REG - Sage Group PLC - Half Yearly Report <Origin Href="QuoteRef">SGE.L</Origin> - Part 2
15/07/2015 16:12
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Underlying cash conversion is underlying cash flow from operating activities divided by underlying 112% 102% 109%
operating profit. Underlying cash flow from operating activities is statutory cash flow from
operating activities less net capital expenditure and adjusted for movements on foreign exchange rates
and non-recurring cash items.
Net debt leverage The net value of cash less borrowings expressed as a multiple of rolling 12-month EBITDA. EBITDA is 1.2:1 1.1:1 0.9:1
defined as earnings before interest, tax, depreciation, amortisation of acquired intangible assets,
acquisition-related items, fair value adjustments and non-recurring items that management judge to be
one-off or non-operational.
Interest cover Statutory operating profit for the last twelve months excluding non-recurring items that management 16x 17x 19x
judge to be one-off or non-operational, expressed as a multiple of finance costs excluding imputed
interest for the same period.
1In prior periods, underlying cash flow from operating activities was calculated before net capital expenditure and
included movements on foreign exchange, which would have shown underlying cash conversion of 129% in H1 2015 (FY 2014:
107%, H1 2014: 110%).
Appendix II - Non-GAAP measures
MEASURE DESCRIPTION WHY WE USE IT
Underlying Prior period underlying measures are retranslated at the current year exchange rates to neutralise the effect of currency fluctuations. Underlying operating profit Underlying measures allow management and investors to compare performance without the potentially distorting effects of foreign exchange movements, one-off items or non-operational items. By including part-period contributions from acquisitions, disposals and products held for sale in the current and/or prior periods, the impact of M&A decisions on earnings per share growth can be evaluated.
excludes:- Recurring items:· Amortisation of acquired intangible assets;· Acquisition-related items;· Fair value adjustments on non-debt-related financial
instruments; and - Non-recurring items that management judge are one-off or non-operational Underlying profit before tax excludes:- All the items above; and-
Imputed interest; and- Fair value adjustments on debt-related financial instruments. Underlying profit after tax and earnings per share excludes:- All the items
above net of tax.
Organic In addition to the adjustments made for underlying measures, organic measures exclude the contribution from acquisitions, disposals and products held for sale in the Organic measures allow management and investors to understand the like-for-like performance of the business.
current and prior period.
Underlying cash conversion Underlying cash conversion is underlying cash flow from operating activities divided by underlying operating profit. Underlying cash flow from operating activities is Underlying cash conversion informs management and investors about the cash operating cycle of the business and how efficiently operating profit is turned into cash.
statutory cash flow from operating activities less net capital expenditure and adjusted for movements on foreign exchange rates and non-recurring cash items.
Underlying (as reported) Where prior period underlying measures are included without retranslation at current period exchange rates, they are labelled as underlying (as reported). This measure is used to report comparative figures for external reporting purposes where it would not be appropriate to retranslate. For instance, on the face of primary financial statements.
Consolidated income statement
For the six months ended 31 March 2015
Note Six months ended Six months ended Six months ended Six months ended Six months ended Six months ended Year ended
31 March 2015 31 March 2015 31 March 2015 31 March 2014 31 March 2014 31 March 2014 30 September 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Underlying Adjustments* Statutory Underlying As reported Adjustments* Statutory Statutory
£m £m £m £m £m £m £m
Revenue 1 699.2 - 699.2 656.5 - 656.5 1,306.8
Cost of sales (44.1) - (44.1) (37.5) - (37.5) (74.5)
Gross profit 655.1 - 655.1 619.0 - 619.0 1,232.3
Selling and administrative expenses (462.0) (10.2) (472.2) (439.0) (5.9) (444.9) (933.9)
Operating profit 1 193.1 (10.2) 182.9 180.0 (5.9) 174.1 298.4
Finance income 1.0 1.0 2.0 0.9 - 0.9 2.1
Finance costs (12.3) - (12.3) (10.0) (0.5) (10.5) (23.0)
Finance costs - net (11.3) 1.0 (10.3) (9.1) (0.5) (9.6) (20.9)
Profit before income tax 181.8 (9.2) 172.6 170.9 (6.4) 164.5 277.5
Income tax expense 3 (45.5) 0.6 (44.9) (47.9) 0.5 (47.4) (89.8)
Profit for the period 136.3 (8.6) 127.7 123.0 (5.9) 117.1 187.7
* Adjustments are detailed in note 2 to the accounts
Profit attributable to:
Owners of the parent 136.3 (8.6) 127.7 122.1 (5.9) 116.2 186.8
Non-controlling interest - - - 0.9 - 0.9 0.9
136.3 (8.6) 127.7 123.0 (5.9) 117.1 187.7
Earnings per share attributable to the owners of the parent (pence)
Basic 5 12.66p 11.86p 11.12p 10.58p 17.07p
Diluted 5 12.63p 11.83p 11.10p 10.56p 17.04p
Consolidated statement of comprehensive income
For the six months ended 31 March 2015
Six months ended Six months ended Year ended
31 March 2015 31 March 2014 30 September 2014
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit for the period 127.7 117.1 187.7
Other comprehensive income/(expenses) for the period:
Items that will not be reclassified to profit or loss:
Actuarial loss on post-employment benefit obligations (0.7) (0.4) (0.4)
Deferred tax credit on actuarial loss on post-employment benefit obligations 0.3 0.1 0.4
(0.4) (0.3) -
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations 3.6 (19.6) (39.6)
3.6 (19.6) (39.6)
Other comprehensive expense for the period, net of tax 3.2 (19.9) (39.6)
Total comprehensive income for the period 130.9 97.2 148.1
Total comprehensive income for the period attributable to:
- Owners of the parent 130.9 96.3 147.2
- Non-controlling interest - 0.9 0.9
130.9 97.2 148.1
The notes on pages 22 to 34 form an integral part of this condensed consolidated half-yearly report.
Consolidated balance sheet
As at 31 March 2015
Note 31 March 31 March 30 September 2014
2015 2014 Audited
(Unaudited) (Unaudited) £m
£m £m
Non-current assets
Goodwill 6 1,540.7 1,483.9 1,433.0
Other intangible assets 6 120.6 102.7 98.1
Property, plant and equipment 6 126.0 126.2 126.7
Deferred income tax assets 25.9 16.5 21.9
Other financial assets 2 1.0 - -
1,814.2 1,729.3 1,679.7
Current assets
Inventories 2.2 2.0 2.0
Trade and other receivables 344.5 350.5 321.5
Cash and cash equivalents (excluding bank overdrafts) 9 268.0 111.5 144.6
614.7 464.0 468.1
Total assets 2,428.9 2,193.3 2,147.8
Current liabilities
Trade and other payables (332.0) (285.2) (297.3)
Current income tax liabilities (11.7) (29.6) (23.7)
Borrowings (34.5) (123.2) (125.4)
Other financial liabilities - (100.5) (60.1)
Deferred consideration (2.3) (2.7) (3.5)
Deferred income (461.8) (448.8) (402.7)
(842.3) (990.0) (912.7)
Non-current liabilities
Borrowings (651.9) (315.2) (415.8)
Post-employment benefits (14.0) (13.8) (13.6)
Deferred income tax liabilities (34.4) (20.9) (19.1)
Deferred income (2.8) - (2.7)
(703.1) (349.9) (451.2)
Total liabilities (1,545.4) (1,339.9) (1,363.9)
Net assets 883.5 853.4 783.9
Equity attributable to owners of the parent
Ordinary shares 8 11.7 11.7 11.7
Share premium 8 538.0 534.5 535.9
Other reserves 92.4 40.9 88.8
Retained earnings 241.4 266.5 147.5
Total equity attributable to owners of the parent 883.5 853.6 783.9
Non-controlling interest - (0.2) -
Total equity 883.5 853.4 783.9
Consolidated statement of cash flows
For the six months ended 31 March 2015
Notes Six months ended Six months ended Year ended 30 September 2014
31 March 2015 31 March (Audited)
(Unaudited) 2014 £m
£m (Unaudited)
£m
Cash flows from operating activities
Cash generated from continuing operations 9 246.3 196.7 382.4
Interest paid (11.2) (10.2) (21.6)
Income tax paid (60.1) (55.3) (107.2)
Net cash generated from operating activities 175.0 131.2 253.6
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired 10 (97.5) (4.3) (14.1)
Purchases of intangible assets 6 (3.1) (3.8) (8.3)
Purchases of property, plant and equipment 6 (8.9) (8.1) (19.7)
Proceeds from sale of property, plant and equipment 0.8 0.1 1.1
Interest received 1.0 0.9 2.1
Net cash generated from investing activities (107.7) (15.2) (38.9)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 8 2.1 2.3 3.7
Purchase of treasury shares (15.5) (23.7) (91.0)
Purchase of non-controlling interest 7 - - (50.4)
Finance lease principal payments (1.5) (0.4) (1.9)
Proceeds from borrowings 456.4 45.2 171.0
Repayments of borrowings (354.6) (38.0) (71.8)
Movements in cash collected from customers 47.6 9.3 15.5
Dividends paid to owners of the parent 4 (85.7) (81.2) (126.2)
Net cash generated from/(used in) financing activities 48.8 (86.5) (151.1)
Net increase in cash, cash equivalents and bank overdrafts 9 116.1 29.5 63.6
(before exchange rate movement)
Effects of exchange rate movement 9 8.2 (2.9) (2.8)
Net increase in cash, cash equivalents and bank overdrafts 124.3 26.6 60.8
Cash, cash equivalents and bank overdrafts at 1 October 9 143.7 82.9 82.9
Cash, cash equivalents and bank overdrafts at period end 9 268.0 109.5 143.7
Consolidated statement of changes in equity
For the six months ended 31 March 2015
Attributable to owners of the parent
Ordinary shares Share premium Other reserves Retained earnings Total Non-controlling interest Total equity £m
£m £m £m £m £m £m
At 1 October 2014 (Audited) 11.7 535.9 88.8 147.5 783.9 - 783.9
Profit for the period - - - 127.7 127.7 - 127.7
Other comprehensive income/(expense):
Exchange differences on translating foreign operations - - 3.6 - 3.6 - 3.6
Actuarial loss on post-employment benefit obligations - - - (0.7) (0.7) - (0.7)
Deferred tax credit on actuarial gain on post-employment obligations - - - 0.3 0.3 - 0.3
Total comprehensive income - - 3.6 127.3 130.9 - 130.9
for the period ended 31 March 2015 (unaudited)
Transactions with owners:
Employee share option scheme:
- Proceeds from shares issued - 2.1 - - 2.1 - 2.1
- Value of employee services, net of deferred tax - - - 4.8 4.8 - 4.8
Purchase of treasury shares - - - (12.5) (12.5) - (12.5)
Close period share buyback programme - - - 60.0 60.0 - 60.0
Dividends paid to owners of the parent - - - (85.7) (85.7) - (85.7)
Total transactions with owners - 2.1 - (33.4) (31.3) - (31.3)
for the period ended 31 March 2015 (Unaudited)
At 31 March 2015 (Unaudited) 11.7 538.0 92.4 241.4 883.5 - 883.5
Attributable to owners of the parent
Ordinary shares Share premium Other reserves Retained earnings Total Non-controlling interest Total equity £m
£m £m £m £m £m £m
At 1 October 2013 (Audited) 11.7 532.2 60.4 267.0 871.3 (1.0) 870.3
Profit for the period - - - 116.2 116.2 0.9 117.1
Other comprehensive income/(expense):
Exchange differences on translating foreign operations - - (19.5) - (19.5) (0.1) (19.6)
Actuarial loss on post-employment benefit obligations - - - (0.4) (0.4) - (0.4)
Deferred tax charge on actuarial gain on post-employment obligations - - - 0.1 0.1 - 0.1
Total comprehensive income - - (19.5) 115.9 96.4 0.8 97.2
for the period ended 31 March 2014 (unaudited)
Transactions with owners:
Employee share option scheme:
Proceeds from shares issued - 2.3 - - 2.3 - 2.3
Value of employee services - - - 3.3 3.3 - 3.3
Equity movement of deferred tax on options - - - 0.6 0.6 - 0.6
Purchase of treasury shares - - - (19.1) (19.1) - (19.1)
Close period share buyback programme - - - (20.0) (20.0) - (20.0)
Cancellation of treasury shares - - - - - - -
Dividends paid to owners of the parent - - - (81.2) (81.2) - (81.2)
Total transactions with owners - 2.3 - (116.4) (114.1) - (114.1)
for the period ended 31 March 2014 (Unaudited)
At 31 March 2014 (Unaudited) 11.7 534.5 40.9 266.5 853.6 (0.2) 853.4
Notes to the financial information
For the six months ended 31 March 2015
Group accounting policies
General information
The Sage Group plc ("the Company") and its subsidiaries (together "the Group") is a leading global supplier of business
management software to Small & Medium Businesses.
This condensed consolidated half-yearly financial report was approved for issue by the board of directors on 6 May 2015.
The financial information set out above does not constitute the Company's Statutory Accounts. Statutory Accounts for the
year ended 30 September 2014 have been delivered to the Registrar of Companies. The auditor's report was unqualified and
did not contain statements under section 498 (2), (3) or (4) of the Companies Act 2006.
Whilst the financial information included in this announcement has been computed in accordance with International Financial
Reporting Standards ("IFRSs") as adopted by the European Union ("EU"), this announcement does not in itself contain
sufficient information to comply with IFRSs. The financial information has been prepared on the basis of the accounting
policies and critical accounting estimates and judgements as set out in the Annual Report & Accounts for 2014.
This condensed consolidated half-yearly financial report has been reviewed, not audited.
The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is
North Park, Newcastle upon Tyne, NE13 9AA. The Company is listed on the London Stock Exchange.
Basis of preparation
The financial information for the six months ended 31 March 2015 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" as adopted by the
European Union, ("EU"). The condensed consolidated half-yearly financial report should be read in conjunction with the
annual statements for the year ended 30 September 2014, which have been prepared in accordance with IFRSs as adopted by the
EU.
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report. Accordingly, the consolidated financial information has
been prepared on a going concern basis and in accordance with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30
September 2014 as described in those annual financial statements.
Adoption of new and revised IFRSs
All amendments to standards effective during the period to 31 March 2015 have been disclosed in the 2014 annual financial
statements.
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
The key area of judgement in respect of recognising revenue is the timing of recognition, specifically in relation to
recognition and deferral of revenue on licence, support and other contracts where management assumptions and estimates are
necessary.
For instance, when products are bundled together for the purpose of sale, the associated revenue, net of any applicable
discounts, is allocated between the constituent parts of the bundle on a relative fair value basis, which determines the
pattern of revenue recognition. The Group has a systematic basis for allocating relative fair values in these situations,
based upon published list prices. In the limited circumstances in which published list prices are not available, a prudent
approach is taken whereby any discounts are recognised immediately. The full revenue recognition policy is disclosed in the
30 September 2014 financial statements.
Goodwill impairment
The judgements in relation to goodwill impairment testing relate to the assumptions applied in calculating the value in use
of the operating companies being tested for impairment and the ongoing appropriateness of the cash-generating units
("CGUs") for the purpose of impairment testing. The key assumptions applied in the calculation relate to the future
performance expectations of the business. The carrying value of goodwill and the key assumptions used in performing the
annual impairment assessment are disclosed in the 30 September 2014 financial statements.
Price purchase adjustments
The judgements in relation to a purchase price allocation exercise relate to the assumptions applied in calculating the
fair value of the intangibles acquired as part of a business combination. The key assumptions include, but are not limited
to medium and long term growth rates, operating margins, discount rates, customer attrition rates and royalty rates. The
Group has an established basis for the calculation of the fair values of acquired intangibles. The full accounting policy
for intangible assets is disclosed in the 30 September 2014 financial statements.
Archer Capital litigation
The claim for damages made by Archer Capital in relation to the potential purchase of MYOB continues to be strongly
rejected by management. Based on supporting expert legal advice, management do not consider there to be a present
obligation and the possibility of an outflow of resources is remote. As such, no provision or contingent liability has been
recognised at 31 March 2015 or in the 30 September 2014 financial statements.
Tax provisions
The Group recognises certain provisions and accruals in respect of tax which involve a degree of estimation and uncertainty
where the tax treatment cannot be finally determined until a resolution has been reached by the relevant tax authority.
Management bases estimates of the likely outcome of decisions by tax authorities on transactions and events whose treatment
for tax purposes is uncertain.
Website
This condensed consolidated half-yearly financial report for the six month ended 31 March 2015 can also be found on our
website: www.sage.com/investors/investor-downloads
1 Segment information
In accordance with IFRS 8, "Operating Segments", information for the Group's operating segments has been derived using the
information used by the chief operating decision maker. The Group's Executive Committee has been identified as the chief
operating decision maker in accordance with their designated responsibility for the allocation of resources to operating
segments and assessing their performance. The Executive Committee use organic and underlying data to monitor business
performance. Refer to the definitions on page 15 for more information on these measures. Operating segments are reported in
a manner which is consistent with the operating segments produced for internal management reporting.
The Group is organised into three operating segments. The UK is the home country of the parent. The main operations in the
principal territories are as follows:
- Europe (France, UK & Ireland, Spain, Germany, Switzerland, Poland, Portugal and Sage Pay)
- Americas (US, Brazil and Canada)
- AAMEA (Africa, Australia, Middle East and Asia)
The Africa operations are principally based in South Africa; the Middle East and Asia operations are principally based in
Singapore, Malaysia and UAE. The revenue analysis in the table below is based on the location of the customer which is not
materially different from the location where the order is received and where the assets are located.
Revenue by segment (Unaudited)
Six months ended 31 March 2015 Change
Statutory £m Underlyingadjustments£m Underlying£m Organic adjustments £m Organic £m Statutory Underlying Organic%
% %
Recurring revenue by segment
Europe 274.5 - 274.5 (2.8) 271.7 4% 9% 8%
Americas 187.4 - 187.4 (3.8) 183.6 12% 8% 6%
AAMEA 43.8 - 43.8 - 43.8 11% 13% 13%
Recurring revenue 505.7 - 505.7 (6.6) 499.1 7% 9% 8%
Software and software related services ("SSRS") revenue by segment
Europe 107.6 - 107.6 (1.3) 106.3 -7% -1% -2%
Americas 49.3 - 49.3 (9.5) 39.8 24% 21% -3%
AAMEA 36.7 - 36.7 - 36.7 25% 27% 27%
SSRS revenue 193.6 - 193.6 (10.8) 182.8 5% 8% 2%
Total revenue by segment
Europe 382.0 - 382.0 (4.0) 378.0 0% 6% 5%
Americas 236.7 - 236.7 (13.3) 223.4 15% 10% 4%
AAMEA 80.5 - 80.5 - 80.5 17% 19% 19%
Total revenue 699.2 - 699.2 (17.3) 681.9 7% 9% 6%
Six months ended 31 March 2014
Statutory£m Underlying adjustments£m Underlying asReported£m Impact of foreign exchange Underlying at constant currency £m Organic adjustments £m Organic
£m £m
Recurring revenue by segment
Europe 265.2 - 265.2 (13.7) 251.5 - 251.5
Americas 166.8 - 166.8 6.6 173.4 - 173.4
AAMEA 39.5 - 39.5 (0.9) 38.6 - 38.6
Recurring revenue 471.5 - 471.5 (8.0) 463.5 - 463.5
Software and software related services ("SSRS") revenue by segment
Europe 116.9 - 116.9 (8.1) 108.8 - 108.8
Americas 38.8 - 38.8 2.1 40.9 - 40.9
AAMEA 29.3 - 29.3 (0.4) 28.9 - 28.9
SSRS revenue 185.0 - 185.0 (6.4) 178.6 - 178.6
Total revenue by segment
Europe 382.1 - 382.1 (21.9) 360.2 - 360.2
Americas 205.6 - 205.6 8.7 214.3 - 214.3
AAMEA 68.8 - 68.8 (1.3) 67.5 - 67.5
Total revenue 656.5 - 656.5 (14.5) 642.0 - 642.0
Operating profit by segment
Six months ended 31 March 2015 Change
Statutory £m Underlying adjustments £m Underlying Organic adjustments £m Organic £m Statutory Underlying Organic %
£m % %
Operating profit by segment
Europe 107.4 3.2 110.6 (0.4) 110.2 3% 8% 8%
Americas 54.2 6.7 60.9 (0.8) 60.1 2% 8% 6%
AAMEA 21.3 0.3 21.6 - 21.6 24% 25% 25%
Total operating profit 182.9 10.2 193.1 (1.2) 191.9 6% 10% 9%
Six months ended 31 March 2014
Statutory £m Underlying adjustments £m Underlying as reported Impact of foreign exchange Underlying Organic adjustments£m Organic£m
£m £m £m
Operating profit by segment
Europe 103.9 4.2 108.1 (5.7) 102.4 - 102.4
Americas 53.0 1.3 54.3 2.1 56.4 - 56.4
AAMEA 17.2 0.4 17.6 (0.4) 17.2 - 17.2
Total operating profit 174.1 5.9 180.0 (4.0) 176.0 - 176.0
Reconciliation of underlying operating profit to statutory operating profit
Six months ended Six months ended
31 March 2015 31 March 2014
(Unaudited)£m (Unaudited)
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