Friday 20 November 2020
- Continued strong growth in high quality organic recurring revenue of 8.5 %, in line with guidance at the start of the year, with 90 % of total revenue now recurring
- Organic operating margin of 22.1 %, reflecting ongoing investment in the business
- Sustained strong cash generation, with underlying cash conversion of 123 %
- Resilient balance sheet, with c. £1.2bn of cash and available liquidity ; net debt to EBITDA ratio of 0.3x
- Good progress in strategic execution, with software subscription penetration of 65 % and Sage Business Cloud penetration of 61 %
- Further targeted investment planned for FY21 to drive future growth, led by cloud native solutions
As a result of rounding throughout this document, it is possible that tables may not cast, and change percentages may not calculate precisely.
FY20 Financial Performance
Organic recurring revenue (excluding assets held for sale) increased by 8.5 % to £1,592m, underpinned by software subscription revenue growth of 20.5 % to £1,141m. This was offset by a 26.1 % decrease in other revenue (SSRS and processing) to £176m. Total organic revenue grew by 3.7 % to £1,768m.
- Including assets held for sale3, recurring revenue growth increased by 8.2 % to £1,674m, underpinned by software subscription revenue growth of 20.2 % to £1,197m, and offset by a 25.8 % decrease in other revenue (SSRS and processing) to £192m. Total revenue grew by 3.3 % to £1,866m.
- Growth in recurring revenue reflects the continued focus on attracting new customers and migrating existing customers to subscription and Sage Business Cloud, with particular strength in Northern Europe and North America.
- Decrease in other revenue (SSRS and processing) is in line with our strategy to transition to subscription revenue and away from licence sales and low margin professional services implementations. As expected, this reduction accelerated in the second half due to the impact of COVID-19.
- Organic operating profit of £391m, representing a margin of 22.1 % (FY19 : 23.8 %), reflects continued investment to drive strategic execution, and a £17m bad debt provision in connection with COVID-19. Including assets held for sale, operating profit was £406m, a margin of 21.8 %.
- Non-recurring gain of £46m (FY19 : loss of £14m) includes a £141m net gain on disposals (Sage Pay and the Brazilian business), offset by office relocation and property restructuring charges of £54m, a £19m charge for goodwill impairment in respect of the Asian business as previously announced, and restructuring charges of £22m reflecting the move away from low margin professional services revenue.
- Continued strong cash generation, with cash conversion above 100 % for the second consecutive year. Cash conversion of 123 % (FY19 : 129 %) reflects continued growth in software subscription and sustained improvements in working capital, with particular success in the collection of receivables.
- Resilient balance sheet, with c. £1.2bn of cash and available liquidity (comprising £848m of cash and cash equivalents, and £398m of undrawn facilities), and net debt to EBITDA of 0.3x as at 30 September 2020.
1 Please see Appendix 1 for guidance on the usage and definitions of the Alternative Performance Measures.
2 Organic revenue and operating profit for FY19 is restated to aid comparability with FY20. The definition of organic measures can be found in Appendix 1 with a full reconciliation of organic, underlying and statutory measures on page 10. Unless otherwise specified, all references to revenue, profit and margins are on an organic basis.
3 Assets held for sale at year-end include businesses in Central Europe and International. Further details are included on page 8.
4 Defined as organic recurring revenue from Sage Business Cloud as a proportion of organic recurring revenue from the Future Sage Business Cloud Opportunity.
5 Defined as the closing ARR from customers active at the start of the year, divided by the opening ARR for the year.
6 Defined as the normalised organic recurring revenue in the last month of the reporting period, adjusted consistently period to period, multiplied by twelve.