Peachtree 2015 Annual Report Download - page 50

Financial and operating review continued
EUROPE
Organic revenue growth FY15 FY14
UKI +7% +6%
France +5% +4%
Spain +3% +1%
Germany +4% +3%
Rest of Europe -1% +4%
Europe +5% +4%
Revenue in Europe grew organically by 5%, with organic recurring
revenue growth of 8% (FY14: 7%). The acceleration in revenue growth
was achieved despite the underperformance of the Enterprise Europe
segment which contracted by 1% for the period.
The organisational change implemented disbanding Enterprise Europe
brings together the management of all product solutions within each
country and enables broader and more effective lead generation as well
as clearer focus on migration.
Organic soware subscription revenue growth of 29% (FY14: 26%) was
a highlight and helped to drive soware subscription revenue to 27%
of total organic revenue in Europe.
Organic processing revenue growth of 9% (FY14: 2%), primarily derived
from the UKI, is a promising result and our ambition is to accelerate this
revenue stream further by concentrating on the opportunity to cross-sell
payments services to our accounts and payroll bases.
Organic SSRS revenue decline of 4% (FY14: decline of 3%) reflects a
sustained substitution effect resulting from subscription growth
particularly in the UKI and France.
UKI – key subscription initiatives continue to drive growth
UKI revenue grew organically by 6% (FY14: 6%) to £279m, supported by
organic subscription revenue growth of 31% to £78m. This performance
continues to be driven by key initiatives within the Sage 50 family of
products. We helped customers to efficiently comply with additional
pension legislation introduced last year, with an automated pension
module, provided on subscription for Sage 50 Payroll. The legislation
is being applied to businesses in stages and of our customers which
were required to comply during FY15, 58% have taken the auto-
enrolment module. Sage 50 Accounts also performed strongly,
supported by enhancements to our subscription value proposition
with the launch of Sage Drive, a cloud enabling feature for on-premise
deployed products. Sage Drive enables users to share data with their
accountants or colleagues via the cloud, accessed on desktop or
mobile devices. The number of Sage Drive installations has increased
over fivefold to around 20,000 during the year. These initiatives have
supported growth in subscription revenue across Sage 50 products
in the UKI to £26m (FY14: £12m).
Sage One paying subscriptions have been increased to 92,000 from
47,000 in September 2014 demonstrating momentum. Sage One is
central to our strategy of addressing the white space opportunity of
Small & Medium Businesses which are not using any means of
accounting soware currently.
Processing revenue, primarily related to payments, grew organically
by 9% to £32m. Cross-sell of payments into the accounting installed
base remains a key focus for FY16.
France – momentum building with subscription initiatives
In France, organic revenue grew by 5% (FY14: 4%) to £222m, with growth
excluding the Enterprise market of 7% to £165m. Strong subscription
momentum was maintained, with soware subscription revenue
growing by 22% to £106m in the year.
It was another successful year for the i7 upgrade which was applied
to the Sage Paie payroll solution in September 2014, having previously
been applied to Sage 100 Accounts. The i7 upgrade, only available on
subscription, delivers increased functionality compared to previous
product versions and also addresses additional legislation concerning
the submission of real-time information to the local tax authorities. The
uptake within our existing Sage Paie base reached 78% by the end of the
year, supporting growth in subscription revenue to £63m (FY14: £52m)
across Sage Paie and Sage 100. Whilst the migration opportunity is
diminishing going forward for Sage Paie, penetration of the i7 initiative
within our Sage 100 base stands at 55% as at year end with scope for
further progress in FY16.
Smaller businesses have continued to embrace the Sage Ciel Flex
subscription offering, which offers enhanced functionality and features.
The majority of subscribers have opted for the highest tier, which
includes mobile data sharing via the cloud, supporting growth in
subscription revenue to £10m across the Ciel range. Flex is an example
of revolutionising business, encouraging subscription by delivering
additional value. Of the customers which subscribed this year, 58%
were reactivated from off-plan status.
Both i7 and Ciel Flex highlight the araction of subscription to Small &
Medium Businesses and offset the weakness experienced in Enterprise
which was flat for the year.
Spain – rate of revenue growth increasing
Organic revenue in Spain grew 3% to £85m (FY14: 1%). The revenue
growth rate throughout the year has improved as we have focussed
marketing efforts on growth products. Sage Murano, our flagship product
for medium sized businesses in Spain grew organic revenues by 8%.
Over two thirds of the growth was generated by Murano Online, the
connected version of the product, which is accessed via web-browser.
Germany – improved soware recurring revenue growth
In Germany, organic revenue of £79m represents organic growth of
4% (FY14: 3%). Through our programme of core product modernisation,
Sage Drive was introduced to Sage 50 in Germany, adopted by both
new and existing customers. Increased focus on the business partner
channel has helped to drive 9% revenue growth for Office Line, our
flagship local product for medium sized businesses.
The Sage Group plc | Annual Report & Accounts 2015
48