REG - Sage Group PLC - Results for the six months to 31 March 2023
17/05/2023 07:17
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RNS Number : 6441Z Sage Group PLC 17 May 2023
The Sage Group plc
Results for the six months to 31 March 2023 (unaudited)
Consistent execution drives strong momentum
Steve Hare, Chief Executive Officer, commented:
"Sage performed strongly in the first half, accelerating revenue growth,
increasing profitability and making further progress against our strategic
priorities. Our investments in technology and in sales and marketing are
continuing to drive results, as small and mid-sized businesses increasingly
choose Sage as a valued partner to transform the way they work.
"Our purpose is to knock down barriers so everyone can thrive. We are
committed to delivering innovative, AI-powered services that make our
customers' lives easier and their organisations more productive and resilient.
Sage's global platform, centred on our expanding digital network, is enabling
us to leverage our scale and collective expertise to maximise the significant
opportunities we see across our markets.
"Small and mid-sized businesses are continuing to digitise, despite the
macroeconomic uncertainty, and through our trusted technology and human
approach Sage is well positioned to support them. I am confident that our
proven strategy will enable us to deliver further efficient growth."
Underlying Financial APMs 1 (#_edn1) H1 23 H1 22 2 (#_edn2) Change Organic
Change
Annualised Recurring Revenue (ARR) £2,100m £1,878m +12% +12%
Underlying Total Revenue £1,087m £989m +10% +10%
Underlying Recurring Revenue £1,039m £925m +12% +12%
Underlying Operating Profit £227m £199m +14% +19%
% Operating Profit Margin 20.8% 20.2% +0.6 ppts +1.6 ppts
EBITDA £275m £243m +13%
% EBITDA Margin 25.2% 24.6% +0.6 ppts
Underlying Basic EPS (p) 15.68p 13.83p +13%
Underlying Cash Conversion 117% 120% -3 ppts
Statutory Measures H1 23 H1 22 Change
Revenue £1,087m £934m +16%
Operating Profit £157m £204m -23%
% Operating Profit Margin 14.4% 21.8% -7.4ppts
Basic EPS (p) 9.78p 14.84p -34%
Dividend Per Share (p) 6.55p 6.30p +4%
Please note that tables may not cast and change percentages may not calculate
precisely due to rounding.
Financial highlights
· Underlying recurring revenue increased by 12% to £1,039m,
underpinned by strong Sage Business Cloud growth of 29% to £787m. Underlying
total revenue grew by 10% to £1,087m.
· Underlying operating profit increased by 14% to £227m, with margin
increasing by 60 basis points to 20.8% driven by operating efficiencies as we
scale the Group.
· EBITDA increased by 13% to £275m, with margin increasing by 60
basis points to 25.2%.
· Statutory operating profit decreased by 23% to £157m due to the
change in recurring and non recurring items, including a £49m one-off gain in
the prior period relating to the disposal of Sage Switzerland. 3 (#_edn3)
· Underlying basic EPS up 13% to 15.68p, reflecting the growth in
underlying operating profit.
· Continued strong cash performance, with cash conversion of 117%
reflecting growth in subscription revenue and continued good working capital
management.
· Robust balance sheet, with £1.2bn of cash and available liquidity
and net debt to EBITDA of 1.3x.
· Interim dividend up 4% to 6.55p, in line with our progressive
policy.
Strategic and operational highlights
· Underlying annualised recurring revenue (ARR) up 12% to £2,100m
(H1 22: £1,878m), reflecting a strong performance across all regions, with
growth balanced between new and existing customers.
· £190m of ARR added through new customer acquisition on an organic
basis since H1 22, up from £150m in the prior year.
· Cloud native ARR up 30% to £612m (H1 22: £470m), driven by new
customers and supported by migrations from cloud connected and desktop
products.
· Renewal rate by value of 101%, ahead of last year (H1 22: 100%),
with continued good retention rates and strong sales to existing customers.
· Sage Business Cloud penetration of 82% (H1 22: 72%), enabling more
customers to connect to Sage's cloud services and ecosystem via Sage's digital
network.
· Subscription penetration of 78% (H1 22: 73%), reflecting continued
focus on attracting new customers and migrating existing customers to
subscription contracts.
· Strong strategic progress, as we expand the availability of global
solutions across the Group and scale Sage's digital network to power
innovative features and AI-enabled services.
Outlook
Building on strong momentum in the first half, we now expect organic recurring
revenue growth for FY23 to be in the region of 11%, driven by continued
strength in Sage Business Cloud. We continue to expect other revenue (SSRS)
to decline, in line with our strategy. Operating margins are expected to
trend upwards in FY23 and beyond, as we focus on efficiently 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 (SMBs) 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) 7341 479956 FGS Global: +44 (0) 20 7251 3801
James Sandford, Investor Relations Conor McClafferty
David Ginivan, Corporate PR Sophia Johnston
A presentation for investors and analysts will be held at 8.30am UK time. The
webcast can be accessed via sage.com/investors or directly via the following
link: https://edge.media-server.com/mmc/p/phr76hz5
(https://edge.media-server.com/mmc/p/phr76hz5) . To join the conference call,
please register via
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(https://register.vevent.com/register/BIe70cc49034ad4da4a1888cdaa81177a1) .
Business Review
Sage delivered a strong first half, with revenue growth accelerating compared
to the prior year, and underlying and organic operating margins trending
upwards, driven by consistent strategic execution.
Overview of results
The Group achieved underlying recurring revenue growth of 12% to £1,039m (H1
22: £925m) in the first half, underpinned by a 29% increase in Sage Business
Cloud revenue to £787m, and underlying total revenue growth of 10% to
£1,087m (H1 22: £989m). Regionally, North America increased recurring
revenue by 17% to £467m, with a strong performance from Sage Intacct and
cloud connected solutions, while UKIA
4 (#_edn4) grew recurring revenue by 11% to £303m, driven by a strong cloud
native performance together with growth in Sage 50 cloud. In Europe, recurring
revenue increased by 6% to £269m, with growth across the Sage Business Cloud
portfolio partly offset by the disposal of the Swiss business in FY22.
Organic recurring revenue also grew by 12% to £1,039m (H1 22: £931m), while
organic total revenue grew by 10% to £1,087m (H1 22: £992m).
Our focus on growing cloud revenues has increased Sage Business Cloud
penetration to 82%, up 10 percentage points compared to H1 22. We have also
continued to grow software subscription revenues, leading to a rise in
subscription penetration of 5 percentage points to 78%. As a result of the
evolving business mix, 96% of the Group's revenue is now recurring.
Revenue growth by portfolio
The portfolio view breaks down Sage's underlying recurring revenue by
strategic product portfolio. Our principal focus is to grow Sage Business
Cloud, by attracting new customers and migrating existing customers and
products to cloud native and cloud connected solutions. Sage Business Cloud
customers can connect to a range of cloud services as part of Sage's digital
network, leading to deeper customer relationships and higher lifetime values.
Underlying Recurring Revenue by Portfolio 5 (#_edn5) H1 23 H1 22 Change Organic
Change
Cloud native 6 (#_edn6) £285m £206m +38% +32%
Cloud connected 7 (#_edn7) £502m £403m +25% +25%
Sage Business Cloud £787m £609m +29% +27%
Products with potential to migrate £177m £241m -27% -25%
Future Sage Business Cloud Opportunity 8 (#_edn8) £964m £850m +13% +13%
Non-Sage Business Cloud 9 (#_edn9) £75m £75m - +1%
Underlying Recurring Revenue £1,039m £925m +12% +12%
Sage Business Cloud Penetration 82% 72%
Underlying recurring revenue from cloud native solutions grew by 38% to
£285m, driven by Sage Intacct together with other solutions including Sage
Accounting, Sage Payroll and Sage HR, largely through new customer acquisition
and supported by migrations. Organic cloud native recurring revenue growth,
which is adjusted for the contribution from last year's acquisitions of
Brightpearl, Futrli and Lockstep, was 32%.
Underlying recurring revenue from cloud connected solutions increased by 25%
to £502m, reflecting good growth in the Sage 50 and Sage 200 franchises
driven by existing and new customers, together with significantly faster
migration of products to Sage Business Cloud through the integration of cloud
functionality. Overall, the Future Sage Business Cloud Opportunity, which
represents products in or with a clear pathway to Sage Business Cloud, has
performed strongly with recurring revenue growth of 13%.
The revenue performance of the Non-Sage Business Cloud portfolio is in line
with expectations and reflects the ongoing strategy to focus on solutions with
a clear pathway to Sage Business Cloud.
ARR growth
Sage's underlying ARR increased by 12% to £2,100m (H1 22: £1,878m),
reflecting strong growth balanced between new and existing customers. This was
underpinned by cloud native ARR growth of 30% to £612m (H1 22: £470m), with
a continued strong performance from Sage Intacct together with other solutions
including Sage Accounting, Sage Payroll and Sage HR. Organic ARR also
increased by 12% to £2,100m (H1 22: £1,883m).
Renewal rate by value of 101% (H1 22: 100%) is ahead of last year reflecting
good retention rates and strong sales to existing customers, including a good
performance in customer add-ons and targeted price rises.
In total, Sage has added £190m of ARR through new customer acquisition on an
organic basis over the last 12 months, up from £150m 10 (#_edn10) a year
earlier.
Progress towards our strategic priorities
Sage focuses on five strategic priorities that help us create long-term value
for our stakeholders, as part of our strategic framework for growth. Our
progress towards these priorities is outlined below.
· Scale Sage Intacct: Sage Intacct continues to grow strongly,
supported by our focus on product enhancements and sales and marketing
optimisation. We have further extended Sage Intacct's reach into new
geographies and verticals, including launching Sage Intacct in continental
Europe, starting with France. Sage Intacct Construction is making good
progress in the US, complemented by the recent acquisition of Corecon, a cloud
native project management solution for the construction industry, while Sage
Intacct Manufacturing is now available in six countries across the Group.
Reflecting this progress, Sage Intacct's ARR grew by 30% in the US over the
last year, while outside the US it doubled.
· Expand medium beyond financials: We also aim to drive growth by
delivering benefits for mid-sized businesses beyond core accounting. Our
AI-powered service to automate accounts payable processes, significantly
reducing invoice handling costs and data entry error, has now been launched
and is gaining traction with customers on Sage Intacct in the US, Sage 50 in
France and Sage Accounting in the UK, with further expansion planned.
Following rapid growth in the US and Canada, Sage Intacct Planning, our
budgeting and planning tool, is now also available in the UK, South Africa and
Australia.
· Build the small business engine: Sage continues to achieve good
levels of growth from its small business solutions, including Sage Accounting,
Sage HR and Sage 50. In the UK, the number of accountants adopting Sage for
Accountants, our accountancy practice management suite, has more than doubled
over the last six months to almost 5,000, and building on this success we have
now launched Sage for Accountants in Canada. We have also launched a new tier
of Sage Accounting in the UK, initially provided through Sage for Accountants,
to help those taxpayers with the simplest of tax affairs to digitise their
record keeping and tax submissions.
· Scale the network: Sage's digital network enables us to connect
organisations to their accountants, tax authorities, customers and suppliers.
Scaling the network creates a virtuous circle, with more data powering AI
solutions that enable richer customer experiences. We are growing the network
by connecting more existing products, expanding the availability of global
solutions including Sage Intacct, and developing new solutions such as Sage
Active, our cloud-native, multi-legislation business management solution for
SMBs, that was built for the European market and recently launched in France.
The acquisition of Lockstep has also accelerated our strategy by bringing new
AI-driven workflow automation tools to the digital network.
· Learn and disrupt: We continue to learn and invest in disruptive
technologies to ensure we remain at the forefront of our markets. We have made
strong progress in leveraging our digital network to embed AI-powered features
across Sage Business Cloud, helping to automate workflows from data ingestion
through to transaction classification. In the first half, we launched our
AI-powered accounts payable automation solution, expanded our outlier
detection service, and made Sage Intelligent Time, our AI-powered time
assistant, available in new markets. Looking ahead, we have a strong AI
pipeline, and through continued investment and our strategic partnerships we
aim to be a leader in this critical area, helping both Sage and our customers
become more effective and more productive.
Colleagues
Management continues to focus on building an inclusive, high-performing and
accountable culture, in which every colleague can perform at their best. Key
to this is our listening strategy, through which colleagues have the
opportunity to share experiences and insights. Our most recent all-colleague
pulse survey achieved a record 87% response rate and resulted in a strong
score for colleague satisfaction.
To develop and retain the best talent we continue to invest in mentoring and
training schemes, both in house and in conjunction with third parties such as
London Business School. We have also launched a new internal talent
marketplace to enhance workforce mobility and agility. Our holistic approach
to colleague wellbeing includes a sharper focus on 'healthy finances' in
response to the cost-of-living crisis, and an improved range of benefits to
support mental health.
Sage is committed to creating a diverse and equitable company which fully
represents the customers we serve and the communities we recruit from. In
December we published our first diversity, equity and inclusion (DEI) impact
report, highlighting progress towards our DEI strategy. This included an
improvement in gender diversity, with one third of leadership teams meeting
our FY26 gender diversity target 11 (#_edn11) , up from 19% at the beginning
of FY22. We have also enhanced our diversity training and resources, holding
education and awareness workshops, and partnering with Neurodiversity in
Business to help drive best practice in neurodiversity recruitment, retention
and empowerment.
Sustainability and Society
Sage plays a key role in supporting SMBs which form the backbone of economies
around the world, helping bring prosperity to their owners, employees and
communities. Through our Sustainability and Society strategy, Sage supports
sustainable and inclusive economic growth so everyone can thrive. During the
first half, Sage colleagues, customers and partners contributed over 56,000
volunteering hours to support charitable and environmental causes.
In December, the Science Based Targets Initiative (SBTi) validated our target
to halve our carbon emissions by 2030 against a 2019 baseline, underlining our
commitment to achieve net zero emissions by 2040 through robust initiatives
addressing our supply chain, properties, products and colleague actions. We
are also supporting SMBs on their own journey to net zero, with Sage Earth,
our innovative carbon accounting solution acquired in October, now available
to support UK-based Sage Accounting and Sage 50 customers looking to measure
and improve their environmental footprint. In addition, we launched a report
at COP 27 featuring insights from over 4,000 SMBs across the UK and South
Africa, and quantifying their impact and influence on the environment and the
economy.
Through Sage Foundation, which supports Sage's volunteering, fundraising and
social partnerships, we aim to support local communities and knock down
barriers to entrepreneurship. In the first half, we have continued to support
thousands of entrepreneurs in underserved communities with loan funds and
grants through our partnerships with Kiva and The BOSS Network. In addition,
we are helping to develop STEM skills in over 10,000 young people in the UK
through our partnership with the Institute of Engineering and Technology, and
we have now also expanded this initiative to Germany.
Sage has an ESG rating from MSCI of 'AAA', indicating we are a leader in the
software and services industry in managing the most significant ESG risks and
opportunities.
Financial Review
The financial review provides a summary of the Group's results on a statutory
and underlying basis, alongside its organic performance. Underlying measures
allow management and investors to understand the Group's financial performance
adjusted for the impact of foreign exchange movements and recurring and
non-recurring items, while organic measures also adjust for the impact of
acquisitions and disposals 12 (#_edn12) .
Statutory and underlying financial results
Financial results Statutory Underlying
H1 23 H1 22 Change H1 23 H1 22 Change
North America £483m £376m +28% £483m £420m +15%
UKIA £311m £284m +10% £311m £284m +10%
Europe £293m £274m +7% £293m £285m +3%
Group total revenue £1,087m £934m +16% £1,087m £989m +10%
Operating profit £157m £204m -23% £227m £199m +14%
% Operating profit margin 14.4% 21.8% -7.4 ppts 20.8% 20.2% +0.6 ppts
Profit before tax £139m £189m -27% £210m £185m +13%
Net profit £100m £152m -34% £160m £141m +13%
Basic EPS 9.78p 14.84p -34% 15.68p 13.83p +13%
The Group achieved statutory and underlying total revenue of £1,087m in the
first half. Statutory total revenue increased by 16% compared to the prior
period, reflecting underlying total revenue growth of 10% together with a
6-percentage point foreign exchange tailwind, principally relating to the US
Dollar in North America.
Statutory operating profit decreased by 23% to £157m, reflecting a 14%
increase in underlying operating profit to £227m offset by changes in
recurring and non-recurring items, including higher M&A related charges
and a property restructuring charge in H1 23 together with a one-off gain on
the disposal of Sage Switzerland in the prior period (see page 9).
Statutory basic EPS decreased by 34% to 9.78p, reflecting a higher statutory
net finance cost and the post-tax impact of non-recurring items. Underlying
basic EPS increased by 13% to 15.68p.
Revenue - underlying and organic reconciliation to statutory
Total revenue bridge H1 23 H1 22 Change
Statutory £1,087m £934m +16%
Recurring items 13 (#_edn13) - £1m
Impact of FX 14 (#_edn14) - £54m
Underlying £1,087m £989m +10%
Disposals - (£5m)
Held for sale - (£2m)
Acquisitions - £10m
Organic £1,087m £992m +10%
Statutory, underlying and organic total revenue was £1,087m in H1 23.
Underlying revenue in H1 22 of £989m reflects statutory revenue of £934m
retranslated at current year exchange rates, resulting in a foreign exchange
tailwind of £54m, together with a £1m fair value adjustment to deferred
income relating to the acquisition of Brightpearl.
Organic revenue in H1 22 of £992m reflects underlying revenue of £989m,
adjusted for £5m of revenue from Sage's business in Switzerland which was
sold during the prior period, £2m of revenue from the South African payroll
outsourcing business which was held for sale, and £10m of revenue from
Brightpearl, Futrli and Lockstep which were acquired during FY22.
Revenue by type
Underlying revenue mix H1 23 H1 22 Change Organic change
Software subscription revenue £853m £724m +18% +17%
Other recurring revenue £186m £201m -7% -7%
Underlying recurring revenue £1,039m £925m +12% +12%
Other revenue (SSRS) £48m £64m -24% -22%
Underlying total revenue £1,087m £989m +10% +10%
Subscription Penetration 78% 73%
Underlying recurring revenue grew by 12% to £1,039m, supported by an 18%
increase in software subscription revenue to £853m, 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 7% to £186m reflects customers migrating from maintenance and support to
subscription contracts. Other revenue (SSRS) declined by 24% to £48m, in line
with our strategy to transition away from licence sales and professional
services implementations. Underlying total revenue increased by 10% in H1 23
to £1,087m.
Revenue performance by region
North America H1 23 H1 22 Change Organic change
Underlying total revenue £483m £420m +15% +14%
Underlying recurring revenue £467m £398m +17% +16%
% Sage Business Cloud Penetration 84% 76% +8 ppts +8 ppts
% Subscription Penetration 77% 70% +7 ppts +7 ppts
Underlying recurring revenue H1 23 H1 22 Change Organic change
US £405m £343m +18% +16%
Of which Sage Intacct £150m £115m +30% +30%
Canada £62m £55m +13% +13%
North America achieved underlying recurring revenue growth of 17% to £467m
and total revenue growth of 15% to £483m. Adjusting for the impact in the US
of the acquisitions of Brightpearl and Lockstep during FY22, organic recurring
and total revenue growth was 16% and 14% respectively. Sage Business Cloud
penetration increased to 84%, up from 76% in the prior year, driven by growth
in cloud native and cloud connected solutions, while subscription penetration
increased to 77%, up from 70% in the prior year.
Cloud native growth was driven primarily through Sage Intacct, which delivered
strong recurring revenue growth of 30% to £150m, reflecting continued success
in attracting new customers and supported by strong sales to existing
customers.
Recurring revenue in the US increased by 18% to £405m, driven by Sage Intacct
alongside cloud connected growth across the Sage 200 and Sage 50 franchises,
as well as success in migrations to Sage Business Cloud. Total revenue for the
US increased by 16% to £420m.
In Canada, recurring revenue increased by 13% to £62m and total revenue by
11% to £63m, driven mainly by Sage 50 cloud and Sage 200 cloud solutions,
together with strong growth in Sage Intacct.
UKIA H1 23 H1 22 Change Organic change
Underlying total revenue £311m £284m +10% +8%
Underlying recurring revenue £303m £273m +11% +10%
% Sage Business Cloud Penetration 88% 76% +12 ppts +12 ppts
% Subscription Penetration 89% 87% +2 ppts +2 ppts
Underlying recurring revenue H1 23 H1 22 Change Organic change
UK & Ireland (Northern Europe) £230m £209m +10% +8%
Africa & APAC £73m £64m +15% +14%
In the UKIA region, underlying recurring revenue grew by 11% to £303m and
total revenue grew by 10% to £311m. Adjusting for the impact in the UK &
Ireland of the acquisitions of Brightpearl and Futrli during FY22, organic
recurring and total revenue growth was 10% and 8% respectively. Sage Business
Cloud penetration reached 88%, up from 76% in the prior year, while
subscription penetration increased to 89%, up from 87% in the prior year.
In the UK & Ireland, recurring revenue increased by 10% to £230m,
reflecting growth in cloud native solutions, supported by further growth in
Sage 50 cloud. Cloud native revenue growth was driven by continued growth in
small business solutions, including Sage Accounting, together with Sage
Intacct which is now starting to scale rapidly through both the direct and
partner channels. Total revenue in the UK & Ireland increased by 10% to
£233m.
Africa & APAC delivered strong recurring revenue growth of 15% to £73m,
driven by growth in both cloud native solutions and local products. Total
revenue in Africa & APAC increased by 10% to £78m.
Europe H1 23 H1 22 Change Organic change
Underlying total revenue £293m £285m +3% +4%
Underlying recurring revenue £269m £254m +6% +8%
% Sage Business Cloud Penetration 70% 61% +9 ppts +8 ppts
% Subscription Penetration 69% 65% +4 ppts +4 ppts
Underlying recurring revenue H1 23 H1 22 Change Organic change
France £142m £133m +7% +7%
Central Europe £60m £59m +3% +10%
Iberia £67m £62m +7% +7%
Europe achieved underlying recurring revenue growth of 6% to £269m and total
revenue growth of 3% to £293m. Adjusting for the impact of the disposal of
the Swiss business in FY22, organic recurring revenue growth and total revenue
growth was 8% and 4% respectively. Sage Business Cloud penetration increased
significantly to 70%, up from 61% in the prior year, while subscription
penetration reached 69%, up from 65% in the prior year, driven by growth from
new and existing customers together with migrations.
In France, recurring revenue increased by 7% to £142m, with a strong
performance in cloud connected, particularly Sage 200 cloud, together with
growth in cloud native solutions. Total revenue in France increased by 5% to
£148m.
Central Europe achieved recurring revenue growth of 3% to £60m, while total
revenue decreased by 3% to £71m. Adjusting for the disposal of the Swiss
business, organic recurring and total revenue growth in Central Europe was 10%
and 3% respectively. Growth in the region was driven by Sage Business Cloud,
with a particularly strong performance in HR solutions.
In Iberia, recurring revenue increased by 7% to £67m, with continued success
in cloud connected supported by growth in cloud native solutions. Total
revenue grew by 5% to £74m.
Operating profit
The Group increased underlying operating profit by 14% to £227m (H1 22:
£199m). Underlying operating margin increased by 60 basis points to 20.8% (H1
22: 20.2%), driven by operating efficiencies as we scale the Group. On an
organic basis, adjusting for the full-year impact of acquisitions and
disposals during FY22, operating profit increased by 19% to £227m (H1 22:
£191m), and margin increased by 160 basis points to 20.8% (H1 22: 19.2%).
Operating profit - underlying and organic reconciliation to statutory
Operating profit bridge H1 23 H1 22
Operating profit Operating margin Operating profit Operating margin
Statutory £157m 14.4% £204m 21.8%
Recurring items 15 (#_edn15) £50m - £34m -
Non-recurring items:
· Property restructuring £20m - - -
· Gain on disposal of subsidiaries - - (£49m) -
· Reversal of restructuring costs - - (£6m) -
Impact of FX 16 (#_edn16) - - £16m -
Underlying £227m 20.8% £199m 20.2%
Disposals - - - -
Held for sale - - (£1m) -
Acquisitions - - (£7m) -
Organic £227m 20.8% £191m 19.2%
The Group achieved a statutory operating profit in H1 23 of £157m (H1 22:
£204m). Underlying and organic operating profit of £227m in H1 23 reflects
statutory operating profit adjusted for recurring and non-recurring items.
Recurring items of £50m (H1 22: £34m) comprise £26m of amortisation of
acquisition-related intangibles (H1 22: £18m) and £24m of M&A related
charges (H1 22: £15m). In H1 22, there was a further £1m of deferred income
adjustment relating to the acquisition of Brightpearl.
Non-recurring items in H1 23 comprise a £20m charge for a property
restructuring programme following a strategic review of the Group's property
portfolio. The programme is expected to be completed by 30 September 2023. In
the prior year, non-recurring items comprised a £49m gain on disposal from
the sale of Sage's business in Switzerland, together with a £6m reversal of
employee restructuring costs.
In addition, the retranslation of H1 22 operating profit at current year
exchange rates has resulted in an operating profit tailwind of £16m. This has
led to a 60-basis point margin tailwind from foreign exchange to 20.2% (H1 22
underlying as reported: 19.6%).
Organic operating profit of £191m in H1 22 reflects underlying operating
profit of £199m adjusted for £1m of operating profit from the South African
payroll outsourcing business, which was held for sale, and £7m of operating
losses from businesses acquired during the period.
EBITDA
EBITDA was £275m (H1 22: £243m) representing a margin of 25.2%. The increase
in EBITDA principally reflects the improvement in underlying operating profit.
H1 23 H1 22 Margin
Underlying operating profit £227m £199m 20.8%
Depreciation & amortisation £28m £28m
Share based payments £20m £16m
EBITDA £275m £243m 25.2%
Net finance cost
The statutory net finance cost for the period increased to £18m (H1 22:
£15m), primarily reflecting the impact of interest on new debt issuances, and
is broadly in line with the underlying net finance cost of £17m (H1 22:
£14m).
Taxation
The underlying tax expense for H1 23 was £50m (H1 22: £44m), resulting in an
underlying tax rate of 24% (H1 22: 24%). The statutory income tax expense for
H1 23 was £39m (H1 22: £37m), resulting in a statutory tax rate of 28% (H1
22: 20%).
The difference between the underlying and statutory rate in H1 23 primarily
reflects non-deductible M&A activity-related items. The H1 23 underlying
tax rate is unchanged from H1 22 due to the offsetting impact of an increase
in the UK corporation tax rate against a decrease in the French corporate tax
rate.
Earnings per share
H1 23 H1 22 Change
Statutory basic EPS 9.78p 14.84p -34%
Recurring items 4.46p 2.97p
Non-recurring items 1.44p (5.19)p
Impact of foreign exchange - 1.21p
Underlying basic EPS 15.68p 13.83p +13%
Underlying basic EPS increased by 13% to 15.68p, reflecting higher underlying
operating profit.
Statutory basic earnings per share decreased by 34%, with the increase in
underlying basic earnings per share offset by the change in post-tax impact of
recurring and non-recurring items, including higher M&A related charges
and a property restructuring charge in H1 23 together with a one-off gain on
the disposal of Sage Switzerland in the prior period.
Cash flow
Sage remains highly cash generative with underlying cash flow from operations
of £266m (H1 22: £220m), representing underlying cash conversion of 117% (H1
22: 120%). This strong cash performance reflects further growth in
subscription revenue and continued good working capital management. Free cash
flow of £194m (H1 22: £167m) largely reflects strong underlying cash
conversion.
Cash flow APMs H1 23 H1 22 (as reported)
Underlying operating profit £227m £183m
Depreciation, amortisation and non-cash items in profit £27m £26m
Share based payments £20m £16m
Net changes in working capital £2m £3m
Net capital expenditure (£10m) (£8m)
Underlying cash flow from operations £266m £220m
Underlying cash conversion % 117% 120%
Non-recurring cash items (£8m) (£12m)
Net interest paid and derivative financial instruments (£28m) (£14m)
Income tax paid (£35m) (£27m)
Profit and loss foreign exchange movements (£1m) -
Free cash flow £194m £167m
Statutory reconciliation of cash flow from operations H1 23 H1 22 (as reported)
Statutory cash flow from operations £251m £193m
Recurring and non-recurring items £24m £36m
Net capital expenditure (£10m) (£8m)
Other adjustments including foreign exchange translations £1m (£1m)
Underlying cash flow from operations £266m £220m
Net debt and liquidity
Group net debt was £691m at 31 March 2023 (30 September 2022: £733m),
comprising cash and cash equivalents of £575m (30 September 2022: £489m) and
total debt of £1,266m (30 September 2022: £1,222m). The Group had £1,205m
of cash and available liquidity at 31 March 2023 (30 September 2022:
£1,270m).
The decrease in net debt in the period is summarised in the table below.
H1 23 H1 22 (as reported)
Net debt at 1 October (£733m) (£247m)
Free cash flow £194m £167m
New leases (£9m) (£4m)
Disposal of businesses - £38m
Acquisition of businesses (£14m) (£223m)
M&A and equity investments (£16m) (£14m)
Dividends paid (£123m) (£119m)
Share buyback - (£249m)
FX movement and other £10m £1m
Net debt at 31 March (£691m) (£650m)
The Group's debt is sourced from a syndicated multi-currency Revolving Credit
Facility (RCF), and from sterling and euro denominated bond notes. The Group's
RCF was refinanced in December 2022 into a new facility of £630m which
expires in December 2027, with an extension option for up to two further years
subject to specific provisions. At 31 March 2023, the RCF was undrawn (H1
22: undrawn).
The Group's sterling denominated bond notes comprise a £400m 12-year bond,
issued in February 2022, with a coupon of 2.875%, and a £350m 10-year bond,
with a coupon of 1.625%, issued in February 2021.
The Group established a Euro Medium Term Note (EMTN) programme in January 2023
and issued €500m of 5-year notes in February 2023, with a coupon of 3.82%.
This issuance funded the repayment of the Group's outstanding US private
placement loan notes totalling £326m (US$400m), and enabled the Group to
extend the maturity of its debt portfolio and to diversify its funding
sources.
Sage has an investment grade issuer credit rating assigned by Standard and
Poor's of BBB+ (stable outlook).
Capital allocation
Sage maintains a disciplined approach to capital allocation, with a focus on
accelerating strategic execution through organic and inorganic investment,
including through acquisitions and partnerships to enhance Sage Business Cloud
and further develop Sage's digital network. During the period Sage completed
the acquisition of Spherics, an innovative carbon accounting solution.
Sage has a progressive dividend policy, intending to grow the dividend over
time while considering the future capital requirements of the Group.
Reflecting the Group's strong business performance and cash generation during
the first half, we have increased the interim dividend by 4% to 6.55p. The
Group also considers returning surplus capital to shareholders.
H1 23 H1 22 (as reported)
Net debt £691m £650m
EBITDA (Last Twelve Months) £520m £439m
Net debt/EBITDA Ratio 1.3x 1.5x
The Group's EBITDA over the last 12 months was £520m, resulting in a net debt
to EBITDA leverage ratio of 1.3x, down from 1.5x in the prior year principally
due to the improvement in EBITDA. Group return on capital employed (ROCE) for
H1 23 was 19% (H1 22 as reported: 19%).
Sage intends 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 business needs
require.
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 31 March 2023 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 20.
External audit tender
The Group's external auditors, Ernst & Young LLP, were first appointed for
the year ended 30 September 2015. In accordance with applicable regulations,
which include a requirement for audit tendering at least every 10 years, the
Audit and Risk Committee has decided to run a tender process which is expected
to conclude later this year. Subject to shareholder approval, this will allow
a potential new audit firm to take up the role and conduct the audit for the
year ended 30 September 2025.
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 normalise prior year underlying and organic figures are as
follows:
Average exchange rates (equal to GBP) H1 23 H1 22 Change
Euro (€) 1.14 1.19 -4%
US Dollar ($) 1.20 1.34 -11%
Canadian Dollar (C$) 1.62 1.70 -5%
South African Rand (ZAR) 21.13 20.62 +2%
Australian Dollar (A$) 1.78 1.85 -4%
Appendix 1 - Alternative Performance Measures
Alternative Performance Measures are used by the Group to understand and
manage performance. These are not defined under International Financial
Reporting Standards (IFRS) or UK-adopted International Accounting Standards
(UK-IFRS) and are not intended to be a substitute for any IFRS or UK-IFRS
measures of performance but have been included as management considers them to
be important measures, alongside the comparable GAAP financial measures, in
assessing 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 in management's Underlying measures allow management and investors to compare performance
judgement need to be disclosed separately by virtue of their size, nature or without the effects of foreign exchange movements, one‑off or
frequency to aid understanding of the performance for the year or non-operational items.
comparability between periods:
By including part-period contributions from acquisitions, discontinued
· Recurring items include purchase price adjustments including operations, disposals and assets held for sale of standalone businesses in the
amortisation of acquired intangible assets and adjustments made to reduce current and/or prior periods, the impact of M&A decisions on earnings per
deferred income arising on acquisitions, acquisition-related items and share growth can be evaluated.
unhedged FX on intercompany balances; and
· Non-recurring items that management judge to be one-off or
non-operational such as gains and losses on the disposal of assets, impairment
charges and reversals, and restructuring related costs.
Recurring items are adjusted each period irrespective of materiality to ensure
consistent treatment.
Underlying basic EPS is also adjusted for the tax impact of recurring and
non-recurring items.
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
· Exclude the contribution from discontinued operations, disposals and continuing business.
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 recurring revenue in ARR represents the annualised value of the recurring revenue base that is
the last month of the reporting period, adjusted consistently period to expected to be carried into future periods, and its growth is a
period, multiplied by twelve. Adjustments to normalise reported recurring forward‑looking indicator of reporting recurring revenue growth.
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 derivative financial instruments, income tax paid, and adjusted for that is available to repay debt, undertake acquisitions or distribute to
non-recurring cash items (which excludes net proceeds on disposals of shareholders.
subsidiaries) and profit and loss foreign exchange movements.
% Subscription Penetration Underlying software subscription revenue as a percentage of underlying total To measure the progress of migrating our customer base from licence and
revenue. maintenance to a subscription relationship.
% Sage Business Cloud Penetration Underlying recurring revenue from the Sage Business Cloud (native and To measure the progress in the migration of our revenue base to the Sage
connected cloud) as a percentage of the underlying recurring revenue of the Business Cloud by connecting our solutions to the cloud and/or migrating our
Future Sage 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 return on the capital invested
in the Company.
- Underlying Operating Profit; minus
ROCE is used as an underpin in the FY21, FY22 and FY23 PSP awards.
- Amortisation of acquired intangibles; the result being divided by
The average (of the opening and closing balance for the period) total net
assets excluding net debt, derivative financial instruments, provisions for
non-recurring costs, financial liability for purchase of own shares and tax
assets or liabilities (i.e. capital employed).
Net debt Net debt is cash and cash equivalents less current and non-current borrowings. To calculate the Net Debt to EBITDA leverage ratio and an indicator of our
indebtedness.
Consolidated income statement
For the six months ended 31 March 2023
Six months Six months Six months Six months Six months Six months
ended
ended
ended
ended
ended
ended
31 March
31 March
31 March
31 March
31 March
31 March
2023
2023
2023
2022
2022
2022
Underlying
Adjustments*
Statutory
Underlying as reported
Adjustments*
Statutory
Note £m £m £m £m £m £m
Revenue 2 1,087 - 1,087 935 (1) 934
Cost of sales (76) - (76) (68) - (68)
Gross profit 1,011 - 1,011 867 (1) 866
Selling and (784) (70) (854) (684) 22 (662)
administrative expenses
Operating profit 2 227 (70) 157 183 21 204
Finance income 4 - 4 - - -
Finance costs (21) (1) (22) (14) (1) (15)
Profit before income tax 210 (71) 139 169 20 189
Income tax expense 4 (50) 11 (39) (40) 3 (37)
Profit for the period 160 (60) 100 129 23 152
* Adjustments are detailed in note 3.
Earnings per share attributable to
the owners of the parent (pence)
Basic 6 15.68p 9.78p 12.62p 14.84p
Diluted 6 15.49p 9.66p 12.49p 14.68p
Consolidated statement of comprehensive income
For the six months ended 31 March 2023
Six months Six months
ended
ended
31 March
31 March
2023
2022
£m £m
Profit for the period 100 152
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss:
Fair value gain on reassessment of equity investment - 30
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations and net investment (93) 24
hedges
Cash flow hedges (1) -
Exchange differences recycled through income statement on sale of foreign - (13)
operations
(94) 11
Other comprehensive (expense)/income for the period, net of tax (94) 41
Total comprehensive income for the period 6 193
The notes on pages 20 to 37 form an integral part of this condensed
consolidated half-yearly report.
Consolidated balance sheet
As at 31 March 2023
Note 31 March 31 March 30 September
2023
2022
2022
£m
£m
Restated*
£m
Non-current assets
Goodwill 7 2,238 2,082 2,391
Other intangible assets 7 288 281 320
Property, plant and equipment 7 124 155 152
Equity investments 4 4 4
Trade and other receivables 125 116 128
Deferred income tax assets 35 34 19
Derivative financial instruments 2 - -
2,816 2,672 3,014
Current assets
Trade and other receivables 367 329 355
Current income tax asset 37 28 39
Cash and cash equivalents (excluding bank overdrafts) 9 575 515 489
Assets classified as held for sale 11 - 2 -
979 874 883
Total assets 3,795 3,546 3,897
Current liabilities
Trade and other payables (302) (311) (368)
Current income tax liabilities (33) (23) (13)
Borrowings 9 (16) (42) (178)
Provisions (20) (44) (33)
Deferred income (770) (705) (734)
(1,141) (1,125) (1,326)
Non-current liabilities
Borrowings 9 (1,250) (1,123) (1,044)
Post-employment benefits (19) (23) (19)
Deferred income tax liabilities (14) (24) (17)
Provisions (24) (36) (20)
Trade and other payables (14) (2) (6)
Deferred income (7) (9) (8)
Derivative financial instruments (20) - (60)
(1,348) (1,217) (1,174)
Total liabilities (2,489) (2,342) (2,500)
Net assets 1,306 1,204 1,397
Equity attributable to owners of the parent
Ordinary shares 8 12 12 12
Share premium 8 548 548 548
Translation reserve 113 53 206
Hedging reserve (1) - -
Merger reserves 61 61 61
Retained earnings 573 530 570
Total equity 1,306 1,204 1,397
*Restated for finalisation of the fair value of assets acquired and
liabilities assumed in the acquisition of Lockstep, completed in the prior
year (see notes 1 & 11).
Consolidated statement of changes in equity
For the six months ended 31 March 2023
Attributable to owners of the parent
Ordinary Share Translation Hedging reserve Merger Retained Total
shares
premium
reserve
reserves
earnings
equity
£m
£m
£m £m
£m
£m
£m
At 1 October 2022 12 548 206 - 61 570 1,397
Profit for the period - - - - - 100 100
Other comprehensive expense
Exchange differences on translating foreign operations and net investment - - (93) - - - (93)
hedges
Cash flow hedges - - - (1) - - (1)
Total comprehensive (expense)/income - - (93) (1) - 100 6
for the period ended 31 March 2023
Transactions with owners
Employee share option scheme - value of employee services including deferred - - - - - 25 25
tax
Proceeds from issuance of treasury shares - - - - - 2 2
Purchase of shares by Employee Benefit Trust - - - - - (1) (1)
Dividends paid to owners of the parent - - - - - (123) (123)
Total transactions with owners - - - - - (97) (97)
for the period ended 31 March 2023
At 31 March 2023 12 548 113 (1) 61 573 1,306
Attributable to owners of the parent
Ordinary Share Translation Merger Retained Total
shares
premium
reserve
reserve
earnings
equity
£m
£m
£m
£m
£m
£m
At 1 October 2021 12 548 42 61 448 1,111
Profit for the period - - - - 152 152
Other comprehensive income/(expense)
Exchange differences on translating foreign operations and net investment - - 24 - - 24
hedges
Exchange differences recycled through income statement on sale of foreign - - (13) - - (13)
operations
Fair value gain on reassessment of equity investment - - - - 30 30
Total comprehensive income - - 11 - 182 193
for the period ended 31 March 2022
Transactions with owners
Employee share option scheme - value of employee services including deferred - - - - 16 16
tax
Proceeds from issuance of treasury shares - - - - 3 3
Dividends paid to owners of the parent - - - - (119) (119)
Total transactions with owners - - - - (100) (100)
for the period ended 31 March 2022
At 31 March 2022 12 548 53 61 530 1,204
Consolidated statement of cash flows
For the six months ended 31 March 2023
Notes Six months Six months
ended
ended
31 March
31 March
2023
2022
£m
£m
Cash flows from operating activities
Cash generated from continuing operations 9 251 193
Interest paid (28) (14)
Income tax paid (35) (27)
Net cash generated from operating activities 188 152
Cash flows from investing activities
Disposal of subsidiaries, net of cash disposed - 37
Acquisition of subsidiaries, net of cash acquired 11 (14) (210)
Purchases of intangible assets 7 (8) (17)
Purchases of property, plant and equipment (2) (4)
Proceeds from disposals of property, plant and equipment - 10
Interest received 4 -
Net cash used in investing activities (20) (184)
Cash flows from financing activities
Proceeds from issuance of treasury shares 8 2 3
Proceeds from borrowings 9 440 516
Repayments of borrowings 9 (353) (166)
Net payments for derivative financial instruments (2) -
Capital element of lease payments (10) (9)
Borrowing costs (2) -
Share buyback programme 8 - (249)
Purchase of shares by Employee Benefit Trust 8 (1) -
Dividends paid to owners of the parent 5 (123) (119)
Net cash used in financing activities (49) (24)
Net increase/(decrease) in cash, cash equivalents and bank overdrafts 119 (56)
(before exchange rate movement)
Effects of exchange rate movement 9 (33) 4
Net increase/(decrease) in cash, cash equivalents and bank overdrafts 86 (52)
Cash, cash equivalents and bank overdrafts at 1 October 9 489 567
Cash, cash equivalents and bank overdrafts at period end 9 575 515
Notes to the financial information
For the six months ended 31 March 2023
1. Group accounting policies
General information
The Sage Group plc ("the Company") and its subsidiaries (together "the Group")
is a leading global supplier of finance, HR and payroll software to small and
mid-sized businesses.
This condensed consolidated half-yearly financial report was approved for
issue by the board of directors on 16 May 2023.
The financial information set out above does not constitute the Company's
Statutory Accounts. Statutory Accounts for the year ended 30 September 2022
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 UK-adopted International Accounting Standards
("UK-IFRS") and International Financial Reporting Standards ("IFRS") as issued
by the International Accounting Standards Board ("IASB"), this announcement
does not in itself contain sufficient information to comply with IFRS or
UK-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 and Accounts 2022.
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 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 financial information for the six months ended 31 March 2023 has been
prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" as
issued by the IASB and as adopted for use in the UK.
The condensed consolidated half-yearly financial report should be read in
conjunction with the annual financial statements for the year ended 30
September 2022, which have been prepared in accordance with UK-IFRS and IFRS
as issued by the IASB.
Going concern
As at 31 March 2023, the Group had a strong liquidity position with cash and
available liquidity of £1.2bn, supported by strong underlying cash conversion
of 117% reflecting the strength of the subscription-based business model. The
Group's position is further supported by a well-diversified customer base
amongst small and medium sized businesses with high quality recurring revenue
and strong retention rates.
In reaching its assessment on going concern, the Directors have reviewed
liquidity forecasts for the Group for the period to 30 September 2024 (the
going concern assessment period), which reflect the expected impact of
economic conditions on trading. In doing so, the Directors have also reviewed
the extent to which the macro-economic environment has been considered in
building assumptions to support the forecasts.
Scenario-specific stress testing has been performed, with the level of churn
assumptions increased by 75%, and a significant reduction in the level of new
customer acquisition and sales to existing customers. In these severe stress
scenarios, the Group continues to have sufficient resources to continue in
operational existence, without the need to draw down the revolving credit
facility or seek additional financing. If more severe impacts occur,
controllable mitigating actions to protect liquidity, including the reduction
of discretionary spend, are available to the Group should they be required.
The Directors also reviewed the results of reverse stress testing to provide
an illustration of the level of churn and deterioration in new customer
acquisition which would be required to exhaust cash down to minimum working
capital requirements. The result of the reverse stress testing has highlighted
that such a scenario would only arise following a catastrophic deterioration
in performance, well in excess of the assumptions considered in the stress
testing scenarios. The probability of these factors occurring is deemed to be
highly unlikely given the resilient nature of the subscription 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 operation throughout the going concern
assessment period. Accordingly, the consolidated financial information has
been prepared on a going concern basis.
Accounting policies
The accounting policies adopted in the preparation of these condensed
consolidated interim financial statements are consistent with those of the
annual financial statements for the year ended 30 September 2022. There has
been one new accounting policy adopted in the period relating to cash flow
hedges, set out in further detail below.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the
effective portion of changes in the fair value of the derivatives is
recognised in other comprehensive income and accumulated in the hedging
reserve. The effective portion of changes in the fair value of the derivative
that is recognised in other comprehensive income is limited to the cumulative
change in fair value of the hedged item, determined on a present value basis,
from inception of the hedge. Any ineffective portion of changes in the fair
value of the derivative is recognised immediately in profit or loss.
The Group designates the change in fair value of the forward element of
forward exchange contracts as the hedging instrument in cash flow hedging
relationships.
If the hedged future cash flows are no longer expected to occur, then the
amounts that have been accumulated in the hedging reserve are immediately
reclassified to profit or loss.
Adoption of new and revised IFRSs
There are no new accounting standards which are currently issued but not yet
effective which management expects would have a material impact on the Group.
Critical accounting estimates and judgements
The preparation of financial statements requires the use of accounting
estimates and assumptions by management. It also requires management to
exercise its judgement in the process of applying the accounting policies. We
continually evaluate our estimates, assumptions and judgements based on
available information. The areas involving a higher degree of judgement or
complexity are described below.
Revenue recognition
Over 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.
Goodwill impairment
Management has performed a review for indicators of impairment of goodwill as
at 31 March 2023. As a result of this review, no indicators of impairment have
been identified.
The carrying value of goodwill and the key assumptions used in performing the
annual impairment assessment are disclosed in note 6.1 of the annual financial
statements for the year ended 30 September 2022.
Business combinations
In the period, the Group finalised the purchase price accounting for Lockstep
Network Holdings Inc ("Lockstep"), for which the Group acquired 100% of the
equity capital and voting rights in August 2022. At the end of the prior
year, the amounts recognised relating to the acquisition were provisional. As
a result of the purchase price accounting being finalised, certain adjustments
have been recognised in the period, specifically the recognition of intangible
assets and deferred tax liabilities, offset by a deduction in the amount of
goodwill provisionally recognised in the prior year. Further explanation of
the changes is set out in note 11.
Key areas of judgement include the identification and subsequent measurement
of acquired intangible assets, for which an external expert was engaged to
support the exercise. The recognised intangible assets included the technology
and customer relationships. The fair value of the acquired technology was
determined using the relief from royalty method and the customer relationship
was determined using a discounted cashflow approach. These valuation
techniques incorporate several key assumptions including revenue forecasts and
the application of an appropriate discount rate to state future cash flows at
their present value. In addition, the relief from royalty method requires the
use of an appropriate royalty rate.
Website
This condensed consolidated half-yearly financial report for the six months
ended 31 March 2023 can also be found on our website:
www.sage.com/investors/financial-information/results
(http://www.sage.com/investors/investor-downloads) .
2. Segment information
In accordance with IFRS 8, "Operating Segments", information for the Group's
operating segments has been derived using the information used by the chief
operating decision maker. The Group's Executive Leadership Team (ELT) has been
identified as the chief operating decision maker, in accordance with their
designated responsibility for the allocation of resources to operating
segments and assessing their performance through the Management Performance
Reviews. The ELT 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.
The Group is organised into seven key operating segments: North America, UK
& Ireland, Central Europe (Germany, Austria and Switzerland), France,
Iberia (Spain and Portugal), Africa and the Middle East, and Asia (including
Australia). For reporting under IFRS 8, the Group is divided into three
reportable segments. These segments are as follows:
· North America
· UK & Ireland
· 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 Africa & APAC. They include the Group's operations in
South Africa, the Middle East, Australia, Singapore and Malaysia.
In previous reporting periods, the UK & Ireland reportable segment was
presented as Northern Europe, the Europe reportable segment was presented as
International - Central and Southern Europe, and the Africa & APAC segment
was presented as International - Africa & APAC.
The reportable segments reflect 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.
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
Six months ended 31 March 2023
Statutory Underlying Organic Change Change Change
£m
£m
£m
Statutory
Underlying
Organic
%
%
%
Recurring revenue by segment
North America 467 467 467 31% 17% 16%
UK & Ireland 230 230 230 11% 10% 8%
Europe 269 269 269 10% 6% 8%
Africa & APAC 73 73 73 14% 15% 14%
Recurring revenue 1,039 1,039 1,039 19% 12% 12%
Other revenue by segment
North America 16 16 16 (16%) (25%) (26%)
UK & Ireland 3 3 3 (19%) (19%) (33%)
Europe 24 24 24 (19%) (23%) (21%)
Africa & APAC 5 5 5 (30%) (31%) (10%)
Other revenue 48 48 48 (20%) (24%) (22%)
Total revenue by segment
North America 483 483 483 28% 15% 14%
UK & Ireland 233 233 233 10% 10% 7%
Europe 293 293 293 7% 3% 4%
Africa & APAC 78 78 78 9% 10% 12%
Total revenue 1,087 1,087 1,087 16% 10% 10%
Revenue by segment
Six months ended 31 March 2022
Statutory £m Underlying adjustments* £m Underlying as reported Impact of Underlying Organic Organic
£m
foreign
£m
adjustments**
£m
exchange
£m
£m
Recurring revenue by segment
North America 356 1 357 41 398 6 404
UK & Ireland 208 - 208 1 209 4 213
Europe 244 - 244 10 254 (4) 250
Africa & APAC 65 - 65 (1) 64 - 64
Recurring revenue 873 1 874 51 925 6 931
Other revenue by segment
North America 20 - 20 2 22 - 22
UK & Ireland 4 - 4 - 4 - 4
Europe 30 - 30 1 31 (1) 30
Africa & APAC 7 - 7 - 7 (2) 5
Other revenue 61 - 61 3 64 (3) 61
Total revenue by segment
North America 376 1 377 43 420 6 426
UK & Ireland 212 - 212 1 213 4 217
Europe 274 - 274 11 285 (5) 280
Africa & APAC 72 - 72 (1) 71 (2) 69
Total revenue 934 1 935 54 989 3 992
* Adjustments are detailed in note 3.
** Adjustments relate to the acquisition of Brightpearl, Lockstep and Futrli,
disposal of the Group's Swiss business in the prior period and the Group's
payroll outsourcing business in South Africa which was classified as held for
sale in the prior period.
Operating profit by segment
Six months ended 31 March 2023
Statutory Underlying Underlying Organic Change Change Change
£m
adjustments
£m
£m
Statutory
Underlying
Organic
£m
%
%
%
Operating profit by segment
North America 43 42 85 85 (27%) 1% 5%
UK & Ireland 35 25 60 60 4% 13% 25%
Europe 66 2 68 68 (32%) 37% 39%
Africa & APAC 13 1 14 14 (11%) 6% 9%
Total operating profit 157 70 227 227 (23%) 14% 19%
Six months ended 31 March 2022
Statutory £m Underlying adjustments £m Underlying as reported Impact of foreign exchange Underlying £m Organic adjustments Organic
£m
£m
£m
£m
Operating profit by segment
North America 59 14 73 12 85 (3) 82
UK & Ireland 34 17 51 1 52 (4) 48
Europe 97 (51) 46 3 49 - 49
Africa & APAC 14 (1) 13 - 13 (1) 12
Total operating profit 204 (21) 183 16 199 (8) 191
Reconciliation of underlying operating profit to statutory operating profit
Six months ended Six months ended
31 March 2023
31 March 2022
£m
£m
North America 85 85
UK & Ireland 60 52
Europe 68 49
Total reportable segments 213 186
Africa & APAC 14 13
Underlying operating profit 227 199
Impact of movement in foreign currency exchange rates - (16)
Underlying operating profit (as reported) 227 183
Amortisation of acquired intangible assets (26) (18)
Adjustment to acquired deferred income - (1)
Other M&A activity-related items (24) (15)
Non-recurring items (20) 55
Statutory operating profit 157 204
3. Adjustments between underlying profit and statutory profit
Six months ended Six months ended Six months ended Six months ended Six months ended Six months ended
31 March 2023
31 March 2023
31 March 2023
31 March 2022
31 March
31 March
Non-
2022
2022
Recurring
recurring
Total
Recurring
Non-
£m
£m
£m
£m
recurring
Total
£m
£m
M&A activity-related items
Amortisation of acquired intangibles 26 - 26 18 - 18
Gain on disposal of subsidiaries - - - - (49) (49)
Adjustment to acquired deferred income - - - 1 - 1
Other M&A activity-related items 24 - 24 15 - 15
Other items
Property restructuring costs - 20 20 - - -
Reversal of restructuring costs - - - - (6) (6)
Total adjustments made to operating profit 50 20 70 34 (55) (21)
Foreign currency movements on intercompany balances 1 - 1 1 - 1
Total adjustments made to profit before income tax 51 20 71 35 (55) (20)
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.
The adjustment to acquired deferred income in the prior year represents the
additional revenue that would have been recorded in the period had deferred
income not been reduced as part of the purchase price allocation adjustment
made for business combinations.
Other M&A activity-related items relate to advisory, legal, accounting,
valuation and other professional or consulting services which are related to
M&A activity as well as acquisition-related remuneration and directly
attributable integration costs. £4m (six months ended 31 March 2022: £5m) of
these costs have been paid in the period, while the remainder is expected to
be paid in subsequent periods.
Foreign currency movements on intercompany balances occur due to retranslation
of unhedged intercompany balances other than those where settlement is not
planned or likely in the foreseeable future and resulted in a loss of £1m
(six months ended 31 March 2022: loss of £1m).
Non-recurring items
Property restructuring costs relate to the reorganisation of a number of
leased properties following a strategic review of the Group's property
portfolio, as a result of which certain of the Group's properties were either
exited or down-sized as part of a consolidated plan. In the current period,
costs of £20m consist of impairment of £13m of right of use assets and other
related fixed assets that are no longer in use as well as a provision for
directly attributable future running costs associated with the properties. The
execution of the programme will be completed by 30 September 2023 with further
costs expected to be incurred in the second half of the year.
The gain on disposal of subsidiaries in the prior year of £49m relates to the
disposal of the Group's Swiss business.
Reversal of restructuring costs of £6m in the prior year primarily relates to
unutilised provisions recognised in 2021 following the implementation of a
business transformation plan to rebalance investment towards the Group's
strategic priorities and simplify the business. The reversal is a result of
fewer colleagues leaving the business as they were redeployed into other
roles.
4. Income tax expense
The effective tax rate on statutory profit before tax was 28% (six months
ended 31 March 2022: 20%) whilst the effective tax rate on underlying profit
before tax for continuing operations was 24% (six months ended 31 March 2022:
24%). The effective income tax rate represents the best estimate of the
Group's average effective income tax rate expected for the full year, applied
to the profit before income tax for the six months ended 31 March 2023.
The difference between the underlying and statutory rate for the six months
ended 31 March 2023 primarily reflects non-deductible other M&A
activity-related items.
5. Dividends
Six months ended Six months ended Year
31 March 2023
ended
£m 31 March
30 September
2022
2022
£m
£m
Final dividend paid for the year ended 30 September 2021 of 11.63p per share - 119 119
Interim dividend paid for the year ended 30 September 2022 of 6.30p per share - - 64
Final dividend paid for the year ended 30 September 2022 of 12.10p per share 123 - -
123 119 183
The interim dividend of 6.55p per share will be paid on 23 June 2023 to
shareholders on the register at the close of business on 2 June 2023. The
Company's distributable reserves are sufficient to support the payment of this
dividend. This condensed consolidated half-yearly financial report does not
reflect this proposed dividend payable.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to owners of the parent by the weighted average number of
ordinary shares in issue during the period, excluding those held as treasury
shares and held by the Employee Benefit Trust, 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. The Group has one class of potentially dilutive 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 period.
Underlying Underlying Underlying Statutory Statutory
Six months ended
as reported Six months ended
Six months ended
Six months ended
Six months ended 31 March
31 March
31 March
31 March
31 March
2022
2023
2022
2022
2023
Earnings attributable to owners of the parent
Profit for the period 160 129 141 100 152
Number of shares (millions)
Weighted average number of shares 1,018 1,023 1,023 1,018 1,023
Dilutive effects of shares 12 10 10 12 10
1,030 1,033 1,033 1,030 1,033
Earnings per share attributable to owners of the parent (pence)
Basic earnings per share 15.68 12.62 13.83 9.78 14.84
Diluted earnings per share 15.49 12.49 13.69 9.66 14.68
Reconciliation of earnings Six months ended Six months ended
31 March
31 March
2023
2022
£m
£m
Underlying earnings attributable to owners of the parent 160 141
Impact of movement in foreign currency exchange rates - (12)
Underlying earnings attributable to owners of the parent (as reported) 160 129
Amortisation of acquired intangible assets (26) (18)
Adjustment to acquired deferred income - (1)
Other M&A activity-related items (24) (15)
Foreign currency movements on intercompany balances (1) (1)
Property restructuring costs (20) -
Gain on disposal of subsidiaries - 49
Reversal of restructuring costs - 6
Taxation on adjustments 11 3
Net adjustments (60) 23
Earnings - statutory profit for period attributable to owners of the parent 100 152
7. Non-current assets
Goodwill Other Property, Total
intangible
plant and equipment
£m
assets
£m £m
£m
Opening net book amount at 1 October 2022* 2,391 320 152 2,863
Additions - 8 12 20
Acquisition of subsidiary** 8 4 - 12
Impairment - - (13) (13)
Depreciation, amortisation and other movements - (33) (22) (55)
Exchange movement (161) (11) (5) (177)
Closing net book amount at 31 March 2023 2,238 288 124 2,650
*Opening net book amount restated for finalisation of fair value of assets
acquired and liabilities assumed in the acquisition of Lockstep in the prior
year (see notes 1 & 11).
**Assets acquired as part of the acquisition of Spherics (see note 11).
Goodwill Other Property, Total
£m
intangible
plant and
£m
assets
equipment
£m
£m
Opening net book amount at 1 October 2021 1,877 190 164 2,231
Additions - 4 8 12
Acquisition of subsidiary 176 110 2 288
Depreciation, amortisation and other movements - (24) (21) (45)
Exchange movement 29 1 2 32
Closing net book amount at 31 March 2022 2,082 281 155 2,518
Impairment of property, plant and equipment in the period of £13m relates to
property restructuring costs, see note 3.
8. Ordinary shares and share premium
Number of Ordinary Share premium Total
shares
Shares
£m
£m
£m
At 1 October 2022 & 31 March 2023 1,100,789,295 12 548 560
At 1 October 2021 1,120,789,295 12 548 560
Cancellation of treasury shares (20,000,000) - - -
At 31 March 2022 1,100,789,295 12 548 560
As at 31 March 2023:
· The Group held 76,477,587 treasury shares (30 September 2022:
81,168,903). During the period the Group transferred 4,691,316 treasury shares
to employees in order to satisfy vested awards (six months ended 31 March
2022: 4,897,923).
· The Employee Benefit Trust held 4,419,478 ordinary shares in the
Company (30 September 2022: 4,610,875 ordinary shares) at a cost of £34m (30
September 2022: £33m). During the period, the Employee Benefit Trust
purchased £1m of ordinary shares from the market, funded by the Company (six
months ended 31 March 2022: £nil).
The Employee Benefit Trust did not receive additional funds for the purchase
of shares in the market (six months ended 31 March 2022: £nil).
During the prior period, the Group completed a previously announced
non-discretionary share buyback programme which resulted in the payment of
£249m in the six months ended 31 March 2022.
9. Cash flow and net debt
Six months ended Six months ended
31 March
31 March
2023
2022
£m
£m
Statutory operating profit 157 204
Recurring and non-recurring items 70 (21)
Underlying operating profit (as reported) 227 183
Depreciation/amortisation/impairment/profit on disposal of non-current 27 26
assets/non-cash items
Share-based payments 20 16
Net changes in working capital 2 3
Net capital expenditure (10) (8)
Underlying cash flow from operations 266 220
Net interest paid and derivative financial instruments (28) (14)
Income tax paid (35) (27)
Non-recurring items (8) (12)
Exchange movement (1) -
Free cash flow 194 167
Net debt at 1 October (733) (247)
Disposal of subsidiaries or similar transactions, net of cash and lease - 38
liabilities disposed
Acquisition of subsidiaries or similar transactions, net of cash acquired and (14) (223)
lease liabilities recognised
Acquisitions and disposals related items (16) (14)
Dividends paid to owners of the parent (123) (119)
Proceeds from issuance of treasury shares 2 3
New leases (9) (4)
Share buyback programme - (249)
Purchase of shares by Employee Benefit Trust (1) -
Exchange movement 9 (3)
Other - 1
Net debt at 31 March (691) (650)
Six months ended Six months ended
31 March
31 March
2023
2022
£m
£m
Underlying cash flow from operations 266 220
Net capital expenditure 10 8
Recurring and non-recurring cash items (24) (36)
Other adjustments including foreign exchange translations (1) 1
Statutory cash flow from operations 251 193
At Cash flow Non-cash movement Exchange movement At
1 October 2022
£m
£m
£m
31 March 2023
Analysis of change in net debt
£m
£m
Cash, cash equivalents and bank overdrafts 489 119 - (33) 575
Liabilities arising from financing activities
Loans due within one year (161) 148 - 13 -
Loans due after more than one year (966) (235) - 24 (1,177)
Lease liabilities due within one year (17) 10 (9) - (16)
Lease liabilities after more than one year (78) - - 5 (73)
(1,222) (77) (9) 42 (1,266)
Total (733) 42 (9) 9 (691)
The Group's debt is sourced from sterling and euro denominated bond notes,
with a syndicated Revolving Credit Facility ("RCF") also available.
Previously, certain US private placements ("USPP") loan notes were held.
During the period, the Group issued euro denominated bond notes under its
newly established Euro Medium Term Note (EMTN) programme, for a nominal amount
of EUR 500m and an expiry date of February 2028. Cash proceeds from the
issuance, net of transaction costs, were EUR 498m (£442m).
At 31 March 2023, bond notes were £1,179m (30 September 2022: £741m),
comprised of sterling denominated bond notes £741m (30 September 2022:
£741m) and euro denominated bond notes £438m (30 September 2022: £nil)
The Group's RCF was refinanced in December 2022, with facility levels of
£630m, and expires in December 2027, with an extension option for up to two
further years subject to specific provisions. At 31 March 2023, £nil of the
RCF was drawn down and associated unamortised costs of £2m had been paid and
capitalised. The previously held RCF comprising (USD 719m and £135m tranches)
was extinguished in December 2022.
Total USPP loan notes at 31 March 2023 were £nil following the repayment of
the remaining balance during the current period (30 September 2022: £386m
comprising USD 400m and EUR 30m).
10. Financial instruments
For financial assets and liabilities, the carrying amount approximates the
fair value of the instruments, with the exception of US private placement loan
notes, euro and sterling denominated bond notes and bank loans.
The fair value of the euro and 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 private placement loan notes is determined by reference
to interest rate movements on the US dollar 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 at 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 31 March 2023 At 31 March 2022 At 30 September 2022
Book Value Fair Value Book Value Fair Value Book Value Fair Value
£m
£m
£m
£m
£m
£m
Long term-borrowings (excluding lease liabilities) (1,177) (1,033) (1,045) (1,006) (966) (753)
Short term-borrowings (excluding lease liabilities) - - (25) (26) (161) (158)
During the period, the Group issued EUR 500m of euro denominated bond notes
(see note 9). In relation to this transaction, the Group also entered into
cross-currency interest rate swaps in order to hedge exposure to foreign
currency exchange movements:
· The Group designated EUR-GBP cross-currency interest rate swap
contracts totalling £264m (EUR 300m) as hedging instruments in a cash flow
hedge to hedge exposure to foreign currency exchange movements of the forecast
principal and interest payments of a portion of the EUR 500m euro denominated
bond entered into in the year (see note 9).
· The Group designated USD-GBP cross-currency interest rate swap
contracts totalling £264m (USD 321m) as hedging instruments in a net
investment hedge to hedge exposure to foreign currency exchange movements of
its net investment in its subsidiaries in the US.
During the second half of the prior year, the Group designated USD-GBP
cross-currency interest rate swap contracts totalling £350m (USD 429m) as
hedging instruments in a net investment hedge to hedge exposure to foreign
currency exchange movements of its net investment in its subsidiaries in the
US. This hedge relationship is still active in the current period.
The fair value of the cross-currency interest rate swaps held by the Group is
determined using a discounted cash flow valuation technique at market rates
and therefore can be considered as a level 2 fair value as defined within IFRS
13. The fair value of the swaps held by the Group as at 31 March 2023 was a
£18m net liability (30 September 2022: a £60m liability).
11. Acquisitions and disposals
Measurement adjustments to business combinations reported using provisional amounts
On 30 August 2022, the Group acquired 100% equity capital and voting rights of
Lockstep Network Holdings Inc ("Lockstep") for total cash consideration of
£80m, of which £3m was deferred and paid in the current period.
The net assets acquired recognised in the financial statements at 30 September
2022 were based on a provisional assessment of their fair value while the
Group undertook a valuation of the acquired intangible assets. During the
period, the purchase price accounting has been approved and completed.
The intangible assets identified and subsequently valued as at the date of
acquisition include:
Valuation Useful economic life
£m
(years)
Acquired intangible assets
Customer relationships 3 8
Technology 23 8
Acquired intangible assets 26
The comparative information for the financial year 2022 has been restated to
reflect the adjustment to the provisional amounts.
As a result of the recognition of intangible assets of £26m, and net deferred
tax liability of £1m, there was a corresponding decrease of £25m to
goodwill. The balancing £54m goodwill comprises the fair value of the
acquired control premium, workforce in place and the expected synergies. The
goodwill has been allocated to the Group's North America CGU where the
underlying benefit arising from the acquisition is expected to be realised. No
goodwill is expected to be deductible for tax purposes. The results of the
business are allocated to the North America operating segment in line with the
underlying operations.
No other adjustments have been made to the provisional fair value of assets
and liabilities reported at 30 September 2022, as set out below:
Fair value of identifiable net assets acquired Previously reported provisional fair values Measurement adjustments Final fair values
£m
£m
£m
Intangible assets - 26 26
Deferred tax liability - (1) (1)
Other identifiable net assets 1 - 1
Fair value of identifiable net assets acquired 1 25 26
Goodwill 79 (25) 54
Total consideration 80 - 80
The increased amortisation charge on the intangibles assets from the
acquisition date to 30 September 2022 was not material and therefore no
adjustment has been made for this. No changes have been identified to the
directly attributable acquisition related costs which were included during the
financial year ended 30 September 2022 in relation to the acquisition.
Acquisitions made during the current period
On 11 October 2022, the Group acquired 100% equity capital and voting rights
of Spherics Technologies Ltd ("Spherics"), a company based in the UK, for
total cash consideration £11m. Spherics provides a carbon accounting software
solution to help businesses easily understand and reduce their environmental
impact.
Summary of acquisition Total
£m
Acquisition-date fair value of consideration 11
Fair value of identifiable net assets (4)
Deferred tax liability 1
Goodwill 8
Acquired intangible net assets comprises technology, at a fair value of £4m,
which will be amortised over a useful economic life of 8 years.
Acquired goodwill of £8m comprises the fair value of the acquired control
premium, workforce in place and the expected synergies. The goodwill has been
allocated to the Group's UK & Ireland CGU where the underlying benefit
arising from the acquisition is expected to be realised. No goodwill is
expected to be deductible for tax purposes. The results of the business are
allocated to the UK & Ireland operating segment in line with the
underlying operations.
The outflow of cash and cash equivalents on the acquisition is as follows:
Total
£m
Cash consideration (11)
Cash and cash equivalents acquired -
Net cash outflow (11)
Transaction costs of £1m relating to the acquisition have been included in
selling and administrative expenses, classified as other M&A
activity-related items within recurring adjustments between underlying and
statutory results. These costs relate to advisory, legal, and other
professional services. See note 3.
Arrangements have been put in place for retention payments to remunerate
employees of Spherics for future services. The amount recognised to date of
£2m is included in selling and administrative expenses, in the consolidated
income statement, as other M&A activity-related items. The total cost of
these arrangements will be recognised in future periods over the retention
period, contingent on employment.
The consolidated income statement reported by Spherics for the period since
the acquisition date, includes an immaterial amount of revenue and loss after
tax.
On an underlying and statutory basis, impact on revenue and profit after tax
would have been immaterial, if Spherics had been acquired at the start of the
financial year and included in the Group's results for the six months ended 31
March 2023.
Disposals and discontinued operations
Discontinued operations and assets and liabilities held for sale
The Group had no discontinued operations during the six-month periods ended 31
March 2023 or 31 March 2022.
Assets held for sale at 31 March 2022 included one disposal group comprising
the Group's payroll outsourcing business in South Africa, with a net book
value of £2m. This business was subsequently sold on 4 April 2022 for cash
consideration £5m resulting in a gain on disposal totalling £4m.
There are no assets held for sale at 31 March 2023.
12. Related party transactions
The Group's related parties are its subsidiary undertakings and its key
management personnel, which comprises the Group's Executive Leadership Team
members and the Non-executive Directors. Transactions and outstanding balances
between the parent and its subsidiaries within the Group, and between those
subsidiaries, have been eliminated on consolidation and are not disclosed in
this note.
Key management compensation Six months ended Six months ended
31 March
31 March
2023
2022
£m
£m
Salaries and short-term employee benefits 5 5
Share-based payments 3 2
8 7
Key management personnel are deemed to be members of the Executive Leadership
Team, as defined in the Group's Annual Report and Accounts 2022 and the
Non-executive Directors. Since the signing of the Group's Annual Report and
Accounts 2022, there have been no changes to the composition of the Executive
Leadership Team.
13. Events after the balance sheet date
On 5 May 2023, the Group acquired 100% of the outstanding equity securities of
Corecon Technologies, Inc. ('Corecon') for cash consideration of £13m
(subject to a customary post-closing net debt and working capital adjustment).
Corecon is a cloud native subscription-based software company used to
streamline and manage project operations focused on the construction industry.
Due to the timing of the acquisition the results of Corecon are not included
in our financial statements for the period ended 31 March 2023 and the
acquisition accounting has not yet been completed. In line with IFRS 3, the
purchase price accounting for the acquisition will be finalised within 12
months of the acquisition date.
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.
Sage continually assesses its principal risks to ensure alignment to our
strategy and consideration of where Sage is currently on its journey to
transforming into 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 priorities. The management and mitigation actions described below
reflect the principal risks and build on those actions previously reported in
the Annual Report and Accounts 2022.
KEY
Scale Sage Intacct Expand medium beyond financials Build the small business engine Scale the network Learn and disrupt
PRINCIPAL RISK RISK CONTEXT MANAGEMENT AND MITIGATION
Understanding Customer Needs Risk Trend: Stable Risk Environment
If we fail to anticipate, understand, and deliver against the capabilities and As Sage continues to communicate its brand and purpose, understanding of how · Brand campaigns to communicate the vision of how Sage will
experiences our current and future to attract new customers whilst retaining its existing customers is essential. support businesses.
This requires a deep and continuous flow of insights supported by processes
customers need in a timely manner; they will find alternative solution and systems. · Brand health surveys to provide an understanding of customer
providers.
perception of the Sage brand and its products, used to inform and enhance our
By understanding the needs of our customers, Sage will differentiate itself market offerings.
Strategic alignment: from competitors, build compelling value propositions and offers, leverage key
drivers to identify opportunities, influence product and process roadmaps, · A Market and Competitive Intelligence team to provide insights
decrease churn and drive more effective revenue generation. that Sage uses to win in the market.
· Proactive analysis of customer activity and churn data, to
improve customer experience.
· Customer Segmentation Framework and the customer market analysis
by region to help inform product roadmaps.
· Customer Advisory Boards, Customer Design Sessions and NPS
detractor call-back channels to constantly gather information on customer
needs.
Execution of Product Strategy Risk Trend Improving Risk Environment
If we fail to deliver the capabilities and experiences outlined in our product We need to execute at pace, a prioritised product strategy that continues to · A product strategy in line with strategic objectives and
strategy in a timely manner, we will not meet the needs of our customers or simplify our product portfolio and focuses on our drive to create a digital priorities, based on our market understanding and customer expectations.
our commercial goals. network that will benefit our customers.
· A robust product organisation supported by a governance model to
enable the way we build products.
Strategic alignment: · Migration framework in key countries to support our customers in
their journey to the cloud.
· Continued expansion of Sage Intacct outside of North America and
for additional product verticals (i.e. retail with the acquisition of
Brightpearl).
· Digitalisation of Sage products to support strategic objections
through the integration of Lockstep.
· Product design governance to ensure product development is always
driven by our understanding of our ability to penetrate key markets.
Developing and Exploiting New Business Models Risk Trend: Stable Risk Environment
If we are unable to develop, commercialise and scale new business models to We must be able to rapidly deploy new innovations to our customers and · A new Business Unit solely focused on creating the Sage Digital
diversify from traditional SaaS, especially consumption-based services and partners by introducing technologies, services, or new ways of working. Network.
those which leverage data, we will not meet the needs of our customers or our
commercial goals. Innovation requires us to address how we drive change and transformation · Continued focus on AI/ML development coupled with a drive to
across our people, processes, and technology, and how we differentiate our improve how to exploit data to provide better management insight to our
Strategic alignment: products and drive customer efficiencies. customers.
· Enhanced, consistent digital experience for all Sage Business
Cloud users through the Sage Design System.
· 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 Risk Trend: Stable Risk Environment
If we fail to deliver a bespoke blend of route to market channels in each We have a blend of channels to communicate with our current and potential · Market data and intelligence is used to support decision making
country, based upon common components, we will not be able to efficiently customers and ensure our customers receive the right information on the right regarding the best routes to market
deliver the right capabilities and experiences to our current and future products and services at the right time. Our sales channels include selling
customers. directly to customers through digital and telephony channels, via our · Dedicated colleagues are in place to support partners, and to
accountant network and through partners, valued added resellers (VARs) and help manage the growth of targeted channels
Strategic alignment: Independent Software Vendors (ISVs).
· Sale processes are targeted and configured by region for key
We use these channels to maximise our marketing and customer engagement customer segments and verticals
activities. This can shorten our sales cycle and ensure that customer
retention is improved. · A dedicated On-Boarding Squad to enhance user journeys to enable
customer conversion
· Acceleration of new partnerships to support the Digital Network
· Centre of Excellence to support our Indirect Sales and
Third-Party approach.
Customer Experience Risk Trend: Stable Risk Environment
If we fail to effectively identify and deliver ongoing value to our customers We must maintain a sharp focus on the relationship we have with our customers, · Battlecards are in place for key products in all countries,
by focusing on their needs over the lifetime of their customer journey, we constantly focusing on delivering the products, services and experiences our setting out the strengths and weaknesses of competitors and their products
will not be able to achieve sustainable growth through renewal. customers need to be successful. If we do not do this, they will likely find
another provider who does give them these things. Conversely, if we do these · A data-driven Customer Success Framework to enhance the customer
Strategic alignment: things well these customers will stay with Sage, increasing their lifetime experience and ensure that Sage is better positioned to meet the current and
value, becoming our greatest marketing advocates. future needs of the customer
Whilst Sage is known for its quality customer support, this area requires · Customer Journey mapping and mapping of the five core customer
constant, proactive focus. By helping customers to recognise and fully realise processes to ensure appropriate strategy alignment and alignment to Target
the value of Sage's products we can help increase the value of these Operating Model
relationships over time and reduce the likelihood of customer loss. By
aligning our people, processes, and technology with this focus in mind, all · 'Customer for life' roadmaps, detailing how products fit
Sage colleagues can help support our customers to be successful and in turn together, any interdependencies, and migration pathways for current and
drive increased financial performance. potential customers
· Continuous Net Promoter Score (NPS) surveying allows Sage to
identify customer challenges rapidly, and respond in a timely manner to
emerging trends
· Launch of member service to provide business tools and advise to
support businesses
Third Party Reliance Risk Trend: Stable Risk Environment
If we do not embed our partners as an integral and aligned part of Sage's Sage places reliance on third-party providers to support the delivery of our · Centre of Excellence for our Indirect Sales and Third- Party
go-to-market strategy in a timely manner, we will fail to deliver the right products to our customers through the provision of cloud native products. partners.
capabilities and experiences to our customers.
Sage also has an extensive network of sales partners critical to our success · Dedicated colleagues in place to support partners, and to help
Strategic alignment: in the market, and suppliers upon whom it places reliance. manage the growth of targeted channels.
Any interruption in these services or relationships could have a profound · Standardised implementation plans for Sage products that
impact on Sage's reputation in the market and could result in significant facilitate efficient partner implementation.
financial liabilities and losses.
· Managed growth of the API estate, including enhanced product
development that enables access by third-party API developers.
· Enhanced third-party management framework, to support closer
alignment and oversight of third-party activities.
· A specialized Procurement function supporting the business with
the selection of strategic third-party suppliers and negotiation of contracts.
· Investing in new types of partnerships to explore and grow
business in new markets.
People and Performance Risk Trend: Stable Risk Environment
If we fail to ensure we have engaged colleagues with As we evolve our priorities, the capacity, knowledge, and leadership skills we · Extensive focus on hiring channels to ensure we are attractive in
need will continue to change. Sage will not only need to attract the talent the market through our enhanced employee value proposition, enhanced presence
the critical skills, capabilities, and capacity we need to deliver on our and experience we will need to help navigate this change. We will also need to through social media such as Glassdoor, Comparably, Twitter, LinkedIn, and
strategy, we will not be successful. provide an environment where colleagues can develop to meet these new Facebook.
expectations, an environment where everyone can perform at their very best.
Strategic alignment:
· Hiring practices focused on the skills we need in balance with
By empowering colleagues and leaders to make decisions, be innovative, and be organisational costs supported by a methodology for upskilling and building
bold in delivering on our commitments, capability in the long term from within the organisation.
Sage will be able to create an attractive working environment. By addressing · Reward mechanisms designed to incentivize and drive the right
drivers of colleague voluntary attrition, and embracing the values of behaviour with a focus on ensuring fair and equitable pay in all markets.
successful technology companies, Sage can increase colleague engagement and
create an aligned high-performing team. · Focused development of our leaders (e.g. a 7-month Senior
Leadership Programme) to ensure they create the environment which enables
colleagues to thrive and perform at their very best.
· An effective hybrid working model across the organization.
Culture Risk Trend: Improving Risk Environment
If we do not fully empower our colleagues and enable them to take The development of a shared behavioural competency that encourages colleagues · Values that align with the Sage brand.
accountability in line with our shared Values and Behaviours, we will be to always do the right thing, put customers at the heart of business and drive
challenged to maintain a culture, that meets Sage's business ambitions. innovation is critical in Sage's success. Devolution of decision making, and · Integration of Values and Behaviours into all colleague
the acceptance of accountability for these decisions, will need to go hand in priorities including talent attraction, selection, onboarding as well as
Strategic alignment: hand as the organisation develops and sustains its shared Values and performance management.
Behaviours, and fosters a culture that provides customers a rich digital
environment. · All colleagues are actively encouraged to take up to five paid
Sage Foundation days each year, to support charities and provide philanthropic
Sage will also need to create a culture of empowered leaders that supports the support to the community.
development of ideas, and that provides colleagues with a safe environment
allowing for honest disclosures and discussions. Such a trusting and empowered · Commitments to diversity, equity and inclusion (DEI) including
environment can help sustain innovation, enhance customer success, and drive zero tolerance to discrimination, equal chance to everyone, inclusive culture,
the engagement that results in increased market share. removing barriers, DEI education, and development of a new DEI strategy to
ensure we deliver on our commitments.
· A DEI strategy focused on building diverse teams, an equitable
culture, and fostering inclusive leadership. This strategy is supported by
measurable plans and metrics to track progress.
· A new transparency and accountability development framework.
· Code of Conduct communicated to all colleagues, and subject to
certification every two years.
· Core eLearning modules rolled out across Sage, with regular
refresher training.
· Whistleblowing and incident reporting mechanisms in place to
allow issues to be formally reported and investigated.
Cyber Security and Data Privacy Risk Trend: Improving Risk Environment
If we fail to responsibly collect, process and store data, together with Information is the life blood of a digital company - protecting the · Multi-year cyber security programmes in IT and products to ensure
ensuring an appropriate standard of cyber security across the business, we confidentiality, integrity and accessibility of this data is critical for a Sage is driving continuous improvement and cyber risk reduction across
will not meet our regulatory obligations, and will lose the trust of our data-driven business, and failure to do so can have significant financial and technology, business processes and culture
stakeholders. regulatory consequences in the General Data Protection Regulation (GDPR) era.
In addition, we also need to use our data efficiently and effectively to drive · Accountability within both IT and Product for all internal and
Strategic alignment: improved business performance. external 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
cyber security, information management and data protection, with a focus on
the GDPR requirements
· A Cyber Security Risk Management Methodology is deployed to
provide objective risk information on our assets and systems.
Data Strategy Risk Trend: Improving Risk Environment
If we fail to recognise the value of our data assets, deliver effective data Data is central to the Sage strategy to deliver our ambition · Data strategy across customer, product, and enterprise data to
foundations, and capitalise on their use, we will not be able to realise their
support the delivery of customer value and solve customer problems, including
full potential to secure strategically aligned outcomes. of a digital network. The strategy is underpinned by our ability to innovate the use of enhanced Artificial Intelligence /Machine Learning capabilities.
and develop solutions to enhance customer propositions, improve insight and
Strategic alignment: decision making and create new business models and ecosystems. Successful · A global data function that drives focus and alignment across the
ability to use data will accelerate our growth and will be a key driver in organization. In FY22, Sage appointed its first Chief Data Officer.
helping customers transform how they run and build their businesses.
· A defined set of Data ethics and principles to ensure we use
customer data responsibly to achieve our strategy.
· 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.
· Governance policies, processes, and tooling to enhance and manage
the quality and consistency of our data.
· A data asset catalogue to enable creation of use cases.
Readiness to Scale Risk Trend: Improving Risk Environment
If we fail to maintain a reliable, scalable, and secure live services As Sage transitions to a digital company, we continue to focus on scaling our · Migrating of products to public cloud offerings to improve
environment, we will be unable to deliver the consistent cloud experience current and future platform services environment in a robust, agile, and scalability, resilience, and security.
expected by our customers. speedy manner to ensure the delivery of a consistent and robust cloud platform
and associated digital network. · Accountability across product owners, underpinned by ongoing risk
Strategic alignment:
assessments and continuous improvement projects.
Sage must provide the right infrastructure and operations for all our customer
products, a hosting platform together with the governance to ensure optimal · Formal onboarding process including ongoing management in
service availability, performance, security protection and restoration (if Portfolio Management processes.
required).
· Incident and problem management change processes adhered to for
all products and services.
· Service-level objectives including uptime, responsiveness, and
mean time to repair objectives.
· Defined Real-Time Demand Management processes and controls and
also Disaster Recovery Capability and operational resilience models.
· Improved focus and monitoring of product availability.
· A governance framework to optimise operational cost base in line
with key metrics.
· All new acquisitions are required to adopt Sage cloud operation
standards.
Environmental, Social and Governance Risk Trend: Improving Risk Environment
If we fail to fully, and continually, respond to the range of environmental We are committed to investing in education, technology, and the environment to · A robust Sustainability and Society strategy which was launched
(especially climate), social, and governance-related opportunities and risks give individuals, small and medium businesses (SMBs), and our planet the in 2021, focusing on three pillars: Tech for Good, Fuel for Business, Protect
we may fail to deliver positive change to social and environmental issues and opportunity to thrive. the Planet.
damage the confidence
· Underpinning the strategy is a robust cross-functional governance
of our stakeholders.
framework.
Internally, it is essential that Sage understands the potential impact
of climate change to its strategy and operations and considers appropriate · Tracking tools in place to enable horizon scanning and to track
mitigations. the Sustainability and Society strategy's impact.
Strategic alignment:
· As part of our broader Sustainability function, the Sage
Foundation, established in 2015, remains focused on the areas of education,
Societal and Governance related issues are integral to Sage's purpose and employment, and entrepreneurship via the contribution of time, investment, and
Values and to the delivery of Sage's strategy. capability on managing climate risks.
· An integrated framework for the management of ESG related risk,
including physical and transitional climate risks as recommended by the
Taskforce for Climate Related Financial Disclosures (TCFD).
Statement of Directors' Responsibilities
The condensed consolidated half-yearly financial report for the six months
ended 31 March 2023 includes the following responsibility statement.
Each of the Directors confirms that, to the best of their knowledge:
· the Group condensed consolidated interim financial statements,
which have been prepared in accordance with IAS34, "Interim Financial
Reporting" as adopted by the UK and as issued by the IASB, give a true and
fair view of the assets, liabilities, financial position and profit of the
Group; and
· the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules 4.2.7R
and 4.2.8R, namely:
o an indication of important events that have occurred during the six months
ended 31 March 2023 and their impact on the condensed consolidated half-yearly
financial report, and a description of the principal risks and uncertainties
that the Group faces for the remaining six months of the current financial
year; and
o any related party transactions in the six months ended 31 March 2023 that
have materially affected the financial position or performance of the Group
during that period and any changes in the related party transactions described
in the last Annual Report that could have a material effect on the financial
position or performance of the Group in the six months ended 31 March 2023.
The Directors of The Sage Group plc are consistent with those listed in the
Group's Annual Report and Accounts 2022, except for the following changes:
· Maggie Chan Jones, in her role as Non-Executive Director has been
appointed to the Board with effect from 1 December 2022; and
· Roisin Donnelly, in her role as Non-Executive Director has been
appointed to the Board with effect from 3 February 2023.
A list of current directors is maintained on the Group's website: www.sage.com
(http://www.sage.com) .
On behalf of the Board
S Hare
Chief Executive Officer
16 May 2023
Independent review report to The Sage Group plc
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
March 2023 which comprises Consolidated income statement, Consolidated
statement of comprehensive income, Consolidated balance sheet, Consolidated
statement of changes in equity, Consolidated statement of cash flows and the
related explanatory notes 1 to 13. We have read the other information
contained in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 March 2023 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
16 May 2023
Notes: 1 The maintenance and integrity of The Sage Group plc web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
information since it was initially presented on the web site. 2
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
1 (#_ednref1) See Appendix 1 for full definitions and guidance on the usage
of the Alternative Performance Measures.
2 (#_ednref2) To aid comparability, underlying and organic measures for the
prior period have been retranslated at current period exchange rates, while
organic measures also adjust for the impact of acquisitions and disposals. A
reconciliation of underlying and organic measures to statutory measures is set
out on pages 6 and 9. In line with Sage's financial reporting changes
announced on 8(th) December 2022, all references to revenue, profit and margin
are on an underlying basis unless otherwise stated.
3 (#_ednref3) See page 9 for further details.
4 (#_ednref4) United Kingdom & Ireland, Africa and APAC.
5 (#_ednref5) The 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.
6 (#_ednref6) Recurring 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.
7 (#_ednref7) Recurring 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.
8 (#_ednref8) Recurring revenue from customers using products that are part
of, or that management believe have a clear pathway to, Sage Business Cloud.
9 (#_ednref9) Recurring 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.
10 (#_ednref10) As reported
11 (#_ednref11) Global gender diversity target of no more than 60% of any
one gender, in any leadership team, anywhere in Sage, by FY26
12 (#_ednref12) Underlying and organic revenue and profit measures are
defined in Appendix 1.
13 (#_ednref13) Recurring and non-recurring items are defined in Appendix 1
and detailed in note 3 of the financial statements.
14 (#_ednref14) Impact of retranslating H1 22 revenue at H1 23 average rates
15 (#_ednref15) Recurring and non-recurring items are defined in Appendix 1
and detailed in note 3 of the financial statements.
16 (#_ednref16) Impact of retranslating H1 22 operating profit at H1 23
average rates.
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