Peachtree 2013 Annual Report Download - page 31

The goal of our mobile strategy is to offer customers
value-adding, integrated and connected cloud and
mobile services that will increase our revenue per
customer and drive subscription adoption. North
America has led the development of Sage Data Cloud,
a common infrastructure and framework that connects
mobile applications with our accounting and ERP
products. At the North America Sage Summit in
July 2013, we launched three mobile applications
built on this platform; Sage Mobile Sales, Sage
Mobile Service, and Sage Billing and Payments.
Customer satisfaction
Our approach to technology is guided by understanding
the requirements of our customers and recognising the
trust they have in Sage to support their move to the
cloud. Whilst technology is a great opportunity for Sage,
we will only be successful if we continue to provide an
extraordinary customer experience. We track customer
satisfaction using the Net Promoter Score (“NPS”)
metric, which measures customers’ willingness to
promote the Sage products and services they use.
NPS is an important indicator of long-term success
and we will maintain our focus on ensuring we meet
our customers’ needs.
The benefits of subscription
The third cornerstone of our growth strategy involves
the migration of customers to a subscription pricing
relationship. Whilst software subscription is a relatively
small proportion of our revenue today, it is important
strategically in delivering sustainable growth over the
longer term. Subscription pricing has been rolled out
across all our major markets, where we typically adopt
a dual model approach by offering customers a choice
between a subscription relationship and a perpetual
licence. We are encouraged by the early progress we
are making, which is evidenced by the 27% increase
in the annualised value of our subscriber base on an
organic basis, which grew to £108m (2012: £85m).
We will continue to drive the adoption of subscription
pricing across our business on a measured basis.
We have seen how subscription can be an attractive
option for new and existing customers. In North America,
for example, we have attracted a new type of customer
to Sage 100 and Sage 300, with subscription making the
up-front cost of a more sophisticated ERP solution more
affordable to smaller businesses by removing the initial
perpetual licence cost. We have seen the same principle
apply to existing customers who are looking to migrate;
in France, the successful Sage 100 i7 upgrade
programme secured 14,000 subscription contracts.
We also use subscription to reactivate existing customers
who have chosen not to maintain a support contract,
a particular opportunity with smaller businesses where
support attachment rates are lower. By offering premium
features on subscription, we are encouraging these
customers to move to subscription. Our French small
business product Ciel Flex has connected services
functionality that is only available on subscription,
and of the 4,700 subscription contracts we secured
this year, around 40% of them were with previously
inactive existing customers.
Financial discipline
The Group remains highly cash generative and we
retain considerable financial flexibility going forward.
We remain disciplined in our capital allocation approach,
whether using cash within the business or returning
it to shareholders. Our financial discipline is evident
in our performance this year, where we maintained
EBITA margin through managing costs whilst increasing
investment in our growth initiatives. We are also
disciplined in our approach to M&A, focusing on
opportunities which support growth in our core business
and meet our established returns criteria. Consistent
with our focus on shareholder value, we returned
£571.8m this year to shareholders through our ordinary
dividend, the payment of a special dividend and our
share buyback programme. We remain committed
to the disciplined allocation of capital to support our
strategy and drive shareholder returns.
People
During the year, we announced a number of changes
to the Board. Tamara Ingram, Mark Rolfe and Ian Mason
retired from the Board, each having made a significant
contribution to Sage over many years. Paul Harrison,
formerly CFO for 13 years, departed Sage for a new
executive challenge. Paul made a considerable
contribution to Sage during his time with the business,
not least in establishing the strategy in recent years,
and in supporting me as CEO. They leave with our
gratitude and best wishes for the future.
Jonathan Howell and Neil Berkett joined the Board
in July 2013, alongside Jo Harlow. Unfortunately,
Jo stood down from the Board in September 2013
due to a conflict arising with her executive role following
the announcement by Microsoft of the acquisition of
Nokia’s Devices and Services division. On 11 November
2013, we announced the appointment of Steve Hare
as the new CFO, effective from 3 January 2014.
Summary and outlook
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.
Guy Berruyer, Chief Executive
29The Sage Group plc | Annual Report & Accounts 2013
Financial statementsGovernanceStrategic report