TIDMSGE
RNS Number : 4859Q
Sage Group PLC
30 November 2016
The Sage Group plc audited results for the year ended 30
September 2016
Wednesday 30 November 2016
Continuing strong performance and business transformation
Strong performance
- Achieved organic revenue growth of 6.1% (FY15: 6.0%) and the
fastest rate of recurring revenue growth for a decade of 10.4%
(FY15: 9.0%);
- Software subscription growth of 32.3% (FY15: 28.9%), in line
with the planned transition and planned decline in SSRS revenue of
8.5% (FY15: decline of 0.7%);
- Customers embracing closer subscription relationships with 46%
increase in software subscription contracts to just over one
million (FY15: 690,000) and an increase in retention rates to 86%
(FY15: 84%);
- Accelerating revenue growth in Europe, Africa and Brazil;
slower performance in Asia (one off regulatory change in the prior
year); growth in North America consistent with last year;
- Underlying cash conversion at 100%, supporting free cash flow
of GBP254m and the 8% increase in full year dividend to 14.15p.
FINANCIAL SUMMARY(1) FY16 FY15 Change
----------------------------------------- -------------- --------------- --------------
Organic revenue GBP1,567m GBP1,477m +6.1%
- Recurring revenue GBP1,092m GBP989m +10.4%
- Processing Revenue GBP204m GBP192m +6.1%
- SSRS Revenue GBP271m GBP296m -8.5%
Organic operating profit GBP427m GBP391m +9.2%
Organic operating profit
margin 27.2% 26.5% +70bps
Underlying basic EPS 27.8p 25.5p +9.0%
Underlying cash conversion 100% 106% -6.0%
Ordinary dividend per
share 14.15p 13.10p +8.0%
----------------------------------------- -------------- --------------- --------------
STATUTORY SUMMARY FY16 FY15 Change
----------------------------------------- -------------- --------------- --------------
Revenue GBP1,569m GBP1,436m +9.3%
Operating profit GBP300m GBP297m +1.1%
Profit before tax GBP275m GBP276m * 0.4%
Basic EPS 19.28p 18.11p +6.4%
----------------------------------------- -------------- --------------- --------------
1. Organic operating profit is stated before non-recurring items
(exceptional costs). Unless otherwise stated, all revenue growth
measures referred to in the CEO report are stated on the constant
exchange organic basis. Refer to Appendix II on page 18 for
information on non-GAAP measures and note 3 of the financial
statements for details of items excluded from underlying operating
profit.
Business Transformation
- The transformation remains on track and progress has been made
in FY16 with a targeted organic operating margin of 27.2% (FY15:
26.5%) achieved for the full year;
- Phase one of the transformation is now complete:
o General and administrative (G&A) expense as a proportion
of revenue has reduced to 16.5% (FY15: 18.7%);
o Annualised savings of GBP51m secured within G&A which are
being reinvested into go-to-market functions of sales and
marketing, with an exceptional cost of GBP110m recognised in FY16
(GBP76m of which is associated to G&A savings);
o Senior Management Team is now established to drive forward the
next phase of the transformation.
- Phase two of the transformation begins in FY17:
o Increased focus on new customer acquisition through innovative
new product launches and continued user experience
improvements;
o Continued investment for growth through sales and marketing:
we are expanding the Customer Business Centres (CBC) to provide
integrated digital marketing, sales and services;
o FY17 annualised cost savings of at least GBP50m identified
with payback of less than two years.
Success in our technology strategy
- Sage One paying subscriptions increase of 81% to 313,000
subscriptions. 54% increase in Sage One revenue in the year;
- X3 revenue growth of 18% in the year and an increase in paying customers of 25%;
- Sage Live launched in two countries in February 2016 and was
awarded most innovative product of 2016 by Salesforce.com;
- Sage 50 Accounts delivered triple digit organic subscription
software revenue growth in the UKI, US and Canada;
- Sage 50, 100 and 300 cloud innovation and product delivered to market;
- Sage Pegg launch with users in 125 countries - the world's
first Chatbot for an accounting engine.
Stephen Kelly, Chief Executive Officer said:
"FY16 saw Sage continue to deliver on the commitment made at our
June 2015 Capital Markets Day to perform and transform. The organic
revenue growth of 6% is driven by higher quality recurring revenue,
which grew at the fastest rate in a decade. The strategy is working
- with customers embracing closer relationships with Sage,
evidenced by a 46% increase in the number of subscription contracts
and a contract retention rate of 86%.
Phase one of the transformation programme has been successfully
delivered. For phase two we have ensured that we have the core
management team, processes and culture to deliver the best
technology ecosystem for our customers - those business builders
that drive the world's economy, creating jobs, growth and
prosperity. Phase two of the transformation will continue to be
non-linear and focus on driving more technology innovation with
increasing focus on new customer acquisition as well as continuing
to improve execution against the strategy for Business Builders. We
are already starting to see Sage drive faster innovation, a more
customer-obsessed DNA and colleagues making a difference in all of
our communities through the Sage Foundation.
For FY17, the second full fiscal year of our transformation, our
full year guidance for FY17 is for at least 6% organic revenue
growth and at least 27% organic operating margin. We will continue
to front-load investment in growth in H117, consistent with our
execution last year. Consequently, we anticipate stronger H2 growth
and accelerating momentum as we exit FY17."
About Sage
Sage - the market and technology leader for integrated
accounting, payroll and payment systems, powered by the cloud and
supporting the ambition of the world's entrepreneurs and business
builders. Because when business builders do well, we all do.
For more information, visit www.sage.com
Enquiries:
The Sage Group plc Tulchan Communications
+44 (0) 191 294 3897 +44 (0) 20 7353 4200
Lauren Wholley, Investor Relations Jonathan Sibun
Amy Lawson, Corporate PR
An analyst presentation will be held at 8.30am today at the
London Stock Exchange plc, 10 Paternoster Square, London, EC4M 7LS.
A live webcast of the presentation will be hosted on
www.sage.com/investors, dial-in number +44 (0) 20 3427 1913, pin
code: 5117993#. A replay of the call will also be available for two
weeks after the event: Tel: +44 (0) 20 3427 0598, pin code:
51177993#
Rounding
As a result of rounding throughout this document, it is possible
that tables may not cast and change percentages may not calculate
precisely.
Non-GAAP measures
Unless stated otherwise all references to revenue operating
profit are organic.
Chief Executive Officer's review
Performance
I am pleased that we have made good progress in performance and
transformation, consistent with our presentations made at the
Capital Markets Day (CMD) back in June 2015. At CMD, we shared with
investors the growth strategy underpinned by the five strategic
pillars of Winning in the Market (New Customer Acquisition);
Customer for Life (C4L); Revolutionise Business; Capacity for
Growth and One Sage. FY16 has been a pivotal year in our
transformation programme and, most importantly, the business
continues to perform. As we have highlighted to investors, FY16 was
one of the years of highest potential risk in the transition of the
business. At CMD, we clearly outlined our strategy and continue to
achieve profitable growth, providing best-in-class support for the
Business Builder entrepreneur. We delivered revenue growth of 6%
with 27% operating margins in line with guidance provided last
year. I am particularly pleased to note that higher quality
recurring revenue was double digit - the first time for a decade.
The strategy for Business Builders is delivering in line with our
expectations and supports the Sage business model of quality
organic growth; superior operating margins; strong free cash
generation (enabling a progressive dividend) combined with
selective acquisitions to accelerate the strategy.
Strong revenue growth of 7% in Europe (10% recurring revenue)
and 8% (16% recurring revenue) in International has been balanced
by 4% revenue growth (9% recurring revenue) in North America, due
mainly to challenges in the Payments business. Growth in Europe and
North America has been led through strong performance in our
Customer for Life (C4L), whilst growth in the International region
has been driven by Winning in the Market (new customer
acquisition).
As part of the C4L strategy, within recurring revenue, software
subscription revenue grew by 32% and the number of software
subscription contracts grew by 46% to just over one million. Our
contract renewal rates grew by 2 percentage points from 84% to 86%
for the year coupled with continuing improvement in our Net
Promoter Scores (NPS).
Organic processing revenue grew by 6% in the year reflecting
strong growth in Europe of 12% driven by Sage Pay in the UKI, and
International of 50%, driven by payroll processing, balanced by
slower growth in North America of 3% that delivered strong payroll
processing growth and a flat year-on-year in payments.
Organic SSRS revenue declined by 8% in the year reflecting the
planned transition to a subscription model as explained at our 2015
Capital Markets Day.
Business Transformation
We achieved an operating margin of 27% in FY16 in line with
guidance, whilst transforming our business by reducing cost from
our back office to reinvest in sales and marketing to support
'Winning in the Market'.
We have reorganised the go-to-market functions and hired a
proven leader, Blair Crump, the recently appointed Sage President,
to ensure that in FY17 we will see a laser focus on new customer
acquisition.
During the year we reduced the general and administrative
(G&A) expense as a proportion of revenue to 16% (FY15: 19%). We
have secured annualised savings of GBP51m from G&A and have
incurred an exceptional charge of GBP110m, GBP76m of which relates
to G&A, therefore giving an associated payback period of under
two years, in line with our guidance.
The extent of the transformation is substantial. Of our top
leadership, 72% has changed in the last two years and half of the
new leaders are internal promotions. The overall headcount remained
stable during the year and yet 3,000 new colleagues have joined
Sage. 32% of the Senior Management Team is now female, up from 25%
in the prior year. We will continue to hire people to support our
growth plans whilst at the same time driving for productivity,
efficiency, high performance and inclusion.
In FY16 as we communicated, there was an exceptional charge of
GBP110m, incurred as part of phase one of the transformation. In
FY17 we have identified additional cost saving opportunities of at
least GBP50m which we will reinvest in our go-to-market functions
in order to accelerate our ability to acquire new customers. This
will create a further exceptional charge, with a targeted payback
of under two years.
Success in our technology strategy
Our suite of cloud accounting solutions continues to drive the
'Winning in the Market' strategy to generate revenue and increase
market share:
- Sage One paying subscriptions increased by 81% to 313,000
during the year and revenue increased by 54%. The majority of the
increase in customers was driven by Europe and in International,
which delivered a triple digit increase in paying customer
numbers;
- X3 revenue grew by 18%, with particular success in the
International region which achieved revenue growth of 74%. Customer
numbers in X3 have increased by 25%;
- Sage Live, launched in USA and UK in February 2016 was awarded
'Best Salesforce Developer Community' innovation award and has now
left 'incubation', gaining momentum as a powerful mobile first,
real-time accounting engine. We now have over Sage Live 600
customers, with over 400 added in the past 90 days.
- Sage 50 Accounts remains a popular choice with our installed
base, with functionality continually increasing as the product
enhances its cloud functionality through Sage Drive and Sage 50C.
In the year Sage 50 Accounts delivered triple digit subscription
revenue growth in the UKI, US and Canada. The overall Sage 50
family of payroll and accounting solutions now accounts for 29% of
all revenue.
Progress in areas targeted to improve performance
As a management team focused on improvements throughout the
business, we share our 'watch list' regularly. During FY15 we
highlighted areas of the business that were underperforming
relative to Sage's overall performance, being Enterprise Europe,
Small and Medium Business North America and Payments North America.
We continue to believe that progress will be non-linear and that we
expect the watch list to vary over time.
Enterprise Europe
Enterprise Europe delivered full year growth of 5% compared to a
decline in the prior year. The strategic product within this
portfolio, X3, grew by 12%, with particular success in the UKI
where revenue grew by 17% and customer numbers grew by 41%. We are
confident of continued growth of X3 and further progress in the
Enterprise segment.
Small and Medium Businesses North America
Revenue has grown by 4% for the full year in this segment,
compared with 4% in the prior year.
This segment continues to be a focus: some progress is notable
with Sage 100 Cloud and Sage 300 Cloud products starting to gain
momentum with software subscription revenue growing by 60% and 63%
respectively. Sage Construction and Real Estate has also been a
success, growing by 7% in the year and adding over 1,000 customers
- a record for this part of the business.
Payments North America
Payments North America has remained flat year-on-year.
Challenges in this segment reflect margin compression in line with
industry trends and new account shortfall due to slower progress in
marketing and the partner channel. In order to drive growth in FY17
we are now offering the power of the combination of Payments,
Accounting and Payroll and therefore differentiating our value
proposition by bundling these solutions, and offering new and
updated product and process functionality. Payments marketing now
has a separately dedicated team and is expected to significantly
improve lead generation and referrals.
Progress of execution
Throughout FY16 we have executed on our transformation by
driving improvements through each of our strategic pillars. There
is strong evidence that our strategy is working, with continued
improvements planned for FY17:
Customers for Life
Progress:
- We are building higher quality relationships with our
customers through subscription. Software subscription revenue has
increased by 32% and the number of software subscriptions has
increased by 46% to just over one million.
- By providing excellent levels of customer service and the
latest technology we continue to build up our contract renewal
rates. The contract renewal rate has grown to 86% in the year,
compared to 84% in FY15, with the best renewal rates in North
America and Europe at 89% and 88% respectively.
- Cross-sell campaigns are starting to gain traction: in the UKI
37% of Sage 50 Accounts customers also have Sage 50 Payroll.
- Our NPS score measures customer satisfaction and has increased by 61% on the prior year.
Focus:
- We will continue to focus on the move to subscription, scaling
up cross-sell in FY17 to improve the average number of products
held by our customers and implementation of our customer journey
maps, which highlight how customers from start-up to scale-up to
enterprise can choose Sage as their cloud accounting partner for
life.
Winning in the Market
Progress:
- Our suite of cloud accounting products designed to win in the
market is showing progress. X3 revenue grew by 18% in the year with
74% growth in the International region. Sage One paying
subscriptions grew by 81% to 313,000, of which 61,000 were added in
the UKI and 23,000 each in both Brazil and South Africa,
representing evidence of Sage's international strength.
- Products continue to develop at pace. Sage One updates are
available every two weeks, leading to over 1,500 design
improvements and over 150 new or improved features in FY16.
- In July 2016 we hosted Sage Summit, the world's largest
gathering of entrepreneurs. We had 15,000 registered attendees,
generated one billion social impressions and over 3,000 media
articles were written from the conference.
- Our digital marketing strategy is starting to deliver: we
increased our social media following by 220%, leapfrogging our
competitors, and tripled engagement with our content on social
channels, as well as increasing our lead to conversion rate in Q4 -
a trend we will continue to build upon.
- We have made significant progress implementing our web domain
consolidation strategy seeing 14% growth in web traffic to all Sage
properties and 77% growth in organic traffic to Sage.com.
Focus:
- FY17 will be a year of focus on execution of the 'Winning in
the Market' cloud accounting product roadmaps in each country, for
Sage One, Sage Live and X3 Cloud with significant upgrades and
distribution planned for the products. Product roadmaps are now
updated monthly, outlining country roll-out plans, major releases
and key feature updates. In addition, we will scale up the Customer
Business Centres (CBCs); take Sage Summit 'on the road' around
major cities; and elevate Sage's brand as the popular cloud
accounting choice for Business Builders. During FY17, Sage is
planning 27 major cloud product launches across our
geographies.
Revolutionise Business
Progress:
- We launched Pegg, the world's first accounting Chatbot at Sage
Summit in July 2016 gaining over 9,000 new users to Sage in 125
different countries.
- We continued to build our ecosystem through Sage Marketplace,
an online hub to access complementary partner applications. 215 ISV
apps have been signed to Sage Marketplace during the year, of which
86 have been fully integrated.
- We have launched the Sage One mobile app and new versions of
Sage One for Partners and Accountants as we continue to move our
Sage One solutions on to our Global Accounting Core (GAC).
- Sage Live was developed in 26 weeks with early adopter
customers contributing to the build of the product. Product updates
are released on a bi-monthly basis and we now have over 600
customers, many of whom are 'live' following a rapid period of
implementation.
- In Spain, a country that has not launched any new products
since 2010, we are launching five major products in six months
(Sage One GAC, Sage Live, Sage 50C and Sage 200C), all in local
language and locally compliant based on the new, agile model of
development.
Focus:
- During FY16 we continued to develop our Sage ecosystem with
further expansion to be sustained throughout FY17. Partner-driven
solutions will be available on Sage Marketplace for six of our
growth products and the suite of ISV apps will continue to
increase. Further innovation is planned for Chatbots, artificial
intelligence, machine learning and data sciences.
Capacity for growth
Progress:
- We are measuring the return on our investment in go-to-market
functions. Within the marketing department, the people cost to
marketing expense ratio has decreased from 46:54 to 39:61, moving
in line with IDC benchmarking.
- We have created greater capacity to reach prospects through
the consolidation of our digital media strategy and a single
worldwide media agency. This has enabled a more consistent approach
to media, faster time to market and a 25% reduction in agency fees.
The first year of implementation achieved a significant increase in
the performance of demand related media investment, reflected in a
37% decrease in cost per enquiry.
- We have made some early changes in other areas of the go to
market functions as we start to integrate areas of sales and
marketing operations and reduce non quota carrying sales support
roles.
- We have streamlined our property portfolio from 139 to 78
premises. Core Sage properties have been upgraded to provide an
outstanding workplace for colleagues in Atlanta, Lawrenceville,
London and Dublin.
- We are establishing the critical platforms for growth with our
CBCs, digital marketing platforms, Sage partnership programme and
our updated brand.
Focus:
During FY17 we will continue our focus on expanding the platform
for sales and marketing to drive new customer acquisition. We will
further leverage the power of our CBCs, which provide one
touchpoint for the customer so we can coordinate leads from initial
contact, selecting a product, through to aftersales success
coaching. Our CBCs are currently located in Dublin and Atlanta and
the same formula will be applied to other locations as we continue
to roll-out this approach.
One Sage
Progress:
- We have reduced fragmentation and misalignment within our business:
o We have continued to consolidate the Sage One towards a single
code base;
o The new Operating Design has been rolled out around the world
and provides a consistent operating model.
- Colleague engagement has increased with All Hands meetings and
Sage TV broadcasting live to all colleagues, and Sage FY17
Kick-Offs, where each major Sage office around the world was
visited by management meeting approximately 10,000 colleagues as
well as customers, partners and accountants.
- We have increased our colleague engagement through Sage
Foundation. 13,000 days were donated by Sage colleagues to
volunteer through Sage Foundation in the year and 110 charities and
non-profit partners globally benefited from grants awarded by the
Foundation.
- To strive towards Excellence in Governance, we have introduced
a suite of 56 refreshed policies to ensure our business remains
fully committed to good governance throughout the transformation
and beyond. In FY16 Sage was recognised in the top four of the FTSE
100 for governance in a study by the Institute of Directors.
- Goal setting has been aligned throughout Sage by Vision,
Strategy, Goals, Measures (VSGM), with the CEO's FY17 objectives
now cascaded down through the organisation, aligning colleague
objectives to both leadership and the strategic pillars.
Focus:
- Further focus on the next phase of Excellence in Governance
with the Sage Excellence in Controls programme and integrated
business planning for FY17 and cultural change to encourage
consistency.
Outlook
FY17 signals the start of phase two of our transformation to
execute the strategy for Business Builders. We will build on the
strong foundations built during phase one in FY16 as follows:
- Rigour in implementation of the country customer journey maps
for C4L and Winning in the Market.
- Increased focus on new customer acquisition with our award
winning cloud accounting products. This includes launching Sage
Live in a further five countries with user experience improvements
and new services for Sage Live for Accountants with Practice
Management; increasing functionality in Sage One with improvements
to banking, user experience, reporting and partnering with
Accountants and shifting the product focus on X3 towards
cloud-first development and subscription pricing. Sage One and Sage
Live are both now sold and supported through CBCs.
- We will continue efficient investment in the marketing
function to increase the number and conversion rate on marketing
qualified leads and improve return on investment.
- Continuing the Capacity for Growth initiative, we will drive
further opportunities for cost saving identified to be achieved in
FY17 of at least GBP50m with an associated exceptional cost and
payback of less than two years.
- Cost savings to be further reinvested into sales and marketing
and product innovation to continue to drive new customer
acquisition.
As we progress into Phase two of the transformation programme,
our guidance for full-year FY17 is at least 6% revenue growth and
at least 27% operating margin. Consistent with FY16 there is a
planned strategic investment bias towards the first half of the
year and therefore we expect margins to be lower than 27% in H117
and higher margin in H2 to achieve the blended 27% margin for the
full year. With the front-load investment in growth in H117, we
anticipate stronger H2 growth and accelerating momentum as we exit
FY17.
Chief Financial Officer's review
Group performance
The Group achieved revenue growth of 6.1% (FY15: 6.0%) and an
operating profit margin of 27.2% (FY15: 26.5%).
The quality of growth is demonstrated by recurring revenue
growth of 10.4% (FY15: 9.0%) including growth in software
subscription revenue of 32% (FY15: 29%).
Organic figures neutralise the impact of foreign currency
fluctuations and exclude the contribution from current and prior
period acquisitions when relevant. A reconciliation of operating
profit to statutory operating profit is shown on page 14.
Statutory performance has been impacted by movements in key
exchange rates during the year, particularly in South Africa and
Brazil, combined with exchange rate re-alignment following the EU
referendum in Sterling against Euro and US Dollar translation.
Statutory figures also include the contribution of acquisitions and
disposals.
Revenue
STATUTORY ORGANIC
--------------------------------------------- -------------------------------------------------
FY16 FY15 Change FY16 FY15 Change
--------------- ----------- ------------------ ------------ ----------------- ----------------- -----------
Europe GBP827m GBP753m +10% GBP827m GBP776m +7%
North
America GBP535m GBP477m +12% GBP535m GBP513m +4%
International GBP207m GBP206m +1% GBP205m GBP189m +8%
--------------- ----------- ------------------ ------------ ----------------- ----------------- -----------
Group GBP1,569m GBP1,436m +9% GBP1,567m GBP1,477m +6%
--------------- ----------- ------------------ ------------ ----------------- ----------------- -----------
Operating profit
STATUTORY ORGANIC
------------------ -------------------------------------------
FY16 FY15 Change FY16 FY15 Change
-------- -------- -------- -------------- -------- -------- -------
Group GBP300m GBP297m +1% GBP427m GBP391m +9.2%
Margin 19.1% 20.7% * 160bps 27.2% 26.5% +70bps
-------- -------- -------- -------------- -------- -------- -------
The Group achieved full year organic operating profit margin of
27.2% (FY15: 26.5%). The current year statutory operating profit is
stated after non-recurring costs incurred relating to business
transformation and recurring costs relating to amortisation of
acquisition related intangible assets and other acquisition related
charges.
FY16 has been a key year of transformation with significant
progress made in delivering cost savings in G&A. During the
year, savings of GBP51m of G&A were realised, which were fully
reinvested in our go-to-market functions of sales and marketing. An
associated exceptional cost of GBP110m has also been recognised in
the year, with both the exceptional cost and the associated saving
broadly in line with guidance. Of the GBP110m exceptional charge,
GBP76m relates to G&A and GBP34m to go-to-market functions.
There is a GBP2m non-recurring credit in relation to the Archer
litigation claim.
We have identified further annualised cost saving opportunities
of at least GBP50m for FY17 which will create a further exceptional
expense with a target payback period of under two years.
Revenue mix
Segmental reporting
Consistent with our FY15 results, the business is split into
three regions: Europe, North America and International.
RECURRING REVENUE PROCESSING REVENUE SSRS REVENUE
-------------------- -------------------------- ------------------------ ----------------------------
ORGANIC FY16 FY15 Change FY16 FY15 Change FY16 FY15 Change
-------------------- --------- ------- ------ ------- ------- ------ ------- ------- ----------
* 7%
Europe GBP642m GBP582m +10% GBP36m GBP32m +12% GBP149m GBP161m
* 8%
North America GBP308m GBP284m +9% GBP157m GBP153m +3% GBP70m GBP76m
International GBP142m GBP123m +16% GBP11m GBP7m +50% GBP52m GBP59m * 12%
-------------------- --------- ------- ------ ------- ------- ------ ------- ------- ----------
* 8%
Group GBP1,092m GBP989m 10% GBP204m GBP192m +6% GBP271m GBP296m
% of total revenue 70% 67% 13% 13% 17% 20%
-------------------- --------- ------- ------ ------- ------- ------ ------- ------- ----------
Recurring revenue
The Group delivered recurring revenue growth of 10% (FY15: 9%),
driven by the year-on-year increase in subscription revenue of 32%
(FY15: 29%). This growth represents the continuing planned
transition from licensing to higher quality subscription
revenue.
Contract renewal rates have reached 86% (FY15: 84%) with
subscription contract renewal rates now over 90%. Recurring revenue
now represents 70% of Group revenue (FY15: 67%).
Processing revenue
Processing revenue has grown by 6% (FY15: 2%), reflecting strong
performance in payroll processing and an increase in Sage Pay
revenue in the UKI, offset by flat growth in Payments North
America.
SSRS revenue
SSRS revenue declined by 8% (FY15: decline of 1%) in line with
the continued transition to subscription based revenue, offset
slightly by growth in Professional Services of 2% and Training of
7%
Regional performance - Europe
ORGANIC REVENUE GROWTH FY16 FY15
------------------------ ----- -----
UK & Ireland +7% +7%
France +6% +5%
Spain +7% +3%
Germany +7% +4%
Rest of Europe +3% +1%
------------------------ ----- -----
Europe +7% +5%
------------------------ ----- -----
Revenue in Europe grew by 7% in the year (FY15: 5%). Within
Europe, there were strong results in UKI, France, Spain and Germany
which all delivered growth in excess of the Group growth rate,
balanced by modest growth in Poland and flat performance in
Switzerland, our smaller European entities.
Europe delivered recurring revenue growth of 10%, of which
software subscription revenue grew by 28% with an overall contract
renewal rate of 88%. The region continues to deliver on the
transition to a recurring revenue model driving growth through the
installed base.
Processing revenue grew by 12% in Europe (FY15: 9%) largely due
to the growth in Sage Pay in the UKI.
SSRS revenue declined by 7% (FY15: decline of 4%) due to the
continued planned decline in licences, offset by growth in upgrades
to modernised products and professional services linked to X3 'big
deals' in France.
X3 revenue grew by 12% in the region, with double digit growth
in UKI, France and Spain and an increase of 22% in X3 customer
numbers in the region.
Sage One paying subscriptions in Europe grew by 62%
demonstrating further momentum of the product footprint.
The focus in Europe in FY17 will be to drive further revenue
growth through new customer acquisition.
UK & Ireland - strong growth driven by C4L
UKI revenue grew by 7% (FY15: 7%) in the year, driving growth
through the Customer for Life strategy. Retention rates have now
risen to 86%. Within recurring revenue, software subscription
revenue grew by 39% driven by successes in Sage 50 Payroll and
especially in Sage 50 Accounts which delivered triple digit
subscription revenue growth as the solution continues to drive
revenue growth through ever-increasing functionality.
The UKI also delivered strong performance on X3 with 17% revenue
growth in the year, both due to new customer acquisition and
migration and implementation of the customer journey map.
Sage One paying subscriptions in the UKI grew by 66% driven
mainly by the Accountants channel.
Processing growth of 11% was driven by the increase in Sage Pay
due to growth of e-commerce within the UKI and an increase in
customers.
SSRS decline of 13% reflects the planned transition to
subscription.
France - Success in i7 upgrades and X3
In France, revenue grew by 6% (FY15: 5%). Recurring revenue
growth of 8% is below Group growth due to the early pace of
subscription in the country (recurring revenue represents 85% of
revenue), with software subscription growth of 14% in the year.
During FY16, the i7 upgrade delivered revenue increases due to
successful customer experience, cross-sell and up-sell campaigns
with scope to further increase revenue into FY17.
X3 has also been a success in France: X3 customer numbers grew
by 28%, now representing 51% of Group X3 customers. France also had
success targeting larger deals, winning 20 with a revenue per
contract in excess of GBP100k.
The decline in SSRS reflects transition to subscription, offset
by SRS growth for professional services and training to implement
X3.
Spain - strong subscription revenue growth
Revenue growth of 7% (FY15: 3%) was driven by a growth in
software subscription revenues of 52%. Improvements in retention
rates were driven through customer experience campaigns and
successful targeting of the existing base with cross-sell and
up-sell.
Spanish local growth products, Contaplus and Murano, both remain
popular delivering double digit growth.
Germany - strong subscription revenue growth
Germany delivered revenue growth of 7% (FY15: 4%). From April
2016, all new contracts signed in Germany are done so on
subscription which, combined with bundling propositions, has led to
an increase in software subscription revenue of 48%. OfficeLine,
the flagship local product in Germany has grown revenue by 15% in
the year.
Regional performance - North America
ORGANIC REVENUE GROWTH FY16 FY15
------------------------ ----- -----
North America +4% +4%
------------------------ ----- -----
North America delivered revenue growth of 4% (FY15: 4%) with
recurring revenue growth of 9% (FY15: 9%) and processing revenue
growth of 3% (FY15: decline of 1%) offset by a decline in SSRS of
8% (FY15: decline of 5%).
Growth in North America was below Group growth of 6%, partly due
to flat revenue within the payments business. Excluding payments
revenues, year-on-year growth in North America was 6%.
Recurring revenue growth of 9% includes an increase in software
subscription revenue of 84%. There has been strong performance in
the year from Sage 50 US and Sage 50 Canada, both of which achieved
triple digit growth in subscription revenue with customers
benefiting from functionally-rich products and increased
flexibility through cloud-based solutions. Canada also drove growth
through success in Sage Drive and mobile invoicing
functionality.
The strong growth in subscription in the region shows positive
signs that recurring growth rates can continue to increase. Focus
for FY17 will be to drive further growth from new customer
acquisition to reduce reliance on the installed base.
Sage One subscriptions grew by 65% year-on-year, driven by
Accountant referrals.
X3 growth of 7% in the year reflects a modest start to the year,
but a strong second half which grew by 18% as the product begins to
gain momentum through new leadership, improved sales and marketing
alignment, pipeline growth and a focus on larger deals.
Processing revenue growth of 3% reflects strong growth in
payroll processing of 25% due to licensee acquisitions and new
customer additions. Payments revenue remained flat year-on-year
reflecting challenges in margin compression in line with industry
trends and new account shortfall due to slower progress in the
partner channel and in marketing. In order to drive growth in this
segment we are now differentiating our product by bundling
payments, payroll and accounting, offering updated functionality
and focusing marketing to improve lead generation and
referrals.
SSRS revenue fell by 8% in the year as licence based customers
continued the planned transition to subscription.
Regional performance - International
ORGANIC REVENUE GROWTH FY16 FY15
------------------------ ----------- -----
Africa +19% +16%
Brazil +12% +8%
Australia +3% +5%
Middle East and Asia * 18% +33%
------------------------ ----------- -----
International +8% +14%
------------------------ ----------- -----
Organic revenue in the International region grew by 8%
year-on-year (FY15: 14%), with recurring revenue growth of 16%
(FY15: 14%) and processing revenue growth of 50% (FY15: 18%),
offset by a decline in SSRS of 12% (FY15: growth of 13%).
Growth in the region has been driven by strong performance in
Brazil and South Africa, both of which have had success in new
customer acquisition through Sage One and X3, balanced by a decline
in revenue in Asia.
Africa - winning in the market with X3 and Sage One
Organic revenue growth of 19% reflects double digit growth
across recurring, processing and SSRS revenue streams. Africa's
revenue growth is driven by new customer acquisition with a 77%
growth in X3 revenue and 71% growth in Sage One revenue, with Sage
One paying subscriptions increasing by 23,000 in the year.
Recurring revenue growth is driven by a 32% increase in software
subscription revenue with triple digit software subscription
revenue growth in X3 and its two local growth products, Sage
Evolution ERP and Sage VIP People HRIS.
Organic processing revenue growth of 27% reflects strong
performance in payroll processing.
Organic SSRS revenue grew by 12% due to X3 licence revenue
growth.
Brazil - resilient software growth despite tough economic
conditions
Brazil's revenue grew by 12% reflecting a 14% increase in
recurring revenue and a 1% increase in SSRS, achieving high revenue
growth despite recession in the country where GDP declined by 4%.
This highlights the indispensable nature of Sage to support
Business Builders during challenging economic times. New customer
acquisition has driven the growth in recurring revenue: focus has
been successfully shifted during the year to drive sales internally
rather than through the Accountant network, with the product
gaining pace and 10,000 units added in October alone.
As we introduced X3 into the Brazilian market and signed up
business partners during the year, we have now secured 41 customers
(FY15: 4).
The slight growth in SSRS reflects X3 licence sales offset by
the trend to transition customers to subscription.
Australia, Middle East and Asia
In Australia, revenue growth of 3% was slow, but this does not
reflect success in Sage One which grew by 12,000 units in the year
mainly through the Accountants channel, and in professional
services which grew by 22% due to X3 implementations.
Middle East and Asia revenue declined by 18% reflecting 17%
growth in the Middle East, offset by decline in Malaysia and
Singapore. Declining revenue in Asia represents a one-off revenue
gain in FY15 due to legislative change in Malaysia in the prior
year and a lack of new product introductions which will be
addressed in FY17. Following the introduction of Blair Crump as
Sage President and the reorganisation of regional management, we
are confident we have the leadership in place to drive growth in
Asia.
Financial review
FY16 FY15
ORGANIC TO STATUTORY Revenue Operating profit Margin Revenue Operating profit Margin
RECONCILIATIONS
Organic GBP1,567m GBP427m 27.2% GBP1,477m GBP391m 26.5%
Organic adjustments(1) GBP2m - GBP3m GBP1m
------------------------------------ ----------- ------------------ ------- ---------- ----------------- -------
Underlying GBP1,569m GBP427m 27.2% GBP1,480m GBP392m 26.5%
------------------------------------ ----------- ------------------ ------- ---------- ----------------- -------
Impact of foreign exchange(2) - - (GBP44m) (GBP12m)
------------------------------------ ----------- ------------------ ------- ---------- ----------------- -------
Underlying (as reported) GBP1,569m GBP427m 27.2% GBP1,436m GBP380m 26.5%
------------------------------------ ----------- ------------------ ------- ---------- ----------------- -------
Recurring items(3) - (GBP19m) - (GBP21m)
Non-recurring items(4) - (GBP108m) - (GBP62m)
------------------------------------ ----------- ------------------ ------- ---------- ----------------- -------
Statutory GBP1,569m GBP300m 19.1% GBP1,436m GBP297m 20.7%
------------------------------------ ----------- ------------------ ------- ---------- ----------------- -------
(1) Organic adjustments comprise contributions from
acquisitions, disposals and assets held for sale of standalone
businesses.
(2) Impact of retranslating FY15 results at FY16 average
rates.
(3) Recurring items comprise amortisation of acquired intangible
assets, acquisition-related items and fair value adjustments.
(4) Non-recurring items comprise items that management judge to
be one-off or non-operational including business transformation
costs.
Revenue
Statutory revenue grew by 9% to GBP1,569m, reflecting organic
growth, combined with foreign exchange movements experienced
throughout the year. The impact of foreign exchange of GBP44m in
FY15 reflects a currency tailwind following the EU referendum. The
average exchange rates used to translate the consolidated income
statement for the year are set out on page 16.
Operating profit
Organic operating profit increased by 9% to GBP427m (FY15:
GBP392m) in line with revenue and the organic operating profit
margin increased by 0.7% to 27.2% in line with guidance issued in
FY15. Statutory operating profit increased by GBP3m, although the
operating profit margin fell by 1.6%.
Adjustments between underlying and statutory operating
profit
Non-recurring items separated from underlying operating profit
of GBP427m include GBP110m of non-recurring costs in relation to
the Business Transformation comprised of people organisation
charges of GBP51m, net property exit costs of GBP40m and other
directly attributable costs of GBP19m, offset by a GBP2m credit in
relation to the Archer litigation claim. Recurring items of GBP19m
represents amortisation of acquisition related intangible assets
and other acquisition related charges.
Net finance cost
The statutory net finance cost for the year was GBP25m (2015:
GBP21m) and the underlying net finance cost was GBP22m (2015:
GBP21m). The difference between underlying and statutory net
finance costs for the year reflects a fair value adjustment to a
debt related instrument and FX movements on intercompany
balances.
Taxation
The statutory income tax expense was GBP67m (FY15: GBP82m). The
effective tax rate on statutory profit before tax was 24% (FY15:
30%). The FY15 statutory tax rate included exceptional impairment
charges which were not deductible for tax purposes. As there are no
similar items in the current year, the FY16 statutory tax rate has
reduced.
The effective tax rate on underlying profit before tax was 26%
(FY15: 25%). The underlying tax rate has increased in the period as
the FY15 rate included one-off credits which are not recurring in
FY16.
Earnings per share
Underlying basic earnings per share increased by 9% to 27.84p
(FY15: 25.54p) and statutory basic earnings per share increased to
19.28p (FY15: 18.11p) due to increased operating profit and a lower
effective tax rate.
Cash flow and net debt
CASH FLOW FY16 FY15
---------------------------------- ----------------- ----------------
Underlying operating GBP427m GBP392m
profit
Exchange rate translation
movements - (12m)
---------------------------------- ----------------- ----------------
Underlying operating GBP427m GBP380m
profit (as reported)
Non-recurring items (GBP58m) -
Depreciation/amortisation/profit GBP30m GBP29m
on disposal
Share-based payments GBP8m GBP9m
Working capital and (GBP10m) GBP5m
balance sheet movements
Exchange rate translation GBP1m (GBP5m)
movements
Statutory cash flow GBP398m GBP419m
from operating activities
Net interest paid (GBP20m) (GBP18m)
Tax paid (GBP92m) (GBP85m)
Net capital expenditure (GBP32m) (GBP20m)
---------------------------------- ----------------- ----------------
Free cash flow GBP254m GBP296m
---------------------------------- ----------------- ----------------
CASH FLOW FY16 FY15
Statutory cash flow from operating activities GBP398m GBP419m
Non-recurring cash items GBP58m -
Net capital expenditure (GBP32m) (GBP20m)
Eliminate exchange rate translation movements GBP1m GBP5m
------------------------------------------------ --------------------------- ---------
Underlying cash flow from operating activities GBP425m GBP403m
------------------------------------------------ --------------------------- ---------
Underlying cash conversion(1) 100% 106%
------------------------------------------------ --------------------------- ---------
(1) Refer to Appendix II on page 18 for information on Non-GAAP
measures.
The Group remains cash generative with underlying cash flows
from operating activities of GBP425m, which represents strong
underlying cash conversion of 100%.
A total of GBP145m was returned to shareholders through ordinary
dividends paid. Net debt stood at GBP397m at 30 September 2016 (30
September 2015: GBP425m).
Treasury management
The Group continues to be able to borrow at competitive rates
and currently deems this to be the most effective means of raising
finance. The current Group's syndicated bank multi-currency
Revolving Credit Facility (RCF), expires in June 2019 with facility
levels of GBP614m (US$551m and EUR218m tranches). There were no
drawings on the RCF at 30 September 2016 (FY15: GBP82m).
Total USPP loan notes at 30 September 2016 were GBP575m (US$650m
and EUREUR85m), (2015: GBP525.4m, US$700m and EUREUR85m).
Approximately GBP35m (US$50m) of USPP borrowings were repaid in
March 2016. This repayment was funded by free cash flow.
Foreign exchange
The Group does not hedge foreign currency profit and loss
translation exposures and the statutory results are therefore
impacted by movements in exchange rates.
The average rates used to translate the consolidated income
statement and to neutralise foreign exchange in prior year
underlying and organic figures are as follows:
AVERAGE EXCHANGE RATES FY16 FY15 Change
(EQUAL TO GBP)
-------------------------- ------ ------ ----------
Euro (EUR) 1.28 1.35 * 5%
US Dollar ($) 1.42 1.54 * 8%
South African Rand (ZAR) 21.05 18.55 +13%
Australian Dollar (A$) 1.94 1.97 * 2%
Brazilian Real (R$) 5.18 4.64 +12%
-------------------------- ------ ------ ----------
Capital structure and dividend
With consistent and strong cash flows, the Group retains
considerable financial flexibility going forward. The Board's main
strategic policy remains an acceleration of growth, both
organically and through targeted acquisitions. The growth underpins
the Board's sustainable, progressive dividend policy with surplus
cash being returned to shareholders from time to time. Consistent
with this policy, the Board is proposing an 8% increase in the
total ordinary dividend per share for the year to 14.15p per share
(FY15: 13.10p per share). The ordinary dividend for the year is
covered two times by underlying earnings per share.
Appendix I - Key Performance Indicators ("KPIs") and other
measures
FY16 FY15
-------------------------------------- ---------------------------------------------------------- -------- --------
STRATEGIC KPIs KPI DESCRIPTION
-------------------------------------- ---------------------------------------------------------- -------- --------
As we focus on providing exceptional customer
experiences, we track the response of our customers
by measuring the number of contracts successfully
Customers for life: renewed for the last twelve months as a
Contract renewal rate percentage of those that were due for renewal. 86% 84%
-------------------------------------- ---------------------------------------------------------- -------- --------
Winning in the market: The number of paying subscriptions for our portfolio of
Adoption of Sage One Sage One products. 313,000 173,000
-------------------------------------- ---------------------------------------------------------- -------- --------
Winning in the market: The percentage increase in underlying revenue derived
Adoption of Sage X3 from Sage X3. 18% 11%
-------------------------------------- ---------------------------------------------------------- -------- --------
Revolutionise business: Our latest technologies are delivered to customers via GBP511m GBP381m
Annualised software subscription base software subscription relationships
("ASB") which drives growth in the ASB, calculated as the amount
of organic software subscription
revenue recorded in the last month of the period
multiplied by 12.
-------------------------------------- ---------------------------------------------------------- -------- --------
Investing for growth is enabled by releasing efficiencies
in General and Administrative ("G&A")
expenses. We track progress by expressing G&A as a
Capacity for growth: percentage of revenue (both on an organic
G&A% basis). 16.5% 18.7%
-------------------------------------- ---------------------------------------------------------- -------- --------
One Sage: Doing business the right way is important at Sage. Giving 13,000 N/A
Foundation Days back to the community through Sage
Foundation allows our colleagues to volunteer to work
with charitable causes. This is the
first year we have had a quantitative measure of One Sage
which recognises the importance
of Sage Foundation within our organisation
-------------------------------------- ---------------------------------------------------------- -------- --------
FINANCIAL DRIVERS KPI DESCRIPTION FY16 FY15
-------------------------------------- ---------------------------------------------------------- -------- --------
Organic revenue neutralises the impact of foreign
exchange in prior period figures and excludes
the contribution of current and prior period
acquisitions, disposals and assets held for sale
Organic revenue growth of standalone businesses. 6.1% 6.0%
-------------------------------------- ---------------------------------------------------------- -------- --------
Organic operating profit excludes:
* Recurring items including amortisation of acquired
intangible assets, acquisition-related items and f
air
value adjustments;
* Non-recurring items that management judge to be
one-off or non-operational; and
* The contribution of current and prior period
acquisitions, disposals and assets held for sale o
f
standalone businesses.
The impact of foreign exchange is neutralised in prior
Organic operating profit margin period figures. 27.2% 26.5%
-------------------------------------- ---------------------------------------------------------- -------- --------
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, 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
Underlying basic EPS growth prior period figures. 9.0% 12.6%
-------------------------------------- ---------------------------------------------------------- -------- --------
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
Underlying cash conversion rates and non-recurring cash items. 100% 106%
-------------------------------------- ---------------------------------------------------------- -------- --------
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
Net debt leverage that management judge to be one-off or non-operational. 0.9:1 1.0:1
-------------------------------------- ---------------------------------------------------------- -------- --------
Statutory operating profit for the last twelve months excluding non-recurring items
that management
judge to be one-off or non-operational, expressed as a multiple of finance costs
excluding
Interest cover imputed interest for the same period. 20x 17x
---------------- --------------------------------------------------------------------------------------- ---- -----
Underlying earnings per share (as reported) divided by the full year dividend per
Dividend cover share. 2.0 1.9x
---------------- --------------------------------------------------------------------------------------- ---- -----
Appendix II - Non-GAAP measures
MEASURE DESCRIPTION WHY WE USE IT
------------------------------- ------------------------------------------ -----------------------------------------
Underlying Prior period underlying measures are Underlying measures allow management
retranslated at the current year and investors to compare performance
exchange rates to neutralise without the potentially
the effect of currency fluctuations. distorting effects of foreign
exchange movements, one-off items or
Underlying operating profit excludes: non-operational items.
-- Recurring items:
-- Amortisation of acquired By including part-period
intangible assets; contributions from acquisitions,
-- Acquisition-related items; disposals and assets held for sale
-- Fair value adjustments on of standalone businesses in the
non-debt-related financial current and/or prior periods, the
instruments and foreign currency impact of M&A decisions
movements on earnings per share growth can be
on intercompany debt balances; and evaluated.
-- Non-recurring items that
management judge are one-off or
non-operational
Underlying profit before tax
excludes:
-- All the items above; and
-- 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.
------------------------------- ------------------------------------------ -----------------------------------------
Organic In addition to the adjustments made Organic measures allow management
for underlying measures, organic and investors to understand the
measures exclude the like-for-like performance
contribution from acquisitions, of the business.
disposals and assets held for sale of
standalone businesses
in the current and prior period.
Acquisitions and disposals which
occurred close to the start
of the opening comparative period
where the contribution impact would
be immaterial are not
adjusted.
------------------------------- ------------------------------------------ -----------------------------------------
Underlying cash conversion Underlying cash conversion is Underlying cash conversion informs
underlying cash flow from operating management and investors about the
activities divided by underlying cash operating cycle
operating profit. Underlying cash of the business and how efficiently
flow from operating activities is operating profit is converted into
statutory cash flow from cash.
operating activities less net capital
expenditure and adjusted for
movements on foreign exchange
rates and non-recurring cash items.
------------------------------- ------------------------------------------ -----------------------------------------
Underlying (as reported) Where prior period underlying This measure is used to report
measures are included without comparative figures for external
retranslation at current period reporting purposes where it
exchange rates, they are labelled as would not be appropriate to
underlying (as reported). retranslate. For instance, on the
face of primary financial
statements.
------------------------------- ------------------------------------------ -----------------------------------------
Revenue Type 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.
---------------------------------------------------- ----------------------------------------------------------------
Consolidated income statement
For the year ended 30 September 2016
Underlying
Underlying Adjustments Statutory as reported Adjustments Statutory
2016 2016 2016 2015 2015 2015
Note GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ==== ========== =========== ========= ============ ============ =========
Revenue 2 1,569.1 - 1,569.1 1,435.5 - 1,435.5
Cost of sales (103.0) - (103.0) (86.7) - (86.7)
=========================== ==== ========== =========== ========= ============ ============ =========
Gross profit 1,466.1 - 1,466.1 1,348.8 - 1,348.8
Selling and administrative
expenses (1,039.1) (126.6) (1,165.7) (968.9) (82.7) (1,051.6)
Operating profit 2 427.0 (126.6) 300.4 379.9 (82.7) 297.2
Share of loss
of an associate (0.4) (0.6) (1.0) - - -
Finance income 2.4 2.7 5.1 2.2 - 2.2
Finance costs (24.1) (5.9) (30.0) (23.6) - (23.6)
=========================== ==== ========== =========== ========= ============ ============ =========
Profit before
income tax 404.9 (130.4) 274.5 358.5 (82.7) 275.8
Income tax expense 4 (105.1) 38.2 (66.9) (90.3) 8.8 (81.5)
=========================== ==== ========== =========== ========= ============ ============ =========
Profit for the
period 299.8 (92.2) 207.6 268.2 (73.9) 194.3
=========================== ==== ========== =========== ========= ============ ============ =========
Profit attributable
to:
Owners of the
parent 299.8 (92.2) 207.6 268.2 (73.9) 194.3
Earnings per share
attributable to
the owners of
the parent (pence)
Basic 6 27.84p 19.28p 25.00p 18.11p
Diluted 6 27.67p 19.16p 24.85p 18.00p
=========================== ==== ========== =========== ========= ============ ============ =========
Consolidated statement of comprehensive income
For the year ended 30 September 2016
2016 2015
GBPm GBPm
============================================================================= ===== ======
Profit for the period 207.6 194.3
Other comprehensive income/(expense) for the period:
Items that will not be reclassified to profit or loss:
Actuarial loss on post-employment benefit obligations (2.2) (4.8)
Deferred tax credit on actuarial loss on post-employment benefit obligations 0.8 0.6
(1.4) (4.2)
============================================================================= ===== ======
Items that may be reclassified to profit or loss:
Deferred tax credit on foreign currency movements 2.6 -
Exchange differences on translating foreign operations 117.1 (23.2)
119.7 (23.2)
============================================================================= ===== ======
Other comprehensive income/(expense) for the period, net of tax 118.3 (27.4)
============================================================================= ===== ======
Total comprehensive income for the period 325.9 166.9
Total comprehensive income for the period attributable to:
Owners of the parent 325.9 166.9
============================================================================= ===== ======
The notes on pages 25 to 36 form an integral part of this
condensed consolidated report.
Consolidated balance sheet
As at 30 September 2016
2016 2015
Note GBPm GBPm
======================================================= ===== ========== ====================
Non-current assets
Goodwill 7 1,658.5 1,446.0
Other intangible assets 7 109.3 105.5
Property, plant and equipment 7 123.4 122.7
Investment in an associate 9.0 -
Other financial assets 2.7 -
Deferred income tax assets 58.4 34.2
1,961.3 1,708.4
======================================================= ===== ========== ====================
Current assets
Inventories 2.1 2.0
Trade and other receivables 419.5 320.9
Current income tax asset 7.9 -
Cash and cash equivalents (excluding bank overdrafts) 10 264.5 263.4
Assets classified as held for sale 1.0 -
======================================================= ===== ========== ====================
695.0 586.3
======================================================= ===== ========== ====================
Total assets 2,656.3 2,294.7
======================================================= ===== ========== ====================
Current liabilities
Trade and other payables (350.5) (311.2)
Current income tax liabilities (20.7) (31.4)
Borrowings (43.3) (33.6)
Provisions (37.6) (9.9)
Deferred income (535.8) (436.5)
Liabilities classified as held for sale (0.4) -
======================================================= ===== ========== ====================
(988.3) (822.6)
======================================================= ===== ========== ====================
Non-current liabilities
Borrowings (534.4) (571.4)
Post-employment benefits (25.3) (18.7)
Deferred income tax liabilities (13.2) (7.3)
Provisions (29.4) (10.4)
Trade and other payables (7.5) -
Deferred income (4.9) (2.2)
(614.7) (610.0)
======================================================= ===== ========== ====================
Total liabilities (1,603.0) (1,432.6)
======================================================= ===== ========== ====================
Net assets 1,053.3 862.1
======================================================= ===== ========== ====================
Equity attributable to owners of the parent
Ordinary shares 9 11.8 11.8
Share premium 9 544.4 541.2
Other reserves 186.6 66.9
Retained earnings 310.5 242.2
======================================================= ===== ========== ====================
Total equity 1,053.3 862.1
------------------------------------------------------- ----- ---------- --------------------
Consolidated statement of changes in equity
For the year ended 30 September 2016
Attributable to owners
of the parent
============================================================= =================================================
Ordinary Share Other Retained
shares premium reserves earnings Total
GBPm GBPm GBPm GBPm GBPm
============================================================= ======== ======== ========= ========= =======
At 1 October 2015 11.8 541.2 66.9 242.2 862.1
============================================================= ======== ======== ========= ========= =======
Profit for the year - - - 207.6 207.6
Other comprehensive income/(expense):
Exchange differences on translating foreign operations - - 117.1 - 117.1
Deferred tax credit on foreign currency movements - - 2.6 - 2.6
Actuarial loss on post-employment benefit obligations - - - (2.2) (2.2)
Deferred tax credit on actuarial gain on post-employment
obligations - - - 0.8 0.8
============================================================= ======== ======== ========= ========= =======
Total comprehensive income for the period ended
30 September 2016 - - 119.7 206.2 325.9
============================================================= ======== ======== ========= ========= =======
Transactions with owners:
Employee share option scheme:
* Proceeds from shares issued - 3.2 - - 3.2
* Value of employee services, net of deferred tax - - - 9.3 9.3
Purchase of treasury shares - - - (2.4) (2.4)
Dividends paid to owners of the parent - - - (144.8) (144.8)
============================================================= ======== ======== ========= ========= =======
Total transactions with owners for the period
ended 30 September 2016 - 3.2 - (137.9) (134.7)
============================================================= ======== ======== ========= ========= =======
At 30 September 2016 11.8 544.4 186.6 310.5 1,053.3
============================================================= ======== ======== ========= ========= =======
Attributable to owners
of the parent
============================================================= =================================================
Ordinary Share Other Retained
shares premium reserves earnings Total
GBPm GBPm GBPm GBPm GBPm
============================================================= ======== ======== ========= ========= =======
At 1 October 2014 11.7 535.9 90.1 130.2 767.9
============================================================= ======== ======== ========= ========= =======
Profit for the year - - - 194.3 194.3
Other comprehensive (expense)/income:
Exchange differences on translating foreign operations - - (23.2) - (23.2)
Actuarial loss on post-employment benefit obligations - - - (4.8) (4.8)
Deferred tax credit on actuarial gain on post-employment
obligations - - - 0.6 0.6
============================================================= ======== ======== ========= ========= =======
Total comprehensive (expense)/income for the
period ended 30 September 2015 - - (23.2) 190.1 166.9
============================================================= ======== ======== ========= ========= =======
Transactions with owners:
Employee share option scheme:
* Proceeds from shares issued 0.1 5.3 - - 5.4
* Value of employee services, net of deferred tax - - - 10.1 10.1
Purchase of treasury shares - - - (14.6) (14.6)
Expenses related to the purchase of treasury
shares - - - (0.1) (0.1)
Close period share buyback programme - - - 60.0 60.0
Dividends paid to owners of the parent - - - (133.5) (133.5)
============================================================= ======== ======== ========= ========= =======
Total transactions with owners for the period
ended 30 September 2015 0.1 5.3 - (78.1) (72.7)
============================================================= ======== ======== ========= ========= =======
At 30 September 2015 11.8 541.2 66.9 242.2 862.1
============================================================= ======== ======== ========= ========= =======
Consolidated statement of cash flows
For the year ended 30 September 2016
2016 2015
Notes GBPm GBPm
============================================= ===== ======= =======
Cash flows from operating activities
Cash generated from continuing operations 10 397.9 418.6
Interest paid (21.1) (19.2)
Income tax paid (92.1) (84.6)
Net cash generated from operating activities 284.7 314.8
============================================= ===== ======= =======
Cash flows from investing activities
Acquisitions of subsidiaries, net of
cash acquired 11 (6.4) (47.3)
Purchases of intangible assets 7 (7.7) (6.0)
Purchases of property, plant and equipment 7 (23.5) (16.4)
Purchase of investment in an associate (10.0) -
Proceeds from sale of property, plant
and equipment 0.1 2.1
Interest received 2.4 2.2
Net cash generated from investing activities (45.1) (65.4)
============================================= ===== ======= =======
Cash flows from financing activities
Proceeds from issuance of ordinary
shares 9 3.2 5.4
Purchase of treasury shares (2.4) (17.7)
Finance lease principal payments (0.6) (1.4)
Proceeds from borrowings 69.2 481.2
Repayments of borrowings (188.8) (474.5)
Movements in cash held on behalf of
customers (13.0) 12.5
Borrowing costs (1.5) (1.3)
Dividends paid to owners of the parent 5 (144.8) (133.5)
============================================= ===== ======= =======
Net cash used in financing activities (278.7) (129.3)
============================================= ===== ======= =======
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts
(before exchange rate movement) 10 (39.1) 120.1
Effects of exchange rate movement 10 35.9 (0.4)
============================================= ===== ======= =======
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts (3.2) 119.7
Cash, cash equivalents and bank overdrafts
at 1 October 10 263.4 143.7
============================================= ===== ======= =======
Cash, cash equivalents and bank overdrafts
at period end 10 260.2 263.4
============================================= ===== ======= =======
Notes to the financial information
For the year ended 30 September 2016
1 Group accounting policies
General information
The Sage Group plc ("the Company") and its subsidiaries
(together "the Group") is a leading global supplier of business
management software to Small & Medium Businesses.
The financial information set out above does not constitute the
Company's Statutory Accounts for the year ended 30 September 2016
or 2015, but is derived from those accounts. Statutory Accounts for
the year ended 30 September 2015 have been delivered to the
Registrar of Companies and those for 2016 will be delivered in
December 2016. The auditors have reported on both sets of accounts;
their reports were unqualified and did not contain statements under
section 498 (2), (3) or (4) of the Companies Act 2006.
Whilst the financial information included in this announcement
has been computed in accordance with International Financial
Reporting Standards ("IFRSs") as adopted by the European Union
("EU"), this announcement does not in itself contain sufficient
information to comply with IFRSs. The financial information has
been prepared on the basis of the accounting policies as set out in
the Annual Report & Accounts for 2015.
The Company is a limited liability company incorporated and
domiciled in the UK. The address of its registered office is North
Park, Newcastle upon Tyne, NE13 9AA. The Company is listed on the
London Stock Exchange.
Basis of preparation
The consolidated financial statements of The Sage Group plc have
been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union ("EU"). The
consolidated financial statements have been prepared under the
historical cost convention, except where adopted IFRS require an
alternative treatment. The principal variations from the historical
cost convention relate to derivative financial instruments which
are measured at fair value through profit or loss.
The financial statements of the Group comprise the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) prepared at the end of the reporting period. The
accounting policies have been consistently applied across the
Group. Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to
benefit from its activities which is usually from date of
acquisition.
Adoption of new and revised IFRSs
There are no IFRS, IAS amendments or IFRIC interpretations
effective for the first time this financial year that have had a
material impact on the Group.
Critical accounting estimates and judgements
The preparation of financial statements requires the use of
accounting estimates and assumptions by management. It also
requires management to exercise its judgement in the process of
applying the accounting policies. We continually evaluate our
estimates, assumptions and judgements based on available
information. The areas involving a higher degree of judgement or
complexity are described below.
The judgements and management's rationale in relation to these
accounting estimates and judgements are assessed and, where
material in value or in risk, are discussed with the Audit and Risk
Committee.
Revenue recognition
Approximately 30% of the company's revenue is generated from
sales to partners rather than to end users. The key judgement in
accounting for the three principal ways in which our business
partners are remunerated is determining whether the business
partner is a customer of the Group in respect of the initial
product sale. The key criteria in this determination is whether the
business partner has paid for and taken on the risks and rewards of
ownership of the software product from Sage. At this point the
business partner is able to sell on the licence to the end user at
a price of its determination and consequently bears the credit risk
of the onward sale.
Where the business partner is a customer of Sage, there are two
ways in which they can be remunerated. Firstly, there are discounts
granted as a discount from the list price. These discounts are
negotiated between the Company and the business partner prior to
the sale and invoices are raised, and revenue booked is based on
the discounted price. Secondly, there are further discounts given
to business partners for subsequent renewals or increased sales to
the end user. These discounts are recognised as a deduction from
the incremental revenue earned.
Where the business partner is not a customer of Sage and their
part in the sale has simply been in the form of a referral, they
are remunerated in the form of a commission payment. These payments
are treated as a cost within selling and administrative costs.
An additional area of judgement is the recognition and deferral
of revenue on bundled products, for example the sale of a perpetual
licence with an annual maintenance and support contract. When
products are bundled together for the purpose of sale, the
associated revenue, net of all applicable discounts, is allocated
between the constituent parts of the bundle on a relative fair
value basis. The Group has a systematic basis for allocating
relative fair values in these situations, based upon published list
prices.
Goodwill impairment
There are two key judgements in relation to goodwill
impairment.
The first is the ongoing appropriateness of the cash-generating
units ("CGUs") for the purpose of impairment testing. In the
current year CGUs were assessed in the context of the Group's
evolving business model, the Sage strategy and the shift to global
product development. As management continues to monitor goodwill at
a country level and product cash flows are still predominantly
generated
by the existing product base within each country, it was
determined that the existing CGUs remain appropriate.
The other key judgement area relates to the assumptions applied
in calculating the value in use of the CGUs being tested for
impairment. The key assumptions applied in the calculation relate
to the future performance expectations of the business - average
medium-term revenue growth and long term growth rate - as well as
the discount rate to be applied in the calculation.
Tax provisions
The Group recognises certain provisions and accruals in respect
of tax which involve a degree of estimation and uncertainty where
the tax treatment cannot finally be determined until a resolution
has been reached by the relevant tax authority. This approach
resulted in providing GBP18.7m as at 30 September 2016 (2015:
GBP32.8m).
The carrying amount is sensitive to the resolution of issues
which is not always within the control of the Group and it is often
dependent on the efficiency of the legal processes in the relevant
taxing jurisdictions in which the Group operates. Issues can take
many years to resolve and assumptions on the likely outcome have
therefore been made by management.
The nature of the assumptions made by management when
calculating the carrying amounts relates to the estimated tax which
could be payable as a result of decisions by tax authorities in
respect of transactions and events whose treatment for tax purposes
is uncertain. In making the estimates, management's judgement was
based on various factors, including:
-- the status of recent and current tax audits and enquiries;
-- the results of previous claims; and
-- any changes to the relevant tax environments.
When making this assessment, we utilise our specialist in-house
tax knowledge and experience of similar situations elsewhere to
confirm these provisions. These judgements also take into
consideration specialist tax advice provided by third party
advisors on specific items.
Website
This condensed consolidated annual financial report for the year
ended 30 September 2016 can also be found on our website:
www.sage.com/investors/investor-downloads
2 Segment information
In accordance with IFRS 8, "Operating Segments", information for
the Group's operating segments has been derived using the
information used by the chief operating decision maker. The Group's
Executive Committee has been identified as the chief operating
decision maker in accordance with their designated responsibility
for the allocation of resources to operating segments and assessing
their performance, through the Quarterly Business Reviews ("QBRs")
chaired by the Chief Executive Officer and Chief Financial Officer.
The Executive Committee use organic and underlying data to monitor
business performance. Operating segments are reported in a manner
which is consistent with the operating segments produced for
internal management reporting.
The Group is organised into four key operating segments, with
Brazil being aggregated with AAMEA with which there are similar
economic characteristics to form the International reporting
segment. The UK is the home country of the parent. The reporting
segments and their main operating territories are as follows:
-- Europe (France, UK & Ireland, Spain, Germany, Switzerland, Poland, Portugal and Sage Pay)
-- North America (US and Canada)
-- International (Brazil, Africa, Australia, Middle East and Asia)
The Africa operations are principally based in South Africa; the
Middle East and Asia operations are principally based in Singapore,
Malaysia and UAE.
The revenue analysis in the table below is based on the location
of the customer which is not materially different from the location
where the order is received and where the assets are located.
Revenue by segment
Year ended 30 September Change
2016
====================================== ===================== =======
Statutory Organic
and underlying adjustments Organic
GBPm GBPm GBPm Statutory Underlying Organic
=================== =============== ============ ======= ========= ========== =======
Recurring revenue by segment
Europe 641.7 - 641.7 13.5% 10.2% 10.2%
North
America 307.9 - 307.9 16.3% 8.5% 8.5%
International 143.3 (1.1) 142.2 7.7% 15.8% 16.0%
===================== =============== ============ ======= ========= ========== =======
Recurring revenue 1,092.9 (1.1) 1,091.8 13.5% 10.4% 10.4%
===================== =============== ============ ======= ========= ========== =======
Software and software related services
("SSRS") revenue by segment
Europe 149.1 - 149.1 (4.0%) (7.4%) (7.4%)
North
America 70.5 - 70.5 (0.8%) (7.6%) (7.6%)
International 52.6 (0.8) 51.8 (18.2%) (13.5%) (12.4%)
===================== =============== ============ ======= ========= ========== =======
SSRS revenue 272.2 (0.8) 271.4 (6.4%) (8.7%) (8.5%)
===================== =============== ============ ======= ========= ========== =======
Processing revenue by segment
Europe 36.2 - 36.2 11.7% 11.5% 11.5%
North
America 157.1 - 157.1 11.3% 2.9% 2.9%
International 10.7 - 10.7 32.1% 49.8% 49.8%
===================== =============== ============ ======= ========= ========== =======
Processing revenue 204.0 - 204.0 12.3% 6.1% 6.1%
===================== =============== ============ ======= ========= ========== =======
Total revenue by segment
Europe 827.0 - 827.0 9.8% 6.6% 6.6%
North
America 535.5 - 535.5 12.3% 4.4% 4.4%
International 206.6 (1.9) 204.7 0.6% 7.8% 8.4%
===================== =============== ============ ======= ========= ========== =======
Total
revenue 1,569.1 (1.9) 1,567.2 9.3% 6.0% 6.1%
===================== =============== ============ ======= ========= ========== =======
Revenue by segment (continued)
Year ended 30 September
2015
=================== ============ ==============================================
Statutory
and
Underlying Impact
as of foreign Organic
Reported exchange Underlying adjustments Organic
GBPm GBPm GBPm GBPm GBPm
=================== ============ =========== ========== ============ =======
Recurring revenue
by segment
Europe 565.3 17.1 582.4 - 582.4
North America 264.7 19.0 283.7 - 283.7
International 133.1 (9.3) 123.8 (1.2) 122.6
=================== ============ =========== ========== ============ =======
Recurring revenue 963.1 26.8 989.9 (1.2) 988.7
=================== ============ =========== ========== ============ =======
Software and software related services ("SSRS")
revenue by segment
Europe 155.3 5.7 161.0 - 161.0
North America 71.1 5.2 76.3 - 76.3
International 64.3 (3.5) 60.8 (1.7) 59.1
========================= ============ =========== ========== ============ =======
SSRS revenue 290.7 7.4 298.1 (1.7) 296.4
========================= ============ =========== ========== ============ =======
Processing revenue by segment
Europe 32.4 0.2 32.6 - 32.6
North America 141.2 11.5 152.7 - 152.7
International 8.1 (1.0) 7.1 - 7.1
========================= ============ =========== ========== ============ =======
Processing
revenue 181.7 10.7 192.4 - 192.4
========================= ============ =========== ========== ============ =======
Total revenue
by segment
Europe 753.0 23.0 776.0 - 776.0
North America 477.0 35.7 512.7 - 512.7
International 205.5 (13.8) 191.7 (2.9) 188.8
========================= ============ =========== ========== ============ =======
Total revenue 1,435.5 44.9 1,480.4 (2.9) 1,477.5
========================= ============ =========== ========== ============ =======
Operating profit by segment
Year ended 30 September
2016 Change
================ ========= ====================================== ======= ========= ========== =======
Underlying Organic
Statutory adjustments Underlying adjustments Organic Statutory Underlying Organic
GBPm GBPm GBPm GBPm GBPm % % %
================ ========= ============ ========== ============ ======= ========= ========== =======
Operating profit by segment
Europe 167.6 88.1 255.7 - 255.7 (22.6%) 12.7% 12.7%
North America 106.0 28.3 134.3 - 134.3 11.7% 15.9% 15.9%
International 26.8 10.2 37.0 (0.1) 36.9 - (25.5%) (23.4%)
================== ========= ============ ========== ============ ======= ========= ========== =======
Total operating
profit 300.4 126.6 427.0 (0.1) 426.9 1.1% 8.8% 9.2%
================== ========= ============ ========== ============ ======= ========= ========== =======
Year ended 30 September
2015
================= ========= ===========================================================================
Impact
Underlying Underlying of foreign Organic
Statutory adjustments as reported exchange Underlying adjustments Organic
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ========= ============ ============ =========== =========== ============ =======
Operating profit
by segment
Europe 216.6 6.4 223.0 3.9 226.9 - 226.9
Americas 94.9 7.5 102.4 13.5 115.9 - 115.9
International (14.3) 68.8 54.5 (5.0) 49.5 (1.3) 48.2
==================== ========= ============ ============ =========== =========== ============ =======
Total operating
profit 297.2 82.7 379.9 12.4 392.3 (1.3) 391.0
==================== ========= ============ ============ =========== =========== ============ =======
Reconciliation of underlying operating profit to statutory
operating profit
Year ended Year ended
30 September 2016 30 September 2015
GBPm GBPm
================================================ =================== ===================
Underlying operating profit 427.0 379.9
Amortisation of acquired intangible assets (18.2) (18.2)
Other acquisition-related items (0.7) -
Goodwill impairment and fair value adjustments - (64.5)
Non-recurring items (107.7) -
================================================ =================== ===================
Statutory operating profit 300.4 297.2
================================================== =================== ===================
3 Adjustments between underlying profit and statutory profit
Year Year Year Year Year Year
ended ended ended ended ended ended
30 September 30 September 30 September 30 September 30 September 30 September
2016 2016 2016 2015 2015 2015
Non- Non-
Recurring recurring Total Recurring recurring Total
GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ============= ============= ============= ============= ============= =============
Amortisation of
acquired intangibles 18.2 - 18.2 18.2 - 18.2
Fair value adjustments - - - 2.2 - 2.2
Other acquisition-related
items 0.7 - 0.7 - - -
Litigation related
items - (2.2) (2.2) - - -
Transformation
costs - 109.9 109.9 - - -
Goodwill impairment - - - - 62.3 62.3
Total adjustments
made to operating
profit 18.9 107.7 126.6 20.4 62.3 82.7
Fair value adjustments (2.7) - (2.7) - - -
Amortisation of
acquired intangibles 0.6 - 0.6 - - -
Foreign currency
movements on intercompany
balances 5.9 - 5.9 - - -
Total adjustments
made to profit
before income
tax 22.7 107.7 130.4 20.4 62.3 82.7
=========================== ============= ============= ============= ============= ============= =============
Recurring items
Acquired intangibles are assets which have previously been
recognised as part of business combinations. These assets are
predominantly brands, customer relationships and technology
rights.
Other acquisition-related items relate to completed transaction
costs and include advisory, legal, accounting, valuation and other
professional or consulting services.
The fair value adjustment relates to an embedded derivative
asset which relates to contractual terms agreed as part of the US
private placement debt.
Amortisation of acquired intangibles below operating profit
relates to the Group's share of the amortisation of intangible
assets arising on the acquisition of an investment in an associate
accounted for under the equity method.
Foreign currency movements on intercompany balances of GBP5.9m
occurs due to retranslation of intercompany balances other than
those where settlement is not planned or likely in the foreseeable
future. The balance arises in the current year due to fluctuation
in exchange rates, predominately the movement in Euro and US Dollar
compared to sterling.
The prior year fair value adjustment of GBP2.2m relates to an
accounting loss on fair valuation of the call option in relation to
the possible acquisition of Mastermaq.
Non-recurring items
Net charges in respect of non-recurring items amounted to
GBP107.7m (2015: GBP62.3m).
Charges of GBP109.9m have been incurred in the current year as a
result of the implementation of the business transformation
strategy. This is comprised of people reorganisation charges of
GBP51.5m, net property exit costs of GBP39.7m and other directly
attributable costs, mainly relating to consultancy, contractor and
asset write downs, of GBP18.7m.
The people reorganisation charges comprise severance costs of
GBP43.8m with the remaining cost largely arising from retention
payments, transition and overlap costs whilst implementing the new
operating model. The property exit costs consist of net lease exit
costs following consolidation of office space used and impairment
and accelerated depreciation of leasehold improvement assets and
other related assets that are no longer in use due to the property
exits. The other costs include expenditure that is directly
attributable to the implementation of the new operating model under
the business transformation strategy, including advisory, legal,
accounting, valuation and other professional or consulting
services.
These charges are one-off in nature and directly linked to the
business transformation that is under way. Given the scale of the
change, further non-recurring costs will be incurred in the next
financial year.
Total cash paid in relation to the business transformation
strategy totalled GBP57.9m in the year.
In addition, there has been income of GBP2.2m in the year
arising from recovery of costs relating to the Archer Capital
litigation case following its conclusion in 2015. All other
litigation costs which may be incurred through the normal course of
business are charged through operating expenses.
As a result of the prior year annual goodwill impairment review,
an impairment of the goodwill held in the Brazilian business was
recognised in 2015, totalling GBP62.3m.
4 Income tax expense
The statutory effective income tax rate for the year ended 30
September 2016 is 24% (2015: 30%), whilst the effective tax rate on
underlying profit before tax was 26% (2015: 25%). The difference
between the statutory effective tax rate and the underlying tax
rate relates to non-recurring items which are deductible in
countries with a tax rate higher than the UK.
The underlying effective tax rate is higher than the UK
corporation tax rate applicable to the Group due to the geographic
profile of the Group. In addition, there is an obligation to
account for local business taxes in the corporate tax expense.
These additional tax expenses are offset by research and
development tax credits which are a government incentive in a
number of operating territories.
5 Dividends
Year ended Year ended
30 September 30 September
2016 2015
GBPm GBPm
================================== ============= =============
Final dividend paid for the year
ended 30 September 2015 of 8.65p
per share 93.0 -
Final dividend paid for the year
ended 30 September 2014 of 8.00p
per share - 85.7
Interim dividend paid for the
year ended 30 September 2016 of
4.80p per share 51.8 -
Interim dividend paid for the
year ended 30 September 2015 of
4.45p per share - 47.8
144.8 133.5
================================== ============= =============
In addition, the directors are proposing a final dividend in
respect of the financial year ended 30 September 2016 of 9.35p per
share which will absorb an estimated GBP101m of shareholders'
funds. It will be paid on 3 March 2017 to shareholders who are on
the register of members on 10 February 2017. These financial
statements do not reflect this dividend payable.
6 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to owners of the parent by the weighted
average number of ordinary shares in issue during the year,
excluding those held as treasury shares, which are treated as
cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares, exercisable at the end of the
year. The Group has one class of dilutive potential ordinary
shares. They are share options granted to employees, where the
exercise price is less than the average market price of the
Company's ordinary shares during the year.
Underlying Underlying as reported Underlying Statutory Statutory
2016 2015 2015 2016 2015
=========================================== =========== ======================= =========== ========== ==========
Earnings attributable to owners of the
parent (GBPm)
Profit for the period 299.8 268.2 274.0 207.6 194.3
=========================================== =========== ======================= =========== ========== ==========
Number of shares (millions)
Weighted average number of shares 1,077.0 1,073.0 1,073.0 1,077.0 1,073.0
Dilutive effects of shares 6.3 6.5 6.5 6.3 6.5
=========================================== =========== ======================= =========== ========== ==========
1,083.3 1,079.5 1,079.5 1,083.3 1,079.5
=========================================== =========== ======================= =========== ========== ==========
Earnings per share attributable to owners
of the parent (pence)
Basic earnings per share 27.84 25.00 25.54 19.28 18.11
=========================================== =========== ======================= =========== ========== ==========
Diluted earnings per share 27.67 24.85 25.38 19.16 18.00
=========================================== =========== ======================= =========== ========== ==========
Year ended Year ended
30 September 30 September
2016 2015
Reconciliation of earnings GBPm GBPm
=========================================== ============= =============
Underlying earnings attributable
to owners of the parent 299.8 274.0
Impact of movement in foreign currency
exchange rates - (5.8)
=========================================== ============= =============
Underlying earnings attributable
to owners of the parent (as previously
reported) 299.8 268.2
Amortisation of acquired intangible
assets (18.8) (18.2)
Goodwill impairment and fair value
adjustments 2.7 (64.5)
Foreign currency movements on intercompany
balances (5.9) -
Other acquisition-related items (0.7) -
Transformation costs and litigation
related items (107.7) -
Taxation on adjustments 38.2 8.8
=========================================== ============= =============
Net adjustments (92.2) (73.9)
=========================================== ============= =============
Earnings statutory profit for the
year 207.6 194.3
=========================================== ============= =============
7 Non-current assets
Other
intangible Property, plant
Goodwill assets and equipment Total
GBPm GBPm GBPm GBPm
================================================ ========= ============ ================ ========
Opening net book amount at 1 October 2015 1,446.0 105.5 122.7 1,674.2
Additions - 7.7 23.5 31.2
Acquisition - 6.4 - 6.4
Disposals - (0.2) (0.1) (0.3)
Depreciation, amortisation and other movements - (29.6) (22.2) (51.8)
Impairment - - (6.6) (6.6)
Exchange movement 212.5 19.5 6.1 238.1
================================================ ========= ============ ================ ========
Closing net book amount at 30 September 2016 1,658.5 109.3 123.4 1,891.2
================================================ ========= ============ ================ ========
Other
intangible Property, plant
Goodwill assets and equipment Total
GBPm GBPm GBPm GBPm
================================================ ========= ============ ================ ========
Opening net book amount at 1 October 2014 1,433.0 98.1 126.7 1,657.8
Additions - 6.0 16.4 22.4
Acquisition 61.9 34.2 1.0 97.1
Disposals - (0.2) (2.1) (2.3)
Depreciation, amortisation and other movements - (29.1) (18.2) (47.3)
Impairment (62.3) - - (62.3)
Exchange movement 13.4 (3.5) (1.1) 8.8
================================================= ========= ============ ================ ========
Closing net book amount at 30 September 2015 1,446.0 105.5 122.7 1,674.2
================================================= ========= ============ ================ ========
Goodwill is not subject to amortisation, but is tested for
impairment annually at the year-end or whenever there is any
indication of impairment. The Group performed its annual test for
impairment in the third quarter of 2016. The recoverable amount
exceeded the carrying value for all CGUs. In the prior year an
impairment of GBP62.3m was recognised, driven by economic
uncertainty in Brazil.
Detail of the current period acquisition has been provided in
note 11.
8 Financial instruments
For financial assets and liabilities other than borrowings, the
carrying amount of the financial instrument approximates the fair
value of the instruments. At 30 September 2016, USPP borrowings
with a carrying value of GBP577.7m had a fair value of GBP602.9m
due to bearing interest at fixed rates which are currently higher
than equivalent current market fixed rates.
9 Ordinary shares and share premium
Number of Ordinary Share
shares shares premium Total
GBPm GBPm GBPm
======================== ============== ========= ========= ======
At 1 October 2015 1,118,298,748 11.8 541.2 553.0
Shares issued/proceeds 1,181,615 - 3.2 3.2
======================== ============== ========= ========= ======
At 30 September 2016 1,119,480,363 11.8 544.4 556.2
======================== ============== ========= ========= ======
Ordinary
Number of Shares Share premium Total
shares GBPm GBPm GBPm
======================== ============== ========= ============== ======
At 1 October 2014 1,115,892,047 11.7 535.9 547.6
Shares issued/proceeds 2,406,701 0.1 5.3 5.4
======================== ============== ========= ============== ======
At 30 September 2015 1,118,298,748 11.8 541.2 553.0
======================== ============== ========= ============== ======
During the year, under the Executive Share Option Scheme,
500,489 1(4/77) p ordinary shares were issued during the year for
aggregate proceeds of GBP0.9m. Under the Savings-related Share
Option Scheme, 675,608 1(4/77) p ordinary shares were issued for
aggregate proceeds of GBP2.3m.
10 Cash flow and net debt
Reconciliation of profit for the year to cash generated Year ended 30 September 2016 Year ended 30 September 2015
from continuing operations GBPm GBPm
======================================================== ============================= =============================
Profit for the year 207.6 194.3
Adjustments for:
Income tax 66.9 81.5
Finance income (5.1) (2.2)
Finance costs 30.0 23.6
Share of loss of an associate 1.0 -
Amortisation and impairment of intangible assets 29.6 29.1
Depreciation and impairment of property, plant and
equipment 28.8 18.2
R&D tax credits (2.0) (2.3)
Equity-settled share-based transactions 7.9 9.1
Fair value adjustments and goodwill impairment - 64.5
Exchange movement (0.4) (4.7)
Changes in working capital (excluding effects of
acquisitions and disposals of subsidiaries):
- Decrease/(increase) in inventories 0.2 (0.2)
- Increase in trade and other receivables (53.8) (8.4)
- Increase/(decrease) in trade and other payables 50.8 (6.8)
- Increase in deferred income 36.4 22.9
Cash generated from continuing operations 397.9 418.6
======================================================== ============================= =============================
2016 2015
Reconciliation of net cash flow to movement in net debt (inclusive of finance leases) GBPm GBPm
================================================================================================== ======== ========
(Decrease)/increase in cash in the year (pre-exchange movements) (22.7) 90.5
Cash inflow/(outflow) from movement in loans, finance leases and cash held on behalf of customers 133.2 (17.8)
================================================================================================== ======== ========
Change in net debt resulting from cash flows 110.5 72.7
Acquisitions (16.4) (21.3)
Non-cash movements (1.0) -
Exchange movement (64.7) (39.6)
================================================================================================== ======== ========
Movement in net debt in the year 28.4 11.8
Net debt at 1 October (425.4) (437.2)
Net debt at 30 September (397.0) (425.4)
================================================================================================== ======== ========
Analysis of At At 30
change in net 1 October Cash Acquisitions Non-cash Exchange September
debt (inclusive 2015 flow GBPm movements movement 2016
of finance leases) GBPm GBPm GBPm GBPm GBPm
======================= ========== ====== ============== ========== ========= ==========
Cash and cash
equivalents 263.4 (18.4) (16.4) - 35.9 264.5
Bank overdrafts - (4.3) - - - (4.3)
======================= ========== ====== ============== ========== ========= ==========
Cash, cash equivalents
and bank overdrafts 263.4 (22.7) (16.4) - 35.9 260.2
Finance leases
due within one
year (0.6) 0.5 - (0.2) (0.1) (0.4)
Loans due within
one year (33.0) 34.7 - (34.7) (5.6) (38.6)
Loans due after
more than one
year (571.0) 84.9 - 33.7 (81.8) (534.2)
Finance leases
due after more
than one year (0.4) 0.1 - 0.2 (0.1) (0.2)
Cash held on
behalf of customers (83.8) 13.0 - - (13.0) (83.8)
======================= ========== ====== ============== ========== ========= ==========
Total (425.4) 110.5 (16.4) (1.0) (64.7) (397.0)
======================= ========== ====== ============== ========== ========= ==========
Included in cash above is GBP83.8m (2015: GBP83.8m) relating to
cash collected from customers. This arises as a consequence of
providing payment processing and electronic fund transfer services.
The balance represents cash in transit from third parties to Sage
Customers. Accordingly, a liability for the same amount is included
in trade and other payables on the balance sheet and is classified
within net debt.
The Group continues to be able to borrow at competitive rates
and currently deems this to be the most effective means of raising
finance. The current Group's syndicated bank multi-currency
revolving credit facility expires in June 2019 with facility levels
of GBP613.5m (GBP525.2m) which consists both of US$551.0m
(GBP424.8m, 2015: GBP364.1m) and EUR218.0m (GBP188.7m, 2015:
GBP161.1m) tranches.
At 30 September 2016, GBPnil (2015: GBP81.6m) of the
multi-currency revolving debt facility was drawn.
Total US private placement ("USPP") loan notes at 30 September
2016 were GBP575.0m (2015: GBP525.2m) consisting of US$650m and
EUREUR85m (2015: US$700m and EUREUR85m). Approximately GBP35m
(US$50m) of USPP borrowings were repaid in March 2016.
11 Acquisitions and disposals
Acquisitions made during the period
On 2 November 2015 the Group acquired trade and business from
People's United Bank, a provider of payroll services for small and
medium sized business in North America, for a total consideration
of GBP6.4m. The transaction price included deferred consideration
of GBP2.0m, which was fully paid in the year. The acquisition
strengthens Sage's position in the large and growing US payroll
market.
The acquisition resulted in the recognition of intangible assets
of GBP6.4m, consisting of customer lists. No goodwill was
recognised.
12 Related party transactions
The Group's related parties are its subsidiary undertakings and
Executive Committee members. The Group has taken advantage of the
exemption available under IAS 24, "Related Party Disclosures", not
to disclose details of transactions with its subsidiary
undertakings.
2016 2015
Key management compensation GBPm GBPm
=========================================== ====== ======
Salaries and short-term employee benefits 7.3 10.0
Post-employment benefits 0.5 0.4
Share-based payments 2.7 2.4
=========================================== ====== ======
10.5 12.8
=========================================== ====== ======
The key management figures given above include Directors. Key
management personnel are deemed to be members of the Executive
Committee.
Supplier transactions occurred during the year between Sage
South Africa (Pty) Ltd, one of the Group's subsidiary companies,
and Ivan Epstein, President, International and Executive Committee
member. These transactions relate to the lease of four properties
in which Ivan Epstein has a minority and indirect shareholding.
During the year GBP4.0m (2015: GBP4.3m) relating to these
transactions was charged through selling and administrative
expenses. There were no outstanding amounts payable for the year
ended 2016 (2015: GBPnil).
Supplier transactions occurred during the year between Sage SP,
S.L., one of the Group's subsidiary companies, and Álvaro Ramírez,
who held the role of President, Europe and Executive Committee
member during the year. These transactions relate to the lease of a
property in which Álvaro Ramírez has a minority shareholding.
During the year GBP0.9m (2015: GBP1.0m) relating to these
transactions was charged through selling and administrative
expenses. There were no outstanding amounts payable for the year
ended 2016 (2015: GBPnil).
These arrangements are subject to independent review using
external advisers to ensure all transactions are at arm's
length.
Managing Risk
Risk is inherent within our business activities, and we continue
to prioritise and develop our risk management strategy and
capability in recognition of this. Timely identification of risks,
combined with their appropriate management and escalation, enables
us to successfully run our business and deliver strategic change,
while ensuring that the likelihood and / or potential impact
associated with such risks is understood and managed within our
defined risk appetite.
The Board continues to monitor the risk environment, and reviews
the appropriateness of the principal risks to the business.
Currently there are ten principal risks which we monitor and
report against. These risks are aligned to successful delivery of
our Strategy and mapped against the strategic pillars to which they
relate. A range of measures are in place to manage and mitigate
these risks, while other activities are in the process of
being developed or deployed
Other risks are analysed and mitigated via the normal embedded
risk management process.
Risk Risk Background Management and Mitigation
================== ============================= ===================================================================
Licensing Sage is transitioning
Model Transition from a perpetual * An approved licensing model transition strategy is in
Sage does to a subscription-based place
not successfully licensing model.
manage In addition to
its transition providing additional * A series of approved subscription revenue targets are
to subscription value for customers, defined, which span multiple years and support
licensing this transition successful and balanced delivery of our strategy
against assists with cash
defined flow; offers a
timelines platform for cross-selling; * Ongoing monitoring and review of the approved targets
and targets and lowers attrition takes place at country, regional and Group levels to
or appropriately rates, which in proactively manage the licence transition, and
adapt its turn aids revenue revenue targets
customer forecasting.
approach. It also provides
regular customer * New products are being offered on a subscription only
Strategic engagement and basis, to support achievement of overall revenue
alignment: enhanced opportunities targets
to develop these
Customers relationships.
for Life The speed of transition * Customer Business Centres (CBCs) are established in
needs to be balanced North America and Europe to integrate digital
against any reduction marketing, sales and service operations for customers
in short-term revenues. using Software as a Service (SaaS), and support
planned growth ambitions
In progress:
* Additional CBCs are being created, to better manage
ongoing customer relationships and the sales cycle
================== ============================= ===================================================================
Market Sage has previously
Intelligence operated as a federated * A Market and Competitive Intelligence team is
Sage fails set of operating established, which has group responsibility for
to understand companies, using Market Intelligence
and anticipate local definitions
changes and methodologies
in the to capture market * Market intelligence surveys are undertaken, to
external data. identify market opportunities
environment, The alignment of
including federated activities
customer allows consolidation * Brand health surveys are undertaken in order to
needs, of data across understand customer perception of the Sage brand and
emerging geographies and its products
market product to provide
trends, a single Sage view,
competitor enabling trends * An approved internal communications plan is delivered,
strategies and white space to share market intelligence to build brand awareness
and regulatory opportunities to
/ legal be identified.
requirements. In order to develop * Market data is provided through a Market Data portal,
a consolidated allowing ease of access and improved analysis
Strategic understanding of
alignment: its market and
Customers customer needs, In progress:
for Life Sage is developing * Action to support the increasing awareness and
Winning its market intelligence quality of the Market Data portal
in the capability, and
Market aligning this with
competitive positioning * Ongoing refinement and improvement of market data
and product development through feedback from the business
activities.
================== ============================= ===================================================================
Competitive The competitive
Positioning environment in * A Product Marketing team is established to oversee
and Product which Sage operates competitive positioning and product development
Development continues to see
Sage is significant development.
unable Sage must translate * A Product Delivery team is established to develop and
to clearly market intelligence deliver products
identify into effective
the approach strategies targeting
to market, attractive market * Battlecards are in place for key products in all
or deploy segments with appropriate countries, setting out the strengths and weaknesses
competitive products and continually of competitors and their products
advantage, work to reinforce
including competitive superiority.
product During the transition * Defined 'customer for life' roadmaps are in place,
development to 'One Sage' products, detailing how products fit together, and any
we continue to interdependencies
Strategic manage the local
alignment: product base and
plan and evolve * A BattleApp has been released to provide timely
Winning these in line with information to sales channels
in the longer-term aspirations.
Market
Capacity In progress:
for Growth
* Prioritised product development based on 'Customer
for life' roadmaps
* Sage wide standard templates are to be launched for
Battlecards to ensure consistent information is
provided
* Analysis of product investments is being enhanced to
further consider anticipated return on investment
================== ============================= ===================================================================
Business Sage has operated
Model Transition as a federated * An approved Business Model Transition Strategy is in
Sage does set of operating place, supported by an overarching plan detailing the
not successfully companies. goal, overall time plan, and scheduled adoption by
manage The move to a 'One countries and functions
its transition Sage' model provides
to a 'One enhanced governance,
Sage' operating process harmonisation, * A programme authority lead is managing transition
model against efficiencies and activity
defined scalability.
timeframes.
* Clear governance is in place to support the strategy
Strategic and overarching plan through the Executive Committee
alignment: and programme steering group
Capacity
for Growth * Consolidated operational reporting is in place and
provides oversight of progress and supports
consistency of direction, and management of potential
conflicts
In progress:
* Country / function transitions are progressing in
line with overarching plan
* On-going monitoring and management of implementation
through the Transformation Forum, including
monitoring of success factors against defined
transition activities
================== ============================= ===================================================================
Supporting Sage's footprint
Control has developed often * Established Global and Regional Risk Committees
Environment through acquisition. oversee the risk and internal control environment,
Sage's Aligning and rationalising and sets the tone-from-the-top
control these systems and
environment, processes, is required
business to support the * Shared Service Centres are established in Newcastle
processes 'One Sage' operating and Johannesburg, enabling the creation of consistent
and technology model. and consolidated systems and processes
infrastructure
do not
support * The Excellence in Governance initiative has developed
the efficient a Sage-wide policy suite, alongside colleague
and effective training and revision to management structures
operation
of the
business * Customer Business Centres (CBCs) are built around
core systems to underpin operational consistency and
Strategic expansion, including Salesforce CRM and Sage's own X3
alignment: for General Ledger activity. As volumes scale, all
new customers for CBC supported products are being
One Sage entered directly into these systems
Capacity
for Growth
In progress:
* Shared Service Centres in Newcastle and Johannesburg
are in the stabilisation phase following installation
of X3 General Ledger
* Post stabilisation plans for migration of other
country General Ledgers is on-track with plans
* Following the success of the 'Excellence in
Governance' initiative, an 'Excellence in Controls'
initiative to enhance the supporting control
environment has commenced
* Selection and deployment of a Governance, Risk and
Compliance technology solution is underway
================== ============================= ===================================================================
Information Sage's footprint
Management has developed through * Accountability is established within both OneIT and
and Protection a process of acquisition, Product for all internal and external data being
(including each arriving with processed by Sage. OneIT and Product Services report
cyber) its own processes to the Chief Information Officer and Chief Product
Sage fails and activities Delivery Officer respectively
to adequately appropriate to
understand, a smaller business,
manage but which did not * A network of Information Security Officers supports
and protect develop in line the business
information with Sage's growth.
Harmonising and
Strategic rationalising these, * Formal certification schemes are maintained, across
alignment: as necessary, is appropriate parts of the business, and include
required to support internal and external validation of compliance
One Sage the 'One Sage'
operating model
and to allow a * Structured and ad-hoc IT internal audit activity is
business view on undertaken by Sage Assurance against an agreed plan,
all data being and reported to management and the Audit and Risk
held and processed, Committee
including management
and protection.
During 2016, we * A revised Sage information security policy suite has
have broadened been launched
the risk to include
all data, both
internal Sage related * The Incident Management framework was revised and
information, and updated, to include the rating of incidents and
external customer requirements for escalation
related information.
In progress:
* Information Security is being aligned with the
existing Governance structures (Global and Regional
Risk Committees), to establish clear accountability
* Awareness training for Information Management and
protection is being rolled out
================== ============================= ===================================================================
Regulatory Sage's services
and Legal operate within * All legal resources across Sage report directly to
Framework a complex regulatory the General Counsel and Company Secretary
Sage does and legal environment.
not understand Monitoring this
and operate evolving regulatory * Legal services use internal and external resources to
within and legal environment monitor planned and realised changes in legislation
the applicable enables timely
regulatory and appropriate
and legal steps to ensure * All product contracts are reviewed and approved
framework ongoing compliance. through Legal services
Strategic
alignment: * An agreed suite of policies is in place as defined
through the Excellence in Governance initiative, and
One Sage has been revised, to support key legislation,
including data protection and anti-bribery
* A Code of Conduct is in place across the business
which provides clarity over how colleagues are
expected to behave. Completion of Code of Conduct
training is mandatory for colleagues, and
confirmation of understanding is recorded and
monitored
* Whistleblowing and Incident Management Policies and
procedures are in place. These have been updated and
processes enhanced in 2016, to ensure appropriate
treatment of identified events, and management
visibility
In progress:
* The appointment of a Sage Head of Compliance and
creation of a Sage Compliance function to reinforce
the drive towards a 100% compliance culture
================== ============================= ===================================================================
Sage Brand Following several
Sage does years of acquisition, * A Brand team is in place which has overall
not deliver work continues responsibility for developing the Sage Brand
clear and to develop and
consistent harmonise the Sage
branding brand. Whilst it * All countries must comply with Sage's Brand
to the is well-recognised Governance and Brand Guidelines, which are designed
market and trusted by to execute the Sage Masterbrand Strategy. The
customers in many timeframes for compliance of all products are defined,
Strategic core markets, brand and any exceptions must be approved through the Brand
alignment: awareness remains team
inconsistent.
One Sage A clear and consistent
brand enables customers * A Digital Asset Management (DAM) tool is in place
to understand Sage which workflows requests and approvals, and acts as a
values. single information repository
* Ongoing reviews of customer experience are performed
(Net Promoter Scores), and output is reviewed across
both countries and products to identify variance, and
develop improvement plans
* Sage Summit 2016 took place in Chicago
* The Sage Foundation was expanded across Sage during
FY16, aligned with our values and behaviours.
In progress:
* All branded assets must be uploaded to the Brand
Library, and any exceptions from brand guidelines
reported to the Chief Marketing Officer
* Compliance Programme to be rolled out, to assess and
educate on compliance with Brand Governance and Brand
Guidelines
* Brand awareness campaign to be launched to improve
Brand recognition
* Sage Summit will take place across eight cities in
2017
================== ============================= ===================================================================
Strategic There are increasing
Partnerships instances where * A Partner and Alliances team is established to
Sage fails developing strategic oversee the selection and management of Sage's
to identify, partnerships will strategic alliances and partners, including
build and benefit Sage. accountability for active management of relationships
maintain The governance
strategic and control around
partnerships. engagement and * Definitions are in place to ensure clarity and
use must be defined, consistency over strategic alliances and partners, to
Strategic as well as management enable appropriate and consistent management of these
alignment: of the ecosystem. arrangements
During 2016, we
Revolutionise have broadened
Business the risk to include * All contracts for strategic alliances require
our extended distribution approval through legal services
network (Sage Partner
Programme).
* Defined legal provisions are required for inclusion
in contracts. Any variance in provisions must be
recorded as part of the formal contract approval
process
In progress:
* Ongoing review and development of the Sage Partner
Programme
* A financial model for the Sage Partner Programme is
being developed
================== ============================= ===================================================================
Third Party Several Sage customer
Reliance service offerings * A Procurement function ensures key controls are
Sage does are delivered or applied in the selection and on-boarding of third
not understand supported using parties
and manage third parties,
its third whilst Sage remains
party ecosystem accountable for * The Procurement function supports the business with
quality of performance. the selection of third parties and negotiation of
Strategic The third party contracts
alignment: ecosystem must
be understood and
Revolutionise effectively managed, * Legal resources are used in contract negotiation
Business in order to limit
Sage's exposure.
* A Procurement Lifecycle Policy and procedures are
defined, agreed and published. These contain clear
roles and responsibilities for colleagues and align
with existing processes, including investment
approval
In progress:
* Implementation of the Procurement Lifecycle
Procedures is underway, including classifying third
parties for business criticality, and associated
actions
* Rationalisation of the third party ecosystem is
continuing
================== ============================= ===================================================================
Statement of Directors' Responsibilities
Responsibility statement of the Directors on the Annual Report
& Accounts
The Annual Report & Accounts for the year ended 30 September
2016 includes the following responsibility statement.
The Directors as at the date of this report, whose names and
functions are listed in the Board of Directors section of the
Annual Report and Accounts, confirm that:
-- To the best of their knowledge, the Group's financial
statements, which have been prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group;
-- To the best of their knowledge, the Directors' report and the
Strategic report include a fair review of the development and
performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that it
faces.
On behalf of the Board
S Hare
Chief Financial Officer
29 November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GMMZMFLMGVZZ
(END) Dow Jones Newswires
November 30, 2016 02:01 ET (07:01 GMT)
Sage (LSE:SGE)
Historical Stock Chart
From Apr 2024 to May 2024
Sage (LSE:SGE)
Historical Stock Chart
From May 2023 to May 2024