Financial highlights - higher organic revenue growth momentum maintained
- Organic revenue growth of 5% maintains the higher growth established in H2 2013 and represents good acceleration against the same period last year (H1 2013: 3%);
- Growth in software subscription revenue has been the main driver behind a 7% increase in organic recurring revenue (H1 2013: 6%). Recurring revenue now accounts for 72% of Group revenue;
- Organic SSRS revenue growth in North America and AAMEA was offset by continued contraction in Europe, leaving SSRS revenue flat overall (H1 2013: 3% contraction); and
- The increase in organic operating profit margin to 27.4% primarily reflects a reduction in overheads that previously supported disposed non-core products, alongside disciplined cost management and revenue growth. This has returned organic operating margin to the underlying trend of 27%.
Strategic highlights - good progress with software subscription transition
- Annualised value of software subscriber base increased 24% to £201m (H1 2013: £162m), representing good growth that builds on a significant base of over 400,000 software subscription contracts across the Group;
- High quality nature of software subscription revenue evidenced by the increase in the recurring contract renewal rate to 83% (H1 2013: 81%);
- Strong market position established in the UK & Ireland with Sage One, our cloud solution for smaller businesses, where paying subscriptions in that market have almost trebled to 33,000 over the last 12 months;
- 7% organic revenue growth for Sage ERP X3 (H1 2013: 8%), our global ERP solution for mid-market customers, with good growth of 22% outside of France; and
- 15% increase in the number of integrated payments customers to 15,200 (H1 2013: 13,200), with good adoption in the UK, building on a more established base in North America.
Capital structure and dividend
With consistent and strong cash flows, the Group retains considerable financial flexibility going forward. The Board's main strategic priority remains an acceleration of growth, both organically and through targeted acquisitions, and investment will support that aim. This growth underpins the Board's sustainable progressive dividend policy, with surplus capital being returned to shareholders from time to time.
Consistent with this policy, the Board has declared a 6% increase in the interim dividend per share for the period to 4.12p per share (H1 2013: 3.88p per share on a post-share consolidation basis). The H1 2013 interim dividend was 3.69p per share on a pre-share consolidation basis.
Guy Berruyer, Chief Executive Officer, said: "This is a good set of results, with the increase in organic recurring revenue growth demonstrating that the strategy is working well. Sage is changing, with greater focus, investment in technology to address customer needs and the move to subscription all delivering results. We remain confident that the good first half performance will be carried through to the full year, and of achieving our target of 6% organic revenue growth in 2015."
