TIDMSGE

RNS Number : 3554L

Sage Group PLC

13 May 2022

The Sage Group plc

Results for the six months to 31 March 2022 (unaudited)

13 May 2022

Strong first half performance with accelerating growth

   --     Strong organic recurring revenue growth of 8%, driven by Sage Business Cloud growth of 21% 
   --     Increasing momentum with ARR growth of 10%, underpinned by cloud native ARR growth of 43% 
   --     Strategic investment continues to drive growth and new customer acquisition 
   --     Organic operating margin of 19.9%, in line with expectations 
   --     Sustained strong cash generation, with underlying cash conversion of 120% 
   --     Full year outlook unchanged 
 
 Alternative Performance Measures             H1 22   H1 21 [2]      Change 
  (APMs) [1] 
 Organic Financial APMs 
 Organic Total Revenue                      GBP924m     GBP877m         +5% 
 Organic Recurring Revenue                  GBP866m     GBP800m         +8% 
 Organic Operating Profit                   GBP184m     GBP177m         +4% 
     % Organic Operating Profit Margin        19.9%       20.2%   -0.3 ppts 
 Underlying Financial APMs 
 EBITDA                                     GBP226m     GBP229m         -1% 
     % EBITDA Margin                          24.1%       24.8%   -0.7 ppts 
 Underlying Operating Profit                GBP183m     GBP188m         -3% 
     % Underlying Operating Profit 
      Margin                                  19.6%       20.4%   -0.8 ppts 
 Underlying Basic EPS                        12.62p      11.91p         +6% 
 Underlying Cash Conversion                    120%        133%    -13 ppts 
 KPIs 
 Annualised Recurring Revenue 
  (ARR)                                   GBP1,784m   GBP1,625m        +10% 
 Renewal Rate by Value                         100%         97%     +3 ppts 
 % Subscription Penetration                     74%         68%     +6 ppts 
 % Sage Business Cloud Penetration              72%         65%     +7 ppts 
                                         ----------  ----------  ---------- 
 Statutory Measures                           H1 22       H1 21      Change 
                                         ----------  ----------  ---------- 
 Revenue                                    GBP934m     GBP937m           - 
 Operating Profit                           GBP204m     GBP203m           - 
     % Operating Profit Margin                21.8%       21.7%   +0.1 ppts 
 Basic EPS (p)                               14.84p      13.29p        +12% 
 Dividend Per Share (p)                       6.30p       6.05p         +4% 
                                         ----------  ----------  ---------- 
 

Please note that tables may not cast and change percentages may not calculate precisely due to rounding.

Commenting on the results, CEO Steve Hare said:

"We achieved a strong first half performance , in line with expectations , demonstrating sustainable growth and building further momentum. Our strategic investment in sales, marketing and innovation has continued to accelerate revenues across Sage Business Cloud, underpinned by increasing levels of new customer acquisition. Cloud native solutions, which now account for around a quarter of Group ARR, have performed particularly well.

" While we are mindful of increased macroeconomic and geopolitical uncertainties, our customers remain confident and resilient. Our aim is to knock down barriers to their success, delivering solutions that make their lives easier, and we continue to make good progress against our strategic objectives. I am confident that our ambition to become the trusted network for small and mid-sized businesses will drive the success of Sage, as we focus on growing both revenue and earnings in absolute terms."

Financial highlights

-- Organic recurring revenue increased by 8% to GBP866m, underpinned by Sage Business Cloud growth of 21% to GBP572m. Organic total revenue grew by 5% to GBP924m.

-- Organic operating profit increased by 4% to GBP184m, representing a margin of 19.9% (H1 21: 20.2%). Following a period of additional strategic investment to accelerate growth, organic operating margin has trended upwards from 18.4% in H2 21, in line with expectations.

-- Statutory operating profit remained stable at GBP204m (H1 21: GBP203m), including non-recurring net gains of GBP55m (H1 21: GBP37m) driven by disposals.

-- Strong underlying cash conversion of 120% (H1 21: 133%) reflects growth in subscription revenue and continued good working capital management.

-- Robust balance sheet, with c. GBP1.2bn of cash and available liquidity, and net debt to EBITDA of 1.5x.

-- Interim dividend up 4% to 6.3p, with a progressive policy going forwards of growing the dividend over time.

Strategic and operational highlights

-- Annualised recurring revenue (ARR) up 10% to GBP1,784m (H1 21: GBP1,625m), reflecting a strong performance across all regions, with growth balanced between new and existing customers.

-- Sage added GBP150m of ARR through new customer acquisition since H1 21, up from GBP110m a year earlier .

-- Cloud native ARR up 43% to GBP424m (H1 21: GBP296m), driven by new customers and supported by migrations from cloud connected and desktop products.

-- Renewal rate by value of 100 %, ahead of last year (H1 21: 97%), reflecting improved renewal rates and strong sales to existing customers.

-- Sage Business Cloud penetration of 72% (H1 21: 65%), enabling more customers to connect to Sage's cloud services and ecosystem via the digital network.

-- Strong performance in key cloud native solutions (Sage Intacct, Sage Accounting and Sage People), together with continued growth in the Sage 50 and Sage 200 franchises.

-- Accelerated our strategy for growth by acquiring Brightpearl , a cloud native retail operations management system .

-- Disposed of Sage's business in Switzerland and its South African payroll outsourcing business, increasing focus on core geographies and completing the Group's disposal programme .

Outlook

Sage's outlook remains unchanged. We continue to expect organic recurring revenue growth in the region of 8% to 9% in FY22, driven by strength in Sage Business Cloud, and in cloud native revenues in particular. We also expect other revenue (SSRS) to continue to decline, in line with our strategy. Organic operating margin is expected to trend upwards in FY22 and beyond, as we focus on scaling the Group.

About Sage

Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid--Sized Businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis.

 
                                             Finsbury Glover   +44 (0) 20 7251 
Enquiries:    Sage:    +44 (0) 7721 121147    Hering:           3801 
  James Sandford, Investor                   Conor McClafferty 
   Relations 
  Becky Potgieter/Rachel                     Sophia Johnston 
   Bibby, Corporate PR 
 

A presentation for investors and analysts will be held at 8.30am UK time. The webcast can be accessed live, and subsequently as a replay, via www.sage.com/investors . Participants may also dial in by calling +44 (0) 20 7192 8338, using pin code 9998372 .

Business Review

Sage delivered a strong first half, with organic revenue growth accelerating and operating margin trending upwards, driven by continued strategic execution.

Sage serves a diverse customer base of small and mid-sized businesses (SMBs) around the world. Digitisation is driving the rapid adoption of new cloud solutions, with SMBs investing in software to automate workflows, gain better business insights and comply with regulatory obligations. Our unrivalled, trusted portfolio of accounting, HR and payroll solutions positions us well to support them.

Our purpose is to knock down barriers so everyone can thrive, recognising that as we remove friction and make life easier for SMBs, they in turn have a positive effect on the economies and communities in which they operate. We are fully committed to supporting not only our customers but also society more widely, investing in tackling digital inequality, economic inequality and the climate crisis to deliver positive change.

Overview of results

The Group achieved organic recurring revenue growth of 8% to GBP866m, underpinned by a 21% rise in Sage Business Cloud revenue to GBP572m, and organic total revenue growth of 5% to GBP924m.

Our focus on growing cloud revenues has increased Sage Business Cloud penetration to 72%, up 7 percentage points compared to H1 21. We have also continued to grow software subscription revenues, leading to a rise in subscription penetration of 6 percentage points to 74%. As a result of the evolving business mix, 94% of the Group's organic total revenue is now recurring, up from 91% in H1 21.

Portfolio View of Revenue

The portfolio view breaks down Sage's organic revenue by strategic product portfolio. Our principal focus is to grow Sage Business Cloud, by attracting new customers and migrating existing customers and products to cloud native and cloud connected solutions. Sage Business Cloud customers can connect to a range of cloud services as part of Sage's digital network, leading to deeper customer relationships and higher lifetime values.

 
 Organic Revenue by Portfolio                Recurring                    Total 
  [3] 
                                        H1 22    H1 21  Growth     H1 22    H1 21  Growth 
                                      -------  -------  ------  --------  -------  ------ 
 Cloud native [4]                     GBP187m  GBP130m    +44%   GBP192m  GBP137m    +40% 
 Cloud connected [5]                  GBP385m  GBP341m    +13%  GBP 391m  GBP348m    +12% 
                                      -------  -------  ------  --------  -------  ------ 
 Sage Business Cloud                  GBP572m  GBP471m    +21%   GBP583m  GBP485m    +20% 
 Products with potential to migrate   GBP225m  GBP249m    -10%   GBP258m  GBP294m    -12% 
                                      -------  -------  ------  --------  -------  ------ 
 Future Sage Business Cloud 
  Opportunity [6]                     GBP797m  GBP720m    +11%   GBP841m  GBP779m     +8% 
 Non-Sage Business Cloud [7]           GBP69m   GBP80m    -14%    GBP83m  GBP 98m    -15% 
                                      -------  -------  ------  --------  -------  ------ 
 Organic Total Revenue                GBP866m  GBP800m     +8%   GBP924m  GBP877m     +5% 
                                      -------  -------  ------  --------  -------  ------ 
 Sage Business Cloud Penetration          72%      65% 
                                      -------  ------- 
 

Recurring revenue from cloud native solutions grew by 44% to GBP187m, driven by Sage Intacct together with other solutions including Sage Accounting and Sage People, primarily through new customer acquisition. Cloud native growth has also been driven by migrations principally to Sage HR and to Sage Partner Cloud.

Recurring revenue from cloud connected solutions increased by 13% to GBP385m, reflecting continuing growth in the Sage 50 and Sage 200 franchises through existing customers and new customers acquired in the period. Overall, the Future Sage Business Cloud Opportunity, which represents products in or with a clear pathway to Sage Business Cloud, has performed strongly with recurring revenue growth of 11%.

The revenue decline in the Non-Sage Business Cloud portfolio is in line with expectations and reflects the ongoing strategy to focus on solutions with a clear pathway to Sage Business Cloud.

ARR growth

Sage's ARR increased by 10% to GBP1,784m (H1 21: GBP1,625m), accelerating in the second quarter across all our regions, reflecting strong growth balanced between new and existing customers. This was underpinned by cloud native ARR growth of 43% to GBP424m (H1 21: GBP296m), reflecting a strong performance particularly from Sage Intacct, Sage People, Sage Accounting and Sage HR.

Renewal rate by value of 100% (H1 21: 97%) is ahead of last year reflecting improved renewal rates and strong sales to existing customers, including a good performance in customer add-ons and targeted price rises.

In total, Sage has added GBP150m of ARR through new customer acquisition over the last 12 months, up from GBP110m a year earlier.

Progress towards our strategic priorities

At our FY21 results we set out our strategic framework for growth, including five priorities focused on initiatives to drive the long-term success of Sage. Our progress towards these priorities is outlined below.

-- Scale Sage Intacct : Growth in Sage Intacct has accelerated as we have invested in enhancing the core product, developing its vertical and geographic reach (including through the acquisition of Brightpearl and the launch of Sage Intacct Manufacturing in France), and expanding distribution in key markets across the Group. In the first half Sage Intacct added a record number of new customers , and achieved higher renewal rates driven by good sales growth from existing customers. This is reflected in strong ARR growth, up by a third in the US and by more than 200% outside the US, on a year-on-year basis.

-- Expand medium beyond financials : We are developing solutions for mid-sized businesses that deliver benefits to customers beyond core accounting , expanding into adjacent areas in line with the enlarged remit of today's CFO. In February we launched a service to automate manual accounts payable processes, saving SMBs significant invoice processing costs and reducing data entry error. Sage Intacct Planning continues to grow rapidly and has now been launched in Canada, with other markets to follow.

-- Build the small business engine : By investing in digital marketing and the customer experience, Sage has increased its cloud native ARR from UK small business solutions (including Sage Accounting and Sage HR) by more than 50% over the last year. Sage for Accountants, launched in November and complemented by the recent acquisitions of GoProposal and Futrli , has performed ahead of plan, attracting more than 1,000 accountancy practices to date and serving as a key advocacy tool. We are now internationalising the UK approach in other markets, initially South Africa and Canada.

-- Scale the network: Scaling Sage's digital network creates a virtuous circle, with more data enabling better services to deliver richer experiences. We are expanding the network by increasing Sage Business Cloud penetration, and have launched new cloud native solutions in International, including Sage Accounting in Spain, Sage HR in Germany, and Sage Intacct Manufacturing in France, further driving network participation.

-- Learn and disrupt : Sage continues to invest in innovation, accelerating momentum in AI and machine learning, and driving disruptive new technologies. In February we released the first and only mid-market cloud accounting solution to use AI to increase confidence in the accuracy of general ledger transactions, through our outlier detection engine. We also continue to work with partners, including Tide and Experian, to deliver innovative services to small businesses and consumers .

Refreshed brand

In order to better represent our evolved purpose, strategy and values, Sage has refreshed its brand proposition, in keeping with the changing needs of SMBs globally. The refreshed brand, launched externally at the end of April, focuses on the simplicity and confidence that Sage delivers to customers, highlighting how our easy-to-use solutions, backed by expert human advice and insights, help them make better and faster decisions. Sage has also launched a new marketing campaign alongside the brand, putting Sage customers and their real-life stories at its heart.

Simplifying the business

In November, we completed the disposal of Sage's business in Switzerland, as previously announced, and in April we disposed of Sage's South African payroll outsourcing business. This completes the Group's disposal programme, resulting in a simplified structure, with management and capital resources now focused on fewer, larger geographies.

Colleagues

For colleagues, knocking down barriers means improving their experience at Sage, creating opportunities, and enabling every colleague to do their very best work. Key to this is our focus on development and training, and on inclusion and wellbeing through our thriving colleague support networks and our flexible working model.

In December, we published our three-year global diversity, equity, and inclusion (DEI) strategy, to embed DEI through our everyday business processes through awareness, training and transparency. We are committed to building an inclusive workforce that fully represents the many different cultures, backgrounds, and viewpoints of our customers, partners, and communities.

Sage continues to be recognised as a great place to work based on colleague feedback, receiving awards in the first half from organisations including Comparably for Best Global Culture, and Glassdoor as one of the UK's Best Places to Work.

Society

Sage plays a key role in supporting SMBs which form the backbone of economies around the world, helping bring prosperity to their owners, employees and communities. Through our 'sustainability and society' strategy, Sage aims to support sustainable and inclusive economic growth so everyone can thrive.

Our partnership with the Institute of Engineering and Technology to develop STEM skills in young people in deprived communities is on target to support over 5,000 pupils across the north east of England this year. In the US, our grant partnership with The BOSS Network attracted over 12,500 applications, with grants made to support 35 black women entrepreneurs in their first five years of business. Our global partnership with Kiva has now supported over 4,000 loans to help individuals in underserved communities start and maintain businesses.

Sage has pledged to help the planet by achieving net zero emissions by 2040, and halving its emissions by 2030, across Scopes 1, 2 and 3. We expect to submit our Science Based Targets for approval later this year, underpinning our commitment on climate action and ensuring our plans are aligned with the Paris Agreement.

Sage Foundation provides a way for colleagues and partners to give back to their communities, co--ordinating the contribution of over 64,000 volunteering hours towards charitable projects in the first half. Sage Foundation has also led Sage's response to the humanitarian crisis in Ukraine and surrounding countries, which has included significant donations from Sage, our colleagues, partners and communities, to support local relief programmes.

Financial Review

The financial review provides a summary of Sage's results on a statutory and underlying basis, as well as considering the organic performance of the business. Underlying measures allow management and investors to understand the financial performance of the Group adjusted for the impact of foreign exchange movements and recurring and non-recurring items, while organic measures also adjust for the impact of acquisitions and disposals [8] .

Organic Financial Results

In H1 22 Sage achieved organic recurring revenue growth of 8% to GBP866m and organic total revenue growth of 5% to GBP924m. The increase in recurring revenue was underpinned by a 21% rise in Sage Business Cloud revenue to GBP572m, reflecting strength from new customer acquisition , increased sales to existing customers and continued progress in migrating customers to cloud solutions.

Other revenue (SSRS) declined by 24% to GBP58m, in line with our strategy to transition away from licence sales and professional services implementations.

The Group's organic operating profit increased by 4% to GBP184m, representing an organic operating margin of 19.9 %. Following a period of additional strategic investment during FY21 to accelerate growth, organic operating margin has trended upwards from 18.4% in H2 21, driven by operating efficiencies.

The Group also achieved underlying basic EPS of 12.62p, strong underlying cash conversion of 120% and free cash flow of GBP167m.

Statutory and Underlying Financial Results

 
 Financial Results              Statutory                    Underlying 
                          H1 22     H1 21   Change     H1 22     H1 21   Change 
                       --------  --------  -------  --------  --------  ------- 
 North America          GBP376m   GBP340m     +11%   GBP377m   GBP342m     +10% 
 Northern Europe        GBP212m   GBP200m      +6%   GBP212m   GBP200m      +7% 
 International          GBP346m   GBP397m     -13%   GBP346m   GBP380m      -9% 
                       --------  --------  -------  --------  --------  ------- 
 Group Total Revenue    GBP934m   GBP937m       0%   GBP935m   GBP922m      +1% 
 Operating Profit       GBP204m   GBP203m       0%   GBP183m   GBP188m      -3% 
 % Operating Profit                           +0.1                         -0.8 
  Margin                  21.8%     21.7%     ppts     19.6%     20.4%     ppts 
 Profit Before Tax      GBP189m   GBP190m      -1%   GBP169m   GBP175m      -3% 
 Net Profit             GBP152m   GBP146m      +4%   GBP129m   GBP130m      -1% 
 Basic EPS               14.84p    13.29p     +12%    12.62p    11.91p      +6% 
                       --------  --------  -------  --------  --------  ------- 
 

The Group achieved statutory total revenue of GBP934m, marginally below last year, reflecting good levels of organic growth in all regions, offset by disposals and foreign exchange headwinds (principally in relation to the Euro) in the International region. Underlying total revenue, which normalises the comparative period for foreign exchange movements, increased by 1%.

Statutory operating profit increased slightly to GBP204m, with recurring and non-recurring items higher than the prior year, driven by profit on disposals. Underlying operating profit, which excludes recurring and non--recurring items, decreased by 3% to GBP183m.

Statutory basic EPS increased by 12% to 14.84p, reflecting the post- tax impact of recurring and non--recurring items , and a reduction in the number of shares outstanding following the execution of the Group's share buyback programme. Underlying basic EPS increased by 6% to 12.62p.

Underlying & Organic Reconciliations to Statutory

 
                                                            H1 22                            H1 21 
                                                 Revenue   Operating  Operating   Revenue  Operating  Operating 
                                                              Profit     Margin               Profit     Margin 
                                               ---------  ----------  ---------  --------  ---------  --------- 
 Statutory                                       GBP934m     GBP204m      21.8%   GBP937m    GBP203m      21.7% 
 Recurring items                                   GBP1m      GBP34m          -         -     GBP25m          - 
  [9] 
 Non - recurring 
  items: 
                                                       -    (GBP49m)          -         -   (GBP41m)          - 
   *    Net gain on disposal of subsidiaries 
                                                       -     (GBP6m)          -         -    (GBP 5m          - 
   *    Employee restructuring costs                                                               ) 
                                                       -           -          -         -      GBP9m          - 
   *    Office relocation 
 Impact of FX [10]                                     -           -          -  (GBP15m)    (GBP3m)          - 
                                               ---------  ----------  ---------  --------  ---------  --------- 
 Underlying                                      GBP935m     GBP183m      19.6%   GBP922m    GBP188m      20.4% 
                                               ---------  ----------  ---------  --------  ---------  --------- 
 Disposals                                       (GBP5m)           -          -  (GBP43m)   (GBP10m)          - 
 Held for sale                                   (GBP2m)     (GBP1m)          -   (GBP2m)    (GBP1m)          - 
 Acquisitions                                    (GBP4m)       GBP2m          -         -          -          - 
                                               ---------  ----------  ---------  --------  ---------  --------- 
 Organic                                         GBP924m     GBP184m      19.9%   GBP877m    GBP177m      20.2% 
                                               ---------  ----------  ---------  --------  ---------  --------- 
 

Revenue

The Group achieved statutory revenue of GBP934m and underlying revenue of GBP935m in H1 22. The GBP1m difference reflects a fair value adjustment to deferred income relating to the acquisition of Brightpearl. Underlying revenue in H1 21 of GBP922m reflects statutory revenue of GBP937m retranslated at current year exchange rates, resulting in an FX adjustment of GBP15m.

Organic revenue of GBP924m (H1 21: GBP877m) reflects underlying revenue adjusted for GBP5m of revenue from Sage's business in Switzerland, which was sold during the period, and GBP2m (H1 21: GBP2m) from the South African payroll outsourcing business, which was held for sale at the end of the period and subsequently sold in April 2022. A further adjustment of GBP4m reflects revenue from the acquisition of Brightpearl. In H1 21, revenue from disposals included GBP43m of revenue from Sage's businesses in Poland, Australia and Asia, and Switzerland.

Operating profit

The Group achieved a statutory operating profit in H1 22 of GBP204m (H1 21: GBP203m). Underlying operating profit of GBP183m (H1 21: GBP188m) reflects statutory operating profit adjusted for recurring and non-recurring items. Recurring items of GBP34m (H1 21: GBP25m) comprise GBP18m of amortisation of acquisition-related intangibles (H1 21: GBP16m) and GBP15m of M&A related charges (H1 21: GBP9m), in addition to a GBP1m of deferred income adjustment relating to the acquisition of Brightpearl.

Non-recurring items include a GBP49m net gain on disposal from the sale of Sage's business in Switzerland (H1 21: GBP41m net gain from the disposal of the Polish business), together with a GBP6m reversal of employee restructuring costs, primarily relating to the business transformation announced in September 2021, as some colleagues were redeployed into other roles across the business.

Organic operating profit of GBP184m (H1 21: GBP177m) reflects underlying operating profit adjusted for GBP1m of operating profit from the South African payroll outsourcing business (H1 21: GBP1m) and GBP2m of operating losses from Brightpearl. In H1 21, operating profit from disposals included GBP3m from Sage's business in Switzerland and a further GBP7m from Sage's businesses in Poland, Australia and Asia.

Organic Revenue Overview

 
 Organic Revenue Mix                H1 22                 H1 21         Change 
                                 GBPm  % of Total     GBPm  % of Total 
                             --------  ----------  -------  ----------  ------ 
 Software Subscription 
  Revenue                     GBP682m         74%  GBP600m         68%    +14% 
 Other Recurring Revenue      GBP184m         20%  GBP200m         23%     -8% 
                             --------  ----------  -------  ----------  ------ 
 Organic Recurring Revenue    GBP866m         94%  GBP800m         91%     +8% 
 Other Revenue (SSRS)          GBP58m          6%   GBP77m          9%    -24% 
                             --------  ----------  -------  ----------  ------ 
 Organic Total Revenue        GBP924m        100%  GBP877m        100%     +5% 
                             --------  ----------  -------  ----------  ------ 
 

Organic total revenue increased by 5% in H1 22 to GBP924m. Organic recurring revenue grew by 8% to GBP866m, supported by a 14% increase in software subscription revenue to GBP682m, reflecting the continued focus on attracting new customers and migrating existing customers to subscription and Sage Business Cloud. The decline in other recurring revenue of 8% to GBP184m reflects customers migrating from maintenance and support to subscription contracts. Other revenue (SSRS) declined by 24% to GBP58m, in line with our strategy to transition away from licence sales and professional services implementations.

North America

 
 Organic Revenue by Category            H1 22     H1 21    Change 
 Organic Total Revenue                GBP375m   GBP342m       +9% 
 Organic Recurring Revenue            GBP355m   GBP318m      +12% 
 
 % Sage Business Cloud Penetration        75%       73%   +2 ppts 
 % Subscription Penetration               70%       65%   +5 ppts 
 Organic Recurring Revenue              H1 22     H1 21    Change 
 US                                   GBP303m   GBP269m      +13% 
  Of which Sage Intacct               GBP102m    GBP78m      +31% 
 Canada                                GBP52m    GBP49m       +7% 
                                     --------  --------  -------- 
 

North America achieved organic recurring revenue growth of 12% to GBP355m and organic total revenue growth of 9% to GBP375m. Sage Business Cloud penetration is now 75%, up from 73% in the prior year, driven by growth in cloud native and cloud connected solutions, while subscription penetration is 70%, up from 65% in the prior year.

Cloud native growth was driven mainly through Sage Intacct, which delivered strong recurring revenue growth of 31% to GBP102m reflecting continued strong progress through accelerating new customer acquisition and improved renewal rates driven by strong sales growth from existing customers.

Recurring revenue in the US increased by 13% to GBP303m, driven by Sage Intacct together with continued growth in medium cloud connected products across the Sage 200 franchise. Total revenue for the US increased by 11% to GBP321m.

In Canada, recurring revenue increased by 7% to GBP52m and total revenue by 4% to GBP54m, driven mainly by Sage 50 cloud and Sage 200 cloud solutions, together with growth in Sage Intacct and Sage Accounting.

Northern Europe

 
 Organic Revenue by Category            H1 22     H1 21    Change 
 Organic Total Revenue                GBP210m   GBP200m       +5% 
 Organic Recurring Revenue            GBP206m   GBP192m       +7% 
 
 % Sage Business Cloud Penetration        89%       85%   +4 ppts 
 % Subscription Penetration               91%       88%   +3 ppts 
                                     --------  --------  -------- 
 

Northern Europe (UK & Ireland) achieved organic recurring revenue growth of 7% to GBP206m and organic total revenue growth of 5% to GBP210m. Sage Business Cloud penetration is now 89%, up from 85% in the prior year, while subscription penetration is 91%, up from 88% in the prior year.

Recurring revenue growth reflects accelerating growth in cloud native solutions, supported by further growth in Sage 50 cloud connected.

Cloud native revenue growth in Northern Europe was driven by new customer acquisition in Sage Accounting, Sage Intacct and Sage People, together with migrations to Sage HR. Sage Intacct continues to grow rapidly in the UK, as we accelerate investment across our sales channels.

International

 
 Organic Revenue by Category            H1 22     H1 21     Change 
 Organic Total Revenue                GBP339m   GBP335m        +1% 
 Organic Recurring Revenue            GBP305m   GBP290m        +5% 
 
 % Sage Business Cloud Penetration        56%       43%   +13 ppts 
 % Subscription Penetration               67%       60%    +7 ppts 
                                     --------  --------  --------- 
 Organic Recurring Revenue              H1 22     H1 21     Change 
                                     --------  --------  --------- 
 Central and Southern Europe          GBP240m   GBP230m        +4% 
    France                            GBP128m   GBP124m        +3% 
    Central Europe                     GBP52m    GBP48m        +8% 
    Iberia                             GBP60m    GBP58m        +3% 
 Africa & APAC                         GBP65m    GBP60m        +7% 
                                     --------  --------  --------- 
 

The International region achieved organic recurring revenue growth of 5% to GBP305m and organic total revenue growth of 1% to GBP339m. Sage Business Cloud penetration increased significantly to 56%, up from 43% in the prior year, while subscription penetration is 67%, up from 60% in the prior year.

In France, recurring revenue increased by 3% to GBP128m, with a strong performance in cloud connected, supported by growth in cloud native solutions, partly offset by a reduction in maintenance and support revenues. Total revenue in France decreased by 1% to GBP136m.

Central Europe achieved recurring revenue growth of 8% to GBP52m while total revenue increased by 4% to GBP66m. Growth in the region is driven by a combination of cloud connected and local products.

In Iberia, recurring revenue increased by 3% to GBP60m, with success in migrating customers to subscription and cloud connected solutions. Total revenue was flat at GBP67m.

Africa & APAC delivered strong recurring revenue growth of 7% to GBP65m, driven mainly by a good performance in cloud native solutions, particularly Sage Accounting in Africa, and supported by growth in local products. Total revenue in Africa & APAC increased by 6% to GBP70m compared with the prior year.

Operating Profit

The Group increased organic operating profit by 4% to GBP184m (H1 21: GBP177m ), representing a margin of 19.9% (H1 21: 20.2%). Following a period of additional strategic investment during FY21 to accelerate growth, organic operating margin has trended upwards from 18.4% in H2 21, driven by operating efficiencies. In addition, during the first half, the Group reassessed its bad debt provision in connection with Covid-19, releasing the balance of the provision which resulted in a GBP7m credit to operating profit.

Underlying operating profit was GBP183m (H1 21: GBP188m), representing a margin of 19.6% (H1 21: 20.4%). The difference between organic and underlying operating profit reflects the operating profit or loss from acquisitions and disposals (as described on page 7).

EBITDA was GBP226m (H1 21: GBP229m) representing a margin of 24.1%. The slight reduction in EBITDA principally reflects the impact of disposals on underlying operating profit, partly offset by a GBP2m increase in underlying depreciation and amortisation to GBP27m (H1 21: GBP25m).

 
                                   H1 22      H1 21   H1 22 Margin 
 Organic Operating Profit        GBP184m    GBP177m          19.9% 
 Impact of disposals                   -     GBP10m 
 Impact of held for sale           GBP1m      GBP1m 
 Impact of acquisitions          (GBP2m)          - 
 Underlying Operating Profit     GBP183m    GBP188m          19.6% 
 Depreciation & amortisation      GBP27m     GBP25m 
 Share based payments             GBP16m     GBP16m 
                               ---------  ---------  ------------- 
 EBITDA                          GBP226m    GBP229m          24.1% 
                               ---------  ---------  ------------- 
 

Net Finance Cost

The statutory net finance cost for the period increased to GBP15m (H1 21: GBP13m), primarily reflecting the impact of interest on new debt issuances and is broadly in line with the underlying net finance cost of GBP14m (H1 21: GBP13m).

Taxation

The underlying tax expense for H1 22 was GBP40m (H1 21: GBP45m), resulting in an underlying tax rate of 24% (H1 21: 25%). The statutory income tax expense for H1 22 was GBP37m (H1 21: GBP44m), resulting in a statutory tax rate of 20% (H1 21: 23%).

The difference between the underlying and statutory rate in H1 22 primarily reflects a non-taxable accounting net gain on disposals. The H1 22 underlying tax rate has decreased due to a reduction in the French corporation tax rate together with certain non-recurring adjustments.

Earnings per Share

 
                                          H1 22     H1 21   Change 
 Statutory Basic EPS                     14.84p    13.29p     +12% 
 Recurring items                          2.97p     2.05p 
 Non-recurring items                    (5.19)p   (3.20)p 
 Impact of foreign exchange                   -   (0.23p) 
                              ----------------- 
 Underlying Basic EPS                    12.62p    11.91p      +6% 
                              ----------------- 
 

Underlying basic earnings per share of 12.62p was 6% higher than the prior period , primarily reflecting a reduction in the number of outstanding shares due to the share buyback programme.

Statutory basic earnings per share increased by 12%, reflecting the increase in underlying basic earnings per share and the post-tax impact of recurring and non-recurring items.

Cash Flow

The Group remains highly cash generative with underlying cash flow from operations of GBP 220m (H1 21: GBP255m), representing an underlying cash conversion of 120% (H1 21: 133%). Importantly, the Group has delivered cash conversion in excess of 100% for more than three years. This strong cash conversion reflects growth in subscription revenue and continued good working capital management. Free cash flow was GBP167m (H1 21: GBP190m), largely reflecting strong underlying cash conversion and a reduction in income tax paid.

 
 Cash Flow APMs                                   H1 22   H1 21 (as reported) 
 Underlying operating profit                    GBP183m               GBP191m 
 Depreciation, amortisation and non-cash         GBP26m                GBP22m 
  items in profit 
 Share based payments                            GBP16m                GBP16m 
 Net changes in working capital                   GBP3m                GBP58m 
 Net capital expenditure                        (GBP8m)              (GBP32m) 
                                              ---------  -------------------- 
 Underlying Cash Flow from Operations          GBP 220m               GBP255m 
                                              ---------  -------------------- 
     Underlying cash conversion %                  120%                  133% 
 
 Non-recurring cash items                      (GBP12m)               (GBP6m) 
 Net interest paid                             (GBP14m)              (GBP11m) 
 Income tax paid                               (GBP27m)              (GBP46m) 
 Profit and loss foreign exchange movements           -               (GBP2m) 
                                              ---------  -------------------- 
 Free Cash Flow                                GBP 167m               GBP190m 
                                              ---------  -------------------- 
 
 
 Statutory Reconciliation of Cash Flow            H1 22   H1 21 (as reported) 
  from Operations 
 Statutory Cash Flow from Operations           GBP 193m               GBP266m 
 Recurring and non-recurring items               GBP36m                GBP22m 
 Net capital expenditure                        (GBP8m)              (GBP32m) 
 Other adjustment including foreign exchange    (GBP1m)               (GBP1m) 
  translations 
 Underlying Cash Flow from Operations          GBP 220m               GBP255m 
 

Net debt and liquidity

Group net debt was GBP 650m at 31 March 2022 (30 September 2021: GBP247m), comprising cash and cash equivalents of GBP515m (30 September 2021: GBP567m) and total debt of GBP1,165m (30 September 2021: GBP814m). The Group had GBP1,197m of cash and available liquidity at 31 March 2022 (30 September 2021: GBP1,236m).

The increase in net debt in the period is summarised in the table below.

 
                                                  H1 22   H1 21 (as reported) 
 Net debt at 1 October                        (GBP247m)             (GBP151m) 
 Free cash flow                                GBP 167m               GBP190m 
 New leases                                     (GBP4m)               (GBP4m) 
 Net proceeds from disposal of subsidiaries      GBP38m                GBP61m 
 Net cash for acquisition of subsidiaries     (GBP223m)                     - 
 M&A and equity investments                    (GBP14m)              (GBP32m) 
 Dividends paid                               (GBP119m)             (GBP124m) 
 Share buyback                                (GBP249m)              (GBP47m) 
 FX movement and other                            GBP1m                GBP11m 
 Net debt at 31 March                         (GBP 650m              (GBP96m) 
                                                      ) 
 

The Group's debt is sourced from a syndicated multi-currency Revolving Credit Facility (RCF), US private placement (USPP) loan notes, and sterling denominated bond notes. The Group's RCF expires in February 2025 with facility levels of GBP682m (split between US$719m and GBP135m tranches). At 31 March 2022, the RCF was undrawn (H1 21: undrawn).

The Group's USPP loan notes at 31 March 2022 totalled GBP330m (US$400m and EUR 30m) (H1 21: GBP362m - US$400m and EUR 85m). The USPP loan notes have a range of maturities between January 2023 and May 2025.

The Group's sterling denominated bond notes comprise a GBP400m 12-year bond, issued in February 2022, with a coupon of 2.875%, and a GBP350m 10-year bond, with a coupon of 1.625%, issued in February 2021.

Sage has an investment grade issuer credit rating assigned by Standard and Poor's of BBB+ (stable outlook). Maturities within the next 18 months comprise EUR 30m (GBP25m) and US$150m (GBP114m) of the Group's USPP loan notes in January 2023 and May 2023, respectively.

Capital allocation

Sage maintains a disciplined approach to capital allocation. The Group's focus is to accelerate strategic execution through organic and inorganic investment, including through acquisitions of complementary technology and partnerships to enhance Sage Business Cloud and further develop Sage's digital network. During the period, Sage acquired Brightpearl, helping to accelerate the Group's strategy for growth , and completed the disposal of its Swiss business. The South African payroll outsourcing business was sold in April, following the period end.

Reflecting the Group's continuing strong business performance and cash generation during the first half, we have increased the interim dividend by 4% to 6.3p. Going forwards, Sage will adopt a progressive dividend policy, intending to grow the dividend over time while considering the future capital requirements of the Group.

The Group also considers returning surplus capital to shareholders. On 24 January 2022, Sage completed a GBP300m share buyback programme that commenced on 6 September 2021. A total of 39.8m shares were purchased under this programme and are held as treasury shares. Including a previous GBP300m share buyback programme undertaken during FY21, this brings the total capital returned to shareholders since March 2021 to GBP600m . As a result, the weighted average number of shares in issue during the first half declined by 7% compared to the same period last year.

 
                                   H1 22   H1 21 (as reported) 
 Net debt                       GBP 650m                GBP96m 
 EBITDA (Last Twelve Months)     GBP439m               GBP474m 
                               ---------  -------------------- 
 Net debt/EBITDA Ratio              1.5x                  0.2x 
                               ---------  -------------------- 
 

The Group's EBITDA over the last 12 months was GBP439m, resulting in a net debt to EBITDA leverage ratio of 1.5x, up from 0.2x in the prior year principally due to the impact of the share buyback and acquisitions on net debt. Group return on capital employed (ROCE) for H1 22 was 18.6% (H1 21 as reported: 20.3%).

Sage intends to operate in a broad range of 1-2x net debt to EBITDA over the medium term, with flexibility to move outside this range as business needs require.

Going concern

The Directors have robustly tested the going concern assumption in preparing these financial statements, taking into account the Group's strong liquidity position at 31 March 2022 and a number of downside sensitivities, and remain satisfied that the going concern basis of preparation is appropriate. Further information is provided in note 1 of the financial statements on pages 20 and 21.

Foreign exchange

The Group does not hedge foreign currency profit and loss translation exposures and the statutory results are therefore impacted by movements in exchange rates. The average rates used to translate the consolidated income statement and to normalise prior year underlying and organic figures are as follows:

 
 AVERAGE EXCHANGE RATES (EQUAL TO    H1 22   H1 21   Change 
  GBP) 
 Euro (EUR)                           1.19    1.13       5% 
 US Dollar ($)                        1.34    1.35       0% 
 Canadian Dollar (C$)                 1.70    1.73      -2% 
 South African Rand (ZAR)            20.62   20.62       0% 
 Australian Dollar (A$)               1.85    1.80       3% 
                                    ------  ------  ------- 
 

Appendix 1 - Alternative Performance Measures

Alternative Performance Measures are used by the Group to understand and manage performance. These are not defined under IFRS and are not intended to be a substitute for any IFRS measures of performance but have been included as management considers them to be important measures, alongside the comparable GAAP financial measures, in assessing underlying performance. Wherever appropriate and practical, we provide reconciliations to relevant GAAP measures. The table below sets out the basis of calculation of the Alternative Performance Measures and the rationale for their use.

 
 MEASURE              DESCRIPTION                                                    RATIONALE 
 Underlying           Underlying measures are adjusted                               Underlying measures allow 
  (revenue             to exclude items which would                                   management and investors 
  and profit)          distort the understanding of                                   to compare performance 
  measures             the performance for the year                                   without the potentially 
                       or comparability between periods:                              distorting effects of 
                        *    Recurring items include purchase price adjustments       foreign exchange movements, 
                             including amortisation of acquired intangible assets     one--off or non-operational 
                             and adjustments made to reduce deferred income           items. 
                             arising on acquisitions, acquisition-related items,      By including part-period 
                             unhedged FX on intercompany balances and fair value      contributions from acquisitions, 
                             adjustments; and                                         discontinued operations, 
                                                                                      disposals and assets held 
                                                                                      for sale of standalone 
                        *    Non-recurring items that management judge to be          businesses in the current 
                             one-off or non-operational such as gains and losses      and/or prior periods, 
                             on the disposal of assets, impairment charges and        the impact of M&A decisions 
                             reversals, and restructuring related costs.              on earnings per share 
                                                                                      growth can be evaluated. 
 
                       Recurring items are adjusted 
                       each period irrespective of materiality 
                       to ensure consistent treatment. 
                       All prior period underlying measures 
                       (revenue and profit) are retranslated 
                       at the current year exchange 
                       rates to neutralise the effect 
                       of currency fluctuations. 
                     -------------------------------------------------------------  ---------------------------------- 
 Organic (revenue     In addition to the adjustments                                 Organic measures allow 
  and profit)         made for Underlying measures,                                  management and investors 
  measures            Organic measures:                                              to understand the like--for--like 
                       *    Exclude the contribution from discontinued operations,   revenue and current period 
                            disposals and assets held for sale of standalone         margin performance of 
                            businesses in the current and prior period; and          the continuing business. 
 
 
                       *    Exclude the contribution from acquired businesses 
                            until the year following the year of acquisition; and 
 
 
                       *    Adjust the comparative period to present prior period 
                            acquired businesses as if they had been part of the 
                            Group throughout the prior period. 
 
 
                      Acquisitions and disposals where 
                      the revenue and contribution 
                      impact would be immaterial are 
                      not adjusted. 
                     -------------------------------------------------------------  ---------------------------------- 
 Underlying           Underlying Cash Flow from Operations                           To show the cash flow 
  Cash Flow            is Underlying Operating Profit                                 generated by the operations 
  from Operations      adjusted for non-cash items,                                   and calculate underlying 
                       net capex (excluding business                                  cash conversion. 
                       combinations and similar items) 
                       and changes in working capital. 
                     -------------------------------------------------------------  ---------------------------------- 
 Underlying           Underlying Cash Flow from Operations                           Cash conversion informs 
  Cash Conversion      divided by Underlying (as reported)                            management and investors 
                       Operating Profit.                                              about the cash operating 
                                                                                      cycle of the business 
                                                                                      and how efficiently operating 
                                                                                      profit is converted into 
                                                                                      cash. 
                     -------------------------------------------------------------  ---------------------------------- 
 EBITDA               EBITDA is Underlying Operating                                 To calculate the Net Debt 
                       Profit excluding depreciation,                                 to EBITDA leverage ratio 
                       amortisation and share based                                   and to show profitability 
                       payments.                                                      before the impact of major 
                                                                                      non-cash charges. 
                     -------------------------------------------------------------  ---------------------------------- 
 Annualised           Annualised recurring revenue                                   ARR represents the annualised 
  recurring            ("ARR") is the normalised organic                              value of the recurring 
  revenue              recurring revenue in the last                                  revenue base that is expected 
                       month of the reporting period,                                 to be carried into future 
                       adjusted consistently period                                   periods, and its growth 
                       to period, multiplied by twelve.                               is a forward--looking 
                       Adjustments to normalise reported                              indicator of reporting 
                       recurring revenue include those                                recurring revenue growth. 
                       components that management has 
                       assessed should be excluded in 
                       order to ensure the measure reflects 
                       that part of the contracted revenue 
                       base which (subject to ongoing 
                       use and renewal) can reasonably 
                       be expected to repeat in future 
                       periods (such as non--refundable 
                       contract sign--up fees). 
                     -------------------------------------------------------------  ---------------------------------- 
 Renewal Rate         The ARR from renewals, migrations,                             As an indicator of our 
  by Value             upsell and cross-sell of active                                ability to retain and 
                       customers at the start of the                                  generate additional revenue 
                       year, divided by the opening                                   from our existing customer 
                       ARR for the year.                                              base through up and cross 
                                                                                      sell. 
                     -------------------------------------------------------------  ---------------------------------- 
 Free Cash            Free Cash Flow is Underlying                                   To measure the cash generated 
  Flow                 Cash Flow from Operations minus                                by the operating activities 
                       net interest paid and income                                   during the period that 
                       tax paid and adjusted for non-recurring                        is available to repay 
                       cash items (which excludes net                                 debt, undertake acquisitions 
                       proceeds on disposals of subsidiaries)                         or distribute to shareholders. 
                       and profit and loss foreign exchange 
                       movements. 
                     -------------------------------------------------------------  ---------------------------------- 
 % Subscription       Organic software subscription                                  To measure the progress 
  Penetration          revenue as a percentage of organic                             of migrating our customer 
                       total revenue.                                                 base from licence and 
                                                                                      maintenance to a subscription 
                                                                                      relationship. 
                     -------------------------------------------------------------  ---------------------------------- 
 % Sage Business      Organic recurring revenue from                                 To measure the progress 
  Cloud Penetration    the Sage Business Cloud (native                                in the migration of our 
                       and connected cloud) as a percentage                           revenue base to the Sage 
                       of the organic recurring revenue                               Business Cloud by connecting 
                       of the Future Sage Business Cloud                              our solutions to the cloud 
                       Opportunity.                                                   and/or migrating our customers 
                                                                                      to cloud connected and 
                                                                                      cloud native solutions. 
                     -------------------------------------------------------------  ---------------------------------- 
 Return on            ROCE is calculated as:                                         As an indicator of the 
  Capital Employed      *    Underlying Operating Profit; minus                       current period financial 
  (ROCE)                                                                              return on the capital 
                                                                                      invested in the Company. 
                        *    Amortisation of acquired intangibles; the result         ROCE is used as an underpin 
                             being divided by                                         in the FY20, FY21 and 
                                                                                      FY22 PSP awards. 
 
                       The average (of the opening and 
                       closing balance for the period) 
                       total net assets excluding net 
                       debt, provisions for non-recurring 
                       costs, financial liability for 
                       purchase of own shares and tax 
                       assets or liabilities (i.e. capital 
                       employed). 
                     -------------------------------------------------------------  ---------------------------------- 
 

Consolidated income statement

For the six months ended 31 March 2022

 
                                                          Six months                                  Year 
                  Six months    Six months   Six months        ended    Six months   Six months      ended 
                       ended         ended        ended     31 March         ended        ended         30 
                    31 March      31 March     31 March         2021      31 March     31 March  September 
                        2022          2022         2022  (Unaudited)          2021         2021       2021 
                 (Unaudited)   (Unaudited)  (Unaudited)   Underlying   (Unaudited)  (Unaudited)  (Audited) 
                  Underlying  Adjustments*    Statutory  as reported  Adjustments*    Statutory  Statutory 
                Note    GBPm          GBPm         GBPm         GBPm          GBPm         GBPm       GBPm 
--------------------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
Revenue         2        935           (1)          934          937             -          937      1,846 
Cost of 
 sales                  (68)             -         (68)         (72)             -         (72)      (131) 
-----------  -------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
Gross 
 profit                  867           (1)          866          865             -          865      1,715 
Selling and 
 administrative 
 expenses              (684)            22        (662)        (674)            12        (662)    (1,342) 
--------------------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
Operating 
 profit         2        183            21          204          191            12          203        373 
Finance 
 income                    -             -            -            1             -            1          1 
Finance 
 costs                  (14)           (1)         (15)         (14)             -         (14)       (27) 
-----------  -------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
Profit before income 
 tax                     169            20          189          178            12          190        347 
Income tax 
 expense        4       (40)             3         (37)         (45)             1         (44)       (62) 
-----------  -------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
Profit for 
 the 
 period                  129            23          152          133            13          146        285 
-----------  -------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
* Adjustments are detailed in note 3. 
 
Earnings per share 
 attributable to 
 the owners of the 
 parent (pence) 
--------------------  ------  -------------------------  -----------  ------------  ---------------------- 
Basic           6     12.62p                     14.84p       12.14p                     13.29p     26.33p 
Diluted         6     12.49p                     14.68p       12.05p                     13.19p     26.08p 
-----------  -------  ------  ------------  -----------  -----------  ------------  -----------  --------- 
 
 

Consolidated statement of comprehensive income

For the six months ended 31 March 2022

 
                                                                             Six months     Six months            Year 
                                                                                  ended          ended           ended 
                                                                               31 March       31 March    30 September 
                                                                                   2022           2021            2021 
                                                                            (Unaudited)    (Unaudited)       (Audited) 
                                                                                   GBPm           GBPm            GBPm 
------------------------------------------------------------------------  -------------  -------------  -------------- 
Profit for the period                                                               152            146             285 
Other comprehensive income/(expense): 
 
Items that will not be reclassified to profit or loss: 
Fair value gain on reassessment of equity investment (see note 11)                   30              -               - 
Actuarial gain on post-employment benefit obligations                                 -              -               2 
------------------------------------------------------------------------  -------------  -------------  -------------- 
                                                                                     30              -               2 
------------------------------------------------------------------------  -------------  -------------  -------------- 
 
Items that may be reclassified to profit or loss 
Exchange differences on translating foreign operations                               24           (86)            (60) 
Exchange differences recycled through income statement on sale of 
 foreign operations                                                                (13)            (1)            (21) 
------------------------------------------------------------------------  -------------  -------------  -------------- 
                                                                                     11           (87)            (81) 
------------------------------------------------------------------------  -------------  -------------  -------------- 
 
Other comprehensive income/(expense) for the period, net of tax                      41           (87)            (79) 
------------------------------------------------------------------------  -------------  -------------  -------------- 
 
Total comprehensive income for the period                                           193             59             206 
------------------------------------------------------------------------  -------------  -------------  -------------- 
 

The notes on pages 20 to 38 form an integral part of this condensed consolidated half-yearly report.

Consolidated balance sheet

As at 31 March 2022

 
                                                                      31 March        31 March   30 September 
                                                                          2022            2021           2021 
                                                                   (Unaudited)     (Unaudited)      (Audited) 
                                                          Note            GBPm            GBPm           GBPm 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 Non-current assets 
 Goodwill                                                  7             2,082           1,843          1,877 
 Other intangible assets                                   7               281             188            190 
 Property, plant and equipment                             7               155             165            164 
 Equity investments                                                          4              19             21 
 Other financial assets                                                      -               1              - 
 Trade and other receivables                                               116             101            113 
 Deferred income tax assets                                                 34              36             40 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
                                                                         2,672           2,353          2,405 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 Current assets 
 Trade and other receivables                                               329             290            295 
 Current income tax asset                                                   28              13             37 
 Cash and cash equivalents (excluding bank overdrafts)     10              515             693            553 
 Assets classified as held for sale                        11                2              95             39 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
                                                                           874           1,091            924 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 
 Total assets                                                            3,546           3,444          3,329 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 
 Current liabilities 
 Trade and other payables*                                               (311)           (529)          (592) 
 Current income tax liabilities                                           (23)            (24)           (31) 
 Borrowings                                                10             (42)            (65)           (65) 
 Provisions                                                               (44)            (14)           (68) 
 Deferred income                                                         (705)           (638)          (611) 
 Liabilities classified as held for sale                   11                -            (52)           (13) 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
                                                                       (1,125)         (1,322)        (1,380) 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 
 Non-current liabilities 
 Borrowings                                                10          (1,123)           (742)          (749) 
 Post-employment benefits                                                 (23)            (23)           (22) 
 Deferred income tax liabilities                                          (24)            (10)            (5) 
 Provisions                                                               (36)            (29)           (49) 
 Trade and other payables                                                  (2)             (3)            (3) 
 Deferred income                                                           (9)            (11)           (10) 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
                                                                       (1,217)           (818)          (838) 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 
 Total liabilities                                                     (2,342)         (2,140)        (2,218) 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 Net assets                                                              1,204           1,304          1,111 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 
 Equity attributable to owners of the parent 
 Ordinary shares                                           9                12              12             12 
 Share premium                                             9               548             548            548 
 Translation reserve                                                        53              36             42 
 Merger reserves                                                            61              61             61 
 Retained earnings                                                         530             647            448 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 Total equity                                                            1,204           1,304          1,111 
-------------------------------------------------------  -----  --------------  --------------  ------------- 
 

*Includes GBPnil at 31 March 2022 (GBP253m at 31 March 2021 and GBP249m at 30 September 2021) in relation to the Group's commitment for the purchase of its own shares. See note 9.

Consolidated statement of changes in equity

For the six months ended 31 March 2022

 
                                                                               Attributable to owners 
                                                                                        of the parent 
-------------------------------------  ------------------  ------------------------------------------ 
                                       Ordinary     Share  Translation     Merger   Retained    Total 
                                         shares   premium      reserve   reserves   earnings   equity 
                                           GBPm      GBPm         GBPm       GBPm       GBPm     GBPm 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
At 1 October 2021                            12       548           42         61        448    1,111 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
Profit for the period                         -         -            -          -        152      152 
Other comprehensive income/(expense) 
Exchange differences on translating 
 foreign operations                           -         -           24          -          -       24 
Exchange differences recycled 
 through income statement on sale 
 of foreign operations (see note 
 11)                                          -         -         (13)          -          -     (13) 
Fair value gain on reassessment 
 of equity investment (see note 
 11)                                          -         -            -          -         30       30 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
Total comprehensive income 
 for the period ended 31 March 
 2022 (Unaudited)                             -         -           11          -        182      193 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
Transactions with owners 
Employee share option scheme - 
 Value of employee services, net 
 of deferred tax                              -         -            -          -         16       16 
Proceeds from issuance of treasury            -         -            -          -          3        3 
 shares 
Dividends paid to owners of the 
 parent                                       -         -            -          -      (119)    (119) 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
Total transactions with owners 
 for the period ended 31 March 
 2022 (Unaudited)                             -         -            -          -      (100)    (100) 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
At 31 March 2022 (Unaudited)                 12       548           53         61        530    1,204 
-------------------------------------  --------  --------  -----------  ---------  ---------  ------- 
 
 
                                                                      Attributable to owners of the 
                                                                                             parent 
====================================  ========  =================================================== 
                                      Ordinary     Share  Translation    Merger   Retained    Total 
                                        shares   premium      reserve   reserve   earnings   equity 
                                          GBPm      GBPm         GBPm      GBPm       GBPm     GBPm 
====================================  ========  ========  ===========  ========  =========  ======= 
At 1 October 2020                           12       548          123        61        908    1,652 
Profit for the period                        -         -            -         -        146      146 
Other comprehensive expenses 
Exchange differences on translating 
 foreign operations                          -         -         (86)         -          -     (86) 
Exchange differences recycled 
 through income statement on sale 
 of foreign operations                       -         -          (1)         -          -      (1) 
Total comprehensive income 
 for the period ended 31 March 
 2021 (Unaudited)                            -         -         (87)         -        146       59 
====================================  ========  ========  ===========  ========  =========  ======= 
Transactions with owners 
Employee share option scheme 
 - Value of employee services, 
 net of deferred tax                         -         -            -         -         15       15 
Proceeds from issuance of treasury 
 shares                                      -         -            -         -          2        2 
Share buyback programme*                     -         -            -         -      (300)    (300) 
Dividends paid to owners of the 
 parent                                      -         -            -         -      (124)    (124) 
====================================  ========  ========  ===========  ========  =========  ======= 
Total transactions with owners 
 for the period ended 31 March 
 2021 (Unaudited)                            -         -            -         -      (407)    (407) 
====================================  ========  ========  ===========  ========  =========  ======= 
At 31 March 2021 (Unaudited)                12       548           36        61        647    1,304 
====================================  ========  ========  ===========  ========  =========  ======= 
 

*The repurchase of shares recognised through retained earnings is the maximum consideration that The Sage Group plc is contractually bound under the share buyback programme including costs of purchase. See note 9.

Consolidated statement of cash flows

For the six months ended 31 March 2022

 
                                                         Six months     Six months         Year 
                                                              ended          ended     ended 30 
                                                           31 March       31 March    September 
                                                               2022           2021         2021 
                                                        (Unaudited)    (Unaudited)    (Audited) 
                                               Notes           GBPm           GBPm         GBPm 
=============================================  =====  =============  =============  =========== 
Cash flows from operating activities 
Cash generated from continuing operations                       193            266          476 
Interest paid                                                  (14)           (11)         (19) 
Income tax paid                                                (27)           (46)         (81) 
Net cash generated from operating activities                    152            209          376 
=============================================  =====  =============  =============  =========== 
 
Cash flows from investing activities 
Proceeds on settlement of non-current 
 asset                                                            -              3            3 
Disposal of subsidiaries, net of cash 
 disposed                                       11               37             60          135 
Acquisition of subsidiaries, net of 
 cash acquired                                  11            (210)              -            - 
Purchases of equity investments                                   -           (19)         (21) 
Purchases of intangible assets                   7             (17)            (8)         (17) 
Purchases of property, plant and equipment       7              (4)           (24)         (39) 
Proceeds from disposals of property, 
 plant and equipment                            11               10              -            - 
Interest received                                                 -              -            1 
Net cash (used in)/generated from investing 
 activities                                                   (184)             12           62 
=============================================  =====  =============  =============  =========== 
 
Cash flows from financing activities 
Proceeds from issuance of treasury 
 shares                                          9                3              2            8 
Proceeds from borrowings                        10              516            344          344 
Repayments of borrowings                        10            (166)          (481)        (481) 
Capital element of lease payments                               (9)           (13)         (22) 
Borrowing costs                                                   -              -          (1) 
Share buyback programme                          9            (249)           (47)        (353) 
Dividends paid to owners of the parent           5            (119)          (124)        (189) 
Net cash used in financing activities                          (24)          (319)        (694) 
=============================================  =====  =============  =============  =========== 
 
Net decrease in cash, cash equivalents 
 and bank overdrafts 
 (before exchange rate movement)                               (56)           (98)        (256) 
Effects of exchange rate movement               10                4           (32)         (25) 
Net decrease in cash, cash equivalents 
 and bank overdrafts                                           (52)          (130)        (281) 
Cash, cash equivalents and bank overdrafts 
 at 1 October                                   10              567            848          848 
=============================================  =====  =============  =============  =========== 
Cash, cash equivalents and bank overdrafts 
 at period end                                  10              515            718          567 
=============================================  =====  =============  =============  =========== 
 

Notes to the financial information

For the six months ended 31 March 2022

   1.    Group accounting policies 

General information

The Sage Group plc ("the Company") and its subsidiaries (together "the Group") is a leading global supplier of finance, HR and payroll software to small and mid-sized businesses .

This condensed consolidated half-yearly financial report was approved for issue by the board of directors on 12 May 2022.

The financial information set out above does not constitute the Company's Statutory Accounts. Statutory Accounts for the year ended 30 September 2021 have been delivered to the Registrar of Companies. The auditor's report was unqualified and did not contain statements under section 498 (2), (3) or (4) of the Companies Act 2006.

Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRS") as adopted by the UK and IFRS as issued by the International Accounting Standards Board ("IASB"), this announcement does not in itself contain sufficient information to comply with IFRSs. The financial information has been prepared on the basis of the accounting policies and critical accounting estimates and judgements as set out in the Annual Report and Accounts for 2021.

This condensed consolidated half-yearly financial report has been reviewed, not audited.

The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is C23 - 5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ. The Company is listed on the London Stock Exchange.

Basis of preparation

The financial information for the six months ended 31 March 2022 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" as issued by the International Accounting Standards Board ("IASB") and as adopted for use in the UK.

The condensed consolidated half-yearly financial report should be read in conjunction with the annual financial statements for the year ended 30 September 2021, which have been prepared in accordance with IFRS as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRS as issued by the IASB.

On 31 December 2020, as a result of the UK's withdrawal from the European Union, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement board. With effect from 1 October 2021 the Group's statutory consolidated financial statements were transitioned to UK-adopted International Accounting Standards ("UK-adopted IFRS"). There were no impact or changes in accounting policies from the transition. This change constitutes a change in accounting framework. UK-adopted IFRS differ in certain respects from IFRS as issued by the IASB. The differences have no impact on the Group's condensed consolidated financial statements for the periods presented.

As at 31 March 2022, the Group had a strong liquidity position with cash and available liquidity of GBP1.2bn, supported by strong underlying cash conversion of 120% reflecting the strength of the subscription-based business model. The Group's position is further supported by a well-diversified customer base amongst small and medium sized businesses with high quality recurring revenue and strong retention rate.

In reaching its assessment on going concern, the Directors have reviewed liquidity and covenant forecasts for the Group for the period to 30 September 2023. Stress testing has been performed with the impact of increases in churn and reduced levels of new customer acquisitions and sales to existing customers being considered. In these stress scenarios, the Group continues to have sufficient resources to continue in operational existence. In the event that more severe impacts occur, further mitigating actions are available to the Group should they be required.

The Directors also reviewed the results of reverse stress testing to provide an illustration of the level of churn which would be required to trigger a breach in the Group's covenants or exhaust cash down to minimum working capital requirements. The probability of these factors occurring is deemed to be remote given the resilient nature of the subscription-based business model, robust balance sheet and continued strong cash conversion.

After making enquiries, the Directors have a reasonable expectation that Sage has adequate resources to continue in operational existence for at least 12 months from the date of signing this condensed consolidated half-yearly financial report. Accordingly, the consolidated financial information has been prepared on a going concern basis.

Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2021 as described in those annual financial statements.

Adoption of new and revised IFRSs

There are no new accounting standards which are currently issued but not yet effective which the management expects would have a material impact on the Group.

Critical accounting estimates and judgements

The preparation of financial statements requires the use of accounting estimates and assumptions by management. It also requires management to exercise its judgement in the process of applying the accounting policies. We continually evaluate our estimates, assumptions and judgements based on available information. The areas involving a higher degree of judgement or complexity are described below.

Revenue recognition

Over a third of the Company's revenue is generated from sales to partners rather than end users. The key judgement is determining whether the business partner is a customer of the Group. The key criteria in this determination is whether the business partner has taken control of the product. Considering the nature of Sage's' subscription products and support services, this is usually assessed based on whether the business partner has responsibility for payment, has discretion to set prices, and takes on the risks and rewards of the product from Sage.

Where the business partner is a customer of Sage, discounts are recognised as a deduction from revenue.

Where the business partner is not a customer of Sage and their part in the sale has simply been in the form of a referral, they are remunerated in the form of a commission payment. These payments are treated as contract acquisition costs.

An additional area of judgement is the recognition and deferral of revenue on on--premise subscription offerings, for example the sale of a term licence with an annual maintenance and support contract as part of a subscription contract. In such instances, the transaction price is allocated between the constituent performance obligations on the basis of standalone selling prices (SSPs). Judgement is required when estimating SSPs. The Group has established a hierarchy to identify the SSPs that are used to allocate the transaction price of a customer contract to the performance obligations in the contract. Where SSPs for on--premise offerings are observable and consistent across the customer base, SSP estimates are derived from pricing history. Where there are no directly observable estimates available, comparable products are utilised as a basis of assessment or the residual approach is used. Under the residual approach, the SSP for the offering is estimated to be the total transaction price less the sum of the observable SSPs of other goods or services in the contract. The Group uses this technique in particular for estimating the term licence SSP sold as part of its on--premise subscription offerings as Sage has previously not sold term licences on a stand-alone basis (i.e. the selling price is uncertain).

Goodwill impairment

A key judgement is the ongoing appropriateness of the cash-generating units ("CGUs") for the purpose of impairment testing. CGUs are assessed in the context of the Group's evolving business model, the Sage strategy and the shift to global product development. Management continues to assess performance and allocate resources at a regional level, and so it is appropriate to monitor goodwill at a regional level and CGUs to be based on geographical area of operation.

Management has performed a review for indicators of impairment of goodwill as at 31 March 2022. As a result of this review, no indicators of impairment have been identified.

The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment are disclosed in the 30 September 2021 financial statements.

Business combinations

When the Group completes a business combination, the consideration transferred for the acquisition and the identifiable assets and liabilities are recognised at their fair values. The amounts by which the consideration exceeds the net assets acquired is recognised as goodwill. The application of accounting policies to business combinations involves judgement and the use of estimates.

During the period, the Group acquired the remaining 83% of shares in Brightpearl which constituted a significant business combination. The key areas of judgment include the identification and subsequent measurement of acquired intangible assets. The total fair value of intangible assets (excluding goodwill) acquired was GBP110m.

The Group engaged an external expert to support the identification and measurement exercise. The intangible assets acquired that qualified for recognition separately from goodwill were technology and customer relationships. The fair value of the acquired technology was determined using the relief from royalty method and the customer relationship was determined using a discounted cashflow approach. These valuation techniques incorporate several key assumptions including revenue forecasts and the application of an appropriate discount rate to state future cash flows at their present value. The relief from royalty method also requires the use of an appropriate royalty rate which was determined with reference to licensing arrangements for similar technologies. Full analysis of the consideration transferred, assets and liabilities acquired, and goodwill recognised in business combinations are set out in note 11.

Judgement was also required in allocating the acquired goodwill to CGUs. Based on the strategic intent and rationale for the acquisition, and the way in which Management intend to monitor the performance of the business going forwards, goodwill has been allocated to the Group's UK & Ireland and North America CGUs.

Amounts recognised for Brightpearl at 31 March 2022 are provisional due to the proximity of the acquisition date to the date of the approval of the condensed consolidated half-yearly financial report, and will be finalised during the coming year.

Website

This condensed consolidated half-yearly financial report for the six months ended 31 March 2022 can also be found on our website: www.sage.com/investors/financial-information/results

   2.    Segment information 

In accordance with IFRS 8, "Operating Segments", information for the Group's operating segments has been derived using the information used by the chief operating decision maker. The Group's Executive Leadership Team (previously known as the Executive Committee) has been identified as the chief operating decision maker, in accordance with their designated responsibility for the allocation of resources to operating segments and assessing their performance through the Management Performance Reviews. The Executive Leadership Team uses organic and underlying data to monitor business performance. Operating segments are reported in a manner which is consistent with the operating segments produced for internal management reporting.

The Group is organised into seven key operating segments: North America, Northern Europe (UK and Ireland), Central Europe (Germany, Austria and Switzerland), France, Iberia (Spain and Portugal), Africa and the Middle East, and Asia (including Australia). For reporting under IFRS 8, the Group is divided into three reportable segments. These segments are as follows:

   --     North America 
   --     Northern Europe 
   --     International - Central and Southern Europe (Central Europe, France and Iberia) 

The remaining operating segments of Africa and the Middle East, and Asia (including Australia) do not meet the quantitative thresholds for presentation as separate reportable segments under IFRS 8, and so are presented together and described as International - Africa & APAC. They include the Group's operations in South Africa, the Middle East, Australia, Singapore and Malaysia.

The reportable segments reflect the aggregation of the operating segments for Central Europe, France and Iberia. The aggregated operating segments are considered to share similar economic characteristics because they have similar long-term gross margins and operate in similar markets. Central Europe, France and Iberia operate principally within the EU and the majority of their businesses are in countries within the Euro area.

The revenue analysis in the table below is based on the location of the customer, which is not materially different from the location where the order is received and where the assets are located.

Revenue by segment (Unaudited)

 
                                                                                        Six months ended 31 March 2022 
                                 Underlying                      Organic                 Change       Change    Change 
                  Statutory    adjustments*   Underlying   adjustments**    Organic   Statutory   Underlying   Organic 
                       GBPm            GBPm         GBPm            GBPm       GBPm           %            %         % 
===========================  ==============  ===========  ==============  =========  ==========  ===========  ======== 
Recurring revenue by segment 
North America           356               1          357             (2)        355         13%          13%       12% 
Northern Europe         208               -          208             (2)        206          8%           8%        7% 
International 
 - Central and 
 Southern Europe        244               -          244             (4)        240        (7%)         (2%)        4% 
International 
 - Africa & APAC         65               -           65               -         65       (19%)        (18%)        7% 
================  =========  ==============  ===========  ==============  =========  ==========  ===========  ======== 
Recurring 
 revenue                873               1          874             (8)        866          3%           4%        8% 
================  =========  ==============  ===========  ==============  =========  ==========  ===========  ======== 
Other revenue by segment 
North America            20               -           20               -         20       (22%)        (22%)     (22%) 
Northern Europe           4               -            4               -          4       (42%)        (42%)     (42%) 
International 
 - Central and 
 Southern Europe         30               -           30             (1)         29       (31%)        (27%)     (25%) 
International 
 - Africa & APAC          7               -            7             (2)          5       (39%)        (38%)     (11%) 
================  =========  ==============  ===========  ==============  =========  ==========  ===========  ======== 
Other revenue            61               -           61             (3)         58       (30%)        (29%)     (24%) 
================  =========  ==============  ===========  ==============  =========  ==========  ===========  ======== 
Total revenue by segment 
North America           376               1          377             (2)        375         11%          10%        9% 
Northern Europe         212               -          212             (2)        210          6%           7%        5% 
International 
 - Central and 
 Southern Europe        274               -          274             (5)        269       (10%)         (5%)        0% 
International 
 - Africa & APAC         72               -           72             (2)         70       (22%)        (21%)        6% 
================  =========  ==============  ===========  ==============  =========  ==========  ===========  ======== 
Total revenue           934               1          935            (11)        924          0%           1%        5% 
================  =========  ==============  ===========  ==============  =========  ==========  ===========  ======== 
 

* Adjustments are detailed in note 3.

** Adjustments relate to the disposal of the Group's Swiss business and assets held for sale in the current period, as well as the acquisition of Brightpearl (note 11).

Revenue by segment (Unaudited)

 
                                                           Six months ended 31 March 2021 
----------------------------------------------------------------------------------------- 
                                  Statutory 
                                        and     Impact 
                                 Underlying         of 
                                         as    foreign                   Organic 
                                   reported   exchange  Underlying   adjustments  Organic 
                                       GBPm       GBPm        GBPm          GBPm     GBPm 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
 
Recurring revenue by segment 
North America                           316          2         318             -      318 
Northern Europe                         192          -         192             -      192 
International - Central and 
 Southern Europe                        262       (13)         249          (19)      230 
International - Africa & 
 APAC                                    80        (1)          79          (19)       60 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
Recurring revenue                       850       (12)         838          (38)      800 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
Other revenue by segment 
North America                            24          -          24             -       24 
Northern Europe                           8          -           8             -        8 
International - Central and 
 Southern Europe                         43        (3)          40           (1)       39 
International - Africa & 
 APAC                                    12          -          12           (6)        6 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
Other revenue                            87        (3)          84           (7)       77 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
Total revenue by segment 
North America                           340          2         342             -      342 
Northern Europe                         200          -         200             -      200 
International - Central and 
 Southern Europe                        305       (16)         289          (20)      269 
International - Africa & 
 APAC                                    92        (1)          91          (25)       66 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
Total revenue                           937       (15)         922          (45)      877 
-----------------------------  ------------  ---------  ----------  ------------  ------- 
 

* Adjustments relate to the disposal of the Group's Swiss business in the current period and the payroll outsourcing business in South Africa classified as held for sale at 31 March 2022 (note 11), as well as the disposal of the Group's Polish business and Australia and Asia Pacific business (excluding global products) ("Asia Pacific") in the prior financial year.

Operating profit by segment (Unaudited)

 
                                          Six months ended 31 March 2022 
------------------------------------------------------------------------------------------------------------------- 
                                 Underlying                   Organic               Change       Change      Change 
                    Statutory   adjustments  Underlying   adjustments  Organic   Statutory   Underlying     Organic 
                         GBPm          GBPm        GBPm          GBPm     GBPm           %            %           % 
-----------------  ----------  ------------  ----------  ------------  -------  ----------  -----------  ---------- 
Operating profit 
 by segment 
North America              59            14          73             -       73          7%          10%         10% 
Northern Europe            34            17          51             2       53       (21%)        (15%)     (12%) 
International 
 - Central and 
 Southern Europe           97          (51)          46             -       46          8%           4%       21% 
International 
 - Africa & APAC           14           (1)          13           (1)       12        (9%)        (25%)      (5%) 
-----------------  ----------  ------------  ----------  ------------  -------  ----------  -----------  -------- 
Total operating 
 profit                   204          (21)         183             1      184          0%         (3%)        4% 
-----------------  ----------  ------------  ----------  ------------  -------  ----------  -----------  -------- 
 
 
                                        Six months ended 31 March 2021 
-------------------------------------------------------------------------------------------------------------- 
                                                                  Impact of 
                           Statutory    Underlying    Underlying    foreign                   Organic 
                                GBPm   adjustments   as reported   exchange  Underlying   adjustments  Organic 
                                              GBPm          GBPm       GBPm        GBPm          GBPm     GBPm 
Operating profit 
 by segment 
------------------------  ----------  ------------  ------------  ---------  ----------  ------------  ------- 
North America                     55            11            66          -          66             -       66 
Northern Europe                   42            19            61        (1)          60             -       60 
International - Central 
 and Southern Europe              90          (43)            47        (2)          45           (7)       38 
------------------------  ----------  ------------  ------------  ---------  ----------  ------------  ------- 
International - Africa 
 & APAC                           16             1            17          -          17           (4)       13 
Total operating profit           203          (12)           191        (3)         188          (11)      177 
------------------------  ----------  ------------  ------------  ---------  ----------  ------------  ------- 
 

Reconciliation of underlying operating profit to statutory operating profit

 
                                                           Six months ended   Six months ended 
                                                              31 March 2022      31 March 2021 
                                                                (Unaudited)        (Unaudited) 
                                                                       GBPm               GBPm 
=======================================================   =================  ================= 
 
 North America                                                           73                 66 
 Northern Europe                                                         51                 60 
 International - Central and Southern Europe                             46                 45 
 Total reportable segments                                              170                171 
 International - Africa & APAC                                           13                 17 
========================================================  =================  ================= 
 Underlying operating profit                                            183                188 
 Impact of movement in foreign currency exchange rates                    -                  3 
========================================================  =================  ================= 
 Underlying operating profit (as reported)                              183                191 
 Amortisation of acquired intangible assets                            (18)               (16) 
 Adjustment to acquired deferred income                                 (1)                  - 
 Other M&A activity-related items                                      (15)                (9) 
 Non-recurring items                                                     55                 37 
========================================================  =================  ================= 
 Statutory operating profit                                             204                203 
========================================================  =================  ================= 
 
   3.    Adjustments between underlying profit and statutory profit (Unaudited) 
 
                                   Six months  Six months  Six months  Six months  Six months  Six months 
                                        ended       ended       ended       ended       ended       ended 
                                     31 March    31 March    31 March    31 March    31 March    31 March 
                                         2022        2022        2022        2021        2021        2021 
                                                     Non-                                Non- 
                                    Recurring   recurring       Total   Recurring   recurring       Total 
                                         GBPm        GBPm        GBPm        GBPm        GBPm        GBPm 
=================================  ==========  ==========  ==========  ==========  ==========  ========== 
M&A activity-related 
 items 
Amortisation of acquired 
 intangibles                               18           -          18          16           -          16 
Gain on disposal of subsidiaries            -        (49)        (49)           -        (41)        (41) 
Adjustment to acquired                      1           -           1           -           -           - 
 deferred income 
Other M&A activity-related 
 items                                     15           -          15           9           -           9 
Other items 
Reversal of restructuring 
 costs                                      -         (6)         (6)           -         (5)         (5) 
Office relocation                           -           -           -           -           9           9 
Total adjustments made 
 to operating profit                       34        (55)        (21)          25        (37)        (12) 
=================================  ==========  ==========  ==========  ==========  ==========  ========== 
Foreign currency movements                  1           -           1           -           -           - 
 on intercompany balances 
=================================  ==========  ==========  ==========  ==========  ==========  ========== 
Total adjustments made 
 to profit before income 
 tax                                       35        (55)        (20)          25        (37)        (12) 
=================================  ==========  ==========  ==========  ==========  ==========  ========== 
 

Recurring items

Acquired intangibles are assets which have previously been recognised as part of business combinations or similar transactions. These assets are predominantly brands, customer relationships and technology rights.

The adjustment to acquired deferred income represents the additional revenue that would have been recorded in the period had deferred income not been reduced as part of the purchase price allocation adjustment made for business combinations.

Other M&A activity-related items relate to advisory, legal, accounting, valuation and other professional or consulting services which are related to M&A activity as well as acquisition-related remuneration, directly attributable integration costs and any required provision for future selling costs for assets held for sale.

Foreign currency movements on intercompany balances of GBP1m (six months ended 31 March 2021: GBPnil) occur due to retranslation of unhedged intercompany balances other than those where settlement is not planned or likely in the foreseeable future.

Non-recurring items

Net credit in respect of non-recurring items amounted to GBP55m (six months ended 31 March 2021: credit of GBP37m).

The gain on disposal of subsidiaries of GBP49m relates to the disposal of the Group's Swiss business. Further details can be found in note 11. In the prior period, the GBP41m net gain on disposal of subsidiaries related to the disposal of the Group's Polish business.

Reversal of restructuring costs of GBP6m primarily relates to unutilised provisions recognised in the prior financial year following the implementation of a business transformation plan to rebalance investment towards the Group's strategic priorities and simplify the business. The reversal is a result of fewer colleagues leaving the business as they were redeployed into other roles. In the prior period, the GBP5m reversal of restructuring costs related to unutilised Professional Service provisions created in the financial year FY20.

In the prior period, office relocation costs of GBP9m relate to the incremental depreciation charge resulting from accelerated depreciation on the UK North Park office in advance of the relocation to Cobalt Business Park.

   4.    Income tax expense 

The effective tax rate on statutory profit before tax was 20% (six months ended 31 March 2021: 23%) whilst the effective tax rate on underlying profit before tax for continuing operations was 24% (six months ended 31 March 2021: 25%). The effective income tax rate represents the best estimate of the Group's average effective income tax rate expected for the full year, applied to the profit before income tax for the six months ended 31 March 2022.

The difference between the underlying and statutory rate for the six months ended 31 March 2022 primarily reflects a non-taxable accounting net gain on disposals. See note 3.

   5.    Dividends 
 
                                                                                   Year 
                                                             Six months 
                                                                  ended           ended 
                                              Six months 
                                                   ended       31 March    30 September 
                                                31 March 
                                                    2022           2021            2021 
                                             (Unaudited)    (Unaudited)       (Audited) 
                                                    GBPm           GBPm            GBPm 
=========================================  =============  =============  ============== 
Final dividend paid for the year ended 
 30 September 2020 of 11.32p per share                 -            124             124 
 
Interim dividend paid for the year ended 
 30 September 2021 of 6.05p per share                  -              -              65 
 
Final dividend paid for the year ended 
 30 September 2021 of 11.63p per share               119              -               - 
=========================================  =============  =============  ============== 
                                                     119            124             189 
=========================================  =============  =============  ============== 
 

The interim dividend of 6.3p per share will be paid on 17 June 2022 to shareholders on the register at the close of business on 27 May 2022. The Company's distributable reserves are sufficient to support the payment of this dividend.

   6.    Earnings per share 

Basic earnings per share is calculated by dividing the profit for the period attributable to owners of the parent by the weighted average number of ordinary shares in issue during the period, excluding those held as treasury shares, which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. The Group has one class of dilutive potential ordinary shares. They are share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period.

 
                                                Underlying 
                            Underlying     as reported Six          Underlying           Statutory           Statutory 
                      Six months ended        months ended    Six months ended    Six months ended    Six months ended 
                              31 March            31 March            31 March            31 March            31 March 
                                  2022                2021                2021                2022                2021 
                           (Unaudited)         (Unaudited)         (Unaudited)         (Unaudited)         (Unaudited) 
==================  ==================  ==================  ==================  ==================  ================== 
 Earnings 
 attributable to 
 owners of the 
 parent 
 Profit for the 
  period                           129                 133                 130                 152                 146 
==================  ==================  ==================  ==================  ==================  ================== 
 
 Number of shares 
 (millions) 
 Weighted average 
  number of shares               1,023               1,094               1,094               1,023               1,094 
 Dilutive effects 
  of shares                         10                   8                   8                  10                   8 
==================  ==================  ==================  ==================  ==================  ================== 
                                 1,033               1,102               1,102               1,033               1,102 
==================  ==================  ==================  ==================  ==================  ================== 
 Earnings per 
 share 
 attributable to 
 owners of the 
 parent (pence) 
 Basic earnings 
  per share                      12.62               12.14               11.91               14.84               13.29 
==================  ==================  ==================  ==================  ==================  ================== 
 Diluted earnings 
  per share                      12.49               12.05               11.82               14.68               13.19 
------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 
 
                                                                              Six months ended  Six months ended 
                                                                                      31 March          31 March 
                                                                                          2022              2021 
                                                                                   (Unaudited)       (Unaudited) 
Reconciliation of earnings                                                                GBPm              GBPm 
============================================================================  ================  ================ 
Underlying earnings attributable to owners of the parent                                   129               130 
Impact of movement in foreign currency exchange rates                                        -                 3 
============================================================================  ================  ================ 
Underlying earnings attributable to owners of the parent (as reported)                     129               133 
                                                                              ================  ================ 
Office relocation                                                                            -               (9) 
Reversal of restructuring costs                                                              6                 5 
Amortisation of acquired intangible assets                                                (18)              (16) 
Adjustment to acquired deferred income                                                     (1)                 - 
Foreign currency movements on intercompany balances                                        (1)                 - 
Other M&A related items                                                                   (15)               (9) 
Gain on disposal of subsidiaries                                                            49                41 
Taxation on adjustments                                                                      3                 1 
Net adjustments                                                                             23                13 
============================================================================  ================  ================ 
Earnings - statutory profit for period attributable to owners of the parent                152               146 
============================================================================  ================  ================ 
 
   7.    Non-current assets 
 
                                                                         Other 
                                                                    intangible              Property, 
                                                       Goodwill         assets    plant and equipment          Total 
                                                    (Unaudited)    (Unaudited)            (Unaudited)    (Unaudited) 
                                                           GBPm           GBPm                   GBPm           GBPm 
================================================  =============  =============  =====================  ============= 
 Opening net book amount at 1 October 2021                1,877            190                    164          2,231 
 Additions                                                    -              4                      8             12 
 Acquisition of subsidiary*                                 176            110                      2            288 
 Depreciation, amortisation and other movements               -           (24)                   (21)           (45) 
 Exchange movement                                           29              1                      2             32 
 Closing net book amount at 31 March 2022                 2,082            281                    155          2,518 
================================================  =============  =============  =====================  ============= 
 

*Assets acquired as part of the acquisition of Brightpearl. See note 11.

 
                                                                         Other      Property, 
                                                                    intangible      plant and 
                                                       Goodwill         assets      equipment          Total 
                                                    (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited) 
                                                           GBPm           GBPm           GBPm           GBPm 
================================================  =============  =============  =============  ============= 
 Opening net book amount at 1 October 2020                1,962            212            173          2,347 
 Additions                                                    -              8             25             33 
 Disposal of subsidiary*                                    (9)              -              -            (9) 
 Transfer to held for sale**                                (4)              -              -            (4) 
 Depreciation, amortisation and other movements               -           (22)           (27)           (49) 
 Exchange movement                                        (106)           (10)            (6)          (122) 
 Closing net book amount at 31 March 2021                 1,843            188            165          2,196 
================================================  =============  =============  =============  ============= 
 

*Finalisation of the sale of the Group's Polish business during the six months ended 31 March 2021.

**Reassessment of goodwill allocated to held for sale during the six months ended 31 March 2021.

Goodwill is not subject to amortisation but is tested for impairment annually and whenever there is any indication of impairment. At 31 March 2022, there were no indicators of impairment to goodwill.

Details of the 2021 goodwill impairment review are provided in the 2021 consolidated financial statements.

   8.    Financial instruments 

For financial assets and liabilities, the carrying amount approximates the fair value of the instruments, with the exception of US senior loan notes, sterling denominated bond notes and bank loans.

The fair value of the sterling denominated bond notes is determined by reference to quoted market prices and therefore can be considered as a level 1 fair value as defined within IFRS 13.

The fair value of US senior loan notes is determined by reference to interest rate movements on the US $ private placement market and therefore can be considered as a level 2 fair value as defined within IFRS 13.

The fair value of bank loans is determined using a discounted cash flow valuation technique calculated at prevailing interest rates, and therefore can be considered as a level 3 fair value as defined within IFRS 13.

The respective book and fair values of bank loans, bond notes and loan notes are included in the table below.

 
                                              At 31 March 2022      At 30 September 2021              At 31 March 2021 
                                  ============================  ========================  ============================ 
                                     Book Value     Fair Value   Book Value   Fair Value     Book Value     Fair Value 
                                    (Unaudited)    (Unaudited)    (Audited)    (Audited)    (Unaudited)    (Unaudited) 
                                           GBPm           GBPm         GBPm         GBPm           GBPm           GBPm 
================================  =============  =============  ===========  ===========  =============  ============= 
 Long term-borrowings (excluding 
  lease liabilities)                    (1,045)        (1,006)        (667)        (682)          (659)          (674) 
                                                                ===========  =========== 
 Short term-borrowings 
  (excluding lease liabilities)            (25)           (26)         (47)         (48)           (47)           (48) 
================================  =============  =============  ===========  ===========  =============  ============= 
 
   9.    Ordinary shares and share premium 
 
                                                                            Ordinary 
                                                            Number of         Shares   Share premium          Total 
                                                               shares    (Unaudited)     (Unaudited)    (Unaudited) 
                                                          (Unaudited)           GBPm            GBPm           GBPm 
=====================================================  ==============  =============  ==============  ============= 
 At 31 March 2022                                       1,100,789,295             12             548            560 
=====================================================  ==============  =============  ==============  ============= 
 At 1 October 2020, 31 March 2021 and 1 October 2021    1,120,789,295             12             548            560 
=====================================================  ==============  =============  ==============  ============= 
 

In the current period, the Group transferred 4,897,923 (six months ended 31 March 2021: 3,776,601 ) of treasury shares to employees in order to satisfy vested awards.

During the period, the Group bought back a total of 27,979,129 Ordinary shares, held as treasury shares, as part of the non-discretionary share buyback programme entered into on 6 September 2021. In September 2021, 11,868,392 Ordinary shares were purchased under this share buyback programme. Total consideration for this share buyback programme was GBP300m, of which GBP249m was paid in the six months ended 31 March 2022.

In the six months ended 31 March 2021, the Group repurchased 8,750,986 Ordinary shares, held as treasury shares as part of the non-discretionary share buyback programme entered into on 4 March 2021. The total consideration for those shares purchased in the prior period amounted to GBP52m, of which GBP47m had been paid as at 31 March 2021.

At 31 March 2022 the Group held 82,667,429 (31 March 2021: 32,818,496) treasury shares. In the current period, the Group cancelled 20,000,000 treasury shares which reduced the number of Ordinary shares to 1,100,789,295 at 31 March 2022.

10. Cash flow and net debt

 
                                                                                   Six months ended   Six months ended 
                                                                                           31 March           31 March 
                                                                                               2022               2021 
                                                                                        (Unaudited)        (Unaudited) 
                                                                                               GBPm               GBPm 
================================================================================  =================  ================= 
 Statutory operating profit                                                                     204                203 
 Recurring and non-recurring items                                                             (21)               (12) 
================================================================================  =================  ================= 
 Underlying operating profit (as reported)                                                      183                191 
 Depreciation/amortisation/impairment/profit on disposal of non-current 
  assets/non-cash items                                                                          26                 22 
 Share-based payments                                                                            16                 16 
 Net changes in working capital                                                                   3                 58 
 Net capital expenditure                                                                        (8)               (32) 
================================================================================  =================  ================= 
 Underlying cash flow from operations                                                           220                255 
 Net interest paid                                                                             (14)               (11) 
 Income tax paid                                                                               (27)               (46) 
 Non-recurring items                                                                           (12)                (6) 
 Exchange movement                                                                                -                (2) 
================================================================================  =================  ================= 
 Free cash flow                                                                                 167                190 
 Net debt at 1 October                                                                        (247)              (151) 
 Disposal of subsidiaries or similar transactions, net of cash and lease 
  liabilities disposed                                                                           38                 61 
 Acquisition of subsidiaries or similar transactions, net of cash acquired. and 
 lease liabilities 
 recognised*                                                                                  (223)                  - 
 Acquisitions and disposals related items                                                      (14)               (16) 
 Purchases of equity investments                                                                  -               (19) 
 Proceeds on settlement of non-current asset                                                      -                  3 
 Dividends paid to owners of the parent                                                       (119)              (124) 
 Proceeds from issuance of treasury shares                                                        3                  2 
 New leases                                                                                     (4)                (4) 
 Share buyback programme                                                                      (249)               (47) 
 Exchange movement                                                                              (3)                 10 
 Other                                                                                            1                (1) 
 Net debt at 31 March                                                                         (650)               (96) 
================================================================================  =================  ================= 
 

*Includes GBP13m scheduled cash payment in relation to the prior year acquisition of GoProposal Ltd, for which the consideration was recorded as a liability as at 30 September 2021.

 
                                                              Six months ended   Six months ended 
                                                                      31 March           31 March 
                                                                          2022               2021 
                                                                   (Unaudited)        (Unaudited) 
                                                                          GBPm               GBPm 
===========================================================  =================  ================= 
 Underlying cash flow from operations                                      220                255 
 Net capital expenditure                                                     8                 32 
 Recurring and non-recurring cash items                                   (36)               (22) 
 Other adjustments including foreign exchange translations                   1                  1 
===========================================================  =================  ================= 
 Statutory cash flow from operations                                       193                266 
-----------------------------------------------------------  -----------------  ----------------- 
 
 
                                                                                                                                                                                                 At 
                                                                       At                                                                                                             31 March 2022 
                                                           1 October 2021   Cash flow   Acquisition of subsidiary   Disposal of subsidiary   Non-cash movement   Exchange movement      (Unaudited) 
  Analysis of change in net debt (inclusive of leases)               GBPm        GBPm                        GBPm                     GBPm                GBPm                GBPm             GBPm 
=======================================================  ================  ==========  ==========================  =======================  ==================  ==================  =============== 
Cash and cash equivalents                                             553        (53)                          11                        -                   -                   4              515 
Cash amounts included in held for sale                                 14           -                           -                     (14)                   -                   -                - 
=======================================================  ================  ==========  ==========================  =======================  ==================  ==================  =============== 
Cash, cash equivalents and bank overdrafts including 
 cash as held for sale                                                567        (53)                          11                     (14)                   -                   4              515 
 
Liabilities arising from financing activities 
Loans due within one year                                            (47)          46                           -                        -                (25)                   1             (25) 
Loans due after more than one year                                  (667)       (396)                           -                        -                  25                 (7)          (1,045) 
Lease liabilities due within one year                                (18)           9                           -                        -                 (8)                   -             (17) 
Lease liabilities after more than one year                           (82)           -                           -                        -                   4                   -             (78) 
Lease liabilities included in held for sale                             -           -                           -                        1                   -                 (1)                - 
                                                                    (814)       (341)                           -                        1                 (4)                 (7)          (1,165) 
=======================================================  ================  ==========  ==========================  =======================  ==================  ==================  =============== 
 
Total                                                               (247)       (394)                          11                     (13)                 (4)                 (3)            (650) 
=======================================================  ================  ==========  ==========================  =======================  ==================  ==================  =============== 
 

The Group's debt is sourced from a syndicated multi-currency Revolving Credit Facility ("RCF"), US private placements ("USPP"), and sterling denominated bond notes ("bond notes").

The Group's RCF expires in February 2025 with facility levels of GBP682m (US$719m and GBP135m tranches). At 31 March 2022, GBPnil (31 March 2021: GBPnil) of the multi-currency revolving debt facility was drawn. During the period, GBP120m was drawn down from the GBP tranche of the RCF, and subsequently repaid.

Total USPP loan notes at 31 March 2022 were GBP330m (US$400m and EUREUR30m) (31 March 2021: GBP362m, US$400m and EUREUR85m).

In February 2022, the Group issued bond notes for a nominal amount of GBP400m with an expiry date of February 2034. Net cash proceeds from the issuance were GBP396m.

During the prior period, the Group issued bond notes for a nominal amount of GBP350m with an expiry date of February 2031. Net cash proceeds from the issuance were GBP344m.

11. Acquisitions and disposals

Acquisitions made during the period

On 17 January 2022, the Group obtained control of Brightpearl Limited ("Brightpearl") by acquiring the remaining share capital for cash consideration of GBP221m, bringing the Group's ownership interest to 100%. In January 2021, the Group had acquired a 17% minority interest in Brightpearl for GBP17m.

Brightpearl was acquired to deliver retail operations management capabilities and provides a cloud native multichannel retail management system for the retail and ecommerce vertical, helping to accelerate the Group's strategy for growth.

 
                                                                                 Total 
                                                                           (Unaudited) 
 Summary of acquisition                                                           GBPm 
===================================================  ================================= 
 Cash consideration                                                                221 
 Fair value of previously held minority interest                                    47 
===================================================  ================================= 
 Acquisition-date fair value of consideration                                      268 
 Provisional fair value of identifiable net assets                                (92) 
 Goodwill                                                                          176 
===================================================  ================================= 
 

The fair value of the previously held minority interest has been included in the determination of goodwill, with the gain on revaluation of GBP30m recognised in other comprehensive income in line with Sage's accounting policy.

 
                                                                                       Total 
                                                                                 (Unaudited) 
 Provisional fair value of identifiable net assets acquired                             GBPm 
============================================================  ============================== 
 Intangible assets                                                                       110 
 Deferred income                                                                         (4) 
 Deferred tax liability                                                                 (20) 
 Other net assets                                                                          6 
============================================================  ============================== 
 Provisional fair value of identifiable net assets acquired                               92 
 Goodwill                                                                                176 
============================================================  ============================== 
 Total consideration                                                                     268 
============================================================  ============================== 
 

In line with IFRS 3, the initial accounting for the acquisition of Brightpearl is provisional. Adjustments to provisional amounts (notably fair value adjustments) will be made within the permitted measurement period where they reflect new information obtained about facts and circumstances that were in existence at the acquisition date. It is expected that the acquisition accounting will be finalised by 30 September 2022.

A summary of acquired intangible assets is set out below:

 
                                  Valuation   Useful economic life 
                                (Unaudited)                (years) 
 Acquired intangible assets            GBPm 
============================  =============  ===================== 
 Customer relationships                  35                9 to 15 
 Technology                              75                      8 
============================  =============  ===================== 
 Acquired intangible assets             110 
============================  =============  ===================== 
 

Acquired goodwill of GBP176m comprises the fair value of the acquired control premium, workforce in place and the expected synergies. The goodwill has been allocated to the Group's geographic CGUs where the underlying benefit arising from the acquisition is expected to be realised. This is predominantly within the UK & Ireland and North America regions. No goodwill is expected to be deductible for tax purposes.

The outflow of cash and cash equivalents on the acquisition is as follows:

 
                                             Total 
                                       (Unaudited) 
                                              GBPm 
===================================  ============= 
 Cash consideration                          (221) 
 Cash and cash equivalent acquired              11 
===================================  ============= 
 Net cash outflow                            (210) 
===================================  ============= 
 

Costs of GBP5m relating to the acquisition have been included in selling and administrative expenses classified as other M&A activity-related items within recurring adjustments between underlying and statutory results. These costs relate to advisory, legal and other professional services. See note 3.

Arrangements have been put in place for retention payments to remunerate employees of Brightpearl for future services. The costs of these arrangements will be recognised in future periods over the retention period. The amount recognised to date of GBP3m is included in selling and administrative expenses in the consolidated income statement as other M&A activity-related items.

The consolidated income statement includes revenue of GBP4m and loss after tax of GBP5m reported by Brightpearl for the period since the acquisition date. The loss after tax includes GBP3m of acquisition related costs.

The revenue of the Group would have increased by GBP8m and profit after tax would have decreased by GBP16m if Brightpearl had been acquired at the start of the financial year and included in the Group for the six months ended 31 March 2022. The loss after tax includes GBP10m of acquisition related costs.

Disposals and discontinued operations

Disposals made during the period

On 30 November 2021, the Group completed the sale of its Swiss business for gross consideration of GBP54m. The business was held for sale at 31 March 2021 and 30 September 2021. The gain on disposal is calculated as follows:

 
                                                                                                       Total 
                                                                                                 (Unaudited) 
                                                                                                        GBPm 
=============================================================================================  ============= 
 Cash consideration                                                                                       54 
 Gross consideration                                                                                      54 
 Transaction costs                                                                                       (3) 
=============================================================================================  ============= 
 Net consideration                                                                                        51 
 Net assets disposed                                                                                    (15) 
 Cumulative foreign exchange differences reclassified from other comprehensive income to the 
  income statement                                                                                        13 
=============================================================================================  ============= 
 Gain on disposal                                                                                         49 
=============================================================================================  ============= 
 

Net assets disposed comprise:

 
                                          Total 
                                    (Unaudited) 
                                           GBPm 
================================  ============= 
 Goodwill                                    10 
 Property, plant and equipment                2 
 Customer acquisition costs                   1 
 Trade and other receivables                  1 
 Cash and cash equivalents                   14 
================================  ============= 
 Total assets                                28 
 
 Trade and other payables                   (3) 
 Current income tax liabilities             (1) 
 Borrowings                                 (1) 
 Post-employment benefits                   (2) 
 Deferred income                            (6) 
 Total liabilities                         (13) 
================================  ============= 
 Net assets                                  15 
================================  ============= 
 

The gain on disposal of GBP49m is reported within continuing operations, as a non-recurring adjustment between underlying and statutory results.

Prior to the disposal, the Swiss business formed part of the Group's International - Central and Southern Europe reporting segment.

The net inflow of cash and cash equivalents on the disposal is calculated as follows:

 
                                                                                 Total 
                                                                           (Unaudited) 
                                                                                  GBPm 
=================================================  =================================== 
 Cash consideration                                                                 54 
 Transaction costs                                                                 (3) 
=================================================  =================================== 
 Net consideration received                                                         51 
 Cash disposed                                                                    (14) 
 Inflow of cash and cash equivalents on disposal                                    37 
=================================================  =================================== 
 

During the six-month period ended 31 March 2021, the Group completed the sale of its Polish business. Net assets divested were GBP19m, and the transactions resulted in a net gain on disposal of GBP41m.

Discontinued operations and assets and liabilities held for sale

The Group had no discontinued operations during the six-month periods ended 31 March 2022 or 31 March 2021.

Assets held for sale at 31 March 2022 of GBP2m include one disposal group comprising the Group's payroll outsourcing business in South Africa, with a net book value of GBP2m. This business was subsequently sold on 4 April 2022.

Assets and liabilities held for sale at 30 September 2021 included the disposal group identified above, as well as the disposal group comprising the Group's businesses in Switzerland and the Group's North Park property in the UK. The Swiss business disposal group has been sold during the current period as discussed above. The sale of the Group's North park property completed in October 2021. No gain was recognised on disposal as the assets were sold for their residual value.

Assets and liabilities held for sale at 31 March 2021 included the two disposal groups identified above, as well as the Group's Australia and Asia Pacific business (excluding global products) ("Asia Pacific") which was subsequently sold in the previous year.

12. Related party transactions

The Group's related parties are its subsidiary undertakings and its key management personnel, which comprises the Group's Executive Leadership Team members and the Non-executive Directors. Transactions and outstanding balances between the parent and its subsidiaries within the Group, and between those subsidiaries, have been eliminated on consolidation and are not disclosed in this note.

 
                                              Six months ended   Six months ended 
                                                      31 March           31 March 
                                                          2022               2021 
                                                   (Unaudited)        (Unaudited) 
 Key management compensation                              GBPm               GBPm 
===========================================  =================  ================= 
 Salaries and short-term employee benefits                   5                  4 
 
 Post-employment benefits                                    -                  - 
 Share-based payments                                        2                  1 
===========================================  =================  ================= 
                                                             7                  5 
===========================================  =================  ================= 
 

Key management personnel are deemed to be members of the Executive Leadership Team (previously known as the Executive Committee), as defined in the Group's Annual Report and Accounts 2021 and the Non-executive Directors. Since the signing of the Group's Annual Report and Accounts 2021, the following changes to the Executive Leadership Team have taken place:

-- Walid Abu-Hadba, in his role as Chief Product Officer, has been appointed to the Executive Leadership Team, with effect from 1 January 2022;

-- Aziz Benmalek, in his role as Interim President - North America, has been appointed to the Executive Leadership Team with effect from 1 March 2022;

-- Amy Lawson, in her role as Chief Corporate Affairs Officer, has been appointed to the Executive Leadership Team, with effect from 1 March 2022;

-- Derk Bleeker remains on the Executive Leadership Team, in a new role as President - Europe Middle East Africa (EMEA), with effect from 1 March 2022;

-- Lee Perkins has left his role as Chief Operating Officer, with effect from 31 March 2022; and

-- Sue Goble has retired from her role as Chief Customer Success officer, with effect from 31 March 2022.

There have been no other changes to the composition of the Executive Leadership Team.

13. Events after the balance sheet date

On 12 May 2022, the Group acquired a 100% controlling interest in Futrli Limited ("Futrli"). Total cash consideration for the acquisition is GBP20m, comprising both upfront and deferred consideration. Because the acquisition occurred subsequent to 31 March 2022, the results of Futrli are not included in our financial statements for the six months ended 31 March 2022. Due to the timing of the acquisition, the acquisition accounting has not yet been completed.

Managing Risk

Through our risk process, Sage is able to effectively manage our strategic, operational, commercial, compliance, change and emerging risks. This helps us to deliver our strategic objectives and goals through risk informed decisions. The Board's role is to maintain oversight of the key principal and business risks, together with ensuring that the appropriate committees are managing the risks effectively. Additionally, the Board reviews the effectiveness of our risk management approach and challenges our leaders to articulate their risk management strategies.

Sage continually assesses its principal risks to ensure alignment to our strategy and consideration of where Sage is currently on its journey to transforming into a digital business.

By monitoring risk and performance indicators related to this strategy, principal risk owners focus on those metrics that signal current performance, as well as any emerging risks and issues. The principal risks reflect our five strategic priorities. The management and mitigation actions described below reflect the principal risks and build on those actions previously reported in our FY21 Annual Report.

 
 PRINCIPAL RISK   RISK CONTEXT                                           MANAGEMENT AND MITIGATION 
 Understanding    Improving Risk Environment 
 Customer Needs 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    As Sage continues to 
 anticipate,       transform its business                                  *    Brand health surveys to provide an understanding of 
 understand        and brand, understanding                                     customer perception of the Sage brand and its 
 and deliver       of how to attract customers                                  products, used to inform and enhance our market 
 against           whilst retaining its                                         offerings. 
 the               existing customers and 
 capabilities      migrating those who 
 and               are ready to move to                                    *    A Market and Competitive Intelligence team to provide 
 experiences       the cloud is essential.                                      insights that Sage uses to win in the market. 
 our current       This requires a deep 
 and               and continuous flow 
 future            of insights supported                                   *    Utilisation of customer activity and churn data, to 
 customers         by processes and systems.                                    understand their appetite for products and features. 
 need in a         By understanding the 
 timely            needs of our customers, 
 manner, they      Sage will differentiate                                 *    Master repository of customer MI by region and by 
 will              itself from competitors,                                     product which supports the identification of trends 
 find              build compelling value                                       such as time in product, seasonal trends and usage. 
 alternative       propositions and offers, 
 solution          leverage key drivers 
 providers.        to identify opportunities,                              *    Customer Advisory Boards, Customer Design Sessions 
 Strategic         influence product and                                        and NPS detractor call-back channels are used to 
 alignment         process roadmaps, decrease                                   constantly gather information on customer needs. 
 :                 churn and drive more 
 Expand medium     effective revenue generation. 
 beyond 
 financials. 
 Build the 
 small 
 business 
 engine. 
 Learn and 
 disrupt. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Execution of     Improving Risk Environment 
 Product 
 Strategy 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    We need to execute, 
 deliver the       in a sound and methodical                               *    Refined product strategy in line with our FY22 
 capabilities      manner at pace, a prioritised                                strategic objectives and ambitions, based on our 
 and               product strategy that                                        market understanding and customer expectations. 
 experiences       continues to simplify 
 outlined in       our product portfolio, 
 our               focuses on strategic                                    *    New product organisation and governance model to 
 product           cloud--native offerings,                                     improve the way we build and launch products. 
 strategy          and builds innovative 
 in a timely       and differentiated capabilities 
 manner,           and solutions.                                          *    A migration framework in key countries to support our 
 we will not                                                                    customers in their journey to the cloud. 
 meet 
 the needs of 
 our                                                                       *    Sage Intacct is now available in the UK, Australia 
 customers or                                                                   and South Africa as part of our internationalisation 
 our                                                                            programme. 
 commercial 
 goals. 
 Strategic                                                                 *    Improved proposition for Accountants, including the 
 alignment                                                                      acquisition of GoProposal. 
 : 
 Scaling Sage 
 Intacct.                                                                  *    Improved proposition for the retail and wholesale 
 Build the                                                                      sector, through the acquisition of Brightpearl. 
 small 
 business 
 engine.                                                                   *    Enhanced governance and planning framework aligned to 
 Scale the                                                                      market objectives. 
 network. 
 Learn and 
 disrupt.                                                                  *    Strengthened product design governance to ensure 
 Expand medium                                                                  product development is always driven by our 
 beyond                                                                         understanding of our ability to penetrate key 
 financials.                                                                    markets. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Innovation       Stable Risk Environment 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    We must be able to rapidly 
 identify and      deploy new innovations                                  *    Continued focus on Artificial Intelligence (AI)/ 
 leverage          to our customers and                                         Machine Learning development, coupled with a drive to 
 disruptive        partners by introducing                                      improve how to exploit data to provide better 
 technologies      technologies, services,                                      management insight to our customers. 
 and invest in     or new ways of working. 
 modern            Innovation requires 
 development       us to address how we                                    *    Leveraging Sage ID and the Sage Business Cloud to 
 practices and     drive change and transformation                              deliver a unified and highly personalised experience 
 tools in a        across our people, processes                                 for each customer across the entirety of the customer 
 timely            and technology, and                                          experience and Sage Digital Network. 
 manner, we        how we differentiate 
 will              our products and drive 
 not meet the      customer efficiencies.                                  *    Enhanced, consistent digital experience for all Sage 
 needs                                                                          Business Cloud users through the Sage Design System. 
 of our 
 customers 
 or our                                                                    *    Objectives integrated into the planning of each 
 commercial                                                                     segment and region to drive AI Transformation, Sage 
 goals.                                                                         Business Cloud adoption and innovation of product 
 Strategic                                                                      features based on identified needs of customers. 
 alignment 
 : 
 Learn and                                                                 *    Strategic acquisition and collaboration with partners 
 disrupt.                                                                       to complement and enable accelerated innovation. 
 
 
                                                                           *    Focused colleague engagement to accelerate innovation 
                                                                                across the organisation through a Continuous 
                                                                                Innovation Community. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Route to         Stable Risk Environment 
 Market 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    We have a blend of channels 
 deliver a         to communicate with                                    *    Market data and intelligence is used to support 
 bespoke           our current and potential                                   decision regarding the best routes to market. 
 blend of route    customers and ensure 
 to market         our customers receive 
 channels          the right information                                  *    Dedicated colleagues are in place to support partners, 
 in each           on the right products                                       and to help manage the growth of targeted channels. 
 country,          and services at the 
 based upon        right time. Our sales 
 common            channels include selling                               *    Sale processes are targeted and configured by region 
 components, we    directly to customers                                       for key customer segments and verticals. 
 will not be       through digital and 
 able              telephony channels, 
 to efficiently    via our accountant network                             *    Sage.com has been enhanced to provide clearer user 
 deliver the       and through partners,                                       journeys to enable customer conversion. 
 right             valued added resellers 
 capabilities      (VARs) and Independent 
 and               Software Vendors (ISVs).                               *    Onboarding of new partners to support acceleration in 
 experiences to    We use these channels                                       Cloud Native product utilisation. 
 our current       to maximise our marketing 
 and               and customer engagement 
 future            activities. This can                                   *    New routes to market are being opened through 
 customers.        shorten our sales cycle                                     partnerships with payment and banking technology 
 Strategic         and ensure that customer                                    providers. 
 alignment         retention is improved. 
 : 
 Scale Sage                                                               *    Centre of Excellence created to support our Indirect 
 Intacct.                                                                      Sales and Third--Party approach. 
 Build the 
 small 
 business 
 network. 
 Scale the 
 network. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Customer         Stable Risk Environment 
 Success 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    We must maintain a sharp 
 effectively       focus on the relationships                              *    Battlecards for key products in all countries, 
 identify          we have with our customers,                                  setting out the strengths and weaknesses of 
 and deliver       constantly focusing                                          competitors and their products. 
 ongoing           on delivering the products, 
 value to our      services and experiences 
 customers         our customers need to                                   *    A data-driven Customer Success Framework to enhance 
 by focusing on    be successful. If we                                         the customer experience and ensure that Sage is 
 their needs       do not do this, they                                         better positioned to meet the current and future 
 over              will likely find another                                     needs of the customer. 
 the lifetime      provider who does give 
 of                them these things. Conversely, 
 their customer    if we do these things                                   *    Customer Journey mapping and mapping of the five core 
 journey, we       well these customers                                         customer processes to ensure appropriate strategy 
 will              will stay with Sage,                                         alignment and alignment to target operating model. 
 not be able to    increasing their lifetime 
 achieve           value, becoming our 
 sustainable       greatest marketing advocates.                           *    'Customer for life' roadmaps, detailing how products 
 growth through    Whilst Sage is known                                         fit together, any interdependencies, and migration 
 renewal.          for its quality customer                                     pathways for current and potential customers. 
 Strategic         support, this area requires 
 alignment         constant, proactive 
 :                 focus. By helping customers                             *    Continuous Net Promoter Score (NPS) surveying allows 
 Scale Sage        to recognise and fully                                       Sage to identify customer challenges rapidly and 
 Intacct.          realise the value of                                         respond in a timely manner to emerging trends. 
 Expand medium     Sage's products we can 
 beyond            help increase the value 
 financials.       of these relationships                                  *    A specialised Procurement function supports the 
 Build the         over time and reduce                                         business with the selection of strategic third-party 
 small             the likelihood of customer                                   suppliers and negotiation of contracts. 
 business          loss. By aligning our 
 engine.           people, processes and 
 Learn and         technology with this 
 disrupt.          focus in mind, all Sage 
                   colleagues can help 
                   support our customers 
                   to be successful and 
                   in turn drive increased 
                   financial performance. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Third Party      Stable Risk Environment 
 Reliance 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we do not     Sage places reliance 
 embed             on third-party providers                                *    Centre of Excellence for our Indirect Sales and 
 our partners      to support the delivery                                      Third-Party Partners. 
 as                of our products to our 
 an integral       customers through the 
 and               provision of cloud native                               *    Dedicated colleagues in place to support partners, 
 aligned part      products.                                                    and to help manage the growth of targeted channels. 
 of                Sage also has an extensive 
 Sage's            network of sales partners 
 go-to-market      critical to our success                                 *    Standardised implementation plans for Sage products 
 strategy in a     in the market, and suppliers                                 that facilitate efficient partner implementation. 
 timely manner,    upon whom it places 
 we will fail      reliance. 
 to                Any interruption in                                     *    Managed growth of the API estate, including enhanced 
 deliver the       these services or relationships                              product development that enables access by 
 right             could have a profound                                        third-party API developers. 
 capabilities      impact on Sage's reputation 
 and               in the market and could 
 experiences to    result in significant                                   *    Enhanced third-party management framework, to support 
 our customers.    financial liabilities                                        closer alignment and oversight of third-party 
 Strategic         and losses.                                                  activities. 
 alignment 
 : 
 Scale Sage 
 Intacct. 
 Build the 
 small 
 business 
 engine. 
 Scale the 
 network. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 
 People and       Stable Risk Environment 
 Performance 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    As we evolve our priorities, 
 ensure we have    the capacity, knowledge                                 *    Extensive focus on hiring channels to ensure we are 
 engaged           and leadership skills                                        attractive in the market through our enhanced 
 colleagues        we need will continue                                        employee value proposition, enhanced presence through 
 with the          to change. Sage will                                         social media such as Glassdoor, Comparably, Twitter, 
 critical          not only need to attract                                     LinkedIn, and Facebook. 
 skills,           the talent and experience 
 capabilities      we will need to help 
 and capacity      navigate this change,                                   *    Hiring practices focused on the skills we need in 
 we                we will also need to                                         balance with organisational costs, supported by a 
 need to           provide an environment                                       methodology for upskilling and building capability in 
 deliver           where colleagues can                                         the long term from within the organisation. 
 on our            develop to meet these 
 strategy,         new expectations, an 
 we will not be    environment where everyone                              *    Reward mechanisms designed to incentivise and drive 
 successful.       can perform at their                                         the right behaviour with a focus on ensuring fair and 
 Strategic         very best.                                                   equitable pay in all markets. 
 alignment         By empowering colleagues 
 :                 and leaders to make 
 Scale Sage        decisions, be innovative,                               *    Focused development of our leaders to ensure they 
 Intacct.          and be bold in delivering                                    create the environment which enables colleagues to 
 Expand medium     on our commitments,                                          thrive and perform at their very best. 
 beyond            Sage will be able to 
 financials.       create an attractive 
 Build the         working environment.                                    *    Placing colleagues (and customers) at the heart of 
 small             By addressing drivers                                        our response to the Covid-19 pandemic, including the 
 business          of colleague voluntary                                       availability of 'Headspace', our 'Always Listening' 
 engine.           attrition, and embracing                                     portal and 'Your Voice' Hub. 
 Scale the         the values of successful 
 network.          technology companies, 
 Learn and         Sage can increase colleague 
 disrupt.          engagement and create 
                   an aligned high performing 
                   team. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Culture          Improving Risk Environment 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we do not     The development of a 
 fully             shared behavioural competency                           *    Integration of Values and Behaviours into all 
 empower our       that encourages colleagues                                   colleague priorities including talent attraction, 
 colleagues        to always do the right                                       selection, onboarding as well as performance 
 and enable        thing, put customers                                         management. 
 them              at the heart of business 
 to take           and drive innovation 
 accountability    is critical in Sage's                                   *    All colleagues are actively encouraged to take up to 
 in line with      success.                                                     five paid Sage Foundation days each year, to support 
 our               Devolution of decision                                       charities and provide philanthropic support to the 
 shared Values     making, and the acceptance                                   community. 
 and               of accountability for 
 Behaviours,       these decisions, will 
 we will be        need to go hand in hand                                 *    Six commitments to diversity, equity and inclusion 
 challenged        as the organisation                                          (DEI) including zero tolerance to discrimination, 
 to maintain a     develops and sustains                                        equal chance to everyone, inclusive culture, removing 
 culture that      its shared Values and                                        barriers, DEI education, and a DEI strategy to ensure 
 meets             Behaviours, and fosters                                      we deliver on our commitments. 
 Sage's            a culture that provides 
 business          customers a rich digital 
 ambitions.        environment.                                            *    A three-year DEI strategy focuses on building diverse 
 Strategic         Sage will also need                                          teams, an equitable culture, and fostering inclusive 
 alignment         to create a culture                                          leadership. This strategy is supported by measurable 
 :                 of empowered leaders                                         plans and metrics to track progress. 
 Scale Sage        that supports the development 
 Intacct.          of ideas, and that provides 
 Expand medium     colleagues with a safe                                  *    Code of Conduct communicated to all colleagues, and 
 beyond            environment that allows                                      subject to certification every two years. 
 financials.       for honest disclosures 
 Build the         and discussions. Such 
 small             a trusting and empowered                                *    Core eLearning modules rolled out across Sage, with 
 business          environment can help                                         annual refresher training. 
 engine.           sustain innovation, 
 Scale the         enhance customer success 
 network.          and drive the engagement                                *    Whistleblowing and Incident Reporting mechanisms in 
 Learn and         that results in increased                                    place to allow issues to be formally reported and 
 disrupt.          market share.                                                investigated 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Cyber Security   Improving Risk Environment 
 and Data 
 Privacy 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    Information is the life 
 responsibly       blood of a digital business                             *    Multi-year cyber security programmes in IT and 
 collect,          - protecting the confidentiality,                            products to ensure Sage is driving continuous 
 process and       integrity and accessibility                                  improvement and cyber risk reduction across 
 store             of this data is table                                        technology, business processes and culture. 
 data, together    stakes for a data---riven 
 with ensuring     business, and failure 
 an appropriate    to do so can have significant                           *    Accountability within both IT and Product for all 
 standard of       financial and regulatory                                     internal and external data being processed by Sage. 
 cyber             consequences in the                                          The Chief Information Security Officer oversees 
 security          General Data Protection                                      information security, with a network of Information 
 across            Regulation (GDPR) era.                                       Security Officers that directly support the business. 
 the business,     In addition, we also 
 we will not       need to use our data 
 meet              efficiently and effectively                             *    The Chief Data Protection Officer oversees 
 our regulatory    to drive improved business                                   information protection. 
 obligations,      performance. 
 and 
 will lose the                                                             *    Formal certification schemes maintained, across the 
 trust of our                                                                   business, and include internal and external 
 stakeholders.                                                                  validation of compliance. 
 Strategic 
 alignment 
 :                                                                         *    All colleagues are required to undertake awareness 
 Scale Sage                                                                     training for information management and data 
 Intacct.                                                                       protection, with a focus on the GDPR requirements. 
 Build the 
 small 
 business                                                                  *    An Information Security Risk Management Methodology 
 engine.                                                                        is deployed to provide objective risk information on 
 Scale the                                                                      our assets and systems. 
 network. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Data Strategy    Stable Risk Environment 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    Data is central to the 
 identify,         Sage strategy to deliver                                *    Data strategy across customer, product, and 
 maximise          our ambition of a digital                                    enterprise data to support the delivery of customer 
 and utilise       network. The strategy                                        value and solve customer problems, including the use 
 the               is underpinned by our                                        of enhanced Artificial Intelligence / Machine 
 value of our      ability to innovate                                          Learning capabilities. 
 data              and develop solutions 
 and customer      to enhance customer 
 data              propositions, improve                                   *    Global data function created to drive focus and 
 in a timely       insight and decision                                         alignment across the organisation. 
 manner            making and create new 
 in accordance     business models and 
 with our data     ecosystems. Successful                                  *    Focus on developing Sage ID and Service Fabric to 
 principles, we    ability to use data                                          enable better data accuracy and insight. 
 will not be       will accelerate our 
 able              growth and will be a 
 to realise the    key driver in helping                                   *    Plan to increase digital network participation, which 
 full potential    customers transform                                          will contribute to more data to support the delivery 
 of our assets.    how they run and build                                       of real customer value and solve real customer 
                   their businesses.                                            problems. 
 Strategic 
 alignment 
 :                                                                         *    Customer consent service deployed to manage compliant 
 Scale Sage                                                                     usage of data assets. 
 Intacct. 
 Build the 
 small                                                                     *    Governance policies, processes and tooling to enhance 
 business                                                                       and manage the quality and consistency of our data. 
 engine. 
 Scale the 
 network. 
 Learn and 
 disrupt. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Live Services    Stable Risk Environment 
  Management 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    As Sage transitions 
 maintain a        to a digital company,                                   *    Accountability across product owners, underpinned by 
 reliable,         we continue to focus                                         ongoing risk assessments and continuous improvement 
 scalable and      on scaling our current                                       projects. 
 secure            and future platform 
 live services     services environment 
 environments,     in a robust, agile,                                     *    Formal onboarding process including ongoing 
 we will be        and speedy manner to                                         management in Portfolio Management processes. 
 unable            ensure the delivery 
 to deliver the    of a consistent and 
 consistent        robust cloud platform                                   *    Incident and problem management change processes 
 cloud             and associated digital                                       adhered to for all products and services. 
 experience        network. 
 expected          Sage must provide the 
 by our            right infrastructure                                    *    Service level objectives including uptime, 
 customers.        and operations for all                                       responsiveness, and mean time to repair objectives. 
 Strategic         of our customer products, 
 alignment         a hosting platform together 
 :                 with the governance                                     *    An established forum for continuous assessment and 
 Scale Sage        to ensure optimal service                                    refinement. 
 Intacct.          availability, performance, 
 Build the         security protection 
 small             and restoration (if                                     *    Defined Real Time Demand Management processes and 
 business          required).                                                   controls and a Disaster Recovery Capability and 
 engine.                                                                        operational resilience models. 
 Scale the 
 network. 
                                                                           *    A governance framework to optimise operational cost 
                                                                                base in line with key metrics. 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 Environmental,   Stable Risk Environment 
 Social and 
 Governance 
                 -------------------------------------------------------------------------------------------------------------------- 
 If we fail to    We are committed to 
 fully and        investing in education,                                  *    Sage's Sustainability and Society Strategy was 
 continually      technology, and the                                           launched in 2021, focusing on three pillars: Tech for 
 respond to the   environment to give                                           Good, Fuel for Business, Protect the Planet. 
 range of         individuals, small and 
 environmental,   medium businesses (SMBs), 
 social and       and our planet the opportunity                           *    Underpinning the strategy is a robust 
 governance       to thrive. Our goal                                           cross-functional governance framework. 
 related          is to use our technology, 
 opportunities    time and experience 
 and risks we     to back a generation                                     *    Tracking tools in place to enable horizon scanning 
 may              of diverse, sustainable                                       and to track the Sustainability and Society 
 fail to          businesses.                                                   Strategy's impact. 
 deliver          The potential benefits 
 positive         of investing in our 
 change           ESG strategy include:                                    *    The Sage Foundation, established in 2015, remains 
 to social and     *    Increased customer engagement.                          focused on the areas of education, employment, and 
 environmental                                                                  entrepreneurship via the contribution of time, 
 issues and                                                                     investment, and capability. 
 damage            *    Better use of resources, for example lower ene 
 the confidence   rgy and 
 of our                 water consumption and associated costs.            *    Multiple projects designed to respond to specific ESG 
 stakeholders.                                                                  risks, for example, a project focused on TCFD 
 Strategic                                                                      readiness including risk and opportunities mapping 
 alignment         *    Enhanced stakeholder trust.                             and climate scenario analysis. 
 : 
 Build the 
 small             *    Improved ability to attract and retain talent,     *    Further detail on the mitigation of this risk is 
 business               enabling colleagues to perform at their best.           described in our separate Sustainability and Society 
 engine.                                                                        Report, available at: 
 Learn and                                                                      www.sage.com/en-gb/company/sustainability-and-society 
 disrupt.          *    Stronger community relations.                           . 
                 -----------------------------------------------------  ------------------------------------------------------------- 
 

Statement of Directors' Responsibilities

The condensed consolidated half-yearly financial report for the six months ended 31 March 2022 includes the following responsibility statement.

Each of the Directors confirms that, to the best of their knowledge:

-- the Group consolidated condensed financial statements, which have been prepared in accordance with IAS34, "Interim Financial Reporting" as adopted by the UK and as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

-- the Directors' report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The Directors also confirm that the Interim Management Report herein includes a fair review of information required by 4.2.8R of the DTR (Disclosure and Transparency Rules).

The Directors of The Sage Group plc are consistent with those listed in the Group's 2021 Annual Report and Accounts. A list of current directors is maintained on the Group's website: www.sage.com .

On behalf of the Board

J Howell

Chief Financial Officer

12 May 2022

Independent review report to The Sage Group plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2022 which comprises Consolidated income statement, Consolidated statement of comprehensive income, Consolidated balance sheet, Consolidated statement of changes in equity, Consolidated statement of cash flows and the related explanatory notes 1 to 13. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the Group will be prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

12 May 2022

Notes: [1] The maintenance and integrity of the Sage Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the web site. [2] Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

[1] Please see Appendix 1 for guidance on the usage and definitions of the Alternative Performance Measures.

[2] Organic revenue and operating profit for H1 21 have been restated to aid comparability with H1 22. The definition of organic measures can be found in Appendix 1 with a full reconciliation of organic, underlying and statutory measures on page 7. Unless otherwise specified, all references to revenue, profit and margins are on an organic basis.

[3] The revenue portfolio breakdown is provided as supplementary information to illustrate the differences in the evolution and composition of key parts of our product portfolio. These portfolios do not represent Operating Segments as defined under IFRS 8.

[4] Revenue from subscription customers using products that are part of Sage's strategic future product portfolio, where that product runs in a cloud-based environment enabling customers to access full, updated functionality at any time, from any location, over the Internet.

[5] Revenue from subscription customers using products that are part of Sage's strategic future product portfolio, where that product is normally deployed on-premise, and for which a substantial part of the value proposition is linked to functionality delivered in or through the cloud.

[6] Revenue from customers using products that are part of, or that management believe have a clear pathway to, Sage Business Cloud.

[7] Revenue from customers using products for which management does not currently envisage a path to Sage Business Cloud, either because the product addresses a segment outside Sage's core focus, or due to the complexity and expense involved in a migration.

[8] Underlying and organic revenue and profit measures are defined in Appendix 1.

[9] Recurring and non-recurring items are detailed in the paragraph below and in note 3 of the financial statements.

[10] Impact of retranslating H1 21 results at H1 22 average rates.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR SFEFMEEESELI

(END) Dow Jones Newswires

May 13, 2022 02:00 ET (06:00 GMT)

Sage (LSE:SGE)
Historical Stock Chart
Von Sep 2022 bis Okt 2022 Click Here for more Sage Charts.
Sage (LSE:SGE)
Historical Stock Chart
Von Okt 2021 bis Okt 2022 Click Here for more Sage Charts.