Peachtree 2015 Annual Report Download - page 47

Group performance
The Group delivered organic revenue growth of 6% (FY14: 5%) and
increased the organic operating profit margin to 27.1% (FY14: 26.5%).
Momentum in recurring revenue remains the primary driver of organic
revenue, growing by 9% (FY14: 7%) for the full year. Within this category,
soware subscription revenue grew strongly by 29% (FY14: 25%).
Organic figures neutralise the impact of foreign currency fluctuations
and exclude the contribution from current and prior period acquisitions.
A reconciliation of organic operating profit to statutory operating profit
is shown on page 116.
Statutory performance has been impacted by movements in key
exchange rates during the year, particularly in Europe, the US and Brazil.
Statutory figures also include the contribution of acquisitions and
disposals. The current year statutory operating profit includes a £62m
goodwill impairment relating to our Brazilian operations. The impact is
non-cash and notwithstanding the challenging economic environment,
we remain confident about our growth prospects in Brazil, generating
8% organic revenue growth during FY15.
The operating margin has been achieved despite incurring the initial,
unplanned costs associated with transforming towards the global
operating model and implementing investments to support the
execution of our strategy.
Total organic spending on Research and Development (“R&D”) was
£139 million, which represents 10% of total organic revenue (FY14: 10%).
The proportion of R&D expenditure on Growth products was 87% and
demonstrates focussed resource allocation. All R&D expenditure
incurred this year was expensed in line with our policy. The percentage
of revenue spent on general and administrative expenses (“G&A”) was
19% on an organic basis. As we transition to our target global operating
model, the G&A% is an important measure to monitor our progress in
redirecting our investment towards activities which contribute most
to growth, particularly sales and marketing.
In order to aid comparison with some competitors, particularly those
based in the US, it should be noted that organic operating profit is
stated aer incurring share based payments of £9m and depreciation
and amortisation of £29m. An equivalent non-GAAP EBITDA would
therefore be £418m, representing an organic EBITDA margin of 30%.
Revenue mix
Segmental reporting
As part of Sage 2020 and preparing for the next phase of growth, an
assessment of our regional structure has been undertaken resulting
in the AAMEA region being expanded to include Latin America,
specifically Brazil. The new region will be known as ‘International’ and
will sit alongside Europe and North America as one of our three regions.
Recurring revenue
The Group has delivered an improvement in organic recurring revenue
growth to 9% (FY14: 7%), of which soware subscription growth
accounted for 90% of the year-on-year increase.
Organic recurring revenue represents 68% of the Group’s total organic
revenue (FY14: 66%) with the contract renewal rate at 84% (FY14: 83%).
Both existing and new subscription initiatives are maintaining a
long-running strategic movement towards higher quality revenue,
building on the recurring revenues derived from our maintenance
and support contract base. Subscription contracts also typically
aract higher renewal rates than stand-alone maintenance and
support contracts.
Processing revenue
Processing revenue, reported separately for the first time for enhanced
transparency, has grown organically by 2% (FY14: 2%). Strong growth
came from payments in Europe with a flat performance recorded in
North America.
SSRS revenue
Organic SSRS revenue declined modestly during the year at -1%
(FY14: Flat), due to the substitution effect of the gradual transition
towards subscription relationships, offset partially by growth in
Malaysia. Within SSRS, revenue from perpetual licenses is less than
12% of Group revenue and demonstrates the continued emphasis
on subscription and recurring revenue relationships.
Revenue
Statutory revenue grew by 6% to £1,436m. The growth reflects organic
growth in the business and the contribution from two acquisitions,
offset by adverse foreign exchange movements experienced in FY15.
The average exchange rates used to translate the consolidated income
statement for the year are set out on page 47.
Operating profit
Organic operating profit margin excludes the contribution from
acquisitions made in Germany and the US in Q4 2014 and Q1 2015
respectively. A reconciliation of the reported FY15 underlying margin
of 26.5% to the FY15 organic margin of 27.1% is shown above.
Organic operating profit increased by 8% to £380m (FY14: £350m), and
the organic operating profit margin increased to 27.1% (FY14: 26.5%).
Statutory operating profit was broadly flat due to an impairment charge.
The operating profit margin has benefited from an improvement in
operating leverage as a result of revenue growth and a disciplined
approach to managing the cost base.
Earnings per share
Underlying basic earnings per share increased by 12.6% to 25.00p
(FY14: 22.19p) due to a lower effective tax rate and a reduction in
the average number of shares in issue to 1,073.0m (FY14: 1,089.0m),
resulting from share repurchases.
Basic earnings per share (“EPS”) reconciliation
2015
Pence
Restated
2014
Pence
Underlying basic EPS 25.00 22.19
Impact of foreign exchange –0.72
Underlying basic EPS (as reported) 25.00 22.19
Recurring items 1.10 (1.45)
Non-recurring items 5.79 (4.20)
Statutory basic EPS 18.11 17.26
Statutory basic earnings per share increased to 18.11p (FY14: 17.26p),
which reflects the factors set out above.
Net finance cost
Net finance cost at 30 September 2015 was £21.4m (FY14: £20.9m).
The increase over prior year is due to increased average debt balances
driven by the Paychoice acquisition, partly offset by the refinancing
of $200m (4.39%) of maturing USPP debt in the year at lower rates of
3.73% for 10 years.
The Sage Group plc | Annual Report & Accounts 2015 45
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT