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Giving small and medium sized
companies the condence
and freedom to be successful
The Sage Group plc
Annual Report & Accounts 2013

Table of contents

  • Page 1
    Giving small and medium sized companies the confidence and freedom to be successful The Sage Group plc Annual Report & Accounts 2013

  • Page 2

  • Page 3
    ...combine what customers love about Sage with the benefits of new technology. We have a clearly defined strategy to take advantage of the changes taking place in our markets, which is helping us to leverage our strengths and accelerate our growth. The Sage Group plc | Annual Report & Accounts 2013 1

  • Page 4
    ... to mid-market companies that is backed by market-leading business support. We also offer adjacent products and services typically involving technology which is highly integrated, such as payments and customer relationship management ("CRM"). In this year's Annual Report & Accounts, we highlight...

  • Page 5
    ... 2010 2011 2012 2013 2009 2010 2011 2012 2013 Note: * The 2012 Annual Report & Accounts disclosed Sage One paying customers of 6,100. This year we are reporting the number of paying subscriptions. Definitions of underlying measures: - Organic revenue neutralises the impact of foreign exchange in...

  • Page 6
    4 The Sage Group plc | Annual Report & Accounts 2013

  • Page 7
    ...people and, on behalf of the Board, I would like to thank all employees for their considerable efforts and I look forward to another year of continued progress in delivering on our plans. Governance Financial statements Donald Brydon, Chairman The Sage Group plc | Annual Report & Accounts 2013 5

  • Page 8
    6 The Sage Group plc | Annual Report & Accounts 2013

  • Page 9
    ... to be successful and support our customers and partners effectively. And we're delivering on our strategic and financial commitments to our shareholders through a disciplined approach to managing our resources. Governance Financial statements 7 The Sage Group plc | Annual Report & Accounts 2013

  • Page 10
    ...-leading support, utilising our local expertise, offering ï¬,exibility through choice and meeting the challenges that really matter to our customers. Support Innovation Why customers choose us Choice Brand Localised products and services 8 The Sage Group plc | Annual Report & Accounts 2013

  • Page 11
    ... what we do using the Net Promoter Score ("NPS") system. We have made significant improvements to both our product and service scores this year, some of which are best-in-class, which proves to us that we're still focusing on the right things. The Sage Group plc | Annual Report & Accounts 2013 9

  • Page 12
    ... opportunities to bring great products and services to our customers. To help us identify, measure and understand the challenges faced by small and medium sized businesses, we carry out an annual survey called The Sage Business Index. This year we spoke to over 11,700 business decision makers in 17...

  • Page 13
    ...and through telephone and field sales teams. Accountants Accountants buy software from us, but over 40,000 accountant partners also recommend our products to our other customer segments. Our routes to market *Small to medium sized businesses The Sage Group plc | Annual Report & Accounts 2013 11

  • Page 14
    ... like most about what we already provide. Core customer needs Extraordinary customer experience Technology and pricing Security Intuitiveness Knowledgeable support Efficiency Greater control Cloud Mobile Connected services Subscription 12 The Sage Group plc | Annual Report & Accounts 2013

  • Page 15
    ...and pricing Our technology strategy involves building cloud products that address the specific needs of our customer segments by incorporating the benefits of connectivity, integration and mobility. For start-up and small businesses we've built Sage One, which is our low cost, easy to use accounting...

  • Page 16
    ...'s review continued Our business model We deliver value through a model based on our core strengths We have a strong business model... Sustainable growth Financial discipline Strong cash generation eo pl e O of s r u t re a w 14 an The Sage Group plc | Annual Report & Accounts 2013 d su ...

  • Page 17
    ... Our business model is highly cash generative. Turn to page 25 to read about our approach to capital management. To see how we track our growth, profitability and commercial success, turn to pages 44 and 45 to view our financial and strategic KPIs The Sage Group plc | Annual Report & Accounts 2013...

  • Page 18
    ... work is combined with local deployment to ensure we continue to meet the needs of local markets. Two of our most important global products are Sage One and Sage ERP X3. Sage One Sage One is our cloud solution for start-ups and small businesses. Following its launch in the UK & Ireland in 2011, Sage...

  • Page 19
    ...208 employees Financial statements Americas Revenue £448.2m EBITA £115.0m (26% margin) 3,546 employees AAMEA Revenue £151.0m EBITA £40.6m (27% margin) Revenue contribution by region 2,006 employees 11% 33% 56% Americas AAMEA Europe The Sage Group plc | Annual Report & Accounts 2013 17

  • Page 20
    ... a number of financial and strategic KPIs to chart our progress. its of subscri enef ptio b e n h T e technology op h t po ing rtu r u t n p sing our busines u c s Fo Ca ity Growth To go directly to our strategic KPIs, turn to page 45 18 The Sage Group plc | Annual Report & Accounts 2013

  • Page 21
    ... Officer, Europe Michael Robinson, Company Secretary and Group Legal Director Read the Executive Committee's biographies on page 61 Note: - Steve Hare was appointed Chief Financial Officer after the year end with effect from 3 January 2014. The Sage Group plc | Annual Report & Accounts 2013 19

  • Page 22
    ... growth potential. Turn to our strategic KPIs on page 45 to see how we're doing in reallocating our resources See note 16 in the Financial statements starting on page 134 for details on the disposals 20 The Sage Group plc | Annual Report & Accounts 2013

  • Page 23
    ...and consistent visual identity across our websites. Since joining the Group last year, I am delighted with the progress we have made. I am very confident that our transformation journey will continue to execute at pace and with continued focus. The Sage Group plc | Annual Report & Accounts 2013 21

  • Page 24
    ... access and edit their clients' Sage One data in the cloud. Since the start of the new financial year we have introduced Sage One Accounts Extra, which has a broader range of features to address the needs of businesses with up to 25 employees. 22 The Sage Group plc | Annual Report & Accounts 2013

  • Page 25
    ... computing platform. Earlier this year, we completed the work we have done on Azure that allows our on-premise products to run in the cloud with the launch of Sage ERP Online. Sage ERP X3 Sage ERP X3 is a global product designed to address the needs of mid-market customers, who typically require the...

  • Page 26
    ...in our transition from a perpetual licence model, where customers pay a one-off fee to use the core application, to a recurring revenue model offering annual premium support contracts and connected services. We've now entered a new phase where subscription pricing gives access to all of our features...

  • Page 27
    ...periods; and - Businesses in new geographies where we are prepared to wait longer to achieve target returns in exchange for access to higher-growth markets. This year... to our financial KPIs on page 44 to see how we monitor our financial strength The Sage Group plc | Annual Report & Accounts 2013 25

  • Page 28
    .... Achieved net debt leverage target of 1x EBITDA with payment of special dividend and share consolidation. July 2013 Launch of Sage ERP Online for hybrid cloud products. July 2013 Launch of Sage Data Cloud at the North America Sage Summit. 26 The Sage Group plc | Annual Report & Accounts 2013

  • Page 29
    ... major areas of investment including Sage One, Sage ERP X3 and payment services. The disposal of non-core products announced earlier in the year has streamlined the portfolio, allowing greater focus on the core. Governance Financial statements 27 The Sage Group plc | Annual Report & Accounts 2013

  • Page 30
    ... by 34% outside of its home market of France. Non-French revenue now accounts for 50% of global Sage ERP X3 revenue. North America performed particularly well, with new customer acquisition, migration and support from the channel helping to drive a step-change in growth. The strong performance of...

  • Page 31
    ... is working and growth is accelerating. We remain confident of achieving our target of 6% organic revenue growth in 2015 and anticipate further progress during the year ahead. Governance Financial statements Guy Berruyer, Chief Executive The Sage Group plc | Annual Report & Accounts 2013 29

  • Page 32
    ...change drove demand. SSRS revenue includes stand-alone software licence sales (including new licences, upgrades and migrations), training, business forms and other services. Full year dividend of 11.32p per share up 6% 2012: 10.68p per share# 30 The Sage Group plc | Annual Report & Accounts 2013

  • Page 33
    ... to the share buyback programme and the share consolidation effected in June 2013. Statutory basic earnings per share declined by 79% to 3.97p (2012: 18.63p) primarily due to losses on completed non-core disposals in North America and Europe. The Sage Group plc | Annual Report & Accounts 2013 31

  • Page 34
    ... Rand exchange rate moved significantly in the year to £1 = ZAR14.60 from £1 = ZAR12.72, representing a fluctuation of 14.8%. The average Brazilian Real exchange rate used to translate the results of our Brazilian businesses was R$3.30. 32 The Sage Group plc | Annual Report & Accounts 2013

  • Page 35
    .... Events after the reporting period On 11 November 2013, the Group announced the appointment of Steve Hare as Chief Financial Officer, who will join the Sage Board with effect from 3 January 2014. Darren Fisher, Acting Chief Financial Officer The Sage Group plc | Annual Report & Accounts 2013 33

  • Page 36
    Financial and operating review continued Regional performance Good performance driven by strong execution 34 The Sage Group plc | Annual Report & Accounts 2013

  • Page 37
    ... in customer numbers. Sage Pay also launched in Germany and Spain during the year. The EBITA margin for Europe was 28% (2012: 28%). Underlying revenue (£m) UK & Ireland France Spain Germany Sage Pay Others 258.2 255.1 98.0 85.0 27.6 53.0 The Sage Group plc | Annual Report & Accounts 2013 35

  • Page 38
    ... foothold in Brazil means we are in a strong position to benefit from the structural growth opportunities offered by this market. The EBITA margin for Americas was 26% (2012: 26%). Underlying revenue (£m) North America Brazil 399.2 49.0 36 The Sage Group plc | Annual Report & Accounts 2013

  • Page 39
    ...strong performance from HR and payroll products in Malaysia and Singapore, and Sage ERP X3 across the region. The EBITA margin for AAMEA was 27% (2012: 27%). Underlying revenue (£m) South Africa Australia Middle East and Asia 88.1 45.1 17.8 The Sage Group plc | Annual Report & Accounts 2013 37

  • Page 40
    ... days a week support, so I can ring them up if things go wrong and they're friendly, they're nice. They understand small businesses and they don't speak down to you. They treat you how you would treat your own customers." Sage One Sage One is our cloud accounting and payroll product for start-up...

  • Page 41
    The Sage Group plc | Annual Report & Accounts 2013 39

  • Page 42
    ... into one place, giving our customers a complete picture of the cash they're collecting in real time. 13,800 Integrated payments customers globally at 30 September 2013 20% Increase in global integrated payments underlying revenue this year 40 The Sage Group plc | Annual Report & Accounts 2013

  • Page 43
    The Sage Group plc | Annual Report & Accounts 2013 41

  • Page 44
    .... It is a sophisticated solution for businesses that need to manage a range of functions, including manufacturing, purchasing, inventory, sales, warehousing, CRM and finance. 12% Growth in global Sage ERP X3 underlying revenue this year 42 The Sage Group plc | Annual Report & Accounts 2013

  • Page 45
    The Sage Group plc | Annual Report & Accounts 2013 43

  • Page 46
    ... value adjustments and exceptional items. Interest cover Operating profit for the year excluding exceptional items, expressed as a multiple of finance costs excluding imputed interest for the same year. 1.0:1 0.4:1 0.6 24.1x 32.5x (9.1x) 44 The Sage Group plc | Annual Report & Accounts 2013

  • Page 47
    ... renewed in the year as a percentage of those that were due for renewal. Note: * The 2012 Annual Report & Accounts disclosed Sage One paying customers of 6,100. This year we are reporting the number of paying subscriptions. 82% 81% 1% The Sage Group plc | Annual Report & Accounts 2013 45

  • Page 48
    ...and mitigated via risk management processes that are embedded in the day-to-day running of the business. Identify Evaluate Our risk management process Mitigate Analyse To read more about internal control and risk management, turn to page 67 46 The Sage Group plc | Annual Report & Accounts 2013

  • Page 49
    ... man dependency and succession planning processes. Change management With new business priorities, there are risks associated with the change management impact on employees, systems and the alignment of talent with prioritised business areas. The Sage Group plc | Annual Report & Accounts 2013 47

  • Page 50
    48 The Sage Group plc | Annual Report & Accounts 2013

  • Page 51
    ... requires us to anticipate and interpret our customers' needs so that we're ready to meet them. Having the agility to find relevant, effective solutions and deliver them at the right time is what sets us apart. Governance Financial statements 49 The Sage Group plc | Annual Report & Accounts 2013

  • Page 52
    ... at its heart. We believe this work will help our people support our customers with conviction and also help us attract new talent. Our RV visited seven Sage offices in North America to talk to our customers as part of our Confidence Tour. 50 The Sage Group plc | Annual Report & Accounts 2013

  • Page 53
    ... Women % men % women 84 27 76% 24% 75 24 76% 24% Total workforce diversity 2013 2012 Men 6,830 7,295 5,930 6,214 54% 46% 54% 46% Sage Day is an annual event where our people support local communities and charities. Women % men % women The Sage Group plc | Annual Report & Accounts 2013 51

  • Page 54
    ...appropriate, regional legislation. We also work with local legislative bodies and data protection agencies and continuously look to strengthen our systems and procedures. Cycling 750 miles to Paris and Alpe d'Huez raises thousands for charity. 52 The Sage Group plc | Annual Report & Accounts 2013

  • Page 55
    ... and practical tips that will help small businesses understand the issues they face every day - from navigating the complexities of VAT, to working with mentors and their accountants. The Sage Group plc | Annual Report & Accounts 2013 Sage provides work experience opportunities to young people...

  • Page 56
    ... Europe 5,749 2,302 North America and Brazil 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Electricity, heat, steam and cooling purchased for own use Combustion of fuel and operation of facilities 54 The Sage Group plc | Annual Report & Accounts 2013

  • Page 57
    ... part in this project during the year under review by reporting on our gas (Scope 1) and electricity (Scope 2) emissions for the financial year ended 30 September 2012. However, our emissions reporting for the purposes of this Annual Report & Accounts provides broader emissions information and is...

  • Page 58
    ... employees in North America have donated a total of 3,480 items including food, toys and clothes to various charities. 56 The Sage Group plc | Annual Report & Accounts 2013 Investing in young people Sage South Africa has a long-standing joint initiative with the South African Institute of Chartered...

  • Page 59
    Our 2013 Strategic report, from page 2 to page 57, has been reviewed and approved by the Board of directors on 4 December 2013. Guy Berruyer, Chief Executive The Sage Group plc | Annual Report & Accounts 2013 57

  • Page 60
    ... Board appraisal process for the prior year. In relation to the objectives for the year ended 30 September 2013, the Board has regularly monitored its performance against these and has found this process adds value. Donald Brydon CBE, Chairman 58 The Sage Group plc | Annual Report & Accounts 2013

  • Page 61
    ... views of its shareholders and other stakeholders. Governance Financial statements Donald Brydon CBE, Chairman Guy Berruyer, Chief Executive Neil Berkett Jonathan Howell Ruth Markland Non-executive Executive Biographies are on page 60 The Sage Group plc | Annual Report & Accounts 2013 59

  • Page 62
    ... Apax Partners, where he was Co-Head of the Portfolio Support Group. Prior to joining Apax in 2009, he accumulated over 10 years' experience as CFO for three listed companies, most recently with Invensys, a FTSE 100 company, from 2006 to 2009. 60 The Sage Group plc | Annual Report & Accounts 2013

  • Page 63
    ... budgets; - Monitoring of operational and financial performance; - Assessment and control of risk; - Prioritisation and allocation of resources; and - Monitoring of competitive forces in each area of operation. Governance Financial statements 61 The Sage Group plc | Annual Report & Accounts 2013

  • Page 64
    ... financial year ended 30 September 2013 and to the date of this report, we have complied with the provisions set out in the UK Corporate Governance Code 2012. The Code is publicly available at the website of the FRC (www.frc.org.uk). This corporate governance section of the Annual Report & Accounts...

  • Page 65
    ... of the Board. The Board must continue to provide strong leadership at Sage, and, therefore, continues to appoint only the most appropriate candidates to the Board. The Sage Group plc | Annual Report & Accounts 2013 Governance All directors are subject to election or re-election by shareholders at...

  • Page 66
    ... oversee Sage's financial reporting, risk management and internal controls procedures and the work of its internal and external auditors. The Committee's main responsibilities, as set out in its terms of reference, are to review and advise the Board on: - The interim and annual financial statements...

  • Page 67
    ... controls and risk management activities outlined above, the Committee also received regular reports from the Group Tax Director on the Group's tax policy, approach to tax management and status of compliance. Governance Financial statements 65 The Sage Group plc | Annual Report & Accounts 2013

  • Page 68
    ..., although other large accountancy practices are also used as and when appropriate. During the year, non-audit services obtained from the external auditors included tax compliance and advice and support relating to corporate restructuring. 2013 £m 2012 £m Total audit fees Non-audit fees: Tax...

  • Page 69
    ...policy requirements have been received and understood. In addition, management representations covering compliance with relevant policies and the accuracy of financial information are collated on an annual basis. 67 Governance Financial statements The Sage Group plc | Annual Report & Accounts 2013

  • Page 70
    ... exercises to review the key strategic risks and to identify top local risks within their country. The outputs of these assessment exercises are sent to regional management and the Group Risk and Assurance Director for review and challenge. 68 The Sage Group plc | Annual Report & Accounts 2013

  • Page 71
    ... and replacement of directors" and "Powers of the directors" and is incorporated into this corporate governance section by reference. By order of the Board Governance Financial statements M J Robinson, Company Secretary 4 December 2013 The Sage Group plc | Annual Report & Accounts 2013 69

  • Page 72
    ... with the audited consolidated financial statements for the year ended 30 September 2013. Strategic report The Companies Act 2006 requires us to present a fair review of the business during the year to 30 September 2013 and of the position of the Group at the end of the financial year along with...

  • Page 73
    ... Directors shall be no less than two and no more than 15 in number. Directors may be appointed by the Company by ordinary resolution or by the Board. A director appointed by the Board holds office only until Governance Financial statements 71 The Sage Group plc | Annual Report & Accounts 2013

  • Page 74
    ... committed facilities which are available to be drawn for general corporate purposes including working capital. The Company's Treasury function has a policy of optimising the level of cash in the businesses in order to minimise external borrowings. The Sage Group plc | Annual Report & Accounts 2013

  • Page 75
    ...and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. By Order of the Board Governance Financial statements M J Robinson, Company Secretary 4 December 2013 The Sage Group plc | Annual Report & Accounts 2013 73

  • Page 76
    ... Directors' annual remuneration report will be put to an advisory shareholder vote. Dear fellow shareholder, It is my pleasure to present the Directors' remuneration report for the year ended 30 September 2013. Due to the timing of its financial year end, Sage is among the first companies required...

  • Page 77
    ... proportion of remuneration is performance-based and delivered through shares. Our bonus deferral policy and shareholding guidelines also foster an ongoing commitment to the business from our executives. Governance Financial statements 75 The Sage Group plc | Annual Report & Accounts 2013

  • Page 78
    ...incentives. - While our remuneration policy follows the same principles across the Group, packages offered to employees reflect differences in market practice in the different countries the Group operates in and also differences in size of role. 76 The Sage Group plc | Annual Report & Accounts 2013

  • Page 79
    ... shares; and top 30). The Chairman has use of a car and driver. The Chairman fee has been set at £360,000 non-executive directors may be eligible and fixed at this level for five years from the to benefits such as company car, use date of appointment (July 2012). of secretarial support, healthcare...

  • Page 80
    ...175,000 Stretch 40% 10% 1% 29% 20% £1,215,000 Target 78% 20% 2% £615,000 Below threshold 0 £500,000 Salary Pension Benefits 78 £1,000,000 £1,500,000 £2,000,000 £2,500,000 Annual bonus (including any deferred amounts) Long-term incentives The Sage Group plc | Annual Report & Accounts 2013

  • Page 81
    ...-executive directors and service contracts of executive directors are available for inspection at the Company's registered office during normal business hours and will be available at the Annual General Meeting. Governance Financial statements 79 The Sage Group plc | Annual Report & Accounts 2013

  • Page 82
    ...' annual remuneration report Single figure for total remuneration (audited information) The following table sets out the single figure for total remuneration for Directors for the financial years ended 30 September 2012 and 2013. (a) Salary/fees £'000 Director 2013 2012 (b) Benefits £'000 2013...

  • Page 83
    ... based on EPS performance is adjusted according to TSR performance over the same period compared to a group of international software and computer services companies over a three-year period. EPS performance for awards granted in 2011 The Company's EPS performance was 6% in excess of RPI for the...

  • Page 84
    ..., the bonus payment for the Chief Executive in 2012 represented 35% of target opportunity, whereas for the UK management population the payment for the same year was 66% of target. UK management bonuses are based partly on personal performance. 82 The Sage Group plc | Annual Report & Accounts 2013

  • Page 85
    ... 111, share buy-back taken from consolidated statement of changes in equity on page 97. - Total employee pay - Total staff costs from note 2.3 on page 108, including wages and salaries, social security costs, pension and share-based payments. The Sage Group plc | Annual Report & Accounts 2013 83

  • Page 86
    ... dividends 2012 2013 2012 2013 Ordinary dividends 2012 2013 Statement of implementation of remuneration policy in the following financial year Appointment of the Chief Financial Officer... upper decile (or above) Between 8% and 10% (or above) 84 The Sage Group plc | Annual Report & Accounts 2013

  • Page 87
    ... points, options vest on a straight-line basis. There was no further retesting. - The market price of a share of the Company at 30 September 2013 was 330p and the lowest and highest market price during the year was 304p and 387p respectively. The Sage Group plc | Annual Report & Accounts 2013 85

  • Page 88
    ... granted to each director of the Company under The Sage Group Deferred Bonus Plan are as follows: Shares at 1 October 2012 number Shares awarded during the year number Shares vested during the year number Shares lapsed during the year number Shares at 30 September 2013 number Director Vesting date...

  • Page 89
    ...services ended on that date. - J Harlow ceased to be a director on 4 September 2013 and her contract for services ended on that date. - I Mason and M E Rolfe ceased to be directors on 30 November 2013 and their contracts for services ended on that date. The Sage Group plc | Annual Report & Accounts...

  • Page 90
    ... on the Remuneration report at the 2013 AGM: Votes for Number % Votes against Number % Votes cast Votes withheld 781,616,580 94.16% 48,521,017 5.84% 830,137,597 27,336,704 R Markland Chairman of the Remuneration Committee 4 December 2013 88 The Sage Group plc | Annual Report & Accounts 2013

  • Page 91
    The Sage Group plc | Annual Report & Accounts 2013 89

  • Page 92
    ...' report to the members of The Sage Group plc 91 Group financial statements Our Group financial statements provide a complete picture of our 2013 performance. Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in...

  • Page 93
    ... The Sage Group plc Strategic report Report on the Group financial statements Our opinion In our opinion the Group financial statements: - give a true and fair view of the state of the Group's affairs as at 30 September 2013 and of the Group's profit and cash flows for the year then ended; - have...

  • Page 94
    Independent auditors' report to the members of The Sage Group plc continued Areas of particular audit focus In preparing the financial statements, the directors made a number of subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and ...

  • Page 95
    ... by our prior consent in writing. Other matter We have reported separately on the parent company financial statements of The Sage Group plc for the year ended 30 September 2013 and on the information in the Directors' remuneration report that is described as having been audited. Charles Bowman...

  • Page 96
    ... statement For the year ended 30 September 2013 Note 2013 £m 2012 £m Revenue Cost of sales Gross profit Selling and administrative expenses Loss on disposal of non-core products Operating profit Finance income Finance costs Finance costs - net Profit before income tax Income tax expense Profit...

  • Page 97
    Consolidated statement of comprehensive income For the year ended 30 September 2013 Strategic report Note 2013 £m 2012 £m Governance Profif for fhe year Ofher comprehensive income/(expense): Ifems fhaf will nof be reclassified fo profif or loss al gain/(loss) on post-employment benefit ...

  • Page 98
    ....8 1,375.1 (2.1) 1,373.0 The consolidated financial statements on pages 94 to 137 were approved by the Board of directors on 4 December 2013 and are signed on their behalf by: G S Berruyer, Director 96 96 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 99
    ...statement of changes in equity For the year ended 30 September 2013 Strategic report Ordinary shares £m Attributable to owners of the parent Retained Other Share earnings reserves premium £m £m £m Total £m Non-controlling interest £m Total equity £m Governance At 1 October 2012 Profit...

  • Page 100
    ....9 9.3 4.2 7.7 (251.0) (1.1) 514.1 (256.5) 9.5 (320.8) (298.1) 11.4 (297.5) (0.7) 14.8 (0.7) 0.5 (136.5) (408.7) 12.2 12.2 12.2 12.2 31.2 (2.7) 28.5 54.4 82.9 (124.6) (3.0) (127.6) 182.0 54.4 98 98 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 101
    ... are measured at fair value through profit or loss. The financial statements of the Group comprise the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared at the end of the reporting period. The accounting policies have been consistently applied...

  • Page 102
    ... enacted at the end of the reporting period. Tax assets and liabilities are offset when there is a legally enforceable right. - 50 years - over period of lease - 2 to 7 years - 4 years - 5 to 7 years 100 100 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 103
    ...The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 101 101 Governance Financial statements Financial statements

  • Page 104
    ... paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of the Company until the shares are cancelled or reissued. 102 102 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 105
    ...possibility of an outflow of resources is remote. As such, no provision or contingent liability has been recognised in these financial statements. Governance Financial statements Financial statements 103 99 Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013

  • Page 106
    ... Year ended 30 September 2013 Organic revenue adjustment1 £m NonGAAP organic £m Year ended 30 September 2012 Organic Underlying Currency at constant revenue currency adjustment1 impact £m £m £m Non-GAAP organic constant currency £m Underlying IFRS at constant statutory currency % % Change Non...

  • Page 107
    ... profit)(loss) Adjustment1 £m £m £m Year ended 30 September 2012 IFRS statutory Non-GAAP operating EBITA 1 profit Adjustment reported £m £m £m Underlying Non-GAAP EBITA Currency constant currency impact £m £m IFRS statutory Non-GAAP operating EBITA profit reported % % Change Underlying Non...

  • Page 108
    ... costs Other Disposal of non-core products Archer litigation costs recognised in selling and administrative expenses Total exceptional item (184.6) 5.6 (5.6) (3.8) 2.5 (185.9) (2.3) (188.2) 106 102 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 109
    ... Financial statements Financial statements Services provided by the Group's auditor and network firms During the year, the Group (including its overseas subsidiaries) obtained the following services from the Group's auditor at costs as detailed below: 2013 £m 2012 £m Fees payable to the Group...

  • Page 110
    ... benefits Share-based payments 6.4 0.5 1.3 8.2 5.0 0.5 0.7 6.2 The key management figures given above include directors. Key management personnel are deemed to be members of the Executive Committee as shown on page 19. 108 104 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group...

  • Page 111
    ....6 - - 95.4 The majority of the current tax adjustment in respect of prior years of £6.3m (2012: £15.0m) reflects the resolution of a number of historical tax matters with the tax authorities. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 109 105

  • Page 112
    ... end of the reporting period. Reconcvlvatvons of the earnvngs and wevghted average number of shares Underlyvng 2013 Underlying 2012 Statutory 2013 Statutory 2012 Earnvngs (£m) Profit for the year from continuing operations Profit for the year from discontinued operations Number of shares (mvllvons...

  • Page 113
    ... of shareholders' funds. It will be paid on 10 March 2014 to shareholders who are on the register of members on 14 February 2014. These financial statements do not reflect this dividend payable. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 111 107

  • Page 114
    ... assumed equal to the long-term growth rate in the gross domestic product of the country in which the CGU's operations are undertaken and were in the range of 1.8% (2012: 1.8%) to 5.8% (2012: 5.5%). 112 108 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 115
    ....4 25.6 (5.1) (8.2) 178.7 22.1 33.6 - - 39.0 45.1 139.8 egg amortisation charges regating to continuing operations in the year have been charged through segging and administrative expenses. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 113 109

  • Page 116
    ... (7.0) 296.7 149.6 21.7 (12.3) (4.5) 154.5 142.2 Depreciation expenEeE frow continuing operationE of £20.0w (2012: £21.7w) have been charged through Eelling and adwiniEtrative expenEeE (note 2.2). 114 110 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 117
    ... Receivables written-off during the year as uncollectible Unused amounts reversed Exchange movement At 30 September 30.3 - (2.3) 10.0 (6.0) (3.5) (0.8) 27.7 29.2 0.5 - 9.9 (3.3) (4.1) (1.9) 30.3 Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 115 111

  • Page 118
    ... their fair value. 7.3 Trade and other payables 2013 £m 2012 £m Trade payables Other tax and social security payable Other payables Accruals 46.4 63.8 46.5 130.9 287.6 40.2 64.3 31.3 123.2 259.0 116 112 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 119
    ... 2012 £m Interest cost Expected return on plan assets Current service cost Total included within staff costs The entire cost is included within selling and administrative expenses. (0.8) 0.4 (1.8) (2.2) (0.9) 0.4 (1.4) (1.9) Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013...

  • Page 120
    ... 2012 £m Cumulati3e actuarial gainu and louueu recogniued outuide profit or louu At 1 October Actuarial gain/(loss) recognised in the year (before tax) At 30 September (1.3) 1.1 (0.2) 1.3 (2.6) (1.3) 118 114 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual...

  • Page 121
    ... in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12, "Income Taxes") during the year are shown below. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 119 115

  • Page 122
    ...tax Exchange movement At 30 September 2013 Liabilities At 1 October 2012 Income statement credit/(....3) (9.6) 6.0 - (14.0) 7.8 (0.9) (0.1) (10.8) 16.9 (29.5) 9.0 0.4 (2.8) - (0.1) (0.1) (23.1) (4.4) 120 116 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 123
    ...The Group also leases vehicles, plant and equipment under non-cancellable operating lease agreements. 11 Cobtibgebt liabilities The Group had no contingent liabilities at 30 September 2013 (2012: none). Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 121...

  • Page 124
    ...,3which3the3Group3is3contracted3to3pay3on3to3another3 party.3A3liability3for3the3same3amount3is3included3in3trade3and3other3payables3on3the3balance3sheet3and3is3classified3within3net3debt3above.3 3 122 118 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 125
    ... costs were paid during the year ended 30 September 2010 and 30 September 2013. These costs are allocated to the income statement over the term of the facility using the effective interest method. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 123 119

  • Page 126
    ... incur commitment fees at market rates. In addition, the Group maintains overdraft and uncommitted facilities to provide short-term flexibility and has also utilised the US private placement market. 124 120 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 127
    ...2012 £m In less than one year In more than one year but not more than five years Future finance charges on finance leases Presebt value of fibabce lease liabilities 1.1 0.7 1.8 (0.1) 1.7 1.3 1.7 3.0 (0.2) 2.8 Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts...

  • Page 128
    ... years. The expected life is the average expected period to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds of a term consistent with the assumed option life. 126 122 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 129
    ... growth target proportion to vest, the EBITA margin in the financial year ending 30 September 2015 must not be less than that of the EBITA margin for the financial year ending 30 September 2012. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 127 123

  • Page 130
    ...694) (5,845) 19,128 - - - - - - - 2012 Weighted average remaining life years Range of exercise prices Number of shares '000s Expected Contractual N/A - 16,739 1.4 1.4 - 19,128 1.3 1.3 128 124 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 131
    ...share option scheme for UK employees. The fair value is expensed over the service period of three, five or seven years on the assumption that 20% of options will lapse over the service period as employees leave the Group. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage...

  • Page 132
    ... administering the scheme are charged to the profit and loss account of the Company in the period to which they relate. The market value of the shares at T0 September 201T was £17.9m (2012: £2.2m). 130 126 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 133
    ... Non-controllinf interest arisinf on business combination Non-controllinf interest's share of profit of the year At 30 September (2.1) - 1.1 (1.0) - (2.2) 0.1 (2.1) Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 131 127 Financial statements Financial...

  • Page 134
    ... Financial statements 16 Acquisitions and disposals 16.1 Acquisitions made during the year Acquisition of EBS Empresa Brasileira de Sistemas Ltda. On 11 October 2012 the Group acquired EBS Empresa Brasileira de Sistemas Ltda. ("EBS"), a provider of accounting, business management and tax software...

  • Page 135
    ... in goodwill prior to IFRS 3 (Revised)), "Business Combinations", relate to completed transactions and include advisory, legal, accounting, valuation and other professional or consulting services. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 133 129

  • Page 136
    ...in year Nef assefs disposed (Loss)/proTif on disposal Cumulafive exchange gain in respecf oT fhe nef assefs oT fhe subsidiary, reclassiTied Trom equify on disposal (Loss)/Profit on ... 91.0 (9.6) 81.4 134 130 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 137
    ....0) (307.2) Goodwill allocated to the disposals was equal to the goodwill created on acquisition, reflecting benefits associated with the original acquisitions no longer remaining within the Group. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 135 131

  • Page 138
    ... the year ended 2013 (2012: £nil). These arrangements are subject to independent review using external advisers to ensure all transactions are at arm's length. 18 Events after the reporting period 18.1 Share buyback On 30 September 2013 the Group appointed Citigroup Global Markets Limited to manage...

  • Page 139
    ... and support of business management software and related products and services for small and medium sized businesses. Incorporated subsidiaries Name Country of incorporation Governance Sage (UK) Ltd Sage Pay Europe Limited Sage Hibernia Limited Sage Pay Ireland Limited Ciel SAS Sage SAS Sage FDC...

  • Page 140
    ... of The Sage Group plc 139 Company financial statements Our Company financial statements provide a complete picture of our 2013 position. Notes to the Company financial statements Supplementary notes to the Company financial statements. Company balance sheet 141 Company accounting policies...

  • Page 141
    ...of the parent company acquired in the course of performing our audit; or - Is otherwise misleading. We have no exceptions to report arising from this responsibility. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 139 135 Governance Financial statements

  • Page 142
    ... parent company financial statements in accordance with applicable law and...reported separately on the Group financial statements of The Sage Group plc for the year ended 30 September 2013. Charles Bowman (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants...

  • Page 143
    ....7 13.3 524.5 "239.6) 646.5 944.7 The financial statements on pages 141 to 147 were approved by the Board of directors on 4 December 2013 and are signed on their behalf by: G S Berruyer, Director Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 141 137

  • Page 144
    ...value. Parent company profit and loss account and cash flow statement The awount of profot for the fonancoal year before dovodends wothon the accounts of the parent cowpany os £2,170.7w (2012: £574.0w). There os no wateroal dofference between the profots and losses as reported above and hostorocal...

  • Page 145
    ... of shareholders' funds. It will be paid on 10 March 2014 to shareholders who are on the register of members on 14 February 2014. These financial statements do not reflect this dividend payable. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 143 139

  • Page 146
    ..., distribution and support of business management software and related products and services for small and medium sized businesses. 3 Cash at bank and in hand 2013 £m 2012 £m Cash at bank and in hand 4 Debtors 4.5 0.5 2013 £m 2012 £m Amounts owed by Group undertakings Other debtors...

  • Page 147
    ... year ended 30 September 2010, no issue costs were incurred during the current financial year. These costs are allocated to the income statement over the term of the facility using the effective interest method. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts...

  • Page 148
    ... administering the scheme are charged to the profit and loss account of the Company in the period to which they relate. The market value of the shares at 30 September 2013 was £17.9m (2012: £2.2m). 146 142 The Report & & Accounts Accounts2013 2013 TheSage Sage Group Group plc plc | Annual Report

  • Page 149
    ... payable as at tfe year ended 2013 (2012: £nil). 11 Post-balance sheet events For details refer to note 18 in tfe Group financial statements. Sage Group Group plc plc||Annual AnnualReport Report&& Accounts 2013 The Sage Accounts 2013 147 143 Governance Financial statements Financial statements

  • Page 150
    ... department: Murdo Montgomery Director of Investor Relations Tel: +44 (0)191 294 3068 Fax: +44 (0)191 294 0002 The Sage Group plc Registered office: North Park Newcastle upon Tyne, NE13 9AA. Registered in England Company number 2231246 148 The Sage Group plc | Annual Report & Accounts 2013

  • Page 151
    ...at www.sage.com/investors This report is printed utilising vegetable based inks on Heaven 42 which is sourced from well managed forests independently certified according to the rules of the Forest Stewardship Council (FSC). This report was printed by an FSC and a carbon neutral printing company and...

  • Page 152
    The Sage Group plc North Park Newcastle upon Tyne NE13 9AA United Kingdom www.sage.com