Peachtree 2013 Annual Report Download - page 7

Last year, in my first report as Chairman, I set out how this is an exciting
time in the corporate evolution of Sage, with the leadership team focused
on delivering a step-change in both the level and sustainability of growth.
One year on, I am pleased to report that Sage’s performance in 2013
has reinforced our confidence in our strategic direction. We are realising
the benefits of a settled strategy on which management is delivering.
It has been a year of tangible progress, with the Group delivering
organic revenue growth of 4%, an improvement on the 2% reported
in 2012. There is clear evidence that the strategy is working, with the
key strategic initiatives progressing well. I am particularly pleased
by the progress made on our technology initiatives, with Sage One
now available in eight countries and the model scaling well in the UK.
We are launching cloud versions of our leading ERP solutions in Europe
and North America and are rolling out the next phase of connected
services, with a particular focus on mobility and integration. Sage ERP
X3 has also performed well, delivering on our target of double-digit
revenue growth.
Our strategy is focused on delivering value to our customers, both
existing and new, which will drive sustainable growth from our core
business. Our installed base gives us great insight into the requirements
and needs of our customers. The software industry is changing,
and customer requirements are changing, particularly around mobility,
integration and on-demand functionality. Yet the basic demand drivers
for our customers remain: peace of mind; software that is appealing,
reliable and easy to use; access to knowledgeable support; and control
of data with efficiency.
Innovation is at the heart of our strategy to accelerate growth, particularly
with respect to our technology and subscription pricing initiatives.
Technology is a catalyst for adding more value to customers. Integrating
a connected service such as payments, CRM or business intelligence,
is a powerful lever for creating a more valuable relationship with the
customer. The value is apparent in higher customer satisfaction scores,
lower churn rates, expanding the number of users, higher revenue per
active customer and higher customer lifetime revenue.
Subscription pricing requires Sage to change the substance of
engagement with customers and partners, focusing on the value
of the relationship. Whilst subscription is an emerging opportunity,
2013 has seen encouraging further proof that the business can drive
this change, whether it’s through successfully migrating existing
customers to the “next level up” accounting software, reactivating
customers who have stopped taking support, or attracting new users
to Sage who previously would have found the up-front costs prohibitive.
We remain alert to opportunities to drive growth through the use of
innovation and pricing to strengthen the experience we offer customers.
The importance to our customers of being able to embrace
technology on their own terms and at their own pace should not
be underestimated. In offering customers choice in how they deploy
their software, combined with market-leading customer support,
Sage is differentiated in the market.
It was important to deliver on our commitment to shareholders
of achieving a minimum net debt to EBITDA ratio of 1x. The payment
of a special dividend of almost £200m in the summer of 2013 helped
to achieve this objective and resulted in overall returns to shareholders
of approximately £1bn in a period of 18 months. What is also important
is confidence that management is investing appropriately in the business
to maintain Sage’s market-leading positions. The categorisation of
Sage’s core product portfolio as Invest, Harvest and Sunset products
means that significant investment is being redirected from legacy
products to support our most significant growth opportunities. In effect,
the portfolio is self-funding the investment in growth.
The disposal of several products identified as non-core was an
important feature of the year. The process was intensive and required
significant management time across the business. It also meant that
a number of Sage employees left the business. The successful
completion of these disposals was important in streamlining the
portfolio and removing the distraction of non-core activities.
We are concluding the reconstruction of the Board to ensure that it
contains skills pertinent to the business of Sage. I am delighted that
Jonathan Howell has joined as Chair of the Audit Committee; in addition
to his experience as a CFO he brings good risk management knowledge
relevant to the payments businesses. Neil Berkett brings particular
strengths from his previous executive experience in turning around
companies with disruptive technology challenges. Sadly we lost Jo Harlow
due to conflicts of interest after the acquisition of Nokia by Microsoft;
we are actively seeking an appropriate replacement. Finally we welcome
Steve Hare as the new Group CFO with major experience in his career
both in quoted and private equity backed companies.
During the year, Tamara Ingram, Mark Rolfe and Ian Mason indicated
their intentions to retire from the Board, 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 over this period,
not least in recent years in supporting Guy and establishing the
strategy in the business. They leave with our gratitude and good
wishes for the future.
It has been a year of tangible progress – strategically, operationally and
financially. This could not have been achieved without the dedication,
focus and commitment of all our 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.
Donald Brydon, Chairman
Chairman’s statement
Sage’s performance in 2013 has reinforced our confidence in our
strategic direction. We are realising the benefits of a settled strategy
on which management is delivering.
Financial statementsGovernanceStrategic report
5The Sage Group plc | Annual Report & Accounts 2013