Investing for accelerated growth
‒ Organic operating margin of 25.4% reflects previously communicated first half strategic investment bias in sales and marketing;
‒ Underlying cash conversion remains strong at 111%, supporting free cash flow of £142m and the 8% increase of the interim dividend to 4.80p;
‒ Consistent focus on improving the quality organic growth, superior operating margins, strong free cash flow conversion and progressive dividends;
‒ Reaffirm confidence in achieving full year organic operating margin of at least 27% and delivering at least 6% organic revenue growth
Business transformation
‒ Remain on-track to secure annualised savings of c.£50m from General & Administrative (G&A) functions by the end of FY16 with a target payback of under two years; Actions taken to deliver £17m of annualised G&A savings taken by end of H1, with an associated exceptional cost of £22m at the half year;
‒ Notices served on 46 property leases, which will take locations down to fewer than 100, with 25 exits by end of March 2016;
‒ Continued to strengthen management to accelerate growth, with over a dozen new joiners to the top 100 leadership team.
Technology driving growth
‒ Achieved 17% (H1 2015: 10%) revenue growth for Sage X3, the solution for larger businesses; Highlights include in excess of 60% growth from International; 20% growth in France; and 25% growth in UK & Ireland;
‒ Increased paying subscriptions for Sage One, the cloud solution for small businesses, by 100% year-on-year to 230,000;
‒ Sage 50 Cloud, our market leading accounting solution for small businesses, supported software subscription growth of 31% in Europe and just under 100% in North America.
Stephen Kelly, Chief Executive Officer said: "Sage continues to perform and transform. We made a good start to FY16 with double digit recurring revenue growth as validation that customers are embracing closer subscription relationships. High quality organic revenue growth continued to accelerate H1 over H1.
"In this phase of the transformation, we have been very focussed on improving the capability of our management and creating a culture where customer obsession and innovation becomes a way of life at Sage. Our customers are the entrepreneurs who drive economic growth and prosperity. These entrepreneurs deserve awesome technology that is an enabler to their growth and success. The Sage cloud and partner ecosystem places the customer at the centre to provide a complete business solution from business start-up through scale-up to vibrant enterprise businesses.
"We are pleased with the early progress made and recognise there is still much to do in the transformation. We remain confident in achieving our full year targets of at least 6% organic revenue growth and organic operating margin of 27%."
