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Sage Group PLC (SGE)

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Wednesday 02 December, 2009

Sage Group PLC

Final Results

RNS Number : 4299D
Sage Group PLC
02 December 2009
 



Wednesday 2 December, 2009


Unaudited preliminary results for the year ended 30 September 2009


SMEs CONTINUE TO RELY ON SAGE AS TRUSTED PARTNER


Results at a glance

STATUTORY

UNDERLYING#

2009

2008

Change

2009

2008

Change

Revenue

£1,439.3m

£1,295.0m

+11%

£1,439.3m

£1,504.0m

-4%

EBITA 

 Including restructuring costs

n/a

n/a


£320.7m

£341.2m

-6%

 Excluding restructuring costs

n/a

n/a


£347.1m

£341.2m

+2%

Pre-tax profit

 Including restructuring costs

 Excluding restructuring costs


£267.4m

n/a


£241.0m

n/a


+11%



£307.5m

£333.9m


£314.8m

£314.8m


-2%

+6%

Earnings per share 

 Including restructuring costs


14.46p


12.73p


+14%


16.63p


16.63p


0%


#Underlying figures neutralise the impact of foreign exchange movements and exclude amortisation of intangible fixed assets


Highlights

  • Support contract renewal rates maintained at 81%

  • 245,000 customers added in the year (2008 organic: 304,000)

  • Organic revenue contraction of 5%* (2008: 3%* organic revenue growth) in challenging markets

  • Subscription± revenues now 65% of total revenue. Overall organic subscription revenue growth of 2%*

  • Organic contraction of 16%* in software and software-related services revenues reflecting weaker customer demand in the current economic climate

  • Continued focus on cost savings

  • EBITA† margin including restructuring costs was 22%, excluding restructuring costs was 24% (2008: 23%*)

  • Investment in R&D maintained at £174.6(2008: £175.2m*)

  • Strong operating cash flow of £357.6m (2008: £342.0m) representing 112% of EBITA 

  • Robust balance sheet with committed bank facilities to 2011 and £167.4m of net debt paid down in the year on currency neutral basis

  • Proposed total dividend increased by 3% to 7.43p per share (2008: 7.21p per share) reflecting strength of cash flows and robust business performance


Chief Executive Paul Walker commented:  "The strength of our business model has helped us navigate through the economic downturn. Our customers continue to rely on us as a trusted partner in running their businesses more efficiently, and the demand for high quality support remains strong. This can be seen in the growth in our recurring subscription revenues which has compensated for weaker demand for software and software-related services revenuesWe have managed our cost base to reflect the current market conditions, and at the same time invested for future growth. Our cash generation remains strong, and reflecting this, we are proposing to increase our final dividend by 3%.


Conditions stabilised in the second half of the year with SMEs still investing in value-adding business management products and services. However, at this stage, we are not yet seeing a general recovery in our markets. Therefore, we will continue to manage our cost base prudently whilst ensuring the business is well positioned to take advantage of the future economic upturn."


1


*Foreign currency results for the prior year ended 30 September 2008 have been retranslated based on the average exchange rates for the year ended 30 September 2009 of $1.54/£1 and €1.14/£1 to facilitate the comparison of results.  

EBITA is defined as earnings before interest, tax and amortisation of intangible fixed assets.  

±Subscription revenues are recurring in nature and include combined software/support contracts, maintenance and support, transaction revenues (payment and health insurance claims processing) and hosted products.  

  



Enquiries:

The Sage Group plc +44 (0) 191 294 3068

Tulchan Communications     +44 (0) 20 7353 4200

Paul Walker, Chief Executive

David Shriver

Paul Harrison, Group Finance Director

Stephen Malthouse

Andrew GriffithInvestor Relations 

Lucy Legh


An analyst presentation will be held at 8.30am today at Deutsche Bank, Winchester House, 1 Great Winchester Street, London EC2N 2DB. A live webcast of the presentation will be hosted on www.investors.sage.comdial-in number +44 (0) 1452 568 051, pin code: 44094179. A replay of the call will also be available for two weeks after the event: Tel: +44 (0) 1452 550 000, pin code: 44094179#.


Overview of the year

Our UK and North American customers felt the full impact of the economic downturn in mid to late calendar year 2008. This was followed by Mainland Europe and our other markets early in calendar year 2009. Our customers acted quickly with their own businesses, managing their costs and working capital, and adapting to an environment where credit became scarce. Despite these difficult conditions, our customers continued to renew support contracts at normal rates and we continued to attract a large number of first time customers to Sage.


As market conditions deteriorated, we took swift action to realign our own cost base and eliminated annualised costs of £53.9m, incurring one-off restructuring charges of £26.4m. This saving represented 5%* of our 2008 cost base. However, we balanced the need to reduce our cost base with that of investing appropriately for the future, spending £174.6on research and development in the year, and increasing the headcount in customer support by 5%. 


We have made good progress in our North American business with operational improvements underway and an appropriate reduction in the cost base.


Organic revenues declined by 5%* in the year (2008: 3%* growth). Organic subscription± revenues grew by 2%* with demand for customer support remaining resilient. In the UK and Mainland Europe, where the customer support model is well established, subscription revenues grew 5%* on an organic basis and in the emerging markets of Rest of World, subscription revenues showed strong organic growth of 14%*. In North America, where the premium support model is less well-established, organic subscription revenues contracted 2%*. This represents a key area of focus for our North American business in 2010. Support contract renewals, a key measure of the underlying performance of our business model, remained high at 81% in line with the long-term average renewal rates. Payment processing, which represents 5% of total revenues and is included in subscription revenues, grew by 2%* in the year. We believe that this area offers significant potential for the Group as SMEs seek the benefits of linking payment processing to their back office accounting systems


As we anticipated at the start of the financial year, in these market conditions, customer demand for software and software-related services was weak with an organic contraction of 16%* in the year. Nevertheless, 245,000 new customers purchased software solutions in the year demonstrating the value that our solutions offer to SMEs, and bringing our total customer number to 6.1m. 

  

Product and services strategy

The needs of SMEs continue to evolve. Increasingly, they want access to data via the web or mobile devices. They seek the ability to deploy some software solutions on the web, whilst still making extensive use of their desktop environment. We need to be flexible in allowing customers to buy or rent software as their needs dictate. Connectivity to third parties is an increasing requirement and we find SMEs trading outside their domestic market more than ever before. 


Our strategy is to address the needs of SMEs by developing solutions through our in-country teams who best understand our customers' specific requirements. We take an open approach to the technology that we use, developing across a number of platforms and leveraging a range of delivery models to best meet the needs of our customers. Today, a number of services such as online payment processing, invoicing, CRM, payroll and tax filing are delivered over the web by Sage.


2


*Foreign currency results for the prior year ended 30 September 2008 have been retranslated based on the average exchange rates for the year ended 30 September 2009 of $1.54/£1 and €1.14/£1 to facilitate the comparison of results.  

±Subscription revenues are recurring in nature and include combined software/support contracts, maintenance and support, transaction revenues (payment and health insurance claims processing) and hosted products.  


  

For core accounting and ERP products, at present the significant majority of demand remains for those products deployed on-premise. However, as a new generation of entrepreneurs, instinctively web-centric, start businesses, we expect the proportion of accounting software delivered via the web to increase. We therefore believe that software as a service ("SaaS") for accounting will become more relevant to customers in the small and micro business market segment over time. To that end, we have launched a number of offers to address this emerging market and continue to develop products to meet customer demand.


In the mid-market, we believe that the demand for pure SaaS ERP solutions is currently limited. However, we see the opportunity to combine the advantages of on-premise applications (such as data ownership, customisation flexibility and upgrade control), with easy access to web services which complement and add value to the core application. Such web services include payroll processing, data hosting and online backup, remote access, payment services, and project management. We have, and continue to develop, offerings in this space and are in a strong position to meet this demand.  


Whilst we continue to focus on local solutions and services, the trend of SMEs conducting business internationally is increasing demand for the products we sell in multiple countries. To be successful, these products must meet local requirements in each country as well as having international capabilitiesSage Accpac ERPSage ERP X3 and our CRM products are particularly focussed on meeting this demand. In the year, a number of our businesses have launched Sage ERP X3 which has been well received by customers and industry analysts, and demonstrated growth in the year Group-wide of 13%*.


As a Group we are focussed on the overall customer experience and have launched a number of initiatives to enhance this, including the use of web technologies (such as automatic updates, information feeds and online diagnostic services). Our premium support offers, including, for example, guaranteed response times and dedicated support advisors, enhance the value we deliver to customers. Our support continues to be relied upon by our customers to help them negotiate changes in legislation and business regulation, and address market uncertainty. This has reinforced our role as a trusted business partner to them. 


Acquisitions

During this downturn we have not completed any significant acquisitionsHowever, we continue to evaluate opportunities as they arise.


Regional review

Throughout the regional review, growth trends are stated on a currency neutral basis with prior year results retranslated at current year exchange rates. This is done to facilitate the comparison of results.


Regional analysis



UK

Mainland Europe

North 
America

Rest of 
World

Group

adjusted

Foreign exchange*


Adjustment^

Group

statutory

Revenue

.

.

.

.

.

.

.

.

2009

£m

242.2

520.5

576.4

100.2

1,439.3



1,439.3

2008

£m

248.0

519.1

637.3

99.6

1,504.0

(209.0)


1,295.0

Change

%

-2%

0%

-10%

1%

-4%



11%

.

.

.

.

.

.

.

.

.

.

EBITA/Operating profit 


2009

Including restructuring costs

£m

84.3

107.3

105.3

23.8

320.7


(40.1)

280.6

Restructuring costs

£m

6.9

8.8

10.7

-

26.4



26.4

Excluding restructuring costs

£m

91.2

116.1

116.0

23.8

347.1


(40.1)

307.0











2008

£m

89.6

114.1

111.7

25.8

341.2

(41.4)

(32.4)

267.4

Change excluding 

restructuring costs

%

+2%

+2%

+4%

-8%

+2%

.

.

+15%


UK

Total UK revenues declined by 2%* to £242.2m (2008: £248.0m*)  Organic revenue declined by 3%*, with organic subscription revenues growing at 5%*, while organic software and software-related services revenues contracted by 19%*.  

3

*Foreign currency results for the prior year ended 30 September 2008 have been retranslated based on the average exchange rates for the year ended 30 September 2009 of $1.54/£1 and €1.14/£1 to facilitate the comparison of results.  

^Adjusted pre-tax profit and earnings per share figures stated prior to amortisation of intangible fixed assets and after neutralisation of foreign exchange movements.

EBITA is defined as earnings before interest, tax and amortisation of intangible fixed assets.    

UK (continued)

Sage Pay (formerly Protx) delivered strong growth of 42% benefitting from growth in online purchasing, and Practice Solutions for accountants grew by 8%* with a number of new product and service offerings. Our accounting and ERP products including Sage 50 contracted 5%* reflecting the difficult economic conditions. 


The EBITA margin, including restructuring charges of £6.9m incurred in the year, was 35% (200836%*). Excluding restructuring charges, it was 38%.


Mainland Europe  

Total revenues in Mainland Europe were flat* at £520.5m (2008: £519.1m*). Organic revenue contracted 3%*, reflecting the economic slowdown which became apparent in early calendar year 2009.  Subscription revenues continued to show good organic growth of 5%*, while software and software-related services revenues contracted organically by 13%* after very strong growth in the prior year.  


Revenues in our French business declined 2%* organically in the year. The slowdown in France has had more impact on our vertical and CRM businesses than on our accounting and ERP businesses which still showed overall growth in the year. Spain experienced total revenue growth of 6%*, reflecting the contribution of acquisitions in the current and prior year. As anticipated, organic revenue contracted 7%*, reflecting the exceptional growth of 25%in the prior year resulting from the stimulus of major legislative change, and also the severe impact of the economic slowdown in Spain in 2009.  German revenues were flat* organicallywith the benefit of increased renewal rates on support and continued growth in payroll and entry-level products offsetting general market weakness. Our smaller businesses in Mainland Europe, including Switzerland, Portugal and Poland declined 9%* overall in slowing market conditions. 


The EBITA margin, including restructuring charges of £8.8m incurred in the year, was 21% (200822%*). Excluding restructuring charges, it was 22%.


North America

Total revenues in North America contracted 10%* to £576.4m (2008: £637.3m*), reflecting the difficult economic conditions. Organic revenue contracted 8%*.  Organic subscription revenues declined 2%*, while organic software and software-related services revenues declined 23%*.    


Phase 1 of the changes to our North American business has been successfully completed with the new management team in place and an appropriate reduction of the cost base. Operational improvements planned in Phase 2 are underway including reinvigoration of the channel, growth in premium support offers and several product launchesWe are making good progress in these areas and have seen increases in customer satisfaction scores across our product lines.


Sage North America is organised into 3 divisions, Sage Business Solutions Division ("SBS"), Sage Payment Solutions Division and Sage Healthcare Division. SBS declined organically 11%*, the downturn particularly impacting our mid-market accounting products, CRM products and Sage Timberline Office which serves the construction industry. Our entry-level accounting products (Peachtree and Simply) delivered resilient performances with continued growth of Peachtree QuantumNon-Profit Solutions performed well in the challenging market conditions and grew modestlySage Payment Solutions Division saw a 15% increase in the number of merchants served but lower volume per merchant leading to a fall in revenue of 4%*Payments revenue from cross-sell to our existing customers grew, from a small base, by over 100%* in the year and we regard this as a substantial future opportunity for Sage.


Sage Healthcare Division has improved its EBITA margin in the year to 17% (2008: 8%*). We have improved customer service levels and so reduced customer losses in our Medical Manager base. Although Healthcare revenues declined overall by 5%*, revenue from the Intergy product line, including Electronic Health Records ("EHR") capability, grew by 13%* to £71.2mIntergy, with its accredited, market-leading EHR solution, is well positioned to benefit from incentives within the American Recovery and Reinvestment Act for the adoption of EHR. 


The EBITA margin of Sage North America, including restructuring charges of £10.7m incurred in the year, was 18% (2008:18%*). Excluding restructuring charges, it was 20%. 


4


*Foreign currency results for the prior year ended 30 September 2008 have been retranslated based on the average exchange rates for the year ended 30 September 2009 of $1.54/£1 and €1.14/£1 to facilitate the comparison of results.  

EBITA is defined as earnings before interest, tax and amortisation of intangible fixed assets.  

  

Rest of World

Total and organic revenue in Rest of World grew by 1%* to £100.2m (2008: £99.6m*).  Organic subscription revenues showed strong growth of 14%*, while organic software and software-related services revenues contracted by 8%* after excellent growth in the prior year.


South Africa showed organic revenue growth of 9%*, with both accounting and payroll solutions performing well. However, the impact of the recession began to be experienced in the fourth quarter of the financial year. Australia declined 3%* organically, reflecting the slowing economy, and our Asian businesses, with relatively less mature service offerings declined 15%*.


The EBITA margin was 24% (200826%*), reflecting the difficult market conditions in Asia.  


Financial review


Revenues 

Revenues increased 11% to £1,439.3m (2008: £1,295.0m), benefitting from a favourable movement in exchange rates. Organic revenue, oconstant currency basis, contracted 5%*. Organic revenue excludes contributions of current and prior year acquisitions and disposals (2% of total revenues) and non-core products (2% of total revenues).  


On a constant currency basis, total subscription revenues grew 2%* to £936.8m (2008: £917.1m*)Total software and software-related services revenues contracted 14%* to £502.5m (2008: £586.9m*).  


Profitability

The Group's EBITA margin was 22% (2008: 23%*).  EBITA includes restructuring charges of £26.4m incurred in the year ended 30 September 2009. Excluding restructuring charges, the EBITA margin improved to 24%.  


The Group's net finance expenses decreased significantly with a reduction in interest rates compared to the prior year and a reduction in the level of net debt compared to 2008.


Statutory profit before taxation increased 11% to £267.4m (2008: £241.0m). Statutory earnings per share increased 14% to 14.46p (2008: 12.73p).  On a constant currency basis, adjusted pre-tax profit^ (including restructuring costs) decreased 2% to £307.5m (2008: £314.8m), and adjusted earnings per share^ remained at 16.63p (2008: 16.63p).  A reconciliation of adjusted pre-tax profit^ to statutory profit before tax is shown in the table in Note 2 on page 11.


The Group's effective tax rate for the year is 29% (200831%) partly resulting from a reduction in headline tax rates in a number of Sage territories.


Cash flow

The Group remains highly cash generative with operating cash flow of £357.6m, representing 112% of EBITA.  


At 30 September 2009 net debt was £439.4m (30 September 2008: £541.0m or £606.8m at constant exchange rates). Over the year, strong cash generation reduced net debt by £167.4m on a currency neutral basis. During the year we renegotiated and extended the terms of our £200.0m bank facility so that all of our £815.1m facilities will now mature in 2011. At 30 September 2009, £460.6m of these facilities were drawn down (30 September 2008: £575.4m or £644.1m at constant exchange rates). 


Foreign exchange

The change in foreign currency exchange rates had a favourable impact on the translation of our financial results into Sterling for accounting purposes.  Since 1 October 2008, rates for the Euro to Sterling strengthened 14% to €1.09 from €1.27 with an average rate of €1.14 for the year. Similarly, rates for the US Dollar showed a movement of 10% to US$1.60 from US$1.78with an average rate of US$1.54 for the year.  It is Sage's policy to align the currency denominations of our debt with the cash flows arising from our trading activities in those same currencies to hedge our currency exposure. We do not hedge pure translational exposure resulting from conversion for accounting purposes of overseas companies' results into Sterling.  

5


*Foreign currency results for the prior year ended 30 September 2008 have been retranslated based on the average exchange rates for the year ended 30 September 2009 of $1.54/£1 and €1.14/£1 to facilitate the comparison of results.  

EBITA is defined as earnings before interest, tax and amortisation of intangible fixed assets.  

±Subscription revenues are recurring in nature and include combined software/support contracts, maintenance and support, transaction revenues (payment and health insurance claims processing) and hosted products.  


Dividend

We believe that our consistently strong cash flows, robust balance sheet and recurring revenue streams provide a sustainable basis for a progressive dividend policy, whilst ensuring that the Group can continue to maintain appropriate levels of organic and acquisition-led investment.

  

As a result, we are increasing the full year dividend by 3% to 7.43p per share (2008: 7.21p per share), with a proposed final dividend of 4.93p per share (20084.78p per share). The proposed final dividend will be payable on 5 March 2010 to shareholders on the register at close of business on 5 February 2010.


People

We have over 13,400 employees across the Group. This has been a challenging year for all our people as we have reacted to the difficult market conditions whilst maintaining our focus on our longer term opportunities for growth. We therefore thank all our people for their dedication, professionalism and commitment to delivering the very best to our customers.


Outlook

We have a robust business model with a strong balance sheet underpinned by reliable cash flows. Our customers continue to rely on us as a trusted partner in running their businesses more efficiently.


Conditions stabilised in the second half of the year with SMEs still investing in value-adding business management products and services. However, at this stage, we are not yet seeing a general recovery in our markets. Therefore, we will continue to manage our cost base prudently whilst ensuring the business is well positioned to take advantage of the future economic upturn.

































6


  

Consolidated income statement

For the year ended 30 September 2009








Note 

Year ended 

30 September

2009

(Unaudited) 
£m

Year ended 30 September

2008

(Audited) 
£m

Revenue 

1,2 

1,439.3

1,295.0

Cost of sales 

(108.8)

(94.0)

Gross profit 

1,330.5

1,201.0

Selling and administrative expenses 

(1,049.9)

(933.6)

Operating profit 

280.6

267.4

Finance income 

4.0

3.8

Finance expenses 

(17.2)

(30.2)

Net finance expenses 

(13.2)

(26.4)

Profit before taxation 

2

267.4

241.0

Taxation 

3

(77.9)

(74.7)

Profit for the year 
- attributable to equity shareholders of the parent


189.5


166.3

EBITA* 

1

320.7

299.8

Earnings per share (pence) 

    - Basic 

5

14.46p

12.73p

    - Diluted 

5

14.42p

12.69p



Consolidated statement of recognised income and expense 

For the year ended 30 September 2009






Note 

Year ended 

30 September

2009

(Unaudited) 
£m

Year ended 30 September

2008

(Audited) 
£m

Profit for the year

7

189.5

166.3

Net exchange adjustments offset in reserves

7

140.6

117.1

Equity movement of deferred tax

7

4.0

(0.2)

Actuarial (loss)/gain on employment benefits

7

(0.3)

3.1

Cash flow hedges, net of tax

7

(0.3)

-

Net gains not recognised in income statement

144.0

120.0

Total recognised income for the year 
- attributable to equity shareholders of the parent


333.5


286.3


7

*EBITA measure (Earnings before interest, tax and amortisation) excludes the effects of:

•  Amortisation of acquired intangible assets; and

  Net amortisation or capitalisation of software development expenditure.  

Consolidated balance sheet

As at 30 September 2009





Note

2009

(Unaudited) 
£m

2008

(Audited) 
£m

Non-current assets 

Goodwill 

2,030.8

1,825.5

Other intangible assets 

216.0

223.7

Property, plant and equipment 

144.5

140.5

Deferred tax assets 

7.5

5.2

2,398.8

2,194.9

Current assets 

Inventories 

5.2

5.4

Trade and other receivables 

275.1

267.6

Cash and cash equivalents 

8

59.4

70.1

Total assets 

2,738.5

2,538.0

Current liabilities 

Trade and other payables 

(252.8)

(247.2)

Current tax liabilities 

(62.1)

(69.2)

Financial liabilities 

- Borrowings 

8

(18.8)

(13.9)

Deferred consideration 

(2.3)

(2.6)

Deferred income 

(391.1)

(352.2)

(727.1)

(685.1)

Non-current liabilities 

Financial liabilities 

- Borrowings 

8

(460.6)

(575.2)

Derivative financial instruments

(0.3)

-

Retirement benefit obligations 

(11.8)

(3.9)

Deferred tax liabilities 

(41.2)

(26.8)

(513.9)

(605.9)

Total liabilities 

(1,241.0)

(1,291.0)

Net assets 

1,497.5

1,247.0

Equity 

Share capital 

6,7

13.1

13.1

Share premium account 

6,7

492.0

486.6

Other reserves 

7

249.5

109.2

Retained earnings 

7

742.9

638.1

Total equity

7

1,497.5

1,247.0



8

  

Consolidated cash flow statement

For the year ended 30 September 2009







Note

Year ended 

30 September

2009

(Unaudited) 
£m

Year ended 30 September

2008

(Audited) 
£m

Cash flows from operating activities 

Cash generated from continuing operations 

357.6

342.0

Interest received 

4.0

3.8

Interest paid 

(16.2)

(29.2)

Tax paid 

(55.9)

(62.5)

Net cash generated from operating activities 

289.5

254.1

Cash flows from investing activities 



Acquisitions of subsidiaries (net of cash acquired) 

(13.8)

(81.1)

Disposal of subsidiary 

12.0

-

Purchase of intangible assets 

(10.3)

(15.4)

Purchase of property, plant and equipment 

(19.5)

(25.0)

Proceeds from sale of property, plant and equipment 

0.2

1.8

Net cash used in investing activities 

(31.4)

(119.7)

Cash flows from financing activities 



Net proceeds from issue of ordinary share capital 

5.4

8.5

Finance lease principal payments 

(0.1)

(0.1)

Issue costs on loans 

(0.7)

(0.3)

Repayment of borrowings 

(323.9)

(233.5)

New borrowings 

129.5

193.9

Dividends paid to shareholders 

4

(95.1)

(106.2)

Net cash used in financing activities 

(284.9)

(137.7)

Net decrease in cash, cash equivalents and bank overdrafts 
(before exchange rate changes)

8

(26.8)

(3.3)

Effects of exchange rate changes 

8

8.9

7.8

Net (decrease)/increase in cash, cash equivalents and bank overdrafts

(17.9)

4.5

Cash, cash equivalents and bank overdrafts at 1 October 

8

70.1

65.6

Cash, cash equivalents and bank overdrafts at 30 September 

8

52.2

70.1





9



Notes to financial information

For the year ended 30 September 2009


Group accounting policies 

a General information

The Sage Group plc ("the Company") and its subsidiaries (together "the Group") is one of the leading global suppliers of business management software and services to small and medium-sized enterprises. The Group operates in 24 countries worldwide in the UK & Ireland, Mainland Europe, North America, Southern Hemisphere and Asia.

These financial results do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2008 were approved by the Board of directors on 17 December 2008 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The Company is a limited liability Company incorporated and domiciled in the UK. The address of its registered office is North Park, Newcastle upon Tyne, NE13 9AA.

The Company is listed on the London Stock Exchange.

b Basis of preparation

This financial information for the year ended 30 September 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority. The consolidated financial report should be read in conjunction with the annual financial statements for the year ended 30 September 2008, which have been prepared in accordance with IFRSs as adopted by the European Union.

c Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2008, as described in those annual financial statements.














10



Notes to financial information

For the year ended 30 September 2009


1 Segmental reporting 

Year ended 30 September 2009

Year ended 30 September 2008


Revenue*
(Unaudited)

£m

EBITA*
(Unaudited)

£m

Operating 
profit*

(Unaudited)

£m

Revenue*
(Unaudited)

£m

EBITA*
(Unaudited)

£m

Operating 
profit*

(Unaudited)

£m

UK & Ireland

242.2

84.3

79.7

248.0

89.6

85.6

Mainland Europe

520.5

107.3

90.6

519.1

114.1

101.7

North America

576.4

105.3

86.7

637.3

111.7

95.9

Rest of World

100.2

23.8

23.6

99.6

25.8

25.6


1,439.3

320.7

280.6

1,504.0

341.2

308.8

Foreign exchange impact*

-

-

-

(209.0)

(41.4)

(41.4)


1,439.3

320.7

280.6

1,295.0

299.8

267.4


*The 2009 trading results from businesses located outside the UK were translated into Sterling at the average exchange rates for the year. For our two most significant foreign operating currencies, the US Dollar and the Euro, the resulting rates were £1 = $1.54 and £1 = €1.14 respectively. Results for the prior year ended 30 September 2008 have been retranslated at these exchange rates to facilitate the comparison of results..


The Board measures Group and regional performance by using EBITA (earnings before interest, tax and amortisation), which excludes the effects of amortisation of acquired intangible assets and the net amortisation of software development expenditure.  



Reconciliation of EBITA to operating profit

Year ended 
30 September 2009 (Unaudited) £m

Year ended 30 September 2008 (Audited) £m

EBITA

Net amortisation of software development expenditure

Amortisation of acquired intangible assets

320.7

(0.6)

(39.5)

299.8

(0.6)

(31.8)

Operating profit

280.6

267.4


2 Reconciliation to statutory revenue and profit before taxation



Reconciliation of revenue

Year ended 
30 September 2009 (Unaudited) £m

Year ended 30 September 2008 (Unaudited) £m

Growth
(Unaudited) %

Revenue on foreign currency exchange rate neutral basis

1,439.3

1,504.0

-4%

Impact of movements in foreign currency exchange rates

-

(209.0)

Statutory revenue

1,439.3

1,295.0

11%




Reconciliation of profit before taxation

Year ended 
30 September 2009 (Unaudited) £m

Year ended 30 September 2008 (Unaudited) £m

Growth
(Unaudited) %

Adjusted pre-tax profit 

307.5

314.8

-2%

Impact of movements in foreign currency exchange rates

-

(41.4)

307.5

273.4

12%

Net amortisation of software development expenditure

(0.6)

(0.6)

Amortisation of acquired intangible assets

(39.5)

(31.8)

Statutory profit before taxation

267.4

241.0

11%


11

  

Notes to financial information

For the year ended 30 September 2009



3 Taxation

Income tax for the year ended 30 September 2009 (Unaudited) gives an effective rate of 29% (year ended 30 September 2008 (Audited): 31%). The Group's effective tax rate for the year has reduced partly resulting from a reduction in headline tax rates in a number of Sage territories.


4 Dividends



Year ended 
30 September 2009 (Unaudited) £m

Year ended 
30 September 2008  
(Audited)
  £m

Final dividend paid for the year ended 30 September 2008 of 4.78p per share 

62.5

-

(2008: final dividend paid for the year ended 30 September 2007 of 5.73p per share)

-

74.5

Interim dividend paid for the year ended 30 September 2009 of 2.50p per share 

32.6

-

(2008: interim dividend paid for the year ended 30 September 2008 of 2.43p per share)

-

31.7

95.1

106.2


In addition, the directors are proposing a final dividend in respect of the financial year ended 30 September 2009 of 4.93p per share which will absorb an estimated £64.7m of shareholders' funds. It will be paid on 5 March 2010 to shareholders who are on the register of members on 5 February 2010. These financial statements do not reflect this dividend payable.


5 Earnings per share


Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:



Year ended 30 September 2009

(Unaudited)

Year ended 30 September 2008

(Audited)


Earnings 
£m

Weighted average 
number 

of shares millions

Per share amount 
pence

Earnings 
£m

Weighted 
average 

number 

of shares millions

Per share 
amount 

pence

Basic EPS 

Earnings attributable to ordinary shareholders 

189.5

1,310.6

14.46

166.3

1,306.5

12.73

Effect of dilutive securities 







Options

3.7

(0.04)

3.8

(0.04)

Diluted EPS 

189.5

1,314.3

14.42

166.3

1,310.3

12.69











12

  

Notes to financial information

For the year ended 30 September 2009


5 Earnings per share (continued)


Adjusted EPS - Non GAAP measure



Year ended 30 September 2009

(Unaudited)

Year ended 30 September 2008

(Audited)

Earnings 
£m

Weighted
 average 

number 

of shares millions

Per share amount 
pence

Earnings 
£m

Weighted 
average 

number 

of shares 

millions

Per share 
amount 

pence

Basic EPS

Earnings attributable to ordinary shareholders 

189.5

1,310.6

14.46

166.3

1,306.5

12.73

Adjustments: 

Intangible asset amortisation excluding amortisation of computer software 

40.1

32.4

Taxation 

(11.6)

(10.0)

Net adjustments 

28.5

2.17

22.4

1.71

Adjusted basic EPS 

218.0

1,310.6

16.63

188.7

1,306.5

14.44

Exchange adjustments 

Exchange adjustments

41.4

Taxation

(12.8)

Net exchange adjustments

28.6

2.19

Adjusted basic EPS 
(after exchange adjustments)

218.0

1,310.6

16.63

217.3

1,306.5

16.63

Effect of dilutive securities 

Options

3.7

(0.04)

3.8

(0.04)

Adjusted diluted EPS 
(after exchange adjustments)

218.0

1,314.3

16.59

217.3

1,310.3

16.59



6 Share capital

Capital

Number of shares
(Audited)

Ordinary shares
(Audited)

£m

Share premium
(Audited)

£m

Total
(Audited)

£m

Opening balance 1 October 2007

Allotted under share option schemes

1,304,160,154

5,397,403

13.0

0.1

478.2

8.4

491.2

8.5

At 30 September 2008

1,309,557,557

13.1

486.6

499.7

Capital

Number of shares
(Unaudited)

Ordinary shares
(Unaudited)

£m

Share premium
(Unaudited)

£m

Total
(Unaudited)

£m

Opening balance 1 October 2008

Allotted under share option schemes

1,309,557,557

3,409,399

13.1

-

486.6

5.4

499.7

5.4

At 30 September 2009

1,312,966,956

13.1

492.0

505.1







13

  

Notes to financial information

For the year ended 30 September 2009


7 Shareholders' funds and reconciliation of changes in shareholders' equity


Share 
capital

(Audited)

£m

Share 
premium

(Audited)

£m

Other 
reserves

(Audited)

£m

Retained earnings
(Audited)

£m

Total 
equity

(Audited)

£m

At 1 October 2007 (Audited)

13.0

478.2

(7.9)

567.5

1,050.8

Exchange adjustments 

-

-

117.1

-

117.1

New shares issued

0.1

-

-

-

0.1

Profit for the year 

-

-

-

166.3

166.3

Equity movement of deferred tax

-

-

-

(0.2)

(0.2)

Share options 

- proceeds from shares issued 

-

8.4

-

-

8.4

- value of employee services 

-

-

-

7.6

7.6

Actuarial gain on employment benefits

-

-

-

3.1

3.1

Dividends 

-

-

-

(106.2)

(106.2)

At 30 September 2008 (Audited)

13.1

486.6

109.2

638.1

1,247.0



Share 
capital

(Unaudited)

£m

Share 
premium

(Unaudited)

£m

Other 
reserves

(Unaudited)

£m

Retained earnings
(Unaudited)

£m

Total 
equity

(Unaudited)

£m

At 1 October 2008 (Audited)

13.1

486.6

109.2

638.1

1,247.0

Exchange adjustments 

-

-

140.6

-

140.6

Net cash flow hedge

-

-

(0.3)

-

(0.3)

New shares issued

-

-

-

-

-

Profit for the year 

-

-

-

189.5

189.5

Equity movement of deferred tax

-

-

-

4.0

4.0

Share options 

- proceeds from shares issued 

-

5.4

-

-

5.4

- value of employee services 

-

-

-

6.7

6.7

Actuarial gain on employment benefits

-

-

-

(0.3)

(0.3)

Dividends 

-

-

-

(95.1)

(95.1)

At 30 September 2009 (Unaudited)

13.1

492.0

249.5

742.9

1,497.5




8 Net debt

Analysis of change in net debt

At  
1 October 2008 (Audited) £m

Cash flow
(Unaudited) £m

Acquisitions
(Unaudited) £m


Other
(Unaudited) £m


Exchange movements (Unaudited) £m

At  
30 September 2009 (Unaudited) £m

Cash and cash equivalents

70.1

(19.6)

-

-

8.9

59.4

Bank overdrafts

-

(7.2)

-

-

-

(7.2)

Cash, cash equivalents and bank overdrafts

70.1

(26.8)

-

-

8.9

52.2

Loans due within one year

(13.6)

3.1

-

-

(0.9)

(11.4)

Finance leases due within one year

(0.3)

-

-

-

0.1

(0.2)

Loans due after more than one year

(574.3)

186.1

-

(1.0)

(71.3)

(460.5)

Finance leases due after more than one year

(0.2)

0.1

-

-

-

(0.1)

Cash collected from customers

(22.7)

5.9

-

-

(2.6)

(19.4)

(541.0)

168.4

-

(1.0)

(65.8)

(439.4)


Included in cash above is £19.4m (30 September 2008: £22.7m) relating to cash collected from customers, which the Group is contracted to pay onto another party. A liability for the same amount is included in trade and other payables on the balance sheet and is classified within net debt above.

14




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