REG - Sage Group PLC - Results for the year ended 30 September 2023
22/11/2023 07:15
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RNS Number : 2072U Sage Group PLC 22 November 2023
The Sage Group plc
Results for the year ended 30 September 2023 (audited)
22 November 2023
Strong performance driven by consistent strategic execution
Steve Hare, Chief Executive Officer, commented:
"Sage performed well in FY23, delivering double-digit revenue growth,
increased profitability and strong cash flows. We sustained good momentum
throughout the year in all regions, driven by consistent strategic execution.
"We continue to help small and mid-sized businesses succeed, providing them
with the tools and expertise they need to simplify their accounting and HR
processes, streamline their operations, and make more informed business
decisions. Through the Sage Network, we are delivering innovative,
AI-powered services to customers, faster and more efficiently than ever
before.
"Small and mid-sized businesses are continuing to digitalise, despite the
macroeconomic uncertainty. We are building a resilient platform to deliver
sustained, efficient growth, and I am confident that Sage is well positioned
to take advantage of the market opportunity in 2024 and beyond."
Underlying Financial APMs 1 (#_edn1) FY23 FY22 2 (#_edn2) Change Organic
Change
Annualised Recurring Revenue (ARR) £2,188m £1,964m +11% +11%
Underlying Total Revenue £2,184m £1,982m +10% +10%
Underlying Recurring Revenue £2,096m £1,875m +12% +11%
Underlying Operating Profit £456m £386m +18% +22%
% Operating Profit Margin 20.9% 19.5% +1.4 ppts +2.2 ppts
EBITDA £553m £477m +16%
% EBITDA Margin 25.3% 24.1% +1.2 ppts
Underlying Basic EPS (p) 32.3p 26.4p +22%
Underlying Cash Conversion 116% 107% +9 ppts
Statutory Measures FY23 FY22 Change
Revenue £2,184m £1,947m +12%
Operating Profit £315m £367m -14%
% Operating Profit Margin 14.4% 18.9% -4.5 ppts
Basic EPS (p) 20.7p 25.5p -19%
Dividend Per Share (p) 19.3p 18.4p +5%
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 £2,096m,
underpinned by Sage Business Cloud growth of 25% to £1,628m. Underlying total
revenue increased by 10% to £2,184m.
· Underlying operating profit grew by 18% to £456m, with margin
increasing by 140 bps to 20.9% driven by operating efficiencies as we scale
the Group.
· EBITDA increased by 16% to £553m, with margin increasing by 120
bps to 25.3%.
· Statutory operating profit decreased by 14% to £315m, including
one-off gains on business disposals in FY22, together with property
restructuring and M&A-related charges in FY23.
· Underlying basic EPS increased by 22% to 32.3p.
· Strong underlying cash conversion of 116% reflecting growth in
subscription revenue and continued good working capital management.
· Robust balance sheet, with £1.3bn of cash and available liquidity
and net debt to EBITDA of 1.0x.
Shareholder returns
· Proposed final dividend of 12.75p, increasing the full year
dividend by 5% to 19.3p, in line with our progressive policy.
· Share buyback programme of up to £350m announced separately this
morning, reflecting the Board's confidence in Sage's future prospects,
together with Sage's strong cash generation and robust financial position.
Strategic and operational highlights
· Underlying annualised recurring revenue (ARR) up 11% to £2,188m,
reflecting broad-based growth across all regions balanced between new and
existing customers.
· £190m of ARR added through new customer acquisition on an organic
basis, up from £180m in FY22.
· Cloud native ARR up 28% to £684m (FY22: £534m), driven largely by
new customers, with a continued strong performance from Sage Intacct.
· Renewal rate by value of 102% (FY22: 101%), ahead of last year,
reflecting increased sales to existing customers and good retention rates.
· Sage Business Cloud penetration of 84% (FY22: 75%), enabling more
customers to connect to Sage's cloud services and ecosystem via the Sage
Network.
· Subscription penetration of 79% (FY22: 75%), reflecting continued
growth from subscription contracts.
· Strong strategic progress including further growth in global cloud
solutions across our markets, with continued investment in innovation
complemented by the acquisitions of Spherics and Corecon.
Outlook
Sage enters FY24 with good momentum driven by consistent strategic execution.
Looking ahead, we expect organic total revenue growth in FY24 to be broadly in
line with FY23. Operating margins are expected to trend upwards in FY24 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
Caroline Xu, Group Finance Conor McClafferty
James Sandford, Investor Relations Sophia Johnston
David Ginivan, Corporate PR
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/sb4btbwk
(https://edge.media-server.com/mmc/p/sb4btbwk) . To join the conference call,
please register via
https://register.vevent.com/register/BI46eb1e22ac7245dcbfd330d9d13d3736
(https://register.vevent.com/register/BI46eb1e22ac7245dcbfd330d9d13d3736) .
Business Review
Sage delivered a strong financial performance in FY23, including double-digit
revenue growth, increased profitability and strong cash flows.
Overview of results
The Group achieved underlying recurring revenue growth of 12% to £2,096m
(FY22: £1,875m), driven by a 25% increase in Sage Business Cloud recurring
revenue to £1,628m (FY22: £1,300m). Underlying total revenue increased by
10% to £2,184m (FY22: £1,982m). As a result, over 96% of the Group's revenue
is now recurring.
On a regional basis, North America increased recurring revenue by 16% to
£944m (FY22: £815m), with a strong performance from Sage Intacct and cloud
connected solutions. UKIA 3 (#_edn3) grew recurring revenue by 10% to £611m
(FY22: £557m), driven by increased demand for cloud native solutions as well
as Sage 50 cloud. In Europe, recurring revenue increased by 7% to £541m
(FY22: £503m), reflecting growth across the Sage Business Cloud portfolio.
Organic recurring revenue grew by 11% to £2,095m (FY22: £1,882m), while
organic total revenue grew by 10% to £2,182m (FY22: £1,986m).
Revenue 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 the Sage
Network, leading to deeper customer relationships and higher lifetime values.
Underlying Recurring Revenue by Portfolio 4 (#_edn4) FY23 FY22 Change Organic
Change
Cloud native 5 (#_edn5) £596m £445m +34% +30%
Cloud connected 6 (#_edn6) £1,032m £855m +21% +21%
Sage Business Cloud £1,628m £1,300m +25% +24%
Products with potential to migrate £316m £429m -26% -26%
Future Sage Business Cloud Opportunity 7 (#_edn7) £1,944m £1,729m +12% +12%
Non-Sage Business Cloud 8 (#_edn8) £152m £146m +4% +4%
Underlying Recurring Revenue £2,096m £1,875m +12% +11%
Sage Business Cloud Penetration 84% 75%
Underlying recurring revenue from cloud native solutions grew by 34% to
£596m, driven by Sage Intacct together with other solutions including Sage
Accounting, Sage Payroll and Sage HR, through new customer acquisition and
growth from existing customers. Organic cloud native recurring revenue growth,
which is adjusted for the contribution from acquisitions in the current and
prior year, was 30%.
Underlying recurring revenue from cloud connected solutions increased by 21%
to £1,032m, reflecting growth in the Sage 50 and Sage 200 franchises, driven
by existing and new customers, together with the continued 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, performed strongly with
recurring revenue growth of 12%. The revenue performance of the Non-Sage
Business Cloud portfolio was in line with expectations.
ARR growth
Sage's underlying ARR increased by 11% to £2,188m (FY22: £1,964m), with
growth balanced between new and existing customers. This was underpinned by
cloud native ARR growth of 28% to £684m (FY22: £534m), driven by a continued
strong performance from Sage Intacct, together with other solutions including
Sage Accounting, Sage Payroll and Sage HR. Organic ARR also increased by 11%
to £2,186m (FY22: £1,964m).
Renewal rate by value of 102% was ahead of the prior year (FY22: 101%)
reflecting good retention rates and increased sales to existing customers,
including a strong performance in customer add-ons and targeted price rises.
In total, Sage added £190m of ARR through new customer acquisition on an
organic basis during the year, up from £180m reported in FY22.
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: We continue to scale Sage Intacct through
product enhancements, extended vertical reach and geographic expansion. During
the year, Sage Intacct was launched in continental Europe, starting with
France, and with Germany expected to follow. Sage Intacct Construction is
making strong progress in the US, complemented by the acquisition in May 2023
of Corecon, a project management solution, while Sage Distribution and
Manufacturing Operations (formerly Sage Intacct Manufacturing) has now been
launched across seven countries. In FY23, Sage Intacct's ARR grew by almost
30% in the US and more than 80% outside the US, adding around £100m of ARR to
the Group.
· Expand medium beyond financials: We also deliver benefits for
mid-sized businesses beyond core accounting, including payroll, HR, planning,
analytics, and workflow automation. During the year we launched in Canada and
South Africa an integration between Sage Intacct, Sage Payroll and Sage HR,
providing a seamless customer experience and helping to drive cross-sell. We
have also expanded the availability of Sage Intelligent Time, an AI-powered
time tracking tool, and Sage Intacct Planning, into more markets across the
Group.
· Build the small business engine: Our small business solutions,
including Sage Accounting and Sage 50, continue to drive growth in key
markets. Sage for Accountants has now been adopted by almost 8,000 accountants
in the UK, up from around 2,000 a year ago, and has also been launched in
Canada. We have also enhanced our customer proposition in the UK through the
introduction of My Sage, an integrated account management tool. In Europe, we
have launched Sage Active, a new multi-legislation business management
solution for SMBs, now available in France, Spain and Germany.
· Scale the network: Through the Sage Network we connect businesses
to their customers, suppliers, tax authorities and banks, providing connected
services that automate workflows and streamline operations. In FY23 we enabled
more customers to connect to the network by increasing Sage Business Cloud
penetration, and we drove participation by introducing new services such as
accounts payable automation, which is growing rapidly. We also enabled greater
network usage by third-party software providers, generating consumption-based
revenue for Sage while expanding and enriching the customer experience.
· Learn and disrupt: We invest in disruptive technologies to drive
innovation. AI-powered services are increasingly deployed in products across
Sage Business Cloud, automating workflows from data ingestion through to
transaction classification. We recently launched Sage Network Inbox, a
connected accounting workflow management tool, and we are developing and
testing Sage Copilot, our digital assistant, both incorporating generative AI
technology to enable natural language interaction. We also deepened our
relationships with key partners including Microsoft and AWS.
Sustainability and Society
Our Sustainability and Society strategy is pivotal to how we deliver on Sage's
purpose of knocking down barriers so everyone can thrive. In FY23, we evolved
this strategy to better reflect our role in society and our transition from
commitment to action.
To help protect the planet, we are targeting net zero carbon emissions by
2040, with an SBTi-validated interim target of halving scope 1, 2 and 3
emissions by 2030 against a 2019 baseline. We also help SMBs on their own
journey to net zero, including through Sage Earth (previously Spherics), our
innovative carbon accounting solution acquired in October 2022, and through
online support via masterclasses.
We aim to use our technology for good, providing insights that help
governments and regulators make better policy decisions for SMBs, and building
digital trust in areas such as cyber security and data privacy. Through Sage
Foundation, colleagues, their families and our partners dedicated more than
150,000 volunteering hours in FY23 to their communities and, in conjunction
with our charity partners, helped more than 10,500 underserved entrepreneurs
to grow their businesses.
We also aim to foster a high-performance culture based on accountability and
inclusivity. By prioritising diversity, wellbeing and development, we enable
colleagues to collaborate effectively and perform at their best. Currently 34%
of leadership teams meet our FY26 gender diversity target 9 (#_edn9) , up
from 19% at the beginning of FY22.
During the year, Sage achieved a top-5 ranking in IDC's European Sustainable
Strategies and Technologies Index, and was listed among The Times's Top 50
Employers for Gender Equality as well as the FT's Europe Climate Leaders
2023. Sage has an ESG rating of 'AAA' from MSCI.
Future revenue reporting changes
In FY24 we intend to simplify our revenue reporting, to enable continued,
clear understanding of progress and performance given the recent evolution of
the Group. These changes will include:
· Focusing revenue metrics and analysis on total rather than
recurring revenue 10 (#_edn10) , as their growth rates increasingly converge
reflecting the reduction in other revenue (SSRS). ARR will continue to be
provided as one of Sage's strategic KPIs.
· Reporting revenue performance principally on a regional basis going
forward. Accordingly, the tables relating to revenue by portfolio and by type
will no longer be provided; however, we will continue separately to provide
cloud native, Sage Business Cloud and subscription revenue and commentary.
Further details of these changes will be published in early December.
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 11 (#_edn11) .
Statutory and underlying financial results
Financial results Statutory Underlying
FY23 FY22 Change FY23 FY22 Change
North America £973m £818m +19% £973m £849m +15%
UKIA £627m £586m +7% £627m £575m +9%
Europe £584m £543m +7% £584m £558m +5%
Group total revenue £2,184m £1,947m +12% £2,184m £1,982m +10%
Operating profit £315m £367m -14% £456m £386m +18%
% Operating profit margin 14.4% 18.9% -4.5 ppts 20.9% 19.5% +1.4 ppts
Profit before tax £282m £337m -16% £424m £355m +20%
Profit after tax £211m £260m -19% £329m £269m +22%
Basic EPS 20.7p 25.5p -19% 32.3p 26.4p +22%
The Group achieved statutory and underlying total revenue of £2,184m in FY23.
Statutory total revenue increased by 12% compared to the prior year,
reflecting underlying total revenue growth of 10% together with a 2-percentage
point foreign exchange tailwind, principally relating to the US Dollar in
North America.
Statutory operating profit decreased by 14% to £315m, reflecting an 18%
increase in underlying operating profit to £456m offset by a £131m increase
in recurring and non-recurring items 12 (#_edn12) , including a £53m one-off
gain on business disposals in FY22 together with property restructuring and
M&A-related charges in FY23.
Statutory basic EPS decreased by 19% to 20.7p, reflecting lower statutory
operating profit, slightly higher statutory net finance costs and the post-tax
impact of non-recurring items. Underlying basic EPS increased by 22% to 32.3p,
reflecting higher underlying operating profit and a slight reduction in the
Group's underlying effective tax rate.
Revenue - underlying and organic reconciliation to statutory
Total revenue bridge FY23 FY22 Change
Statutory £2,184m £1,947m +12%
Recurring items - £2m
Impact of FX 13 (#_edn13) - £33m
Underlying £2,184m £1,982m +10%
Disposals - (£7m)
Acquisitions (£2m) £11m
Organic £2,182m £1,986m +10%
Statutory and underlying total revenue was £2,184m in FY23. Underlying
revenue in FY22 of £1,982m reflects statutory revenue of £1,947m
retranslated at current year exchange rates, resulting in a foreign exchange
tailwind of £33m, together with a £2m fair value adjustment to deferred
income relating to the acquisition of Brightpearl.
Organic total revenue in FY23 was £2,182m, reflecting underlying revenue of
£2,184m adjusted for £2m of revenue from the acquisition of Spherics and
Corecon during the year. Organic revenue in FY22 of £1,986m reflects
underlying revenue of £1,982m, adjusted for £5m of revenue from Sage's
business in Switzerland and £2m of revenue from the South African payroll
outsourcing business, both of which were sold during FY22, and £11m of
revenue from Lockstep, Futrli and Brightpearl which were acquired during FY22.
Revenue by type
Underlying revenue mix FY23 FY22 Change Organic change
Software subscription revenue £1,732m £1,484m +17% +16%
Other recurring revenue £364m £391m -7% -7%
Underlying recurring revenue £2,096m £1,875m +12% +11%
Other revenue (SSRS) £88m £107m -18% -18%
Underlying total revenue £2,184m £1,982m +10% +10%
Subscription Penetration 79% 75%
Underlying recurring revenue grew by 12% to £2,096m, supported by a 17%
increase in software subscription revenue to £1,732m, 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 £364m reflects customers migrating from maintenance and
support to subscription contracts. Other revenue (SSRS) declined by 18% to
£88m, in line with our strategy to transition away from licence sales and
professional services implementations.
Revenue performance by region
North America FY23 FY22 Change Organic change
Underlying total revenue £973m £849m +15% +14%
Underlying recurring revenue £944m £815m +16% +15%
% Sage Business Cloud Penetration 86% 79% +7 ppts +7 ppts
% Subscription Penetration 78% 73% +5 ppts +5 ppts
Underlying recurring revenue FY23 FY22 Change Organic change
US £819m £703m +16% +15%
Of which Sage Intacct £312m £241m +30% +30%
Canada £125m £112m +12% +12%
North America achieved underlying recurring revenue growth of 16% to £944m
and total revenue growth of 15% to £973m. Adjusting for the impact in the US
of the acquisitions of Brightpearl and Lockstep during FY22, organic recurring
and total revenue growth was 15% and 14%, respectively. Sage Business Cloud
penetration increased to 86%, up from 79% in the prior year, driven by growth
in cloud native and cloud connected solutions, while subscription penetration
increased to 78%, up from 73% in the prior year.
Cloud native growth was driven primarily through Sage Intacct, which delivered
strong recurring revenue growth of 30% to £312m, reflecting further progress
in attracting new customers and continued strong sales to existing customers.
Recurring revenue in the US increased by 16% to £819m, reflecting growth in
Sage Intacct alongside growth in cloud connected solutions, driven by new and
existing customers across the Sage 200 and Sage 50 franchises. Total revenue
for the US increased by 15% to £846m.
In Canada, recurring revenue increased by 12% to £125m and total revenue by
11% to £127m, driven mainly by Sage 50 cloud, and supported by strong growth
in Sage Intacct.
UKIA FY23 FY22 Change Organic change
Underlying total revenue £627m £575m +9% +8%
Underlying recurring revenue £611m £557m +10% +9%
% Sage Business Cloud Penetration 90% 79% +11 ppts +11 ppts
% Subscription Penetration 89% 88% +1 ppts +1 ppts
Underlying recurring revenue FY23 FY22 Change Organic change
UK & Ireland £466m £429m +9% +8%
Africa & APAC £145m £128m +13% +13%
In the UKIA region, underlying recurring revenue grew by 10% to £611m and
total revenue grew by 9% to £627m. Adjusting for the impact in the UK &
Ireland of the acquisitions of Brightpearl and Futrli during FY22, organic
recurring and total revenue growth was 9% and 8%, respectively. Sage Business
Cloud penetration reached 90%, up from 79% in the prior year, while
subscription penetration increased to 89%, up from 88% in the prior year.
In the UK & Ireland, recurring revenue increased by 9% to £466m,
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, together with Sage Intacct as we continue to drive
scale through both the direct and partner channels. Total revenue in the UK
& Ireland increased by 8% to £471m.
Africa & APAC delivered strong recurring revenue growth of 13% to £145m,
driven by growth in cloud native solutions, including Sage Accounting, Sage
Payroll and Sage Intacct, and supported by local products. Total revenue in
Africa & APAC increased by 11% to £156m.
Europe FY23 FY22 Change Organic change
Underlying total revenue £584m £558m +5% +5%
Underlying recurring revenue £541m £503m +7% +8%
% Sage Business Cloud Penetration 73% 64% +9 ppts +8 ppts
% Subscription Penetration 70% 65% +5 ppts +5 ppts
Underlying recurring revenue FY23 FY22 Change Organic change
France £284m £264m +7% +7%
Central Europe £123m £115m +7% +10%
Iberia £134m £124m +9% +9%
Europe achieved underlying recurring revenue growth of 7% to £541m and total
revenue growth of 5% to £584m. Adjusting for the disposal of the Swiss
business in FY22, organic recurring revenue growth and total revenue growth
was 8% and 5%, respectively. Sage Business Cloud penetration increased to 73%,
up from 64% in FY22, while subscription penetration reached 70%, up from 65%
in FY22.
In France, recurring revenue increased by 7% to £284m, with a strong
performance in cloud connected, particularly Sage 200 cloud, supported by
growth in cloud native solutions. Total revenue in France increased by 5% to
£295m.
Central Europe achieved recurring revenue growth of 7% to £123m, while total
revenue increased by 1% to £142m. Adjusting for the disposal of the Swiss
business, organic recurring and total revenue growth in Central Europe was 10%
and 5% 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 9% to £134m, with further progress
in cloud connected supported by growth in cloud native solutions. Total
revenue grew by 6% to £147m.
Operating profit
The Group increased underlying operating profit by 18% to £456m (FY22:
£386m). Underlying operating margin increased by 140 basis points to 20.9%
(FY22: 19.5%), 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 22% to £457m (FY22:
£374m), and margin increased by 220 basis points to 21.0% (FY22: 18.8%).
Operating profit - underlying and organic reconciliation to statutory
Operating profit bridge FY23 FY22
Operating profit Operating margin Operating profit Operating margin
Statutory £315m 14.4% £367m 18.9%
Recurring items 14 (#_edn14) £103m - £83m -
Non-recurring items:
· Property restructuring £32m - - -
· Employee-related costs £9m - - -
· Gain on disposal of subsidiaries - - (£53m) -
· Reversal of restructuring costs (£3m) - (£20m) -
Impact of FX 15 (#_edn15) - - £9m -
Underlying £456m 20.9% £386m 19.5%
Disposals - - (£1m) -
Acquisitions £1m - (£11m) -
Organic £457m 21.0% £374m 18.8%
The Group achieved a statutory operating profit in FY23 of £315m (FY22:
£367m). Underlying operating profit of £456m in FY23 reflects statutory
operating profit adjusted for recurring and non-recurring items. Recurring
items of £103m (FY22: £83m) comprise £54m of amortisation of
acquisition-related intangibles (FY22: £42m) and £49m of M&A related
charges (FY22: £39m). In FY22, there was a further £2m deferred income
adjustment relating to the acquisition of Brightpearl.
Non-recurring items in FY23 comprise a £32m charge for a property
restructuring programme undertaken during the year, following a strategic
review of the Group's property portfolio, together with a £9m
employee-related charge for French payroll taxes relating to previous years.
This is partly offset by a £3m (FY22: £20m) reversal of employee
restructuring costs. Non-recurring items in FY22 also comprise gains of on the
disposals of Sage Switzerland (£49m) and the South African payroll
outsourcing business (£4m).
In addition, the retranslation of FY22 operating profit at current year
exchange rates has resulted in an operating profit tailwind of £9m in that
year. This has led to a 10-basis point margin tailwind from foreign exchange
to 19.5% (FY22 underlying as reported: 19.4%).
Organic operating profit of £457m in FY23 reflects underlying operating
profit of £456m adjusted for £1m of losses from Spherics (now Sage Earth)
which was acquired during the year. Organic operating profit of £374m in FY22
reflects underlying operating profit of £386m adjusted for £1m of operating
profit from the South African payroll outsourcing business, which was sold
during the prior year, and £11m of operating losses from businesses acquired
during the prior year.
EBITDA
EBITDA was £553m (FY22: £477m) representing a margin of 25.3%. The increase
in EBITDA principally reflects the improvement in underlying operating profit.
FY23 FY22 Margin
Underlying operating profit £456m £386m 20.9%
Depreciation & amortisation £54m £55m
Share based payments £43m £36m
EBITDA £553m £477m 25.3%
Net finance cost
The statutory net finance cost for the period increased to £33m (FY22:
£30m), reflecting the impact of interest on new debt issuances, partly offset
by higher interest income on deposits. The statutory net finance cost is
broadly in line with the underlying net finance cost of £32m (FY22: £31m).
Taxation
The underlying tax expense for FY23 was £95m (FY22: £86m), resulting in an
underlying tax rate of 23% (FY22: 24%). The statutory income tax expense for
FY23 was £71m (FY22: £77m), resulting in a statutory tax rate of 25% (FY22:
23%). The FY23 underlying tax rate has decreased due to the benefit of
higher tax incentive claims in the US, UK, and France, partly offset by an
increase in the UK corporation tax rate.
Earnings per share
FY23 FY22 Change
Statutory basic EPS 20.7p 25.5p -19%
Recurring items 8.8p 6.7p
Non-recurring items 2.8p (6.5)p
Impact of foreign exchange - 0.7p
Underlying basic EPS 32.3p 26.4p +22%
Underlying basic EPS increased by 22% to 32.3p, reflecting higher underlying
operating profit. Statutory basic earnings per share decreased by 19%, with
the increase in underlying basic earnings per share offset by the change in
post-tax impact of recurring and non-recurring items, including one-off gains
on business disposals in FY22 together with property restructuring and higher
M&A-related charges in the current year.
Cash flow
Sage remains highly cash generative with underlying cash flow from operations
of £528m (FY22: £402m), representing underlying cash conversion of 116%
(FY22: 107%). This strong cash performance reflects further growth in
subscription revenue and continued good working capital management. Free cash
flow of £404m (FY22: £295m) reflects strong underlying cash conversion.
Cash flow APMs FY23 FY22 (as reported)
Underlying operating profit £456m £377m
Depreciation, amortisation and non-cash items in profit £51m £51m
Share based payments £43m £36m
Net changes in working capital - (£40m)
Net capital expenditure (£22m) (£22m)
Underlying cash flow from operations £528m £402m
Underlying cash conversion % 116% 107%
Non-recurring cash items (£11m) (£23m)
Net interest paid (£24m) (£21m)
Income tax paid (£85m) (£62m)
Profit and loss foreign exchange movements (£4m) (£1m)
Free cash flow £404m £295m
Statutory reconciliation of cash flow from operations FY23 FY22 (as reported)
Statutory cash flow from operations £505m £368m
Recurring and non-recurring items £41m £55m
Net capital expenditure (£22m) (£22m)
Other adjustments including foreign exchange translations £4m £1m
Underlying cash flow from operations £528m £402m
Net debt and liquidity
Group net debt was £561m at 30 September 2023 (30 September 2022: £733m),
comprising cash and cash equivalents of £696m (30 September 2022: £489m) and
total debt of £1,257m (30 September 2022: £1,222m). The Group had £1,326m
of cash and available liquidity at 30 September 2023 (30 September 2022:
£1,270m).
The decrease in net debt in the period is summarised in the table below.
FY23 FY22 (as reported)
Net debt at 1 October (£733m) (£247m)
Free cash flow £404m £295m
New leases less disposals (£14m) (£6m)
Disposal of businesses - £43m
Acquisition of businesses (£26m) (£315m)
M&A and equity investments (£30m) (£22m)
Dividends paid (£190m) (£183m)
Share buyback - (£249m)
Purchase of shares by Employee Benefit Trust (£1m) (£32m)
FX movement and other £29m (£17m)
Net debt at 30 September (£561m) (£733m)
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 2028, having been extended by one year in November 2023,
with an extension option for a further year subject to specific provisions. At
30 September 2023, the RCF was undrawn (FY22: 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 prepayment in March 2023 of the Group's outstanding
US private placement loan notes totalling £326m (US$400m) and enabled the
Group both 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's disciplined capital allocation policy is focused on accelerating
strategic execution through organic and inorganic investment, and delivering
shareholder returns. During FY23 Sage completed the acquisition of Spherics,
an innovative carbon accounting solution, and Corecon, a construction project
management solution.
Sage has a progressive dividend policy, intending to grow the dividend over
time while considering the future capital requirements of the Group. The final
dividend proposed by the Board is 12.75p per share, taking the full year
dividend to 19.3p, up 5% compared to the prior year (FY22: 18.4p).
The Group also considers returning surplus capital to shareholders.
Alongside our FY23 results, we have announced a share buyback programme of up
to £350m, reflecting the Board's confidence in the future prospects of the
Group, together with Sage's strong cash generation and robust financial
position. Sage continues to have considerable financial flexibility to drive
the execution of its growth strategy.
FY23 FY22 (as reported)
Net debt £561m £733m
EBITDA (Last Twelve Months) £553m £468m
Net debt/EBITDA Ratio 1.0x 1.6x
The Group's EBITDA over the last 12 months was £553m, resulting in a net debt
to EBITDA leverage ratio of 1.0x, down from 1.6x in the prior year. Sage
intends to operate in a broad range of 1x to 2x net debt to EBITDA over the
medium term, with flexibility to move outside this range as business needs
require.
Group return on capital employed (ROCE) for FY23 was 19% (FY22 as reported:
18%).
Going concern
The Directors have robustly tested the going concern assumption in preparing
these financial statements, taking into account the Group's strong liquidity
position at 30 September 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
21.
External audit tender
Following a formal tender process overseen by the Audit and Risk Committee,
the Board has approved the appointment of KPMG LLP as external auditor for the
financial year ending 30 September 2025, subject to an updated independence
confirmation and shareholder approval at Sage's 2025 AGM. The current external
auditor, Ernst and Young LLP, will continue in its role for the financial year
ending 30 September 2024, subject to shareholder approval at the 2024 AGM.
Further details of the tender process and selection criteria are included in
Sage's 2023 Annual Report.
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) FY23 FY22 Change
Euro (€) 1.15 1.18 -3%
US Dollar ($) 1.23 1.28 -4%
Canadian Dollar (C$) 1.65 1.63 +1%
South African Rand (ZAR) 22.31 20.21 +10%
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 or recurring or
frequency to aid understanding of the performance for the year or non-recurring 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 capital expenditure (excluding business combinations cash conversion.
and similar 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 underlying depreciation, To calculate the Net Debt to EBITDA leverage ratio and to show profitability
amortisation and share based payments. before the impact of major non-cash charges.
Underlying depreciation and amortisation is the statutory equivalent measure,
adjusted for the amortisation of acquired intangibles. Underlying share based
payments is the statutory equivalent measure, adjusted for M&A-related
share based payment charges included within other M&A activity related
items.
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 involve excluding certain components (such as non‑refundable
contract sign‑up fees) to ensure the measure reflects that part of the
revenue base which (subject to ongoing use and renewal) can reasonably be
expected to repeat in future periods.
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 To measure the cash generated by the operating activities during the period
paid, derivative financial instruments and 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 as a percentage of To measure the progress in the migration of our revenue base to the Sage
the underlying recurring revenue of the Future Sage Business Cloud Business Cloud by connecting our solutions to the cloud and/or migrating our
Opportunity. customers to cloud connected and cloud native solutions.
Return on Capital Employed (ROCE) ROCE is calculated as underlying Operating Profit, minus As an indicator of the current period financial return on the capital invested
in the Company. ROCE is used as an underpin in the FY21, FY22 and FY23 PSP
amortisation of acquired intangibles, the result being divided by capital awards.
employed, which is 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.
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 year ended 30 September 2023
Note Underlying Statutory 2023 Underlying as reported* 2022 Adjustments
Adjustments
£m
£m
Statutory 2022
2023
(note 3)
£m
£m (note 3)
2022
2023
£m
£m
Revenue 2 2,184 - 2,184 1,949 (2) 1,947
Cost of sales (156) - (156) (138) - (138)
Gross profit 2,028 - 2,028 1,811 (2) 1,809
Selling and administrative expenses (1,572) (141) (1,713) (1,434) (8) (1,442)
Operating profit 2 456 (141) 315 377 (10) 367
Finance income 12 - 12 1 - 1
Finance costs (44) (1) (45) (32) 1 (31)
Profit before income tax 424 (142) 282 346 (9) 337
Income tax expense 4 (95) 24 (71) (83) 6 (77)
Profit for the year 329 (118) 211 263 (3) 260
329 (118) 211
Profit attributable to:
Owners of the parent 263 (3) 260
Earnings per share attributable to the owners of the parent (pence)
Basic 6 32.25p 20.75p 25.74p 25.47p
Diluted 6 31.75p 20.43p 25.44p 25.17p
All operations in the year relate to continuing operations.
Note:
* Underlying as reported is at 2022 reported exchange rates.
Consolidated statement of comprehensive income
For the year ended 30 September 2023
2023 2022
£m £m
Profit for the year 211 260
Items of other comprehensive income that will not be reclassified to profit or
loss
Fair value gain on reassessment of equity investment - 30
Actuarial gain on post-employment benefit obligations - 3
- 33
Items of other comprehensive income that may be reclassified to profit or loss
Exchange differences on translating foreign operations and net investment (82) 177
hedges
Cash flow hedges 4 -
Exchange differences recycled through income statement on sale of foreign - (13)
operations
(78) 164
Other comprehensive (expense)/income for the year, net of tax (78) 197
Total comprehensive income for the year 133 457
Total comprehensive income for the year attributable to:
Owners of the parent 133 457
The notes on pages 21 to 39 form an integral part of this condensed
consolidated yearly report.
Consolidated balance sheet
As at 30 September 2023
Note 2023 2022
£m Restated*
£m
Non-current assets
Goodwill 7 2,245 2,391
Other intangible assets 7 274 320
Property, plant and equipment 7 104 152
Equity investments 4 4
Trade and other receivables 138 128
Deferred income tax assets 56 19
Derivative financial instruments 1 -
2,822 3,014
Current assets
Trade and other receivables 376 355
Current income tax asset 42 39
Cash and cash equivalents (excluding bank overdrafts) 9 696 489
1,114 883
Total assets 3,936 3,897
Current liabilities
Trade and other payables (378) (368)
Current income tax liabilities (25) (13)
Borrowings 9 (14) (178)
Provisions (23) (33)
Deferred income (745) (734)
(1,185) (1,326)
Non-current liabilities
Borrowings 9 (1,243) (1,044)
Post-employment benefits (19) (19)
Deferred income tax liabilities (18) (17)
Provisions (24) (20)
Trade and other payables (13) (6)
Deferred income (7) (8)
Derivative financial instruments (20) (60)
(1,344) (1,174)
Total liabilities (2,529) (2,500)
Net assets 1,407 1,397
Equity attributable to owners of the parent
Ordinary shares 8 12 12
Share premium 8 548 548
Other reserves 8 189 267
Retained earnings 658 570
Total equity 1,407 1,397
Note:
* Restated for finalisation of the fair value of assets acquired and
liabilities assumed in the acquisition of Lockstep (see notes 7 and 11)
Consolidated statement of changes in equity
For the year ended 30 September 2023
Ordinary shares Share premium Other reserves Retained earnings Total
£m
£m
£m
£m
equity
£m
At 1 October 2022 12 548 267 570 1,397
Profit for the year - - - 211 211
Other comprehensive (expense)/income
Exchange differences on translating foreign operations and net investment - - (82) - (82)
hedges
Cashflow hedges - - 4 - 4
Total comprehensive (expense)/income for the year ended 30 September 2023 - - (78) 211 133
Transactions with owners
Employee share option scheme-value of employee services including deferred tax - - - 57 57
Proceeds from issuance of treasury shares - - - 11 11
Purchase of shares by Employee Benefit Trust - - - (1) (1)
Dividends paid to owners of the parent - - - (190) (190)
Total transactions with owners for the year ended 30 September 2023 - - - (123) (123)
At 30 September 2023 12 548 189 658 1,407
Consolidated statement of changes in equity
For the year ended 30 September 2022
Ordinary shares Share premium Other reserves Retained earnings Total
£m
£m
£m
£m
equity
£m
At 1 October 2021 12 548 103 448 1,111
Profit for the year - - - 260 260
Other comprehensive income/(expense)
Exchange differences on translating foreign operations and net investment - - 177 - 177
hedges
Exchange differences recycled through income statement on sale of foreign - - (13) - (13)
operations
Fair value gain on reassessment of equity investment - - - 30 30
Actuarial gain on post-employment benefit obligations - - - 3 3
Total comprehensive income for the year ended 30 September 2022 - - 164 293 457
Transactions with owners
Employee share option scheme-value of employee services including deferred tax - - - 37 37
Proceeds from issuance of treasury shares - - - 7 7
Purchase of shares by Employee Benefit Trust - - - (32) (32)
Dividends paid to owners of the parent - - - (183) (183)
Total transactions with owners for the year ended 30 September 2022 - - - (171) (171)
At 30 September 2022 12 548 267 570 1,397
Consolidated statement of cash flows
For the year ended 30 September 2023
Note 2023 2022
£m £m
Cash flows from operating activities
Cash generated from continuing operations 505 368
Interest paid (33) (21)
Income tax paid (85) (62)
Net cash generated from operating activities 387 285
Cash flows from investing activities
Disposal of subsidiaries, net of cash disposed - 42
Acquisition of subsidiaries, net of cash acquired 11 (26) (285)
Purchases of intangible assets 7 (17) (40)
Purchases of property, plant and equipment 7 (5) (12)
Proceeds from disposals of property, plant and equipment - 10
Interest received 12 1
Net cash used in investing activities (36) (284)
Cash flows from financing activities
Proceeds from borrowings 9 440 516
Repayments of borrowings 9 (353) (166)
Capital element of lease payments 9 (18) (19)
Borrowing costs (3) (1)
Proceeds from issuance of treasury shares 11 7
Share buyback programmes 8 - (249)
Purchase of shares by Employee Benefit Trust 8 (1) (32)
Dividends paid to owners of the parent 5 (190) (183)
Net cash used in financing activities (114) (127)
Net increase/(decrease) in cash and cash equivalents
(before exchange rate movement)
237 (126)
Effects of exchange rate movement 9 (30) 48
Net increase/(decrease) in cash and cash equivalents 207 (78)
Cash, cash equivalents and bank overdrafts at 1 October 9 489 567
Cash, cash equivalents and bank overdrafts at 30 September 9 696 489
Notes to the financial information
For the year ended 30 September 2023
1. Group accounting policies
General information
The Sage Group plc (the "Company") and its subsidiaries (together the "Group")
is a leading global provider of accounting financial, HR and payroll
technology to small and mid-sized businesses.
The financial information set out above does not constitute the Company's
statutory financial statements, which comprise the Annual Report &
Accounts and audited annual financial statements for the year ended 30
September 2023 or 2022 but is derived from those financial statements.
Statutory financial statements for the year ended 30 September 2022 have been
delivered to the Registrar of Companies and those for 2023 will be delivered
in December 2023. The auditors have reported on both sets of accounts; their
reports were unqualified and did not contain statements under section 498 (2),
(3) or (4) of the Companies Act 2006.
Whilst the financial information included in this announcement has been
computed in accordance with 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 as issued by
the IASB or UK-IFRS. The financial information has been prepared on the basis
of the accounting policies and accounting estimates and judgements as set out
in the Annual Report & Accounts for 2023.
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.
All figures presented are rounded to the nearest £m, unless otherwise stated.
Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with UK-IFRS in conformity with the requirements of the Companies
Act 2006 and also prepared in accordance with IFRS as issued by the IASB.
UK-IFRS can differ in certain respects from IFRS as issued by the IASB. The
differences have no impact on the Group's consolidated financial statements
for the years presented.
The consolidated financial statements have been prepared under the historical
cost convention, except where adopted IFRS require an alternative treatment.
The principal variations from the historical cost convention relate to
derivative financial instruments and equity investments which are measured at
fair value. The financial statements of the Group comprise the financial
statements of the Company and entities controlled by the Company (its
subsidiaries) prepared at the end of the reporting period. The accounting
policies have been consistently applied across the Group. The Company controls
an entity when it is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity, which is usually from date of acquisition.
Going Concern
In preparing these financial statements, the Directors have reviewed and
approved a going concern assessment which considers the liquidity forecast of
the Group for the period through to 31 March 2025 (the going concern
assessment period). The liquidity forecast reflects the expected impact of the
economic environment, including the current inflationary environment. More
specifically, full consideration has been given to the potential risks and
uncertainties linked to the changing macro-economic environment, and the
possible impact on the Group's customer base.
In light of this, we note that the Group's operational and financial robust
position is supported by:
· High-quality recurring and subscription-based revenue;
· Resilient cash generation and robust liquidity, supported by strong
underlying cash conversion of 116%, reflecting the strength of the
subscription business model; and
· A well-diversified small and medium-sized customer base which is
geographically diverse.
In preparing the going concern assessment scenario-specific stress testing has
been performed, with the level of churn assumptions increasing by 75%, and a
significant reduction in the level of new customer acquisition and sales to
existing customers. Under these scenarios, the Group continues to have
sufficient resources to continue in operational existence without the need to
drawdown on its revolving credit facility or seek additional financing. If
more severe impacts occur there are further controllable mitigating actions
which can be taken to protect liquidity, including the reduction of
discretionary spend. Stress testing has also been performed as part of the
severe but plausible scenarios (as described within the Viability Statement in
the Annual Report & Accounts for 2023).
The Directors have also reviewed the results of reverse stress testing
performed to provide an illustration of the level of churn and deterioration
in new customer acquisition which would be required to 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 highly
significant deterioration in performance, well in excess of the assumptions
considered in the stress testing scenarios above. The probability of these
factors occurring is deemed to be remote 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 operational existence throughout the
going concern assessment period. Accordingly, the consolidated and parent
Company financial information has been prepared on a going concern basis.
Further details for adopting the going concern basis are set out in the
Directors' Report on pages 164 to 165 of the Annual Report & Accounts for
2023.
Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 September 2023.
Adoption of new and revised IFRSs
There are no accounting standards, amendments or interpretations effective for
the first time this financial year that have had a material impact on the
Group. No standards have been early adopted during the year.
In July 2023, the UK Endorsement Board adopted 'International Tax Reform -
Pillar Two Model Rules (Amendments to IAS 12)' as issued by the IASB. The
Amendments introduce a temporary mandatory exception from accounting for
deferred taxes arising from the Pillar Two model rules, effective immediately
and retrospectively, and the Group has applied this exception.
The Directors also considered the impact on the Group of new and revised
accounting standards, interpretations, or amendments which have been issued
but were not effective for the Group for the year ended 30 September 2023.
None are expected to have a material impact on the consolidated financial
statements when first applied.
Climate change
In preparing the consolidated financial statements, management has considered
the impact of climate change, specifically with reference to the disclosures
provided in the Group's Strategic Report within the 2023 Annual Report &
Accounts.
As a business, we are committed to reducing our carbon emissions and target
achieving net zero by 2040. We support our customers, small and mid-sized
businesses, in achieving net zero by sharing the knowledge, technology and
skills to be a driving force for change. We also support more broadly by
advocating for enabling policies and standards that support a transition to a
low-carbon economy.
We recognise the importance of identifying and effectively managing the
physical and transitional risks that climate change poses to our operations
and consider the impact of climate-related matters, including legislation, on
our business. The climate change scenario analyses undertaken in line with
Task Force on Climate-related Financial Disclosures (TCFD) recommendations did
not identify any material impact on the Group's financial results, going
concern or viability. More specifically:
· In preparing the viability assessment, consideration has been given to the
potential impact of climate change over the next three years, as set out in
the Strategic Report.
· Climate change related factors on matters including residual values, useful
lives and depreciation and amortisation periods which relate to non-current
assets have also been considered, with no impact identified at this stage.
· In our future forecasts used for goodwill impairment and the going concern
assessment, we have considered the extent to which costs associated with our
climate related commitments have been considered, as well as broader societal
commitments. These commitments do not have a material impact.
· We have also considered the extent to which climate change could impact
longer-term economic growth, which may impact long-term growth rates used in
the goodwill impairment test. Sensitivity testing demonstrates that all
cash-generating units (CGUs) retain sufficient headroom.
Accounting estimates and judgements
The preparation of financial statements requires the use of accounting
estimates and judgements by management. It also requires management to
exercise its judgement in the process of applying the accounting policies. We
continually evaluate our estimates and judgements based on available
information.
Management has determined that there are no areas of estimation uncertainty
that could be significant under IAS 1, 'Presentation of Financial Statements',
being areas of estimation uncertainty with a significant risk of a material
change to the carrying value of assets and liabilities within the next
financial year.
Other key estimates are made when preparing the financial statements, which,
while not meeting the definition of a significant estimate under IAS 1,
involve the measurement of certain material assets or a higher degree of
complexity.
Significant judgements are those made by management in applying our accounting
policies that have a material impact on the amounts presented in the financial
statements.
Management's rationale in relation to these key accounting estimates and
significant judgements are regularly assessed and, where material in value or
in risk, are discussed with the Audit and Risk Committee. These areas are
discussed in further detail below:
Revenue recognition (judgement)
Over a third of the Company's revenue is generated from sales to business
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 (estimate)
The estimates applied in calculating the value in use of the CGUs being tested
for impairment are a source of estimation uncertainty. The key estimates
considered in the calculation relate to the future performance expectations of
the business and include the average medium-term revenue growth rate, the
long-term growth rate of net operating cash flows and the discount rate.
Further information on these key estimates, as well as the level at which
goodwill is monitored and the results of sensitivity analysis, are disclosed
in the annual financial statements for the year ended 30 September 2023.
Business Combinations (judgement and estimate)
During the year, 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. During the current year, the purchase price accounting has been
finalised, therefore certain adjustments have been recognised in the year.
These adjustments include the recognition of intangible assets and deferred
tax liabilities, offset by a reduction in the amount of goodwill provisionally
recognised in the prior year. Further explanation of the changes are set out
in note 11.
Key areas of judgement and estimation 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 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 estimates 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, which was corroborated
against the Group's own royalty rates used for internal transfer pricing
purposes as well as external benchmark data.
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 its
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 and Austria), 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 years, 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 segment Europe reflects the aggregation of the operating
segments for Central Europe, France and Iberia. The aggregated operating
segments are considered to share similar economic characteristics because they
have similar long-term gross margins and operate in similar markets. Central
Europe, France and Iberia operate principally within the EU and the majority
of their customers are in countries within the EU.
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.
Category Examples
Recurring revenue Subscription revenue
Other recurring revenue
Other revenue Perpetual software licences
Upgrades to perpetual licences
Professional services
Training
Revenue by segment
Year ended 30 September 2023 Change
Statutory Underlying Underlying Organic Organic Statutory Underlying Organic
£m
£m
£m
adjustments adjustments*
£m £m
Recurring revenue by segment
North America 944 - 944 (1) 943 20% 16% 15%
UK & Ireland 466 - 466 - 466 9% 9% 8%
Europe 541 - 541 - 541 10% 7% 8%
Africa & APAC 145 - 145 - 145 4% 13% 13%
Recurring revenue 2,096 - 2,096 (1) 2,095 14% 12% 11%
Other revenue by segment
North America 29 - 29 - 29 (11%) (14%) (15%)
UK & Ireland 5 - 5 (1) 4 (20%) (20%) (39%)
Europe 43 - 43 - 43 (19%) (21%) (21%)
Africa & APAC 11 - 11 - 11 (17%) (12%) 2%
Other revenue 88 - 88 (1) 87 (16%) (18%) (18%)
Total revenue by segment
North America 973 - 973 (1) 972 19% 15% 14%
UK & Ireland 471 - 471 (1) 470 9% 8% 7%
Europe 584 - 584 - 584 7% 5% 5%
Africa & APAC 156 - 156 - 156 2% 11% 12%
Total revenue 2,184 - 2,184 (2) 2,182 12% 10% 10%
Notes:
* Adjustments relate to the acquisitions of Spherics and Corecon (see note
11).
Revenue by segment (continued)
Year ended 30 September 2022
Statutory Underlying adjustments Underlying as reported Impact of foreign exchange Underlying Organic Organic
£m
£m
£m
£m
£m
£m
Adjustments*
£m
Recurring revenue by segment
North America 786 1 787 28 815 6 821
UK & Ireland 427 1 428 1 429 5 434
Europe 490 - 490 13 503 (4) 499
Africa & APAC 140 - 140 (12) 128 - 128
Recurring revenue 1,843 2 1,845 30 1,875 7 1,882
Other revenue by segment
North America 32 - 32 2 34 - 34
UK & Ireland 6 - 6 - 6 - 6
Europe 53 - 53 2 55 (1) 54
Africa & APAC 13 - 13 (1) 12 (2) 10
Other revenue 104 - 104 3 107 (3) 104
Total revenue by segment
818 1 819 xx]
North America 818 1 819 30 849 6 855
UK & Ireland 433 1 434 1 435 5 440
Europe 543 - 543 15 558 (5) 553
Africa & APAC 153 - 153 (13) 140 (2) 138
Total revenue 1,947 2 1,949 33 1,982 4 1,986
Notes:
* Adjustments relate to the acquisition of Brightpearl, Lockstep and Futrli,
and disposal of the Group's Swiss business and its payroll outsourcing
business in South Africa in the prior year.
Operating profit by segment
Year ended 30 September 2023 Change
Statutory Underlying adjustments Underlying Organic adjustments £m Organic Change Change Change
£m
Statutory
Underlying
Organic
£m £m £m
%
%
%
Operating profit by segment
North America 127 71 198 - 198 9% 30% 36%
UK & Ireland 59 55 114 1 115 2% 6% 14%
Europe 108 10 118 - 118 (29%) 25% 26%
Africa & APAC 21 5 26 - 26 (49%) (21%) (21%)
Total operating profit 315 141 456 1 457 (14%) 18% 22%
Year ended 30 September 2022
Statutory Underlying adjustments £m Underlying as reported Impact of foreign exchange Underlying Organic adjustments Organic
£m
£m £m £m £m £m
Operating profit by segment
North America 116 30 146 6 152 (6) 146
UK & Ireland 58 47 105 1 106 (5) 101
Europe 152 (61) 91 4 95 - 95
Africa & APAC 41 (6) 35 (2) 33 (1) 32
Total operating Profit 367 10 377 9 386 (12) 374
Reconciliation of underlying operating profit to statutory operating profit
2023 2022
£m
£m
Underlying operating profit by reportable segment
North America 198 152
Northern Europe 114 106
Europe 118 95
Total reportable segments 430 353
Africa & APAC 26 33
Underlying operating profit 456 386
Impact of movement in foreign currency exchange rates - (9)
Underlying operating profit (as reported) 456 377
Amortisation of acquired intangible assets (54) (42)
Adjustment to acquired deferred income - (2)
Other M&A activity-related items (49) (39)
Non-recurring items (38) 73
Statutory operating profit 315 367
3. Adjustments between underlying profit and statutory profit
2023 2023 2023 2022 2022 2022
Non-
Non-
Recurring
recurring
Total
Recurring
recurring
Total
£m
£m
£m
£m
£m
£m
M&A activity-related items
Amortisation of acquired intangibles 54 - 54 42 - 42
Gain on disposal of subsidiaries - - - - (53) (53)
Adjustment to acquired deferred income - - - 2 - 2
Other M&A activity-related items 49 - 49 39 - 39
Other items
Property restructuring costs - 32 32 - - -
Employee-related costs - 9 9 - - -
Reversal of restructuring costs - (3) (3) - (20) (20)
Total adjustments made to operating profit 103 38 141 83 (73) 10
Foreign currency movements on intercompany balances 1 - 1 (1) - (1)
Total adjustments made to profit before income tax 104 38 142 82 (73) 9
Recurring items
Acquired intangibles are assets which have previously been recognised as part
of business combinations or similar transactions. These assets are
predominantly 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 year 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. £18m (2022: £14m) of these costs have been
paid in the year, while the remainder is expected to be paid in subsequent
financial years.
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
(2022: gain £1m).
Non-recurring items
Net charges in respect of non-recurring items amounted to £38m (2022: net
credit £73m).
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 downsized as part of a consolidated plan. Costs of £32m consist of
impairment of £22m of right-of-use assets and other related fixed assets that
are no longer in use and therefore fully impaired, as well as a provision of
£10m for directly attributable future running costs associated with the
properties. The programme was completed in the current year, with no further
costs expected to be incurred in the following year.
Employee-related costs of £9m (2022: £nil) relate to a charge for French
payroll taxes relating to previous years.
The gain on disposal of subsidiaries in the prior year of £53m relates to the
disposal of the Group's Swiss business (£49m) and the Group's payroll
outsourcing business in South Africa (£4m).
Reversal of restructuring costs of £3m (2022: £20m) largely relates to
unutilised provisions recognised in the year ended 30 September 2021 following
the implementation of a business transformation plan. In the prior year, this
largely resulted from 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 25% (2022: 23%),
whilst the effective tax rate on underlying profit before tax on continuing
operations was 23% (2022: 24%).
The underlying effective tax rate is higher than the UK corporation tax rate
applicable to the Group, primarily due to the geographic profile of the Group
and the inclusion of local business taxes in the corporate tax expense. This
net increase to the rate is offset by innovation tax credits for registered
patents and software, and research and development activities which attract
government tax incentives in a number of operating territories. The underlying
effective tax rate was reduced in the year, principally due to the benefit
of increased tax incentive claims in the US, UK, and France, which were partly
offset by the impact of an increase in the UK corporate tax rate.
5. Dividends
2023 2022
£m £m
Final dividend paid for the year ended 30 September 2022 of 12.10p per share 123 -
(2022: final dividend paid for the year ended 30 September 2021 of 11.63p per - 119
share)
Interim dividend paid for the year ended 30 September 2023 of 6.55p per share 67 -
(2022: interim dividend paid for the year ended 30 September 2022 of 6.30p per - 64
share)
190 183
In addition, the Directors are proposing a final dividend in respect of the
financial year ended 30 September 2023 of 12.75p per share. The Company's
distributable reserves are sufficient to support the payment of this
dividend. If approved at the AGM, it will be paid on 9 February 2024 to
shareholders who are on the register of members on 12 January 2024. These
financial statements do not reflect this proposed dividend payable.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit for the year
attributable to owners of the parent by the weighted average number of
ordinary shares in issue during the year, excluding those held as treasury
shares and held by the Employee Benefit Trust, which are treated as cancelled,
until reissued.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares, exercisable at the end of the year. The Group has one class of
dilutive potential ordinary shares, which are share options granted to
employees where the exercise price is less than the average market price of
the Company's ordinary shares during the year, where the vesting criteria are
achieved at year-end.
Underlying 2023 Underlying Underlying Statutory
as reported*
2022
2022
Statutory
2022
2023
Earnings attributable to owners of the parent** (£m)
Profit for the year 329 263 269 211 260
Number of shares (millions)
Weighted average number of shares 1,020 1,020 1,020 1,020 1,020
Dilutive effects of shares 16 12 12 16 12
1,036 1,032 1,032 1,036 1,032
Earnings per share attributable to owners of the
parent** (pence)
Basic earnings per share 32.25 25.74 26.39 20.75 25.47
Diluted earnings per share 31.75 25.44 26.08 20.43 25.17
Note:
* Underlying as reported is at 2022 reported exchange rates.
** All operations in the years relate to continuing operations.
Reconciliation of earnings - continuing operations 2023 2022
£m
£m
Underlying earnings attributable to owners of the parent 329 269
Impact of movement in foreign currency exchange rates, net of taxation - (6)
Underlying earnings attributable to owners of the parent (as reported) 329 263
Amortisation of acquired intangible assets (54) (42)
Other M&A activity-related items (49) (39)
Adjustment to acquired deferred income - (2)
Property restructuring costs (32) -
Employee-related costs (9) -
Reversal of restructuring costs 3 20
Gain on disposal of subsidiaries - 53
Foreign currency movements on intercompany balances (1) 1
Taxation on adjustments between underlying and statutory profit before tax 24 6
Net adjustments (118) (3)
Earnings: statutory profit for the year attributable to owners of the parent 211 260
7. Non-current assets
Goodwill Other Property, plant and equipment Total
£m
£m
intangible £m
assets
£m
Opening net book amount at 1 October 2022 restated* 2,391 320 152 2,863
Additions - 17 20 37
Acquisition of subsidiaries 11 15 - 26
Impairment - - (22) (22)
Depreciation, amortisation and other movements - (69) (40) (109)
Exchange movement (157) (9) (6) (172)
Closing net book amount at 30 September 2023 2,245 274 104 2,623
Note:
*Restated for the finalisation of the fair value of assets acquired and
liabilities assumed in the acquisition of Lockstep (see note 11).
Goodwill Other Property, plant Total
£m intangible and equipment £m
assets £m
£m
Opening net book amount at 1 October 2021 1,877 190 164 2,231
Additions - 29 18 47
Acquisition of subsidiaries* 230 136 2 368
Depreciation, amortisation and other movements - (56) (41) (97)
Exchange movement 284 21 9 314
Closing net book amount at 30 September 2022 restated* 2,391 320 152 2,863
Note:
*Restated for the finalisation of the fair value of assets acquired and
liabilities assumed in the acquisition of Lockstep (see note 11).
Goodwill is not subject to amortisation but is tested for impairment annually
or upon any indication of impairment. At 30 September 2023, there were no
indicators of impairment to goodwill.
Impairment of property, plant and equipment of £22m (FY22: £nil) relate to
the property restructuring programme in the year, classified within
non-recurring adjustments between underlying and statutory results (see note
3).
8. Equity
Ordinary shares and share premium
Number of Ordinary Share premium Total
shares Shares £m £m
£m
At 1 October 2022 and 30 September 2023 1,100,789,295 12 548 560
1,120,789,295
At 1 October 2021 12 548 560
Cancellation of treasury shares (20,000,000) - - -
At 30 September 2022 1,100,789,295 12 548 560
At 30 September 2023 the Group held 73,906,470 treasury shares (2022:
81,168,903). During the year, the Group satisfied the vesting of certain share
awards utilising 7,262,433 treasury shares (2022: 6,396,278).
At 30 September 2023 the Employee Benefit Trust holds 4,419,478 ordinary
shares in the Company (2022: 4,610,875). During the year, the Employee Benefit
Trust satisfied the vesting of certain share awards utilising 258,505 ordinary
shares (2022: nil).
Other Reserves
All components of other reserves are presented on a consolidated basis on the
face of the consolidated statement of changes in equity.
Translation reserve Hedging Reserve Merger Reserve Total
£m £m £m £m
At 1 October 2022 206 - 61 267
Exchange differences on translating foreign operations and net investment (82)
hedges
- - (82)
Cash flow hedges - 4 - 4
At 30 September 2023 124 4 61 189
Translation reserve Merger Reserve Total
£m £m £m
At 1 October 2021 42 61 103
Exchange differences on translating foreign operations and net investment 177
hedges
- 177
Exchange differences recycled through income statement on sale of foreign (13) - (13)
operations
At 30 September 2022 206 61 267
9. Cash flow and net debt
2023 2022
£m
£m
Statutory operating profit 315 367
Recurring and non-recurring items 141 10
Underlying operating profit (as reported) 456 377
Depreciation, amortisation and other non-cash items 51 51
Share-based payments 43 36
Net changes in working capital - (40)
Net capital expenditure (22) (22)
Underlying cash flow from operating activities 528 402
Non-recurring items (11) (23)
Net interest paid (24) (21)
Income tax paid (85) (62)
Exchange movement (4) (1)
Free cash flow 404 295
Net debt at 1 October (733) (247)
Disposals of businesses - 43
Acquisition of businesses (26) (315)
Acquisition and disposals related items (30) (22)
Proceeds from issuance of treasury shares 11 7
Dividends paid to owners of the parent (190) (183)
Share buyback programmes - (249)
Purchase of shares by Employee Benefit Trust (1) (32)
New leases less disposals (14) (6)
Exchange movement 19 (23)
Other (1) (1)
Net debt at 30 September (561) (733)
2023 2022
£m
£m
Underlying cash flow from operations 528 402
Net capital expenditure 22 22
Recurring and non-recurring cash items (41) (55)
Other adjustments including foreign exchange translations (4) (1)
Statutory cash flow from operations 505 368
Analysis of change in net debt
At 1 October 2021 At 1 October Cash flow Acquisition of subsidiaries Non-cash movements Exchange movement At 30
£m
£m
£m
£m
£m
2022 September
£m 2023
£m
Cash and cash equivalents 553 489 236 1 - (30) 696
Cash amounts included in held for sale 14 - - - - - -
Cash and cash equivalents including cash as held for sale 567 489 236 1 - (30) 696
Liabilities arising from financing activities
Loans due within one year (47) (161) 148 - - 13 -
Loans due after more than one year (667) (966) (235) - (1) 31 (1,171)
Lease liabilities due within one year (18) (17) 18 - (16) 1 (14)
Lease liabilities after more than one year (82) (78) - - 2 4 (72)
(814) (1,222) (69) - (15) 49 (1,257)
Total (247) (733) 167 1 (15) 19 (561)
The Group's debt is sourced from sterling and euro denominated bond notes,
with a syndicated Revolving Credit Facility (RCF) also available.
Interest coupon* 2023 2022
£m £m
Bonds
· GBP 350m bond notes 1.63%
350 350
· GBP 400m bond notes 2.88% 400 400
· EUR 500m bond notes 3.82% 433 -
· Unamortised issue and discount costs N/A (10) (9)
US private placement
· USD 150m loan note 3.71% - 135
· USD 50m loan note 3.86% - 45
· EUR 30m loan note 2.07% - 26
· USD 200m loan note 3.73% - 180
Unamortised RCF loan costs N/A (2) -
Total 1,171 1,127
Note: This does not include the impact of cross currency interest rate swaps
entered into in relation to the GBP 350m bond notes and EUR 500m bond notes.
During the year, 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).
The Group's RCF was refinanced in December 2022, with facility levels of
£630m, and maturity in December 2027, with an extension option for up to two
further years subject to specific provisions. In November 2023, after the
balance sheet date, a one-year extension was agreed, resulting in a new
maturity in December 2028. An extension option for a further year remains
available subject to specific provisions. At 30 September 2023, £nil of the
RCF was drawn down (2022: £nil).
10. Financial instruments
The carrying amounts of the following financial assets and liabilities
approximate to their fair values: trade and other payables excluding tax and
social security, trade and other receivables excluding prepayments and accrued
income, lease liabilities, and short-term bank deposits, and cash at bank and
in hand.
The fair value of the sterling and euro denominated bond notes are 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 loan notes held in the prior year is determined by
reference to interest rate movements on the USD private placement market and
therefore can be considered as a level 2 fair value as defined within IFRS 13.
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 Group does not hold any financial liabilities whose fair value would be
considered as a level 3 fair value as defined within IFRS 13.
The respective book and fair values of bond notes and loan notes are included
in the table below.
At 30 September 2023 At 30 September 2022
Book Value Fair Value Book Value Fair Value
£m £m £m £m
Long-term borrowings (excluding lease liabilities) (1,171) (1,014) (966) (753)
Short-term borrowing (excluding lease liabilities) - - (161) (158)
11. Acquisitions and disposals
Acquisitions made during the current year
Corecon
On 5 May 2023, the Group acquired 100% equity capital and voting rights of
Corecon Technologies Inc ("Corecon"), a company based in the US, for total
cash consideration of £13m. Corecon is a cloud native subscription-based
software company used to streamline and manage project operations focused on
the construction industry.
Summary of acquisition Total
£m
Acquisition-date fair value of consideration 13
Fair value of identifiable net assets (12)
Deferred tax liability 2
Goodwill 3
Acquired intangible assets comprises technology, at a fair value of £10m,
which will be amortised over a useful economic life of 8 years, in line with
comparable previously acquired technology and Sage policy range of 3 to 8
years, and customer relationships at a fair value of £1m which will be
amortised over a useful economic life of 5 years consistent with Sage policy.
A summary of the acquired intangible assets is set out below:
Acquired intangible assets Valuation Useful economic life
£m
(years)
Customer relationships 1 5
Technology 10 8
Acquired intangible assets 11
Acquired goodwill of £3m 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 geographic CGUs where the underlying benefit arising
from the acquisition is expected to be realised. This is predominantly within
North America. 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.
The outflow of cash and cash equivalents on the acquisition is as follows:
Total
£m
Cash consideration (13)
Cash and cash equivalents acquired 1
Net cash outflow (12)
Transaction costs of £3m 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 Corecon for future services. The amount recognised to date of
£1m is included in selling and administrative expenses, in the consolidated
income statement, classified 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 includes revenue and loss after tax relating
to Corecon for the period since the acquisition date, of which both are
immaterial.
On an underlying and statutory basis, the impact on revenue and profit after
tax would have been immaterial, if Corecon had been acquired at the start of
the financial year and included in the Group's results for the year ended 30
September 2023.
Spherics
On 11 October 2022, the Group acquired 100% equity capital and voting rights
of Spherics Technologies Limited ("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 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
£5m 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, the 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 year ended 30
September 2023.
Measurement adjustments to business combinations reported using provisional
amounts - Lockstep
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 year.
The acquired net assets as 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 year, the purchase price accounting has been approved and
completed. The intangible assets identified and subsequently valued as at the
date of acquisition include:
Acquired intangible assets Valuation Useful economic life
£m
(years)
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 remaining 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 assts 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 intangible 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.
Discontinued operations and assets and liabilities held for sale
There are no assets or liabilities held for sale at 30 September 2023 (30
September 2022: none).
The Group had no discontinued operations during the year (30 September 2022:
none).
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 personnel compensation 2023 2022
£m £m
Salaries and short-term employee benefits 10 10
Share-based payments 7 5
17 15
The key management personnel figures given above include the Executive
Leadership Team and the Non-executive Directors of the Group.
13. Events after the balance sheet date
On 21 November 2023, The Sage Group plc approved a share buyback programme of
its ordinary shares of up to £350m, which is expected to commence on 22
November 2023 and end no later than 23 April 2024.
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
Build the small business engine Learn and disrupt
Scale Sage Intacct
Expand medium beyond financials
Scale the network
PRINCIPAL RISK RISK CONTEXT MANAGEMENT AND MITIGATION
Understanding Customer Needs Risk Trend: Stable Risk Environment
If Sage fails to anticipate, understand, and deliver against the capabilities Understanding of how to attract new customers while retaining existing · Brand-health surveys to provide an understanding of customer
and experiences of current and future customer needs, then customers will find customers is essential to building sustainable growth. This requires a deep perception of the Sage brand and its products, used to inform and enhance our
alternative solution providers. and continuous flow of insights supported by processes and systems. market offerings.
Strategic alignment: · A Market and Competitive Intelligence team to provide insights
that Sage uses to win in the market.
By understanding the needs of our customers, Sage will differentiate itself
from competitors, build compelling value propositions and offers, use key · Proactive analysis of customer activity and churn data, to
drivers to identify opportunities, influence product and process roadmaps, improve customer experience.
decrease churn and support more effective revenue generation.
· Customer Segmentation Framework and the customer market analysis
by region to help inform product roadmaps.
· Customer Advisory Boards, Customer Design Sessions and
closed-loop feedback to constantly gather information on customer needs.
Execution of Product Strategy Risk Trend Improving Risk Environment
If we fail to offer the capabilities and experiences outlined in our product We need to execute rapidly, a prioritised product strategy that continues to · A robust product organisation supported by a governance model to
strategy, we will not meet the needs of our customers or commercial goals. simplify our product portfolio and focuses on our drive to create the Sage enable the way we build products.
Network that will benefit our customers.
· Migration framework in key countries to support our customers as
they move to the cloud.
Strategic alignment:
· Continued expansion of Sage Intacct outside of North America and
for additional product verticals.
· Several successful product launches in key regions (e.g. Sage
Active in Europe).
· Enhancing accessibility of Sage cloud products to WCAG 2.1 AA
standard by the end of 2025.
· A strong focus on accountants through a tailored Sage for
Accountants proposition.
· Launch of Sage Earth, a carbon accounting solution to help small
and medium businesses easily understand and reduce their environmental impact.
Developing and Exploiting New Business Models Risk Trend: Stable Risk Environment
Sage is unable to develop, commercialise and scale new business models to We must be able to rapidly deploy new innovations to our customers and · A Business Unit solely focused on scaling the Sage Network.
diversify from traditional SaaS, especially consumption-based services and partners by introducing technologies, services, or new ways of working.
those which leverage data.
· Continued digitalisation and automation of Sage products through
Innovation requires us to address how we change and transform our people, Sage Network and AI services.
Strategic alignment: processes and technology, and how we differentiate our products and increase
customer efficiencies. · Enhanced, consistent digital experience for all Sage Business Cloud
users through the Sage Design System.
· Strategic acquisition (e.g. Spherics) and collaboration with
partners to complement and enable accelerated innovation.
· A new Venture Studios Team asked to search for new business models
that may align with the Sage vision.
Route to Market Risk Trend: Stable Risk Environment
If we fail to deliver a globally consistent blend of route to market channels We have a blend of channels to communicate with our current and potential · Market data and intelligence supports decision- making regarding
in each market, Sage will miss the opportunity to efficiently deliver the customers and ensure our customers receive the right information, on the right the best routes to market.
right capabilities and experiences to our current and future customers. products and services, at the right time. Our sales channels include selling
directly to customers through digital and telephone channels, via our · Specified colleagues are in place to support partners, and to help
Strategic alignment: accountant network, and through partners, valued-added resellers (VARs) and manage the growth of targeted channels.
independent software vendors (ISVs).
· Sale processes are targeted and configured by region for key
customer segments and verticals.
We use these channels to maximise our marketing and customer engagement · A specific Onboarding Squad enhances user journeys to enable
activities. This can shorten our sales cycle and ensure we improve customer customer conversion.
retention.
· Acceleration of new partnerships to support the Sage Network.
· Centre of Excellence to support our indirect sales and third-party
approach.
Customer Experience Risk Trend: Stable Risk Environment
If we fail to provide ongoing value to our customers by focusing on their We must maintain a sharp focus on the relationship we have with our customers, · Customer-journey mapping to ensure appropriate strategy alignment
needs over the lifetime of their customer journey, we will not be able to constantly offering the products, and alignment to Target Operating Model.
achieve sustainable growth through renewal.
services, and experiences they need for success. If we do not, they are likely · Introduction of micromoments, which are customer experiences broken
Strategic alignment: to find another provider who does. down into moments that matter most to our customers. We use micromoments to
prioritise improvements.
Conversely, if we meet or exceed their expectations, customers will stay with
Sage, increasing their lifetime value, and becoming our greatest marketing · 'Customer for life' roadmaps, detailing how products fit together,
advocates. any interdependencies, and migration pathways for current and potential
customers.
· Continuous Net Promoter Score (NPS) surveying allows us to identify
While Sage is known for its high-quality customer support, this area requires customer challenges rapidly, and respond in a timely manner to emerging
constant, proactive focus. By helping customers recognise and fully realise trends.
the value of Sage's products, we can help increase the value of these
relationships over time and reduce the likelihood of customer loss. By · Sage Membership offered to all customers, providing customers with
aligning our people, processes, and technology with this focus in mind, all access to curated resources, tools, and a connected community of business
Sage colleagues can help our customers to be successful and, in turn, improve leaders.
financial performance.
Third Party Reliance Risk Trend: Stable Risk Environment
If we do not make our partners an integral and aligned part of Sage's Sage relies on third-party providers to support the delivery of our products · Centre of Excellence for our indirect sales and third- party
go-to-market strategy, we will fail to deliver the right capabilities and to our customers through the provision of cloud-native products. partners.
experiences to our customers.
· Specified colleagues in place to support partners, and to help
Strategic alignment:
manage the growth of targeted channels.
Sage also has an extensive network of sales partners critical to our success
in the market, and suppliers it relies on. · Managed growth of the API estate, including enhanced product
development that enables access by third-party API developers and optimisation
of API integrations to improve efficiency.
Any interruption in these services or relationships could have a profound · Enhanced third-party management framework, to support global
impact on Sage's reputation in the market and could result in significant alignment, execution and oversight of third-party activities.
financial liabilities and losses.
· A specialised Procurement function supporting the business with the
selection of strategic third-party suppliers and negotiation of contracts and
the implementation of a Sustainable Supply Chain Strategy.
People and Performance Risk Trend: Improving 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 right the market through our enhanced employee value proposition and enhanced
the critical skills, capabilities, and capacity we need to deliver on our talent to navigate change, but will also need to provide an environment where presence through social media such as Glassdoor, Comparably, Twitter,
strategy, we will not be successful. colleagues can develop to meet these new expectations. LinkedIn, and Facebook.
Strategic alignment: · Reward mechanisms designed to incentivise and encourage the right
behaviour, with a focus on ensuring fair and equitable pay in all markets.
By empowering colleagues and leaders to make decisions, be innovative, and be
bold in meeting our commitments, Sage will be able to create an attractive · A series of Learning Academies and talent programmes to support the
working environment. By addressing what causes colleague voluntary attrition, development of internal talent including sponsorship programmes, new Director,
and embracing the values of successful technology companies, Sage can increase graduate and apprentice programmes.
colleague engagement and
· An improved OKR (Objectives and Key Results) framework to define
create an aligned high-performing team. measurable goals and track outcomes of colleague success.
· Implementation of Talent Market Place solution to support
identification of capabilities and gaps; talent pipelines; development and
career pathways; mentoring.
· Adoption of a Strategic Workforce Planning Framework across the
business.
Culture Risk Trend: Stable Risk Environment
If we do not define, shape and proactively manage our culture in line with our The development of a shared behavioural competency that encourages colleagues · Integration of Values and Behaviours into all colleague priorities
brand values, we will risk disengaging colleagues, increasing attrition and to always do the right thing, put customers at the heart of business, and including talent attraction, selection, and onboarding as well as OKRs.
affecting our ability to attract and retain diverse talent. improve innovation, is critical in Sage's success. Devolution of
decision-making, and the acceptance of accountability for those decisions, · All colleagues are encouraged to take up to 5 paid Sage Foundation
Strategic alignment: will need to go hand in hand as the organisation develops and sustains its days each year, to support charities and provide philanthropic support to the
shared Values and Behaviours, and fosters a culture that provides customers community.
with a rich digital environment.
· A DEI strategy focused on building diverse teams, an equitable
culture, and fostering inclusive leadership. This is supported by measurable
plans and metrics to track progress, ensuring Sage meets its commitments,
Sage will also need to create a culture of empowered leaders that supports the including no tolerance of discrimination, equal chances for everyone, an
development of ideas, and that provides colleagues with a safe environment inclusive culture, removing barriers, and DEI education.
allowing for honest disclosures and discussions. Such a trusting and empowered
environment can help sustain innovation, enhance customer success, and · Refreshed Code of Conduct training for all colleagues (including
encourage the engagement that results in increased market share. Anti-Bribery and Corruption requirements) delivered as snippets, allowing Sage
to signpost relevant training at colleagues' point of need.
· 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 collect, process and store data responsibly, and ensure an Information is the life blood of a digital company - protecting the · Multi-year cyber security programmes in IT and products to ensure
appropriate standard of cyber security across the business, we will not meet confidentiality, integrity and accessibility of this data is critical for a Sage is continuously improving, and reduce cyber risk across technology,
our regulatory obligations and will lose the trust of our stakeholders. data-driven business, and failure to do so can have significant financial and business processes and culture.
regulatory consequences in the General Data Protection Regulation (GDPR) era.
Strategic alignment: In addition, we also need to use our data efficiently and effectively to · Accountability within both IT and Product for all internal and
improve 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, create effective data Data is central to the Sage strategy to deliver sustainable growth by · A strategy across customer, product, and enterprise data to support
foundations, and capitalise on their use, we will not be able to realise their expanding the Sage Network. The strategy is underpinned by our ability to the delivery of customer value and solve customer problems, including the use
full potential to secure strategically aligned outcomes. innovate and develop solutions to enhance customer propositions, improve of enhanced AI/ML capabilities.
insight and decision-making and create new business models and ecosystems.
Strategic alignment:
· A global data function to increase focus and alignment across the
organization.
Successful ability to use data will accelerate our growth and will be a key · A defined set of Data and AI Ethics Principles to ensure we use
driver in helping customers transform how they run and build their businesses. customer data responsibly to achieve our strategy.
· A new Data and AI Ethics Council, which includes members from the
Executive Leadership Team and will govern activities relating to Data and AI
Ethics.
· Plan to increase participation in the Sage Network, 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 trust in our data.
· The implementation of data architecture and associated data models
that facilitate data sharing and utilisation.
· A data asset register, and associated use case catalogue, to enable
effective prioritisation and value creation.
Readiness to Scale Risk Trend: Stable Risk Environment
As Sage's ambition grows, if it fails to ensure its cloud products can build As Sage continues to build sustainable growth, we continue to focus on scaling · Migrating of products to public cloud offerings to improve
and operate at an industrial, global scale it will erode its competitive our current and future platform-services environment in a rigorous, agile, and scalability, resilience, and security.
advantage. speedy manner to ensure we provide a consistent and healthy cloud platform and
associated network. · Accountability across product owners, underpinned by ongoing risk
The hosting of products must achieve economies of scale, aligned to ambition,
assessments and continuous improvement projects.
in parallel with the ability to accelerate to market with quality. Both must
be achieved with reduced environmental impact and no customer impact.
· Migration of products to public cloud offerings to improve
Sage must provide the right infrastructure and operations for all customer scalability, resilience and security.
If not addressed, Sage's cloud products would be less resilient and less able products, a hosting platform together with the governance to ensure optimal
to respond to its customer expectations. service availability, performance, security protection, and restoration (if · Accountability across product owners, underpinned by ongoing risk
required). assessments and continuous improvement projects.
Strategic alignment:
· Formal onboarding process through ongoing portfolio management
· Incident and problem management change processes adhered to for all
products and services.
· Service-level objectives including uptime, responsiveness, and mean
time to repair.
· Defined real-time demand-management processes and controls, and
also disaster-recovery capability and operational-resilience models.
· 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 Sage fails to fully, and continually, respond to the range of opportunities We invest in education, technology, · Sage's Sustainability and Society strategy, informed by a rigorous
and risks associated with ESG it will erode its competitive advantage, its
materiality assessment, focusing on 3 pillars: Protect the Planet, Tech for
reputation, and potentially be denied its licences to operate. and the environment to give individuals, SMBs, and our planet the opportunity Good, Human by Design.
to thrive.
· Ensuring adequate executive oversight through the Sustainability
and Society Committee.
Sage would also be less resilient and able to respond to its internal and
external expectations and damage stakeholder trust. Sage may also incur higher Internally, it is essential that Sage understands the potential impact of · Enabling accountability through integration on ESG measures within
cost of capital and lose credibility unless it can demonstrate strong ESG climate change to its strategy and operations and considers appropriate long-term incentive plans.
credentials to the market. mitigations.
· A strict portfolio governance approach to working
cross-functionally to meet sustainability commitments.
Strategic alignment: Societal and Governance-related issues are integral to Sage's purpose and · An integrated framework for the management of ESG-related risk and,
values and to the achievement of in particular, physical and transitional climate risks, as detailed by TCFD
Sage's strategy.
You can read more about the work we are doing on ESG in the Sustainability and
Society Report.
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.
All references to revenue, profit and margin are on an underlying basis unless
otherwise stated.
3 (#_ednref3) United Kingdom, Ireland, Africa and APAC.
4 (#_ednref4) 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.
5 (#_ednref5) 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.
6 (#_ednref6) 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.
7 (#_ednref7) Recurring revenue from customers using products that are part
of, or that management believe have a clear pathway to, Sage Business Cloud.
8 (#_ednref8) 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.
9 (#_ednref9) Global gender diversity target of no more than 60% of any one
gender, in any leadership team, anywhere in Sage, by FY26.
10 (#_ednref10) Consistent with this change, Sage's FY24 outlook statement
(see page 2) includes guidance based on total revenue, rather than on
recurring revenue as in previous years.
11 (#_ednref11) Underlying and organic revenue and profit measures are
defined in Appendix 1.
12 (#_ednref12) Recurring and non-recurring items are defined in Appendix 1,
and detailed on page 9 and in note 3 of the financial statements.
13 (#_ednref13) Impact of retranslating FY22 revenue at FY23 average rates
14 (#_ednref14) Recurring and non-recurring items are defined in Appendix 1
and detailed in note 3 of the financial statements.
15 (#_ednref15) Impact of retranslating FY22 operating profit at FY23
average rates.
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