Sage Group PLC Directorate Change (3697Z)

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RNS Number : 3697Z

Sage Group PLC

31 August 2018

Directorate Change

The Sage Group plc (the Group) announces today that the Board and Stephen Kelly, Chief Executive Officer, have come to an agreement and Stephen has stepped down as a director and CEO. He will remain available to the Group until he leaves on 31(st) May 2019. The Board has initiated a process to find a new CEO.

The Board has today appointed Steve Hare, Chief Financial Officer, to the additional post of Chief Operating Officer on an interim basis. In his position as CFO and interim COO, Steve Hare will have full executive authority to run the business until the appointment of the new CEO.

The Group remains focused on completing its evolution to a SaaS business, driven by Sage Business Cloud and providing outstanding customer experience, with greater prioritisation on accelerating the operational execution required to realise the significant opportunity available to Sage.

In seeking a new CEO, the Board is particularly focused on finding an executive practiced in embedding sustainable processes at scale for the next phase of the Sage journey to capture the significant opportunities ahead.

Donald Brydon, Chairman, said: "Stephen has much to be proud of in the very heavy lifting he has led as the Group is transformed. He energised the Group, drove change with relentless focus on customers, and under his leadership the strategy to become a leading SaaS business has been defined. The Board remains fully supportive of the overall strategy. We wish Stephen well in the next phase of his life."

Stephen Kelly said: "I joined Sage four years ago and am immensely proud of the extraordinary change that I have had the privilege to lead. I joined a fragmented organisation with minimal presence in the cloud. The major cultural transformation has created Sage Business Cloud which has now grown to GBP386m of annualised recurring revenue (ARR) from a standing start and has driven total shareholder return for Sage of over twice that of the FTSE100 during my tenure. I am proud of my role in positioning Sage as a champion of entrepreneurs and a voice of business heroes. In addition, the Sage Foundation is living proof that companies can make a difference across their communities. It has been an honour to build a world-class management team, to serve my colleagues and inspire in them my overriding passion of customer obsession. I look forward to Sage's continued growth and success."

The Group continues to trade in line with previous full year FY18 guidance of around 7% organic revenue growth and around 27.5% organic operating margin. As indicated when the Group provided its Q3 trading update earlier this month, achieving guidance depends on closing a number of Enterprise Management opportunities in September. The Group will announce its FY18 full year results on 21 November 2018.

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014. The person responsible for making this announcement on behalf of the Group is Miranda Craig (Company Secretary).

Enquiries

The Sage Group plc: [phone]

Lauren Wholley, Investor Relations

Amy Lawson, Corporate PR

FTI Consulting: [phone]

Charles Palmer

Appendix

CEO stepping down

The following information is provided pursuant to section 430(2B) of the Companies Act 2006. The financial terms below have been agreed with Mr Kelly in connection with his announced departure and are in line with the Company's Remuneration Policy which was approved by the shareholders at the 2016 AGM.

The following arrangements will apply in respect of Mr Kelly's notice period:

-- Mr Kelly's 12 month notice period commences immediately. Mr Kelly will spend the first nine months of his notice period on garden leave.

-- During his garden leave Mr Kelly will be available to be consulted at the Board's discretion.

-- Mr Kelly's termination date will be 31 May 2019. Following this date he will receive a payment in lieu of notice, calculated by reference to the base salary, pension contributions and car allowance he would have received during the remaining three months of his notice period. Such payment will be made in instalments and will be subject to deductions for mitigation.

Other terms agreed with Mr Kelly, which were the subject of careful consideration by the remuneration committee, are as follows:

-- Mr Kelly will remain eligible to receive a bonus in respect of the 2017/18 financial year, subject to the remuneration committee's determination as to the achievement of any applicable financial and personal performance conditions. Any bonus awarded to Mr Kelly will be pro-rated by reference to the period of the bonus year which has elapsed by August 2018.

   --     Mr Kelly will not be eligible for a bonus in respect of the 2018/19 financial year. 

-- Mr Kelly will be treated as a good leaver in respect of his existing awards under the Company's Performance Share Plan (PSP), which will vest on their normal vesting dates subject to satisfaction of the applicable performance conditions. Mr Kelly's PSP awards will be pro-rated by reference to the proportion of the applicable performance period that has elapsed by 31 May 2019.

-- Mr Kelly will be treated as a good leaver in respect of his existing awards under the Company's Deferred Bonus Plan (DBP), which will vest on their normal vesting dates and will not be subject to time pro-rating.

Information on the vesting of the PSP and DBP awards will be disclosed in the relevant directors' remuneration reports following vesting. Any awards which are currently subject to malus and clawback provisions set out in the relevant plan rules will continue to be subject to such provisions.

The table below sets out the relevant number of shares under each of Mr Kelly's PSP and DBP awards, along with date of grant and date of vesting. In the case of the PSP, vesting (and therefore future value) is subject to the achievement of applicable stretching performance conditions. The DBP awards relate to deferred bonuses already earned for previous performance years.

 
                           Number of shares 
Type of award  Grant date     under award    Vesting date 
PSP award 
     PSP       12/01/2015      213,421        12/01/2021 
               ----------  ----------------  ------------ 
     PSP       02/03/2016      327,909        02/03/2019 
               ----------  ----------------  ------------ 
     PSP       14/12/2016      323,224        14/12/2019 
               ----------  ----------------  ------------ 
     PSP       07/12/2017      266,272        07/12/2020 
               ----------  ----------------  ------------ 
DBP awards 
     DBP       14/12/2016       36,503        14/12/2018 
               ----------  ----------------  ------------ 
     DBP       07/12/2017       8,520         07/12/2019 
               ----------  ----------------  ------------ 
 

The Company will make a contribution of GBP11,000 (plus VAT) towards Mr Kelly's legal fees incurred in connection with the arrangements relating to his departure.

Interim COO

In connection with the appointment of Steve Hare to the role of interim COO, the following changes will be made to his terms until the new CEO is appointed:

-- A 'step-up' allowance of GBP186,750 per annum will be paid in addition to his current base salary of GBP522,000 for the duration of his appointment as interim CEO, providing a new interim annual salary of GBP708,750.

   --     His benefits, pension allowance and all other employment terms will remain unchanged. 

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August 31, 2018 02:00 ET (06:00 GMT)