Financial targets achieved with momentum for sustainable growth

Strong performance from Sage 50 and X3 helped maintain growth in FY 15

LONDON (December 2, 2015) — The Sage Group plc released the audited results for the year ended September 30, 2015.

 

Global Headlines

  • Achieved organic revenue growth of 6% (FY14: 5%);
  • Increased organic recurring revenue by 9% (FY14: 7%), with software subscription the primary driver;
  • Software subscription contracts grown to over 690,000 (FY14: 450,000) and achieved 28% growth in the annualised value of the software subscriber base to £344m (FY14: £268m);
  • Increased the number of paying subscriptions for Sage One by over 100% to 173,000 (FY14: 86,000), and in the UK & Ireland, surpassed 100,000 paying subscriptions in November 2015.

North America Headlines

  • In North America, strong performance from Sage 50 and X3 helped Sage maintain growth. X3 saw 19% revenue growth in North America.
  • The release of Sage Drive in Canada and a focus on subscription adoption across North America has seen software subscription revenue for Sage 50 in North America grow by over five-fold.
  • Creation new Customer Business Center (CBCs) in Atlanta (one of two), which brings together all teams involved in digital marketing, lead qualification, sales, service and renewals. The CBCs foster collaboration and provide a platform for accelerated growth.

Business review

  • Completed wide-ranging review of the business, including products, organisational structure, operating model and policies, in order to prepare for the next phase of long-term sustainable growth;
  • Simplified product categories to Growth and Heritage, with 87% of Research and Development investment focussed on the Growth category;
  • Initiated organisational transformation to realise at least £50m of annualised run-rate cost savings by the end of FY16 to be reinvested for growth;
  • Refined revenue category definitions and amended the application of the revenue recognition policy to certain products enabling stakeholders to clearly and transparently track performance. None of the changes impact cash generation and the financial summary below is included for comparability to previous announcements. A full reconciliation is set out on page 3.

 

FINANCIAL SUMMARY1

Previous basis

Revised basis

FY15

FY14

Change

FY15

FY14

Change

Organic revenue

£1,357m

£1,272m

+6.7%

£1,400m

£1,321m

+6.0%

- Recurring revenue

£1,010m

£930m

+8.5%

£953m

£874m

+9.0%

- Processing revenue

N/A

N/A


£161m

£158m

+1.7%

- SSRS revenue

£348m

£341m

+1.9%

£287m

£289m

-0.7%

Organic operating profit

£383m

£349m

+9.6%

£380m

£350m

+8.3%

Organic operating profit margin

28.2%

27.5%

+70bps

27.1%

26.5%

+60bps

 

OTHER FINANCIAL METRICS

FY15

FY14

Change

Underlying basic EPS

25.00p

22.19p

+12.6%

Underlying cash conversion

106%

101%

+5%

Ordinary dividend per share

13.10p

12.12p

+8.1%

STATUTORY SUMMARY2

FY15

FY14

Change

Revenue

£1,436m

£1,354m

+6.1%

Operating profit

£297m

£300m

-0.8%

Basic EPS

18.11p

17.26p

+4.9%

Free cash flow

£296m

£229m

+29.2%

 

Further progress with global products

  • Sage One now available in 14 countries following launches in Australia, Brazil and Malaysia;
  • Launched Sage Live, our global cloud solution for Small & Medium Businesses, via newly established Customer Business Centres (CBCs);
  • Delivered 11% organic revenue growth for Sage X3, with growth of 22% outside of France and launched X3 Cloud.

Earnings improved

  • Increased the organic operating margin to 27.1% (FY14: 26.5%), despite incurring initial costs of transformation;
  • Underlying cash conversion of 106%, achieved through continued disciplined capital management, generating free cash flow of £296m (FY14: £229m) and supporting the 8% increase of the full year dividend to 13.10p.

Marc Scheipe, Interim President, North America said: "We are pleased to have met the global financial targets set three years ago and to be showing good momentum with our transformation program. In North America, strong performance from Sage 50 and X3 has helped us maintain growth. The release of Sage Drive in Canada and a focus on subscription adoption across North America has seen software subscription revenue for Sage 50 in North America grow by over five-fold. In FY16, we’ll deepen focus on cross-sell and partner initiatives to accelerate progress."

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About Sage

Sage is the market leader for integrated accounting, payroll, and payment systems, supporting the ambition of the world’s entrepreneurs. Sage began as a small business in the U.K. 30 years ago, and over 13,000 colleagues now support millions of entrepreneurs across 23 countries as they power the global economy. We reinvent and simplify business accounting through brilliant technology, working with a thriving community of entrepreneurs, business owners, tradespeople, accountants, partners, and developers. And as a FTSE 100 business, we are active in supporting our local communities and invest in making a real difference through the philanthropy of the Sage Foundation.

Sage—the market leader for integrated accounting, payroll, and payment systems, supporting the ambition of the world’s entrepreneurs.

For more information, visit www.sage.com

Inquiries:

Sage North America
Aimee Ertley, Director of External Communications
678-280-5556

The Sage Group plc
+44 (0) 191 294 4190
Anna Campopiano, Chief Communications Officer
Simon John, Investor Relations

Tulchan Communications
+44 (0) 20 7353 4200
David Shriver
Jonathan Sibun

 

  1. Unless otherwise stated, all financial measures for both current and prior year have been stated after the revenue reporting changes described on page 3 and growth rates in the Chief Executive Officer's review and Chief Financial Officer's review are stated on an organic basis. For information on the definition of revenue categories, Non-GAAP measures and changes during the year, please see page 3 and Appendix II on page 17.
  2. Statutory operating profit includes a £62m impairment charge relating to goodwill on acquired operations in Brazil.
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