) FCF 229 ofit on disposal Share-based payments 8 Taxation (107) M&A (65) Wo
Slide 13: The move to subscription
The move to subscription Progressive move to subscription driving increase in recurring revenue mix Organic revenue split by type 8% 8% 26% of “Pay-to- revenue on 13% play” 16% 2% “pay-to-play” 2% basis 48% 47% Recurring revenue 73% of total Group revenue 29% 27% is recurring in nature 2013 2014 SSR
Slide 14: Technology and subscription: Bringing the cloud to all our customers
Technology and subscription Bringing the cloud to all our customers drives subscription Core system Connected services Business intelligence Connected Mobility features Core product modernisation Payments CRM On-premise installed base 14
Slide 15: Technology and subscription: The installed base opportunity
Technology and subscription The installed base remains a significant opportunity Multiple opportunities to grow subscription and manage the near-term impact Sage Ciel Sage 100 Auto- Flex i7 enrolment New and existing Core product customers 15
Slide 16: Technology and subscription: Bringing the cloud to all our customers
Technology and subscription Bringing the cloud to all our customers drives subscription Core system Connected services Business Sage One/ERP intelligence Online Connected Mobility features Payments CRM 16
Slide 17: Technology and subscription: Sage One momentum
Technology and subscription Sage One momentum Sage One paying subscriptions in UKI vs. average monthly run-rate* • 86,000 global Sage One paying 50,000 2,500 subscriptions, an increase of ca.150% 45,000 • Several existing SSB SaaS products 40,000 2,000 incorporated into the Sage One 35,000 portfolio
Slide 18: The move to subscription: greater and more predictable revenue base
The move to subscription Building a greater and more predictable revenue base for the future Organic annualised value of software subscriber base 225 £220m Over 450,000 215 software 205 subscription 195 contracts £m 185 29% 175 growth ca.90% 165 renewal rate for 155 subscription 145 contracts H1 201
Slide 19: Summary and outlook
Summary and outlook • Exiting 2014 with momentum in cloud, subscription and recurring revenue growth • Confident in achieving organic revenue growth and margin targets for 2015 19
Slide 20: Questions?
Questions? 20
Slide 21: Non-GAAP measures
Non-GAAP measures Measure Description Why we use it Underlying Prior year underlying measures are retranslated at the current year Underlying measures allow management and investors to compare exchange rates to neutralise the effect of currency fluctuations. performance without the potentially disto
Slide 22: Segmental analysis: Year ended 30 September 2014
Segmental analysis Year ended 30 September 2014 Europe Americas AAMEA Group Organic recurring revenue £536m £335m £81m £951m Organic SSRS revenue £215m £77m £63m £355m Total organic revenue £750m £412m £144m £1,306m Organic revenue growth +4% +5% +12% +5% Europe Americas* AAMEA Group Opening contrac
Slide 23: Strategic KPIs
Strategic KPIs KPI Measure 2014 2013 Focusing our business R&D %: split by ‘Invest’:’Harvest’:’Sunset’ 62:35:03 52:41:07 Resource optimisation S&M %: split by ‘Invest’:’Harvest’:’Sunset’ 57:39:04 52:43:05 Capturing the technology opportunity Number of Sage One paying subscriptions 86,000 35,000* Ado
Slide 24: Financial KPIs
Financial KPIs KPI 2014 2013 Organic revenue growth 4.9% 4.3% Organic operating profit margin 27.5% 27.1% Underlying basic earnings per share growth 8.2% 12.0% Underlying cash conversion 107% 112% Net debt leverage 1.1:1 1.0:1 Interest cover 17x 24x 24