Africa: double-digit growth performance maintained

Global Headlines

• Achieved organic revenue growth of 6% (FY14: 5%);
• Increased organic recurring revenue by 9% (FY14: 7%), with software subscription the primary driver;
• Software subscription contracts grown to over 690,000 (FY14: 450,000) and achieved 28% growth in the annualised value of the software subscriber base to £344m (FY14: £268m);
• Increased the number of paying subscriptions for Sage One by over 100% to 173,000 (FY14: 86,000), and in the UK & Ireland, surpassed 100,000 paying subscriptions in November 2015.

Sage International Headlines

• Organic revenue grew strongly in the International region (Brazil, Africa, Australia, Middle East and Asia) at 14% (FY14: 11%).
• Double-digit growth performance maintained in Africa:
  • Organic revenue of £92m for Africa represents sustained organic growth of 16% (FY14 15%), supported by double-digit organic growth in Processing and Recurring revenue.
  • The Enterprise market in Africa continues to perform well, with all key products delivering double digit growth.
  • The contribution of revenue from sales outside of South Africa supported the result, representing 15% of total Africa revenue and growing 22% organically (FY14: 22%).
• 33% revenue growth for Sage X3 for Sage International.

Business review

• Completed wide-ranging review of the business, including products, organisational structure, operating model and policies, in order to prepare for the next phase of long-term sustainable growth;
• Simplified product categories to Growth and Heritage, with 87% of Research and Development investment focussed on the Growth category;  
• Initiated organisational transformation to realise at least £50m of annualised run-rate cost savings by the end of FY16 to be reinvested for growth;
• Refined revenue category definitions and amended the application of the revenue recognition policy to certain products enabling stakeholders to clearly and transparently track performance.  None of the changes impact cash generation and the financial summary below is included for comparability to previous announcements. 

Further progress with global products

• Sage One now available in 14 countries following launches in Australia, Brazil and Malaysia;
• Launched Sage Live, our global cloud solution for Small & Medium Businesses, via newly established Customer Business Centres (CBCs);
• Delivered 11% organic revenue growth for Sage X3, with growth of 22% outside of France and launched X3 Cloud. 

Earnings improved

• Increased the organic operating margin to 27.1% (FY14: 26.5%), despite incurring initial costs of transformation;
• Underlying cash conversion of 106%, achieved through continued disciplined capital management, generating free cash flow of £296m (FY14: £229m) and supporting the 8% increase of the full year dividend to 13.10p. 

Ivan Epstein, President, Sage International said: ‘We are pleased to have met the Group financial targets set three years ago and to be showing strong momentum with our global transformation programme. In the International region, we’ve seen solid organic revenue growth and we’re particularly pleased to see Sage One launched and gaining traction in Australia. There has also been robust performance into Africa with double-digit organic growth. We look forward to sustained progress across the region in FY16.’