REG - Sage Group PLC - Audited results for year ended 30 September 2021
17/11/2021 07:05
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RNS Number : 6030S Sage Group PLC 17 November 2021
The Sage Group plc audited results for the year ended 30 September 2021
Wednesday 17 November 2021
Accelerating growth driven by continued strategic progress
- Strategic investment driving growth and significant acceleration
in new customer acquisition
- Organic recurring revenue growth of 5.4%, driven by growth in
Sage Business Cloud of 19%
- Organic operating margin of 19.3%, in line with guidance
- Sustained strong cash generation, with underlying cash
conversion of 126%
- ARR growth of 7.7%, underpinned by cloud native ARR growth of
44%
- FY22 organic recurring revenue growth expected to be in the
region of 8% to 9%
- Refreshed strategic framework to reflect Sage's evolving
strategic priorities
Alternative Performance Measures (APMs) 1 (#_ftn1) FY21 FY20 2 (#_ftn2) Change
Organic Financial APMs
Organic Total Revenue £1,778m £1,725m +3%
Organic Recurring Revenue £1,637m £1,553m +5%
Organic Operating Profit £343m £380m -10%
% Organic Operating Profit Margin 19.3% 22.0% -2.7 ppts
Underlying Financial APMs
EBITDA £443m £486m -9%
Underlying Operating Profit £358m £400m -11%
% Underlying Operating Profit Margin 19.4% 21.6% -2.2 ppts
Underlying Basic EPS 23.09p 26.74p -14%
Underlying Cash Conversion 126% 123% +3 ppts
KPIs
Annualised Recurring Revenue (ARR) £1,680m £1,560m +8%
Renewal Rate by Value 99% 99% -
% Subscription Penetration 70% 65% +5 ppts
% Sage Business Cloud Penetration 67% 60% +7 ppts
Statutory Measures FY21 FY20 % Change
Revenue £1,846m £1,903m -3%
Operating Profit £373m £404m -8%
% Operating Profit Margin 20.2% 21.3% -1.1 ppts
Basic EPS (p) 26.33p 28.38p -7%
Dividend Per Share (p) 17.68p 17.25p +2.5%
Please note that tables may not cast and change percentages may not calculate
precisely due to rounding.
Commenting on the results, CEO Steve Hare said:
"Sage delivered a strong performance in FY21. We achieved recurring revenue
growth ahead of our initial expectations and ended the year with real
momentum, supported by our strategic investment in sales, marketing and
innovation. Our cloud native solutions have performed particularly well, as
more new customers choose Sage to take care of their accounting, people and
payroll processes - removing friction, delivering business insights, and
giving them a competitive edge. I would like to thank our colleagues and
partners, whose hard work and commitment has helped deliver a successful year.
"Having reshaped and invested significantly in the Group over the last three
years, we are now focused on growing the business in absolute terms, both
organically and through acquisitions. The small and mid-sized businesses that
power the global economy are adopting digital solutions at a faster rate than
ever before, and through our trusted technology and human approach, Sage is
well positioned to support them. I am confident that, through our refreshed
strategic framework, we will deliver further sustainable growth, driving the
success of Sage now and in the long term."
Financial highlights
- Organic recurring revenue increased by 5% to £1,637m,
underpinned by Sage Business Cloud growth of 19% to £997m. Organic total
revenue grew by 3% to £1,778m.
- Organic operating profit of £343m represents a margin of 19.3%
(FY20: 22.0%). This reflects our planned strategic investment to accelerate
growth across Sage Business Cloud, with a focus on cloud native solutions, as
set out in our FY20 results announcement.
- Statutory operating profit reduced to £373m (FY20: £404m),
principally reflecting the additional strategic investment, with non-recurring
net gains of £55m (FY20: £46m) driven by disposals.
- Strong underlying cash conversion of 126% (FY20: 123%) reflects
continued growth in subscription revenue and sustained improvements in working
capital, including strength in receivables collection.
- Robust balance sheet, with c. £1.2bn of cash and available
liquidity (comprising £567m of cash and cash equivalents, and £669m of
undrawn facilities), and net debt to EBITDA of 0.6x.
- Final dividend up 2.7% to 11.63p, in line with our dividend
policy, taking the full year dividend to 17.68p.
Strategic and operational highlights
- Annualised recurring revenue (ARR) up 8% to £1,680m (FY20:
£1,560m), with growth accelerating significantly in the second half across
all regions.
- Cloud native ARR increased by 44% to £347m (FY20: £240m),
driven by growth from new customers and supported by migrations from cloud
connected and desktop products.
- £140m of ARR added through new customer acquisition (including
reactivations), up from £90m in FY20.
- Renewal by value of 99% is in line with FY20, and reflects a
strong performance in customer add-ons in the second half, together with a
continued focus on customer retention.
- Sage Business Cloud penetration increased to 67% (FY20: 60%),
enabling more customers to connect to Sage's cloud services and ecosystem via
the digital network.
- Delivered against our FY21 strategic priorities for growth:
- Accelerated growth in solutions for mid-sized businesses,
particularly Sage Intacct, both in North America and globally.
- Built significant momentum in cloud native solutions for small
businesses in Northern Europe.
- Cloud connected portfolio continues to perform well, led by the
International region.
- Completed disposals of businesses in Poland, Asia and Australia,
and announced an agreement for the disposal of Sage's business in Switzerland,
increasing focus on core geographies.
Outlook
We expect to achieve organic recurring revenue growth in the region of 8% to
9% in FY22, driven by continuing strength in Sage Business Cloud, and in cloud
native revenues in particular. We also expect other revenue (SSRS &
processing) to continue to decline, in line with our strategy. Consistent with
previous guidance, organic operating margin is expected to trend upwards in
FY22 and beyond, as we now focus on scaling the Group.
About Sage
Sage exists to knock down barriers so everyone can thrive, starting with the
millions of Small and Mid-Sized Businesses served by us, our partners and
accountants. Customers trust our finance, HR and payroll software to make work
and money flow. By digitising business processes and relationships with
customers, suppliers, employees, banks and governments, our digital network
connects SMBs, removing friction and delivering insights. Knocking down
barriers also means we use our time, technology and experience to tackle
digital inequality, economic inequality and the climate crisis.
Enquiries: Sage: +44 (0) 7900 046714 Finsbury Glover Hering: +44 (0) 20 7251 3801
James Sandford, Investor Relations Conor McClafferty
Amy Lawson, Corporate PR Amanda Healy
A presentation for investors and analysts will be held at 8.30am UK time. The
webcast can be accessed live, and subsequently as a replay, via
www.sage.com/investors (http://www.sage.com/investors) . Participants may also
dial in by calling +44 (0) 20 7192 8338, using pin code 5495161.
Business Review
Sage began FY21 amid the uncertainties of the Covid pandemic, with a
commitment to accelerate growth across Sage Business Cloud, increase our
strategic investment in sales, marketing and innovation, and continue to embed
SaaS capabilities and culture throughout the organisation. This approach built
on the strong foundations created through our consistent focus on strategic
execution, and led to a strong performance for the year.
Overview of results
In FY21 the Group achieved organic recurring revenue growth of 5% to £1,637m,
and organic total revenue growth of 3% to £1,778m. The increase in recurring
revenue was underpinned by a 19% rise in Sage Business Cloud revenue to
£997m, reflecting strength from new customer acquisition together with
continued progress in migrating existing customers from desktop to cloud
solutions.
Our focus on growing cloud revenues has resulted in Sage Business Cloud
penetration increasing to 67%, up 7 percentage points compared to FY20. We
have also continued to grow software subscription revenues, leading to a rise
in subscription penetration of 5 percentage points to 70%.
As a result of the continuing evolution of the business mix, 92% of the
Group's organic total revenue is now recurring, up from 90% in FY20.
Portfolio View of Revenue
Organic Revenue by Portfolio 3 (#_ftn3) Recurring Total
FY21 FY20 Growth FY21 FY20 Growth
£m £m % £m £m %
Cloud native 4 (#_ftn4) £286m £212m +35% £299m £224m +33%
Cloud connected 5 (#_ftn5) £711m £623m +14% £724m £636m +14%
Sage Business Cloud £997m £835m +19% £1,023m £860m +19%
Products with potential to migrate £490m £546m -10% £574m £654m -12%
Future Sage Business Cloud Opportunity 6 (#_ftn6) £1,487m £1,381m +8% £1,597m £1,514m +5%
Non-Sage Business Cloud 7 (#_ftn7) £150m £172m -12% £181m £211m -14%
Organic Total Revenue £1,637m £1,553m +5% £1,778m £1,725m +3%
Sage Business Cloud Penetration 67% 60%
The portfolio view provides a breakdown of Sage's organic revenue by strategic
product portfolio. Our principal focus is to grow Sage Business Cloud, by
acquiring new customers and migrating existing customers to Sage's cloud
native and cloud connected solutions. All customers within Sage Business Cloud
are able to connect to Sage's digital network of cloud services, leading to
deeper customer relationships and higher lifetime values.
Recurring revenue from cloud native solutions grew by 35% in FY21 to £286m,
driven by Sage Intacct together with other solutions including Sage Accounting
and Sage People, primarily through new customer acquisition. Cloud native
growth has also been driven by migrations principally to Sage HR, our HR
management software for small customers, and to Sage Partner Cloud, our
managed cloud solution for mid-sized customers.
The increase in cloud connected recurring revenue of 14% to £711m reflects
growth in both the Sage 50 and Sage 200 franchises. This has been driven by
the migration of existing customers, predominantly in International, as well
as further growth from new customers acquired in the period.
Overall, the Future Sage Business Cloud Opportunity, which represents products
in or with a clear pathway to Sage Business Cloud, has performed well with
recurring revenue growth of 8%.
The Non-Sage Business Cloud portfolio comprises products for which management
does not envisage a path to Sage Business Cloud. The revenue decline in this
portfolio is in line with expectations and reflects the strategy to focus on
solutions with a direct pathway to Sage Business Cloud.
ARR growth
Sage's ARR increased by 8% to £1,680m (FY20: £1,560m), accelerating in the
second half of the year across all our regions, reflecting strong levels of
growth balanced between new and existing customers.
This was underpinned by particularly strong cloud native ARR growth of 44% to
£347m (FY20: £240m), driven by a good performance across our cloud native
portfolio including strong new customer acquisition for Sage Intacct and Sage
Accounting, together with migrations principally to Sage HR and to Sage
Partner Cloud. In total, Sage added £140m of ARR through new customer
acquisition (including reactivations) during the year (FY20: £90m), through
an improving customer proposition supported by increased sales and marketing
spend.
Across the Group, existing customer renewal rates have been strong, with
customer churn slightly below pre-Covid levels. Renewal rate by value of 99%
is in line with FY20 and reflects a strong performance in customer add-ons
during the second half, together with a continued focus on customer retention.
Progress in strategic execution
At our FY20 results we set out a number of strategic priorities to accelerate
the execution of our strategy. Our progress against these priorities is
outlined below.
Growing in our target markets
In Northern Europe, we continue to make progress in cloud native solutions for
small businesses. By improving the customer experience and investing in sales
and marketing, new customer additions for Sage Accounting increased by 80% in
FY21, while for Sage Payroll they doubled, supported by a strong attach rate
to Sage Accounting. Sage HR also enjoyed strong growth through migrations and
new customer wins.
In North America, momentum in solutions for mid-sized businesses strengthened
during the year, particularly in Sage Intacct, driven by product enhancements,
sales and marketing investment, and broader distribution. Across the Group, we
added more than 2,000 new Sage Intacct customers, an increase of over 50%
compared to FY20. Retention rates across the Sage 50 and Sage 200 product
franchises have also remained strong.
In our newly created International segment, growth has centred around cloud
connected products, together with a significant contribution from cloud
native, including Sage Partner Cloud, X3 Cloud and Sage Intacct. Leveraging
our global scale, we've recently introduced new cloud native solutions in
these markets, and further launches are planned to drive growth across the
region.
Investing to accelerate growth
Our sales and marketing investment has been focused on growing digital
marketing spend and enhancing our sales capacity and capability. We have
also invested in the Sage brand, helping to attract new audiences to Sage
solutions. The "Boss It" campaign has continued to spur strong demand for our
small business solutions in the UK, and was also launched in other markets
including South Africa and Canada, driving increases in website visitors and
online conversion.
Our investment in product development (R&D) has focused on driving
innovation including developing the Sage Business Cloud digital network,
enriching our cloud solutions, and enhancing our artificial intelligence (AI)
capabilities:
· We've invested in the Service Fabric, our microservices
architecture, to support the deployment of new cloud services, where we have
seen a significant increase in customer engagement.
· We've enhanced our cloud banking and e-invoicing services, and we
launched a new automated tax determination service that processed over 7
million transactions on its first day.
· We've continued to grow our team of data scientists and AI
engineers and expand our machine-learning infrastructure, investing in
innovative solutions such as the General Ledger Outlier Detection tool, Sage
Intelligent Time, and a new predictive absence management tool.
· We are working in partnership with Tide to provide small business
owners and entrepreneurs with a combined banking and accounting product,
connecting Tide members to Sage's new accounting and compliance as a service
(ACaaS) platform.
· We've invested in how we serve accountants, acquiring GoProposal,
a cloud native client onboarding solution, and we will launch a new cloud
native practice management solution in the UK shortly.
· We've also invested in a number of complementary businesses
including BrightPearl, an eCommerce solutions provider, and CountingUp, a
mobile-based banking and accounting startup.
Additionally, Sage Intacct was recognised as a Visionary by Gartner in its
2021 Magic Quadrant for Cloud Core Financial Management Suites, and it
achieved the highest product score in the Core Financials for Lower Midsize
Enterprises Use Case, for the fifth consecutive year.
Colleagues
Management is committed to further embedding SaaS capabilities, based on an
innovative and high-performing culture. During the year, new customer-centric
programmes were introduced for all colleagues. These include our '10x
Innovation' programme which trains colleagues in design thinking methodology
and helps to instil a culture of customer-centred innovation and
experimentation across the Group.
We continue to prioritise all forms of colleague wellbeing, to shape our
culture, create a more inclusive environment, and develop sustainable high
performance. During the year we launched our Flexible Human Work initiative.
Co-created with our colleagues, this framework sets out the future of work at
Sage and empowers teams to experiment with how, when and where colleagues
work.
In September we achieved our highest colleague NPS score to date, and have
made progress across other key measures of colleague engagement - including
further awards received from organisations such as Glassdoor and Comparably -
showing that colleagues recognise our focus in this area.
Sustainability and society
Sage plays a key role in supporting the small and mid-sized businesses (SMBs)
that form the backbone of economies around the world, helping to bring
prosperity to their owners and staff, and to the communities in which they
operate. In June, Sage launched its 'sustainability and society' strategy,
aiming to support a new generation of diverse and sustainable businesses,
tackle societal and economic inequality, and play its part in the race to net
zero carbon.
Key initiatives include partnering with social enterprise MyKindaFuture to
provide mentoring and training for disadvantaged people in the UK in starting
their own business, with non-profit lending platform Kiva to improve financial
inclusion in communities around the world that find it hard to start or grow
businesses, and with the Institute of Engineering and Technology to deliver a
STEM skills education programme to young people in deprived communities.
Sage has also pledged to help protect the planet by achieving net zero
emissions by 2040, and halving its carbon emissions by 2030, across Scopes 1,
2 and 3. In addition, Sage recently launched its online Sustainability Hub,
providing SMBs with expertise and advice on how to reduce their carbon impact.
These initiatives build on the longstanding work of the Sage Foundation which
celebrated its fifth birthday this year. Over this period, we have built an
action-oriented volunteering programme, with colleagues, their families and
partners giving over 22,000 volunteering days to our communities and the
environment across all of our markets in FY21.
Simplifying the business
During the year, we completed the disposals of Sage's businesses in Poland,
Asia and Australia, as previously announced. We also announced an agreement to
sell Sage's business in Switzerland; this transaction is expected to complete
during the first half of FY22. Both Sage's business in Switzerland and its
South African payroll outsourcing business remained held for sale at the end
of FY21. Sage's disposal programme is now largely complete, resulting in a
simplified Group structure, with management and capital resources now focused
on fewer, larger geographies.
In addition, in September Sage announced an organisational restructuring to
further simplify and streamline our operations, including the removal of
around 800 roles. We expect to fully reinvest the resulting cost savings in
areas that are key to Sage's long-term success including customer experience
and brand, technology and innovation, and AI and data. Associated one-off
restructuring costs of £67m have been recognised in FY21.
Refreshed strategic framework
Looking ahead to FY22, we have refreshed our strategic framework to reflect
the Group's evolving priorities. Our purpose is to knock down barriers so
everyone can thrive, recognising that as Sage removes friction to help SMBs
thrive, they in turn have a positive effect on the economies and communities
in which they operate. Our ambition is to be the trusted network for SMBs, as
we continue to develop our existing technology footprint into an integrated
digital network of applications and services which connect, remove friction
and deliver insights for customers. To serve our purpose and achieve our
ambition, we will focus on five strategic priorities that will help Sage
create value for customers, colleagues, society and shareholders, in FY22 and
beyond:
1. Scale Sage Intacct
Sage Intacct forms the heart of our cloud native financial management
proposition for mid-sized businesses. We have already invested significantly
in scaling the proposition, establishing Sage Intacct in new markets including
the UK, Australia and South Africa, and expanding its vertical focus. We will
continue to grow Sage Intacct's customer base and addressable market,
deepening its capabilities in existing verticals, driving expansion into new
verticals - both directly and with partners - and accelerating international
growth.
2. Expand medium beyond financials
Sage's well-established position in providing financial management solutions
to mid-sized businesses around the world creates a compelling opportunity to
expand into adjacent areas - automating and adding value to a broader set of
business processes, and delivering improved data accuracy and insight.
Through a combination of organic and inorganic development, Sage will broaden
its value proposition for mid-sized businesses to support their digital
transformation, by automating manual processes, for example in accounts
payable and accounts receivable, and by providing integrated solutions that
connect and deliver insight.
3. Build the small business engine
Sage has made significant progress in the small business market in FY21,
increasing new business wins in the UK by offering an integrated suite of
cloud native solutions, including Sage Accounting, Sage Payroll, Sage HR and
AutoEntry. By investing in customer experience and digital marketing
capabilities, Sage has created a scalable growth 'engine' that can be deployed
in other geographies. Our priority is to continue to build this small business
engine, including through acquisitions where appropriate - refining the
proposition and capabilities in the UK while scaling and internationalising
the approach in other markets.
4. Scale the network
Sage is focused not only on developing solutions for specific business needs,
but also on integrating those solutions to provide a unified digital
experience, and creating a digital network of connections between
organisations and their customers, suppliers, employees and regulatory
bodies. Leveraging our existing scale across North America, Northern Europe
and International, our priority is to enable and encourage further
participation in the digital network, attracting new and migrating existing
customers to Sage Business Cloud so they can enjoy an expanding number of
cloud-based digital services. More digital network participants contributing
more data will power the insight we need to build more innovative customer
experiences, improving our ability to attract and retain customers.
5. Learn and disrupt
Innovation is key to the long-term success of Sage. By providing the
opportunity to create actionable insights through data, the Sage Business
Cloud digital network is a key enabler of innovation, and Sage will continue
to invest in the technology and capabilities that underpin it. This includes
continuously improving our innovation capability and culture, accelerating
momentum in AI and machine learning, and complementing this with partnerships,
investments and acquisitions, in order to share in early learnings from
disruptive trends, and inform subsequent investment choices.
Financial Review
This financial review provides a summary of Sage's results on an organic
basis, as well as considering the underlying and statutory performance of the
business. Organic measures allow management and investors to understand the
like-for-like revenue and margin performance of the continuing business.
Organic Financial Results
In FY21 Sage achieved organic recurring revenue growth of 5% to £1,637m and
organic total revenue growth of 3% to £1,778m. The increase in recurring
revenue was underpinned by a 19% rise in Sage Business Cloud revenue to
£997m, reflecting strength from new customer acquisition together with
continued progress in migrating existing customers from desktop to cloud
solutions.
Other revenue (SSRS and processing) declined by 18% to £141m, in line with
our strategy to transition away from licence sales and professional services
implementations.
The Group's organic operating profit decreased by 10% to £343m, representing
an organic operating margin of 19.3% (FY20: 22.0%). This reflects the
Group's additional strategic investment in sales and marketing and product
development (R&D) to accelerate growth in Sage Business Cloud, primarily
in cloud native.
The Group also achieved underlying basic EPS of 23.09p, strong underlying cash
conversion of 126% and free cash flow of £339m.
Statutory and Underlying Financial Results
Financial Results Statutory Underlying 8 (#_ftn8)
FY21 FY20 Change FY21 FY20 Change
North America £687m £692m -1% £687m £651m +6%
Northern Europe £402m £412m -2% £402m £412m -2%
International 9 (#_ftn9) £757m £799m -5% £757m £794m -5%
Group Total Revenue £1,846m £1,903m -3% £1,846m £1,857m -1%
Operating Profit £373m £404m -8% £358m £400m -11%
% Operating Profit Margin 20.2% 21.3% -1.1 ppts 19.4% 21.6% -2.2 ppts
Profit Before Tax £347m £373m -7% £333m £376m -12%
Net Profit £285m £310m -8% £250m £292m -14%
Basic EPS 26.33p 28.38p -7% 23.09p 26.74p -14%
The Group achieved statutory total revenue of £1,846m, a 3% decrease on the
prior year, reflecting the disposals of Sage Pay and Sage's Brazilian business
in FY20, together with foreign exchange headwinds, principally in relation to
the US dollar. Underlying total revenue, which normalises the comparative
period for foreign exchange movements, reduced by 1%.
Statutory operating profit decreased by 8% to £373m, primarily reflecting the
additional strategic investment in the business, with non-recurring net gains
slightly higher than the prior year, driven by disposals. Underlying operating
profit, which excludes recurring and non-recurring items, decreased by 11% to
£358m.
Statutory basic EPS decreased by 7% to 26.33p, reflecting the additional
strategic investment and the post-tax impact of recurring and non-recurring
items. Underlying basic EPS declined by 14% to 23.09p.
Underlying & Organic Reconciliations to Statutory
FY21 FY20
Revenue Operating Profit Operating Margin % Revenue Operating Profit Operating Margin %
Statutory £1,846m £373m 20.2% £1,903m £404m 21.3%
Recurring items 10 (#_ftn10) - £40m - - £53m -
Non-recurring items:
- Net gain on disposal of subsidiaries - (£126m) - - (£141m) -
- Asia goodwill impairment - - - - £19m -
- Property restructuring costs - - - - £21m -
- Employee restructuring costs - £62m - - £22m -
- Office relocation - £9m - - £33m -
Impact of FX 11 (#_ftn11) - - - (£46m) (£11m) -
Underlying £1,846m £358m 19.4% £1,857m £400m 21.6%
Disposals (£40m) (£7m) - (£103m) (£14m) -
Held for sale (£28m) (£8m) - (£29m) (£6m) -
Organic £1,778m £343m 19.3% £1,725m £380m 22.0%
Revenue
The Group achieved statutory and underlying revenue of £1,846m in FY21.
Underlying revenue in FY20 of £1,857m reflects statutory revenue of £1,903m
retranslated at current year exchange rates, resulting in an FX adjustment of
£46m.
Organic revenue of £1,778m (FY20: £1,725m) reflects underlying revenue
adjusted for £40m of revenue from Sage's businesses in Poland, Australia and
Asia, which were sold during the period, and £28m (FY20: £29m) from assets
held for sale at the end of the period, including Sage's business in
Switzerland and the South African payroll outsourcing business. In FY20,
revenue from disposals included £69m of revenue from Sage's businesses in
Poland, Australia and Asia, and £34m from Sage Pay and Sage's Brazilian
business.
Operating profit
The Group achieved a statutory operating profit in FY21 of £373m (FY20:
£404m). Underlying operating profit of £358m (FY20: £400m) reflects
statutory operating profit adjusted for recurring and non-recurring items.
Recurring items of £40m (FY20: £53m) comprise £31m of amortisation of
acquisition-related intangibles (FY20: £33m) and £9m of M&A related
charges (FY20: £20m).
Non-recurring items include a £126m net gain on disposal of subsidiaries from
the sale of Sage's businesses in Poland, Australia and Asia (FY20: £141m net
gain from the disposals of Sage Pay and Sage's Brazilian business). This is
partly offset by a £62m provision for employee restructuring costs,
comprising £67m relating to the business simplification announced in
September and a £5m reversal of professional services restructuring costs
that had previously been provided for, together with a non-cash accelerated
depreciation charge relating to the relocation of our North Park office in
Newcastle of £9m (FY20: £33m).
Organic operating profit of £343m (FY20: £380m) reflects underlying
operating profit adjusted for £7m of operating profit from Sage's businesses
in Poland, Australia and Asia (FY20: £10m) and £8m of operating profit from
assets held for sale at the end of the period (FY20: £6m). In FY20, operating
profit from disposals included a further £4m from Sage Pay and Sage's
Brazilian business.
Organic Revenue Overview
Organic Revenue Mix FY21 FY20 % Change
£m % of Total £m % of Total
Software Subscription Revenue £1,242m 70% £1,116m 65% +11%
Other Recurring Revenue £395m 22% £437m 25% -10%
Organic Recurring Revenue £1,637m 92% £1,553m 90% +5%
Other Revenue £141m 8% £172m 10% -18%
Organic Total Revenue £1,778m 100% £1,725m 100% +3%
Organic total revenue increased by 3% in FY21 to £1,778m. Organic recurring
revenue grew by 5% to £1,637m, supported by an 11% increase in software
subscription revenue to £1,242m, reflecting the continued focus on attracting
new customers and migrating existing customers to subscription and Sage
Business Cloud. The decline in other recurring revenue of 10% to £395m
reflects customers migrating from maintenance and support to subscription
contracts. Other revenue (SSRS and processing) declined by 18% to £141m, in
line with our strategy to transition away from licence sales and professional
services implementations.
In the portfolio view of revenue, the Future Sage Business Cloud Opportunity
delivered organic recurring revenue growth of 8% to £1,487m and organic total
revenue growth of 5% to £1,597m, driven by sales to new and existing
customers. In the Non-Sage Business Cloud portfolio, organic recurring revenue
decreased by 12% to £150m, and total revenue decreased by 14% to £181m, in
line with our strategy.
North America
Organic Revenue by Category FY21 FY20 % Change
Organic Total Revenue £687m £651m +6%
Organic Recurring Revenue £641m £597m +7%
% Sage Business Cloud Penetration 73% 71% +2 ppts
% Subscription Penetration 66% 61% +5 ppts
Organic Recurring Revenue FY21 FY20 % Change
US £543m £504m +8%
Of which Sage Intacct £164m £134m +22%
Canada £98m £93m +6%
North America achieved organic recurring revenue growth of 7% to £641m and
organic total revenue growth of 6% to £687m. Sage Business Cloud penetration
is now 73%, up from 71% in the prior year, driven by growth in cloud native
and cloud connected solutions, while subscription penetration is 66%, up from
61% in the prior year.
Cloud native growth was driven through Sage Intacct, which delivered recurring
revenue growth of 22% to £164m reflecting continued strong progress driven by
accelerating new customer acquisition.
Recurring revenue in the US increased by 8% to £543m, driven by Sage Intacct
together with continued growth in small and medium cloud connected products,
primarily the Sage 200 franchise and supported by Sage 50 solutions. Total
revenue for the US increased by 6% to £584m.
In Canada, recurring revenue increased by 6% to £98m and total revenue by 5%
to £103m, driven by growth in Sage 50 cloud and Sage 200 cloud solutions.
Northern Europe
Organic Revenue by Category FY21 FY20 % Change
Organic Total Revenue £402m £394m +2%
Organic Recurring Revenue £391m £377m +4%
% Sage Business Cloud Penetration 86% 82% +4 ppts
% Subscription Penetration 90% 85% +5 ppts
Northern Europe (UK & Ireland) achieved organic recurring revenue growth
of 4% to £391m and organic total revenue growth of 2% to £402m. Sage
Business Cloud penetration is now 86%, up from 82% in the prior year, while
subscription penetration is 90%, up from 85% in the prior year.
Recurring revenue growth reflects accelerating growth in cloud native
solutions, supported by further growth in Sage 50 cloud connected.
Cloud native revenue growth in Northern Europe was driven by new customer
acquisition in Sage Accounting, Sage People and AutoEntry, together with
migrations to Sage HR. Sage Intacct continues to grow rapidly in the UK,
building a good momentum in new contract wins through both direct sales and
the partner channel.
International
Organic Revenue by Category FY21 FY20 % Change
Organic Total Revenue £689m £680m +1%
Organic Recurring Revenue £605m £579m +4%
% Sage Business Cloud Penetration 47% 35% +12 ppts
% Subscription Penetration 62% 56% +6 ppts
Organic Recurring Revenue FY21 FY20 % Change
Central and Southern Europe £480m £464m +3%
France £257m £245m +5%
Central Europe £102m £96m +6%
Iberia £121m £123m -2%
Africa & APAC £125m £115m +9%
The International region achieved organic recurring revenue growth of 4% to
£605m and organic total revenue growth of 1% to £689m. Sage Business Cloud
penetration is now 47%, up from 35% in the prior year, while subscription
penetration is 62%, up from 56% in the prior year.
In France, recurring revenue increased by 5% to £257m, with a strong
performance in cloud connected, and further growth in cloud native solutions.
Total revenue in France increased by 3% to £281m.
Central Europe achieved recurring revenue growth of 6% to £102m while total
revenue increased by 4% to £132m. Growth in the region is driven by a
combination of cloud connected and local products.
In Iberia, while subscription revenue increased by 18%, overall recurring
revenue decreased by 2% to £121m, reflecting a reduction in maintenance and
support revenues, as non-subscription customers opted not to renew their
maintenance and support contracts, principally during the first half. Total
revenue decreased by 4% to £137m.
Africa & APAC delivered strong recurring revenue growth of 9% to £125m,
driven by a continued good performance in cloud native solutions, particularly
Sage Accounting in Africa, and supported by growth in local products. Total
revenue in Africa & APAC was broadly flat at £139m compared with the
prior year.
Operating Profit
The Group achieved organic operating profit of £343m (FY20: £380m),
representing a margin of 19.3% (FY20: 22.0%). This margin reflects increased
strategic investment in sales and marketing and product development (R&D)
to drive growth. During the year, the Group reassessed its bad debt provision
in connection with Covid-19, resulting in an £8m credit to operating profit.
Underlying operating profit was £358m (FY20: £400m), representing a margin
of 19.4% (FY20: 21.6%). The difference between organic and underlying
operating profit reflects the operating profit from assets sold during the
period (Sage's businesses in Poland, Australia and Asia in FY21, and Sage Pay
and the Brazilian business in FY20) and assets held for sale (Sage's business
in Switzerland and Sage's South African payroll outsourcing business).
EBITDA was £443m (FY20: £486m) representing a margin of 24.1%. The reduction
in EBITDA reflects the additional strategic investment made during the year.
While the charge for share based payments increased by £7m to £36m (FY20:
£29m) reflecting the expansion of equity reward schemes, this was offset by
an £8m reduction in underlying depreciation and amortisation to £49m (FY20:
£57m) as a result of the Group's property rationalisation programme and
assets held for sale.
FY21 FY20 FY21 Margin %
Organic Operating Profit £343m £380m 19.3%
Impact of disposals £7m £14m
Impact of held for sale £8m £6m
Underlying Operating Profit £358m £400m 19.4%
Depreciation & amortisation £49m £57m
Share based payments £36m £29m
EBITDA £443m £486m 24.1%
Net Finance Cost
The statutory net finance cost for the period decreased to £26m (FY20:
£31m), primarily reflecting the reduced impact from FX movements on
intercompany balances, and is broadly in line with the underlying net finance
cost of £25m (FY20: £25m).
Taxation
The underlying tax expense for FY21 was £83m (FY20: £84m), resulting in an
underlying tax rate of 25% (FY20: 23%). The statutory income tax expense for
FY21 was £62m (FY20: £63m), resulting in a statutory tax rate of 18% (FY20:
17%).
The difference between the underlying and statutory rate in FY21 primarily
reflects a non-taxable accounting net gain on disposals, partially offset by
the non-tax-deductible accelerated depreciation charge relating to the
relocation of our North Park office in Newcastle.
The FY21 underlying tax rate has increased primarily as a result of certain
non-recurring adjustments in FY20.
Earnings per Share
FY21 FY20 % Change
Statutory Basic EPS 26.33p 28.38p -7%
Recurring items 3.01p 4.57p
Non-recurring items (6.25p) (5.52)p
Impact of foreign exchange - (0.69p)
Underlying Basic EPS 23.09p 26.74p -14%
Underlying basic earnings per share of 23.09p was 14% lower than the prior
period (FY20: 26.74p), reflecting the decrease in underlying operating profit
due to additional strategic investment.
Statutory basic earnings per share decreased by 7%, reflecting the reduction
in underlying basic earnings per share and the post-tax impact of recurring
and non-recurring items.
Cash Flow
The Group remains highly cash generative with underlying cash flow from
operations of £451m (FY20: £505m), representing an underlying cash
conversion of 126% (FY20: 123%). Importantly, the Group has continued to
deliver cash conversion in excess of 100% for three years. This strong cash
conversion reflects further growth in subscription revenue and sustained
improvements in working capital, with continued strength in receivables
collection. Free cash flow was £339m (FY20: £382m), largely reflecting
continued strong underlying cash conversion and a reduction in net interest
and income tax paid.
Cash Flow APMs FY21 FY20 (as reported)
Underlying operating profit £358m £411m
Depreciation, amortisation and non-cash items in profit £47m £56m
Share based payments £36m £29m
Net changes in working capital £65m £45m
Net capital expenditure (£55m) (£36m)
Underlying Cash Flow from Operations £451m £505m
Underlying cash conversion % 126% 123%
Non-recurring cash items (£9m) (£4m)
Net interest paid (£19m) (£26m)
Income tax paid (£81m) (£93m)
Profit and loss foreign exchange movements (£3m) -
Free Cash Flow £339m £382m
Statutory Reconciliation of Cash Flow from Operations FY21 FY20 (as reported)
Statutory Cash Flow from Operations £476m £527m
Recurring and non-recurring items £30m £14m
Net capital expenditure (£55m) (£36m)
Underlying Cash Flow from Operations £451m £505m
Net debt and liquidity
Group net debt was £247m at 30 September 2021 (30 September 2020: £151m),
comprising cash and cash equivalents of £567m (30 September 2020: £848m) and
total debt of £814m (30 September 2020: £999m). The increase in net debt in
the period is summarised in the table below.
FY21 FY20
Net debt at 1 October (£151m) (£529m)
Free cash flow £339m £382m
New leases (£8m) (£30m)
Net proceeds from disposal of subsidiaries £142m £212m
M&A and equity investments (£39m) (£10m)
Dividends paid (£189m) (£186m)
Share buyback (£353m) (£7m)
FX movement and other £12m £17m
Net debt at 30 September (£247m) (£151m)
The Group's debt is sourced from a syndicated multi-currency Revolving Credit
Facility (RCF), US private placement (USPP) loan notes, and sterling
denominated bond notes. The Group's RCF expires in February 2025 with facility
levels of £669m (split between US$719m and £135m tranches). At 30 September
2021, the RCF was undrawn (FY20: £294m).
The Group's USPP loan notes at 30 September 2021 totalled £370m (US$400m and
EUR 85m) (FY20: £387m - US$400m and EUR 85m). The USPP loan notes have a
range of maturities between January 2022 and May 2025.
The Group issued a debut £350m 10-year bond in February 2021, with a coupon
of 1.625%. This issuance enabled the Group to extend the maturity of its debt
portfolio and to diversify its funding sources. The net proceeds were used to
repay an existing £200m syndicated Term Loan that was due to expire in
September 2022 and for general corporate purposes.
Sage currently has an investment grade issuer credit rating assigned by
Standard and Poor's of BBB+ (stable outlook).
Maturities within the next 18 months comprise EUR 55m (£47m) and EUR 30m
(£26m) of the Group's USPP loan notes in January 2022 and January 2023
respectively.
The Group had £1,236m of cash and available liquidity at 30 September 2021,
comprising cash and cash equivalents of £567m and undrawn facilities of
£669m.
Capital allocation
Sage maintains a disciplined approach to capital allocation. The Group's focus
is to accelerate strategic execution through organic and inorganic investment,
including through acquisitions of complementary technology and partnerships to
enhance Sage Business Cloud and further develop Sage's digital network. In
line with management's focus on core geographies, Sage's businesses in Poland,
Australia and Asia were sold during the year, and a sale agreement was
announced in respect of the disposal of Sage's Swiss business.
Our policy is to maintain the dividend in real terms. In line with our
policy, and reflecting the Group's strong business performance and cash
generation during the year, we have increased the full year dividend by 2.5%
to 17.68p.
The Group also considers returning surplus capital to shareholders. On 4 March
2021 Sage launched a £300m share buy-back programme that completed on 3
September 2021. A total of 45.4m shares were purchased under this programme
and are held as treasury shares. A further £300m share buyback programme
commenced on 6 September and is expected to end no later than 24 January 2022.
As at 12 November, 28m shares had been purchased under the current programme
for a total consideration of £202m and held in treasury.
FY21 FY20 (as reported)
Net debt £247m £151m
EBITDA (Last Twelve Months) £443m £498m
Net debt/EBITDA Ratio 0.6x 0.3x
Group net debt as at 30 September 2021 was £247m and EBITDA over the last 12
months was £443m, resulting in a net debt to EBITDA leverage ratio of 0.6x.
Group return on capital employed (ROCE) for FY21 was 19% (FY20 as reported:
20%).
Sage plans to operate in a broad range of 1-2x net debt to EBITDA over the
medium term, with flexibility to move outside this range as the business needs
require. Accordingly, we expect our leverage ratio to move back to the
medium-term range, through organic investment, M&A and/or capital returns.
Going concern
The Directors have robustly tested the going concern assumption in preparing
these financial statements, taking into account the Group's strong liquidity
position at 30 September 2021 and a number of downside sensitivities, and
remain satisfied that the going concern basis of preparation is appropriate.
Further information is provided in note 1 of the financial statements on page
23.
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 TO GBP) FY21 FY20 Change
Euro (€) 1.15 1.14 1%
US Dollar ($) 1.37 1.28 7%
Canadian Dollar (C$) 1.73 1.72 1%
South African Rand (ZAR) 20.28 20.67 -2%
Australian Dollar (A$) 1.82 1.88 -3%
Appendix 1 - Alternative Performance Measures
Alternative Performance measures are used by the company to understand and
manage performance. These are not defined under IFRS and are not intended to
be a substitute for any IFRS measures of performance but have been included as
management considers them to be important measures, alongside the comparable
GAAP financial measures, in assessing the underlying performance. Wherever
appropriate and practical, we provide reconciliations to relevant GAAP
measures. The table below sets out the basis of calculation of the Alternative
Performance Measures and the rationale for their use.
MEASURE DESCRIPTION RATIONALE
Underlying (revenue and profit) measures Underlying measures are adjusted to exclude items which would distort the Underlying measures allow management and investors to compare performance
understanding of the performance for the year or comparability between without the potentially distorting effects of foreign exchange movements,
periods: one-off or non-operational items.
- Recurring items include purchase price adjustments including
amortisation of acquired intangible assets and adjustments made to reduce
deferred income arising on acquisitions, acquisition-related items, unhedged By including part-period contributions from acquisitions, discontinued
FX on intercompany balances and fair value adjustments; and operations, disposals and assets held for sale of standalone businesses in the
current and/or prior periods, the impact of M&A decisions on earnings per
- Non-recurring items that management judge to be one-off or share growth can be evaluated.
non-operational such as gains and losses on the disposal of assets, impairment
charges and reversals, and restructuring related costs.
All prior period underlying measures (revenue and profit) are retranslated at
the current year exchange rates to neutralise the effect of currency
fluctuations.
Organic (revenue and profit) measures In addition to the adjustments made for Underlying measures, Organic measures: Organic measures allow management and investors to understand the
like-for-like revenue and current period margin performance of the continuing
- Exclude the contribution from discontinued operations, disposals business.
and assets held for sale of standalone businesses in the current and prior
period; and
- Exclude the contribution from acquired businesses until the year
following the year of acquisition; and
- Adjust the comparative period to present prior period acquired
businesses as if they had been part of the Group throughout the prior period.
Acquisitions and disposals where the revenue and contribution impact would be
immaterial are not adjusted.
Underlying Cash Flow from Operations Underlying Cash Flow from Operations is Underlying Operating Profit adjusted To show the cash flow generated by the operations and calculate underlying
for non-cash items, net capex (excluding business combinations and similar cash conversion.
items) and changes in working capital.
Underlying Cash Conversion Underlying Cash Flow from Operations divided by Underlying (as reported) Cash conversion informs management and investors about the cash operating
Operating Profit. cycle of the business and how efficiently operating profit is converted into
cash.
EBITDA EBITDA is Underlying Operating Profit excluding depreciation, amortisation and To calculate the Net Debt to EBITDA leverage ratio and to show profitability
share based payments. before the impact of major non-cash charges.
Annualised recurring revenue Annualised recurring revenue ("ARR") is the normalised organic recurring ARR represents the annualised value of the recurring revenue base that is
revenue in the last month of the reporting period, adjusted consistently expected to be carried into future periods, and its growth is a
period to period, multiplied by twelve. Adjustments to normalise reported forward-looking indicator of reporting recurring revenue growth.
recurring revenue include those components that management has assessed should
be excluded in order to ensure the measure reflects that part of the
contracted revenue base which (subject to ongoing use and renewal) can
reasonably be expected to repeat in future periods (such as non-refundable
contract sign-up fees).
Renewal Rate by Value The ARR from renewals, migrations, upsell and cross-sell of active customers As an indicator of our ability to retain and generate additional revenue from
at the start of the year, divided by the opening ARR for the year. our existing customer base through up and cross sell.
Free Cash Flow Free Cash Flow is Underlying Cash Flow from Operations minus net interest paid To measure the cash generated by the operating activities during the period
and income tax paid and adjusted for non-recurring cash items (which excludes that is available to repay debt, undertake acquisitions or distribute to
net proceeds on disposals of subsidiaries) and profit and loss foreign shareholders.
exchange movements.
% Subscription Penetration Organic software subscription revenue as a percentage of organic total To measure the progress of migrating our customer base from licence and
revenue. maintenance to a subscription relationship.
% Sage Business Cloud Penetration Organic recurring revenue from the Sage Business Cloud (native and connected To measure the progress in the migration of our revenue base to the Sage
cloud) as a percentage of the organic recurring revenue of the Future Sage Business Cloud by connecting our solutions to the cloud and/or migrating our
Business Cloud Opportunity. customers to cloud connected and cloud native solutions.
Return on Capital Employed (ROCE) ROCE is calculated as: As an indicator of the current period financial
- Underlying Operating Profit; minus return on the capital invested in the company.
- Amortisation of acquired intangibles; the result being divided ROCE is used as an underpin in the FY19, FY20 and FY21 PSP awards.
by
- The average (of the opening and closing balance for the period)
total net assets excluding net debt, provisions for non-recurring costs,
financial liability for purchase of own shares and tax assets or liabilities
(i.e. capital employed).
Consolidated income statement
For the year ended 30 September 2021
Note Underlying Statutory 2021 Underlying as reported* 2020 Adjustments
Adjustments
£m
£m
Statutory 2020
2021
(note 3)
£m
£m (note 3)
2020
2021
£m
£m
Revenue 2 1,846 - 1,846 1,903 - 1,903
Cost of sales (131) - (131) (126) - (126)
Gross profit 1,715 - 1,715 1,777 - 1,777
Selling and administrative expenses (1,357) 15 (1,342) (1,366) (7) (1,373)
Operating profit 2 358 15 373 411 (7) 404
Finance income 1 - 1 3 - 3
Finance costs (26) (1) (27) (28) (6) (34)
Profit before income tax 333 14 347 386 (13) 373
Income tax expense 4 (83) 21 (62) (87) 24 (63)
Profit for the year 250 35 285 299 11 310
Earnings per share attributable to the owners of the parent (pence)
Basic 6 23.09p 26.33p 27.43p 28.38p
Diluted 6 22.87p 26.08p 27.21p 28.15p
All operations in the year relate to continuing operations.
Note:
* Underlying as reported is at 2020 reported exchange rates.
Consolidated statement of comprehensive income
For the year ended 30 September 2021
2021 2020
£m £m
Profit for the year 285 310
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Actuarial gain on post-employment benefit obligations 2 -
2 -
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations (60) (43)
Exchange differences recycled through income statement on sale of foreign (21) 43
operations
(81) -
Other comprehensive expense for the year, net of tax (79) -
Total comprehensive income for the year 206 310
The notes on pages 22 to 38 form an integral part of this condensed
consolidated yearly report.
Consolidated balance sheet
As at 30 September 2021
Note 2021 2020
£m £m
Non-current assets
Goodwill 7 1,877 1,962
Other intangible assets 7 190 212
Property, plant and equipment 7 164 173
Equity investments 21 -
Other financial assets - 1
Trade and other receivables 113 86
Deferred income tax assets 40 35
2,405 2,469
Current assets
Trade and other receivables 295 302
Current income tax asset 37 5
Cash and cash equivalents (excluding bank overdrafts) 10 553 831
Assets classified as held for sale 11 39 108
924 1,246
Total assets 3,329 3,715
Current liabilities
Trade and other payables (592) (297)
Current income tax liabilities (31) (13)
Borrowings (65) (20)
Provisions (68) (19)
Deferred income (611) (593)
Liabilities classified as held for sale 11 (13) (73)
(1,380) (1,015)
Non-current liabilities
Borrowings (749) (970)
Post-employment benefits (22) (23)
Deferred income tax liabilities (5) (14)
Provisions (49) (31)
Trade and other payables (3) (3)
Deferred income (10) (7)
(838) (1,048)
Total liabilities (2,218) (2,063)
Net assets 1,111 1,652
Equity attributable to owners of the parent
Ordinary shares 9 12 12
Share premium 9 548 548
Translation reserve 42 123
Merger reserve 61 61
Retained earnings 448 908
Total equity 1,111 1,652
Consolidated statement of changes in equity
For the year ended 30 September 2021
Attributable to owners of the parent
Ordinary shares Share premium Translation reserve Merger reserves Retained earnings Total
£m
£m
£m
£m
£m
equity
£m
At 1 October 2020 12 548 123 61 908 1,652
Profit for the year - - - - 285 285
Other comprehensive (expense)/income
Exchange differences on translating foreign operations - - (60) - - (60)
Exchange differences recycled through income statement on sale of foreign - - (21) - - (21)
operations
Actuarial gain on post-employment benefit obligations - - - - 2 2
Total comprehensive income - - (81) - 287 206
for the year ended 30 September 2021
Transactions with owners
Employee share option scheme:
- Value of employee services including deferred tax - - - - 36 36
Proceeds from issuance of treasury shares - - - - 8 8
Share buyback programme - - - - (602) (602)
Dividends paid to owners of the parent - - - - (189) (189)
Total transactions with owners - - - - (747) (747)
for the year ended 30 September 2021
At 30 September 2021 12 548 42 61 448 1,111
Attributable to owners of the parent
Ordinary shares Share premium Translation reserve Merger reserve Retained earnings Total
£m
£m
£m
£m
£m
equity
£m
At 1 October 2019 as originally presented 12 548 123 61 760 1,504
Adjustment on initial application of IFRS 16 net of tax - - - - (7) (7)
At 1 October 2019 as adjusted 12 548 123 61 753 1,497
Profit for the year - - - - 310 310
Other comprehensive (expense)/income
Exchange differences on translating foreign operations - - (43) - - (43)
Exchange differences recycled through income statement on sale of foreign - - 43 - - 43
operations
Total comprehensive income - - - - 310 310
for the year ended 30 September 2020
Transactions with owners
Employee share option scheme:
- Value of employee services including deferred tax - - - - 29 29
Proceeds from issuance of treasury shares - - - - 9 9
Share buyback programme - - - - (7) (7)
Dividends paid to owners of the parent - - - - (186) (186)
Total transactions with owners - - - - (155) (155)
for the year ended 30 September 2020
At 30 September 2020 12 548 123 61 908 1,652
Consolidated statement of cash flows
For the year ended 30 September 2021
Note 2021 2020
£m £m
Cash flows from operating activities
Cash generated from continuing operations 476 527
Interest paid (19) (28)
Income tax paid (81) (93)
Net cash generated from operating activities 376 406
Cash flows from investing activities
Proceeds on settlement of non-current asset 3 -
Disposal of subsidiaries, net of cash disposed 11 135 216
Purchases of equity investments (21) -
Purchases of intangible assets 7 (17) (16)
Purchases of property, plant and equipment 7 (39) (24)
Interest received 1 3
Net cash generated from investing activities 62 179
Cash flows from financing activities
Proceeds from issuance of treasury shares 9 8 9
Proceeds from borrowings 344 302
Repayments of borrowings (481) (167)
Capital element of lease payments (22) (38)
Borrowing costs (1) (1)
Share buyback programmes 9 (353) (7)
Dividends paid to owners of the parent 5 (189) (186)
Net cash used in financing activities (694) (88)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (256) 497
(before exchange rate movement)
Effects of exchange rate movement 10 (25) (21)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (281) 476
Cash, cash equivalents and bank overdrafts at 1 October 10 848 372
Cash, cash equivalents and bank overdrafts at 30 September 10 567 848
Notes to the financial information
For the year ended 30 September 2021
1 Group accounting policies
General information
The Sage Group plc (the "Company") and its subsidiaries (together the "Group")
is a leading global supplier of business management software to Small &
Medium Businesses.
The financial information set out above does not constitute the Company's
Statutory Accounts for the year ended 30 September 2021 or 2020 but is derived
from those accounts. Statutory Accounts for the year ended 30 September 2020
have been delivered to the Registrar of Companies and those for 2021 will be
delivered in December 2021. The auditors have reported on both sets of
accounts; their reports were unqualified and did not contain statements under
section 498 (2), (3) or (4) of the Companies Act 2006.
Whilst the financial information included in this announcement has been
computed in accordance with International Financial Reporting Standards
("IFRS") as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union ("EU") and IFRS as issued by the International Accounting
Standards Board ("IASB"), this announcement does not in itself contain
sufficient information to comply with IFRS. 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
2021.
The Company is a limited liability company incorporated and domiciled in the
UK. The address of its registered office is C23 - 5 & 6 Cobalt Park Way,
Cobalt Park, Newcastle upon Tyne, NE28 9EJ. The Company is listed on the
London Stock Exchange.
Basis of preparation
The consolidated financial statements of The Sage Group plc have been prepared
in accordance with International Accounting Standards ("IAS") in conformity
with the requirements of the Companies Act 2006 and also prepared in
accordance with IFRS as adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU and IFRS as issued by the IASB. IFRS as adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the EU differ in certain
respects from IFRS as issued by the IASB. The differences have no impact on
the Group's consolidated financial statements for the years presented.
The consolidated financial statements have been prepared under the historical
cost convention, except where adopted IFRS require an alternative treatment.
The principal variations from the historical cost convention relate to
derivative financial instruments which are measured at fair value through
profit or loss and equity investments which are measured at fair value through
other comprehensive income. The financial statements of the Group comprise the
financial statements of the Company and entities controlled by the Company
(its subsidiaries) prepared at the end of the reporting period. The accounting
policies have been consistently applied across the Group. The Company controls
an entity when it is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity, which is usually from date of acquisition.
The possible continuing and future impact of Covid-19 on the Group has been
considered in the preparation of the financial statements including within our
evaluation of critical accounting estimates and judgements which are detailed
further below. The Group's operational and financial robust position is
supported by:
· High quality recurring and subscription based revenue;
· Resilient cash generation and robust liquidity position is supported
by strong underlying cash conversion of 126%, reflecting the strength of the
subscription business model; and
· A well-diversified small and medium sized customer base.
The Directors have reviewed liquidity and covenant forecasts for the Group for
the period to 31 March 2023, which reflect the expected impact of Covid-19 on
trading. Stress testing has been performed with the impact of severe increases
in churn and significantly reduced levels of new customer acquisition and
sales to existing customers being considered. In these severe stress
scenarios, the Group continues to have sufficient resources to continue in
operational existence. In the event that more severe impacts occur,
controllable mitigating actions are available to the Group should they be
required. Additional stress testing has been performed as part of the severe
but plausible scenarios (as described within the Viability Statement of the
Annual Report & Accounts for 2021).
The Directors also reviewed the results of reverse stress testing performed to
provide an illustration of the level of churn and deterioration in new
customer acquisition which would be required to trigger a breach in the
Group's covenants or exhaust cash down to minimum working capital
requirements. The probability of these factors occurring is deemed to be
remote given the resilient nature of the subscription-based business model,
robust balance sheet and continued strong cash conversion.
After making enquiries, the Directors have a reasonable expectation that Sage
has adequate resources to continue in operational existence for at least 12
months from the date of signing these financial statements. Accordingly, the
consolidated financial information has been prepared on a going concern basis.
All figures presented are rounded to the nearest £m, unless otherwise stated.
Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 September 2021.
Adoption of new and revised IFRSs
There are no IFRS, IAS amendments or IFRIC interpretations effective for the
first time this financial year that have had a material impact on the Group.
From 1 October 2021, the Group will apply UK-adopted International Accounting
Standards under the Companies Act 2006. No standards have been early adopted
during the year.
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 a third of the Company's revenue is generated from sales to
partners rather than end users. The key judgement is determining whether the
business partner is a customer of the Group. The key criteria in this
determination is whether the business partner has taken control of the
product. Considering the nature of Sage's subscription products and support
services, this is usually assessed based on whether the business partner has
responsibility for payment, has discretion to set prices, and takes on the
risks and rewards of the product from Sage.
Where the business partner is a customer of Sage, discounts are recognised as
a deduction from revenue.
Where the business partner is not a customer of Sage and their part in the
sale has simply been in the form of a referral, they are remunerated in the
form of a commission payment. These payments are treated as contract
acquisition costs.
An additional area of judgement is the recognition and deferral of revenue on
on-premise subscription offerings, for example the sale of a term licence with
an annual maintenance and support contract as part of a subscription contract.
In such instances, the transaction price is allocated between the constituent
performance obligations on the basis of standalone selling prices (SSPs).
Judgement is required when estimating SSPs. The Group has established a
hierarchy to identify the SSPs that are used to allocate the transaction price
of a customer contract to the performance obligations in the contract. Where
SSPs for on-premise offerings are observable and consistent across the
customer base, SSP estimates are derived from pricing history. Where there are
no directly observable estimates available, comparable products are utilised
as a basis of assessment or the residual approach is used. Under the residual
approach, the SSP for the offering is estimated to be the total transaction
price less the sum of the observable SSPs of other goods or services in the
contract. The Group uses this technique in particular for estimating the term
licence SSP sold as part of its on-premise subscription offerings as Sage has
previously not sold term licences on a stand-alone basis (i.e. the selling
price is uncertain).
Goodwill impairment
A key judgement is the ongoing appropriateness of the cash-generating units
("CGUs") for the purpose of impairment testing. CGUs are assessed in the
context of the Group's evolving business model, the Sage strategy and the
shift to global product development. Management continues to monitor goodwill
at a regional level, thus it was determined that the use of CGUs based on
geographical area of operation remains appropriate.
With effect from 1 October 2020, this also includes the goodwill acquired with
the acquisition of the Sage Intacct business in 2017 which is monitored as a
Group of CGUs comprising both Sage's Business Solutions Division (SBS) and
Sage Intacct business in North America. This decision has been taken following
strategic and operational changes made during the year, as a result of which
the North American business is now managed, and performance monitored, on a
combined basis.
The assumptions applied in calculating the value in use of the CGUs being
tested for impairment are a source of estimation uncertainty. The key
assumptions applied in the calculation relate to the future performance
expectations of the business (average medium-term revenue growth and
long-term growth rate) as well as the discount rate to be applied in the
calculation.
The key assumptions used in performing the annual impairment assessment, and
further information on the level at which goodwill is monitored are disclosed
in the annual financial statements for the year ended 30 September 2021.
Trade receivables
There remains a high degree of uncertainty as countries emerge from the
Covid-19 pandemic and government support measures are lifted. Therefore, the
expected credit loss allowance against trade receivables is a source of
estimation uncertainty and as a result management judgement and estimates
reflect a degree of caution.
The impact of Covid-19 on expected credit loss provision has been calculated
on a region-specific basis, considering macroeconomic factors, such as GDP
outlook, government support available and other regional specific
microeconomic factors. As a consequence, management provided an additional
£17m expected credit loss provision as at 30 September 2020. During the
current year this provision has been reassessed at £8m to reflect improvement
in economic conditions and the reduced level of gross receivables as at 30
September 2021.
Website
This annual consolidated financial report for the year ended 30 September 2021
will be available on our website from 2 December 2021: www.sage.com/investors
(http://www.sage.com/investors)
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 its designated
responsibility for the allocation of resources to operating segments and
assessing their performance, through the Monthly Business Reviews chaired by
the Chief Operating Officer. The Executive Committee uses 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 2020, the Group is organised into seven key
operating segments: North America, Northern Europe (UK and Ireland), Central
Europe (Germany, Austria, Poland and Switzerland), France, Iberia (Spain and
Portugal), Africa and the Middle East, and Asia (including Australia). Prior
to this date, the North America operating segment was presented as two
operating segments, North America (excluding North America Sage Intacct) and
North America Sage Intacct. For reporting under IFRS 8, the Group is divided
into three reportable segments. These segments are as follows:
· North America
· Northern Europe
· International - Central and Southern Europe (Central Europe, France
and Iberia)
The remaining operating segments of Africa and the Middle East, and Asia
(including Australia) do not meet the quantitative thresholds for presentation
as separate reportable segments under IFRS 8, and so are presented together
and described as International - Africa & APAC. They include the Group's
operations in South Africa, Middle East, Australia, Singapore and Malaysia.
The reportable segment International - Central and Southern Europe reflects
the aggregation of the operating segments for Central Europe, France and
Iberia. The aggregated operating segments are considered to share similar
economic characteristics because they have similar long-term gross margins and
operate in similar markets. Central Europe, France and Iberia operate
principally within the EU and the majority of their businesses are in
countries within the Euro area.
In the prior year, the reportable segment International - Central and Southern
Europe was reported as Central and Southern Europe, and the residual grouping
of International - Africa & APAC was reported as International. The
Group's Latin America operations were sold during the prior year and were
included within International.
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. The Group reports revenue under
two revenue categories as noted below:
Category Examples
Recurring revenue Subscription contracts
Maintenance and support contracts
Other revenue Perpetual software licences
Upgrades to perpetual licences
Professional services
Training
Payment processing services
Payroll processing services
Revenue by segment
Year ended 30 September 2021
Statutory and Underlying Organic adjustments* £m Organic Change Statutory Change Underlying Change Organic
%
%
%
£m £m
Recurring revenue by segment
North America 641 - 641 1.1% 7.5% 7.5%
Northern Europe 391 - 391 3.8% 3.8% 3.8%
International - Central and Southern Europe 509 (29) 480 0.1% 0.9% 3.3%
International - Africa & APAC 152 (27) 125 (13.0%) (12.5%) 8.6%
Recurring revenue 1,693 (56) 1,637 (0.1%) 2.5% 5.4%
Other revenue by segment
North America 46 - 46 (20.7%) (15.5%) (15.5%)
Northern Europe 11 - 11 (67.1%) (67.1%) (35.7%)
International - Central and Southern Europe 74 (4) 70 (9.7%) (9.0%) (8.4%)
International - Africa & APAC 22 (8) 14 (37.3%) (37.9%) (43.7%)
Other revenue 153 (12) 141 (26.9%) (25.5%) (18.2%)
Total revenue by segment
North America 687 - 687 (0.7%) 5.6% 5.6%
Northern Europe 402 - 402 (2.2%) (2.2%) 2.0%
International - Central and Southern Europe 583 (33) 550 (1.2%) (0.5%) 1.6%
International - Africa & APAC 174 (35) 139 (17.1%) (16.8%) 0.0%
Total revenue 1,846 (68) 1,778 (3.0%) (0.6%) 3.1%
* Adjustments relate to the disposal of the Group's Polish and Asia Pacific
businesses and assets held for sale in the current year (note 11).
Revenue by segment (continued)
Year ended 30 September 2020
Statutory and Underlying as reported Impact on foreign exchange Underlying Organic adjustments* Organic
£m
£m
£m
£m £m
Recurring revenue by segment
North America 634 (37) 597 - 597
Northern Europe 377 - 377 - 377
International - Central and Southern Europe** 508 (4) 504 (40) 464
International - Africa & APAC*** 175 (2) 173 (58) 115
Recurring revenue 1,694 (43) 1,651 (98) 1,553
Other revenue by segment
North America 58 (4) 54 - 54
Northern Europe 35 - 35 (18) 17
International - Central and Southern Europe** 82 (1) 81 (4) 77
International - Africa & APAC*** 34 2 36 (12) 24
Other revenue 209 (3) 206 (34) 172
Total revenue by segment
North America 692 (41) 651 - 651
Northern Europe 412 - 412 (18) 394
International - Central and Southern Europe** 590 (5) 585 (44) 541
International - Africa & APAC*** 209 - 209 (70) 139
Total revenue 1,903 (46) 1,857 (132) 1,725
* Adjustments relate to the disposal of the Group's Polish and Asia
Pacific businesses and assets held for sale in the current year (note 11) and
the disposal of Sage Pay and the Group's Brazilian business in the prior
year.
** Previously reported Central and Southern Europe.
*** Previously reported as International.
Operating profit by segment
Year ended 30 September 2021
Statutory Underlying adjustments Underlying Organic adjustments £m Organic Change Change Change
£m
Statutory
Underlying
Organic
£m £m £m
%
%
%
Operating profit by segment
North America 109 28 137 - 137 (14.4%) (5.3%) (5.3%)
Northern Europe 71 28 99 - 99 (73.4%) (22.1%) (19.3%)
International - Central and Southern Europe 82 10 92 (10) 82 26.5% (6.8%) (9.3%)
International - Africa & APAC 111 (81) 30 (5) 25 (307.8%) 0.8% 12.3%
Total operating profit 373 (15) 358 (15) 343 (7.8%) (10.6%) (9.8%)
Year ended 30 September 2020
Statutory Underlying adjustments £m Underlying as reported Impact of foreign exchange Underlying Organic adjustments Organic
£m
£m £m £m £m £m
Operating profit by segment
North America 127 28 155 (10) 145 - 145
Northern Europe 266 (138) 128 - 128 (5) 123
International - Central and Southern Europe* 65 34 99 (1) 98 (8) 90
International - Africa & APAC** (54) 83 29 - 29 (7) 22
Total operating Profit 404 7 411 (11) 400 (20) 380
* Previously reported Central and Southern Europe.
** Previously reported as International.
Reconciliation of underlying operating profit to statutory operating profit
2021 2020
£m
£m
Underlying operating profit by reportable segment
North America 137 145
Northern Europe 99 128
International - Central and Southern Europe 92 98
Total reportable segments 328 371
International - Africa & APAC 30 29
Underlying operating profit 358 400
Impact of movement in foreign currency exchange rates - 11
Underlying operating profit (as reported) 358 411
Amortisation of acquired intangible assets (31) (33)
Other M&A activity-related items (9) (20)
Non-recurring items 55 46
Statutory operating profit 373 404
3 Adjustments between underlying profit and statutory profit
2021 2021 2021 2020 2020 2020
Non-
Non-
Recurring
recurring
Total
Recurring
recurring
Total
£m
£m
£m
£m
£m
£m
M&A activity-related items
Amortisation of acquired intangibles 31 - 31 33 - 33
Net gain on disposal of subsidiaries - (126) (126) - (141) (141)
Other M&A activity-related items 9 - 9 20 - 20
Other items
Restructuring costs - 62 62 - 22 22
Impairment of goodwill - - - - 19 19
Property restructuring costs - - - - 21 21
Office relocation - 9 9 - 33 33
Total adjustments made to operating profit 40 (55) (15) 53 (46) 7
Fair value adjustments 1 - 1 - - -
Foreign currency movements on intercompany balances - - - 6 - 6
Total adjustments made to profit before income tax 41 (55) (14) 59 (46) 13
Recurring items
Acquired intangibles are assets which have previously been recognised as part of business combinations or similar transactions. These assets are predominantly brands, customer relationships and technology rights.
Other M&A activity-related items relate to advisory, legal, accounting, valuation and other professional or consulting services which is related to M&A as well as acquisition-related remuneration, directly attributable integration costs and any required provision for future selling costs for assets held for sale. £7m (2020: £4m) of these costs have been paid in the year while the remainder is expected to be paid in subsequent financial years. Further details can be found in note 11.
Foreign currency movements on intercompany balances of £nil (2020: £6m) occur due to retranslation of unhedged intercompany balances other than those where settlement is not planned or likely in the foreseeable future.
Fair value adjustments of £1m (2020: £nil) are in relation to an embedded
derivative asset which relates to contractual terms agreed as part of the US
private placement debt.
Non-recurring items
Net credit in respect of non-recurring items amounted to £55m (2020: £46m).
Restructuring costs of £62m (2020: £22m) are comprised of charges of £67m
incurred in the current year offset by the reversal of £5m of prior year
restructuring costs.
Restructuring costs of £67m have been incurred in the current year following
the implementation of a business transformation plan to rebalance investment
towards the Group's strategic priorities and simplify the business. The costs
relate to severance costs across the Group. All of these costs are expected to
be paid in subsequent financial years. No further non-recurring costs are
expected to arise in subsequent financial years in relation to the business
transformation
Reversal of £5m of restructuring costs relates to unutilised Professional
Service provisions created in the prior year (2020: charge of £22m) as the
business continues to de-prioritise low margin professional services. The
reversal is a result of fewer colleagues leaving the business as they are
redeployed into other roles.
In the prior year, following challenging trading and economic conditions in Asia, an impairment of goodwill relating to the Asia group of CGUs of £19m was recognised.
In the prior year, property restructuring costs of £21m relate to the reorganisation of the Group's properties and consist of net lease exit costs, following consolidation of office space and impairment of leasehold and other related assets that are no longer in use.
Office relocation costs of £9m (2020: £33m) relate to the incremental depreciation charge resulting from accelerated depreciation following the UK office move.
The net gain on disposal of subsidiaries relates to the disposal of the Group's Polish business (gain: £41m) and the Group's Asia Pacific business (gain: £85m). In the prior year, the net gain on disposal of subsidiaries related to Sage Pay (gain: £193m) and the Brazilian business (loss: £52m). Details of net gain on disposal of subsidiaries can be found in note 11.
4 Income tax expense
The effective tax rate on statutory profit before tax was 18% (2020: 17%), whilst the effective tax rate on underlying profit before tax on continuing operations was 25% (2020: 23%).
The underlying effective tax rate has increased in the current year primarily as a result of certain non-recurring adjustments in the prior year.
The difference between the underlying and statutory rate in the current year primarily reflects a non-taxable accounting net gain on disposals, partially offset by the non-tax-deductible accelerated depreciation charge relating to the relocation of our North Park office in Newcastle.
5 Dividends
2021 2020
£m £m
Final dividend paid for the year ended 30 September 2020 of 11.32p per share 124 -
(2020: final dividend paid for the year ended 30 September 2019 of 11.12p per - 121
share)
Interim dividend paid for the year ended 30 September 2021 of 6.05p per share 65 -
(2020: interim dividend paid for the year ended 30 September 2020 of 5.93p per - 65
share)
189 186
In addition, the Directors are proposing a final dividend in respect of the
financial year ended 30 September 2021 of 11.63p per share which will absorb
an estimated £118m of shareholders' funds. The Company's distributable
reserves are sufficient to support the payment of this dividend. If approved
by the AGM, it will be paid on 10 February 2022 to shareholders who are on the
register of members on 14 January 2022. These financial statements do not
reflect this proposed dividend payable.
6 Earnings per share
Basic earnings per share is calculated by dividing the profit for the year
attributable to owners of the parent by the weighted average number of
ordinary shares in issue during the year, excluding those held as treasury
shares, which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares, exercisable at the end of the year. The Group has one class of
dilutive potential ordinary shares. They are share options granted to
employees where the exercise price is less than the average market price of
the Company's ordinary shares during the year.
Underlying 2021 Underlying Underlying Statutory
as reported*
2020
2020
Statutory
2020
2021
Earnings attributable to owners of the parent
- continuing operations (£m)
Profit for the year 250 299 292 285 310
Number of shares (millions)
Weighted average number of shares 1,080 1,091 1,091 1,080 1,091
Dilutive effects of shares 10 9 9 10 9
1,090 1,100 1,100 1,090 1,100
Earnings per share attributable to owners of the
parent - continuing operations (pence)
Basic earnings per share 23.09 27.43 26.74 26.33 28.38
Diluted earnings per share 22.87 27.21 26.53 26.08 28.15
* Underlying as reported is at 2020 reported exchange rates.
Reconciliation of earnings - continuing operations 2021 2020
£m
£m
Underlying earnings attributable to owners of the parent (after exchange 250 292
movement)
Impact of movement in foreign currency exchange rates, net of taxation - 7
Underlying earnings attributable to owners of the parent (as reported) 250 299
Amortisation of acquired intangible assets (31) (33)
Net gain on disposal of subsidiaries 126 141
Foreign currency movements on intercompany balances - (6)
Other M&A activity-related items (9) (20)
Impairment of goodwill - (19)
Restructuring costs (62) (22)
Property restructuring costs - (21)
Office relocation (9) (33)
Fair value adjustments (1) -
Taxation on adjustments between underlying and statutory profit before tax 21 24
Net adjustments 35 11
Earnings: statutory profit for the year 285 310
7 Non-current assets
Goodwill Other Property, plant Total
£m
£m
intangible and equipment
assets £m
£m
Opening net book amount at 1 October 2020 1,962 212 173 2,347
Additions - 30 49 79
Disposals - - (1) (1)
Disposals of subsidiaries (11) - - (11)
Transfer to held for sale (2) - (10) (12)
Depreciation, amortisation and other movements - (44) (43) (87)
Exchange movement (72) (8) (4) (84)
Closing net book amount at 30 September 2021 1,877 190 164 2,231
Goodwill Other Property, plant Total
£m intangible and equipment £m
assets £m
£m
Opening net book amount at 1 October 2019 2,083 245 117 2,445
Impact of adoption of IFRS 16 - - 113 113
Additions - 19 57 76
Disposals - - (2) (2)
Transfer to held for sale (47) - (14) (61)
Depreciation, amortisation and other movements (19) (45) (93) (157)
Exchange movement (55) (7) (5) (67)
Closing net book amount at 30 September 2020 1,962 212 173 2,347
Goodwill is not subject to amortisation but is tested for impairment annually
or upon any indication of impairment. At 30 September 2021, there were no
indicators of impairment to goodwill. Full details of the outcome of the 2021
goodwill impairment review are provided in the 2021 financial statements.
Details of the current period disposals of subsidiaries and transfer to held
for sale 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,
sterling denominated bond notes and bank loans, and equity investments.
The fair value of the sterling denominated bond notes is determined by
reference to quoted market prices and therefore can be considered as a level 1
fair value as defined within IFRS 13.
The fair value of US senior loan notes 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.
The fair value of bank loans is determined using a discounted cash flow
valuation technique calculated prevailing interest rates and therefore can be
considered as a level 3 fair value as defined within IFRS 13.
The respective book and fair values of bank loans, bond notes and loan notes
are included in the table below.
At 30 September 2021 At 30 September 2020
Book Value Fair Value Book Value Fair Value
£m £m £m £m
Long-term borrowings (excluding lease liabilities) (667) (682) (877) (902)
Short-term borrowing (excluding lease liabilities) (47) (48) - -
The fair value of the unlisted equity investments held by the Group is
determined using a market-based valuation approach. The significant
unobservable inputs used in level 3 fair value measurement are transaction
prices paid for identical or similar instruments of the investee and revenue
growth factors.
9 Ordinary shares and share premium
Number of Ordinary Share premium Total
shares Shares £m £m
£m
At 1 October 2020 and 30 September 2021 1,120,789,295 12 548 560
At 1 October 2019 and 30 September 2020 1,120,789,295 12 548 560
During the year the Group agreed to satisfy the vesting of certain share
awards, utilising a total of 5,544,880 (2020: 4,956,977) treasury shares.
On 4 March 2021, the Group entered into a non-discretionary share buyback
programme under which 45,418,600 shares were bought back for a total
consideration of £302m. This programme was completed during the year. On 6
September 2021, the Group entered into a non-discretionary share buyback
programme ending no later than 24 January 2022, to purchase £300m of its own
shares (2020: 1,101,918 shares as part of the share buyback programme
announced on 11 March 2020 and suspended on 18 March 2020).
The total consideration for all shares purchased in the year under share
buyback programmes amounts to £387m (57,286,992 shares), of which £353m had
been paid as at 30 September 2021 (2020: £7m, of which £7m had been paid).
10 Cash flow and net debt
2021 2020
£m
£m
Statutory operating profit - continuing operations 373 404
Recurring and non-recurring items (15) 7
Underlying operating profit - as reported 358 411
Depreciation/amortisation/impairment/non-cash items 47 56
Share-based payments 36 29
Net changes in working capital 65 45
Net capital expenditure (55) (36)
Underlying cash flow from operating activities 451 505
Non-recurring cash items (9) (4)
Net interest paid (19) (26)
Income tax paid (81) (93)
Profit and loss foreign exchange movements (3) -
Free cash flow 339 382
Net debt at 1 October* (151) (529)
Disposals of subsidiaries and similar transactions, net of cash and lease 142 212
liabilities disposed
Acquisition and disposals related items (21) (10)
Purchases of equity investments (21) -
Proceeds on settlement of non-current assets 3 -
Proceeds from issuance of treasury shares 8 9
Dividends paid to owners of the parent (189) (186)
Share buyback programmes (353) (7)
New leases (8) (30)
Exchange movement 7 6
Other (3) 2
Net debt at 30 September (247) (151)
* Adjusted as at 1 October 2019 on adoption of IFRS16.
2021 2020
£m
£m
Underlying cash flow from operating activities 451 505
Recurring and non-recurring cash items* (30) (14)
Net capital expenditure** 55 36
Statutory cash flow from operating activities 476 527
* Cash paid from recurring and non-recurring items (note 3) charged in
the year or in previous years.
** Relates to purchases of property, plant and equipment and purchases of
computer software intangible assets.
At At Cash flow Disposal of subsidiary Non-cash movements Exchange movement At 30
1 October 2019*
£m
£m
£m
£m
Analysis of change in net debt
£m 1 October September
2020 2021
£m
£m
Cash and cash equivalents 371 831 (254) - - (24) 553
Cash amounts included in held for sale 1 17 21 (23) - (1) 14
Cash, cash equivalents and bank overdrafts including cash as held for sale 372 848 (233) (23) - (25) 567
Liabilities arising from financing activities
Loans due within one year (122) - - - (49) 2 (47)
Loans due after more than one year (643) (877) 138 - 44 28 (667)
Lease liabilities due within one year (29) (20) 20 - (18) - (18)
Lease liabilities after more than one year (106) (93) - - 9 2 (82)
Lease liabilities included in held for sale (1) (9) 2 7 - - -
(901) (999) 160 7 (14) 32 (814)
Total (529) (151) (73) (16) (14) 7 (247)
* Adjusted as at 1 October 2019 on adoption of IFRS16.
11 Acquisitions and disposals
Acquisitions made during the current year
On 30 September 2021, the Group acquired 100% of the equity capital of
GoProposal Ltd ("GoProposal"), a company based in the UK, for total
consideration of £13m, payable in cash.
The GoProposal acquisition is accounted for as an asset acquisition which is
an acquisition of a legal entity that does not qualify as a business
combination under IFRS 3 "Business Combinations". This treatment has been
adopted as the value of the GoProposal business largely comprises the rights
to the acquired technology, the GoProposal software. As a result, no goodwill
has been recognised as part of the acquisition accounting.
The net assets recognised in the financial statements, including the
technology intangible, are based on a valuation of the acquired identifiable
net assets as at the acquisition date. The technology intangible has a fair
value of £13m and is recognised as an intangible asset (see note 7) which
will be amortised over a useful life of 8 years. Other net assets acquired are
negligible.
Disposals made during the current year
On 1 March 2021, the Group completed the sale of its Polish business for gross
consideration of £70m. Subsequently, on 31 May 2021, the Group completed the
sale of its Australia and Asia Pacific business (excluding global products)
("Asia Pacific") for gross consideration of £127m. The gains on disposal are
calculated as follows:
Gains on disposal Poland Asia Pacific Total
£m
£m £m
Cash consideration 63 106 169
Loan consideration 7 21 28
Gross consideration 70 127 197
Transaction costs (4) (7) (11)
Net consideration 66 120 186
Net assets disposed (19) (34) (53)
Intercompany loan receivable disposed (7) (21) (28)
Cumulative foreign exchange differences reclassified from other comprehensive 1 20 21
income to the income statement
Gains on disposal 41 85 126
Net assets disposed comprise:
Poland Asia Pacific Total
£m £m £m
Goodwill 21 28 49
Other intangible assets - 1 1
Property, plant and equipment 2 10 12
Customer acquisition costs 3 5 8
Deferred income tax asset 3 3 6
Inventory - 3 3
Trade and other receivables 3 6 9
Cash and cash equivalents 1 22 23
Total assets 33 78 111
Trade and other payables (4) (9) (13)
Borrowings (1) (6) (7)
Current income tax liabilities - (6) (6)
Provisions - (1) (1)
Deferred income (9) (22) (31)
Total liabilities (14) (44) (58)
Net assets 19 34 53
The net gain is reported within continuing operations, as a non-recurring
adjustment between underlying and statutory results.
The net inflow of cash and cash equivalents on the disposals is calculated as
follows:
Poland Asia Pacific Total
£m £m £m
Cash consideration 63 106 169
Transaction costs (4) (7) (11)
Net consideration received 59 99 158
Cash disposed (1) (22) (23)
Net inflow of cash and cash equivalents on disposal 58 77 135
Prior to the disposal, the Polish business formed part of the Group's
International - Central and Southern Europe reporting segment and the Asia
Pacific business formed part of the International - Africa & APAC
reporting segment.
Discontinued operations and assets and liabilities held for sale
Assets and liabilities held for sale at 30 September 2021 include two disposal
groups which comprise the Group's business in Switzerland and the payroll
processing business in South Africa as well as the Group's North Park property
site assets in the UK.
As at 30 September 2020, these two disposal groups were also classified as
held for sale alongside the Group's business in Poland and Asia Pacific which
were subsequently sold during the year. The North Park property site was
reclassified to assets held for sale at 30 September 2021. Subsequently, a
sale was agreed which completed in October 2021.
The Group's business in Switzerland forms part of the International - Central
and Southern Europe reporting segment and the payroll processing business in
South Africa forms part of the International - Africa & APAC reporting
segment. An agreement to sell the Group's business in Switzerland was reached
on 6 April 2021 and is expected to complete in the year ending 30 September
2022. The Group is also in advanced discussions for the sale of its payroll
processing business in South Africa.
On classification as held for sale, no adjustment was required to the carrying
value of the North Park property site assets, which were depreciated to their
residual value of £10m. No fair value adjustment is required to the carrying
value of the two disposal groups.
The Group had no discontinued operations during the year (30 September 2020:
none).
Assets and liabilities of the disposal groups held for sale at 30 September
comprise:
Switzerland Payroll processing business (South Africa) 2021 2020
£m
£m Total Total
£m
£m
Goodwill 10 1 11 47
Other intangible assets - - - 1
Property, plant and equipment 2 - 2 14
Deferred income tax asset - - - 5
Customer acquisition costs - - - 7
Current income tax asset - - - 1
Trade and other receivables 1 1 2 16
Cash and cash equivalents 14 - 14 17
Total assets 27 2 29 108
Trade and other payables (3) - (3) (16)
Borrowings - - - (9)
Current income tax liabilities (1) - (1) (1)
Post-employment benefits (2) - (2) (4)
Provisions - - - (2)
Deferred income (7) - (7) (41)
Total liabilities (13) - (13) (73)
Net assets 14 2 16 35
Specific to the disposal groups held for sale at 30 September 2021, the
aggregate income included in other comprehensive income relating to cumulative
foreign exchange differences amounted to £13m. Upon disposal, the income will
be recycled to the income statement.
12 Related party transactions
The Group's related parties are its subsidiary undertakings and its key
management personnel, which comprises the Group's Executive Committee and
non-executive directors. Transactions and outstanding balances between the
parent and its subsidiaries within the Group and between those subsidiaries
and have been eliminated on consolidation and are not disclosed in this note.
Key management compensation 2021 2020
£m £m
Salaries and short-term employee benefits 8 8
Share-based payments 4 4
12 12
The key management figures given above include the executive directors of the
Group.
Managing Risk
Through our risk process, Sage is able to effectively manage our strategic,
operational, commercial, compliance, change and emerging risks. This helps us
to deliver our strategic objectives and goals through risk informed decisions.
The Board's role is to maintain oversight of the key principal and business
risks, together with ensuring that the appropriate committees are managing the
risks effectively. Additionally, the Board reviews the effectiveness of our
risk management approach and challenges our leaders to articulate their risk
management strategies. In January 2021, Sage appointed a Chief Risk Officer, a
new role which underlines its commitment to drive improvement in risk
management across the Group.
Sage continually assesses its principal risks to ensure continued and enhanced
alignment to our strategy and consideration of where Sage is currently on its
journey to transforming into a digital business. In FY21 we monitored our 11
principal risks and created a new principal risk in relation to our ability to
deliver on our commitments to Environment, Social and Governance ambitions.
The Covid-19 pandemic continues to bring significant change to the global
economic, social, political and business landscape. In response, we have
continually reviewed the actual, emerging and potential impacts of the
pandemic on our principal risks to identify any new risks or changes to
existing risks and opportunities that may have arisen, with a specific lens on
what could change the risk profile materially.
This has ensured that the business can provide the appropriate response to
impacts being felt in the short term, to both the business, our colleagues and
customers, and to position ourselves regarding long term sustainability and
viability.
As above, the principal risks continue to evolve, reflecting the
organisation's strategic focus on becoming a digital business. By monitoring
risk and performance indicators related to this strategy, principal risk
owners focus on those metrics that signal current performance, as well as any
emerging risks and issues. The principal risks reflect our five strategic
lenses. The management and mitigation actions described below reflect the
refreshed principal risks and build on those actions previously reported in
our FY20 Annual Report.
Principal risk Risk context Management and mitigation
Understanding Customer Needs Improving risk environment
If we fail to anticipate, understand and deliver against the capabilities and
experiences our current and future customers need in a timely manner, they
will find alternative solution providers.
Strategic alignment:
Expand medium beyond financials
Build the small business engine
Learn and disrupt
As Sage continues to transform its business and brand, understanding of how to · Brand health surveys to provide an understanding of customer perception
attract customers whilst retaining its existing customers and migrating those of the Sage brand and its products, used to inform and enhance our market
who are ready to move to the cloud is essential. This requires a deep and offerings.
continuous flow of insights supported by processes and systems.
· A Market and Competitive Intelligence team to provide insights that Sage
uses to win in the market.
By understanding the needs of our customers, Sage will differentiate itself · Utilisation of customer activity and churn data, to understand their
from competitors, build compelling value propositions and offers, leverage key appetite for products and features.
drivers to identify opportunities, influence product and process roadmaps,
· Master repository of customer MI by region and by product which supports
decrease churn and drive more effective revenue generation. the identification of trends such as time in product, seasonal trends and
usage.
· Customer Advisory Boards, Customer Design Sessions and NPS detractor
call-back channels are used to constantly gather information on customer
needs.
Execution of Product Strategy Improving risk environment
If we fail to deliver the capabilities and experiences outlined in our product
strategy in a timely manner, we will not meet the needs of our customers or
our commercial goals.
Strategic alignment:
Scaling Sage Intacct
Expand medium beyond financials
Build the small business engine
Scale the network
Learn and disrupt
We need to execute, in a sound and methodical manner at pace, a prioritised · Refined product strategy in line with our FY22 strategic objectives and
product strategy that continues to simplify our product portfolio, focuses on ambitions, based on our market understanding and customer expectations.
strategic cloud-native offerings, and builds innovative and differentiated
capabilities and solutions. · New product organisation and governance model to improve the way we build
and launch products.
· A migration framework in key countries to support our customers in their
journey to the cloud.
· Sage Intacct is now available in the UK, Australia and South Africa as
part of our internationalisation programme.
· Improved proposition for Accountants proposition, including the
acquisition of GoProposal.
· Enhanced governance and planning framework aligned to market objectives.
· Strengthened product design governance to ensure product development is
always driven by our understanding of our ability to penetrate key markets.
Innovation Stable risk environment
If we fail to identify and leverage disruptive technologies and invest in
modern development practices and tools in a timely manner, we will not meet
the needs of our customers or our commercial goals.
Strategic alignment:
Learn and disrupt
We must be able to rapidly deploy new innovations to our customers and · Continued focus on Artificial Intelligence (AI)/ Machine Learning
partners by introducing technologies, services, or new ways of working. development, coupled with a drive to improve how to exploit data to provide
better management insight to our customers.
Innovation requires us to address how we drive change and transformation
across our people, processes and technology, and how we differentiate our · Leveraging Sage ID and the Sage Business Cloud to deliver a unified and
products and drive customer efficiencies. highly personalised experience for each customer across the entirety of the
customer experience and Sage Digital Network.
· Enhanced, consistent digital experience for all Sage Business Cloud users
through the Sage Design System.
· Objectives integrated into the planning of each segment and region to
drive AI Transformation, Sage Business Cloud adoption and innovation of
product features based on identified needs of customers.
· Strategic acquisition and collaboration with partners to complement and
enable accelerated innovation.
· Focused colleague engagement to accelerate innovation across the
organisation through a Continuous Innovation Community.
Route to Market Stable risk environment
If we fail to deliver a bespoke blend of route to market channels in each
country, based upon common components, we will not be able to efficiently
deliver the right capabilities and experiences to our current and future
customers.
Strategic alignment:
Scale Sage Intacct
Build the small business engine
Scale the network
We have a blend of channels to communicate with our current and potential · Market data and intelligence is used to support decision regarding the
customers and ensure our customers receive the right information on the right best routes to market.
products and services at the right time. Our sales channels include selling
directly to customers through digital and telephony channels, via our · Dedicated colleagues are in place to support partners, and to help manage
accountant network and through partners, valued added resellers (VARs) and the growth of targeted channels.
Independent Software Vendors (ISVs).
· Sale processes are targeted and configured by region for key customer
We use these channels to maximise our marketing and customer engagement segments and verticals.
activities. This can shorten our sales cycle and ensure that customer
retention is improved. · Sage.com has been enhanced to provide clearer user journeys to enable
customer conversion.
· Onboarding of new partners to support acceleration in Cloud Native
product utilisation.
· New routes to market are being opened through partnerships with payment
and banking technology providers.
· Centre of Excellence created to support our Indirect Sales and
Third-Party approach.
Customer Success Stable risk environment
If we fail to effectively identify and deliver ongoing value to our customers
by focusing on their needs over the lifetime of their customer journey, we
will not be able to achieve sustainable growth through renewal.
Strategic alignment:
Scale Sage Intacct
Expand medium beyond financials
Build the small business engine
Learn and disrupt
We must maintain a sharp focus on the relationships we have with our · Battlecards for key products in all countries, setting out the strengths
customers, constantly focusing on delivering the products, services and and weaknesses of competitors and their products.
experiences our customers need to be successful. If we do not do this, they
will likely find another provider who does give them these things. Conversely, · A data-driven Customer Success Framework to enhance the customer
if we do these things well these customers will stay with Sage, increasing experience and ensure that Sage is better positioned to meet the current and
their lifetime value, becoming our greatest marketing advocates. future needs of the customer.
· Customer Journey mapping and mapping of the five core customer processes
to ensure appropriate strategy alignment and alignment to target operating
Whilst Sage is known for its quality customer support, this area requires model.
constant, proactive focus. By helping customers to recognise and fully realise
the value of Sage's products we can help increase the value of these · 'Customer for life' roadmaps, detailing how products fit together, any
relationships over time and reduce the likelihood of customer loss. By interdependencies, and migration pathways for current and potential customers.
aligning our people, processes and technology with this focus in mind, all
Sage colleagues can help support our customers to be successful and in turn · Continuous Net Promoter Score (NPS) surveying allows Sage to identify
drive increased financial performance. customer challenges rapidly and respond in a timely manner to emerging trends.
· A specialised Procurement function supports the business with the
selection of strategic third-party suppliers and negotiation of contracts.
Third Party Reliance Stable risk environment
If we do not embed our partners as an integral and aligned part of Sage's
go-to-market strategy in a timely manner, we will fail to deliver the right
capabilities and experiences to our customers.
Strategic alignment:
Scale Sage Intacct
Build the small business engine
Scale the network
Sage places reliance on third-party providers to support the delivery of our · The appointment of an experienced senior leader to strengthen our Global
products to our customers through the provision of cloud native products. Partner Alliance team.
· Centre of Excellence for our Indirect Sales and Third-Party Partners.
Sage also has an extensive network of sales partners critical to our success · Dedicated colleagues in place to support partners, and to help manage the
in the market, and suppliers upon whom it places reliance. growth of targeted channels.
· Standardised implementation plans for Sage products that facilitate
efficient partner implementation.
Any interruption in these services or relationships could have a profound
impact on Sage's reputation in the market and could result in significant · Managed growth of the API estate, including enhanced product development
financial liabilities and losses. that enables access by third-party API developers.
· Enhanced third-party management framework, to support closer alignment
and oversight of third-party activities.
People and Performance Stable risk environment
If we fail to ensure we have engaged colleagues with the critical skills,
capabilities and capacity we need to deliver on our strategy, we will not be
successful.
Strategic alignment:
Scale Sage Intacct
Expand medium beyond financials
Build the small business engine
Scale the network
Learn and disrupt
As we evolve our priorities, the capacity, knowledge and leadership skills we · Extensive focus on hiring channels to ensure we are attractive in the
need will continue to change. Sage will not only need to attract the talent market through our enhanced employee value proposition, enhanced presence
and experience we will need to help navigate this change, we will also need through social media such as Glassdoor, Comparably, Twitter, LinkedIn, and
to provide an environment where colleagues can develop to meet these new Facebook.
expectations, an environment where everyone can perform at their very best.
· Hiring practices focused on the skills we need in balance with
By empowering colleagues and leaders to make decisions, be innovative, and organisational costs, supported by a methodology for upskilling and building
be bold in delivering on our commitments, Sage will be able to create an capability in the long term from within the organisation.
attractive working environment. By addressing drivers of colleague voluntary
attrition, and embracing the values of successful technology companies, Sage · Reward mechanisms designed to incentivise and drive the right behaviour
can increase colleague engagement and create an aligned high performing team. with a focus on ensuring fair and equitable pay in all markets.
· Focused development of our leaders to ensure they create the environment
which enables colleagues to thrive and perform at their very best.
· Placing colleagues (and customers) at the heart of our response to the
Covid-19 pandemic, including the availability of 'Headspace', our 'Always
Listening' portal and 'Your Voice' Hub and an additional three paid days off
from work to help cope with the stresses of the pandemic.
Culture Improving risk environment
If we do not fully empower our colleagues and enable them to take
accountability in line with our shared Values and Behaviours, we will be
challenged to maintain a culture, that meets Sage's business ambitions.
Strategic alignment:
Scale Sage Intacct
Expand medium beyond financials
Build the small business engine
Scale the network
Learn and disrupt
The development of a shared behavioural competency that encourages colleagues · Integration of Values and Behaviours into all colleague priorities
to always do the right thing, put customers at the heart of business and drive including talent attraction, selection, onboarding as well as performance
innovation is critical in Sage's success. Devolution of decision making, and management.
the acceptance of accountability for these decisions, will need to go hand in
hand as the organisation develops and sustains its shared Values and · All colleagues are actively encouraged to take up to five paid Sage
Behaviours, and fosters a culture that provides customers a rich digital Foundation days each year, to support charities and provide philanthropic
environment. support to the community.
· Six new commitments to diversity, equity and inclusion (DEI) including
zero tolerance to discrimination, equal chance to everyone, inclusive culture,
Sage will also need to create a culture of empowered leaders that supports the removing barriers, DEI education, and development of a new DEI strategy to
development of ideas, and that provides colleagues with a safe environment ensure we deliver on our commitments.
that allows for honest disclosures and discussions. Such a trusting and
empowered environment can help sustain innovation, enhance customer success · A new three-year DEI strategy focuses on building diverse teams, an
and drive the engagement that results in increased market share. equitable culture, and fostering inclusive leadership. This strategy is
supported by measurable plans and metrics to track progress.
· Code of Conduct communicated to all colleagues, and subject to
certification every two years.
· Core eLearning modules rolled out across Sage, with annual refresher
training.
· Whistleblowing and Incident Reporting mechanisms in place to allow issues
to be formally reported and investigated.
Cyber Security and Data Privacy Improving risk environment
If we fail to responsibly collect, process and store data, together with
ensuring an appropriate standard of cyber security across the business, we
will not meet our regulatory obligations, and will lose the trust of our
stakeholders.
Strategic alignment:
Scale Sage Intacct
Build the small business engine
Scale the network
Information is the life blood of a digital business - protecting the · Multi-year cyber security programmes in IT and products to ensure Sage is
confidentiality, integrity and accessibility of this data is table stakes for driving continuous improvement and cyber risk reduction across technology,
a data-driven business, and failure to do so can have significant financial business processes and culture.
and regulatory consequences in the General Data Protection Regulation (GDPR)
era. In addition, we also need to use our data efficiently and effectively to · Accountability within both IT and Product for all internal and external
drive improved business performance. data being processed by Sage. The Chief Information Security Officer oversees
information security, with a network of Information Security Officers that
directly support the business.
· The Chief Data Protection Officer oversees information protection.
· Formal certification schemes maintained, across the business, and include
internal and external validation of compliance.
· All colleagues are required to undertake awareness training for
information management and data protection, with a focus on the GDPR
requirements.
· An Information Security Risk Management Methodology is deployed to
provide objective risk information on our assets and systems.
Data Strategy Stable risk environment
If we fail to identify, maximise and utilise the value of our data and
customer data in a timely manner in accordance with our data principles, we
will not be able to realise the full potential of our assets.
Strategic alignment:
Scale Sage Intacct
Build the small business engine
Scale the network
Learn and disrupt
Data is central to the Sage strategy to deliver our ambition of a digital · Data strategy across customer, product, and enterprise data to support
network. The strategy is underpinned by our ability to innovate and develop the delivery of customer value and solve customer problems, including the use
solutions to enhance customer propositions, improve insight and decision of enhanced Artificial Intelligence /Machine Learning capabilities.
making and create new business models and ecosystems. Successful ability to
use data will accelerate our growth and will be a key driver in helping · Global data function created to drive focus and alignment across the
customers transform how they run and build their businesses. organisation.
· Focus on developing Sage ID and Service Fabric to enable better data
accuracy and insight.
· Plan to increase digital network participation, which will contribute to
more data to support the delivery of real customer value and solve real
customer problems.
· Customer consent service deployed to manage compliant usage of data
assets.
· Governance policies, processes and tooling to enhance and manage the
quality and consistency of our data.
Live Services Management Stable risk environment
If we fail to maintain a reliable, scalable and secure live services
environments, we will be unable to deliver the consistent cloud experience
expected by our customers.
Strategic alignment:
Scale Sage Intacct
Build the small business engine
Scale the network
As Sage transitions to a digital company, we continue to focus on scaling our · Accountability across product owners, underpinned by ongoing risk
current and future platform services environment in a robust, agile, and assessments and continuous improvement projects.
speedy manner to ensure the delivery of a consistent and robust cloud platform
and associated digital network. · Formal onboarding process including ongoing management in Portfolio
Management processes.
· Incident and problem management change processes adhered to for all
Sage must provide the right infrastructure and operations for all of our products and services.
customer products, a hosting platform together with the governance to ensure
optimal service availability, performance, security protection and restoration · Service level objectives including uptime, responsiveness, and mean time
(if required). to repair objectives.
· An established forum for continuous assessment and refinement.
· Defined Real Time Demand Management processes and controls and a Disaster
Recovery Capability and operational resilience models.
· A governance framework to optimise operational cost base in line with key
metrics.
Environment, Social and Governance New risk
If we fail to fully and continually respond to the range of environmental,
social and governance related opportunities and risks we may fail to deliver
positive change to social and environmental issues and damage the confidence
of our stakeholders.
Strategic alignment:
Build the small business engine
Learn and disrupt
We are committed to investing in education, technology, and the environment to · Sage's Sustainability and Society Strategy was
give individuals, small and medium businesses (SMBs), and our planet the
opportunity to thrive. Our goal is to use our technology, time, and experience launched in 2021, focusing on three pillars: Tech for Good, Fuel for Business,
to back a generation of diverse, sustainable businesses. Protect the Planet.
The potential benefits of investing in our ESG strategy include: · Underpinning the strategy is a robust cross- functional governance
framework.
· Increased customer engagement
· Tracking tools in place to enable horizon scanning and to track the
· Better use of resources, for example lower energy and water Sustainability and Society Strategy's impact.
consumption and associated costs
· The Sage Foundation, established in 2015, remains focused on the areas of
· Enhanced stakeholder trust education, employment, and entrepreneurship via the contribution of time,
investment, and capability.
· Improved ability to attract and retain talent, enabling
colleagues to perform at their best · Multiple projects designed to respond to specific ESG risks, for example,
a project focused on TCFD readiness including risk and opportunities mapping
· Stronger community relations. and climate scenario analysis.
Further detail on the mitigation of this risk is described in our separate
Sustainability and Society Report
Statement of Directors' Responsibilities
Responsibility statement of the Directors on the Annual Report & Accounts
The Annual Report & Accounts for the year ended 30 September 2021 includes
the following responsibility statement.
The Directors as at the date of this report, whose names and functions are
listed in the Board of Directors section of the Annual Report and Accounts,
confirm that:
‒ To the best of their knowledge, the Group's financial
statements, which have been prepared in accordance with IFRS adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the EU, give a true and fair
view of the assets, liabilities, financial position and profit of the Group;
‒ To the best of their knowledge, the Directors' report and the
Strategic report include a fair review of the development and performance of
the business and the position of the Group, together with a description of the
principal risks and uncertainties that it faces.
The contents of this announcement, including the responsibility statement
above, have been extracted from the annual report and accounts for the year
ended 30 September 2021 which may be found at www.sage.com/investors
(http://www.sage.com/investors) and will be published on 2 December 2021.
Accordingly, this responsibility statement makes reference to the financial
statements of the Company and the Group and to the relevant narrative
appearing in that annual report and accounts rather than the contents of this
announcement.
On behalf of the Board
J Howell
Chief Financial Officer
16 November 2021
1 (#_ftnref1) Please see Appendix 1 for guidance on the usage and
definitions of the Alternative Performance Measures.
2 (#_ftnref2) Organic revenue and operating profit for FY20 have been
restated to aid comparability with FY21. The definition of organic measures
can be found in Appendix 1 with a full reconciliation of organic, underlying
and statutory measures on page 8. Unless otherwise specified, all references
to revenue, profit and margins are on an organic basis.
3 (#_ftnref3) The revenue portfolio breakdown is provided as supplementary
information to illustrate the differences in the evolution and composition of
key parts of our product portfolio. These portfolios do not represent
Operating Segments as defined under IFRS 8.
4 (#_ftnref4) Revenue from subscription customers using products that are
part of Sage's strategic future product portfolio, where that product runs in
a cloud-based environment enabling customers to access full, updated
functionality at any time, from any location, over the Internet.
5 (#_ftnref5) Revenue from subscription customers using products that are
part of Sage's strategic future product portfolio, where that product is
normally deployed on-premise, and for which a substantial part of the value
proposition is linked to functionality delivered in or through the cloud.
6 (#_ftnref6) Revenue from customers using products that are part of, or
that management believe have a clear pathway to, Sage Business Cloud.
7 (#_ftnref7) Revenue from customers using products for which management
does not currently envisage a path to Sage Business Cloud, either because the
product addresses a segment outside Sage's core focus, or due to the
complexity and expense involved in a migration.
8 (#_ftnref8) Revenue and profit measures are defined in Appendix 1.
9 (#_ftnref9) Since H1 21, the International segment has included Central
and Southern Europe, in addition to the Africa and Asia-Pacific (APAC) region.
For reporting under IFRS 8, we continue to report Central and Southern Europe
as "International - Central and Southern Europe" and the former International
segment as "International - Africa and APAC".
10 (#_ftnref10) Recurring and non-recurring items are detailed in the
paragraph below and in note 3 of the financial statements.
11 (#_ftnref11) Impact of retranslating FY20 results at FY21 average
rates.
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