The history of Sage
Sage was established in 1981 as one of the first accountancy software players in the market. The company grew quickly through acquisition to become market leader in many of its geographies but over time became slow to embrace the latest technology.
Sage entered a transformation from 2015 to 2017 to accelerate the shift to subscription and the cloud, reduce inefficiencies and excess costs and embrace customer obsession. The business has now been transformed, with the leadership, organisational alignment, brand and comprehensive suite of cloud solutions required to accelerate momentum.
- High quality recurring revenue growth:
78% recurring revenue, 37% software subscription revenue
- Significant cost savings:
> £100m annualised cost savings identified in FY16 and FY17
- Strong free cash flow:
Free cash conversion 15-20% of revenue (FY17: 15%)
- Sustainable and progressive dividend:
Increase in ordinary dividend every year since 1999 (FY17: 9% increase)
The market opportunity
- There are 82m businesses in our total addressable market, which is currently worth $27bn
- Spend on cloud software is growing double digits year-on-year
- Competition is fragmented, localised and inconsistent across geographies
- With Sage Business Cloud, Sage is the only global company in its chosen market that can accommodate the needs of a customer all the way from start-up to scale-up and through to enterprise
Financial performance and outlook
- In FY17 we once again achieved our guidance targets.
- In FY18 we have raised our guidance as we continue on the pathway to accelerated growth.
- In the mid-term revenue growth will accelerate towards 10% with operating margins of at least 27%.
- Longer term guidance is for sustainable organic revenue growth of at least 10% and operating margins of at least 30%.
Our £1.7bn revenue is made up as follows:
- Recurring revenue, comprising software subscription revenue from subscription contracts and maintenance and support from on-plan customers
- Processing revenue comprising payroll and payments revenue
- Software and software related services (SSRS revenue), comprising licences and services (e.g. training, implementation)
- Over time recurring revenue will become 85-90% of total revenue (currently 78%), largely comprised of software subscription revenue