Sage Group plc results for the six months ended 31 March 2017

Transcription

1 Sage Group plc results for the six months ended 31 March 2017

2 Safe harbour The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in The Sage Group plc (the Company ) or any company which is a subsidiary of the Company. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. The release, publication, distribution or this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. Certain statements contained in this presentation constitute forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company s financial condition, business strategy, plans and objectives, are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may, will, or should or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate in the future. Such risks, uncertainties and other factors include, among others: Inherent difficulty in predicting customer behaviour; customers may not respond as we expected to our sales and marketing activities; the competitive environment; our ability to adapt to technological change; business interruption or failure of our systems architecture and communication systems; problems with implementing upgrades to our applications and supporting information technology infrastructure; any failure to properly use and protect personal customer information and data; our ability to manage and maintain third party business partnerships; increased regulation of our businesses; any failure to process transactions effectively; any failure to adequately protect against potential fraudulent activities; any significant quality problems or delays; the global macro-economic environment; our inability to attract, retain and develop talented people; our ability to repurchase shares; our inability to adequately protect our intellectual property rights; disruptions, expenses and risks associated with any acquisitions and divestitures; amortisation of acquired intangible assets and impairment charges; our use of debt to finance acquisitions or other activities; and the cost of, and potential adverse results in, litigation involving intellectual property, competition authority, shareholder and other matters. These forward-looking statements speak only as at the date of this presentation. Except as required by the Financial Conduct Authority, or by law, the Company expressly excludes any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. Rounding As a result of rounding throughout this document, it is possible that tables may not cast and change percentages may not calculate precisely. Materiality Only figures over 1m are considered to be material for the purposes of this presentation. 02

3 Agenda: Stephen Kelly Chief Executive Summary CFO review Progress Outlook Q&A 03

4 H1 17 Summary The strategy is working Strong foundations and road map for accelerating growth Q2 momentum continuing into H2 04

5 Steve Hare Chief Financial 05

6 Organic and underlying revenue Revenue H1 17 m H1 16 m Growth Organic* 838m 787m +6.4% Inorganic adjustments 74m 76m Underlying* 912m 863m +5.7% Operating Profit Margin % H1 17 % H1 16 % Change Organic 25.2% 25.6% -40bps Underlying 25.1% 25.5% -40bps *See appendix for definitions 06

7 Financial summary H1 17 H1 16 Change Organic revenue 838m 787m +6.4% Organic operating profit 211m 201m +5.0% Organic Margin % 25.2% 25.6% -40bps Underlying EPS 14.5p 14.2p +2.0% 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% 07

8 Strong capital metrics Underlying operating profit 229m Underlying cash flow from operating activities 238m Opening net debt ( 397m) Depreciation/ amortisation 17m Interest ( 10m) Free cash flow 166m Share-based payments 5m M&A ( 87m) Change in working capital and deferred income 2m Tax paid ( 39m) Ordinary dividends ( 101m) Net CAPEX ( 15m) Exceptional costs ( 23m) Exchange movement on debt ( 15m) Underlying cash flow from operating activities 238m Free cash flow 166m Closing net debt ( 434m) Key Metrics: Free cash flow as Cash conversion 104% 18% Net leverage 0.9x % of revenue 08

9 Revenue categories +6% Software subscription Other recurring +31% -3% +10% Recurring Revenue SSRS Processing -8% +11% H1 16 H

10 Software subscriber growth Software subscriber growth Growth in ASB of 82m to 618m over last 6 months m 15% Sep-16 Sage One Sage 50 Sage 200 Sage X3 Other Mar-17 10

11 Regional overview Northern Europe North America Central & Southern Europe International 11

12 Europe What went well Every major European country excl. France 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 Recurring Mix 78% H1 16: 75% Subscription penetration 35% H1 16: 31% Revenue H1 17 m H1 16 m Growth Areas for improvement France Monetising new products Phase out first year premium Recurring 361m 329m +10% Processing 20m 18m +11% SSRS 81m 90m -10% Total 462m 437m +6% 12

13 North America What went well Recurring Mix 78% H1 16: 76% Subscription penetration 22% H1 16: 12% 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 Revenue H1 17 m H1 16 m Growth Recurring 187m 174m +7% Processing 17m 16m +4% SSRS 37m 40m -7% Total 241m 230m +5% 13

14 International What went well Brazil: 23% revenue growth, double digit recurring revenue growth 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 Recurring Mix 73% H1 16: 72% Subscription penetration 55% H1 16: 51% Areas for improvement South East Asia: focus on C4L H1 17 H1 16 Revenue Growth m m Recurring 99m 86m +16% Processing 7m 5m +36% SSRS 29m 29m -% Total 135m 120m +13% 14

15 Financial Discipline Annual savings secured in H1 17 Headcount 21m Other 7m Total savings 28m Total exceptional costs ( 19m) 15

16 Organic operating profit margin: 12 month snapshot 27.0% 25.0% -0.5% -4.4% 4.5% 23.0% 21.0% 25.6% 25.2% 19.0% 17.0% 15.0% Mar-16 Product Development Go to Market G&A Mar-17 16

17 H1 17 Summary Focus on financial discipline Strong foundations and road map for accelerating growth Q2 momentum continuing into H2 17

18 Stephen Kelly Chief Executive 18

19 Commitment to The Golden Triangle People and Payroll Golden Triangle Payments and Banking Accounting 19

20 Strategic Pillars Customers for Life Winning in the Market One Sage Revolutionise Business Capacity for Growth 20

21 Revolutionise business In-the-moment accounting More insights into our data Powerful business apps Easy-to-use technology Invisible admin 21

22 Revolutionise business Cloud-first, mobile led Open API Complete cloud solution AI powered, enabling invisible admin Intuitive dashboards Real time access to financial health 22

23 Revolutionise business Strategic alliances 23

24 Customers for Life Transition to subscription Software subscriptions Renewal Rates Subscription Subscription On plan On plan 840k 1,240k 84% 86% Off plan Off plan H1 16 H1 17 H1 16 H1 17 H1 16 H

25 Customers for Life Sage 50c H1 17 Sage 50c revenue growth +25% Cloud enabled contracts >110k 25

26 Winning in the Market Enterprise Scale Up Start Up 26

27 Winning in the Market H1 16 Product USA UK & Ireland France Spain Germany Canada Brazil RSA Australia 27

28 Winning in the Market FY 17 Product USA UK & Ireland France Spain Germany Canada Brazil RSA Australia 28

29 Capacity for Growth Financial discipline Efficient Capital Allocation Profitable growth 29

30 One Sage Communication of strategy and values Sage Foundation Colleague engagement 30

31 Growth Drivers M&A M&A M&A NCA NCA NCA C4L C4L FY17 Further Acceleration 31

32 FY17 Outlook Revenue growth Operating margin Exceptional charge not expected to exceed 75m 32

33 H1 17 Summary The strategy is working Strong foundations and road map for accelerating growth Q2 momentum continuing into H2 33

34 Q&A 34 #

35 Glossary - revenue Measure /Description Organic revenue Organic revenue neutralises the impact of foreign exchange in prior period figures and excludes the contribution from current and prior period acquisitions, disposals and assets held for sale. Underlying revenue Underlying revenue neutralises the impact of foreign exchange in prior period figures but includes the contribution from current and prior period acquisitions, disposals and assets held for sale. Processing revenue Processing revenue is revenue earned from customers for the processing of payments or where Sage colleagues process our customers payroll. Recurring revenue Recurring revenue is revenue earned from customers for the provision of a good or service, where risks and rewards are transferred to the customer over the term of a contract, with the customer being unable to continue to benefit from the full functionality of the good or service without on-going payments. Recurring revenue includes both software subscription revenue and maintenance and service revenue. Software subscription revenue Subscription revenue is revenue earned from customers for the provision of a good or service, where the risk and rewards are transferred to the customer over the term of a contract. In the event that the customer stops paying, they lose the legal right to use the software and the Company has the ability to restrict the use of the product or service (also known as Pay to play ). Software and software related services ( SSRS ) SSRS revenue is for goods or services where the entire benefit is passed to the customer at the point of delivery. It comprises revenue for software or upgrades sold on a perpetual license basis and software related services, including hardware sales, professional services and training. Annual contract value Annual Contact Value (ACV) is the value of bookings that will be generated over the ensuing year under a given contract or contracts. Annual recurring revenue Annual recurring revenue (ARR) is the value of all components of recurring revenue, annualised for the ensuing year.

36 Glossary profit and cash flow Measure /Description Why we use it Underlying Prior period underlying measures are retranslated at the current year exchange rates to neutralise the effect of currency fluctuations. Underlying operating profit excludes: Recurring items: Amortisation of acquired intangible assets M&A activity-related items Fair value adjustments on non-debt-related financial instruments and foreign currency movements on intercompany debt balances; and Non-recurring items that management judge are one-off or non-operational Underlying profit before tax excludes: All the items above; and Imputed interest Fair value adjustments on debt-related financial instruments. Underlying profit after tax and earnings per share excludes: All the items above net of tax. Underlying measures allow management and investors to compare performance without the potentially distorting effects of foreign exchange movements, one-off items or non-operational items. By including part-period contributions from acquisitions, disposals and products held for sale in the current and/or prior periods, the impact of M&A decisions on earnings per share growth can be evaluated. Organic In addition to the adjustments made for underlying measures, organic measures exclude the contribution from acquisitions, discontinued operations, disposals and assets hel d for sal e of standalone bus ines ses in the current and pri or peri od. Acquisitions and disposals which occurred close to the start of the opening comparative period where the contribution impact would be immaterial or not adjusted. Organic measures allow management and investors to understand the like-for-like performance of the business. Underlying cash conversion Underlying cash conversion is underlying cash flow from operating activities divided by underlying operating profit. Underlying cash flow from operating activities is statutory cash flow from operating activities less net capital expenditure and adjusted for movements on foreign exchange rates and non-recurring cash items. Underlying cash conversion informs management and investors about the cash operating cycle of the business and how efficiently operating profit is converted into cash. Underlying (as reported) Where prior period underlying measures are included without retranslation at current period exchange rates, they are labelled as underlying (as reported). This measure is used to report comparative figures for external reporting purposes where it would not be appropriate to retranslate. For instance, on the face of primary financial statements. Net debt leverage The net value of cash less borrowings expressed as a multiple of rolling 12-month EBITDA. EBITDA is defined as earnings before interest, tax, depreciation, amortisation of ac quired i ntangi ble ass ets, ac qui si tion-related items, fair value adjustments and non-recurring items that management judge to be one-off or non-operational.