REG - Sage Group PLC - Results for the year ended 30 September 2024
20/11/2024 07:00
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RNS Number : 8753M Sage Group PLC 20 November 2024
The Sage Group plc
Results for the year ended 30 September 2024 (audited)
20 November 2024
Strong and efficient growth driven by focused strategic execution
Steve Hare, Chief Executive Officer, commented:
"Sage has delivered another successful year, achieving strong, broad-based
revenue growth together with significantly higher profits and cash flows. We
also invested further in our products and continued to execute well against
our strategic priorities.
"Our high pace of innovation continues, as we enhance existing products and
expand key cloud solutions throughout our markets. The Sage Network platform
is enabling us to accelerate the delivery of new services, and we've made good
progress with Sage Copilot, our generative AI-based digital assistant, now
available with selected products across our portfolio.
"Small and mid-sized businesses remain resilient, despite the ongoing
macroeconomic uncertainty, and they continue to choose Sage to help them
become more productive and efficient. Building on our progress to date, we
look forward to delivering further sustainable growth in the year ahead."
Underlying Financial APMs i (#_edn1) FY24 FY23 ii (#_edn2) Change Organic
Change
Annualised Recurring Revenue (ARR) £2,339m £2,112m +11% +11%
Underlying Total Revenue £2,332m £2,133m +9% +9%
Underlying Operating Profit £529m £438m +21% +21%
% Operating Profit Margin 22.7% 20.5% +2.2 ppts +2.2 ppts
EBITDA £622m £534m +16%
% EBITDA Margin 26.6% 25.0% +1.6 ppts
Underlying Basic EPS (p) 37.9p 30.9p +23%
Underlying Cash Conversion 123% 116% +7 ppts
Statutory Measures FY24 FY23 Change
Revenue £2,332m £2,184m +7%
Operating Profit £452m £315m +43%
% Operating Profit Margin 19.4% 14.4% +5.0 ppts
Basic EPS (p) 32.1p 20.7p +55%
Dividend Per Share (p) 20.45p 19.30p +6%
Please note that tables may not cast and change percentages may not calculate
precisely due to rounding.
Financial highlights
· Underlying total revenue increased by 9% to £2,332m, reflecting
the strength of our subscription-based recurring revenue model.
· Underlying operating profit grew by 21% to £529m, driving a
particularly strong margin increase of 220 basis points to 22.7%, with
disciplined cost management supporting ongoing investment.
· EBITDA grew by 16% to £622m, with margin increasing by 160 basis
points to 26.6%.
· Statutory operating profit increased by 43% to £452m reflecting
strong growth in underlying operating profit, lower M&A-related expenses
and the non-recurrence of prior year restructuring charges.
· Underlying basic EPS increased by 23% to 37.9p.
· Free cash flow increased by 30% to £524m, supported by excellent
underlying cash conversion of 123%, reflecting growth in subscription revenue
and continued good working capital management.
· Robust balance sheet, with £1.1bn of cash and available liquidity,
and net debt to EBITDA of 1.2x.
Shareholder returns
· Proposed final dividend of 13.50p, increasing the full year
dividend by 6% to 20.45p, in line with our progressive policy.
· Share buyback programme of up to £400m announced separately today,
reflecting Sage's strong cash generation, robust financial position, and the
Board's confidence in Sage's future prospects.
Strategic and operational highlights
· Underlying annualised recurring revenue (ARR) up 11% to £2,339m,
with growth across all regions balanced between new and existing customers.
· Renewal rate by value of 101% (FY23: 102%), reflecting strong
retention rates and a good level of sales to existing customers.
· Sage Business Cloud revenue increased by 16% to £1,871m (FY23:
£1,619m), including cloud native revenue growth of 23% to £732m (FY23:
£597m).
· Subscription penetration increased to 82% (FY23: 79%) driven by
growth in subscription revenue of 13% to £1,910m (FY23: £1,694m).
· Strong strategic progress as we further expand our global cloud
solutions, deepen our vertical-specific capabilities and introduce new
software suites across the Group.
· Continued to scale the Sage Network and roll out Sage Copilot, our
generative AI-powered assistant, now available to over 8,000 customers of Sage
Accounting, Sage for Accountants and Sage Active.
· Simplified our strategic framework to reflect evolving priorities.
Outlook
Sage enters FY25 with good momentum driven by consistent strategic execution.
Looking ahead, we expect organic total revenue growth in FY25 to be 9% or
above. Operating margins are expected to trend upwards in FY25 and beyond, as
we focus on efficiently scaling the Group.
About Sage
Sage exists to knock down barriers so everyone can thrive, starting with the
millions of small and mid-sized businesses (SMBs) served by us, our partners
and accountants. Customers trust our finance, HR and payroll software to make
work and money flow. By digitising business processes and relationships with
customers, suppliers, employees, banks and governments, our digital network
connects SMBs, removing friction and delivering insights. Knocking down
barriers also means we use our time, technology and experience to tackle
digital inequality, economic inequality and the climate crisis.
Enquiries: Sage: +44 (0) 7341 479956 FGS Global: +44 (0) 20 7251 3801
James Sandford, Investor Relations Conor McClafferty
David Ginivan, Corporate PR Sophia Johnston
A presentation for investors and analysts will be held at 8.30am UK time. The
webcast can be accessed via sage.com/investors or directly via the following
link: https://edge.media-server.com/mmc/p/czay8sbw
(https://edge.media-server.com/mmc/p/czay8sbw) . To join the conference call,
please register via
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(https://register.vevent.com/register/BI0c875da171514d128ecd0423d836f3f9) .
Business Review
Sage continued to perform well in FY24, achieving strong broad-based revenue
growth together with significantly higher profits and cash flows.
Overview of results
The Group increased underlying total revenue by 9% to £2,332m (FY23:
£2,133m), with all regions contributing to growth. In North America, revenue
grew by 12%, driven by a good performance from Sage Intacct together with
continued growth in Sage 50 cloud and Sage 200 cloud. In the UKIA iii
(#_edn3) region, revenue increased by 8%, driven by Sage Intacct together with
cloud solutions for small businesses. In Europe, revenue increased by 6%, with
growth across our accounting, payroll and HR solutions.
Throughout the Group, our principal focus is to grow Sage Business Cloud,
comprising our cloud native iv (#_edn4) and cloud connected v (#_edn5)
solutions, by attracting new customers and delivering further value to
existing customers. Sage Business Cloud solutions enable customers to benefit
from a growing range of cloud services as part of the Sage Network, leading to
deeper customer relationships and higher lifetime values.
As a result, Sage Business Cloud total revenue increased by 16% to £1,871m
(FY23: £1,619m), driven by growth in cloud native revenue of 23% to
£732m (FY23: £597m) primarily through new customer acquisition, and by
growth in cloud connected revenue from both existing and new customers.
Underlying recurring revenue increased by 10% to £2,257m (FY23: £2,048m),
with software subscription revenue up by 13% to £1,910m (FY23: £1,694m)
leading to subscription penetration of 82% (FY23: 79%). As a result, 97% of
the Group's revenue is recurring.
On an organic basis, total revenue grew by 9% to £2,332m (FY23: £2,134m),
whilst recurring revenue grew by 10% to £2,257m (FY23: £2,049m).
ARR growth
Sage's underlying ARR increased by 11% to £2,339 (FY23: £2,112m), reflecting
strong growth balanced between new and existing customers. Organic ARR also
increased by 11% to £2,334m (FY23: £2,112m).
Renewal rate by value of 101% (FY23: 102%) reflects strong retention rates and
a good level of sales to existing customers, including customer add-ons and
targeted price rises. In total, Sage added £190m of ARR through new customer
acquisition on an organic basis during FY24, in line with the prior year.
Performance by region
North America FY24 FY23 Change Organic change
US £918m £819m 12% 12%
Canada £134m £121m 11% 11%
Underlying total revenue £1,052m £940m 12% 12%
In North America, underlying total revenue increased by 12% to £1,052m, with
growth across Sage's key accounting solutions, particularly among mid-sized
businesses. Recurring revenue grew by 13% to £1,028m (FY23: £913m), while
subscription penetration increased to 81%, up from 78% in the prior year.
In the US, total revenue increased by 12% to £918m, with growth moderating
compared to the prior year. Sage Intacct, which represents over 40% of US
revenue, grew by 24% to £385m (FY23: £311m), driven by strength across
multiple verticals including not-for-profit and construction & real
estate. Revenue was also driven by Sage 200 cloud, Sage 50 cloud and Sage X3,
reflecting good levels of upsell to existing customers and higher pricing,
together with growth from new customers.
In Canada, total revenue grew by 11% to £134m, driven mainly by Sage 50 cloud
which saw strong renewals and new customer acquisition, together with growth
in Sage 200 cloud. In addition, Sage Intacct grew strongly, while Sage HR
achieved good traction following its Canadian launch earlier in the year.
UKIA FY24 FY23 Change Organic change
UK & Ireland £505m £471m 7% 7%
Africa & APAC £165m £149m 11% 11%
Underlying total revenue £670m £620m 8% 8%
In the UKIA region, underlying total revenue increased by 8% to £670m, with
continuing strength across the portfolio including accounting, HR and payroll
solutions. Recurring revenue also grew by 8% to £655m, while subscription
penetration was 89%, in line with the prior year.
In the UK & Ireland, total revenue grew by 7% to £505m. Sage Intacct made
a significant contribution, benefitting from strong new customer wins, with
momentum continuing to build throughout the year.
Alongside Sage Intacct, Sage's cloud native solutions for small businesses
including Sage Accounting, Sage Payroll and Sage HR delivered good levels of
growth, mainly through new customer acquisition. Revenue was also driven by
growth in accountancy practice management tools, supported by the continued
adoption of Sage for Accountants. In addition, Sage 50 cloud and Sage 200
cloud continued to perform well, with growth mainly from existing customers
through good levels of upsell and higher pricing.
In Africa and APAC, total revenue grew by 11% to £165m, with strong growth in
Sage Accounting, Sage Payroll and Sage HR driven by good levels of new
customer acquisition, while Sage Intacct also performed well, off a small
base. In addition, Sage X3 and local products within the Sage 200 cloud and
Sage 50 cloud franchises continued to contribute to growth.
Europe FY24 FY23 Change Organic Change
France £309m £290m 6% 6%
Central Europe £148m £140m 6% 6%
Iberia £153m £143m 7% 7%
Underlying total revenue £610m £573m 6% 6%
Europe achieved underlying total revenue growth of 6% to £610m, reflecting a
strong performance particularly in Sage 200 cloud, Sage 50 cloud, HR and
payroll solutions. Recurring revenue grew by 8% to £574m (FY23: £531m),
while subscription penetration increased to 76%, up from 70% in the prior
year.
In France, total revenue grew by 6% to £309m driven by accounting solutions.
Sage 200 cloud was a significant contributor to growth, as was Sage X3 which
continued to benefit from strong demand. Solutions for accountants performed
well, driven by accelerated upsell of add-ons. Payroll and HR solutions also
contributed to growth within the region.
Central Europe achieved a total revenue increase of 6% to £148m. Cloud HR and
payroll solutions, which represent almost half of the region's revenue, grew
particularly strongly, driven by upsell to existing customers together with
new customer wins. Growth was also driven by Sage 200 cloud, mainly through
sales to existing customers.
In Iberia, total revenue grew by 7% to £153m, reflecting strength across Sage
200 cloud and Sage 50 cloud, driven by renewals, higher pricing and new
customers. Iberia also achieved good levels of growth from accountants,
complemented by the recent launch of Sage for Accountants in Spain.
Evolving our strategy
During the year, we simplified our strategic framework in order to accelerate
progress, focusing our ambition both on developing the Sage Network platform
and on leveraging generative AI, in order to significantly enhance the value
we deliver to customers. Our refreshed framework is consistent with our
existing strategic priorities and is centred on three key focus areas:
· Connecting our customers, products and data through the Sage
Network, which is our platform cloud products and services that digitally
transform customer workflows across their business ecosystems.
· Growing our business by winning new and delighting existing
customers. This includes further scaling Sage Intacct in North America and
UKIA, growing our small business solutions through success with accountants,
establishing Sage Intacct and Sage Active in Europe, and driving 'in-life'
growth through focused cross-sell and upsell.
· Delivering productivity and insights through AI, enabling our
customers to save time and money and helping them make better decisions.
Our progress in each of these areas is outlined below.
Connect
The Sage Network connects customers to their trading partners, suppliers, tax
authorities and banks, automating their workflows and streamlining operations.
During the year we connected more customers to network services such as
accounts payable automation, and we enabled new services such as e-invoicing.
We also launched a customer account portal, enabling Sage customers in the UK
to confidentially share invoice and payment information, and we expanded our
partnership with Stripe to help improve cashflow management and payment
processing for SMBs.
Grow
We continue to scale Sage Intacct by enhancing its core functionality,
deepening its vertical-specific capabilities and expanding its geographical
reach. Already well established in the US, Sage Intacct is growing rapidly in
the UK with almost 1,200 customers so far, scaling well in Canada and South
Africa, and gaining early momentum following recent launches in France and
Germany. Reflecting this progress, in FY24 Sage Intacct's ARR grew by almost
a quarter in the US and by 60% outside the US.
During the year we introduced a number of suites in order to simplify our
customer proposition, including Sage for Small Business in the UK, and Sage
for Construction and Sage for Nonprofits in the US. We also continued expand
Sage for Accountants, now launched in Canada, Spain and the UK. These suites
provide a streamlined, integrated offering tailored to our customers' needs.
In Europe, we enhanced our proposition by introducing Sage Active Essentials,
which integrates sales management capabilities into Sage Active and is now
available in France, Spain and Germany.
Deliver
Sage Copilot is our new, generative AI-powered productivity assistant that
streamlines routine tasks, provides strategic insights and enhances customer
decision-making. Features such as automated invoice management, payment
reminders, insight generation and recommendations are helping customers get
paid faster and be more productive. During the year we focused on creating a
strong value proposition and driving early adoption. As a result, Sage Copilot
is available to over 8,000 customers of Sage Accounting, Sage for Accountants
and Sage Active so far, with strong feedback and high engagement levels. Our
focus for FY25 is to scale the solution to more products and customers
throughout the Group.
Sustainability and Society
Sage supports sustainable and inclusive economic growth so everyone can
thrive. To help protect the planet, we are focused on achieving our
SBTi-validated carbon targets of halving emissions by 2030 and achieving net
zero by 2040, against a 2019 baseline. Through our "tech for good"
initiatives, we are empowering under-served entrepreneurs to scale and grow
their businesses, and championing cyber security, data ethics and digital
equality. In addition, Sage Foundation helped colleagues to dedicate almost
160,000 volunteering hours to their communities in FY24.
Sage also seeks to develop an inclusive, sustainable working environment. In
FY24 we took steps to drive a high-performance culture, focusing colleagues
throughout the Group on accountability, continuous learning and customer
centricity. We also seek to embed Diversity, Equity and Inclusion (DEI) into
everyday business processes and decisions, to drive diversity of thought.
During the year, we increased the proportion of leadership teams that meet our
FY26 gender diversity target vi (#_edn6) to 41%, up from 34% last year.
Sage has an 'AAA' ESG rating from MSCI and an 'A-' Climate Change score from
CDP.
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 vii (#_edn7) .
Statutory and underlying financial results
Financial results Statutory Underlying
FY24 FY23 Change FY24 FY23 Change
North America £1,052m £973m +8% £1,052m £940m +12%
UKIA £670m £627m +7% £670m £620m +8%
Europe £610m £584m +5% £610m £573m +6%
Total revenue £2,332m £2,184m +7% £2,332m £2,133m +9%
Operating profit £452m £315m +43% £529m £438m +21%
% Operating profit margin 19.4% 14.4% +5.0 ppts 22.7% 20.5% +2.2 ppts
Profit before tax £426m £282m +51% £502m £407m +23%
Profit after tax £323m £211m +53% £382m £315m +21%
Basic EPS 32.1p 20.7p +55% 37.9p 30.9p +23%
The Group achieved statutory and underlying total revenue of £2,332m in FY24.
Statutory total revenue increased by 7%, reflecting underlying total revenue
growth of 9%, offset by a 2-percentage point foreign exchange headwind, as
sterling strengthened against the US dollar and other international currencies
compared to the prior year.
Statutory operating profit increased by 43% to £452m, reflecting a 21%
increase in underlying operating profit to £529m, together with a £64m
decrease in recurring and non-recurring items viii (#_edn8) , reflecting
lower M&A-related charges in FY24 together with non-recurring
restructuring charges in the prior year.
Statutory basic EPS increased by 55% to 32.1p, reflecting higher underlying
operating profit, lower net finance costs and the post-tax impact of lower
recurring and non-recurring items. Underlying basic EPS increased by 23% to
37.9p, primarily reflecting higher underlying operating profit.
Revenue - underlying and organic reconciliation to statutory
Total revenue bridge FY24 FY23 Change
Statutory £2,332m £2,184m +7%
Recurring items - -
Impact of FX - (£51m)
Underlying £2,332m £2,133m +9%
Disposals - -
Acquisitions - £1m
Organic £2,332m £2,134m +9%
Statutory, underlying and organic total revenue was £2,332m in FY24.
Underlying revenue in FY23 of £2,133m reflects statutory revenue of £2,184m
retranslated at current year exchange rates, resulting in a foreign exchange
headwind of £51m. Organic revenue in FY23 of £2,134m reflects underlying
revenue of £2,133m, adjusted for £1m of revenue from Corecon which was
acquired during FY23.
Operating profit
Underlying and organic operating profit grew by 21% to £529m (FY23: £438m),
resulting in a particularly strong increase in operating margin of 220 basis
points to 22.7% (FY23: 20.5%). This was driven by strong revenue growth and
operating efficiencies, with disciplined cost management supporting ongoing
investment.
Operating profit - underlying and organic reconciliation to statutory
Operating profit bridge FY24 FY23
Operating profit Operating margin Operating profit Operating margin
Statutory £452m 19.4% £315m 14.4%
Recurring items ix (#_edn9) £82m £103m
Non-recurring items:
· Property restructuring - £32m
· Employee-related costs (£3m) £9m
· Reversal of restructuring costs (£2m) (£3m)
Impact of FX x (#_edn10) - (£18m)
Underlying £529m 22.7% £438m 20.5%
Disposals - - - -
Acquisitions - - - -
Organic £529m 22.7% £438m 20.5%
The Group achieved a statutory operating profit in FY24 of £452m. Underlying
operating profit of £529m in FY24 reflects statutory operating profit
adjusted for recurring and non-recurring items.
Recurring items of £82m (FY23: £103m) comprise £48m of amortization of
acquisition-related intangibles (FY23: £54m) and £34m of M&A-related
charges (FY23: £49m). Non-recurring items in FY24 comprise a £3m reversal of
employee-related charges for French payroll taxes relating to previous years
(FY23: £9m charge), and a £2m reversal of restructuring costs (FY23: £3m).
Non-recurring items in FY23 also include property restructuring charges of
£32m. Together, recurring and non-recurring items reduced by £64m compared
to the prior year.
In addition, the retranslation of FY23 underlying and organic operating profit
at current year exchange rates has resulted in an operating profit headwind of
£18m. This has led to a 40-basis point margin headwind from foreign exchange
to 20.5% (FY23 underlying as reported: 20.9%).
EBITDA
EBITDA was £622m (FY23: £534m) representing a margin of 26.6%. The increase
in EBITDA principally reflects the growth in underlying operating profit,
together with a £5m reduction in underlying depreciation and amortisation to
£48m (FY23: £53m) as a result of property restructuring.
FY24 FY23 Margin
Underlying operating profit £529m £438m 22.7%
Depreciation & amortisation £48m £53m
Share-based payments £45m £43m
EBITDA £622m £534m 26.6%
Net finance cost
The underlying net finance cost for the year decreased to £27m (FY23: £32m),
reflecting higher interest income on deposits, and is broadly in line with the
statutory net finance cost of £26m (FY23: £33m).
Taxation
The underlying tax expense for FY24 was £120m (FY23: £92m), resulting in an
underlying tax rate of 24% (FY23: 23%). The underlying tax rate has increased
principally due to the recent rise in the UK corporation tax rate. The
statutory income tax expense for FY24 was £103m (FY23: £71m), resulting in a
statutory tax rate of 24% (FY23: 25%).
Earnings per share (EPS)
FY24 FY23 Change
Statutory basic EPS 32.1p 20.7p +55%
Recurring items 6.3p 8.8p
Non-recurring items (0.5)p 2.8p
Impact of foreign exchange - (1.4)p
Underlying basic EPS 37.9p 30.9p +23%
Underlying basic EPS increased by 23% to 37.9p, reflecting higher underlying
operating profit. Statutory basic EPS increased by 55%, reflecting the
increase in underlying basic EPS together with lower charges for recurring and
non-recurring items compared to the prior year.
Cash flow
Sage remains highly cash generative with underlying cash flow from operations
increasing by 23% to £649m (FY23: £528m), representing underlying cash
conversion of 123% (FY23: 116%). This strong cash performance reflects further
growth in subscription revenue and continued good working capital management.
Free cash flow growth of 30% to £524m (FY23: £404m) reflects strong
underlying cash conversion.
Cash flow APMs FY24 FY23 (as reported)
Underlying operating profit £529m £456m
Depreciation, amortisation and non-cash items in profit £44m £51m
Share-based payments £45m £43m
Net changes in working capital £55m -
Net capital expenditure (£24m) (£22m)
Underlying cash flow from operations £649m £528m
Underlying cash conversion % 123% 116%
Non-recurring cash items (£5m) (£11m)
Net interest paid (£25m) (£24m)
Income tax paid (£91m) (£85m)
Profit and loss foreign exchange movements (£4m) (£4m)
Free cash flow £524m £404m
Statutory reconciliation of cash flow from operations FY24 FY23 (as reported)
Statutory cash flow from operations £625m £505m
Recurring and non-recurring items £44m £41m
Net capital expenditure (£24m) (£22m)
Other adjustments including foreign exchange translations £4m £4m
Underlying cash flow from operations £649m £528m
Net debt and liquidity
Group net debt was £738m at 30 September 2024 (30 September 2023: £561m),
comprising cash and cash equivalents of £508m (30 September 2023: £696m) and
total debt of £1,246m (30 September 2023: £1,257m). The Group had £1,138m
of cash and available liquidity at 30 September 2024 (30 September 2023:
£1,326m).
The increase in net debt in the period is summarised in the table below:
FY24 FY23 (as reported)
Net debt at 1 October (£561m) (£733m)
Free cash flow £524m £404m
New leases (£26m) (£14m)
Acquisition of businesses (£34m) (£26m)
M&A and equity investments (£41m) (£30m)
Dividends paid (£199m) (£190m)
Share buyback (£348m) -
Purchase of shares by Employee Benefit Trust (£55m) (£1m)
FX movement and other £2m £29m
Net debt at 30 September (£738m) (£561m)
The Group's debt is sourced from sterling and euro denominated bond notes,
together with a syndicated multicurrency revolving credit facility (RCF).
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,
issued in February 2021, with a coupon of 1.625%. Sage's euro denominated
bond notes comprise €500m of 5-year notes, with a coupon of 3.82%, issued in
February 2023 as part of the Group's Euro Medium Term Note (EMTN) programme.
The Group's RCF of £630m expires in December 2029, having been extended by
one year in November 2024. At 30 September 2024, the RCF was undrawn (FY23:
undrawn).
Sage has an investment grade issuer 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 FY24 Sage completed the acquisitions of Bridgetown
Software (BidMatrix), a bid analysis tool for the construction industry;
Infineo, a specialist in integrated reporting and data visualization software;
and Anvyl, a provider of end-to-end supply chain management software.
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 13.50p per share, taking the total dividend
for the year to 20.45p, up 6% compared to the prior year (FY23: 19.30p).
The Group also considers returning surplus capital to shareholders. On 11
April 2024, Sage completed a share buyback programme, commenced on 22 November
2023, under which a total of 29.3m shares were purchased for an aggregate
consideration of £345m and subsequently cancelled.
Alongside these results, we have announced a further share buyback programme
of up to £400m, reflecting Sage's strong cash generation, robust financial
position, and the Board's confidence in the Group's future prospects. Sage
continues to have considerable financial flexibility to drive the execution of
its growth strategy.
FY24 FY23 (as reported)
Net debt £738m £561m
EBITDA (last twelve months) £622m £553m
Net debt/EBITDA Ratio 1.2x 1.0x
The Group's EBITDA over the last 12 months was £622m, resulting in a net debt
to EBITDA leverage ratio of 1.2x, up from 1.0x 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.
Return on capital employed (ROCE) for FY24 was 26% (FY23 as reported: 19%).
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 2024 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
19.
Foreign exchange
The Group does not hedge foreign currency profit and loss translation exposure
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) FY24 FY23 Change
Euro (€) 1.17 1.15 +2%
US Dollar ($) 1.27 1.23 +3%
Canadian Dollar (C$) 1.73 1.65 +4%
South African Rand (ZAR) 23.50 22.31 +5%
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 adjusting for 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.
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 the 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 2024
Note 2024 2023
£m
£m
Revenue 2 2,332 2,184
Cost of sales (168) (156)
Gross profit 2,164 2,028
Selling and administrative expenses (1,712) (1,713)
Operating profit 2 452 315
Finance income 19 12
Finance costs (45) (45)
Profit before income tax 426 282
Income tax expense 4 (103) (71)
Profit for the year 323 211
323
Profit attributable to:
Owners of the parent 211
Earnings per share attributable to the owners of the parent (pence)
Basic 6 32.10p 20.75p
Diluted 6 31.55p 20.43p
All operations in the year relate to continuing operations.
Consolidated statement of comprehensive income
For the year ended 30 September 2024
2024 2023
£m £m
Profit for the year 323 211
Items of other comprehensive income that will not be reclassified to profit or
loss
Actuarial loss on post-employment benefit obligations (2) -
(2) -
Items of other comprehensive income that may be reclassified to profit or loss
Exchange differences on translating foreign operations and net investment (101) (82)
hedges
Cash flow hedges - 4
(101) (78)
Other comprehensive expense for the year, net of tax (103) (78)
Total comprehensive income for the year 220 133
Total comprehensive income for the year attributable to:
Owners of the parent 220 133
The notes on pages 19 to 35 form an integral part of this condensed
consolidated yearly report.
Consolidated balance sheet
As at 30 September 2024
Note 2024 2023
£m £m
Non-current assets
Goodwill 7 2,130 2,245
Other intangible assets 7 219 274
Property, plant and equipment 7 108 104
Equity investments 6 4
Trade and other receivables 137 138
Deferred income tax assets 81 56
Derivative financial instruments 29 1
2,710 2,822
Current assets
Trade and other receivables 404 376
Current income tax asset 16 42
Cash and cash equivalents (excluding bank overdrafts) 9 508 696
928 1,114
Total assets 3,638 3,936
Current liabilities
Trade and other payables (405) (378)
Current income tax liabilities (26) (25)
Borrowings 9 (15) (14)
Provisions (22) (23)
Deferred income (758) (745)
(1,226) (1,185)
Non-current liabilities
Borrowings 9 (1,231) (1,243)
Post-employment benefits (23) (19)
Deferred income tax liabilities (18) (18)
Provisions (25) (24)
Trade and other payables (3) (13)
Deferred income (6) (7)
Derivative financial instruments (13) (20)
(1,319) (1,344)
Total liabilities (2,545) (2,529)
Net assets 1,093 1,407
Equity attributable to owners of the parent
Ordinary shares 8 11 12
Share premium 8 548 548
Other reserves 8 88 189
Retained earnings 446 658
Total equity 1,093 1,407
Consolidated statement of changes in equity
For the year ended 30 September 2024
Ordinary shares Share premium Other reserves Retained earnings Total
£m
£m
£m
£m
equity
£m
At 1 October 2023 12 548 189 658 1,407
Profit for the year - - - 323 323
Other comprehensive expense
Exchange differences on translating foreign operations and net investment - - (101) - (101)
hedges
Actuarial loss on post-employment benefit obligations - - - (2) (2)
Total comprehensive (expense)/income - - (101) 321 220
for the year ended 30 September 2024
Transactions with owners
Employee share option scheme - value of employee services including deferred - - - 62 62
tax
Proceeds from issuance of treasury shares - - - 9 9
Cancellation of ordinary shares (1) - - 1 -
Share buyback programme - - - (351) (351)
Purchase of shares by Employee Benefit Trust - - - (55) (55)
Dividends paid to owners of the parent - - - (199) (199)
Total transactions with owners for the year ended 30 September 2024 (1) - - (533) (534)
At 30 September 2024 11 548 88 446 1,093
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 - - (78) 211 133
for the year ended 30 September 2023
Transactions with owners
Employee share option scheme - value of employee services including deferred - - - 57 57
tax
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 cash flows
For the year ended 30 September 2024
Note 2024 2023
£m £m
Cash flows from operating activities
Cash generated from continuing operations 625 505
Interest paid (43) (33)
Income tax paid (91) (85)
Net cash generated from operating activities 491 387
Cash flows from investing activities
Purchase of equity investment (2) -
Acquisition of subsidiaries, net of cash acquired 11 (30) (26)
Purchases of intangible assets 7 (18) (17)
Purchases of property, plant and equipment 7 (19) (5)
Proceeds from disposals of property, plant and equipment 7 9 -
Interest received 19 12
Net cash used in investing activities (41) (36)
Cash flows from financing activities
Proceeds from borrowings - 440
Repayments of borrowings - (353)
Capital element of lease payments 9 (16) (18)
Borrowing costs (1) (3)
Share buyback programme (348) -
Proceeds from issuance of treasury shares 8 9 11
Purchase of shares by Employee Benefit Trust 8 (55) (1)
Dividends paid to owners of the parent 5 (199) (190)
Net cash used in financing activities (610) (114)
Net (decrease)/increase in cash and cash equivalents (160)
(before exchange rate movement)
237
Effects of exchange rate movement 9 (28) (30)
Net (decrease)/increase in cash and cash equivalents (188) 207
Cash, cash equivalents and bank overdrafts at 1 October 9 696 489
Cash, cash equivalents and bank overdrafts at 30 September 9 508 696
Notes to the financial information
For the year ended 30 September 2024
1. Group accounting policies
General information
The Sage Group plc (the "Company") and its subsidiaries (together the "Group")
is a leader in accounting, financial, HR and payroll technology for 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 2024 or 2023 but is derived from those financial statements.
Statutory financial statements for the year ended 30 September 2023 have been
delivered to the Registrar of Companies and those for 2024 will be delivered
in December 2024. 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 2024.
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. In preparing the financial statements in the current year,
management have removed non-GAAP information (i.e. underlying measures) from
the consolidated income statement that was presented in previous years, in
order to simplify the report by limiting the primary statements to information
prepared under UK-IFRS.
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 the 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 2026 (the going concern
assessment period). The liquidity forecast reflects the expected impact of
economic conditions on trading, 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 financially 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 123%, reflecting the strength of the
subscription business model; and
· A well-diversified small and mid-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
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 2024).
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 available
liquidity down to minimum working capital requirements. The result of the
reverse stress testing has highlighted that such a scenario would only arise
following a 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 page 156 of the Annual Report & Accounts for 2024.
Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 September 2024.
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.
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 2024.
On 9 April 2024, the International Accounting Standards Board ("IASB") issued
a new standard IFRS 18 "Presentation and Disclosure in Financial Statements",
which if adopted by the UK Endorsement Board, will be effective for annual
reporting periods beginning on or after 1 January 2027. While IFRS 18 will not
impact the recognition or measurement of items in the financial statements, it
will likely result in changes to how Sage presents certain information. The
Group is in the process of assessing the impact that the application of this
standard will have on the Group's financial statements when first applied.
No other new or revised accounting standards, interpretations, or amendments
which have been issued but were not effective are expected to have a material
impact on the Group's financial statements when first applied.
Climate change
In preparing the consolidated financial statements, management has considered
the impact of climate change, with particular reference to the disclosures
provided in the Group's Strategic Report within the Annual Report &
Accounts for 2024.
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 have continued to 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. No material impact has been identified at this
stage.
· 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 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 2024.
Business Combinations (judgement and estimate)
When the Group completes a business combination, the consideration transferred
for the acquisition and the identifiable assets and liabilities are recognised
at their fair values. The amount by which the consideration exceeds the net
assets acquired is recognised as goodwill. The application of accounting
policies to business combinations involves judgement and the use of estimates.
On 9 September 2024, the Group acquired a 100% controlling interest in Infineo
SAS ("Infineo") which constituted a significant business combination (see note
11). The key areas of judgement include the identification and subsequent
measurement of acquired intangible assets. However, in line with IFRS 3, the
initial accounting for the acquisition of Infineo is provisional as at 30
September 2024. The residual excess of consideration over the net assets
acquired has been provisionally recognised as unallocated goodwill. No
goodwill is expected to be deductible for tax purposes. Adjustments to
provisional amounts will be made within the permitted measurement period where
they reflect new information obtained about facts and circumstances that were
in existence at the acquisition date. It is expected that the acquisition
accounting will be finalised within 12 months.
2. Segment information
In accordance with IFRS 8, "Operating Segments", information for the Group's
operating segments has been derived using the information used by the chief
operating decision maker. The Group's Executive Leadership Team ("ELT") has
been identified as the chief operating decision maker, in accordance with
their designated responsibility for the allocation of resources to operating
segments and assessing their performance through the Monthly Execution &
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.
With effect from 1 October 2023, the Group is organised into three key
operating segments:
· North America
· United Kingdom, Ireland, Africa and APAC (UKIA)
· Europe
For reporting under IFRS 8, each of the three operating segments above
represents a reportable segment.
Prior to this date, the Group was organised into seven operating segments:
North America, UK & Ireland, Central Europe (Germany, Austria and
Switzerland), France, Iberia (Spain and Portugal), Africa and the Middle East,
and Asia (including Australia).
The UKIA operating segment is the aggregation of the previously identified UK
& Ireland, Africa and the Middle East, and Asia (including Australia)
segments, while the Europe operating segment is the aggregation of the
previously identified Central Europe, France and Iberia operating segments.
There have been no changes to the North America operating segment.
Two of the reportable segments presented above, North America and Europe,
remain consistent with the reportable segments identified in the previous
annual financial statements for the year ended 30 September 2023. However in
previous years, the UKIA reportable segment was disaggregated and presented as
two reportable segments, UK & Ireland and Africa & APAC.
Therefore, the financial data presented in the following tables for the
comparative period (year ended 30 September 2023) has been restated to
aggregate the two historic reportable segments into the newly identified UKIA.
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 2024 Change
Statutory Underlying Underlying Organic Organic Statutory Underlying Organic
£m
£m
£m
adjustments adjustments
£m £m
Recurring revenue by segment
North America 1,028 - 1,028 - 1,028 9% 13% 12%
UKIA 655 - 655 - 655 7% 8% 8%
Europe 574 - 574 - 574 6% 8% 8%
Recurring revenue 2,257 - 2,257 - 2,257 8% 10% 10%
Other revenue by segment
North America 24 - 24 - 24 (15%) (12%) (12%)
UKIA 15 - 15 - 15 (4%) (1%) (1%)
Europe 36 - 36 - 36 (15%) (14%) (14%)
Other revenue 75 - 75 - 75 (13%) (11%) (11%)
Total revenue by segment
North America 1,052 - 1,052 - 1,052 8% 12% 12%
UKIA 670 - 670 - 670 7% 8% 8%
Europe 610 - 610 - 610 5% 6% 6%
Total revenue 2,332 - 2,332 - 2,332 7% 9% 9%
Year ended 30 September 2024 Change
Statutory Underlying Underlying Organic Organic Statutory Underlying Organic
£m
£m
£m
adjustments adjustments
£m £m
Total recurring revenue by type
Software subscription revenue 1,910 - 1,910 - 1,910 10% 13% 13%
Other recurring revenue 347 - 347 - 347 (5%) (2%) (2%)
Recurring revenue 2,257 - 2,257 - 2,257 8% 10% 10%
Other revenue 75 - 75 - 75 (13%) (11%) (11%)
Total revenue 2,332 - 2,332 - 2,332 7% 9% 9%
Revenue by segment (continued)
Year ended 30 September 2023 (Restated)
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 944 - 944 (31) 913 1 914
UKIA** 611 - 611 (7) 604 - 604
Europe 541 - 541 (10) 531 - 531
Recurring revenue 2,096 - 2,096 (48) 2,048 1 2,049
Other revenue by segment
North America 29 - 29 (2) 27 - 27
UKIA** 16 - 16 - 16 - 16
Europe 43 - 43 (1) 42 - 42
Other revenue 88 - 88 (3) 85 - 85
Total revenue by segment
North America 973 - 973 (33) 940 1 941
UKIA** 627 - 627 (7) 620 - 620
Europe 584 - 584 (11) 573 - 573
Total revenue 2,184 - 2,184 (51) 2,133 1 2,134
Year ended 30 September 2023
Statutory Underlying adjustments Underlying as reported Impact of foreign exchange Underlying Organic Organic
£m
£m
£m
£m
£m
£m
Adjustments*
£m
Total recurring revenue by type
Software subscription revenue 1,732 - 1,732 (38) 1,694 1 1,695
Other recurring revenue 364 - 364 (10) 354 - 354
Recurring revenue 2,096 - 2,096 (48) 2,048 1 2,049
Other revenue 88 - 88 (3) 85 - 85
Total revenue 2,184 - 2,184 (51) 2,133 1 2,134
Notes:
* Adjustments relate to the acquisition of Corecon in the previous year.
** Previously disaggregated into two reportable segments, i) UK & Ireland,
and ii) Africa & APAC.
Operating profit by segment
Year ended 30 September 2024 Change
Statutory Underlying adjustments Underlying Organic adjustments £m Organic Statutory Underlying Organic
£m
%
%
%
£m £m £m
Operating profit by segment
North America 192 43 235 - 235 51% 26% 26%
UKIA 155 33 188 - 188 94% 37% 37%
Europe 105 1 106 - 106 (3%) (7%) (7%)
Total operating profit 452 77 529 - 529 43% 21% 21%
Year ended 30 September 2023 (Restated)
Statutory Underlying adjustments £m Underlying as reported Impact of foreign exchange Underlying Organic adjustments Organic
£m
£m £m £m £m £m
Operating profit by segment
North America 127 71 198 (11) 187 - 187
UKIA* 80 60 140 (3) 137 - 137
Europe 108 10 118 (4) 114 - 114
Total operating Profit 315 141 456 (18) 438 - 438
* Previously disaggregated into two reportable segments, i) UK & Ireland,
and ii) Africa & APAC.
Reconciliation of underlying operating profit to statutory operating profit
2024 2023
£m
£m
Underlying operating profit by reportable segment
North America 235 187
UKIA* 188 137
Europe 106 114
Underlying operating profit 529 438
Impact of movement in foreign currency exchange rates - 18
Underlying operating profit (as reported) 529 456
Recurring items (82) (103)
Non-recurring items 5 (38)
Statutory operating profit 452 315
* Previously disaggregated into two reportable segments, i) UK & Ireland,
and ii) Africa & APAC.
3. Adjustments between underlying profit and statutory profit
Year ended 30 September 2024 Year ended 30 September 2023
Operating Profit Operating Profit
profit before tax profit before tax
£m
£m
£m
£m
Statutory measures 452 426 315 282
Recurring items
· Amortisation of acquired intangibles 48 48 54 54
· Other M&A activity-related items 34 34 49 49
· Foreign currency movements on intercompany balances - (1) - 1
Non-recurring items
· Reversal of employee-related costs (3) (3) 9 9
· Reversal of restructuring costs (2) (2) (3) (3)
· Property restructuring costs - - 32 32
Underlying (as reported) measures 529 502 456 424
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.
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. £5m (2023: £18m) 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 gain of £1m
(2023: loss of £1m).
Non-recurring items
Net credits in respect of non-recurring items amounted to £5m (2023: net
charge £38m).
Reversal of employee-related costs of £3m (2023: charge of £9m) relate to a
charge for French payroll taxes relating to previous years.
Reversal of restructuring costs of £2m (2023: £3m) largely relates to an
unutilised provision recognised in 2021.
Property restructuring costs in the prior year related to the reorganisation
of a number of leased properties following a strategic review of the Group's
property portfolio. Costs of £32m consisted of impairment of £22m of right
of use assets and other related fixed assets that are no longer in use as well
as a provision for directly attributable future running costs associated with
the properties.
4. Income tax expense
The effective tax rate on statutory profit before tax was 24% (2023: 25%),
whilst the effective tax rate on underlying profit before tax on continuing
operations was 24% (2023: 23%).
The underlying effective tax rate is lower than the UK corporation tax rate
applicable to the Group, primarily due to the innovation tax credits for
registered patents and software, and research and development activities which
attract government tax incentives in a number of operating territories.
5. Dividends
2024 2023
£m £m
Final dividend paid for the year ended 30 September 2023 of 12.75p per share 129 -
(2023: final dividend paid for the year ended 30 September 2022 of 12.10p per - 123
share)
Interim dividend paid for the year ended 30 September 2024 of 6.95p per share 70 -
(2023: interim dividend paid for the year ended 30 September 2023 of 6.55p per - 67
share)
199 190
In addition, the Directors are proposing a final dividend in respect of the
financial year ended 30 September 2024 of 13.50p per share. The Company's
distributable reserves are sufficient to support the payment of this
dividend. If approved at the AGM on 6 February 2025, it will be paid on 11
February 2025 to shareholders who are on the register of members on 10 January
2025. 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 2024 Underlying Underlying Statutory
as reported*
2023
2023
Statutory
2023
2024
Earnings attributable to owners of the
parent** (£m)
Profit for the year 382 329 315 323 211
Number of shares (millions)
Weighted average number of shares 1,007 1,020 1,020 1,007 1,020
Dilutive effects of shares 18 16 16 18 16
1,025 1,036 1,036 1,025 1,036
Earnings per share attributable to owners of the
parent** (pence)
Basic earnings per share 37.91 32.25 30.92 32.10 20.75
Diluted earnings per share 37.25 31.75 30.44 31.55 20.43
Note:
* Underlying as reported is at 2023 reported exchange rates.
** All operations in the years relate to continuing operations.
Reconciliation of earnings 2024 2023
£m
£m
Statutory profit for the period attributable to owners of the parent 323 211
Adjustments:
· Recurring items 81 104
· Non-recurring items (5) 38
Taxation on adjustments between statutory and underlying profit before tax (17) (24)
Underlying profit for the period attributable to owners of the parent (as 382 329
reported)
Impact of movement in foreign currency exchange rates - (14)
Underlying profit for the period (after exchange movement) attributable to 382 315
owners of the parent
7. Non-current assets
Goodwill Other Property, plant and equipment Total
£m
£m
intangible £m
assets
£m
Opening net book amount at 1 October 2023 2,245 274 104 2,623
Additions - 21 43 64
Acquisition of subsidiaries 32 - - 32
Disposals - - (7) (7)
Depreciation, amortisation and other movements - (67) (29) (96)
Exchange movement (147) (9) (3) (159)
Closing net book amount at 30 September 2024 2,130 219 108 2,457
Goodwill Other Property, plant and equipment Total
£m intangible £m £m
assets
£m
Opening net book amount at 1 October 2022 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
Goodwill is not subject to amortisation but is tested for impairment annually
or upon any indication of impairment. At 30 September 2024, there were no
indicators of impairment to goodwill.
In the prior year, impairment of property, plant and equipment of £22m
related to the property restructuring programme, classified within
non-recurring adjustments between underlying and statutory results (see note
3).
During the year, the Group disposed of its Beaverton property site with a
carrying value of £7m, which was part of the North America operating segment,
for proceeds of £9m. The profit on disposal of the site has been recognised
through selling and administrative expenses and proceeds from the sale have
been recognised through cashflows from investing activities.
8. Equity
Ordinary shares and share premium
Number of Ordinary Share premium Total
shares Shares* £m £m
£m
At 1 October 2023 1,100,789,295 12 548 560
Cancellation of shares (29,289,778) (1) - (1)
At 30 September 2024 1,071,499,517 11 548 559
At 1 October 2022 and 30 September 2023 1,100,789,295 12 548 560
* Issued and fully paid ordinary shares of 1(4/77) pence each
At 30 September 2024 the Group held 66,725,007 treasury shares (2023:
73,906,470). During the year, the Group satisfied the vesting of certain share
awards utilising 7,181,463 treasury shares (2023: 7,262,433).
On 22 November 2023, the Group entered into a non-discretionary share buyback
programme to purchase up to £350m of its own shares. The programme completed
in April 2024, for a total consideration of £345m plus expected associated
taxes, corresponding to the £351m recognised through retained earnings at the
balance sheet date, of which £348m was paid in the current year.
During the year, the Group repurchased a total of 29,289,778 ordinary shares
as part of the programme, all of which were subsequently cancelled. The
average price paid per ordinary share was £11.79.
At 30 September 2024 the Employee Benefit Trust holds 8,473,802 ordinary
shares in the Company (2023: 4,419,478) with £55m of shares purchased during
the year (2023: £1m), funded by the Company, and a nominal value of £nil
(2023: £nil). During the year, the Employee Benefit Trust satisfied the
vesting of certain share awards utilising 1,381,398 ordinary shares (2023:
258,505).
The EBT did not receive additional funds for future purchase of shares in the
market (2023: £nil).
The costs of funding and administering the EBT are charged to the profit and
loss account of the Company in the period to which they relate. The market
value of the shares of the Company held by the EBT at 30 September 2024 was
£87m (2023: £44m).
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 2023 124 4 61 189
Exchange differences on translating foreign operations and net investment (101) - - (101)
hedges
At 30 September 2024 23 4 61 88
Translation reserve Hedging Reserve Merger Reserve Total
£m £m £m £m
At 1 October 2023 206 - 61 267
Exchange differences on translating foreign operations and net investment (82) - - (82)
hedges
Cash flow hedges - 4 - 4
At 30 September 2024 124 4 61 189
9. Cash flow and net debt
2024 2023
£m
£m
Statutory operating profit 452 315
Recurring and non-recurring items 77 141
Underlying operating profit (as reported) 529 456
Depreciation, amortisation and other non-cash items 44 51
Share-based payments 45 43
Net changes in working capital 55 -
Net capital expenditure (24) (22)
Underlying cash flow from operating activities 649 528
Non-recurring items (5) (11)
Net interest paid (25) (24)
Income tax paid (91) (85)
Exchange movement (4) (4)
Free cash flow 524 404
Net debt at 1 October (561) (733)
Acquisition of businesses (34) (26)
Acquisition and disposals related items (39) (30)
Purchase of equity investment (2) -
Proceeds from issuance of treasury shares 9 11
Dividends paid to owners of the parent (199) (190)
Share buyback programme (348) -
Purchase of shares by Employee Benefit Trust (55) (1)
New leases less disposals (26) (14)
Exchange movement (7) 19
Other - (1)
Net debt at 30 September (738) (561)
2024 2023
£m
£m
Underlying cash flow from operations 649 528
Net capital expenditure 24 22
Recurring and non-recurring cash items (44) (41)
Other adjustments including foreign exchange translations (4) (4)
Statutory cash flow from operations 625 505
Analysis of change in net debt
At 1 October 2022 At 1 October Cash flow Acquisition of subsidiaries Non-cash movements Exchange movement At 30
£m
£m
£m
£m
£m
2023 September
£m 2024
£m
Cash and cash equivalents 489 696 (164) 4 - (28) 508
Liabilities arising from financing activities
Loans due within one year (161) - - - - - -
Loans due after more than one year (966) (1,171) - - (2) 17 (1,156)
Lease liabilities due within one year (17) (14) 18 - (20) 1 (15)
Lease liabilities after more than one year (78) (72) - - (6) 3 (75)
(1,222) (1,257) 18 - (28) 21 (1,246)
Total (733) (561) (146) 4 (28) (7) (738)
The Group's debt is sourced from sterling and euro denominated bond notes,
with a syndicated Revolving Credit Facility (RCF) also available.
Year issued Interest coupon* Maturity 2024 2023
£m £m
Bonds
· GBP 350m bond notes 2021 1.63% 25-Feb-31 350 350
· GBP 400m bond notes 2022 2.88% 8-Feb-34 400 400
· EUR 500m bond notes 2023 3.82% 15-Feb-28 416 433
· Unamortised issue and discount costs N/A N/A N/A (9) (10)
Unamortised RCF loan costs N/A N/A N/A (1) (2)
Total 1,156 1,171
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.
In November 2023, a one-year extension of the Group's RCF was agreed,
resulting in a new maturity in December 2028. In November 2024, after the
balance sheet date, a further one-year extension was agreed, resulting in a
new maturity in December 2029. At 30 September 2024, £nil of the RCF was
drawn down (2023: £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 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 are included in the table
below.
At 30 September 2024 At 30 September 2023
Book Value Fair Value Book Value Fair Value
£m £m £m £m
Long-term borrowings (excluding lease liabilities) (1,156) (1,065) (1,171) (1,014)
11. Acquisitions and disposals
Acquisitions made during the current year
Infineo
On 9 September 2024, the Group acquired a 100% controlling interest in Infineo
SAS ("Infineo"). Infineo provides on-premises and cloud based financial
reporting solutions for SMB's, streamlining data collection and enabling the
creation of real-time dashboards and reports. The acquisition of Infineo
accelerates Sage's strategy for growth by broadening its value prioritisation
for SMBs and demonstrating Sage's renewed commitment to the French market.
Summary of acquisition Total
£m
Acquisition-date fair value of consideration 34
Provisional fair value of identifiable net assets (2)
Goodwill 32
In line with IFRS 3, the initial accounting for the acquisition of Infineo is
provisional. The provisional fair value of identifiable net assets acquired
comprises cash and cash equivalents of £4m and trade and other payables of
£2m. The residual excess of consideration over the net assets acquired has
been provisionally recognised as unallocated goodwill. No goodwill is expected
to be deductible for tax purposes. Adjustments to provisional amounts will be
made within the permitted measurement period where they reflect new
information obtained about facts and circumstances that were in existence at
the acquisition date. It is expected that the acquisition accounting will be
finalised within 12 months. The results of the business are allocated to the
Europe 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 (34)
Cash and cash equivalents acquired 4
Net cash outflow (30)
Transaction costs of £2m 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 Infineo for future services, 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 Infineo for the period since the acquisition date, of which both are
immaterial. On an underlying basis, revenue would have increased by £1m and
profit after tax would have increased by £3m, if Infineo had been acquired at
the start of the financial year and included in the Group's results for the
year ended 30 September 2024. On a statutory basis, revenue would have
increased by £1m with no impact on the profit after tax, which includes £3m
of other M&A activity related items.
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 2024 2023
£m £m
Salaries and short-term employee benefits 12 10
Share-based payments 8 7
20 17
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 29 October 2024, the Group acquired 100% equity capital and voting rights
of Tritium Software, S.L ("Tritium Software"), a company based in Spain, for a
total consideration of £32m. Tritium Software provides a cloud-native, mobile
workforce management solution for field-based sales teams through its main
product, ForceManager. Due to the timing of the acquisition being after 30
September 2024, the results of Tritium Software are not included in our
financial statements for the year ended 30 September 2024 and the acquisition
accounting has not yet been completed. In line with IFRS 3, the purchase price
accounting for the acquisition will be finalised within 12 months of the
acquisition date.
On 19 November 2024, The Sage Group plc approved a share buyback programme of
its ordinary shares of up to £400m, which is expected to commence on 20
November 2024, and end no later than 3 June 2025.
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
creating the world's most trusted, thriving network for SMBs, powered by Sage
Copilot. In Q4 FY24, the number of Principal Risks was reduced from twelve to
ten. The reason for the change was to ensure Management and Board focus is on
the most important areas and that accountabilities for risk ownership are
clearer. Two of the customer-centred Principal Risks were consolidated into a
single Principal Risk, a Principal Risk related to reliance on third parties
was removed as a standalone Principal Risk but its sub-risks were reallocated
to other Principal Risks, and the Principal Risk relating to Sage's Data
Strategy was changed in scope to also encompass AI and data privacy risks.
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 management and mitigation
actions described below reflect the principal risks and build on those actions
previously reported in the Annual Report and Accounts 2024.
Key-Stakeholder groups Partners
Colleagues
Customers
Society
Shareholders
Risk exposure change
Stable
Decreasing
Increasing
Principal Risk Risk Connect Management and mitigation
1. Customer experience We must maintain a sharp focus on the relationship we have with our customers, · Brand-health surveys to provide an understanding of the customer
constantly offering the products, services and experiences they need for perception of the Sage brand and its products, used to inform and enhance our
If we fail to deliver ongoing value to our customers by focusing on their success. If we meet or exceed their expectations, customers will stay with market offerings.
needs over the lifetime of their customer journey, we will not be able to Sage, increasing their lifetime value, and becoming our greatest advocates. By
achieve sustainable growth through renewal. aligning our people processes and technology with this focus in mind, all Sage · A Market and Competitive Intelligence team to provide insights that
colleagues can help our customers be successful and in turn improve financial Sage uses to win in the market.
Trend performance.
· Proactive analysis of customer activity and churn data, to improve
customer experience.
Stakeholder alignment
· Customer Advisory Boards, Customer Design Sessions, and closed-loop
feedback to constantly gather information on customer needs.
· Customer-journey mapping to ensure appropriate strategy alignment
and alignment to Target Operating Model.
Link to viability scenario · "Customer for life" roadmaps, detailing how products can fit
together, any interdependencies, and migration pathways for current and
Data breach potential customers.
Existing or new market disruptor · Continuous Net Promoter Score (NPS) surveying
Global economic shock Cloud operations failure allows us to identify customer challenges rapidly and respond in a timely
manner to emerging trends.
· Sage Membership offered to all customers, providing customers with
access to curated resources, tools, and a connected community of business
leaders.
Principal Risk Risk Connect Management and mitigation
2. Execution of product strategy Sage needs to continuously adapt its approach to new technologies and · A robust product organisation supported by a governance model to
challenges. This needs to be underpinned by a clear direction and guardrails enable the way we build products.
If we fail to deliver the capabilities and experiences outlined in our product through the product strategy to support of the go to market offerings,
strategy, we will not meet the needs of our customers or commercial goals. ensuring Sage simplifies its product offering and partners with the right · Migration framework in key countries to support our customers as
business to enhance our solutions. they move to the cloud.
Trend
· Continued expansion of Sage Intacct outside of North America and
for additional product verticals.
· Enhancing accessibility of Sage cloud products to WCAG 2.1 AA
standard by the end of 2025.
Stakeholder alignment
· A strong focus on accountants through a tailored Sage for
Accountants proposition.
Link to viability scenario · A new partnership with Amazon Web Services (AWS) to develop
domain-specific accounting and compliance focused Large Language Model (LLM).
Existing or new market disruptor
· Acquisition of Bridgetown Software to strengthen Sage's
Global economic shock Cloud operations failure Construction and Real Estate portfolio.
· AI developments through the announcement and launch of Sage Copilot
AI-powered productivity assistant into existing Sage products during the year,
and partnership with AWS to launch the first domain- specific accounting Large
Language Model (LLM).
3. Developing and exploiting new business models Sage must be able to identify, design and deploy new innovations to create new · A business unit solely focused on scaling the Sage Network.
or enhance existing products and capabilities. Unlocking the ability to do
Sage is unable to develop, commercialise and scale new business models to this at pace will enable access to new markets and/or customers early, driving · Continued digitalisation and automation of Sage products through
diversify from traditional Software as a Service (SaaS), especially new revenue and opportunities for the business. Sage Network and AI services.
consumption-based services and those which leverage data.
· Enhanced, consistent digital experience for all Sage Business Cloud
Trend users through the Sage Experience Platform.
· A Venture Studios team asked to assess new business models that may
Stakeholder alignment align with the Sage vision
· Expansion of Sage's Fintech and Payments ecosystem through
partnership with Stripe to
Link to viability scenario simplify cashflow management for SMBs.
Data breach · Managed growth of the API estate, including enhanced product
development that enables access by third- party API developers and
Existing or new market disruptor optimisation of API integrations to improve efficiency.
Global economic shock · Sage Developer platform announced at Transform 2024 to expand
developer community.
Cloud operations failure
Principal Risk Risk Connect Management and mitigation
4. Route to market We have a blend of channels to communicate with our current and potential · Chief Growth Officer and Chief Commercial Officer appointments to
customers and ensure our customers receive the right information, on the right demonstrate Sage's commitment to serve SMBs on a global and consistent basis.
If we fail to deliver a globally consistent blend of route to market channels products and services, at the right time. Our sales channels include selling
in each market, Sage will miss the opportunity to efficiently deliver the directly to customers through digital and telephone channels, via our · A specific Onboarding Squad enhances user journeys to enable
right capabilities and experiences to our current and future customers. accountant network and through partners, and we will adapt our approach to customer conversion.
target customers in our key verticals. We use these channels to maximise our
Trend marketing and customer engagement activities. This can shorten our sales cycle · Acceleration of new partnerships to support the Sage Network.
and ensure we improve customer retention, maximising our market opportunity.
· Centre of Excellence to support our indirect sales and third-party
approach.
Stakeholder alignment · Expansion of relationship with AWS to elevate sustainability for
SMBs through the introduction of Sage Earth to the AWS marketplace.
Link to viability scenario
Data breach
Existing or new market disruptor
Global economic shock Cloud operations failure
5. People and performance 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
If we fail to ensure we have engaged colleagues with the critical skills, talent to navigate change, but will also need to provide an environment where presence through social media such as Glassdoor, Comparably, Twitter,
capabilities and capacity we need to deliver on our strategy, we will not be colleagues can develop to meet these new expectations. LinkedIn, and Facebook.
successful.
By empowering colleagues and leaders to make decisions be innovative and be · Reward mechanisms designed to incentivise and encourage the right
Trend bold in meeting our commitments behaviour, with a focus on ensuring fair and equitable pay in all markets.
Sage will be able to create an attractive working environment. By addressing · A series of Learning Academies and talent programmes to support the
what causes colleague voluntary attrition and embracing the values of development of internal talent including sponsorship programmes, and new
Stakeholder alignment successful colleague engagement and create aligned high-performing teams. Director, graduate, and apprentice programmes.
· An OKR framework to define measurable goals and track outcomes of
Link to viability scenario colleague success.
Data breach · Talent Marketplace solution to support identification of
capabilities and gaps, talent pipeline, development and career pathways, and
Global economic shock mentoring.
· Strategic Workforce Planning Framework across the business.
Principal Risk Risk Connect Management and mitigation
6. Culture The development of a shared behavioural competency that encourages colleagues · Integration of Values and Behaviours into all colleague priorities
to always do the right thing, put customers at the heart of business, and including talent attraction, selection, and onboarding as well as OKRs.
If we do not define, shape and proactively manage our culture in line with our improve innovation is critical in Sage's success. Devolution of decision
brand values, we will be challenged to deliver our strategic priorities and making, and the acceptance of accountability for those decisions, will need to · All colleagues are encouraged to take up to five paid Sage
purpose; we will risk disengaging colleagues, increasing attrition and go hand in hand as the organisation develops and sustains its shared Values Foundation days each year, to support charities and provide philanthropic
impacting our ability to attract and retain diverse talent. and Behaviours, and fosters a culture that provides customers with a rich support to the community.
digital environment.
Trend
· A DEI strategy focused on building diverse teams, an equitable
Sage will also need to create a culture of empowered leaders that supports the culture, and fostering inclusive leadership. This is supported by measurable
development of ideas, and that provides colleagues with a safe plans and metrics to track progress, ensuring Sage meets its commitments,
including no tolerance of discrimination, equal chances
Stakeholder alignment environment allowing for honest disclosures and discussions. Such a trusting
and empowered environment can help sustain innovation, enhance customer for everyone, an inclusive culture, removing barriers, and DEI education.
success, and encourage the engagement that results in increased market share.
· Code of Conduct training for all colleagues (including anti-bribery
Link to viability scenario and corruption requirements) delivered as snippets, allowing Sage to signpost
relevant training at colleagues' point of need.
Data breach
· Core e-learning modules rolled out across Sage, with regular
Global economic shock refresher training.
· Whistleblowing and incident-reporting mechanisms in place to allow
issues to be formally reported and investigated.
· New training aimed at colleagues with responsibilities for managing
people to explain what high performance culture means at Sage and provide
tools and techniques to help embed this culture across the business.
7. Cyber security Stakeholder trust is central to Sage's growth and cyber security is an · Multi-year cyber security programmes in IT and Product to ensure
essential component of that. Failure to safeguard customer and colleague data Sage is continuously improving, and reduce cyber risk across technology,
If we fail to ensure an appropriate standard of cyber security across the and ensure the availability of our products and critical services could have business processes, and culture.
business, we will not be able to combat cyber threats and will fail to meet severe reputational, legal and financial consequences. This means we must be
our regulatory obligations and lose the trust of our stakeholders. confident our cyber security controls and the culture and awareness of our · Accountability within both IT and Product for all internal and
colleagues are sufficient to mitigate the dynamic and evolving cyber risk external data being processed by Sage. The Chief Information Security Officer
Trend environment, while also supporting the agility and innovation of the business. oversees information security, with a network of Information Security Officers
that directly support the business.
· Formal certification schemes maintained across
Stakeholder alignment
the business include internal and external validation of compliance.
· All colleagues are required to undertake awareness training for
Link to viability scenario cyber security and information management.
Data breach · A Cyber Security Risk Management Methodology and standards are
deployed to provide clear requirements and objective risk information on our
Cloud operations failure assets and systems.
· A Trust and Security Hub and publication of Cyber security for SMBs
report to support our customers and their understanding of cyber security in
Sage products.
Principal Risk Risk Connect Management and mitigation
8. Data and AI governance Data is central to the Sage strategy and our ambition to deliver sustainable · Published AI and Data Ethics Principles to ensure we use customer
growth by leveraging AI and expanding the Sage Network. The strategy is data responsibly to achieve our strategy and an ethics checklist, assessing
If Sage fails to collect, process, store and use data in a way which is underpinned by our ability to innovate customer propositions, improve insight adherence to principles.
compliant with regulation, internal policy and our ethical principles we will and decision making, and create new business models and ecosystems. Successful
lose the trust of our stakeholders. ability to use data will accelerate our growth and will be key in helping · Governance policies, processes and tooling to enhance and manage
customers transform how they run and build their businesses and Sage must do the quality and trust in our data.
If we fail to recognise the value of our data and deliver effective data this in a way which is compliant with laws, regulations and in line with our
foundations, we will be unable to realise the full potential of our data values. · The implementation of data architecture and associated data models
assets. that facilitate data sharing and utilisation.
Trend · A Sustainability, AI and Data Ethics Committee, which includes
members from the Executive Leadership Team and Sage Board, governing
activities relating to data and AI ethics.
Stakeholder alignment
· All colleagues are required to undertake awareness training for
data protection, with a focus on all relevant data privacy laws and
regulations.
· A Trust and Security Hub to support our customers and their
Link to viability scenario understanding of cyber security, data privacy, and AI and data ethics in Sage
products.
Data breach
Existing or new market disruptor
9. Readiness to scale As Sage continues to build sustainable growth, we continue to focus on scaling · Cost optimisation of cloud-native products and continued migration
our current and future platform-services environment in a rigorous, agile, and of legacy footprint to public cloud.
As Sage's ambition grows, if it fails to ensure its cloud products can build speedy manner to ensure we provide a consistent and healthy cloud platform and
and operate at an industrial, global scale it will erode its competitive associated network. Sage must provide the right infrastructure and operations · Accountability across product owners, underpinned by ongoing risk
advantage. for all customer products, a hosting platform together with the governance to assessments and continuous improvement projects.
ensure optimal service availability, performance, security protection, and
The hosting of its products must achieve economies of scale, aligned to restoration (if required). · Formal onboarding process through ongoing portfolio management.
ambition, in parallel with the ability to accelerate to market with quality.
Both must be achieved with reduced environmental impact and zero customer · Incident and problem management change processes adhered to for all
impact. products and services, with new acquisitions onboarded in less than 90 days.
If not addressed, Sage's cloud products would be less resilient and less able · Service-level objectives including uptime, responsiveness, and mean
to respond to its customer expectations. time to repair.
Trend · Defined real-time demand-management processes and controls, and
also disaster-recovery capability and operational-resilience models.
Stakeholder alignment · A governance framework to optimise operational cost base in line
with key metrics.
· All new acquisitions are required to adopt Sage cloud operation
Link to viability scenario standards.
Data breach
Cloud operations failure
Principal Risk Risk Connect Management and mitigation
10. Environmental, social, and governance We invest in education, technology, and the environment to give individuals, · Sage's Sustainability and Society strategy, informed by a rigorous
SMBs, and our planet the opportunity to thrive. materiality assessment, focusing on three pillars: Protect the Planet, Tech
If Sage is unable to respond to evolving stakeholder expectations and ESG
for Good, and Human by Design.
regulation, Sage could face fines and potential legal action, damaging Sage's Internally, it is essential that Sage understands the potential impact of
reputation and brand, and diminishing stakeholder trust and credibility. climate change on its strategy and operations and considers appropriate · Ensuring adequate executive oversight through the Sustainability,
mitigations. AI and Data Ethics Committee.
In addition, if Sage fails to respond to the range of opportunities and risks
associated with Sustainability and Sage Foundation, it would be less Societal and governance-related issues are integral to Sage's purpose and · Enabling accountability through integration on ESG measures within
resilient, less competitive, and could put its licence to operate at risk. Values and to the achievement of Sage's strategy. long-term incentive plans.
Trend You can read more about the work we are doing on ESG in the Sustainability and · An integrated framework for the management of ESG-related risk and,
Society Report. in particular, physical and transitional climate risks, as detailed by TCFD.
· External limited assurance obtained over selected metrics to ensure
Stakeholder alignment accuracy of sustainability data and claims.
Link to viability scenario
Global economic shock
Cloud operations failure
i (#_ednref1) See Appendix 1 for full definitions and guidance on the usage
of the Alternative Performance Measures.
ii (#_ednref2) To aid comparability, underlying and organic measures for the
prior period have been retranslated at current period exchange rates and
exclude recurring and non-recurring items, 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 7.
Underlying and organic measures are defined in Appendix 1.
All references to revenue, profit and margin are on an underlying basis unless
otherwise stated.
iii (#_ednref3) United Kingdom, Ireland, Africa and APAC.
iv (#_ednref4) Cloud native solutions run in a cloud environment enabling
access to up-to-date functionality at any time, from any location, via the
internet.
v (#_ednref5) Cloud connected solutions are deployed on premise with
significant functionality delivered through the cloud.
vi (#_ednref6) Global gender diversity target of no more than 60% of any one
gender, in any leadership team, anywhere in Sage, by FY26.
vii (#_ednref7) Underlying and organic revenue and profit measures are
defined in Appendix 1.
viii (#_ednref8) Recurring and non-recurring items are defined in Appendix
1, and detailed on page 7 and in note 3 of the financial statements.
ix (#_ednref9) Recurring and non-recurring items are defined in Appendix 1
and detailed in note 3 of the financial statements.
x (#_ednref10) Impact of retranslating FY23 revenue and costs at FY24
average rates.
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