Peachtree 2015 Annual Report Download - page 46

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Continuing operations
SSRS
£m
Recurring
£m
Processing
£m
Total
Revenue
£m
Operating
costs
£m
Operating
profit
£m
Margin
%
Previous basis 348 1,010 –1,357 (974) 383 28.2
Revenue reporting changes:
– SSRS/Recurring reclassification1(58) 55 –(3) –(3) (0.2)
– Referral commissions treatment246 –46 (46) –(0.9)
– Separate presentation of Processing3(3) (158) 161 –– –
Revised basis 287 953 161 1,400 (1,020) 380 27.1
1. We have assessed the categorisation of revenue between Soware and Soware Related Services (SSRS) (recognised immediately) and Recurring (recognised over initial
contract duration). Upfront revenue associated with time limited products is now being pro-rated over the initial contract life. The impact is to reclassify some revenue
from SSRS to Recurring. The difference between revenue deferred in FY14 and FY15 results in a £3m decrease in the revenue and operating profit for FY15.
2. We also considered the accounting for arrangements with business partners that refer customers to the Group, such as Independent Sales Organisations (ISOs) in the
North America Payments business. We have concluded that payments made to these business partners are beer reflected as costs and not as deductions to revenue.
The impact is an equal increase in revenue and costs, therefore having no effect on the operating profit figure, but decreases the operating profit percentage.
3. In order to enhance disclosure, a separate category has been introduced for Processing revenue, which is volume based and relates to payments and some payroll
processing services. The impact is to disclose this revenue separately from SSRS and Recurring revenue, with no change to total revenue or the operating margin.
Throughout the year we have conducted a complete review of the business, including our products, organisational structure, operating model and
policies in order to prepare for next phase of long-term sustainable growth. We have simplified our three existing product categories to Growth and
Heritage and have initiated organisational transformation in order to implement our target operating model and realise cost savings to re-invest for
growth. Our revenue category definitions have refined and we have amended the application of the revenue recognition policy to certain products
enabling stakeholders to clearly and transparently track performance. None of the updates impact cash generation and the financial summary below
is included for comparability to previous announcements. All subsequent figures and metrics are prepared on the revised basis.
Impact of changes to revenue reporting:
As we enter the next phase of growth, the definitions of revenue categories have been refined and we have amended the application of the
revenue recognition policy to certain products to enable stakeholders to clearly and transparently track performance. None of the changes
impact cash generation.
Financial and operating review
Chief Financial Officer,
Steve Hare, analyses
the 2015 financial
performance
Financial targets achieved with
momentum for sustainable growth
The Sage Group plc | Annual Report & Accounts 2015
44