Sage Group plc results for the six months ended 31 March 2017
Safe harbour The following presentation is being made only to, and is only directed at, persons to whom business strategies and the environment in which the Company will such presentation may lawfully be communicated (“relevant persons”). Any person who is no t a operate in the future. Such risks, uncertainties and other factors include, among others: relevant person should not act or rely on this presentation or any of its contents. Information in Inherent difficulty in predicting customer behaviour; customers may not respond as we the following presentation relating to the price at which relevant investments have been bought expected to our sales and marketing activities; the competitive environment; our ability to or sold in the past or the yield on such investments cannot be relied upon as a guide to the adapt to technological change; business interruption or failure of our systems architecture future performance of such investments. and communication systems; problems with implementing upgrades to our application s a n d • This presentation does not constitute an offering of securities or otherwise constitute an supporting information technology infrastructure; any failure to properly use and protect invitation or inducement to any person to underwrite, subscribe for or otherwise acquire personal customer information and data; our ability to manage and maintain third party securities in The Sage Group plc (the “Company”) or any company which is a subsidiary o f business partnerships; increased regulation of our businesses; any failure to process the Company. Information in the following presentation relating to the price at which transactions effectively; any failure to adequately protect against potential fraudulent relevant investments have been bought or sold in the past or the yield on such investment s activities; any significant quality problems or delays; the global macro-economic cannot be relied upon as a guide to the future performance of such investments. environment; our inability to attract, retain and develop talented people; our ability to repurchase shares; our inability to adequately protect our intellectual property rights; • The release, publication, distribution or this presentation in certain jurisdictions may be disruptions, expenses and risks associated with any acquisitions and divestitures; restricted by law, and therefore persons in such jurisdictions into which this presentation is amortisation of acquired intangible assets and impairment charges; our use of debt to released, published or distributed should inform themselves about, and observe, such finance acquisitions or other activities; and the cost of, and potential adverse results in, restrictions. litigation involving intellectual property, competition authority, shareholder and other matters. These forward-looking statements speak only as at the date of this presentation. • Certain statements contained in this presentation constitute forward-looking statements. A ll Except as required by the Financial Conduct Authority, or by law, the Company expressly statements other than statements of historical facts included in this presentation, including , excludes any obligation to update or revise publicly any forward-looking statement, whet h e r without limitation, those regarding the Company’s financial condition, business strategy, as a result of new information, future events, or otherwise. Nothing in the foregoing is plans and objectives, are forward-looking statements. These forward-looking statements intended to or shall exclude any liability for, or remedy in respect of, fraudulent can be identified by the use of forward-looking terminology, including the terms “believes”, misrepresentation. “estimates”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology. Such forward-looking • Rounding statements involve known and unknown risks, uncertainties and other factors, which may As a result of rounding throughout this document, it is possible that tables may not cast cause the actual results, performance or achievements of the Company, or industry and change percentages may not calculate precisely. results, to be materially different from any future results, performance or achievements • Materiality expressed or implied by such forward-looking statements. Such forward-looking stateme n t s Only figures over £1m are considered to be material for the purposes of this presentation. are based on numerous assumptions regarding the Company’s present and future #SageResults 02 Sage Group plc interim results 2017
Agenda: • Summary Stephen Kelly • CFO review Chief Executive Officer • Progress @SKellyCEO • Outlook • Q&A #SageResults 03 Sage Group plc interim results 2017
H1 17 Summary The strategy is Strong foundations Q2 momentum working and road map continuing into H2 for accelerating growth #SageResults 04 Sage Group plc interim results 2017
Steve Hare Chief Financial Officer @SteveHareCFO #SageResults 05 Sage Group plc interim results 2017
Organic and underlying revenue H1 17 H1 16 Revenue Growth £m £m Organic* £838m £787m +6.4% Inorganic adjustments £74m £76m Underlying* £912m £863m +5.7% H1 17 H1 16 Operating Profit Margin % Change % % -40bps Organic 25.2% 25.6% -40bps Underlying 25.1% 25.5% *See appendix for definitions #SageResults 06 Sage Group plc interim results 2017
Financial summary H1 17 H1 16 Change £838m £787m +6.4% Organic revenue £211m £201m +5.0% Organic operating profit Organic Margin % 25.2% 25.6% -40bps 14.5p 14.2p +2.0% Underlying EPS Non-recurring items (exceptional costs) (£19m) (£29m) Recurring items (£12m) (£8m) Statutory Operating Profit £180m £137m +32% Reconciliation to Non-GAAP EBITDA: Organic operating profit £211m £201m +5.0% Share based payments £5m £6m Underlying depreciation and amortisation £17m £15m Non-GAAP EBITDA £233m £222m +5.4% Non-GAAP EBITDA margin 27.9% 28.2% #SageResults 07 Sage Group plc interim results 2017
Strong capital metrics Underlying Underlying cash flow from £229m £238m Opening net debt (£397m) operating profit operating activities Free cash flow £166m Depreciation/ £17m amortisation Interest (£10m) M&A (£87m) Share-based £5m payments Tax paid (£39m) Ordinary (£101m) dividends Change in working capital £2m and deferred income Exchange movement (£15m) Exceptional costs (£23m) on debt Net CAPEX (£15m) Underlying cash flow from £238m Free cash flow £166m Closing net debt (£434m) operating activities Key Metrics: Free cash flow as Cash conversion 104% 18% Net leverage 0.9x % of revenue #SageResults 08 Sage Group plc interim results 2017
Revenue categories +6% +31% Software +10% subscription Recurring Revenue Other -3% recurring -8% SSRS +11% Processing H1 16 H1 17 #SageResults 09 Sage Group plc interim results 2017
Software subscriber growth Software subscriber growth Growth in ASB of £82m to £618m over last 6 months 15% £m 630 2 11 610 22 590 570 34 550 13 618 530 510 536 490 470 450 Sep-16 Sage One Sage 50 Sage 200 Sage X3 Other Mar-17 #SageResults 10 Sage Group plc interim results 2017
Regional overview Northern Europe Central North & Southern America Europe International #SageResults 11 Sage Group plc interim results 2017
Subscription penetration 35% Europe Recurring Mix H1 16: 31% 78% What went well • Every major European country excl. France H1 16: 75% growing above the group revenue growth rate • Northern Europe revenue growth of 8%, driven by: • Strong performance from Sage 50 Accounts, achieving 30% recurring revenue growth • X3 - 34% growth • Central Europe: 8% revenue growth • Iberia: 8% revenue growth H1 17 H1 16 Revenue Growth £m £m Areas for improvement Recurring £361m £329m +10% • France Processing £20m £18m +11% • Monetising new products SSRS £81m £90m -10% • Phase out first year premium Total £462m £437m +6% #SageResults 12 Sage Group plc interim results 2017
Subscription penetration 22% Recurring Mix North America 78% H1 16: 12% H1 16: 76% What went well • USA: X3 grew by 25% • USA: triple digit software subscription growth in Sage 50c & 200c • Canada: 9% growth, driven by Sage 50c and 200c Areas for improvement • USA subscription growth • USA focus on top 30 partners H1 17 H1 16 Revenue Growth £m £m Recurring £187m £174m +7% Processing £17m £16m +4% SSRS £37m £40m -7% Total £241m £230m +5% #SageResults 13 Sage Group plc interim results 2017
International Subscription penetration 55% Recurring Mix What went well 73% H1 16: 51% • Brazil: 23% revenue growth, double digit recurring revenue growth H1 16: 72% • Africa: 14% X3 growth, 64% growth in Sage One revenue • Middle East: growing by 23%, with strong Sage X3 growth • Australia: 8% growth, with strong recurring revenue growth H1 17 H1 16 Areas for improvement Revenue Growth £m £m • South East Asia: focus on C4L Recurring £99m £86m +16% Processing £7m £5m +36% SSRS £29m £29m -% Total £135m £120m +13% #SageResults 14 Sage Group plc interim results 2017
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