Results for the six months ended 31 March #SageResults

Transcription

1 Results for the six months ended 31 March 2018 #SageResults

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 The release, publication or distribution of 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 macroeconomic 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. Terminology Unless stated otherwise all references to revenue are organic. Materiality Only figures over 1m are considered to be material for the purposes of this presentation. 2 #SageResults Sage Group plc Interim Results 2018

3 Stephen Kelly Chief Executive Welcome H2 18 delivery plan CFO review Strategy Outlook Q&A 3 #SageResults Sage Group plc Interim Results 2018

4 H2 18 Delivery Plan 1 Subscription 2 Enterprise Management 3 Leadership 4 #SageResults Sage Group plc Interim Results 2018

5 FY18 Outlook Around 7% organic revenue growth Around 27.5% organic operating margin 5 #SageResults Sage Group plc Interim Results 2018

6 Steve Hare Chief Financial 6 #SageResults Sage Group plc Interim Results 2018

7 H1 18 summary 1 Strong underlying business 2 Focus on subscription 3 Confidence in FY18 guidance 7 #SageResults Sage Group plc Interim Results 2018

8 Financial summary H1 18 H1 17 Growth Organic 1 revenue 908m 854m 6.3% Sage Business Cloud revenue 164m 100m 64% Sage Business Cloud ARR 1 336m 215m 57% Underlying 1 operating profit margin 2 % 24.5% 25.3% (0.8%) 1 See appendix for definitions 2 In FY18, there is no difference between organic and underlying operating margin 8 #SageResults Sage Group plc Interim Results 2018

9 Financial summary H1 18 H1 17 Change Underlying operating profit margin 1 % 24.5% 25.3% (0.8%) Underlying basic EPS p 14.12p 0.9% Underlying adjusted EPS p 12.33p 15.5% Non-GAAP EBITDA 3 margin % 26.9% 27.5% (0.6%) 1 In FY18, there is no difference between organic and underlying operating margin 2 See appendix for definitions 3 Non-GAAP EBITDA is based on the underlying operating profit, adjusted for underlying amortisation, depreciation and share-based payment charges 9 #SageResults Sage Group plc Interim Results 2018

10 Strong capital metrics Underlying operating profit 222m Underlying cash flow from operating activities 221m Opening net debt ( 813m) Depreciation/ amortisation/impairment/ profit on disposal 17m Net interest paid ( 12m) Free cash flow 157m Share-based payments 5m Net changes in working capital ( 5m) Income tax paid Non-recurring items ( 29m) ( 21m) M&A Ordinary dividends Exchange movement on net debt ( 8m) ( 110m) 31m Net capital expenditure ( 18m) Exchange movements ( 2m) M&A related items ( 1m) Underlying cash flow from operating activities 221m Free cash flow 157m Closing net debt ( 744m) Key Metrics: Underlying cash conversion 1 99% Free cashflow as a % of revenue 17% Net debt leverage 1 1.4:1 1 See appendix for definitions 10 #SageResults Sage Group plc Interim Results 2018

11 Revenue categories +6% 78% Software subscription +25% Recurring mix H1 17: 78% +6% Other recurring -11% Recurring revenue 44% SSRS Processing H % +2% H1 18 Software subscription penetration H1 17: 37% 11 #SageResults Sage Group plc Interim Results 2018

12 Impact of subscription model Licence contract Subscription contract Customer acquired H2 18 Revenue ARR H2 18 Revenue April 1st 1.1m 500k 250k September 1st 1.0m 500k 40k 12 #SageResults Sage Group plc Interim Results 2018

13 H2 18 Sources of growth Cloud connected Enterprise Management Progress in France 13 #SageResults Sage Group plc Interim Results 2018

14 ASB ( m) Software subscriber growth Growth in ASB of 187m to 820m in H % H1 17 Cloud connected Cloud native Desktop H #SageResults Sage Group plc Interim Results 2018

15 Regional overview Europe North America International 15 #SageResults Sage Group plc Interim Results 2018

16 Europe H1 18 revenue growth Northern Europe: Revenue 4%; flat recurring Sage Accounting revenue 54% Sage People ARR 70% France: revenue and recurring both 1% Central Europe: revenue 11%; recurring 12% Iberia: revenue 7% 77% Recurring mix H1 17: 78% 40% Software subscription penetration H1 17: 36% Focus for H2 18 Subscription in the UK Continuing progress in France Revenue H1 18 H1 17 Growth Recurring 377m 368m +2% Processing 19m 20m -3% SSRS 97m 83m +17% Total 493m 471m +5% 16 #SageResults Sage Group plc Interim Results 2018

17 North America H1 18 revenue growth North America: software subscription 51% USA: cloud connected revenue 89% Canada: double digit revenue and recurring growth Intacct: continued momentum, 31% ARR growth 82% Recurring mix H1 17: 80% 42% Software subscription penetration H1 17: 31% Focus for H2 18 Continued migration to cloud connected Enterprise Management acceleration Continued momentum of Sage Intacct Revenue H1 18 H1 17 Growth Recurring 230m 203m +13% Processing 16m 15m +3% SSRS 36m 37m -2% Total 282m 255m +10% 17 #SageResults Sage Group plc Interim Results 2018

18 International 60% H1 18 revenue growth Africa Middle East: revenue 5%; recurring 11% Brazil: revenue decline 1%, impacted by macro environment Australia: 12% revenue 75% Recurring mix H1 17: 73% Software subscription penetration H1 17: 56% Focus for H2 18 Africa Middle East: Enterprise Management Continued momentum in subscription Revenue H1 18 H1 17 Growth Recurring 100m 94m +8% Processing 8m 7m +16% SSRS 25m 27m -10% Total 133m 128m +4% 18 #SageResults Sage Group plc Interim Results 2018

19 Underlying Operating Profit Margin +140bps +20bps 25% 20% -40bps -50bps -150bps 15% 10% 25.3% 24.5% 5% H1 17 G&A GTM Product Sage Sage H Development People Intacct 1 In FY18, there is no difference between organic and underlying operating margin 19 #SageResults Sage Group plc Interim Results 2018

20 H1 18 summary 1 Strong underlying business 2 Focus on subscription 3 Confidence in FY18 guidance 20 #SageResults Sage Group plc Interim Results 2018

21 Stephen Kelly Chief Executive 21 #SageResults Sage Group plc Interim Results 2018

22 Total addressable market $28bn 7% $30bn $12bn 13% $14bn Cloud On-premise $16bn 2% $16bn Source: IDC & Gartner, #SageResults Sage Group plc Interim Results 2018

23 Unique position in the market Trusted brand Global reach Market breadth 23 #SageResults Sage Group plc Interim Results 2018

24 Progress in strategy: Revolutionise Business Cloud Products Accounting Financials Sage Intacct Enterprise People Payroll Payments Management & Banking Marketplace Applications Sage Developer Platform APIs Microservices Platform Services Artificial Intelligence Pegg Bot Framework Collective Intelligence Machine Learning 24 #SageResults Sage Group plc Interim Results 2018

25 Progress in strategy: Customers for Life Cloud Products Accounting Financials Sage Intacct Enterprise People Payroll Payments Management & Banking Revenue H1 18 ARR Growth Cloud connected 1 205m 72% Cloud native 2 131m 37% Sage Business Cloud 336m 57% 1 Cloud connected versions of Sage 50 and Sage 200 families 2 Sage Accounting, Sage Financials, Sage People, Sage Intacct & cloud version of Sage Enterprise Management 25 #SageResults Sage Group plc Interim Results 2018

26 North America: Cloud connected playbook 26 #SageResults Sage Group plc Interim Results 2018

27 Progress in strategy: Winning in the Market Cloud Products Accounting Financials Sage Intacct Enterprise People Payroll Payments Management & Banking Revenue H1 18 ARR Growth Cloud connected 1 205m 72% Cloud native 2 131m 37% Sage Business Cloud 336m 57% 1 Cloud connected versions of Sage 50 and Sage 200 families 2 Sage Accounting, Sage Financials, Sage People, Sage Intacct & cloud version of Sage Enterprise Management 27 #SageResults Sage Group plc Interim Results 2018

28 Winning in the market: ARR growth 31% Sage Intacct 62% Sage People 42% Sage Accounting 28 #SageResults Sage Group plc Interim Results 2018

29 Summary 1 Confidence in FY18 guidance 2 Progress against strategy 3 Platform for success 29 #SageResults Sage Group plc Interim Results 2018

30 Q&A #SageResults 30 #SageResults Sage Group plc Interim Results 2018

31 Glossary Financial drivers Measure /Description Organic In addition to the adjustments made for underlying measures, organic measures exclude the contribution from discontinued operations, disposals and assets held for sale of standalone businesses in the current and prior period and include acquired businesses from the beginning of the financial year following their year of acquisition. Adjustments are made to the comparative period to present acquired businesses as if these had been part of the Group throughout the period. Contributions from acquired businesses are excluded in the year of acquisition. Acquisitions and disposals which occurred close to the start of the opening comparative period where the contribution impact would be immaterial are not adjusted. Organic operating profit margin is presented for the current period only to allow comparability to current period underlying operating profit margin. 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 and purchase price adjustments made to reduce deferred income arising on acquisitions; - 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; Imputed interest; and Fair value adjustments on debt-related financial instruments. Underlying profit after tax and earnings per share excludes: All the items above net of tax and non-recurring tax items that management judge are one-off or non-operational. Underlying basic EPS Underlying basic EPS is defined as underlying profit after tax divided by the weighted average number of ordinary shares in issue during the period, excluding those held as treasury shares. Underlying profit after tax is defined as profit attributable to owners of the parent excluding: Recurring items including amortisation of acquired intangible assets, purchase price adjustments made to reduce deferred income arising on acquisitions, acquisition-related items, fair value adjustments and imputed interest; and Non-recurring items that management judge to be one-off or non-operational. All of these adjustments are net of tax. The impact of foreign exchange is neutralised in prior period figures Underlying adjusted EPS The underlying adjusted EPS neutralises the impact of significant acquisitions and disposals by excluding current period acquisitions and current and prior period disposals and by including prior year acquisitions in the comparable period based on the margin achieved by the acquired business in the prior year for the post-acquisition period. 31 #SageResults Sage Group plc Interim Results 2018

32 Glossary Financial drivers Measure /Description 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. 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 acquired intangible assets, acquisition-related items, fair value adjustments and non-recurring items that management judge to be one-off or non-operational. 32 #SageResults Sage Group plc Interim Results 2018

33 Glossary Revenue types Measure /Description 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 ongoing 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. Processing revenue Processing revenue is revenue earned from customers for the processing of payments or where Sage colleagues process our customers payroll. Annual contract value Annual contract 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. 33 #SageResults Sage Group plc Interim Results 2018