Final Results

RNS Number : 4297J

Sage Group PLC

03 December 2008

 



SAGE REVENUES INCREASE 7%* TO £1,295.0M FOR YEAR ENDED 30 SEPTEMBER 2008

The Sage Group plc ('Sage'), a leading global supplier of business management software solutions for small and medium-sized enterprises ('SMEs'), announces its unaudited results for the year ended 30 September 2008.

Financial highlights 

• Revenues increased by 7%* to £1,295.0m (2007: £1,214.1m*)
• EBITA† margin of 23% (2007: 24%*), reflecting recent acquisitions and the planned investment in our North American business
• Adjusted pre-tax profit^ rose by 3% to £273.4m (2007: £265.1m)
• Adjusted earnings per share^ increased by 3% to 14.44p (2007: 14.07p)
• Operating cash flow of £342.0m (2007: £317.1m), representing 114% of EBITA† (2007: 112%)
• Strong balance sheet with net debt to EBITA† of 1.8 times; interest cover of 10.1 times with committed debt facilities of £850m 
• Proposed total dividend increased by 3% to 7.21p (2007: 7.00p); dividend cover of 2 times

Operational and strategic highlights

• 6%* organic revenue growth excluding Sage Healthcare Division (2007: 7%*); 3%* organic revenue growth overall 
• 10%* total growth in subscription revenues±; representing 61% of our business; combined software/support contracts continue to drive strong growth in subscription revenues
• 2%* total growth in software and software-related services
• Good performance in the UK despite challenging market conditions
• Continued strong growth in Mainland Europe and Rest of World
• New management team in North America focused on driving operational efficiencies
• Customer base increased to 5.8m businesses (2007: 5.5m)

*Foreign currency results for the year ended 30 September 2007 have been retranslated based on the average exchange rates for the year ended 30 September 2008 of $1.97/£1 and €1.31/£1 to facilitate the comparison of results.

^Pre-tax profit and earnings per share figures stated prior to amortisation of intangible fixed assets and neutralisation of foreign exchange movements. A table reconciling adjusted pre-tax profit to statutory profit before taxation is shown in Note 2 on page 12 and a table reconciling adjusted earnings per share to statutory earnings per share is shown in Note 5 on page 14.

†Earnings before interest, tax and amortisation of intangible fixed assets (EBITA).

±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.

Regional analysis* 

£m	2008 Revenues		2007 Revenues		2008  EBITA†		2007  EBITA†
UK	236.3		224.1		87.5		82.6
Mainland Europe	455.5		395.9		100.2		91.5
North America	500.9		515.6		87.7		102.2
Rest of World	91.1		78.5		23.4		20.7
	1,283.8		1,214.1		298.8		297.0
Acquisitions:
UK	9.4		-		1.0		-
Mainland Europe	1.8		-		-		-
	11.2		-		1.0		-
Foreign exchange impact*	-		(56.5)		-		(13.8)
Statutory revenue	1,295.0		1,157.6
					299.8		283.2

Paul Walker, Chief Executive, commented:  'The strength and flexibility of our business model has helped us achieve solid results in difficult market conditions. As markets weakened in the UK and North America, we were rapidly able to adapt to the changing markets and proactively refocus our businesses in these regions.  Our businesses in Mainland Europe and Rest of World recorded strong results through a combination of favourable market conditions and good commercial execution.

'We anticipate that the broader economic climate will remain uncertain for the near future. However, our business model, together with consistently strong cash flows, robust balance sheet and high level of recurring revenue streams, provides a solid foundation for our operations. Our large and geographically diverse customer base of over 5m customers also provides many opportunities to meet future demand for business critical solutions designed to help SMEs run their businesses more efficiently in difficult market conditions.

'Whilst we are still early in our new financial year, growth in subscription revenues has continued to offset weakness in software revenues. Although we remain cautious in our outlook, we expect demand for our customer support to continue, which combined with tight cost control and our strong geographic market positions, will allow us to weather these turbulent times.'

A presentation for analysts will be held at 8.30am today at Deutsche Bank, Winchester House, 1 Great Winchester Street, London EC2N 2DB. The presentation will be webcast on www.investors.sage.com. A live audio broadcast of the presentation and subsequent Q&A will also be available for analysts on the dial-in conference number [phone], pass code 75430177.  A replay of the call will be available for two weeks after the event, on [phone], pass code: 75430177#.

Enquiries:

The Sage Group plc   [phone]	Tulchan Communications     [phone]
Paul Walker, Chief Executive	Susanna Voyle
Paul Harrison, Group Finance Director	Stephen Malthouse
Cynthia Alers, Investor Relations Director	Lizzie Morgan

Overview

This has been a challenging year with volatile market conditions in two of our key geographic regions.  After a good performance in the first half of the year, the Group saw softening customer demand in the UK and North America, although Mainland Europe and Rest of World continued to perform strongly. This resulted in organic revenue growth excluding Sage Healthcare Division for the Group of 6%* (3%* organic revenue growth overall). 

Subscription revenues±, representing the 61% of our revenues which are recurring in nature, grew by 10%*
and were less affected by market conditions in the UK and North America.  The continued growth in subscription revenues compensated for the more challenging market conditions we experienced in software and software-related services. Combined software/support contracts, the largest component of subscription revenues, represented 39% of our total revenues and grew by 14%* over the year. This demonstrates the resilience of our business model, with our customers continuing to use our products and services to increase their operational efficiency in difficult markets.  Software and software-related services revenues grew by

2%*, reflecting the market slowdown in North America and the UK, beginning in the second half of the year. 

Product and service strategy

Innovation is at the heart of our strategy.  We continue to adapt and evolve our products and services offering to meet the changing needs of our 5.8m customers, with an increasing range of customer support contracts, as well as tiered subscription offerings tailored to the varying requirements of our customer base.  Our integrated product suites, launched last year, have been well received by our customers and business partners and are beginning to contribute to organic growth.  'Software as a service' and hosted products such as Sage 50 Accounts Professional Online, SageCRM.com, Sage Accpac ERP and Billing Boss continue to show strong demand, although they remain a modest contributor to Group revenues overall.  

Over the year we successfully extended our support offerings with Sage Accountants' Club Priority Link in the UK, Contrat Platine for Ciel! customers in France and the Premier and Avanzado support contracts in Spain.  Customer support continues to drive growth in Spain, South Africa, Poland and Portugal, while our newer markets in China, India, Malaysia and Singapore successfully leveraged their existing solutions, adapting best practice solutions from our more established regions. The growth in customer demand for quality support confirms that customers want to improve their business performance through the innovative and well-designed products and services that Sage offers.

We are also seeing a growing trend for larger companies in the SME sector to extend their businesses beyond their home territories. Our mid-market customers increasingly need solutions that are robust enough to cope with multiple government legislation, multiple currencies, multiple languages, yet can offer rapid integration and local customisation.  Our international products such as Customer Relationship Management ('CRM') (ACT!, SalesLogix, SageCRM), Sage ERP X3 and Sage Accpac ERP broaden our portfolio of localised solutions and are growing well in our emerging markets, helping us expand into new territories.  We anticipate that the trends in the SME sector will increasingly facilitate the development of new products and services aimed at the emerging international SME sector that will complement our current portfolio of locally focused solutions.  With our long experience with SMEs, we understand these emerging challenges and are developing solutions that meet the international demands of medium-sized companies yet still offer the flexibility and localisation that is our competitive advantage.  

Acquisition strategy

Relative to previous years, this has been a quiet year for acquisitions. We continue to evaluate a number of opportunities in both new and existing markets, although in many cases vendor price expectations have not as yet adjusted to current market conditions.  During the year, we completed three principal acquisitions, for an enterprise value of £51.2m.  KCS, a leading supplier of HR and payroll services in the UK, was completed in October 2007 for an enterprise value of £20.2m.  Tekton, a supplier of construction solutions for UK mid-market companies, was completed in March 2008 for an enterprise value of £19.8m. Eurowin, acquired in July 2008 for an enterprise value of £11.2m, strengthened our market position at the entry-level in Spain.  These acquisitions were all strategic investments in broadening our product offering.    

We remain committed to our acquisition strategy of expanding our product and service offering to SMEs in both new and existing territories. As we expand the scope of our businesses worldwide, we are increasingly focused on leveraging our scale and exploiting global synergies between our businesses.  Our strong balance sheet and cash conversion put us in an advantageous position to pursue opportunities when asset prices fall.  However, our acquisition methodology remains robust and highly disciplined in determining valuation parameters.

Distribution strength

Our distribution strength remains one of our key competitive advantages, with over 30,000 business partners and 40,000 accountancy practices recommending and marketing Sage products worldwide.  The role of our business partners in promoting our products and services and providing local expertise continues to evolve as customers demand increasing levels of tailored products and specialised services.  Our business partners are a key component in building and maintaining on-going relationships with our customers. 

Customer base

Over the year, we added 341,000 new customers (37,000 resulting from acquisitions made this year).  New customers are an important component in our long term growth strategy as customers tend to remain loyal to their original software supplier as they grow, purchasing upgrades and additional products and driving future organic revenue growth.

Regional review

UK 

Total UK revenues grew by 10% to £245.7m (2007: £224.1m). Organic revenue growth was 3% for the year, as the deteriorating macroeconomic environment in the second half of the year affected growth in software and software-related services.  Sage 50, our flagship UK product, grew by 8% driven by our combined software/support contract SageCover Extra.  Our fully integrated product suite solutions, Sage 200 and Sage 1000, launched last year continue to be well received by our customers and business partners alike.  Sage 200 performed strongly over the year, although Sage 1000 in the upper mid-market was more affected by the challenging market conditions. Protx, the payment services solution also performed strongly.  HR and payroll reported modest growth in the absence of legislative stimulus.  

Two acquisitions were completed in the UK over the year.  KCS extended our payroll offering into the mid-market and complemented our prior year acquisition in this area, Snowdrop. Tekton, a leading supplier to mid-market construction companies complements Sage 50 CIS which targets smaller construction companies.  

The EBITA† margin decreased to 36% (2007: 37%), due to the dilutive effects of acquisitions. 

Mainland Europe

Our businesses in Mainland Europe experienced strong growth throughout the year. Total revenues in Mainland Europe grew by 15%* overall to £457.3m (2007: £395.9m*) with strong organic revenue growth of 

9%*.  France reported 7%* organic revenue growth for the full year.  Excellent performances from our entry-level business, Ciel! and mid-market solutions contributed to France's strong growth.  Germany, as forecast, recovered in the second half of the year, although a muted performance in Switzerland held back combined organic revenue growth in Germany/Switzerland to 1%*.  Office Line, CRM and mid-market solutions all performed well.  Spain recorded another year of excellent organic revenue growth of 25%*, with growth across most of its product range, stimulated by changes in accounting legislation.  Poland enjoyed strong organic revenue growth of 18%* driven by its mid-market solutions and the continued extension of customer support. 

During the year, we acquired Eurowin for an enterprise value of £11.2m, which extended our leading market position at the entry-level in the Spanish market.

The EBITA† margin reduced to 22% (2007: 23%*), primarily as a result of restructuring charges associated with our French logistics business and the integration of a lower margin Swiss acquisition completed in the prior year.

North America

This has been a transitional year for our North American business and a period of organisational change.  In March 2008, we appointed Sue Swenson as President and CEO to lead our North American business. She was joined in June 2008 by Marc Loupé as Chief Financial Officer of North America. Lindy Benton, who brings extensive experience in healthcare industry management, joined in September 2008 as Chief Operating Officer of Sage Healthcare Division.  Greg Hammermaster joined in November 2008, after the end of the financial year, as President of Sage Payment Solutions Division.  Greg has long term experience of the payments industry.  The new executive management team is focusing on driving operational improvements and earnings growth.  

Excluding Sage Healthcare Division, total revenues in North America grew by 1%* to £361.8m (2007: £358.9m*), which also represented organic revenue growth of 1%*. Including Sage Healthcare Division organic revenues contracted by 3%*.  The Business Management Division ('BMD') reported flat revenues for the year, as did its key products, Peachtree and the MAS range.  Simply, the market leader in Canada recorded good growth, as did specialist solutions such as FAS and the accountants' club. Organic revenue growth in the Industry & Specialised Solutions Division ('ISSD') was 3%*.  Sage Timberline Office/Master Builder reported modest growth despite challenging conditions in the US construction industry.  Non Profit Solutions continued to show good growth.  Sage Payment Solutions Division ('PSD') grew by 5%* for the full year, reflecting the slowing US economy and turmoil in the credit markets towards the end of the year. 

Revenues at Sage Healthcare Division contracted 11%*, as, over the course of the year, management concentrated on improving operational efficiency within the business and increasing margins, after a significant restructuring of the business.  Good progress is being made in stabilising the support operations and network services.

Similar to the UK, our North American business experienced an economic slowdown as the year progressed.  This affected the second half performance of PSD, whilst BMD and ISSD both saw softening late in the second half of the year.  

The EBITA† margin decreased, in line with our guidance last year, to 18% (2007: 20%*) as a result of investment made in our support operations in BMD.

Rest of World

Total revenues in Rest of World grew by 16%* to £91.1m (2007: £78.5m*). Organic revenue growth was 

14%*. South Africa had another impressive year, with a strong finish to the year and excellent growth in support, payroll and international products.  Australia experienced good revenue growth in the first half, with only a slight moderation to growth in the second half. India, China and the Middle East all grew strongly, successfully leveraging our existing solutions such as Sage ERP X3, CRM products and Sage Accpac ERP to build their market positions.

The EBITA† margin was maintained at 26% (2007: 26%*).

Financial review

In order to assess like-for-like performance, regional and Group growth trends are shown on a foreign currency neutral basis throughout this statement, unless otherwise stated.  The impact of foreign exchange movements are shown in the tables in Notes 2 and 5, on pages 12 and 14 respectively.  

It is Sage's policy to hedge currency exposure to cash flows. This is largely achieved by aligning the currency denominations of our debt with the cash flows arising from our trading activities in those same currencies.  We do not hedge pure translational exposure resulting from conversion for accounting purposes of overseas companies' results into Sterling.

Over the year, we saw significant movement in foreign currency exchange rates. The average rate for the Euro strengthened 13% from £1 = €1.48 to £1 = €1.31, which had a favourable translational impact on our financial results. The US Dollar to Sterling average rate for the year remained broadly unchanged at £1 = $1.97 (2007: $1.98). However, the US Dollar appreciated rapidly near the end of our financial year, closing at $1.78, an appreciation of 13% against the prior year end rate. This affected various balance sheet items, including valuation of our net debt, a substantial proportion of which is denominated in US Dollars and Euros.  At 30 September 2008, net debt stood at £541.0m (2007: £509.7m).   

The Group remains highly cash generative with operating cash flow of £342.0m, representing 114% of EBITA† (2007: 112%).  The balance sheet remains strong with net debt to EBITA† of 1.8 times and interest cover of 10.1 times. We have financing facilities of £850m underwritten by our long term banking syndicate, of which £750m is committed until 2011.

Revenues 

Revenues increased 7%* to £1,295.0m (2007: £1,214.1m*).  Organic revenue growth for the year, excluding Sage Healthcare Division, was 6%* (3%* including Sage Healthcare Division). Organic revenue growth in the first half of the year was 8%* excluding Sage Healthcare Division and was 5%* including Sage Healthcare Division. In the second half organic revenue growth was 4%* excluding Sage Healthcare Division and was 2%* including Sage Healthcare Division.  Organic revenue growth excludes the contributions of current year and prior year acquisitions (together 5% of total revenues) and non-core products (2% of total revenues).  

Total revenues for software and software-related services were £509.3m (2007: £499.8m*), with organic revenue growth of 2%* excluding Sage Healthcare Division. Total subscription revenues grew by

10%* to £785.7m (2007: £714.3m*), benefiting from strong organic revenue growth in combined software/support contracts. 

Following the reclassification of our revenue categories last year, software and software-related services include stand-alone software licence sales (including new licences, upgrades and migrations) and professional services, hardware and business forms. Subscription revenues are recurring in nature and include maintenance and support (13% of total revenues), combined software/support contracts (39% of total revenues), hosted products (1% of total revenues) and transaction services (8% of total revenues).

Profitability

EBITA† increased 1%* to £299.8m (2007: £297.0m*), adjusted pre-tax profit^ rose by 3% to £273.4m (2007: £265.1m) and, after accounting for the effects of amortisation and currency movements, statutory profit before tax rose 8% to £241.0m (2007: £223.3m). A reconciliation of adjusted pre-tax profit^ to statutory profit before tax is shown in the table in Note 2 on page 12.  Adjusted basic earnings per share^ grew 3% to 14.44p (2007: 14.07p) and statutory basic earnings per share grew 7% to 12.73p (2007: 11.85p).  

The Group's EBITA† margin was reduced by 1% to 23% (2007: 24%*) due to the dilutive effects from recent acquisitions and the announced investment in our North American business over the year.

The Group's effective tax rate for the year was 31% (2007: 31%).  

Dividend

The Board is strongly committed to enhancing shareholder value. 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 Board can continue to maintain the appropriate levels of organic and acquisition-led investment.

As a result, we are increasing the full year dividend by 3% to 7.21p per share (2007: 7.00p per share), with a proposed final dividend of 4.78p per share (2007: 5.73p per share, following the rebasing of our dividend policy which was reflected in our final dividend in the second half of the prior year). 

The final dividend will be payable on 6 March 2009 to shareholders on the register at close of business on 6 February 2009.

Corporate developments

People

We now employ over 14,500 people (2007: 13,900), and our employees are at the heart of our strategy continuously to improve our customers' experience. As markets become more challenging over the coming year, we rely on our employees to enhance our competitive advantage in all our markets.  Our loyal, dedicated and customer-focused employees have greatly contributed to our results in this challenging year, and we thank them for their continuing efforts.

Environment 

We are aware of the current debate around climate change, and our corporate policy is to minimise our carbon footprint where possible. This year, our focus has been on developing a globally consistent template for measuring our carbon emissions and waste generation across our businesses in all our major locations as an initial step in our strategy to reduce our long term impact on the global environment.  We encourage our employees to think and act in an environmentally positive manner to help us realise this strategy.

Board changes

David Clayton joined the Board on 1 October 2007 as Group Strategy and Mergers and Acquisitions Director. On 1 November 2007, Ian Mason, Chief Executive of Electrocomponents plc, joined the Board as a non-executive director.  Mark Rolfe, formerly Finance Director of Gallaher Group plc, joined the Board on 1 December 2007 and became chair of the Audit Committee on 1 April 2008.

Outlook

The strength and flexibility of our business model has helped us achieve solid results in difficult market conditions. As markets weakened in the UK and North America, we were rapidly able to adapt to the changing markets and proactively refocus our businesses in these regions.  Our businesses in Mainland Europe and Rest of World recorded strong results through a combination of favourable market conditions and good commercial execution.

We anticipate that the broader economic climate will remain uncertain for the near future. However, our business model, together with consistently strong cash flows, robust balance sheet and high level of recurring revenue streams, provides a solid foundation for our operations. Our large and geographically diverse customer base of over 5m customers also provides many opportunities to meet future demand for business critical solutions designed to help SMEs run their businesses more efficiently in difficult market conditions.

Whilst we are still early in our new financial year, growth in subscription revenues has continued to offset weakness in software revenues. Although we remain cautious in our outlook, we expect demand for our customer support to continue, which combined with tight cost control and our strong geographic market positions, will allow us to weather these turbulent times.

  Consolidated income statement 

For the year ended 30 September 2008

	Note	Year ended 30 September  2008 (Unaudited) £m	Year ended 30 September  2007 (Audited) £m
Continuing operations
Revenue	1,2	1,295.0	1,157.6
Cost of sales		(94.0)	(103.7)
Gross profit		1,201.0	1,053.9
Selling and administrative expenses		(933.6)	(798.7)
Operating profit	1	267.4	255.2
Finance income		3.8	3.6
Finance expenses		(30.2)	(35.5)
Net finance expenses		(26.4)	(31.9)
Profit before taxation	2	241.0	223.3
Taxation	3	(74.7)	(69.2)
Profit for the year - attributable to equity shareholders	7	166.3	154.1
EBITA†	1	299.8	283.2
Earnings per share (pence)
- Basic	5	12.73p	11.85p
- Diluted	5	12.69p	11.79p

Consolidated statement of recognised income and expense

For the year ended 30 September 2008

	Note	Year ended 30 September  2008 (Unaudited)   £m	Year ended 30 September  2007 (Audited)   £m
Profit for the year	7	166.3	154.1
Net exchange adjustments offset in reserves	7	117.1	(51.6)
Equity movement of deferred tax	7	(0.2)	(3.3)
Actuarial gain/(loss) on employment benefits	7	3.1	(1.2)
Net gains/(losses) not recognised in income statement		120.0	(56.1)
Total recognised income for the year - attributable to equity shareholders		286.3	98.0

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

Amortisation of acquired intangible assets; and

Amortisation (or capitalisation) of software development expenditure.

Consolidated balance sheet

As at 30 September 2008

	Note	30 September 2008  (Unaudited)   £m	Restated 30 September 2007  (Audited)   £m
Non-current assets
Goodwill		1,825.5	1,567.0
Other intangible assets		223.7	200.6
Property, plant and equipment		140.5	130.5
Deferred tax assets		5.2	8.3
		2,194.9	1,906.4
Current assets
Inventories		5.4	5.5
Trade and other receivables		267.6	230.3
Cash and cash equivalents	8	70.1	65.6
		343.1	301.4
Total assets		2,538.0	2,207.8
Current liabilities
Trade and other payables		(247.2)	(210.2)
Current tax liabilities		(69.2)	(56.3)
Financial liabilities
- Borrowings		(13.9)	(0.3)
Deferred consideration		(2.6)	(8.5)
Deferred income		(352.2)	(300.2)
		(685.1)	(575.5)
Non-current liabilities
Financial liabilities
- Borrowings		(575.2)	(562.0)
Retirement benefit obligations		(3.9)	(5.3)
Deferred tax liabilities		(26.8)	(14.2)
		(605.9)	(581.5)
Total liabilities		(1,291.0)	(1,157.0)
Net assets		1,247.0	1,050.8
Equity
Share capital	6,7	13.1	13.0
Share premium account	6,7	486.6	478.2
Other reserves	7	109.2	(7.9)
Retained earnings	7	638.1	567.5
Total equity	7	1,247.0	1,050.8

The notes on pages 11 to 15 form an integral part of this financial information.

Consolidated cash flow statement 

For the year ended 30 September 2008

	Note	Year ended 30 September 2008  (Unaudited) £m	Year ended 30 September  2007  (Audited) £m
Cash flows from operating activities
Cash generated from continuing operations		342.0	317.1
Interest received		3.8	3.6
Interest paid		(29.2)	(34.4)
Tax paid		(62.5)	(66.1)
Net cash generated from operating activities		254.1	220.2
Cash flows from investing activities
Acquisitions of subsidiaries (net of cash acquired)		(81.1)	(96.2)
Disposal of subsidiaries		-	0.9
Purchase of intangible assets		(15.4)	(15.9)
Purchase of property, plant and equipment		(25.0)	(22.1)
Proceeds from sale of property, plant and equipment		1.8	0.2
Net cash used in investing activities		(119.7)	(133.1)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		8.5	15.0
Finance lease principal payments		(0.1)	(0.2)
Issue costs on loans		(0.3)	(0.2)
Repayment of borrowings		(233.5)	(189.0)
New borrowings		193.9	122.2
Dividends paid to shareholders	4	(106.2)	(49.0)
Net cash used in financing activities		(137.7)	(101.2)
Net decrease in cash and cash equivalents (before exchange rate changes)	8	(3.3)	(14.1)
Effects of exchange rate changes	8	7.8	(2.3)
Net increase/(decrease) in cash and cash equivalents		4.5	(16.4)
Cash and cash equivalents at 1 October	8	65.6	82.0
Cash and cash equivalents at 30 September	8	70.1	65.6

Notes to financial information

For the year ended 30 September 2008

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 26 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 240 of the Companies Act 1985. Statutory accounts for the year ended 30 September 2007 were approved by the Board of directors on 18 January 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 237 of the Companies Act 1985.

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 2008 has been prepared in accordance with the  Listing Rules and 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 2007, 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 2007, as described in those annual financial statements.

Adoption of new and revised International Financial Reporting Standards

At the date of approval of this information, the following standards, interpretations and amendments were issued but not yet mandatory for the Group and early adoption has not been applied.  

International Financial Reporting Standards ('IFRS')

IFRS 8 ''Operating Segments'' (this has been adopted by the EU)

IFRS 3 (Revised) ''Business Combinations''

IAS 1 (Revised) ''Presentation of Financial Statements''

IAS 27 (Revised) ''Consolidated and Separate Financial Statements''

International Financial Reporting Interpretations Committee ('IFRIC') interpretations

IFRIC 12 ''Service Concession Arrangements''

IFRIC 13 ''Customer Loyalty Programmes''

IFRIC 14 ''IAS19 - The Limit of a Defined Benefit Asset, Minimum Funding Requirements and their Interaction''

IFRIC 15 ''Agreements for construction of Real Estates''

IFRIC 16 ''Hedges of a Net Investment in a Foreign Operation''

Amendments to existing standards

Amendment to IAS 23 - ''Borrowing Costs''

Amendment to IAS 32 - ''Financial Instruments: Presentation - Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation''

Amendment to IFRS 1 and IAS 27 - ''Cost of an Investment in a Subsidiary, Jointly Controlled Entity or an Associate''

Amendment to IAS 39 and IFRS 7 - 'Reclassification of Financial Assets'

Amendment to IAS 39 - ''Eligible Hedged Items''

Amendment to IFRS 2 - ''Vesting Conditions and Cancellations''

IFRS Annual Improvements

All the IFRSs, IFRIC interpretations and amendments to existing standards are yet to be endorsed by the EU at the date of approval of these consolidated financial statements with the exception of IFRS 8 and the amendment to IAS 39 and IFRS 7. 

The directors anticipate that the future adoption of those standards, interpretations and amendments listed above will not have a material impact on the Consolidated financial statements. 

Balance sheet restatement

When the accounting for acquisitions is provisional at a year end date and is then finalised within 12 months, the carrying amount of the assets and associated goodwill is accounted for at the revised level from the original acquisition date. Comparative information presented for the periods before the accounting is complete, is presented as if the initial accounting had been complete from the acquisition date. As a result the consolidated balance sheet as at 30 September 2007 has been restated to reflect the final accounting. The impact of the restatement has been to reduce goodwill by £5.1m, and increase other intangible assets by £5.1m. There is no impact on the consolidated income statement for the year ended 30 September 2007.

Notes to financial information

For the year ended 30 September 2008

1 Segmental reporting 

	Year ended 30 September 2008			Year ended 30 September 2007
	Revenue* (Unaudited) £m	EBITA†* (Unaudited) £m	Operating  profit* (Unaudited) £m	Revenue* (Audited) £m	EBITA†* (Audited) £m	Operating  profit* (Audited) £m
UK & Ireland	236.3	87.5	84.9	224.1	82.6	80.9
Mainland Europe	455.5	100.2	87.9	395.9	91.5	82.0
North America	500.9	87.7	71.9	515.6	102.2	85.6
Rest of World	91.1	23.4	23.2	78.5	20.7	20.5
	1,283.8	298.8	267.9	1,214.1	297.0	269.0
Acquisitions - UK & Ireland	9.4	1.0	(0.4)	-	-	-
Acquisitions - Mainland Europe	1.8	-	(0.1)	-	-	-
Foreign exchange impact*	-	-	-	(56.5)	(13.8)	(13.8)
	1,295.0	299.8	267.4	1,157.6	283.2	255.2

* The 2008 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 = $1.97 and £1 = €1.31 respectively. Results for the year ended 30 September 2007 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 or capitalisation of software development expenditure.

EBITA† includes a charge for share-based payments of £7.6m (2007: £8.8m).

Reconciliation of operating profit to EBITA†	Year  ended 30 September  2008 (Unaudited) £m	Year ended 30 September  2007   (Audited) £m
Operating profit	267.4	255.2
Amortisation of acquired intangible assets	31.8	27.2
Net amortisation of software development expenditure	0.6	0.8
EBITA†	299.8	283.2

 2 Reconciliation to statutory revenue and profit before taxation

Reconciliation of revenue	Year  ended 30 September  2008 (Unaudited) £m	Year ended 30 September  2007   (Audited) £m	Growth (Unaudited) %
Revenue on foreign currency exchange rate neutral basis	1,295.0	1,214.1	7%
Impact of movements in foreign currency exchange rates	-	(56.5)
Statutory revenue	1,295.0	1,157.6	12%

Reconciliation of profit before taxation	Year  ended 30 September  2008 (Unaudited) £m	Year ended 30 September  2007   (Audited) £m	Growth (Unaudited) %
Adjusted pre-tax profit	273.4	265.1	3%
Impact of movements in foreign currency exchange rates	-	(13.8)
	273.4	251.3	9%
Net amortisation of software development expenditure	(0.6)	(0.8)
Amortisation of acquired intangible assets	(31.8)	(27.2)
Statutory profit before taxation	241.0	223.3	8%

  Notes to financial information

For the year ended 30 September 2008

3 Taxation

Income tax for the year ended 30 September 2008 (Unaudited) gives an effective rate of  31% (year ended 30 September 2007 (Audited): 31%).

4 Dividends

	Year  ended 30 September  2008 (Unaudited) £m	Year ended 30 September  2007   (Audited) £m
Final dividend paid for the year ended 30 September 2007 of 5.73p per share	74.5	-
(2007: final dividend paid for the year ended 30 September 2006 of 2.51p per share)	-	32.4
Interim dividend paid for the year ended 30 September 2008 of 2.43p per share	31.7	-
(2007: interim dividend paid for the year ended 30 September 2007 of 1.27p per share)	-	16.6
	106.2	49.0

The final dividend proposed for approval at the Annual General Meeting on 3 March 2009, of 4.78p per share will be paid on 6 March 2009 to shareholders on the register at the close of business on 6 February 2009.  

5 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held in the employee share trust, which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those 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 and the contingently issuable shares under the Group's long-term incentive plan. 

At 30 September 2008, the performance criteria for the vesting of the awards under the incentive scheme had not been met and consequently the shares in question are excluded from the diluted EPS calculation.

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

	Year ended 30 September 2008   (Unaudited) 2008			Year ended 30 September 2007   (Audited) 2007
	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	166.3	1,306.5	12.73	154.1	1,299.9	11.85
Effect of dilutive securities
Options	-	3.8	(0.04)	-	7.1	(0.06)
Diluted EPS	166.3	1,310.3	12.69	154.1	1,307.0	11.79

  Notes to financial information

For the year ended 30 September 2008

5 Earnings per share (continued)

Adjusted EPS - Non GAAP measure

	Year ended 30 September 2008   (Unaudited) 2008			Year ended 30 September 2007   (Audited) 2007
	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	166.3	1,306.5	12.73	154.1	1,299.9	11.85
Non GAAP items:
Intangible asset amortisation and net development expenditure	32.4			28.0
Taxation	(10.0)			(8.7)
Net adjustments	22.4	-	1.71	19.3	-	1.49
Adjusted basic EPS	188.7	1,306.5	14.44	173.4	1,299.9	13.34
Exchange adjustments
Exchange adjustments	-	-	-	13.8
Taxation				(4.3)
Net exchange adjustments	-	-	-	9.5	-	0.73
Adjusted basic EPS (after exchange adjustments)	188.7	1,306.5	14.44	182.9	1,299.9	14.07
Effect of dilutive securities
Options	-	3.8	(0.04)	-	7.1	(0.08)
Adjusted diluted EPS (after exchange adjustments)	188.7	1,310.3	14.40	182.9	1,307.0	13.99

6 Share capital

Capital	Number of  shares (Audited)	Ordinary shares (Audited) £m	Share premium (Audited) £m	Total (Audited) £m
Opening balance 1 October 2006	1,294,280,944	12.9	462.8	475.7
Allotted under share option schemes	9,879,210	0.1	15.4	15.5
At 30 September 2007	1,304,160,154	13.0	478.2	491.2

Capital	Number of shares (Unaudited)	Ordinary shares (Unaudited) £m	Share premium (Unaudited) £m	Total (Unaudited) £m
Opening balance 1 October 2007	1,304,160,154	13.0	478.2	491.2
Allotted under share option schemes	5,397,403	0.1	8.4	8.5
At 30 September 2008	1,309,557,557	13.1	486.6	499.7

  Notes to financial information

For the year ended 30 September 2008

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

	Share  capital (Audited) £m	Share  premium (Audited) £m	Retained  earnings (Audited) £m	Other  reserves (Audited)  £m	Equity  funds (Audited)  £m	Minority  interest (Audited) £m	Total  equity (Audited)  £m
At 1 October 2006	12.9	462.8	458.1	43.7	977.5	0.1	977.6
Exchange adjustments	-	-	-	(51.6)	(51.6)	-	(51.6)
New shares issued	0.1	-	-	-	0.1	-	0.1
Purchase of minority interest	-	-	-	-	-	(0.1)	(0.1)
Profit for the year	-	-	154.1	-	154.1	-	154.1
Equity movement of deferred tax	-	-	(3.3)	-	(3.3)	-	(3.3)
Share options
- proceeds from shares issued	-	15.4	-	-	15.4	-	15.4
- value of employee services	-	-	8.8	-	8.8	-	8.8
Actuarial loss on employment benefits	-	-	(1.2)	-	(1.2)	-	(1.2)
Dividends	-	-	(49.0)	-	(49.0)	-	(49.0)
At 30 September 2007	13.0	478.2	567.5	(7.9)	1,050.8	-	1,050.8
	Share  capital (Unaudited) £m	Share  premium (Unaudited) £m	Retained  earnings (Unaudited) £m	Other  reserves (Unaudited)  £m	Equity  funds (Unaudited)  £m	Minority  interest (Unaudited) £m	Total  equity (Unaudited)  £m
At 1 October 2007	13.0	478.2	567.5	(7.9)	1,050.8	-	1,050.8
Exchange adjustments, net of tax	-	-	-	117.1	117.1	-	117.1
New shares issued	0.1	-	-	-	0.1	-	0.1
Profit for the year	-	-	166.3	-	166.3	-	166.3
Equity movement of deferred tax	-	-	(0.2)	-	(0.2)	-	(0.2)
Share options
- proceeds from shares issued	-	8.4	-	-	8.4	-	8.4
- value of employee services	-	-	7.6	-	7.6	-	7.6
Actuarial gain on employment benefits	-	-	3.1	-	3.1	-	3.1
Dividends	-	-	(106.2)	-	(106.2)	-	(106.2)
At 30 September 2008	13.1	486.6	638.1	109.2	1,247.0	-	1,247.0

Other reserves relate to the merger reserve which was present under UK GAAP and frozen on transition to IFRS, in addition it includes the translation reserve which was created following the adoption of IFRS.

8 Net debt

	At  1 October  2007 (Audited)  £m	Cash flow (Unaudited)  £m	Acquisitions (Unaudited)  £m	Other (Unaudited)  £m	Exchange  movements (Unaudited)  £m	At  30 September  2008 (Unaudited)  £m
Net cash at bank and in hand	65.6	(3.3)	-	-	7.8	70.1
Loans due within one year	(0.2)	(12.7)	(0.7)	-	-	(13.6)
Finance leases due within one year	(0.1)	(0.1)	-	-	(0.1)	(0.3)
Loans due after more than one year	(561.1)	59.7	-	(1.0)	(71.9)	(574.3)
Finance leases due after more than one year	(0.1)	-	(0.2)	-	0.1	(0.2)
Cash collected from customers	(13.8)	(6.9)	-	-	(2.0)	(22.7)
Total	(509.7)	36.7	(0.9)	(1.0)	(66.1)	(541.0)

Included in cash above is £22.7m (30 September 2007: £13.8m) relating to cash collected from customers, which we are 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.

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