29th Nov 2006 07:00
FOR IMMEDIATE RELEASE 29 November
2006
SAGE EARNINGS PER SHARE^ RISES 20% TO 12.54p FOR YEAR ENDED 30 SEPTEMBER 2006
The Sage Group plc ("Sage"), a leading supplier of business management softwaresolutions for small-and-medium enterprises ("SMEs"), announces its unauditedresults (prepared under International Financial Reporting Standards, "IFRS")for the year ended 30 September 2006.
Financial highlights
* Revenues increased by 22%* to ‚£935.6m (2005: ‚£766.4m*) * EBITA increased by 23%* to ‚£249.3m (2005: ‚£203.3m*)
* Pre-tax profit after amortisation charges rose by 14% to ‚£221.2m (2005: ‚£
193.6m) * Adjusted earnings per share^ increased by 20% to 12.54p (2005: 10.49p) * EBITA margin of 27% (2005: 27%*) * Operating cash flow represented 107% of EBITA (2005: 119%) * Proposed total dividend raised 25% to 3.59p per share (2005: 2.88p)
Operational and strategic highlights
* Total licence growth of 12%*, total growth in services of 28%*
* 7%* organic growth for the full year, reflecting 8%* organic growth in the
second half of the year
* Growth across all regions and strong performance in established product
lines such as Line 50 (UK), Line 100 (France), MAS 500, Peachtree, Simply
Accounting (all North America) and Pastel (South Africa)
* Customer Relationship Management ("CRM") products delivered global organic
growth of 8%* * Customer base expanded to 5.2m businesses (2005: 4.7m) * Significant acquisition activity, broadening both geographic reach and product range Regional analysis‚£m 2006 2005 2006 2005 Revenues Revenues EBITA EBITA UK 205.2 192.6 75.6 70.4 Mainland Europe 253.2 203.8 59.3 45.4 North America 321.4 311.6 76.4 73.3 Rest of World 68.2 58.4 18.2 14.2 848.0 766.4 229.5 203.3 Acquisitions: Mainland Europe 46.6 - 7.2 - North America 40.1 - 12.5 - Rest of World 0.9 - 0.1 - 87.6 - 19.8 - Foreign exchange - (6.8) - (1.2)impact* 935.6 759.6 249.3 202.1Chief Executive, Paul Walker, commented: "This has been an exciting year forSage with a number of significant acquisitions broadening both the products andservices we offer to SMEs. We are one of the largest suppliers of businessmanagement software solutions to the SME market worldwide and our presence inhigh growth, high margin markets continues to expand. We have reported strongorganic growth in our business, demonstrating the strength and potential of ourexisting customer base.
We will continue to serve the changing needs of our dynamic SME customer base using our expertise and insight into a wide range of industries. We remain confident about our prospects for continued growth through focusing on value-added services, tailored solutions and premium versions of current products."
A presentation for analysts will be held at 9.30 am today at Deutsche Bank,Winchester House, 1 Great Winchester Street, London EC2N 2DB. The presentationwill also be available at www.sage.com. A live audio broadcast of thepresentation will also be available for analysts. The dial-in number is +44
(0)203 003 2605.Enquiries:The Sage Group plc +44 (0) 191 294 3068 Tulchan Communications +44 (0) 20 7353 4200 Paul Walker, Chief Executive Julie Foster
Paul Harrison, Finance Director Kirstie Hamilton Cynthia Alers, Investor Relations
Overview
We are pleased once again to report strong growth during 2006, with our existing business performing well. Our acquisition programme has this year moved us into new product lines and new geographic areas.
Our customer base and business partners continue to provide the cornerstone ofour strong market positions and underpin our organic growth. Our strategy ofdeveloping local products and services for local markets has helped ourcustomer base increase to 5.2 million businesses (2005: 4.7 million), makingSage one of the largest global vendors of business management softwaresolutions to SMEs.
Product and service strategy
Our decentralised organisational model, local product strategy and industryspecialisms give us a unique insight into our customers' businesses. Throughinnovation, we translate this into an offering that fits the specialised needsof SME customers. This is one of our competitive advantages and it has allowedus to build successfully our market position.Increasingly we incorporate common technology platforms across differentproduct lines to benefit from global synergies. In October 2006, after the yearend, we announced a global agreement to work with MySQL AB, using a commondatabase platform in our entry-level products. From our customers' perspectivethis is a significant development as it reduces the overall cost of ownership.In the mid-market, choice of operating systems and databases is important tomany of our customers, therefore we remain committed to working with a range ofoperating systems and databases.As our customers grow, they demand more sophisticated applications for managingtheir businesses, tailored to the requirements of their specific industry. Overthe year, we introduced new industry-specific applications in health care, fooddistribution, transport, manufacturing and real estate/construction, furtherextending the product range we can offer our customers. These applicationsbroaden the range of industry-specific solutions we offer globally to ourcustomers in these business segments.There is also increased demand for "packaged" combinations of software upgradesand support services contracts. These combined software/support contractsrepresented 53% (2005: 51%*) of total support revenues and showed an organicgrowth rate of 12%*. We expect that these combined software/support contractswill constitute an increasing portion of services revenues going forward andwill strengthen the recurring revenues derived from traditional softwarerevenues. Overall, these specialist solutions and enhanced services are highermargin business lines and enjoy strong customer loyalty.
Distribution strength
The diversity of our distribution channels is one of our key businessstrengths. Each operating company works closely with an influential "referral"group, usually accountants and business advisors, who act as advocates for ourproducts in the market. Worldwide, we have over 40,000 advisors recommendingSage products to their clients. We are also developing new referral networks,such as the partnership we initiated with Barclays Bank in the UK, who sellSage business management products to their small business customers.In addition, we have over 23,000 business partners and certified consultantspromoting our products to the market. Most of these business partners arelong-term Sage partners with in-depth specialist knowledge of Sage products.They keep us in touch with market dynamics and help us develop productstailored to local needs, particularly in the mid-market sector that often hasunique requirements.Customer baseOver the year, we added 553,000 new businesses (283,000 resulting fromacquisitions made this year), increasing our customer base to 5.2 million. Wehave seen strong revenue growth across all our regions from existing customerswho increasingly demand complementary products and tailored applications to runtheir businesses more efficiently. In response to customer demand, we continueto broaden our industry-specific applications and provide value-added supportservices across our product range.
Acquisition strategy
We continue to seek acquisitions which enhance our range of products andservices and which support our strategy of meeting the broader needs of SMEs.We focus on opportunities to expand our business into new geographic areas, tobroaden our core product and service offerings through related products and todevelop our industry-specific applications. Over the year, we completed sevensignificant acquisitions that met these criteria, complementing and extendingour businesses around the world.
Regional review
UK
UK revenues totalled ‚£205.2m (2005: ‚£192.6m) with strong organic growth of 7%. Line 50, our core UK product, had another strong year, with revenue growing 13%. We also introduced several new products and continued our successful strategy of combining software and services contracts. Payroll, CRM and industry-specific products also performed well.
This year Sage UK began a review of its product lines to improve integration ofdifferent applications into a broad suite of business management softwaresolutions. Extensive customer research showed that customers increasingly wantbusiness management software solutions rather than individual products. We areinitiating a new phase in our product development to meet that need bystrengthening integration of different product lines and building on commondatabase technology for entry-level products where possible.
The EBITA margin was maintained at 37% (2005: 37%).
In November 2006, after the close of the financial year, we announced theacquisition of Protx Group Ltd ("Protx"), a provider of payment processingservices. This was our second acquisition in the rapidly growing merchantservices sector. Protx complements our acquisition of Verus FinancialManagement, Inc. ("Verus") in February 2006, which provides a similar, lessspecialised range of payment processing services in the US. The acquisition ofProtx in the UK represented a further step in developing our offering in thisexciting market.Mainland EuropeTotal revenues in Mainland Europe were ‚£299.8m (2005: ‚£203.8m*) with organicgrowth of 5%*. Spain recorded another year of strong organic growth of 10%*,with excellent progress in developing the support offering for entry-levelproducts. A strong performance in the Mid-Market Division contributed toFrance's organic growth rate of 4%*. Switzerland showed good organic growth,with strength in both entry-level and mid-market licences. Challenging marketconditions in Germany kept combined organic growth in Germany/Switzerland to 2%*. Poland's Symfonia, acquired in 2005, showed good growth in entry-levellicences, with overall revenues rising 15%* on a like-for-like basis.
The EBITA margin was maintained at 22% (2005: 22%*).
Several acquisitions were completed in Mainland Europe over the year, includingAdonix S.A. ("Adonix"), Bƒ¤urer GmbH ("Bƒ¤urer") and Elit Group ("Elit"), whichsignificantly expanded our industry-specific solutions into new industries.These high growth, high margin businesses offer great potential in developingour mid-market, industry-specific products in Europe. Adonix complements ourexisting Line 1000 product in France and brings new offerings for the realestate and manufacturing sectors. Bƒ¤urer strengthens our mid-market position inGermany bringing a suite of advanced business management solutions includingindustry-specific software for manufacturing. Elit, also in France, offersindustry-specific applications tailored to the food distribution and transportsectors.North AmericaTotal revenues in North America were ‚£361.5m (2005: ‚£311.6m*) with organicgrowth of 6%*, reflecting a recovery of organic growth in the second half to 7%*. Accounting products, including Peachtree, Simply Accounting and MAS 500, allposted significant growth, as did CRM products.The Small Business Division grew organically by 10%*, with strong performancesfrom all products, particularly ACT!, Simply Accounting and Peachtree. TheMid-Market Division recovered from the slowdown in the first half of the yearand recorded an annual organic growth rate of 4%*, boosted by good performancesin MAS 500 and ACCPAC products.
The EBITA margin improved 1% to 25% (2005: 24%*) including a profit on disposal of ‚£2.7m relating to a small business unit disposed of in January 2006.
We made three significant acquisitions in North America over the year: Verus, Emdeon Practice Services ("Emdeon") and Master Builder/Contractor Anywhere.
Verus was our first acquisition in the rapidly growing area of merchantservices, a strategically important market for our business. Verus brought anew customer base of 100,000 businesses concentrated in the SME segment, wherewe have great potential to integrate our back office solutions with paymentprocessing. Verus has performed ahead of our expectations at acquisition andhas grown by 24%* on a like-for-like basis since acquisition.Emdeon, now renamed Sage Healthcare Division, establishes for Sage asignificant presence in the doctors' practices market in the US. Doctors'practices in the US are classic SMEs, often resource-constrained, yet withsignificant administrative and back office challenges. This industry iscurrently facing substantial legislative change, which in the past has been acatalyst for increased demand for our products and services. We completed theEmdeon acquisition on 14 September 2006 and are confident about theopportunities for this business with its established customer base of 20,000doctors' practices.Master Builder and Contractor Anywhere were acquired in May 2006 and togetherfurther enhanced our existing presence in the construction industry in the US.These acquisitions expanded our offering to smaller businesses in theconstruction industry complementing our existing mid-market product TimberlineOffice.Rest of World
Total revenues in Rest of World were ‚£69.1m (2005: ‚£58.4m*) with organic growthof 17%*. Our South African business enjoyed an excellent year with strongperformances in accounting and payroll products. Australia also reported goodgrowth in its core products for professional accountants and payroll markets.
The EBITA margin increased to 27% (2005: 24%*).
We completed two smaller acquisitions during the year in China, a strategicallyimportant geography. In May 2006, Sage Software (Shanghai) Co Ltd was foundedthrough the acquisitions of SWA Ltd. and Huatuo Software Ltd., both establishedIT companies in the mid-market ERP segment. In July 2006, we completed theacquisition of UBS Corporation Berhad ("UBS"), the leading vendor of businessmanagement software solutions for SMEs in Malaysia.
These acquisitions were important steps in our strategy gradually to build up a significant presence in the Asian markets whilst developing local market expertise.
Global CRM review
Our CRM product lines encompass a comprehensive range from entry-level packageslike ACT! through to Sage CRM and hosted SageCRM.com, which offer a greaterdegree of customer functionality. SalesLogix is a highly customisable CRMsolution offering our reseller partners significant opportunities to add valuethrough bespoking our customers' solution to suit their specific requirements.Global CRM revenue grew 8%* organically.
Financial review
The Group is, for the first time, reporting full year results under IFRS. Theresults for 2005 have been restated under IFRS. Reconciliation of the 2005results is available on Sage's website, www.sage.com. To measure financialperformance, the Board uses EBITA (earnings before interest, tax andamortisation, which includes the effects of amortisation of acquired intangibleassets and the net amortisation or capitalisation of software developmentexpenditure).
Revenues
Revenues increased 22%* to ‚£935.6m (2005: ‚£766.4m*). Organic revenue growthimproved from 5%* in the first half of the year to 8%* in the second half,giving organic growth for the year of 7%* (2005: 6%*). Organic revenue growthexcludes the contributions of current year and prior year acquisitions (17%contribution to total revenues) and non-core products (3% of total revenues).Total software licence revenues were ‚£322.8m (2005: ‚£289.0m*), with organicgrowth of 5%*. Total services revenues increased to ‚£612.8m (2005: ‚£477.4m*),benefiting from strong organic growth of 8%* for the year. Following theacquisition of Verus, services revenues now include three categories ofrevenues, maintenance and support (75% of services revenue), Merchant Services(5% of services revenue) and other (business forms, professional services andhardware, 20% of services revenue). Maintenance and support revenues grew by 9%* organically. Merchant Services is a new category comprising Verus, and, in2007, Protx, following our acquisition of this company in November 2006. Thecategory of other services grew by 2%* organically, but remains an importantancillary service to our main support offering.
Profitability
EBITA increased 23%* to ‚£249.3m (2005: ‚£203.3m*) and pre-tax profit (afteramortisation charges) rose 14% to ‚£221.2m (2005: ‚£193.6m). Adjusted earningsper share^ grew 20% to 12.54p (2005: 10.49p). These results include a gain of ‚£2.7m on the disposal of a small North American business unit in January 2006.
The Group's EBITA margin was maintained at 27% (2005: 27%*).
The Group's effective tax rate for the year was 31% (2005: 32%).
Cash flow
The Group remains highly cash generative with operating cash flow of ‚£267.1mrepresenting 107% of EBITA. This strong cash flow meant that the Group was ableto fund ‚£617.5m of investment relating to acquisitions of recently acquiredbusinesses through cash resources. At 30 September 2006, net debt stood at
‚£593.6 m (2005: ‚£114.8m).AcquisitionsDuring the year, we completed seven significant acquisitions, across most ofour operating regions. These acquisitions, detailed in the table below, furtherstrengthen our business in key geographic areas, as well as adding severalindustry-specific applications, broadening our product range.Date Company Industry specialism Country Enterprise value (‚£m) November 2005 Adonix Real estate/ France ‚£75.1m manufacturing February 2006 Verus Merchant services US ‚£171.4m May 2006 Master Builder and Construction US ‚£15.5m Contractor Anywhere July 2006 Bƒ¤urer Manufacturing Germany ‚£16.0m July 2006 UBS Business management/ Malaysia ‚£13.5m accounting August 2006 Elit Food distribution/ France ‚£23.2m transport September 2006 Emdeon Health care US ‚£305.8m Other smaller acquisitions ‚£16.9m Total enterprise value ‚£637.4m Deferred consideration (‚£19.9m) Net cash paid ‚£617.5m
We continue to pursue a number of acquisition opportunities which expand our product and service offerings to SMEs in both existing and new territories.
Dividend
The proposed final dividend is being raised to 2.51p per share (2005: 1.95p),giving dividend growth for the full year of 25% to 3.59p (2005: 2.88p). Thedividend will be payable on 9March 2007 to shareholders on the register atclose of business on 9February 2007. This significant increase in the dividendmeets our objective set in 2004 to achieve dividend cover of 3.5 times over
2-3years.People
We now employ over 13,000 people (2005: 10,000), with most of this growth a consequence of acquisitions made over the year. Our new employees have integrated well into our corporate structure and are already making a contribution to our local businesses. Over the year we also made a significant investment in customer service, which resulted in record renewal levels in support contracts. The numerous industry awards we have won demonstrate the integrity and commitment of our employees. We thank everyone for their excellent contribution.
Community
Sage and its employees take seriously our role in the communities in which weare based. Throughout the Group, our people undertake numerous communityinitiatives. For our UK business, this was reflected by our winning the recentaward for "Best Community Spirit" at the Contact Centre World Awards ceremonyheld in Las Vegas.Board
In March 2006, Sir Julian Horn-Smith joined the Board and was appointed Chairman in August 2006. Sir Julian was previously Deputy Chief Executive of Vodafone plc and is a non-executive director of Lloyds TSB Group. He brings considerable experience as an international business leader, in particular around investment in and integration of acquisitions.
In September 2006, Ruth Markland was appointed to the Board. Ms Markland was asenior partner of the law firm Freshfields Bruckhaus Deringer, with eight yearsas Managing Partner for Asia. She is also a non-executive director of StandardChartered plc and brings strong operational experience of services businessesin an international context and board-level strategy development.In August 2006, Michael Jackson stepped down from the Board after 22 years withSage, having guided the Group through its initial growth to become UK marketleader, its flotation as a listed company and its international expansionthrough a series of successful acquisitions. Lindsay Bury, a non-executivedirector, also retired from the Board in May 2006 after 10 years with Sage.
We thank both Michael Jackson and Lindsay Bury for their long service and contribution to our successful development and welcome Sir Julian Horn-Smith and Ruth Markland to the Board.
Outlook
This has been an exciting year for Sage with a number of significantacquisitions broadening both the products and services we offer to SMEs. We areone of the largest suppliers of business management software solutions to theSME market worldwide and our presence in high growth, high margin marketscontinues to expand. We have reported strong organic growth in our business,demonstrating the strength and potential of our existing customer base.
We will continue to serve the changing needs of our dynamic SME customer base using our expertise and insight into a wide range of industries. We remain confident about our prospects for continued growth through focusing on value-added services, tailored solutions and premium versions of current products.
CONSOLIDATED INCOME STATEMENTFor the year ended 30 September 2006 Year Year ended 30 ended 30 September September 2006 2005 (Unaudited) (Unaudited) Note ‚£m ‚£m Revenue 1 935.6 759.6 Operating profit 1 235.8 199.3 Financial income 3.5 2.8 Financial expenses (18.1) (8.5) Profit before taxation 221.2 193.6 Taxation 3 (68.6) (61.2) Profit for the year 152.6 132.4 Attributable to: Equity shareholders 152.5 132.3 Minority interest 0.1 0.1 Profit for the year 152.6 132.4 Earnings per share (pence) - basic after 5 11.81p 10.31pamortisation Earnings per share (pence) - diluted 5 11.73p 10.26pafter amortisation
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 30 September 2006
Year Year ended 30 ended 30 September September 2006 2005 (Unaudited) (Unaudited) ‚£m ‚£m Profit for the year 152.6 132.4
Net exchange adjustments offset in (30.8)
13.4reserves Total recognised income for 121.8 145.8the year CONSOLIDATED BALANCE SHEETAs at 30 September 2006 30 September 30 September 2006 2005 (Unaudited) (Unaudited) ‚£m ‚£m Goodwill 1,561.9 1,076.8 Other intangible assets 185.6 45.4 Property, plant and equipment 133.8 119.9 Deferred tax assets 26.3 46.0 Total non-current assets 1,907.6 1,288.1 Inventories 5.6 3.5 Trade and other receivables 215.7 149.9 Cash and cash equivalents 82.0 69.1 Total current assets 303.3 222.5 TOTAL ASSETS 2,210.9 1,510.6 Trade and other payables (190.3) (145.5) Tax liabilities (63.5) (60.8) Financial liabilities - Borrowings (1.0) (0.2) Deferred consideration (21.5) (5.8) Deferred income (282.1) (228.3) Total current liabilities (558.4) (440.6) Financial liabilities - Borrowings (662.8) (176.3) Retirement benefit obligations (2.1) (2.3) Deferred tax liabilities (10.0) (2.5) Total non-current liabilities (674.9) (181.1) TOTAL LIABILITIES (1,233.3) (621.7) NET ASSETS 977.6 888.9 Share capital 12.9 12.8 Share premium account 462.8 451.0 Other reserve 61.1 61.1
Currency translation reserve (17.4)
13.4 Retained earnings 458.1 350.4 Total shareholders' equity 977.5
888.7
Minority interest in equity 0.1
0.2 TOTAL EQUITY 977.6 888.9CONSOLIDATED CASH FLOW STATEMENTFor the year ended 30 September 2006 Year Year ended 30 ended 30 September September 2006 2005 (Unaudited) (Unaudited) Note ‚£m ‚£m Cash flows from operating 267.1 241.0activities Interest received 3.5 2.8 Interest paid (17.5) (8.1) Tax paid (60.3) (57.3) Net cash from operating 192.8 178.4activities Cash flows from investing activities Acquisitions of subsidiaries (net (617.5) (101.0)of cash acquired) Disposal of subsidiaries 7.8 - Purchase of property, plant and (23.8) (20.7)equipment
Proceeds from sale of property, 2.9
3.5plant and equipment
Purchase of intangible assets (3.2)
- Development expenditure (0.1) (0.7) Net cash used in investing (633.9) (118.9)activities Cash flows from financing activities Net proceeds from issue of 11.7 4.6ordinary share capital Purchase of treasury shares (13.3) - Finance lease principal (0.3) 0.9(repayment)/borrowing Issue costs on loans (2.2) - Repayment of borrowings (631.7) (209.4) New borrowings 1,131.1 173.1 Dividends paid to shareholders (39.1)
(33.9)
Net cash from/(used in) financing 456.2 (64.7)activities Net increase/(decrease) in cash 2 15.1 (5.2)and cash equivalents
Cash and cash equivalents at 1 2 69.1
74.3October
Effects of exchange rate changes 2 (2.2)
- Cash and cash equivalents 2 82.0 69.1NOTES
For the year ended 30 September 2006
1 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with those parts of the Companies Act 1985 that are applicable to companies reporting under IFRS.
Sage adopted IFRS with a transition date of 1 October 2004. Comparative figures for the year ended 30 September 2005 and the Group's balance sheet as at 30 September 2005 that were previously reported in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") have been restated to comply with IFRS.
IFRS 1 `First-time Adoption of International Financial Reporting Standards'allows certain exemptions from the retrospective application of IFRS prior to 1October 2004. The consolidated financial information has been prepared underthe historical cost convention. * IAS 32 `Financial Instruments: Disclosure and Presentation' and IAS 39 `Financial Instruments: Recognition and Measurement' were adopted with effect from 1 October 2005;
* The Group has not applied IFRS 3 `Business Combinations' retrospectively to
business combinations that occurred before the transition date;
* The Group has set cumulative translation differences to zero at the
transition date for all subsidiaries. From the date of transition onwards
foreign exchange differences on the retranslation of foreign subsidiaries
are recognised in a separate reserve within equity; and
* IFRS 2 `Share-based Payment' has been applied to all grants of equity
instruments after 7 November 2002 that had not vested at 1 January 2005.
On 27 March 2006 the Group disclosed the unaudited restatement of financialinformation for the Group under IFRS for the six months ended 31 March 2005 andthe year ended 30 September 2005 including the reconciliation of the Group's UKGAAP consolidated income statement, balance sheet and cash flow statement toIFRS. In addition, details of the impacts on the primary segmental disclosureof geographic region were provided.
This document is available at www.sage.com/investors/ifrs.pdf
Analysis of results* Year ended Year ended 30 September 2006 30 September 2005 Revenue EBITA Operating Revenue* EBITA* Operating profit profit* (Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Unaudited) (Unaudited) ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m UK 205.2 75.6 76.3 192.6 70.4 70.9 Mainland Europe 253.2 59.3 54.2 203.8 45.4 42.4 North America 321.4 73.7 72.8 311.6 73.3 73.0 Rest of World 68.2 18.2 18.2 58.4 14.2 14.2 848.0 226.8 221.5 766.4 203.3 200.5 Acquisitions: Mainland Europe 46.6 7.2 4.7 - - - North America 40.1 12.5 6.9 - - - Rest of World 0.9 0.1 - - - - 87.6 19.8 11.6 - - - Profit on disposal - 2.7 2.7 - - - Impact of foreign - - - (6.8) (1.2) (1.2)exchange* 935.6 249.3 235.8 759.6 202.1 199.3* The 2006 trading results from businesses located outside the UK weretranslated into Sterling at the average exchange rates for the period. For ourtwo most significant foreign operating currencies, the US Dollar and the Euro,the resulting rates were ‚£1=$1.80 and ‚£1=¢â€š¬1.46 respectively. Results for theyear ended 30 September 2005 have been retranslated at these exchange rates tofacilitate the comparison of results. The Group does not hedge thistranslational exposure.EBITA includes a charge for share-based payments of ‚£8.9m (2005: ‚£7.4m).
The Board measures Group and regional performance by using the EBITA (earnings before interest, tax and amortisation, which includes the effects of amortisation of acquired intangible assets and the net amortisation or capitalisation of software development expenditure).
Reconciliation of EBITA to 2006 2005operating profit (Unaudited) (Unaudited) ‚£m ‚£m EBITA 249.3 202.1 Net development cost Development cost 0.9 1.1 capitalised Development amortisation (0.8) (0.6) 0.1 0.5 Intangible amortisation (13.6) (3.3) Operating profit 235.8 199.3
The geographical restatement of UK GAAP figures for the period ended 30 September 2005 to IFRS is presented below. Further details are available at
www.sage.com/investors/ifrs.pdf
Revenue - year ended 30 September 2005 (Unaudited)
UK Mainland North Rest of Total Europe America World ‚£m ‚£m ‚£m ‚£m ‚£m UK GAAP 195.7 205.2 315.9 59.8 776.6 IFRS adjustments: IAS 18 - Revenue (3.1) (0.3) (13.6) - (17.0) IFRS 192.6 204.9 302.3 59.8 759.6
Operating profit - year ended 30 September 2005 (Unaudited)
UK Mainland North Rest of Total Europe America World ‚£m ‚£m ‚£m ‚£m ‚£m UK GAAP (excluding 74.5 48.9 74.1 14.9 212.4intangible amortisation) IFRS adjustments: IFRS 2 - Share-based (2.2) (1.8) (3.0) (0.4) (7.4)payment IAS 18 - Revenue (1.8) 0.2 - - (1.6) IAS 19 - Employee (0.1) (0.9) (0.3) - (1.3)benefits EBITA 70.4 46.4 70.8 14.5 202.1 IFRS 3 - Business - (1.7) (0.3) - (2.0)combinations (amortisation) Intangible amortisation - (1.0) (0.3) - (1.3)- UK GAAP Total intangible - (2.7) (0.6) - (3.3)amortisation IAS 38 - Intangible 0.5 (0.3) 0.3 - 0.5assets (development costs) Operating profit 70.9 43.4 70.5 14.5 199.3
2 Analysis of change in net debt
At 1 At 30 October Exchange September 2005 movement/ 2006 (Unaudited) Cash flow other (Unaudited) ‚£m ‚£m ‚£m ‚£m Cash and cash equivalents 69.1 15.1 (2.2) 82.0 Loans due within one year (0.1) 5.7 (6.5) (0.9) Finance leases due within one (0.1) - - (0.1)year Loans due after more than one (175.2) (497.6) 11.1 (661.7)year Finance leases due after more (0.6) 0.3 0.1 (0.2)than one year Cash collected from customers (7.9) (5.3) 0.5 (12.7) (114.8) (481.8) 3.0 (593.6)
Included in cash above is ‚£12.7m (2005: ‚£7.9m) relating to cash collected fromcustomers, which we are contracted to pay onto another party. A liability forthe same amount is included in trade and other payables on the balance sheetand is classified within net debt above.
3 Taxation
The taxation charge for the year comprises:
Year Year ended 30 September ended 30 September 2006 2005 (Unaudited) (Unaudited) ‚£m ‚£m UK taxation 22.6 19.1 Overseas taxation 46.0 42.1 68.6 61.2
The taxation charge gives an effective rate of 31% (2005: 32%).
4 Statutory accounts
The unaudited financial information set out above does not constitute the Company's statutory accounts for the year ended 30 September 2006. The Company's statutory accounts for the year ended 30 September 2005, based on UK GAAP, have been delivered to the Registrar of Companies.
The Group results for the year ended 30 September 2005 have been extracted fromthose statutory accounts as adjusted for IFRS in the unaudited restatement offinancial information for the year ended 30 September 2005 highlighted above.The Auditors' Report on the UK GAAP accounts to 30 September 2005 wasunqualified and did not contain a statement under Section 237 of the CompaniesAct 1985. Accounts to 30 September 2006 under IFRS will be delivered in duecourse.
5 Earnings per share
The calculation of basic earnings per ordinary share is based on earnings,after amortisation, of ‚£152,503,000 (2005: ‚£132,324,000) being the profit forthe year and on 1,290,759,040 ordinary 1p shares (2005: 1,283,347,008) beingthe weighted average number of ordinary shares in issue during the period.The diluted earnings per ordinary share is based on profit for the period of ‚£152,503,000 (2005: ‚£132,324,000) and on 1,299,714,922 ordinary 1p shares (2005:1,289,706,063).6 Dividends
The final dividend proposed and to be approved at the Annual General Meeting on 6 March 2007, of 2.51 pence per share will be paid on 9 March 2007 to shareholders on the register at the close of business on 9 February 2007.
* Foreign currency results for the year ended 30 September 2005 have been
retranslated based on the average exchange rates for the year ended 30
September 2006 of $1.80/‚£1 and EUR1.46/‚£1 to facilitate the comparison of
results. Results for 2005 have been restated in accordance with IFRS.
^ EPS figures stated prior to amortisation of intangible assets.
SAGE GROUP PLCRelated Shares:
Sage Group