Interim results

6 months
th ended
d d 31 M
March
h 2010
Financial
a c a highlights
g g ts

Half year ended 31 March 2010

Half-year

H1 FY10 Statutory Underlying

Revenue £718.9m -4% -2%*

Pre-tax profit £177.5m^ +15% +11%^

Earnings per share 9.59p^ +16% +12%^

Operating cash flow/EBITA† 130%

Dividend per share 2.58p +3%

*At constant
t t exchange
h rates
t and d on an organici bbasis
i
^Stated prior to amortisation of intangible fixed assets and after neutralisation of foreign exchange movements
†Earnings before interest, tax and amortisation of intangible fixed assets (EBITA)

2
Strong
g H1 performance
p

• Reduction in rate of organic

g revenue decline to 2%
(compared to a contraction of 6% for the half-year
ended 30 September 2009)

• EBITA margin increased to 25% following cost savings

from restructuring
g in 2009

• Operating cash generation remained high at 130% of

EBITA

• Continued dividend progression: 3% increase in interim

dividend to 2.58p per share

At constant exchange rates

3
Our p
priorities for 2010

• Continuingg to be a trusted p
partner to SMEs includingg
provision of high quality support - renewal rates remain
at 81%

• Innovating to meet evolving market needs, particularly

connected business solutions and g
global roll out of
Sage ERP X3

• Continued good cost efficiency

• Operational and financial improvements in North

America

4
Fi
Financial
i l review
i
Revenue sources for H1
Total revenue -3% Organic revenue
£800m

£700m Group organic revenue -2%

£600m 274 248

37% 34% Software and software-related
£500m services revenue
Licence,, Training
g -8%
£400m Professional services
Business forms, Hardware

£300m 63% 66%

471 471
Subscription
Subsc pt o revenue
e e ue
£200m Combined software/support
contracts
£100m Maintenance and support +1%
Transaction revenues
Hosted products
£0m
H1 FY09 H1 FY10
Software and software-related services Subscription

At constant exchange rates

6
Improving
p g organic
g revenue
trends
10%
10% 8% UK
8% Mainland Europe
North America
6% 5%
Group
4%
2%
2%
0% 0%
0% 1%
H1 FY08 H2 FY08 H1 FY09 H2 FY09 H1 FY10
-2%
-2% -4% -2%
-4%
-4% -5%
-6% -5% -5%
-6%
6%
-8%
-8%
-10% -9%

At constant exchange rates

7
Cost efficiency
y drives margin
g

26%
+130 bps
25% • EBITA margin increased to
+130 bps
25%
24%
• Cost savings made in FY09
23% benefitting H1 FY10
25.3%
22% 24.0% • Planned investments fall
22.7% largely in H2 FY10
21%

20%

Reported H1 FY09 EBITA margin H1 FY10 Reported

EBITA margin cost of H1 FY09 margin uplift EBITA margin
H1 FY09* restructuring* excluding H1 FY10
restructuring*

*At constant exchange rates

8
H1 cash flow and net debt

£m £m £m

Cash flow from Net debt

EBITA 181.9 236.6 (439.4)
operations 1 October 2009
Depreciation/
amortisation/profit on 15.0 Interest/issue costs (5.1) Free cash flow 192.4
disposal
Acquisitions
q
Share based payments
Share-based 39
3.9 Tax (28 6)
(28.6) 39
3.9
/disposals

Working capital change (17.5) Net capex (10.5) Dividends (64.7)

Deferred income
55.1 FX translation (2.5)
change

Exchange differences (1.8) Other 5.0

Cash flow from Net debt

236.6 Free cash flow 192.4 (305.3)
operations 31 March 2010

Cash:profit FCF Dividend

130% Interest cover 34.9x 3.0x
conversion cover
9
Balance sheet

• Net
N tddebt/EBITDA:
bt/EBITDA 00.8x
8 Balance sheet March March
– Covenant <3.0x EBITDA 2010 2009
£m £m
• PBIT/Interest: 34.9x
34 9x Goodwill and intangible assets 2,284.9 2,424.1

– Covenant >4.0x Property, plant and equipment 141.2 148.2

Net deferred tax (24.8) (19.4)

• £650m committed bank facility
Net working capital 62.0 92.1
– Matures in 2011
Deferred income (452.7) (453.1)
• $300m
$ p
private p
placement notes Current tax liabilities (87 0)
(87.0) (95 0)
(95.0)
issued in the period Retirement benefit obligations (10.8) (4.8)

• Strong working capital control Acquisition deferred (1.6) (2.7)

consideration
1,911.2 2,089.4

Net debt (305.3) (557.8)

Net assets 1,605.9 1,531.6

10
R i
Regional
l review
i
Strong
g UK performance
p

• Organic and headline revenue £120m

unchanged
£122m £122m
– Subscription +5% £100m

– Software and software-related services -11%

£80m £122m £122m
– Sage Pay continued to grow strongly
– Accountants’ Practice Solutions p
performed well
£60
£60m
with enhanced service levels
– HR, payroll and verticals markets remained
£40m
weak
– Irish business impacted by economy 36% 37%
£20m margin
37% 37%
margin
• EBITA margin 37% (H1 FY09: 36%) margin margin
£0m
– Margin in H1 FY09 excluding restructuring costs
was 36% H1 FY09 H1 FY10

Revenue EBITA

At constant exchange rates

12
Resilient p
performance in
Mainland Europe
• Total revenues declined 4% £280m
£260m
• Organic revenue decline of 2% £240m £281m
£281m £270m
£270m
£220m
– Subscription +2%
£200m
– Software and software-related services -6% £180m £269m £275m
– France resilient at 1% organic growth, with £160m
good performance in ERP products £140m
– Sound Spanish business impacted by weak £120m
economy – revenues -9% £100m
£80m
– Germanyy flat,, with good
g performance
p in
£60m
support and payroll, offsetting a softer 23% 24%
mid-market £40m 37% 37%
margin margin
£20m margin margin
• EBITA margin 24% (H1 FY09: 23%) £0m

– Margin in H1 FY09 excluding restructuring H1 FY09 H1 FY10

costs was 23%
Revenue EBITA

At constant exchange rates

13
Progress
g in North America
• Total revenues contracted 6% and 5%
£300
£300m £287
£287m
organic £270m
– Subscription -2% organic £250m
– Software and software
software-related
related services -13%
13%
organic £200m

• Improving revenue trend for business £150m

– SBS contracted 6% organically – continued
customer caution impacting new licences £100m

– Sage Payment Solutions Division contracted 2%

18% 22%
organically - growth in merchants £50m
margin
37% margin
– Sage Healthcare Division contracted 4% margin
organically - impact of stimulus expected in FY11 £0m
H1 FY09 H1 FY10
• EBITA margin 22% (H1 FY09: 18%) Sage Healthcare Division

– Margin in H1 FY09 excluding restructuring costs Sage Payment Solutions Division

was 20% S
Sage Business
B i S
Solutions
l ti Di
Division
i i (SBS)
At constant exchange rates
– Sage Healthcare margin 19% (H1 FY09: 15%)
14
Strong
g subscription
p growth
g in
Rest of World
£60
£60m
• Revenue growth of 4% headline and
organic
£50m £55m
£100m £57m
£100m
– Subscription +13%
– Software and software-related services -4%
£40m

• South Africa still grew strongly at 5%

£30m
• Australia grew 4% with strong
performance by Handisoft £20m

• Smaller Asian businesses declined 3%

£10m 21% 23%
• EBITA margin 23% (H1 FY09: 21%) margin margin
£0m
H1 FY09 H1 FY10

Revenue EBITA

At constant exchange rates

15
Business
B i review
i
and
d outlook
tl k
Strong
g relationship
p with our
customers
• Sage
S i a ttrusted
is t d partner
t to
t >6m
>6 SME customers
t
worldwide

• SMEs have delayed upgrading and investing in new

business management solutions

• SMEs are cautious of new technology but prepared to

spend where it brings real business benefits

17
Customers rely
y on Sage
g for
support
• Maintenance and support (M&S) renewal rates stable at
81%

• Higher renewals in mid-market where value is greater:

Small business Mid market
Mid-market Group
M&S revenue* £148.4m £255.7m £404.1m
Split
p 37% 63%
M&S contracts 1,012 814 1,826
Split 55% 45%
M&S renewal rates 76% 90% 81%
* For H1 FY10

18
Growth of p
premium support
pp

Evolution of support
pp
100%

90%
36 33 33
80% 41
47
70% 59

60%

50%

40%
64 67 67
30% 59
53
20% 41

10% Basic
0% Combined
FY05 FY06 FY07 FY08 FY09 H1 FY10

Split by volume of contracts

19
Connected business solutions

• The technology
gy world is divided over where data and
applications should reside – desktop vs web vs hybrid

• We believe the future is connected business solutions

• The desktop will remain relevant for most SMEs,

complemented by web-enabled services - offers rich
functionality for low total cost of ownership

• Online accounting will be attractive for some SMEs,

particularly small and micro, and web-native
businesses

20
Delivering
g value to customers

• Different views of the same data in online solutions

• Opening up data to non-accounting users such as sales
reps warehouse staff
reps, staff, external accountants etc
etc, with
web/mobile access
Sage 100 Anywhere

21
We are well p
placed to deliver
connected business solutions

Sage 100 Anywhere

Sage Fundraising Online

SalesLogix Cl d Editi
Cloud Edition

Sage ERP X3
22
Global collaboration

• Common approach
pp and technology
gy standards for
delivering connected business solutions

• Sage brand features alongside local product names

• Launched Sage ERP X3 across the Group to meet

growing demand for Global solutions for upper mid-
market

• Decentralised structure enables us to be agile and

remain close to customer

23
Payment
y p
processing
g

• Closelyy linked to ERP

• Opportunities across our markets,

but functionality will be linked to
local payments ecosystem

• Sage Pay in UK continued to grow

rapidly, Sage Payment Solutions
cross sell in US gaining momentum
cross-sell

• Announced acquisition of Netcash in

South Africa, providing payment
processing services

24
Well p
positioned for long
g term
profitable growth
• Improving revenue trends and increase in margin

• Pent up demand as markets recover

• Specific opportunity in markets such as payments and

h lth
healthcare

• Longer term opportunity to provide connected business

solutions to our customers

25
Supplementary
S l t
information
Regional
g profile
p

Revenue H1 FY10 EBITA EBITA

H1 FY10 revenue H1 FY10 margin
% of H1 FY10
£m £m
Group %
UK 122.0 17% 44.9 37%

Mainland Europe 270.0 38% 63.7 24%

North America 269 6

269.6 37% 60 2
60.2 22%

Rest of World 57.3 8% 13.1 23%

Total 718.9 100% 181.9 25%

27
UK

Revenue EBITA

Subscription £89.3m EBITA £44.9m

Software and software-related services £32.7m

Total £122.0m EBITA margin 37%

Customers Support contracts

New in the period 22,000 4,000

At 31 March 2010 825,000 364,000

28
Mainland Europe
p

Revenue EBITA

Subscription £149.6m EBITA £63.7m

Software and software-related services £120.4m

Total £270.0m EBITA margin 24%

Customers Support contracts

New in the period 37,000 20,000

At 31 March 2010 1,713,000 672,000

29
 North America

Revenue EBITA

Subscription £204.3m EBITA £60.2m

Software and software-related services £65.3m

Total £269.6m EBITA margin 22%

Customers*
Customers Support contracts

New in the period 48,000 17,000

At 31 March 2010 3,166,000 618,000

* Excluding ACT!
30
Rest of World

Revenue EBITA

Subscription £27.9m EBITA £13.1m

Software and software-related services £29.4m

Total £57.3m EBITA margin 23%

Customers Support contracts

New in the period 20,000 6,000

At 31 March 2010 565,000 172,000

31