Peachtree 2013 Annual Report Download - page 29

Overview of the year
We delivered a strong trading performance in 2013,
with organic revenue growth of 4%, representing
acceleration on the 2% organic revenue growth
achieved in the prior year. Organic recurring revenue
grew by 6% (2012: 6%), reflecting the continued
strength of our premium support offering and
encouraging growth in both software subscription
revenue and payment services. SSRS revenue was
flat organically against the prior year (2012: 5%
contraction). North America and AAMEA delivered
good SSRS growth, led by a particularly encouraging
performance from Sage ERP X3. Organic SSRS
revenue in Europe contracted modestly, reflecting
new licence weakness, particularly in the French
mid-market and in Spain. SSRS revenue is variable
and we continue to see the shift to recurring revenue
as a core part of our strategy to deliver accelerated
growth on a sustainable basis. Recurring revenue
now represents 71% of Group revenues (2012: 69%).
A feature of the year has been successful execution
driving good results across all regions. North America
reported organic revenue growth of 6% for the year, a
significant acceleration from the 2% reported in 2012.
Highlights included good growth from premium support
and the success of Sage ERP X3. Europe achieved
organic revenue growth of 2% for the year, a positive
performance given the macroeconomic environment and
an improvement on growth of 1% in 2012. The highlight
was the UK & Ireland, with organic revenue growth of 5%
for the year, although it was encouraging to see France
and Germany return to growth in H2 and for Spain
to exit the year with modest growth. AAMEA delivered
good organic revenue growth of 9% (2012: 12%),
with a very strong performance in South Africa offset
by a weaker Australian performance. Highlights for South
Africa included a strong mid-market performance and
strong growth in the rest of Africa. Whilst Brazil is not
included in organic growth until 2014, the business
delivered good growth notwithstanding the slowdown
in the economy. Approximately 15% of Group revenues
are now generated from attractive growth markets in
AAMEA and Brazil.
Strategy for growth
Our aim is to achieve organic revenue growth of 6%
in 2015, with an associated increase in EBITA margin
of 100 to 200 basis points, and to sustain higher-growth
over the longer term. Our success will be determined
by execution on our most important initiatives and these
are captured by our three strategic cornerstones –
Focusing our business, Capturing the technology
opportunity and The benefits of subscription.
The acceleration in growth we are reporting shows
the strategy is working, with greater focus on our
most important opportunities delivering results.
It is encouraging to see these results reflected in our
key performance indicators (“KPIs”), which track our
progress in delivering on our key strategic and financial
initiatives. Notable developments for the year in respect
of these initiatives are covered in the commentary
below, with the complete set of KPIs set out on
pages 44 and 45.
Focusing our business
Aligning our resources and investment to products
with the highest growth potential is a key enabler
of our growth strategy. Our approach to managing
our portfolio, which categorises core products as
Invest, Harvest and Sunset, is driving a marked
increase in the allocation of resources to Invest
products. During the year, the direct spend on Invest
products increased to 50% of total research and
development (“R&D”) expenditure (2012: 35%) and
49% of sales and marketing (“S&M”) expenditure
(2012: 42%). This reflects a combined increase in
investment in Invest products of 32%. The existing
portfolio is self-funding this investment in our most
significant growth opportunities, whilst supporting
our margin commitment.
We can see the results of greater focus with
good progress during the year on our 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.
I am pleased to report a strong set of results, with good growth across
all regions and our strategic initiatives progressing well. These results
highlight the strong appeal of our offering to SMEs, great execution in
delivering on our plans and the benefit of a clear strategy, which focuses
on our most significant growth opportunities. The strategy 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.
27The Sage Group plc | Annual Report & Accounts 2013
Financial statementsGovernanceStrategic report