We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for real-time alerts, custom portfolio, and market movers
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sage Group Plc | LSE:SGE | London | Ordinary Share | GB00B8C3BL03 | ORD 1 4/77P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -9.50 | -0.81% | 1,160.50 | 1,164.00 | 1,165.00 | 1,168.50 | 1,151.00 | 1,161.00 | 3,385,955 | 16:35:21 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Prepackaged Software | 2.18B | 211M | 0.2059 | 56.53 | 11.93B |
From Apr 2019 to Apr 2024
TIDMSGE
RNS Number : 9739D
Sage Group PLC
03 May 2017
The Sage Group plc unaudited results for the six months ended 31 March 2017
Wednesday 3 May 2017
Strong momentum into the second half of FY17
Operating performance
- Achieved:
o H1 17 organic(1) revenue growth of 6.4% (excluding North American Payments) with stronger organic revenue growth in Q2 of 7.0% (H1 16: 6.6%);
o H1 17 underlying(1) revenue growth (including North American Payments) of 5.7% with underlying growth in Q2 of 6.3% (H1 16: 6.2%);
- Organic recurring revenue growth of 9.9% (H1 2016: 10.0%) and software subscription growth of 30.5% (H1 16: 34.8%), with managed 7.5% decline in SSRS revenue in line with the planned migration to subscription (H1 16: SSRS decline of 6.2%);
- Organic operating margin of 25.2% (H1 16: 25.6%) achieved, in line with front-loading investment into H1 which will support accelerating momentum in H2;
- Underlying cash conversion at 104% (H1 16: 111%), supporting free cash flow of GBP166m (H1 16: GBP142m) and the 8.8% increase in interim dividend to 5.22p;
- General and administrative (G&A) expense as a proportion of revenue has reduced to 15.2% (H1 16: 19.7%);
- Non-recurring items (exceptional costs) of GBP19m (H1 16: GBP29m) have secured annualised cost savings of GBP28m in the first six months of the year (H1 16: GBP17m), to be reinvested into growth, particularly sales and marketing. On track for full year annualised savings in excess of GBP50m.
1. See full definition of organic revenue and underlying revenue in appendix II on page 17.
Hot Features
Premium
FINANCIAL SUMMARY H1 17 H1 16 Change
------------------------------------ -------- -------- ---------
Organic revenue GBP838m GBP787m 6.4%
- Recurring revenue GBP647m GBP589m 9.9%
- Processing Revenue GBP44m GBP39m 11.1%
- SSRS Revenue GBP147m GBP159m -7.5%
Underlying Revenue GBP912m GBP863m 5.7%
Organic operating profit GBP211m GBP201m 5.0%
Organic operating profit margin 25.2% 25.6% -0.4%
Underlying basic EPS 14.45p 14.17p 2.0%
Underlying cash conversion 104% 111% -7.0%
Ordinary dividend per share 5.22p 4.80p 8.8%
------------------------------------ -------- -------- ---------
(2. As a result of rounding throughout this document, it is possible that tables may not cast and change percentages may not calculate precisely.)
(3. All comparatives are made against H1 16 unless otherwise disclosed.)
(4. Unless otherwise stated, all revenue growth measures are stated on an organic basis at constant exchange rates. Refer to Appendix II on page 17 for full definitions on non-GAAP measures and note 3 of the financial) (statements for details of items excluded from underlying operating profit.)
STATUTORY SUMMARY - CONTINUING OPERATIONS H1 17 H1 16 Change ------------------------------------------- ---------- ---------- --------- Revenue GBP840m GBP684m 22.7% Operating profit GBP180m GBP137m 31.6% Profit before tax GBP180m GBP128m 41.1% Basic EPS 12.57p 9.11p 38.0% ------------------------------------------- ---------- ---------- ---------
Statutory performance has been positively impacted by movements in key exchange rates during the year in all major currencies.
Building our business model for accelerating growth
- New customer acquisition is starting to gain traction through the "Cloud First" initiative:
o Sage One annual recurring revenue (ARR) increased by 88% to GBP22m with an average annual contract value (ACV) of GBP70;
o Sage Live customers at 889 with a March average ACV of GBP1,800;
o Sage X3 revenue increased by 17% with 200 new customers added in H1;
o Rolling out our cloud accounting products in our major geographies, with 52 product launches planned in FY17;
- Acquisitions of Fairsail and Compass announced in H1 17;
- Strategic review of Payments concluded and North American Payments business now classified as an asset held for sale and a discontinued operation. The Sage Pay UK & Ireland and Sage Pay South Africa businesses will be retained as they are delivering integrated solutions core to the strategy.
Stephen Kelly, Chief Executive Officer said:
"These are positive results in line with market expectations and there are clear signs our strategy is working, with seven of our nine largest geographies, that collectively generate 95% of our revenues(5) , now delivering growth in excess of our revenue guidance. The investments in our go-to-market functions are starting to bear fruit: our cloud-enabled products are growing strongly and we have made progress in our new customer acquisition strategy, driving momentum in Q2 that will continue throughout H2 and as we exit FY17.
Our updated payments and banking strategy and the acquisition of Fairsail, show our commitment to the golden triangle of accounting, people & payroll and payments & banking, reinforced by our cloud capabilities. We are focused on Sage continuing to invest in growth, predominantly through new customer acquisition with cloud-products, and supported by bolt-on acquisitions that accelerate the strategy."
Outlook
The business as defined and constituted at the time of publishing FY17 guidance included North American Payments and excluded the contributions from FY17 acquisitions. On this basis we are very confident of exceeding our full year guidance of 6% revenue growth. In addition we reconfirm our guidance of at least 27% operating margin on an underlying basis with acquisitions having no dilutive impact. We confirm there will be no further transformation-related exceptional charge post FY17 and the exceptional charge for current year is not expected to exceed GBP75m. We expect our strong Q2 performance to continue into H2 with accelerating momentum as we exit FY17.
About Sage
Sage - the market and technology leader for integrated Accounting, People & Payroll and Payment & Banking solutions, 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 FTI Consulting +44 (0) 191 294 3457 +44 (0) 20 3727 1000 Lauren Wholley, Investor Relations Charles Palmer Amy Lawson, Corporate PR Dwight Burden
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 1904, pin code: 3583475#. A replay of the call will also be available for two weeks after the event: Tel: +44 (0) 20 3427 0598, pin code: 3583475#
5.The geographies that generate 95% of Sage revenues comprise: Australia; Brazil; Canada; France; Germany; South Africa; Spain; USA and. UK & Ireland,
Chief Executive Officer's review
All commentary refers to organic growth (with underlying in brackets) unless otherwise stated and therefore excludes the contribution of assets held for sale (North American Payments) and acquisitions (Fairsail).
Operating Performance
H1 17 saw Sage continue to deliver on its strategy with revenue growth of 6.4% (5.7% underlying) in line with market expectations for the first six months. We have often stated that progress throughout the transformation would be non-linear, with H1 17 demonstrating this - Q1 was slightly weaker followed by a stronger Q2, growing at 7.0% (6.3% underlying), and we see the momentum from Q2 continuing into H2.
The strategy is working with seven out of our nine core geographies, which collectively generate 95% of our revenue, now growing in excess of revenue guidance. The transition to subscription continues: recurring revenue grew at 10%, underpinned by software subscription growth of 31%, with a managed decline in SSRS of 8%.
Growth in the European regions reflects 8% growth in Northern Europe (UK and Ireland) and 5% growth in Central and Southern Europe (predominately France, Spain, Germany). France had a challenging Q1 with some improvement in Q2. Growth in North America of 5% reflects 9% growth in Canada, balanced by slower growth in the US with recurring revenue below the overall growth rate. The International region grew by 13% in H1 17, driven by growth in Brazil of 23%, with good performance in Australia, balanced by weaker performance in Asia.
Update on our payments and banking strategy
The golden triangle remains integral to our strategy. Earlier in the year we announced a review of our payments and banking capabilities, which has now made significant progress. Today we reconfirm our commitment as a key participant in the global payments and banking services ecosystem, increasing our focus on deeply embedding payments and banking services within our accounting, payroll and people products, to help customers move and manage their money in many more geographies than we do today.
Execution of this strategy involves:
-- Leveraging existing payments capability where it is complementary to our core business model and growth aspirations, like in South Africa where payments capabilities are deeply integrated within our software, and in the UK & Ireland, which is growing strongly through e-commerce;
-- Evolving and adding to our existing strong and stable partnerships in this area with leading payment and technology companies such as PayPal, Verifone, Elavon, Mastercard, American Express, and major banks in key geographies;
-- Exiting those areas where the fit with our core business is not as strong.
We can therefore confirm that our North American payments business is now held for sale but we plan to retain the payments businesses in UK & Ireland and South Africa.
This renewed focus allows us to integrate the latest in innovation and technology into our Sage solutions, speeding up the movement of money for our customers and enabling payments in all of our major geographies.
Strategy and transformation
The Sage business model provides profitable growth, superior margins, operating leverage and strong free cash flow to support progressive dividend and further investment in growth.
The customer for life (C4L) strategy provides the foundation for our growth as we add value both through the subscription model and through our hybrid cloud-line products (Sage 50c and Sage 200c family, with 200c family comprising 100c, 200c, 300c). The C-line product range provides the pathway for our on-premise customers to enjoy the flexibility of the cloud with improved user interface whilst maintaining the familiarity of desktop functionality. Uptake in C-line products has been successful, with Sage 50c growing by 25% in the past six months and the integration of Microsoft's Office 365, launched in H1, gaining strong early momentum.
As we maintain the focus on C4L, phase two of our plan involves driving forward new customer acquisition (NCA) with innovative cloud products developed in the last two years. Throughout the year we have been rolling out our new Cloud Accounting Products into our major geographies, with Sage Live launching in eight countries, Sage One now in 14 countries, of which seven are now on a single code base and the latest version of X3 in 14 countries.
As the roll out of these products continues throughout the year we expect the performance from Q2 to carry into H2, building momentum towards the end of the year, and we are already seeing green shoots of NCA success:
- Sage One is becoming a more significant revenue stream. The product now has over 382k subscriptions with monthly contract values starting to increase as we continue to enhance functionality and integrate more features such as Pegg, inventory and bank feeds;
- Sage Live average contract value also continues to rise as functionality increases, with inventory and fixed asset modules launching in 2017, and as customers appreciate the value of this product: the average ACV increased from GBP1,200 in November 2016 to GBP1,800 in March 2017.
- Sage X3 is growing at 17% with customer numbers up 13% in H1 17 and is starting to scale up further into the enterprise market.
We also stated that as part of phase two of the transformation we would identify at least GBP50m of cost savings in FY17 with a payback of under two years. In H1 17, we have already identified savings of GBP28m (H1 16: GBP17m) with further savings in H2, reinvesting in our go to market function.
The strategy is clear, simple and working. For our three million business customers, C4L provides the platform for growth. Addressing the wider total market of over 70m businesses, we have strong conviction that NCA with our award-winning cloud products will accelerate growth and market share. Bolt-on acquisitions that complement the strategy will further supplement profitable growth.
There will be no further exceptional cost from the transformation post FY17, signalling the end of our transformational restructuring, but continuing to drive efficiencies and simplification in the business will become "business as usual" into FY18 and beyond. The exceptional charge for FY17 is not expected to exceed GBP75m.
Technology Strategy
Accounting is becoming increasingly automated and in future, all businesses will be software enabled - a huge opportunity for Sage. We are using the latest technological innovations to evolve accountancy software into complete cloud solutions, leap-frogging the competition, with products such as Sage Live. Instead of hard to analyse, backwards-looking financial data, Sage Live provides real-time, commercially-focused scoreboards, encouraging both front and back-office use to facilitate managing much more of the business than just accounts - all in the cloud, from the palm of the hand and fully integrated into our golden triangle of Accounting, People & Payroll and Payments.
We are also incorporating the latest technology to increase automation in our products. Sage One now uses AI to automatically perform bank reconciliations, previously an arduous manual task. Pegg, the world's first accounting chatbot and with over 20,000 users, is also now embedded within Sage One, providing a virtual personal assistant to perform admin tasks through chat, voice and camera.
Throughout this digital transformation we are taking our accountants on the cloud and automation journey, working together with them. Our launch of Sage Accounting Cloud at Sage Summit UK in April 2017 will provide the most comprehensive and most connected ecosystem of cloud solutions for accountants and their clients.
Capital allocation
Our disciplined capital allocation involves investing in growth, both organically, through our pure cloud and hybrid cloud solutions, and through targeted investments and bolt-on acquisitions.
In March 2017 we announced the acquisition of Fairsail. The business strengthens our commitment and acceleration to cloud technology and further enhances the golden triangle. Fairsail, now rebranded as Sage People, is integrating into the Sage family and the acquisition has accelerated our People & Payroll offering. Sage People is growing faster than Group rate, and delivering People science with X3, our enterprise accounting solution.
We also announced the acquisition of Compass, the collective intelligence, analytics and benchmarking platform, adding to our IP and technological innovation to be integrated into our suite of Cloud Accounting Products.
Our North American Payments business is now held for sale.
Progress in areas targeted to improve performance
Throughout FY15 and FY16 we highlighted that Enterprise Europe, Payments North America and Small and Medium Business North America were areas targeted for improvement. Of this list, Enterprise Europe is now showing sustained growth, with X3 growing at 11% in the region in H1. We have also announced the disposal of our North American Payments business and in Small and Medium Business North America we are starting to see strong traction in our C-line products, with Sage 50c, and products within the 200c family achieving triple digit software subscription revenue growth.
Progress of execution
Throughout H1 17 we have continued to execute on our transformation by driving improvements through each of our five strategic pillars, shared at the Capital Markets Day in June 2015, which we use internally to report progress. There is strong evidence that our strategy is working, with continued improvements planned throughout FY17:
1. Customers for Life
- Software subscription contract growth of 48% with over 1.2m software subscription contracts now in place and 2.2m recurring revenue contracts in total.
- Renewal rate of 86% up from 84% in H1 16.
- We are starting to see traction in our cross-sell campaigns. In the US, we have a 57% payroll attach rate for on-plan Sage 50 and Sage 200 customers, and in the UK, the 4Ps campaign of cross-selling pension auto-enrolment with payroll, payslips and payments generated a 41% conversion rate and tripled the value of contracts.
2. Winning in the Market
- Sage One achieved revenue growth of 66%. Sage One single code base is now available in seven countries and the single code base enables rapid roll-out to new geographies.
- Sage Live average ACV in March is now GBP1,800 with 889 customers signed.
- In FY17 Sage Summit has been rolled out across the globe to seven of our major countries, with focus on local customers, partners and accountants. The April event in London gained over 8,000 registrations with over 100m social media impressions.
3. Revolutionise Business
- The technology innovation accentuates the most noticeable change in Sage with 52 major country product launches planned in FY17.
- The Sage Cloud Ecosystem enables us to develop microservices (e.g. bank feeds, compliance updates) that can be implemented in one step across our entire suite of hybrid and pure cloud solutions, instead of applying individually to each of our products - a huge efficiency.
- We have now signed over 350 ISVs with over 100 applications fully integrated, enabling our customers to customise their solution to allow Sage to manage much more than just accounting.
4. Capacity for growth
- G&A expense as a proportion of revenue has now reduced to 15% (H1 16: 20%) and we are still focused on delivering further efficiencies.
- We continue to transform our organisation, reducing marketing headcount by 11% to enable greater flexibility on variable investment and hiring over 300 new sales heads in H1 17.
5. One Sage
- Throughout the transformation it is imperative that we embed the right culture within our organisation and align our colleagues to Sage's values and strategy. Goal setting and reward is now aligned throughout Sage by our Vision, Strategy, Goals, Measures (VSGM) initiative. Each individual's goals and objectives are aligned to their function and the CEO's VSGM, which ensures colleagues are fully attuned to the strategy.
- The Sage Foundation continues to expand and has proven to be a great way to attract and maintain the right talent, whilst giving back to the community and doing the right thing. We have awarded 188 grants to date and donated 10,000 days by Sage colleagues in H1 17, as well as launching 'botcamp' around the UK, to inspire the next generation of chatbot innovators.
Strategic focus for H2 17
We invested for growth throughout H1, rolling out our pure cloud and hybrid solutions in our major geographies and delivering Sage Summit globally. The focus for H2 is to deliver on these investments to continue to drive momentum throughout the rest of FY17 and beyond, through a combination of building, buying and partnering to access the latest technology, underpinned by rigorous financial discipline.
Chief Financial Officer's review
Group performance
The Group achieved organic revenue growth of 6.4% (5.7% underlying growth) (H1 16: 6.2%) and an organic operating profit margin of 25.2% (H1 16: 25.62).
Higher quality recurring revenue growth continues to drive revenue growth, growing at 9.9% in H1 17 (H1 16: 10.0%) including growth in software subscription revenue of 30.5% (H1 16: 34.8%).
Organic revenue neutralises the impact of foreign currency fluctuations and excludes the contribution from current and prior period acquisitions, discontinued operations, disposals and assets held for sale. Underlying revenue neutralises the impact of foreign currency fluctuations but includes the contribution from current and prior period acquisitions, discontinued operations, disposals and assets held for sale. A reconciliation of operating profit to statutory operating profit is shown on page 13.
Statutory performance has been impacted by favourable movements in key exchange rates during the year in all major currencies. Statutory figures are based on continuing operations and include the impacts of acquisitions and disposals.
Revenue
STATUTORY UNDERLYING ORGANIC
------------------- ------------------- -------------------
H1 H1 Change H1 H1 Change H1 H1 Change
17 16 17 16 17 16
-------------------- ---- ---- ------- ---- ---- ------- ---- ---- -------
Northern Europe 180 166 8.8% 180 166 7.8% 180 166 7.5%
Central & Southern
Europe 282 233 21.2% 282 271 4.5% 282 271 4.5%
North America 241 192 24.7% 313 304 3.0% 241 230 4.6%
International 137 93 47.1% 137 122 12.6% 135 120 12.8%
Group 840 684 22.7% 912 863 5.7% 838 787 6.4%
-------------------- ---- ---- ------- ---- ---- ------- ---- ---- -------
Operating Profit
STATUTORY UNDERLYING ORGANIC
------------------------ ----------------------- -------------------------
H1 17 H1 16 Change H1 17 H1 16 Change H1 17 H1 16 Change
-------- ------ -------- ------ ------ ------- ------ ------ -------
Group 180 137 32% 229 220 +4% 211 201 +5%
Margin 21.4% 20.0% +140bps 25.1% 25.5% -40bps 25.2% 25.6% -40bps
-------- ------ ------ -------- ------ ------ ------- ------ ------ -------
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 M&A activity related charges.
Throughout H1 17 we have focused on cost savings with GBP28m secured in the first six months of the year (H1 16: GBP17m), mainly relating to people savings, fully reinvested into sales and marketing. An associated exceptional cost of GBP19m (H1 16: GBP31m) has been recognised in the period.
Revenue mix
Segmental reporting
Following a change in our regional management structure, we have split our Europe region into Northern Europe, comprising the UK and Ireland with Central & Southern Europe comprising Germany, Switzerland, Poland, France, Spain, and Portugal.
RECURRING REVENUE PROCESSING REVENUE SSRS REVENUE
-------------------- --------------------------- ------------------------- ---------------------------
ORGANIC H1 H1 Change H1 H1 Change H1 17 H1 Change
17 16 17 16 16
-------------------- --------
Northern Europe GBP143m GBP127m +12% GBP19m GBP17m +9% GBP18m GBP22m -20%
Central & Southern
Europe GBP218m GBP202m +8% GBP1m GBP1m +47% GBP63m GBP68m -7%
-------------------- -------- -------- ------- ------- ------- ------- -------- -------- -------
Total Europe GBP361m GBP329m +10% GBP20m GBP18m +11% GBP81m GBP90m -10%
North America* GBP187m GBP174m +7% GBP17m GBP16m +4 % GBP37m GBP40m -7%
International GBP99m GBP86m +16% GBP7m GBP5m +36% GBP29m GBP29m +0%
-------- -------- ------- ------- ------- ------- -------- -------- -------
Group GBP647m GBP589m +10% GBP44m GBP39m +11% GBP147m GBP159m -8%
% of total organic
revenue 77% 75% 5% 5% 18% 20%
-------------------- -------- -------- ------- ------- ------- ------- -------- -------- -------
*excluding North American Payments
Recurring revenue
The Group delivered recurring revenue growth of 10% (H1 16: 10%), driven by the year-on-year increase in subscription revenue of 31% (H1 16: 35%), in line with the transition to a subscription model.
Contract renewal rates have reached 86% (H1 16: 84%) and recurring revenue now represents 77% of organic revenue (H1 16: 75%).
Processing revenue
Processing revenue has grown by 11% (H1 16: 17%), reflecting strong growth in the European regions and International, offset by slower growth in North America. Including North American Payments, processing revenue growth was 2% for the half.
SSRS revenue
SSRS revenue declined by 8% (H1 16: decline of 6%) in line with the continued transition to subscription based revenue, balanced by flat professional services revenue and growth in X3 licences and software related services.
Performance - European regions
ORGANIC REVENUE GROWTH H1 17 H1 16 --------------------------- ------ ------ Northern Europe 8% 8% --------------------------- ------ ------ Germany 7% 6% France 1% 7% Spain 8% 6% Other European countries 10% -4% Central & Southern Europe 5% 5% --------------------------- ------ ------ Total Europe 6% 7% --------------------------- ------ ------
Revenue in the European regions grew by 6% overall in H1 17 (H1 16: 7%). Within Europe all markets excluding France have grown in excess of the organic group growth rate of 6.4%.
Europe achieved recurring revenue growth of 10%, of which software subscription revenue grew by 21% (H1 16: 30%), with strong growth in all markets except France. Europe continues to deliver on the transition to a recurring revenue model driving growth through the installed base. Software subscription now represents 35% of total revenue in Europe (H1 16: 31%).
Processing revenue grew by 11% in Europe (H1 16: 9%) largely due to the growth in Sage Pay in the UK & Ireland.
SSRS revenue declined by 10% (H1 16: decline of 1%) due to the continued planned decline in licences and a slight decline in professional services revenue, offset by the growth in X3.
Northern Europe
UK & Ireland - strong growth driven by C4L
UK & Ireland revenue grew by 8% (H1 16: 8%) in the half, with recurring revenue growth of 12% underpinned by software subscription growth of 26%.
The main growth driver in H1 17 was Sage 50 Accounts, a very popular solution in the UK & Ireland market, with software subscription revenue doubling in H1 17 as customers transition to subscription and benefit from enhanced features and functionality in Sage 50c, our hybrid cloud product.
The UK & Ireland also delivered strong performance on X3 with 34% revenue growth in the half, harvesting a stronger pipeline developed by a strengthened direct sales team. Three transactions over GBP100k were signed in the first six months for X3.
Sage One paying subscriptions in the UK & Ireland grew by 54%, driven mainly by the Accountants channel.
Processing growth of 9% was driven by the increase in Sage Pay due to growth of e-commerce within the UK & Ireland.
Central and Southern Europe
France - challenges in partners and NCA
In France, revenue grew by 1% (H1 16: 7%), below our ambitions for the country. Recurring revenue growth of 4% is below Group growth, due to a first year premium being charged in prior years as customers were migrated to subscription, and with challenges in driving NCA through the partner channel. The first year premium is now being phased out to align the commercial model in France with the rest of Sage.
SSRS decline of 14% in H1 reflects the transition to subscription and timing of X3 transactions. This decline has recovered somewhat from Q1 as revenue starts to catch up from the delay in training revenue that had been expected in Q1.
We are focused on improving growth in France in H2 with several initiatives implemented:
- Strong push on NCA with the launch of Sage 50c, Sage 200c, Sage One Global Accounting Core (single code base) and Sage Live in the country;
- New sales organisations with partner account managers aligned to key partners in the country to encourage growth through NCA in this channel.
Spain - strong subscription revenue growth
Revenue growth of 8% (H1 16: 6%) was driven by recurring revenue growth of 10%. Spanish local growth products, Contaplus and Murano were the main sources of revenue growth in the country, but X3 is starting to gain significant traction, growing by 43% in the half.
Six new products are being launched in Spain this financial year which we expect will secure sustained revenue growth both through the installed base with hybrid cloud products and in new customer acquisition with pure cloud products.
Germany - strong subscription revenue growth
Germany delivered revenue growth of 7% (H1 16: 6%), driven by strong recurring revenue growth of 15% in the half. Office Line, the flagship local product, continues to deliver double digit revenue growth. The transition to subscription continues to progress well in Germany, with software subscription growth of 39%.
Performance - North American region
ORGANIC REVENUE GROWTH H1 17 H1 16 ----------------------------------------- ------ ------ USA (excluding North American Payments) +4% +7% Canada +9% +4% North America +5% +7% ----------------------------------------- ------ ------
North America delivered revenue growth of 5% (H1 16: 7%) comprising recurring revenue growth of 7% (H1 16: 9%) and processing revenue growth of 4% (H1 16: growth of 30%), offset by a decline in SSRS of 7% (H1 16: decline of 9%).
Recurring revenue growth of 7% is below the Group growth rate. This is a function of success in the on-plan base in the past, where most customers were on the highest tier of support, driving a lower level of value uplift to subscription than other countries. Nevertheless, the transition to subscription is starting to gain traction in North America, with triple digit software subscription revenue growth in the period. Particularly successful growth was seen in Sage 50 and 200 where C-line products are proving popular solutions. Challenges in the partner channel are starting to be addressed in the region, with increased focus on the top 30 partners to drive recurring revenue growth. Software subscription revenue in North America is now 22% of total revenue (H1 16: 12%).
Processing revenue growth of 4% reflects a slowing of payroll processing growth in H1. Plans are in place to improve growth by investing in more quota carrying heads.
The decline in SSRS was driven by the transition to subscription, offset by growth in X3 of 25%, driven by geographical expansion and the hire of quota carrying sales heads.
Canada performed particularly well, growing at 9% in the first six months of the year, driven by success with Sage 50c and Sage 200c.
In H2 the focus for the region will be:
- Improving growth in payroll processing by employing more quota-carrying heads; - Continuing attention towards top 30 partners; - Accelerating Sage Live growth;
- Continuing the transition to subscription through C-line products, integrated with Office 365.
North American Payments - held for sale
We have completed the strategic review of North American Payments with the conclusion that the business now held for sale. Revenue in North American Payments declined slightly in H1. The business had experienced some compression in margin and volume, although the decline was less pronounced in Q2 than Q1.
Performance - International region
ORGANIC REVENUE GROWTH H1 17 H1 16 ------------------------ ---------- ----------- Africa and Middle East +14% +17% Brazil +23% +8% Australia +8% +7% Asia * 6% * 35% ------------------------ ---------- ----------- International +13% +6% ------------------------ ---------- -----------
Organic revenue in the International region grew by 13% year-on-year (H1 16: 6%), with recurring revenue growth of 16% (H1 16: 17%), processing revenue growth of 36% (H1 16: 12%) and flat SSRS (H1 16: decline of 17%). Software subscription revenue in International is now 55% of total revenue (H1 16: 51%).
Growth in the region has been driven by strong performance in Brazil and Africa & Middle East, both of which have had success in new customer acquisition through Sage One and X3, balanced by a slight decline in revenue in Asia.
Africa and Middle East - winning in the market with X3 and Sage One
Growth in Africa and Middle East of 14% reflects growth across recurring, processing and subscription revenue.
Africa's revenue growth is driven by new customer acquisition with a 14% growth in X3 revenue and 64% growth in Sage One revenue with Africa generating the second highest sales value for Sage One, behind UK & Ireland.
Middle East grew 23% driven by strong growth in X3.
Brazil - success in new customer acquisition
Brazil grew at the fastest rate of our major countries at 23% with double digit recurring and SSRS revenue. Brazil continues to attract new Sage One customers at scale, with almost 50,000 paying subscriptions now secured and Sage One revenue increasing by triple digits, thanks to successful marketing campaigns and the legislative environment.
Australia and Asia
In Australia, revenue growth of 8% reflects strong recurring revenue growth of 11%, driven by local growth product, Sage Meridian. Sage One continues to perform well, adding 9,000 contracts in the past twelve months.
Asia revenue (accounting for 1% of total revenue) declined by 6% reflecting a flat performance in Singapore and a 17% decline in Malaysia due to challenges in C4L initiatives.
Financial review
H1 17 H1 16
------------------------------------- --------------------------------------- --------------------------------------
ORGANIC TO STATUTORY RECONCILIATIONS Revenue Operating profit Margin Revenue Operating profit Margin
------------------------------------- ---------- ------------------ ------- ---------- ----------------- -------
Organic GBP838m GBP211m 25.2% GBP787m GBP201m 25.6%
Organic adjustments(1) GBP2m - GBP2m -
------------------------------------- ---------- ------------------ ------- ---------- ----------------- -------
Underlying - Continuing GBP840m GBP211m 25.1% GBP789m GBP201m 25.5%
Discontinued operations GBP72m GBP18m GBP74m GBP19m
Underlying GBP912m GBP229m 25.1% GBP863m GBP220m 25.5%
------------------------------------- ---------- ------------------ ------- ---------- ----------------- -------
Discontinued operations(2) (GBP72m) (GBP18m) (GBP74m) (GBP19m)
Impact of foreign exchange(3) - - (GBP105m) (GBP27m)
------------------------------------- ---------- ------------------ ------- ---------- ----------------- -------
Underlying (as reported) -
Continuing GBP840m GBP211m GBP684m GBP174m
------------------------------------- ---------- ------------------ ------- ---------- ----------------- -------
Recurring items(4) - (GBP12m) - (GBP8m)
Non-recurring items(5) - (GBP19m) - (GBP29m)
Statutory - Continuing GBP840m GBP180m 21.4% GBP684m GBP137m 20.0%
------------------------------------- ---------- ------------------ ------- ---------- ----------------- -------
(1) Organic adjustments are as per note 2 of the financial statements.
(2) For the purposes of this reconciliation, FY16 discontinued operations have been retranslated at FY17 average rates.
(3) Impact of retranslating FY16 results at FY17 average rates.
(4) Recurring items comprise amortisation of acquired intangible assets, M&A activity-related items and fair value adjustments.
(5) Non-recurring items comprise items that management judge to be one-off or non-operational including business transformation costs.
Revenue
Statutory revenue grew by 23% to GBP840m (H1 16: GBP684m), reflecting organic growth, combined with foreign exchange movements experienced throughout the year. The impact of foreign exchange of GBP105m in H1 16 reflects a currency tailwind during the period.
Operating profit
Organic operating profit increased by 5% to GBP211m (H1 16: GBP201m) in line with organic revenue and the organic operating profit margin was lower by 0.4% at 25.2% as we front-load investment, in line with guidance issued in FY16. Statutory operating profit increased by GBP43m, with the operating profit margin rising by 1.4% due to the impact of foreign exchange.
Adjustments between underlying and statutory operating profit
Non-recurring items excluded from the underlying operating profit of GBP211m include GBP19m costs in relation to the business transformation comprised of people organisation charges of GBP9m, net property exit costs of GBP3m and other directly attributable costs of GBP7m. Recurring items of GBP12m represents amortisation of acquisition related intangible assets and M&A activity related charges.
Non-recurring item from Fairsail acquisition
A gain of GBP13m has arisen on remeasurement of the existing investment in Fairsail held prior to the acquisition of the remaining shareholding completed in March 2017.
Net finance cost
The statutory net finance cost for the period was GBP11m (H1 16: GBP9m) and the underlying net finance cost was GBP11m (H1 16: GBP11m). The difference between underlying and statutory net finance costs for the period reflects a gain of GBP1m (H1 16: nil) from a valuation adjustment of a financial asset, offset by a fair value adjustment to a debt related instrument charge of GBP1m (H1 16: income GBP2m).
Taxation
The Group's underlying effective tax rate for H1 17 is 27% (H1 16: 26% excluding discontinued operations). The effective rate has increased in the period primarily due to a number of one off prior year credits in the prior year in relation to a US tax settlement.
The Group's statutory effective tax rate is 25% (H1 16: 23% excluding discontinued operations). In FY17, the statutory tax rate is lower than the underlying effective tax rate mainly due to a non-taxable gain arising from the Fairsail acquisition.
Earnings per share
Underlying basic earnings per share increased by 2.0% to 14.45p (H1 16: 14.17p) and statutory basic earnings per share increased to 13.54p (H1 16: 9.88p) due to increased operating profit, offset by a higher effective tax rate.
Cash flow and net debt
CASH FLOW H1 17 H1 16 ------------------------------------------------ -------- -------- Underlying operating profit (as reported) GBP229m GBP189m Underlying cash flow from operating activities GBP238m GBP210m ------------------------------------------------ -------- -------- Underlying cash conversion(1) 104% 111% ------------------------------------------------ -------- --------
(1) Refer to Appendix II on page 17 for information on Non-GAAP measures
(2.) See note 10 within the financial statements
The Group remains cash generative with underlying cash flows from operating activities of GBP238m, which represents underlying cash conversion of 104%, down slightly from H1 16, reflecting an increase in working capital.
A total of GBP101m was returned to shareholders through ordinary dividends paid. Net debt stood at GBP434m at 31 March 2017 (31 March 2016: GBP404m).
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 GBP625m (US$551m and EUR218m tranches). At 31 March 2017, GBP92m (H1 16: GBP110m) of the RCF was drawn. Current year RCF drawings was used principally to fund the Fairsail acquisition and USPP note repayment, both in March 2017, with drawings at March 2016 repaid prior to 30 September 2016.
Total USPP loan notes at 31 March 2017 were GBP551m (US$600m and EUREUR85m), (H1 16: GBP519m (US$650m and EUR85m). Approximately GBP40m (US$50m) of USPP borrowings were repaid in March 2017. This repayment was funded by free cash flow and RCF drawings.
Foreign exchange
The Group does not hedge foreign currency profit and loss translation exposures and the statutory results are therefore impacted by movements in exchange rates.
The average rates used to translate the consolidated income statement and to neutralise foreign exchange in prior year underlying and organic figures are as follows:
AVERAGE EXCHANGE RATES (EQUAL H1 17 H1 16 Change TO GBP) ------------------------------- ------ ------ ------- Euro (EUR) 1.16 1.34 -14% US Dollar ($) 1.24 1.48 -16% South African Rand (ZAR) 16.82 22.12 -24% Australian Dollar (A$) 1.65 2.05 -20% Brazilian Real (R$) 3.99 5.71 -30% ------------------------------- ------ ------ -------
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 bolt-on 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 8.8% increase in the interim ordinary dividend per share for the period to 5.22p per share (H1 16: 4.80p per share).
Appendix I - Key Performance Indicators ("KPIs") and other measures
STRATEGIC KPIs KPI DESCRIPTION H1 17 FY16 H1 16
---------------------------- ---------------------------------------------------------- -------- -------- --------
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% 86% 84%
---------------------------- ---------------------------------------------------------- -------- -------- --------
Winning in the market: The number of paying subscriptions for our portfolio of
Adoption of Sage One Sage One products. 382,000 313,000 229,000
---------------------------- ---------------------------------------------------------- -------- -------- --------
Winning in the market: The percentage increase in underlying revenue derived
Adoption of Sage X3 from Sage X3. 17% 19% 17%
---------------------------- ---------------------------------------------------------- -------- -------- --------
Revolutionise business: Our latest technologies are delivered to customers via GBP618m GBP536m GBP483m
Annualised software software subscription relationships
subscription base ("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). 15% 17% 20%
---------------------------- ---------------------------------------------------------- -------- -------- --------
One Sage We use multiple measures to track progress in areas such as employee engagement, social
responsibility
and brand strength. One Sage supports our entire strategy and enables all other
strategic
pillars, therefore does not have association with any single measure in the KPI suite.
---------------------------- ----------------------------------------------------------------------------------------
H1 17 FY16 H1 16
---------------------------- ---------------------------------------------------------- -------- -------- --------
Organic revenue neutralises the impact of foreign
exchange in prior period figures and excludes
the contribution of current and prior period
acquisitions, disposals and products held for
Organic revenue growth sale. 6.4% 6.8% 6.6%
---------------------------- ---------------------------------------------------------- -------- -------- --------
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 businesses or products
held for sale.
Organic operating profit The impact of foreign exchange is neutralised in prior
margin period figures. 25.2% 27.1% 25.6%
---------------------------- ---------------------------------------------------------- -------- -------- --------
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.
All of these adjustments are net of tax. The impact of
foreign exchange is neutralised in
Underlying basic EPS growth prior period figures. +2.0% +9.0% -1.5%
---------------------------- ---------------------------------------------------------- -------- -------- --------
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. 104% 100% 111%
---------------------------- ---------------------------------------------------------- -------- -------- --------
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 0.9:1 1.0:1
---------------------------- ---------------------------------------------------------- -------- -------- --------
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,
-- M&A activity-related items; discontinued operations, disposals
-- Fair value adjustments on and assets held for sale of
non-debt-related financial standalone businesses in the current
instruments and foreign currency and/or prior periods, the
movements impact of M&A decisions on earnings
on intercompany debt balances; and per share growth can be 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.
discontinued operations, 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.
---------------------------------------------------- ----------------------------------------------------------------
Annual contract value Annual Contact Value (ACV) is the value of bookings that
will be generated over the ensuing
year under a given contract or contracts.
---------------------------------------------------- ----------------------------------------------------------------
Annual recurring revenue Annual recurring revenue (ARR) is the value of all
components of recurring revenue, annualised
for the ensuing year.
---------------------------------------------------- ----------------------------------------------------------------
Consolidated income statement
For the six months ended 31 March 2017
Six months
Six months Six months Six months ended Six months Six months Year ended
ended ended ended 31 March ended ended 30
31 March 31 March 31 March 2016 31 March 31 March September
2017 2017 2017 (Unaudited) 2016 2016 2016
(Unaudited) (Unaudited) (Unaudited) Underlying (Unaudited) (Unaudited) (Unaudited)
Underlying Adjustments* Statutory as reported Adjustments* Statutory Statutory
Restated Restated Restated Restated
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ==== =========== ============ =========== =========== ============ =========== ===========
Revenue 2 840 - 840 684 - 684 1,439
Cost of sales (54) - (54) (42) - (42) (91)
=============== ==== =========== ============ =========== =========== ============ =========== ===========
Gross profit 786 - 786 642 - 642 1,348
Selling and
administrative
expenses (575) (31) (606) (468) (37) (505) (1,081)
Operating
profit 2 211 (31) 180 174 (37) 137 267
Share of loss
of an
associate (1) (1) (2) - - - (1)
Gain on
remeasurement
of existing
investment
in an
associate - 13 13 - - - -
Finance income 1 1 2 1 2 3 5
Finance costs (12) (1) (13) (12) - (12) (29)
=============== ==== =========== ============ =========== =========== ============ =========== ===========
Profit before
income tax 199 (19) 180 163 (35) 128 242
Income tax
expense 4 (54) 10 (44) (42) 12 (30) (54)
=============== ==== =========== ============ =========== =========== ============ =========== ===========
Profit for the
period
- continuing
operations 145 (9) 136 121 (23) 98 188
Profit on
discontinued
operations 11 11 (1) 10 9 (1) 8 20
=============== ==== =========== ============ =========== =========== ============ =========== ===========
Profit for the
period 156 (10) 146 130 (24) 106 208
* Adjustments are detailed in note 3 to the accounts.
Earnings per
share
attributable
to the owners
of the parent
(pence)
From continuing
operations
Basic 6 13.46p 12.57p 11.27p 9.11p 17.43p
Diluted 6 13.40p 12.52p 11.20p 9.06p 17.33p
=============== ==== =========== ============ =========== =========== ============ =========== ===========
From continuing
and
discontinued
operations
Basic 6 14.45p 13.54p 12.09p 9.88p 19.28p
Diluted 6 14.39p 13.48p 12.01p 9.82p 19.16p
=============== ==== =========== ============ =========== =========== ============ =========== ===========
Consolidated statement of comprehensive income
For the six months ended 31 March 2017
Six months ended Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
============================================================= ================ ================ ===================
Profit for the period 146 106 208
Other comprehensive income/(expenses) for the period
Items that will not be reclassified to profit or loss
Actuarial loss on post-employment benefit obligations 1 - (2)
Deferred tax credit on actuarial loss on post-employment
benefit obligations - - 1
1 - (1)
============================================================= ================ ================ ===================
Items that may be reclassified to profit or loss
Deferred tax credit on foreign currency movements - - 2
Exchange differences on translating foreign operations 15 37 117
15 37 119
============================================================= ================ ================ ===================
Other comprehensive income for the period, net of tax 16 37 118
============================================================= ================ ================ ===================
Total comprehensive income for the period 162 143 326
============================================================= ================ ================ ===================
The notes on pages 23 to 38 form an integral part of this condensed consolidated half-yearly report.
Consolidated balance sheet
As at 31 March 2017
31 March 31 March
2017 2016 30 September 2016
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
======================================================= ===== ============== ============== ==================
Non-current assets
Goodwill 7 1,589 1,520 1,659
Other intangible assets 7 102 108 109
Property, plant and equipment 7 121 128 123
Investment in associate - - 9
Other financial assets 2 1 3
Deferred income tax assets 58 39 58
1,872 1,796 1,961
======================================================= ===== ============== ============== ==================
Current assets
Inventories 3 2 2
Trade and other receivables 445 375 420
Current income tax asset 5 - 8
Cash and cash equivalents (excluding bank overdrafts) 10 309 356 264
Assets classified as held for sale 11 265 - 1
======================================================= ===== ============== ============== ==================
1,027 733 695
======================================================= ===== ============== ============== ==================
Total assets 2,899 2,529 2,656
======================================================= ===== ============== ============== ==================
Current liabilities
Trade and other payables (322) (374) (350)
Current income tax liabilities (23) (25) (21)
Borrowings (5) (35) (43)
Provisions (34) (19) (38)
Deferred income (624) (523) (536)
Liabilities classified as held for sale 11 (51) - -
======================================================= ===== ============== ============== ==================
(1,059) (976) (988)
======================================================= ===== ============== ============== ==================
Non-current liabilities
Borrowings (642) (592) (535)
Post-employment benefits (24) (22) (25)
Deferred income tax liabilities (19) (7) (13)
Provisions (26) (11) (29)
Trade and other payables (5) - (8)
Deferred income (5) (3) (5)
======================================================= ===== ============== ============== ==================
(721) (635) (615)
======================================================= ===== ============== ============== ==================
Total liabilities (1,780) (1,611) (1,603)
======================================================= ===== ============== ============== ==================
Net assets 1,119 918 1,053
======================================================= ===== ============== ============== ==================
Equity attributable to owners of the parent
Ordinary shares 9 12 12 12
Share premium 9 545 543 544
Other reserves 202 104 187
Retained earnings 360 259 310
======================================================= ===== ============== ============== ==================
Total equity 1,119 918 1,053
======================================================= ===== ============== ============== ==================
Consolidated statement of changes in equity
For the six months ended 31 March 2017
Attributable to owners of the parent
========================================================= ===========================================================
Ordinary Retained Total
shares Share premium Other reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
========================================================= ======== ============= ============== ========= =======
At 1 October 2016 (Audited) 12 544 187 310 1,053
========================================================= ======== ============= ============== ========= =======
Profit for the period - - - 146 146
Other comprehensive income
Exchange differences on translating
foreign operations - - 15 - 15
Actuarial loss on post-employment
benefit obligations - - - 1 1
Deferred tax credit on actuarial
loss on post-employment obligations - - - - -
========================================================= ======== ============= ============== ========= =======
Total comprehensive income
for the period ended 31 March
2017 (Unaudited) - - 15 147 162
========================================================= ======== ============= ============== ========= =======
Transactions with owners
Employee share option scheme:
* Proceeds from shares issued - 1 - - 1
* Value of employee services, net of deferred
tax - - - 4 4
Purchase of treasury shares - - - - -
Dividends paid to owners of the
parent - - - (101) (101)
========================================================= ======== ============= ============== ========= =======
Total transactions with owners
for the period ended 31 March
2017 (Unaudited) - 1 - (97) (96)
========================================================= ======== ============= ============== ========= =======
At 31 March 2017 (Unaudited) 12 545 202 360 1,119
========================================================= ======== ============= ============== ========= =======
Attributable to owners of the parent
=================================================== =================================================================
Ordinary Retained Total
shares Share premium Other reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
=================================================== ======== ============= ============== =============== =======
At 1 October 2015 (Audited) 12 541 67 242 862
=================================================== ======== ============= ============== =============== =======
Profit for the period - - - 106 106
Other comprehensive income
Exchange differences on translating
foreign operations - - 37 - 37
Total comprehensive income
for the period ended 31 March
2016 (Unaudited) - - 37 106 143
=================================================== ======== ============= ============== =============== =======
Transactions with owners
Employee share option scheme:
* Proceeds from shares issued - 2 - - 2
* Value of employee services, net of def
erred tax - - - 6 6
Purchase of treasury shares - - - (2) (2)
Dividends paid to owners of the
parent - - - (93) (93)
=================================================== ======== ============= ============== =============== =======
Total transactions with owners
for the period ended 31 March
2016 (Unaudited) - 2 - (89) (87)
=================================================== ======== ============= ============== =============== =======
At 31 March 2016 (Unaudited) 12 543 104 259 918
=================================================== ======== ============= ============== =============== =======
Consolidated statement of cash flows
For the six months ended 31 March 2017
Six months
Six months ended Year ended
ended 31 March 30 September
31 March 2016 2016
2017 (Unaudited) (Unaudited)
(Unaudited) Restated Restated
Notes GBPm GBPm GBPm
===================================================== ===== ============ ============ =============
Cash flows from operating activities
Cash generated from continuing operations 217 199 360
Interest paid (12) (10) (21)
Income tax paid (39) (48) (92)
Operating cash flows generated from discontinued
operations 13 14 38
Net cash generated from operating activities 179 155 285
===================================================== ===== ============ ============ =============
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash
acquired 11 (79) (6) (6)
Purchases of intangible assets 7 (7) (3) (8)
Purchases of property, plant and equipment 7 (8) (13) (23)
Purchase of investment in an associate - - (10)
Proceeds from sale of property, plant and
equipment - 1 -
Interest received 2 1 2
Investing cash flows generated from discontinued -
operations - -
Net cash used in investing activities (92) (20) (45)
===================================================== ===== ============ ============ =============
Cash flows from financing activities
Proceeds from issuance of ordinary shares 9 1 2 3
Purchase of treasury shares - (2) (2)
Finance lease principal payments - - (1)
Proceeds from borrowings 133 70 69
Repayments of borrowings (80) (79) (189)
Movements in cash held on behalf of customers 22 45 (4)
Borrowing costs (1) - (2)
Dividends paid to owners of the parent 5 (101) (93) (145)
Financing cash flows generated from discontinued
operations 7 (1) (8)
===================================================== ===== ============ ============ =============
Net cash used in financing activities (19) (58) (279)
===================================================== ===== ============ ============ =============
Net increase/(decrease) in cash, cash equivalents
and bank overdrafts
(before exchange rate movement and reclassification
as held for sale) 10 68 77 (39)
Effects of exchange rate movement 10 4 16 36
Reclassification as held for sale 10 (28) - -
===================================================== ===== ============ ============ =============
Net increase/(decrease) in cash, cash equivalents
and bank overdrafts 44 93 (3)
Cash, cash equivalents and bank overdrafts
at 1 October 10 260 263 263
===================================================== ===== ============ ============ =============
Cash, cash equivalents and bank overdrafts
at period end 10 304 356 260
===================================================== ===== ============ ============ =============
Notes to the financial information
For the six months ended 31 March 2017
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.
This condensed consolidated half-yearly financial report was approved for issue by the board of directors on 2 May 2017.
The financial information set out above does not constitute the Company's Statutory Accounts. Statutory Accounts for the year ended 30 September 2016 have been delivered to the Registrar of Companies. The auditor's report was 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 and critical accounting estimates and judgements as set out in the Annual Report & Accounts for 2016.
This condensed consolidated half-yearly financial report has been reviewed, not audited.
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 financial information for the six months ended 31 March 2017 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" as adopted by the European Union, ("EU"). The condensed consolidated half-yearly financial report should be read in conjunction with the annual financial statements for the year ended 30 September 2016, which have been prepared in accordance with IFRSs as adopted by the EU.
The prior periods consolidated income statement, consolidated statement of cash flows and their related notes have been restated for the presentation of discontinued operations. For further information on discontinued operations see note 11. In line with the requirements of IFRS 5 'Non-current assets held for sale and discontinued operations', the statement of financial position has not been restated.
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the consolidated financial information has been prepared on a going concern basis.
Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2016 as described in those annual financial statements.
Adoption of new and revised IFRSs
The following new accounting standards may have a material impact on the Group. They are currently issued but not effective for the Group for the six-month period ended 31 March 2017:
-- IFRS 9 "Financial Instruments" -- IFRS 15 "Revenue from Contracts with Customers" -- IFRS 16 "Leases"
IFRS 16 has not yet been endorsed by the EU. The Group plans to adopt these standards in line with their effective dates, which for IFRS 16 will be confirmed once the standard is endorsed by the EU. Currently, based on the expected timing of that endorsement, IFRSs 9 and 15 will be adopted for the financial year commencing 1 October 2018, and IFRS 16 for the financial year commencing 1 October 2019. The Group is continuing its assessment of the impact that the application of these standards will have on the Group's financial statements but it remains too early to determine how significant any effect on actual financial results and financial position might be.
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.
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. 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.
The full revenue recognition policy is disclosed in the 30 September 2016 financial statements.
Goodwill impairment
The judgements in relation to goodwill impairment testing relate to two key areas. The first is the ongoing appropriateness of the cash-generating units ("CGUs") for the purpose of impairment testing. The second relates to the assumptions applied in calculating the value in use of the CGUs being tested for impairment.
The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment are disclosed in the 30 September 2016 financial statements.
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 be finally determined until a resolution has been reached by the relevant tax authority. 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 half-yearly financial report for the six month ended 31 March 2017 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 chaired by the President and Chief Financial Officer (CFO). 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.
With effect from 1 October 2016, the Group has been organised into seven key operating segments: Northern Europe, Central Europe, Southern Europe, North America, Africa and the Middle East, Asia (including Australia) and Latin America. The current structure reflects changes made to introduce a flatter, more focussed structure to allow businesses to get closer to their customers. Prior to that date, the organisation structure reflected four operating segments (Europe, North America, Brazil and Africa, Australia, Middle East and Asia) and three reportable segments. For reporting under IFRS 8 for the six months ended 31 March 2017, the Group is divided into three reportable segments. These segments and their main operating territories are as follows:
-- Northern Europe (UK & Ireland)
-- Central and Southern Europe (Germany, Switzerland, Poland, France, Spain and Portugal)
-- North America (US and Canada)
The remaining operating segments of Africa and the Middle East, Asia and Latin America do not meet the quantitative thresholds for presentation as separate reportable segments under IFRS 8, and so are presented together and described as International. They include the Group's operations in South Africa, UAE, Australia, Singapore, Malaysia and Brazil.
The operating segments for Central Europe and Southern Europe have been aggregated into a single reportable segment. These operating segments are considered to share similar economic characteristics because they have similar long term gross margins, operate in similar markets principally within the EU and the majority of their businesses are in countries within the euro area.
Segment information for the six months ended 31 March 2016 has been restated to reflect the above organisation structure and discontinued operations as detailed in note 11.
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 (Unaudited)
Six months Six months Six months
ended 31 ended 31 ended 31
March 2017 March 2017 March 2017 Change Change Change
===================== ================== =================== ============= ========= ========== =======
Statutory
and underlying Organic adjustments Organic Statutory Underlying Organic
GBPm GBPm GBPm % % %
===================== ================== =================== ============= ========= ========== =======
Recurring revenue by segment
Northern Europe 143 - 143 13.3% 12.4% 12.0%
Central and Southern
Europe 218 - 218 25.6% 8.3% 8.3%
North America 187 - 187 28.0% 7.3% 7.3%
International 100 (1) 99 51.7% 15.4% 15.6%
======================= ================== =================== ============= ========= ========== =======
Recurring revenue 648 (1) 647 26.6% 9.9% 9.9%
======================= ================== =================== ============= ========= ========== =======
Software and software related services ("SSRS") revenue by segment
Northern Europe 18 - 18 -18.3% -19.7% -19.7%
Central and Southern
Europe 63 - 63 7.6% -7.2% -7.2%
North America 37 - 37 10.9% -6.9% -6.9%
International 30 (1) 29 28.8% 0.6% 0.4%
======================= ================== =================== ============= ========= ========== =======
SSRS revenue 148 (1) 147 7.9% -7.4% -7.5%
======================= ================== =================== ============= ========= ========== =======
Processing revenue by segment
Northern Europe 19 - 19 10.7% 9.2% 9.2%
Central and Southern
Europe 1 - 1 69.8% 46.5% 46.5%
North America 17 - 17 23.7% 4.0% 4.0%
International 7 - 7 78.5% 36.0% 36.0%
======================= ================== =================== ============= ========= ========== =======
Processing revenue 44 - 44 24.3% 11.1% 11.1%
======================= ================== =================== ============= ========= ========== ======= Total revenue by segment Northern Europe 180 - 180 8.8% 7.8% 7.5% Central and Southern Europe 282 - 282 21.2% 4.5% 4.5% North America 241 - 241 24.7% 4.6% 4.6% International 137 (2) 135 47.1% 12.6% 12.8% ======================= ================== =================== ============= ========= ========== ======= Total revenue 840 (2) 838 22.7% 6.5% 6.4% ======================= ================== =================== ============= ========= ========== =======
Revenue by segment (Unaudited) (continued)
Six months Six months Six months Six months Six months
ended ended 31 ended ended ended 31
31 March March 2016 31 March 31 March March 2016
2016 2016 2016
===================== =============== =========== =========== ============ ===========
Statutory Impact
and underlying of foreign Organic
as reported exchange Underlying adjustments Organic
GBPm GBPm GBPm GBPm GBPm
===================== =============== =========== =========== ============ ===========
Recurring revenue by segment
Northern Europe 127 - 127 - 127
Central and Southern
Europe 174 28 202 - 202
North America 146 28 174 - 174
International 66 21 87 (1) 86
======================== =============== =========== =========== ============ ===========
Recurring revenue 513 77 590 (1) 589
======================== =============== =========== =========== ============ ===========
Software and software related services ("SSRS") revenue by segment
Northern Europe 22 - 22 - 22
Central and Southern
Europe 58 10 68 - 68
North America 34 6 40 - 40
International 23 7 30 (1) 29
======================== =============== =========== =========== ============ ===========
SSRS revenue 137 23 160 (1) 159
======================== =============== =========== =========== ============ ===========
Processing revenue by segment
Northern Europe 17 - 17 - 17
Central and Southern
Europe 1 - 1 - 1
North America 12 4 16 - 16
International 4 1 5 - 5
======================== =============== =========== =========== ============ ===========
Processing revenue 34 5 39 - 39
======================== =============== =========== =========== ============ ===========
Total revenue by segment
Northern Europe 166 - 166 - 166
Central and Southern
Europe 233 38 271 - 271
North America 192 38 230 - 230
International 93 29 122 (2) 120
======================== =============== =========== =========== ============ ===========
Total revenue 684 105 789 (2) 787
======================== =============== =========== =========== ============ ===========
Operating profit by segment (Unaudited)
Six months ended 31 March
2017 Change
==================== ========= ====================================== ======= ========= ========== =======
Underlying Organic
Statutory adjustments Underlying adjustments Organic Statutory Underlying Organic
GBPm GBPm GBPm GBPm GBPm % % %
==================== ========= ============ ========== ============ ======= ========= ========== =======
Operating profit by segment
Northern Europe 68 4 72 - 72 34% 19% 19%
Central and Southern
Europe 67 8 75 - 75 86% 24% 24%
North America 37 8 45 - 45 -3% -25% -25%
International 8 11 19 - 19 -35% -9% -9%
====================== ========= ============ ========== ============ ======= ========= ========== =======
Total operating
profit 180 31 211 - 211 31% 5% 5%
====================== ========= ============ ========== ============ ======= ========= ========== =======
Six months ended 31 March 2016
======================= ========= ============ ==============================================================
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
Northern Europe 51 8 59 1 60 - 60
Central and Southern
Europe 36 14 50 10 60 - 60
North America 37 12 49 11 60 - 60
International 13 3 16 5 21 - 21
======================== ========= ============ ============ =========== ========== ============ =======
Total operating profit 137 37 174 27 201 - 201
======================== ========= ============ ============ =========== ========== ============ =======
Reconciliation of underlying operating profit to statutory operating profit
Six months ended Six months ended
31 March 2017 31 March 2016
(Unaudited) (Unaudited)
GBPm GBPm
======================================================= ==== ==== ================= =================
North Europe 72 60
Central and Southern Europe 75 60
North America 45 60
=================================================================== ================= =================
Total reportable segments 192 180
International 19 21
=================================================================== ================= =================
Underlying operating profit 211 201
Impact of movement in foreign currency exchange rates - (27)
=================================================================== ================= =================
Underlying operating profit (as reported) 211 174
Amortisation of acquired intangible assets (9) (8)
Other M&A activity-related items (3) -
Non-recurring items (19) (29)
=================================================================== ================= ================= Statutory operating profit 180 137 =================================================================== ================= =================
3 Adjustments between underlying profit and statutory profit (Unaudited)
Six months Six months
Six months ended Six months Six months ended Six months
ended 31 March ended ended 31 March ended
31 March 2017 31 March 31 March 2016 31 March
2017 Non- 2017 2016 Non- 2016
Recurring recurring Total Recurring recurring Total
GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ========== ========== ========== ========== ========== ==========
M&A activity-related
items
Amortisation of acquired
intangibles (9) - (9) (8) - (8)
Other M&A activity-related
items (3) - (3) - - -
Other items
Business transformation - (19) (19) - (31) (31)
Recovery of litigation
costs - - - - 2 2
Total adjustments made
to operating profit (12) (19) (31) (8) (29) (37)
Fair value adjustments - - - 2 - 2
Amortisation of acquired
intangibles (1) - (1) - - -
Gain on remeasurement
of existing investment
in an associate - 13 13 - - -
Total adjustments made
to profit before income
tax (13) (6) (19) (6) (29) (35)
=========================== ========== ========== ========== ========== ========== ==========
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.
The adjustment for M&A activity related items comprises the cost of carrying out M&A activities including business combinations in the period.
The fair value adjustment comprises a charge of GBP1m (H1 16: gain of GBP2m) in relation to an embedded derivative asset which relates to contractual terms agreed as part of the US private placement debt offset by a GBP1m credit (H1 16: nil) relating to a fair value adjustment of a financial asset.
Non-recurring items
Charges of GBP19m (H1 16: GBP31m) have been incurred as a result of the implementation of the business transformation strategy. This is comprised of people reorganisation charges of GBP9m (H1 16: GBP16m), net property exit costs of GBP3m (H1 16: GBP11m) and other directly attributable costs, mainly relating to consultancy and contractors of GBP7m (H1 16: GBP4m). These charges are one-off in nature and directly linked to the business transformation that is under way.
In H1 16 there was income that arose from recovery of costs relating to the Archer Capital litigation case following its conclusion in 2015.
Total cash paid in relation to the business transformation strategy totalled GBP23m (H1 16: GBP12m) in the period.
The gain on remeasurement of existing investment in an associate relates to the acquisition of Fairsail, see note 11.
4 Income tax expense
The effective tax rate on statutory profit before tax was 25% (six months ended 31 March 2016: 23%) whilst the effective tax rate on underlying profit before tax for continuing operations was 27% (six months ended 31 March 2016: 26%). The effective income tax rate represents the best estimate of the average annual effective income tax rate expected for the full year, applied to the profit before income tax for the six months ended 31 March 2017.
5 Dividends
Six months Six months
ended ended Year
31 March 31 March ended
2017 2016 30 September
2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
========================================== ============= ============= ==============
Final dividend paid for the year ended 30
September 2015 of 8.65p per share - 93 93
Interim dividend paid for the year ended
30 September 2016 of 4.80p per share - - 52
Final dividend paid for the year ended 30
September 2016 of 9.35p per share 101 - -
========================================== ============= ============= ==============
101 93 145
========================================== ============= ============= ==============
The interim dividend of 5.22p per share will be paid on 2 June 2017 to shareholders on the register at the close of business on 12 May 2017.
6 Earnings per share
Basic earnings per share is calculated by dividing the profit for the period attributable to owners of the parent by the weighted average number of ordinary shares in issue during the period, 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. The Group has dilutive potential ordinary shares consisting of share options granted to employees, where the exercise price is less than the average market price of the Company's ordinary shares during the period.
Underlying Statutory
Underlying as reported Six Underlying Six months Statutory
Six months ended months ended Six months ended ended Six months
31 March 31 March 31 March 31 March ended 31 March
2017 2016 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
================= ================= ================ ================= ================= ================
Earnings
attributable to
owners of the
parent -
Continuing
operations
(GBPm)
Profit for the
period 145 121 141 136 98
================= ================= ================ ================= ================= ================
Number of shares
(millions)
Weighted average
number of
shares 1,079 1,075 1,075 1,079 1,075
Dilutive effects
of shares 5 7 7 5 7
================= ================= ================ ================= ================= ================
1,084 1,082 1,082 1,084 1,082
================= ================= ================ ================= ================= ================
Earnings per
share
attributable to
owners of the
parent -
Continuing
operations
(pence)
Basic earnings
per share 13.46 11.27 13.11 12.57 9.11
================= ================= ================ ================= ================= ================
Diluted earnings
per share 13.40 11.20 13.03 12.52 9.06
================= ================= ================ ================= ================= ================
Underlying
Underlying as reported Six Underlying Statutory Statutory
Six months ended months ended Six months ended Six months ended Six months
31 March 31 March 31 March 31 March ended 31 March
2017 2016 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
================= ================= ================ ================= ================= ================
Earnings
attributable to
owners of the
parent -
Continuing and
discontinued
operations
(GBPm)
Profit for the
period 156 130 152 146 106
================= ================= ================ ================= ================= ================
Number of shares
(millions)
Weighted average
number of
shares 1,079 1,075 1,075 1,079 1,075
Dilutive effects
of shares 5 7 7 5 7
================= ================= ================ ================= ================= ================
1,084 1,082 1,082 1,084 1,082
================= ================= ================ ================= ================= ================
Earnings per
share
attributable to
owners of the
parent -
Continuing and
discontinued
operations
(pence)
Basic earnings
per share 14.45 12.09 14.17 13.54 9.88
================= ================= ================ ================= ================= ================
Diluted earnings
per share 14.39 12.01 14.08 13.48 9.82
================= ================= ================ ================= ================= ================
Six months ended Six months ended
31 March 31 March
2017 2016
(Unaudited) (Unaudited)
Reconciliation of earnings - Continuing operations GBPm GBPm
================================================================================== ================ ================
Underlying earnings attributable to owners of the parent 145 141
Impact of movement in foreign currency exchange rates - (20)
================================================================================== ================ ================
Underlying earnings attributable to owners of the parent (after exchange movement) 145 121
Transformation costs and litigation related items (19) (29)
Amortisation of acquired intangible assets (10) (8)
Gain on remeasurement of existing investment in an associate 13 -
Fair value adjustments - 2
Other acquisition-related items (3) -
Taxation on adjustments 10 12
================================================================================== ================ ================
Net adjustments (9) (23)
================================================================================== ================ ================
Earnings statutory profit for period 136 98
================================================================================== ================ ================
Six months ended Six months ended
31 March 31 March
2017 2016
(Unaudited) (Unaudited)
Reconciliation of earnings - Continuing and discontinued operations GBPm GBPm
================================================================================== ================ ================
Underlying earnings attributable to owners of the parent 156 152
Impact of movement in foreign currency exchange rates - (22)
================================================================================== ================ ================
Underlying earnings attributable to owners of the parent (after exchange movement) 156 130
Net adjustments - Continuing operations (9) (23)
Amortisation of acquired intangible assets - discontinued operations (1) (1)
Net adjustments (10) (24)
================================================================================== ================ ================
Earnings statutory profit for period 146 106
================================================================================== ================ ================
7 Non-current assets
Other
intangible Property, plant
Goodwill assets and equipment Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBPm GBPm GBPm GBPm
================================================ ============= ============= ================ =============
Opening net book amount at 1 October 2016 1,659 109 123 1,891
Additions - 7 8 15
Acquisition 103 - - 103
Transfer to held for sale (199) (1) (1) (201)
Depreciation, amortisation and other movements - (15) (12) (27)
Exchange movement 26 2 3 31
Closing net book amount at 31 March 2017 1,589 102 121 1,812
================================================ ============= ============= ================ =============
Other
intangible Property, plant
Goodwill assets and equipment Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBPm GBPm GBPm GBPm
================================================ ============= ============= ================ =============
Opening net book amount at 1 October 2015 1,446 106 123 1,675
Additions - 3 13 16
Acquisition - 6 - 6
Disposals - - (1) (1)
Depreciation, amortisation and other movements - (14) (10) (24)
Exchange movement 74 7 3 84
Closing net book amount at 31 March 2016 1,520 108 128 1,756
================================================ ============= ============= ================ =============
Goodwill is not subject to amortisation, but is tested for impairment annually at the year-end or whenever there is any indication of impairment. At 31 March 2017, there were no indicators of impairment to goodwill. Full details of the outcome of the 2016 goodwill impairment review are provided in the 2016 financial statements.
Detail of the current period acquisition has been provided in note 11.
8 Financial instruments
For financial assets and liabilities, the carrying amount approximates the fair value of the instruments, with the exception of US senior loan notes due to these bearing interest at fixed rates which are currently higher than floating rates. The fair value of borrowings is determined by reference to interest rate movements on the US $ private placement market and therefore can be considered as a level 2 fair value as defined within IFRS 13 with the respective book and fair values included in the table below.
At 31 March 2017 At 31 March 2016
======================== ========================
Book Value Fair Value Book Value Fair Value
GBPm GBPm GBPm GBPm
====================== =========== =========== =========== ===========
Long term-borrowing 551 557 484 495
Short term-borrowing - - 35 36 ====================== =========== =========== =========== ===========
9 Ordinary shares and share premium
Ordinary
Number of Shares Share premium Total
shares (Unaudited) (Unaudited) (Unaudited)
(Unaudited) GBPm GBPm GBPm
======================== ============== ==================== ===================== ==================
At 1 October 2016 1,119,480,363 12 544 556
Shares issued/proceeds 315,053 - 1 1
======================== ============== ==================== ===================== ==================
At 31 March 2017 1,119,795,416 12 545 557
======================== ============== ==================== ===================== ==================
Number of Ordinary Share
Shares Shares (Unaudited) Premium (Unaudited) Total (Unaudited)
(Unaudited) GBPm GBPm GBPm
======================== ============== ==================== ===================== ==================
At 1 October 2015 1,118,298,748 12 541 553
Shares issued/proceeds 551,880 - 2 2
======================== ============== ==================== ===================== ==================
At 31 March 2016 1,118,850,628 12 543 555
======================== ============== ==================== ===================== ==================
In the current period, the Group transferred 1,019,166 of treasury shares to the Employee Benefit Trust in order to satisfy vested PSP awards.
In the prior period, the group purchased 385,000 shares at a cost of GBP2m through the Employee Benefit Trust.
10 Cash flow and net debt
Six months ended Six months ended
31 March 31 March
2017 2016
(Unaudited) (Unaudited)
GBPm GBPm
=============================================================================== ================= =================
Statutory operating profit - continuing operations 180 137
Recurring and non-recurring items 31 37
=============================================================================== ================= =================
Underlying operating profit - continuing operations 211 174
Underlying operating profit - discontinued operations 18 15
=============================================================================== ================= =================
Underlying operating profit (as reported) 229 189
Depreciation/amortisation/impairment/profit on disposal of non-current assets 17 15
Share-based payments 5 6
Net changes in working capital 2 15
Net capital expenditure (15) (15)
=============================================================================== ================= =================
Underlying cash flow from operating activities 238 210
Net interest paid (10) (9)
Income tax paid (39) (48)
Non-recurring items (23) (12)
Exchange movement - 1
=============================================================================== ================= =================
Free cash flow 166 142
Net debt at 1 October (397) (425)
Acquisitions and disposals of subsidiaries, net of cash (79) (6)
Reclassification as held for sale (8) -
Dividends paid to owners of the parent (101) (93)
Purchase of treasury shares - (2)
Exchange movement (15) (19)
Other - (1)
=============================================================================== ================= =================
Net debt at 31 March (434) (404)
=============================================================================== ================= =================
At
1 October At 31 March
2016 2017
Reclassification
as held for Non-cash Exchange
(Audited) Cash flow Acquisitions sale movements movement (Unaudited)
Analysis of
change in net
debt (inclusive
of finance
leases) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== =========== ========= ============ ================ ========== ========= =============
Cash and cash
equivalents 264 148 (79) (28) - 4 309
Bank overdrafts (4) (1) - - - - (5)
===================== =========== ========= ============ ================ ========== ========= =============
Cash, cash
equivalents
and bank overdrafts 260 147 (79) (28) - 4 304
Loans due within
one year (38) 39 - - - (1) -
Loans due after
more than one
year (535) (92) - - - (15) (642)
Cash held on
behalf of customers (84) (29) - 20 - (3) (96)
===================== =========== ========= ============ ================ ========== ========= =============
Total (397) 65 (79) (8) - (15) (434)
===================== =========== ========= ============ ================ ========== ========= =============
Included in cash above is GBP96m (31 March 2016: GBP133m, 30 September 2016: GBP84m) relating to cash held on behalf of customers. This arises as a consequence of providing payment transaction 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 Group's current syndicated bank multi-currency revolving credit facility expires in June 2019 with facility levels of GBP625m (US$551m and EUR218m tranches). At 31 March 2017, GBP92m (H1 2016: GBP110m) of the multi-currency revolving debt facility was drawn, with the decrease due to ongoing repayments funded from free cash flows.
Total US private placement ("USPP") loan notes at 31 March 2017 were GBP551m (US$600m and EUREUR85m) (H1 2016: GBP519m, US$650m and EUREUR85m). GBP41m (US$50m) of USPP borrowings were repaid in March 2017.
11 Acquisitions and disposals
Acquisitions made during the period
On 17 March 2017, the Group obtained control of Fairsail Limited (Fairsail) by acquiring the remaining share capital for a cash consideration of GBP89m and cost of replacement share based payments of GBP1m. The Group now holds 100% of Fairsail's share capital. Fairsail is a leading Human Capital Management (HCM) cloud provider to mid-sized, multinational companies. Fairsail is a private entity incorporated in the UK and not listed on any public exchange. The Group became a minority shareholder in Fairsail in 2016 and subsequently launched a shared product, Sage People. Taking full ownership will build on the success of that product, and the resulting combined portfolio provides growth opportunities, particularly through new customer acquisition internationally, and cross-sell to the combined customer base.
Summary of acquisition GBPm
=================================================== =====
Purchase consideration
Cash 89
Cost of replacement share based payments 1
Fair value of previously held interest 20
=================================================== =====
110
Provisional fair value of identifiable net assets (7)
=================================================== =====
Goodwill 103
=================================================== =====
Cost of replacement share based payments consists of contingent share awards granted to Fairsail employees under the Sage Group Restricted Share Plan in place of their existing unvested share option arrangements. The amount treated as consideration is the fair value of awards attributable to pre-acquisition service. The Group recognised a gain of GBP13m on the remeasurement to fair value of its existing investment in an associate. This gain is included on a separate line in the consolidated income statement.
Provisional fair value of acquisition GBPm =================================================== ===== Cash 10 Trade & other debtors 3 Trade & other creditors (2) Deferred revenue (4) =================================================== ===== Provisional fair value of identifiable net assets acquired 7 Goodwill 103 =================================================== ===== Total consideration 110 =================================================== =====
Provisional values have been used as the initial accounting for acquired intangible assets and goodwill is not yet completed with the short period between the acquisition date and the approval of the half-yearly report making this impractical. Pending completion of the fair value exercise, the residual excess of consideration over the net assets acquired has been provisionally recognised entirely as goodwill. Goodwill is expected to reflect benefits from the assembled workforce and growth opportunities through customer acquisition and cross-sell to the combined customer base. No goodwill is expected to be deductible for tax purposes.
The outflow of cash and cash equivalents on the acquisition GBPm is as follows: ============================================================= ===== Cash consideration 89 Cash and cash equivalents acquired (10) ============================================================= ===== Net cash outflow 79 ============================================================= =====
Costs totalling less than GBP1m relating to the business combination have been included in selling and administrative expenses in the Consolidated income statement as acquisition-related items and relate to advisory, legal and other professional services.
Immediately prior to the acquisition, the Group had recognised prepaid licences of GBP1m for Fairsail's products purchased by the Group prior to the acquisition. At the acquisition date, the Group recognised a loss equal to the carrying of the prepaid licences. The loss is included in selling and administrative expenses in the Consolidated income statement.
Arrangements have been put in place for retention and performance related payments to remunerate employees of Fairsail for future services. The costs of these arrangements will be recognised in future periods over the retention and performance periods. No amounts have been recognised to date.
The amounts of revenue and profit or loss reported by Fairsail since the acquisition date are not material in the context of the Group as a whole. The revenue of the Group for the six months ended 31 March 2017 would have increased by GBP5m and the profit would have reduced by GBP2m if Fairsail had been included in the Group for the whole of the period.
Disposals made during the period
There were no disposals made in the period.
Discontinued operations and assets and liabilities held for sale
Discontinued operations relate to the subsidiaries forming the Group's North American Payments business. Assets and liabilities held for sale relate to the subsidiaries forming the Group's North America Payments business, the Group's subsidiary Syska GmbH and the Group's subsidiary Sage XRT Brasil Ltda. Bids have been received from prospective buyers for North America Payments business and due diligence is in progress. The North America Payments business was classified as held for sale at 1 March 2017 and its sale is expected to be finalised during the half-year ending 30 September 2017. The business forms part of the Group's North America reportable segment. Syska GmbH was classified as held for sale at 31 March 2017. At that date the sale process with the preferred buyer was at an advanced stage and the sale subsequently completed on 6 April 2017. The business forms part of the Group's Central and Southern Europe reportable segment. See note 13, Events after the balance sheet date, for further details of the disposal transaction. XRT was classified as held for sale in the year ended 30 September 2016. Its sale process continues to progress and is expected to complete by 30 September 2017. The business forms part of the Group's International segment.
At 31 March 2017 assets held for sale comprise goodwill of GBP199m, cash of GBP28m, trade and other receivables of GBP26m and other assets of GBP12m with liabilities held for sale comprising trade and other payables of GBP45m and other liabilities of GBP6m. At 31 March 2016 assets and liabilities held for sale were GBPnil. At 30 September 2016 assets held for sale comprise trade and other receivables of GBP1m.
Profit from discontinued operations is analysed as follows:
Six months Six months Six months Six months Six months Six months Year ended
ended ended ended ended ended ended 30 September
31 March 31 March 31 March 31 March 31 March 31 March 2016
2017 2017 2017 2016 2016 2016 (Unaudited)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Statutory
Underlying Adjustments* Statutory Underlying Adjustments* Statutory
as reported GBPm
GBPm GBPm GBPm GBPm GBPm GBPm
================ ============ ============= ============ ============ ============= ============ ==============
Revenue 72 - 72 62 - 62 130
Cost of sales (7) - (7) (6) - (6) (12)
================ ============ ============= ============ ============ ============= ============ ============
Gross profit 65 - 65 56 - 56 118
Selling and
administrative
expenses (47) (1) (48) (41) (1) (42) (84)
================ ============ ============= ============ ============ ============= ============ ============
Operating
profit 18 (1) 17 15 (1) 14 34
Finance income - - - - - - -
Finance costs - - - - - - (1)
================ ============ ============= ============ ============ ============= ============ ============
Profit before
income tax 18 (1) 17 15 (1) 14 33
Income tax
expense (7) - (7) (6) - (6) (13)
================ ============ ============= ============ ============ ============= ============ ============
Profit for the
period 11 (1) 10 9 (1) 8 20
================ ============ ============= ============ ============ ============= ============ ============
*Adjustments comprise amortisation of acquired intangible assets which have previously been recognised as part of business combinations.
Upon disposal, income in relation to cumulative foreign exchange differences that has been recognised in other comprehensive income relating to the assets and liabilities of the North America Payments business from the date of acquisition to the date of disposal will be recycled to the income statement.
Cash flow from discontinued operations is analysed as follows:
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2016
2017 2016 GBPm
Cash flows from: GBPm GBPm
====================== =========== =========== ==============
Operating activities 13 14 38
Investing activities - - -
Financing activities 7 (1) (8)
====================== =========== =========== ==============
20 13 30
====================== =========== =========== ==============
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.
Six months ended Six months ended
31 March 31 March
2017 2016
(Unaudited) (Unaudited)
Key management compensation GBPm GBPm
=========================================== ================= =================
Salaries and short-term employee benefits 4 4
Post-employment benefits - -
Share-based payments 1 2
=========================================== ================= =================
5 6
=========================================== ================= =================
The key management figures given above include directors. Key management personnel are deemed to be members of the Executive Committee and are defined in the Group's Annual Report & Accounts 2016. There have been no changes to the Executive Committee since the signing of the Group's Annual Report & Accounts 2016, other than Santiago Solanas who left the Group on 31 March 2017.
13 Events after the balance sheet date
On 3 April 2017, the Group acquired 100% of the equity capital of Startup Compass Inc. (Compass), the provider of a highly innovative analytics and benchmarking platform, for cash consideration of GBP5m. The provisional value of net assets acquired is GBPnil, comprising principally working capital balances, resulting in provisional goodwill of GBP5m. Provisional values have been used as the initial accounting for acquired intangible assets and goodwill is not yet completed due to the short period between the acquisition date and the approval of the interim consolidated condensed financial statements.
On 6 April 2017, the Group sold its subsidiary Syska GmbH for GBP2m. Net liabilities divested were GBP1m, resulting in a gain on disposal of GBP3m.
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.
Other risks are analysed and mitigated via the normal embedded risk management process.
Principal Risk Background Management and Mitigation
Risk
================= ================================ ===================================================================
Licensing Sage is transitioning
Model Transition from a perpetual to * An approved licensing model transition strategy is in
Sage does a subscription based place
not successfully licensing model.
manage its In addition to providing
ongoing additional value for * A series of approved subscription revenue targets are
transition customers, this transition defined, which span multiple years and support
to subscription assists with cash flow; successful and balanced delivery of our strategy
licencing offers a platform for
against defined cross selling; and lowers
timelines attrition rates, which * Ongoing monitoring and review of the approved targets
and targets in turn aids revenue takes place at country, regional and group levels to
or appropriately forecasting. proactively manage the licence transition, and
adapt its It also provides regular revenue targets
customer customer engagement
approach. and enhanced opportunities
to develop these relationships. * New products are being offered on a subscription only
Strategic The speed of transition basis, to support achievement of overall revenue
alignment: needs to be balanced targets
Customers against any reduction
for Life in short term revenues.
* Customer Business Centres (CBCs) are established in
North America and Europe to integrate digital
marketing, sales and service operations for customers
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 companies, established, which has Group responsibility for
to understand using local definitions Market Intelligence
and anticipate and methodologies to
changes in capture market data.
the external The alignment of federated * Market intelligence surveys are undertaken, to
environment, activities allows consolidation identify market opportunities
including of data across geographies
customer and product to provide
needs, emerging a single Sage view, * Brand health surveys are undertaken in order to
market trends, and enables trends and understand customer perception of the Sage brand and
competitor white space opportunities its products
strategies to be identified.
and In order to develop
regulatory/legal a consolidated understanding * An approved internal communications plan is delivered,
requirements of its market and customer to share market intelligence to build brand awareness
needs, Sage is developing
Strategic its market intelligence
alignment: capability, and aligning * Market data is provided through a Market Data portal,
Customers this with competitive allowing ease of access and improved analysis
for Life positioning and product
Winning development activities.
in the Market In progress:
* Action to support the increasing awareness and
quality of the Market Data portal
* Ongoing refinement and improvement of market data
through feedback from the business
================= ================================ ===================================================================
Competitive The competitive environment
Positioning in which Sage operates * A Product Marketing team is established to oversee
and Product continues to see significant competitive positioning and product development
Development developments.
Sage is unable Sage must translate
to clearly market intelligence * A Product Delivery team is established to develop and
identify into effective strategies deliver products
the approach targeting attractive
to market, market segments with
or deploy appropriate products * Battlecards in place for key products in all
competitive and continually work countries, setting out the strengths and weaknesses
advantage, to reinforce competitive of competitors and their products
including superiority.
product During the transition
development to 'One Sage' products, * Defined 'customer for life' roadmaps are in place,
we continue to manage detailing how products fit together, and any
Strategic the local product base interdependencies
alignment: and plan and evolve
these in line with longer-term
Winning in aspirations. * A BattleApp has been released to provide timely
the Market information to sales channels
Capacity
for Growth
In progress:
* 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 is embedding its
Model Delivery global operating model * A new Operating Model was implemented in October 2016
Sage does which provides enhanced
not successfully governance, process
deliver a harmonisation, efficiencies * A Transformation Forum is in place, which provides
global operating and scalability. governance over project activity supporting the
model that The effective interaction effective delivery of the operating model
supports between all parts of
its growth the organisation will
ambitions allow Sage to grow at * Consolidated operational reporting is in place and
pace. provides oversight of progress and supports
Strategic consistency of direction, and management of potential
alignment: conflicts. This is overseen by the Programme
Management Office (PMO)
Capacity
for Growth
* A formal gating process through which all projects
must pass
In progress:
* Defined success criteria established for all projects,
which align with delivery of the operating model
* Ongoing monitoring and management of projects through
the Transformation Forum, including monitoring of
success factors against defined transition activities
================= ================================ ===================================================================
Supporting Sage's footprint has
Control developed often through * Established Global and Regional Risk Committees
Environment acquisition. Aligning oversee the risk and internal control environment,
Sage's control and rationalising these sets the tone-from-the-top
environment, systems and processes,
business is required to support
processes the 'One Sage' operating * Shared Service Centres are established in Newcastle
and technology model. and Johannesburg, enabling the creation of consistent
infrastructure and consolidated systems and processes
does not
support the
efficient * Rationalised Management Committee structures
and effective
operation
of the business. * Policy Approval Committee in place to supervise and
approve policies within the Sage-wide policy suite
Strategic
alignment:
* Customer Business Centres (CBCs) are built around
One Sage core systems to underpin operational consistency and
Capacity expansion, including Salesforce CRM and Sage's own X3
for Growth for General Ledger activity. As volumes scale, all
new customers for CBC supported products are being
entered directly into these systems
* Shared Service Centres (SSCs) in Newcastle and
Johannesburg have installed X3 General Ledger
In progress:
* Plans for migration of country General Ledgers into
X3 is on track with plans
* An Excellence in Controls initiative to enhance the
supporting control environment has commenced
* Deployment of a Governance, Risk and Compliance
technology solution is underway
================= ================================ ===================================================================
Information Sage's footprint has
Management developed through a * Accountability is established within both OneIT and
and Protection process of acquisition, Product for all internal and external data being
(including each arriving with its processed by Sage. OneIT and Product Services report
cyber) own processes and activities to the Chief Information Officer and Chief Product
Sage fails appropriate to a smaller Delivery Officer respectively
to adequately business, but which
understand, did not develop in line
manage and with Sage's growth. * A network of Information Security Officers supports
protect Harmonising and rationalising the business
information these, as necessary,
is required to support
Strategic the 'One Sage' operating * Formal certification schemes are maintained, across
alignment: model and to allow a appropriate parts of the business, and include
business view on all internal and external validation of compliance
One Sage data being held and
processed, including
management and protection. * Secure coding standards are in place for the
During 2016, we have development of new code
broadened the risk to
include all data, both
internal Sage related * Structured and ad-hoc IT internal audit activity is
information, and external undertaken by Sage Assurance against an agreed plan,
customer related information. and reported to management and the Audit and Risk
Committee
* A revised Sage information security policy suite has
been launched
* The Incident Management framework was revised and
updated, to include the rating of incidents and
requirements for escalation
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 continues to be deployed
* Data Governance Committee providing direction around
data and Data Protection
================= ================================ ===================================================================
Regulatory Sage's services operate
and Legal within a complex regulatory * All legal resources across Sage report directly to
Framework and legal environment. the General Counsel and Company Secretary
Sage does Monitoring this evolving
not understand regulatory and legal
and operate environment enables * Legal services use internal and external resources to
within the timely and appropriate monitor planned and realised changes in legislation
applicable steps to ensure ongoing
regulatory compliance.
and legal * All product contracts are reviewed and approved
framework through Legal Services
Strategic
alignment: * An agreed suite of policies is in place which
supports key legislation, including Data Protection
One Sage 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, which ensure appropriate
treatment of identified events, and management
visibility
* Sage Compliance function to re-enforce the drive
towards a 100% compliance culture
In progress:
* Data Governance Committee providing direction around
General Data Protection Regulations (GDPR)
================= ================================ ===================================================================
Sage Brand Following several years
Sage does of acquisition, work * A Brand team is in place which has overall
not deliver continues to develop responsibility for developing the Sage Brand
clear and and harmonise the Sage
consistent brand. Whilst it is
branding well recognised and * All countries must comply with Sage's Brand
to the market trusted by customers Governance and Brand Guidelines, which are designed
in many core markets, to execute the Sage Masterbrand Strategy. The
Strategic brand awareness remains timeframes for compliance of all products are defined,
alignment: inconsistent. and any exceptions must be approved through the Brand
A clear and consistent team
One Sage brand enables customers
to understand Sage values.
* A Digital Asset Management (DAM) tool is in place
which workflows requests and approvals, and acts as a
single information repository
* Brand Library used as a repository for branded assets,
and any exceptions from brand guidelines reported to
the Chief Marketing Officer
* 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 Summits completed across four cities in 2017
(Paris, Berlin, Johannesburg, and Melbourne) Brand
awareness campaign launched to improve Brand
recognition
* The Sage Foundation operating across Sage, aligned
with our values and behaviours
In progress:
* Compliance Programme being rolled out, to assess and
educate on compliance with Brand Governance and Brand
Guidelines
* Four Sage Summits taking place between April and June
(London, Madrid, Atlanta, and Toronto)
================= ================================ ===================================================================
Partners There are instances
and Alliances where leveraging partnerships * A Partner and Alliances team is established to
Sage fails and alliances can support oversee the selection and management of Sage's
to identify, the growth ambitions alliances and partners, including accountability for
build, enable of Sage. active management of relationships
and maintain The governance and control
appropriate around engagement and
partnerships use must be defined, * Definitions are in place to ensure clarity and
and alliances as well as management consistency over alliances and partners, to enable
Strategic of the ecosystem. appropriate and consistent management of these
alignment: arrangements
Revolutionise
Business * All contracts for alliances and partners require
approval through legal services
* 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 Sage Partner
Programme
* A financial model for Sage Partner Programme is being
developed
================= ================================ ===================================================================
Third Party Several Sage customer
Reliance service offerings are * A Procurement function ensures key controls are
Sage does delivered or supported applied in the selection and on-boarding of third
not understand using third parties, parties
and manage whilst Sage remains
its third accountable for quality
party ecosystem of performance. * The Procurement function supports the business with
The third party ecosystem the selection of third parties and negotiation of
Strategic must be understood and contracts
alignment: effectively managed,
in order to limit Sage's
Revolutionise exposure. * Legal resources are used in contract negotiation
Business
* 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 continues, including classifying third
parties for business criticality, and associated
actions
* Rationalisation of the third party ecosystem is
continuing
================= ================================ ===================================================================
Statement of Directors' Responsibilities
The condensed consolidated half-yearly financial report for the six months ended 31 March 2017 includes the following responsibility statement.
Each of the directors confirms that, to the best of their knowledge:
- the Group consolidated condensed financial statements, which have been prepared in accordance with IAS34, "Interim Financial Reporting" as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
- the Directors' report includes 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.
The Directors also confirm that the Interim Management Report herein includes a fair review of information required by 4.2.8R of the DTR (Disclosure and Transparency Rules).
The directors of The Sage Group plc are consistent with those listed in the Group's 2016 Annual Report and Accounts subject to the following changes, which took effect from the conclusion of the AGM on 28 February 2017: Ruth Markland and Inna Kuznetsova stepped down from their roles as non-executive directors; and Soni Jiandani was appointed as a non-executive director. A list of current directors is maintained on the Group's website: www.sage.com.
On behalf of the Board
S Hare
Chief Financial Officer
2 May 2017
Independent review report to The Sage Group plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 which comprises Consolidated income statement, Consolidated statement of comprehensive income, Consolidated balance sheet, Consolidated statement of changes in equity, Consolidated statement of cash flows and the related explanatory notes 1 to 13. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in the group accounting policies, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
2 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ATMLTMBAMBMR
(END) Dow Jones Newswires
May 03, 2017 02:00 ET (06:00 GMT)
1 Year Sage Chart |
1 Month Sage Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
