Annual Report and Accounts 2022
Adapt.
Innovate.
Grow.
Introduction
Helping everyone flow
Sage exists to knock down barriers so everyone can thrive, starting
with the millions of small and mid-sized businesses (SMBs) 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.
Purpose
Strategic priorities
To knock down barriers
so everyone can thrive
We have five strategic priorities,
which underpin our purpose and
help us to achieve our ambition.
Ambition
To be the trusted
network for small and
mid-sized businesses—
an integrated experience
of digital and
human connections
Scale Sage Intacct
See pages 26 and 27
Expand medium
beyond financials
See pages 28 and 29
Build the small
business engine
See pages 30 and 31
Scale the network
See pages 32 and 33
Learn and disrupt
See pages 34 and 35
Sage has introduced millions
of customers to cloud technology
and software—helping them to
Adapt, Innovate and Grow.
Stakeholder promises
Values
Colleagues
We are committed to people, driven by
innovation, energising everyone to make
a difference.
See page 70
Customers
We build every experience with human
insight and ingenuity.
See page 72
Society
We tackle digital inequality, economic
inequality and the climate crisis, using
our time, technology and experience.
See page 74
Shareholders
We target sustainable growth in
shareholder value.
See page 76
We do the right thing
Human
We make connections with customers,
partners and colleagues, through
empathy and care.
Bold
We are curious, courageous,
ambitious and creative.
Simplify
We strip away complexity.
Trust
We deliver our promises to customers,
colleagues, society and shareholders.
1
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report In this report
Contents
12
Chief Executive’s review
Our CEO Steve Hare talks about Sage’s
strategic progress and future priorities.
16
Our products
Discover more about our award-winning
solutions and how our products help
customers flow.
44
Sustainability and Society
Learn about our Sustainability and
Society strategy and why it is critical
in helping everyone flow.
82
Financial review
Read a detailed summary of the FY22
financial results for the Group.
2
The Sage Group plc. Annual Report and Accounts 2022 Chair’s statement
Highlights
CEO’s review
Business model
Investment case
Strategic Report
4
At a glance
6
8
10
12
16
Our products
20 Market review
22
24
36
38
44
50
68
69
78
82
90
96
Financial review
TCFD disclosure
Our people
Risk management
Strategic priorities
Our key performance indicators
Sustainability and Society
Non-financial information statement
Stakeholder engagement
Section 172(1) statement
Principal risks and uncertainties
Governance Report
107 Chair’s introduction to Governance
110 Our leadership
114 Corporate governance report
148 Directors’ Remuneration Report
182 Directors’ Report
Financial Statements
189
Independent auditor’s report to the members
of The Sage Group plc.
Consolidated financial statements
200
207 Notes to the consolidated financial statements
280 Company financial statements
Shareholder Information
289 Glossary
292 Shareholder information
3
24
Strategic priorities
Read about how we are driving growth
through our five strategic priorities.
106
Governance Report
Find out how our approach to effective
corporate governance helps drive
long-term value for all our stakeholders.
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information At a glance
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.
Our global reach
Sage serves millions of customers around the world:
North
America
US and Canada
42%
of total organic revenue
Northern
Europe
UK and Ireland
22%
of total organic revenue
International
France, Iberia,
Central Europe,
Africa and APAC
36%
of total organic revenue
FY22 total organic revenue £1,924m
4
The Sage Group plc. Annual Report and Accounts 2022 A global leader
ESG credentials
Countries::
19
Colleagues globally:
11,574
MSCI:
AAA
Glassdoor score:
4.2
Recurring revenue:
Sage Foundation volunteering hours:
95%1
149,409
Accelerating growth
in Annualised Recurring
Revenue (ARR)
Sage Business Cloud
penetration: moving
customers to the cloud
FY22
FY21
FY20
12%
FY22
75%
8%
5%
FY21
FY20
67%
60%
ARR growth has accelerated through the acquisition of new customers and the successful migration of existing
customers to subscription and Sage Business Cloud, our portfolio of unified cloud native and cloud connected
solutions for SMBs. See pages 16 to 19 for further details on our products.
1. As a percentage of total organic revenue.
5
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Highlights
Our year in numbers
Financial highlights
Organic total revenue
Statutory revenue
2022
2021
£1,924m
£1,809m
2022
2021
£1,947m
£1,846m
Organic total revenue of £1,924m grew by 6%, reflecting
a 9% increase in recurring revenue, partly offset by a decline
in Other revenue (SSRS), in line with our strategy.
Statutory revenue of £1,947m grew by 5%, reflecting good levels
of organic growth in all regions, together with a foreign exchange
tailwind, partly offset by disposals.
Organic operating profit
Statutory operating profit
2022
2021
£383m
£353m
2022
2021
£367m
£373m
Organic operating profit grew by 8% to £383m, with margin
increasing to 19.9% from 19.5% in FY21, driven by operating
efficiencies as we focus on scaling the Group.
Statutory operating profit decreased by 2% to £367m due
to changes in recurring and non-recurring items, including
higher net gains in the prior year from disposals.
Underlying basic EPS
Dividend
2022
2021
25.74p
23.79p
2022
2021
18.40p
17.68p
Underlying basic EPS increased by 8% to 25.74p, reflecting the
increase in underlying operating profit and a reduction in the
number of shares outstanding following the Group’s recent
share buyback programme.
The total dividend for the year increased by 4% to 18.40p,
reflecting continued strong business performance and
cash generation.
About our non-GAAP measures and why we use them
Throughout the Strategic Report we quote two kinds of non-GAAP measure: underlying and organic. Underlying measures are
adjusted to exclude items which in management’s judgement need to be disclosed separately by virtue of their size, nature
or frequency to aid understanding of the performance for the year or comparability between periods.
Organic measures allow management and investors to understand the like-for-like performance of the business.
Full definitions of underlying and organic can be found within note 2 of the financial statements. Reconciliations of statutory
revenue, operating profit and basic earnings per share to their underlying and organic equivalents are in the Financial review
starting on page 82.
6
The Sage Group plc. Annual Report and Accounts 2022
Non-financial highlights
Sage Foundation to raise $5 million by 2030
Young people trained in STEM skills
$1m
$5m
4,750
14,000
During FY22, a bold new fundraising challenge was set for Sage
colleagues, their families and our partners—to raise $5m for
good causes by 2030. We have raised $1m towards our target.
Sage has a commitment to train more than 14,000 young
people in Science, Technology, Engineering and Mathematics
(STEM) skills.
13,871
Entrepreneurs supported in developing
countries to grow sustainable
businesses.
Net Zero
Targeting Net Zero by 2040 across
our Scope 1, 2 and 3 emissions, with
a mid-term goal to halve our emissions
by 20301.
Sage Foundation
Our volunteering, fundraising, grant-giving, skills
training and other charitable and community work
all come together under the global banner of Sage
Foundation. It is an integral part of our culture at Sage,
and is regularly cited by colleagues as one of the reasons
they enjoy working here.
Sage Foundation gives every colleague five days of paid
volunteering leave every year to spend time knocking
down barriers locally, supporting causes that are
important to them. Through strategic partnerships,
Sage Foundation provides support to underrepresented
groups to grow sustainable businesses, giving young
people access to STEM skills and knocking down barriers
to entrepreneurship in the developing world.
1. Against a 2019 baseline.
7
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
Investment case
Building
sustainable
shareholder value
Sage provides millions of
customers around the world
with solutions that remove
friction from their accounting,
people, and payroll processes.
Our solutions deliver business
insights and give them
a competitive edge.
The breadth of our business
provides us with unique visibility
into small and mid-sized businesses
globally, enabling Sage to better
understand and serve our customers’
needs. Our scale and experience
form the foundations for our
sustainable growth, and are core
to our investment case.
8
The Sage Group plc. Annual Report and Accounts 2022 Unique assets and capabilities
• We serve a strong and loyal customer base through
Sage Business Cloud. These 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.
The trusted network for SMBs
• Sage connects businesses with their customers,
employees, suppliers, banks and governments through
its digital network. We have a unique advantage in
building this network, given the size of our customer
base and our reputation as a trusted adviser.
• Our people differentiate Sage through their
• Our digital network is here today, enabling
dedicated and hands-on approach to solving customer
problems, ensuring our technology and service retain
a human touch.
connections between participants through the
services we offer. These services save customers time
and money, removing friction from their processes.
•
Our well-established partner network of accountants
and resellers, together with a growing ecosystem of
Independent Software Vendors (ISVs), enhances our
capabilities and reach.
• By scaling the network, we will accelerate the
network effect through increased participation,
leveraging insights to deliver more innovative
AI-powered services.
Investing to scale the business
• We are significantly accelerating revenue growth,
Financially robust position
• We have a high-quality revenue base which is
supported by continuing investment, and expanding
our organic operating margin.
95% recurring in nature, with 75% from software
subscription contracts.
•
Through our focus on innovation, we are enriching
our cloud solutions with AI and machine learning
capabilities, making them easier to use and more
compelling for customers.
• By delivering on our ambition to be the trusted
network for SMBs, we are focused on scaling the Group,
and growing revenue and earnings in absolute terms.
• Sage is a highly cash-generative, low capital intensity
business, and has achieved underlying cash conversion
of over 100% for each of the last four years.
• We balance the need for organic and inorganic
investment with returns to shareholders through
dividends, supplemented by share repurchases
where appropriate.
9
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report Chair’s statement
Consistent
execution driving
growth
Andrew Duff
Chair
Strategic framework for growth
At the beginning of the year, the Board adopted a new
strategic framework, governed by our purpose—to knock
down barriers so everyone can thrive. This purpose
underpins everything we do, in full consideration of our
customers, colleagues, society and shareholders alike, and
recognises the broader economic and social significance
of a thriving SMB sector. SMBs are the heartbeat of all
the economies in which we operate—and their resilience
and resourcefulness during a period of great challenge
and hardship over recent years are testament to the
commitment and ambition of their owners and employees.
Serving their needs is central to the sustainability of the
Group, as we create solutions that make our customers’ lives
easier, while fostering a culture of innovation and inclusion.
At the heart of the Group’s strategy is our ambition—
to be the trusted network for SMBs. The digital network we
are building connects organisations with their employees,
suppliers, customers and regulatory authorities, delivering
value by creating experiences that connect, remove
friction and fuel confidence. Sage has made strong
progress in FY22 towards realising this ambition, through
a disciplined focus on five strategic priorities. You can
read more about our progress on pages 24 to 35.
Financial performance
Our FY22 financial results demonstrate the sustainable
growth engine that we are building at Sage. Organic
recurring revenue grew by 9%, while annualised recurring
revenue (ARR) increased by 12%. The principal driver
continues to be the success of Sage Business Cloud, with
recurring revenue growth of 24%. Within this, cloud native
solutions performed particularly well, growing by 41%.
The quality of the Group’s revenue has continued to improve,
with recurring revenue now representing 95% of organic total
revenue, and subscription revenue representing 75%.
Organic operating margin increased from 19.5% to 19.9%,
trending upwards following a period of additional
strategic investment to accelerate growth. Underlying
basic earnings per share increased by 8% to 25.74p.
Introduction
FY22 was an important year for Sage, as sustained
investment in the business led to a marked acceleration
in revenue growth as well as organic margin expansion.
A sharp focus on strategic execution helped the Group
achieve a number of significant milestones, including
the successful launch of our refreshed brand, the
introduction of new cloud native solutions across our
markets, and several strategically important acquisitions
and partnerships. With Sage’s disposal programme now
complete, the Board is committed to scaling the Group,
and we have made substantial progress in FY22, in terms
of both revenue and earnings.
As I reflect back on my first year as Chair, our colleagues
should justly be proud of all they have achieved, despite
the disruption of Covid-19 and increasing economic and
geopolitical uncertainty. Their energy, enthusiasm and
commitment are evident in all my interactions across
the Group and are the engine for Sage’s success.
10
The Sage Group plc. Annual Report and Accounts 2022 The Group remains strongly cash generative with
underlying cash conversion of 107%. During the year,
Sage completed the acquisition of several complementary
businesses, including Brightpearl, Futrli and Lockstep,
which broaden the Group’s capabilities and reach while
accelerating the development of the digital network.
Sage also concluded the share buyback programme
that was started in FY21, totalling £600m and reflecting
the proceeds from recent disposals. In line with our
progressive dividend policy, the Group is proposing
to increase the total dividend for the year by 4% to 18.40p.
The Board in FY22
Strong corporate governance is central to the Board’s
philosophy and approach, and we maintain the highest
standards across the Group, as set out in the UK Corporate
Governance Code 2018.
It has been pleasing to return to a more normal working
environment, with the Board able to meet in person,
helping us to engage effectively with one another and
with key stakeholders during the year. Engagement
activities included visiting the Group’s operations in key
jurisdictions and participating in talent review sessions
and colleague roundtables. As Chair, I participated in
several such activities, including meeting Sage colleagues
from around the world as well as other stakeholders to gain
a deeper understanding of our business and culture.
In July 2022, Irana Wasti decided to step down from the
Board after two years as a Non-executive Director to
pursue another executive opportunity. We are grateful
to Irana for the valuable contribution, knowledge and
industry expertise that she brought. I strongly believe
that diversity in all its forms leads to more productive and
balanced Board discussions, and maintaining a diverse
and inclusive Board is a key priority. This includes
meeting our targets for gender diversity, while at the
same time ensuring that all Board appointments are made
on merit. In line with this objective, the Nomination
Committee initiated a search for two Non-executive
Directors during the year. The Board was delighted to
recently announce that Maggie Chan Jones will join as
a new Non-executive Director on 1 December 2022. Maggie
brings with her deep international marketing and brand
experience, which will highly complement the skills we
already have on the Board. We look forward to announcing
progress on the remaining Non-executive Director search
in the near future.
During the year, we appointed our fourth Board Associate,
Derek Taylor, Senior VP Client Services and Sales for Sage
Intacct, who is based in San Jose. The Board Associate
role continues to serve as a powerful means for the Board
to hear the voice of colleagues, as well as generating
a greater understanding of the role of the Board
throughout the business.
Our people and values
Key to the success of Sage is our collaborative team of
people and the culture they embody. Doing the right thing
for our customers, colleagues and society is something
we are proud of, and we believe this directly contributes
to our growth. During the year we updated our values to
complement our evolved strategic framework and focus
on the attributes of being bold, being human and acting
with empathy, simplifying where possible to strip away
complexity, and developing trust among our stakeholders.
Sage has continued to be recognised as a great place to
work based on colleague feedback, receiving awards from
organisations including Comparably in the US, Glassdoor
in the UK and Kununu in Germany.
Sustainability and society
Our Sustainability and Society strategy places a strong
emphasis on our Environmental, Social and Governance
(ESG) responsibilities, supporting sustainable and
inclusive economic growth so everyone can thrive. The
Sage Foundation plays an important role in implementing
this strategy by mobilising Sage colleagues, their families
and our partners, to donate their time and resources to
support charitable and environmental causes.
To help tackle the climate crisis, Sage is targeting net
zero carbon emissions by 2040, with a 50% reduction by
2030, against a 2019 baseline. During the year the Group
submitted its Science-Based Target for validation, made
progress towards its Scope 1 and 2 emissions reduction,
and engaged with suppliers to reduce Scope 3 emissions.
As signatories to the Task Force on Climate-related
Financial Disclosures, we are committed to providing
consistent information to our stakeholders, and our TCFD
disclosure can be found starting on page 50.
Our ESG performance has been recognised by third
parties, with MSCI upgrading Sage to “AAA” ESG rating in
May 2022, indicating that we are a leader in the software
and services industry in managing the most significant
ESG risks and opportunities.
Looking forward to FY23 and beyond
On behalf of the Board, I would like to thank all of our
colleagues who have continued to work tirelessly to help
our customers and our communities thrive. The external
environment remains uncertain but, as we enter FY23, we
will remain resolutely focused on executing our strategy,
building on the strong position and good momentum we
achieved this year. I firmly believe that our clear purpose,
great talent and strong culture, combined with ongoing
investment across the business, will enable us to continue
to deliver sustainable growth for the benefit of
shareholders and all our stakeholders.
The Board’s statement in respect of matters
pertaining to section 172(1) of the Companies Act
2006 is set out on page 78.
Further insight into the activities of the Board
for FY22 can be found on page 121.
Andrew Duff
Chair
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The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information CEO’s review
Q&A
Giving people
building business
the confidence
to flow
Steve Hare
Chief Executive
Our success reflects the significant investment we’ve
made over the last few years, particularly in sales &
marketing, technology and innovation. This investment
has enhanced our product offering, while ensuring we have
strong distribution channels in place to drive growth.
During the year, we launched new cloud solutions across
our markets, driving further growth across Sage Business
Cloud. We refreshed our brand, positively repositioning
Sage in the eyes of customers and bringing Sage to new
audiences. And we welcomed several new businesses
and solutions to the Sage family through acquisitions,
providing us with valuable new capabilities.
Finally, through partnerships with the likes of
The BOSS Network, Kiva and ACE, we knocked down
barriers for thousands of entrepreneurs in
underrepresented communities.
I am proud of the Group’s achievements in FY22, and
would like to thank our colleagues and all our partners—
including accountants, resellers and ISVs—for everything
they have done to help our customers and communities
navigate the challenging economic environment and
deliver a very successful year for Sage.
Q How did Sage perform financially In FY22?
Sage achieved organic recurring revenue growth
of 9% to £1,824m, underpinned by a 24% increase in Sage
Business Cloud revenue to £1,261m. Regionally, North
America increased recurring revenue by 14% to £779m,
driven by Sage Intacct and cloud connected solutions, while
Northern Europe grew recurring revenue by 7% to £419m,
largely through a strong cloud native performance. In our
International region, recurring revenue increased by 6% to
£626m, reflecting growth across the Sage Business Cloud
portfolio. Organic total revenue grew by 6% to £1,924m.
CEO Steve Hare discusses Sage’s achievements in
FY22 and the Group’s priorities in FY23 and beyond.
Q How would you summarise the past year
for Sage?
Sage has had a strong year. By living our purpose,
we’ve continued to knock down barriers for millions
of customers, providing solutions that make their lives
easier by simplifying processes, unlocking productivity
and building resilience.
As a result, we significantly accelerated revenue across
all key products and regions, with ARR exceeding £2bn
for the first time. We also expanded our organic operating
margin, and delivered strong cash flow. At the same time,
we made good progress across all our strategic
priorities—delivering innovation and adding greater
value for customers.
12
The Sage Group plc. Annual Report and Accounts 2022 Organic operating profit increased by 8% to £383m, while
organic operating margin was 20%, trending upwards on the
prior year driven by operating efficiencies.
Reflecting strong progress, 95% of the Group’s revenue is
now recurring, with 75% coming from software subscriptions.
Importantly, we’ve also continued to drive up Sage Business
Cloud penetration, by 8 percentage points in FY22 to 75%.
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.
• We are scaling Sage Intacct through multiple
initiatives targeting richer functionality and
a broader reach, leading Sage Intacct’s ARR to grow
by a third in the US and by 150% outside the US in FY22.
• Beyond financials, new solutions such as Sage People
Payroll in the US and UK, are also driving growth.
• Sage for Accountants, adopted by over 2,000 accountancy
practices in the UK since launch in November 2021,
is helping to build the small business engine.
Q What were the main drivers of growth?
Growth accelerated during the year in all regions,
driven by success across Sage Business Cloud, in
accounting, payroll and HR. Sage Intacct performed
outstandingly, with continued strength in the US together
with accelerating growth outside the US, where the
product has been more recently launched. Other cloud
native solutions such as Sage People, Sage Accounting
and Sage HR also performed strongly. In addition, our
cloud connected solutions Sage 200 and Sage 50 were
significant contributors to growth.
As a result, Sage’s ARR increased by 12% to £2,027m, with
growth balanced between new and existing customers.
This was underpinned by cloud native ARR growth of 38%
to £530m. In total, Sage has added £180m of ARR through
new customer acquisition over the last 12 months, up from
£140m a year earlier.
Across the Group, customer renewal rates have been
strong. Our renewal rate by value of 101% is ahead of
last year, reflecting a strong performance in customer
add-ons and targeted price rises, together with
a continued focus on customer retention.
Q How important is your purpose and ambition
in driving the Group’s success?
Our purpose and ambition are fundamental to our
strategy. Our purpose is to knock down barriers so
everyone can thrive, and it has never been more
important. 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.
Our ambition, which expresses how we serve our purpose,
is to be the trusted network for small and mid-sized
businesses. This digital network connects our customers
to the individuals and organisations they need to interact
with, providing features and services that facilitate the
smooth flow of work and money. We drive our ambition
through five strategic priorities.
Q Could you describe the progress you are making
towards your strategic priorities?
Our strategic priorities are the areas that have the greatest
impact on our growth, and we are making strong progress
towards all of them:
•
We are scaling the network by growing Sage Business
Cloud penetration and launching new cloud native
products. We will soon bring Sage Intacct to
continental Europe, starting with France.
• We are accelerating the pace of innovation, leveraging
the power and scale of the Sage digital network to
drive disruptive new technologies powered by AI and
machine learning.
You can read more about each of these strategic priorities
on pages 26 to 35.
Q What is the Sage digital network and why
is scaling it such a focus?
The Sage digital network connects organisations with
everyone that they need to connect with—for example
customers, suppliers, banks and governments—digitising
business relationships and removing friction from their
processes. The network enables Sage to develop and
provide innovative services and solutions, and scaling the
network accelerates this process as it creates a virtuous
circle, with more data enabling better services to deliver
richer experiences.
Our unique advantage in building this network is our size:
Sage already has millions of customers around the world
with the ability to connect to and participate in the
network, making it more attractive for others to join.
Our extensive partner and ISV ecosystem extends the
proposition and drives further scale by offering more
cloud-based services within the digital network.
Importantly, the digital network is here today and
is already benefiting customers. For example, our
banking service enables customers to automate bank
reconciliations through more than 11,000 financial
institutions. Our AI-driven outlier detection service
leverages the power of the network to increase the
accuracy of general ledger transactions. And we have
just launched an innovative service, also driven by AI, to
automate the accounts payable process, saving customers
time and money and creating trust by reducing human
error. We see a substantial opportunity in this area, and
we are excited both by our progress to date and the
potential that lies ahead of us.
13
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information CEO’s review continued
Our five strategic priorities
help drive the growth and long-
term success of the Group.
Accelerate the expansion
of Sage Intacct in existing
and new markets.
See pages 26 and 27
Broaden the value
proposition for
mid‑sized businesses.
See pages 28 and 29
Create a scalable
digital ‘engine’ to
acquire and serve small
business customers.
See pages 30 and 31
Increase participation
in Sage’s digital network
and accelerate the
network effect.
See pages 32 and 33
Build innovative solutions
underpinned by a culture
of continuous learning
and disruption.
See pages 34 and 35
Scale Sage
Intacct
Expand
medium
beyond
financials
Build the
small
business
engine
Scale the
network
Learn and
disrupt
14
“ We have consistently delivered
against our strategic priorities,
and growth is now accelerating.
Small and mid‑sized businesses
are adopting digital solutions
faster than ever, and Sage is ideally
positioned to support them.”
Q How has your refreshed brand been received?
I am delighted with the response from our
customers, partners and colleagues, as well as from the
wider market. Our refreshed brand is a symbol of change,
and it’s making a real difference to how Sage is perceived
and is supporting our growth.
The refreshed brand proposition reflects the simplicity
and confidence we deliver to customers through our
easy-to-use solutions, backed by expert human advice,
helping them make better and faster decisions.
To support the roll-out and drive brand awareness we have
partnered with major sporting competitions including
The Hundred cricket, Major League Baseball and the
Six Nations Rugby to deliver data-led insights to viewers
and fans. Recognising the success of the brand refresh,
Sage was shortlisted for the Marketing Week Awards Brand
of the Year 2022.
Q Can you talk about how Sage’s recent M&A
transactions benefit the Group?
Acquisitions complement our organic investments by
bringing new technology, capabilities and talent into
the Group, and accelerating our strategic progress:
• The acquisition of Brightpearl extends Sage Intacct’s
vertical reach, providing new capabilities in the retail
and ecommerce sector.
• Futrli is aimed at supporting SMBs and accountants to
better understand their current and future cash flow.
• To accelerate our digital network strategy, we acquired
Lockstep, adding accounts receivable automation
capabilities as well as infrastructure connecting
non-Sage customers to the Sage digital network.
• Spherics provides an innovative carbon accounting
solution which supports customers on their journey
to net zero.
In November 2021, we disposed of Sage’s business in
Switzerland, and in April 2022 we sold Sage’s South
African payroll outsourcing business, completing the
Group’s disposal programme.
The Sage Group plc. Annual Report and Accounts 2022 Q How does Sage foster an inclusive and
high-performance culture?
I am passionate about maintaining a vibrant, engaging
culture that enables colleagues as individuals, and the
Group as a whole, to thrive. Our values are key to this—they
were co-created with colleagues, and we took time during
the year to fully embed them within the business. They are
straightforward, easy-to-remember words and phrases—
trust, simplify, human, bold, we do the right thing—that
really do guide our everyday actions.
Our values also drive a high level of ambition and
accountability among colleagues. Underpinning this
is our focus on wellbeing, which helps us attract talent
and drives sustainable high performance. We provide
resources and support across four key pillars: healthy
mind, healthy body, healthy finances and healthy
communities. Our Flexible Human Work initiative gives
teams a clear framework for flexible working and
encourages an experimental, collaborative mindset—
so we can deliver the best outcomes for our customers
and achieve amazing things together.
Increasing diversity, equity, and inclusion (DEI) at Sage is
also a priority. For us to deliver on that purpose, we aim to
build a workforce that fully represents the many different
cultures, backgrounds and viewpoints, of our customers,
partners, and communities. Our focus remains squarely
on removing bias, driving equity, and increasing diversity
at all levels of our business.
Sage continues to be recognised as a great place to
work, receiving awards from organisations including
Comparably in the US, Glassdoor in the UK and Kununu
in Germany. Our Glassdoor score of 4.2 has improved
over the year and is in line with target.
Q What role does sustainability play at Sage?
Sage serves SMBs which form the foundation of
economic prosperity and support livelihoods around the
world. Through our Sustainability and Society strategy, we
aim to extend this support beyond customers, helping to
drive inclusive economic growth so everyone can thrive.
We are targeting net zero carbon emissions by 2040
and a 50% reduction by 2030, against a 2019 baseline.
During the year the Group submitted its Science-Based
Target for validation. We also recently acquired Spherics,
an innovative carbon accounting solution, supporting our
customers in their own net zero journeys.
As part of this, we partnered with the Association of
Chartered Certified Accountants and the International
Chamber of Commerce at COP26 to issue a report calling
on policymakers and large companies to standardise and
simplify carbon reporting and accounting for SMBs.
In May, MSCI upgraded Sage’s ESG rating to ‘AAA’, indicating
we are a leader in the software and services industry in
managing the most significant ESG risks and opportunities.
Q What should we expect in FY23 and beyond?
We have had a strong year in FY22, and we enter
FY23 with momentum. Our solutions are mission-critical
to SMBs globally, and by streamlining processes and
unlocking productivity, they help SMBs achieve more with
less. Looking ahead, our clear focus is to scale the Group,
driving sustainable growth in both revenue and earnings
through innovation powered by the Sage digital network.
For FY23, we expect organic recurring revenue growth to
be ahead of last year driven by strength in Sage Business
Cloud, and other revenue (SSRS) to decline in line with
our strategy. Operating margins are expected to trend
upwards in FY23 and beyond, as we focus on efficiently
scaling the Group.
While we are mindful of the macroeconomic uncertainties,
I am confident that our resilient business model together
with our strategy for delivering efficient growth will enable
us to create further long-term value for all our stakeholders.
Strategic Report
Our Strategic Report on pages 4 to 105 has been reviewed
and approved by the Board.
The Sage Foundation continues to play a vital role in this
strategy, creating opportunities for Sage colleagues, their
families and partners to donate 150,000 volunteer hours
and raise almost £1 million in FY22 to support good causes.
Steve Hare
Chief Executive
To help tackle economic inequality, we have supported
over 13,000 entrepreneurs in underserved communities
with loan funds and grants through our partnerships with
Kiva and The Boss Network. In addition, to address digital
inequality, we have helped develop STEM skills in almost
5,000 young people in deprived communities across
northeast England, through our partnership with the
Institution of Engineering and Technology.
15
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Our products
Award-winning solutions
Our solutions, whether cloud
native or cloud connected, enable
businesses to be more productive,
resilient and flexible. We are
continuously innovating to enrich
these solutions, not just adding
better features but providing
a network of applications and
services that make it easier for
customers to connect, collaborate
and do business.
Sage serves millions of small
and mid-sized customers
around the world
Sage Business Cloud
Sage Business Cloud is a portfolio of unified
cloud native and cloud connected solutions for
SMBs and accountants, enabling customers to be
more productive, resilient and flexible. This is
supported by a rich and robust marketplace of
ISV apps and emerging tech across AI, machine
learning and automation.
16
Small businesses
Small customers are typically owner-run businesses
with individuals or small teams responsible for finances
and human resources. They are looking to automate
accounting and compliance while managing costs and
cash flow. Our solutions are tailored to their specific
needs, enabling them to prioritise their time and stay
on top of evolving regulations.
Mid-sized businesses
Mid-sized customers are often scaling and transforming,
with functions structured around specialist teams and
departments. They are focused on growth and efficiency,
requiring insight and automation. Our solutions give
finance and HR professionals insights to help their
organisations analyse, strategise, and improve
forecasting, by streamlining their workflows.
Cloud connected solutions
Cloud connected solutions combine the
power and productivity of the desktop with the freedom
and security of the cloud.
Small businesses
Sage 50cloud
Mid-sized businesses
Sage X3
Sage 200cloud
Cloud native solutions
Cloud native solutions offer anytime, anywhere
availability, automatic updates and full access to a wide
ecosystem of partners and ISVs, in a hosted environment.
Small businesses
Sage Accounting
Sage Payroll
Sage HR
Mid-sized businesses
Sage Intacct
Sage People
The Sage Group plc. Annual Report and Accounts 2022
Our products in action
Sage Intacct
Sage Intacct helps organisations thrive in today’s digital world
with proven cloud native solutions across accounting, planning,
analytics, and payroll. The powerful cloud platform offers deep
multi‑dimensional insight and AI‑powered automation which
enables organisational agility.
Sage Intacct is the first and only preferred provider of financial
applications of the AICPA, ranked highest in customer satisfaction
by G2 and recognised as a leader by industry analysts. Sage Intacct
is named a Leader in IDC MarketScape: Worldwide SME-focused
Subscription and Usage Management Applications 2022 and the
IDC MarketScape: Worldwide SaaS and Cloud-Enabled Midmarket
Finance and Accounting Applications 2020.
It enables data-driven finance teams to automate complex
processes, speed up the close, consolidate multiple legal
entities in minutes, become GAAP compliant, and make
strategic decisions using built-in, customisable reporting
and dashboards. As Sage Intacct customers’ businesses grow,
AI-driven automation helps organisations continue to scale.
Trusted by thousands of customers across the US, Canada,
Australia, the UK and South Africa, Sage Intacct serves mid-sized
businesses, focusing on service-centric industries as well
as construction and real estate, manufacturing and wholesale
distribution, ensuring the product strategy is tightly focused
on customer needs.
Sage Accounting
Sage Accounting is a unique proposition that ensures small
businesses, accountants and bookkeepers can manage
their customer data, accounts and people all in one cloud
native solution.
It allows customers to quickly and easily create and track
invoices, track cash flow, accept payments, record transactions,
automate admin, capture expenses, and much more. This is
supported by award-winning 24/7 product support, online or
on the phone.
Sage Accounting is designed for small business owners and sole
traders operating in any industry—from professional services
to construction to retail.
HMRC recognised and Making Tax Digital (MTD) ready, Sage
Accounting also supports customers to stay compliant through
every stage of MTD for Income Tax Self-Assessment and VAT.
“ Sage Accounting is so seamless—I can use
my phone or my iPad, I can easily access my
accounts. I can focus more on my business,
and deliver great service to my customers.”
Janice B. Gordon
Scale Your Sales
“ Sage Intacct met our needs and
is a game-changer for us. It has
completely improved our trajectory…
we’re emboldened to seek new
opportunities for growth.”
Bonnie Forssell
CFO, Vitamin Angels
“ I would recommend Sage Accounting
to any accountancy practice.”
Emily Smith
Finlayson
17
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Our products continued
Sage People
Sage People is our global cloud HR and people management
solution designed for customers with 200—5,000 employees.
It empowers leading multinational, mid‑size organisations to
build great employee experiences that truly engage and inspire
their people.
A cloud HR and people system that allows businesses to
effectively respond to changing priorities, Sage People uses
powerful automation, comprehensive analytics, and flexible
workflows to ensure global workforces can adapt and thrive,
whilst staying connected.
“ Sage People has really played into our
strategy to make our employees more
flexible and agile in terms of where,
and how they can work.”
“ We chose Sage People for its awesome
workforce experience interface. It had the
potential to amplify our ‘actively caring
culture’ and get employees excited about it.”
Gaynor Bailey
Head of Operations and Employee Engagement, Channel 4
Will Tedrow
HR Director, Youth Dynamics Inc
Sage Payroll
Sage Payroll, the UK’s number one payroll provider, helps
small businesses manage their payroll with confidence. It is
an intuitive, cloud‑based solution that helps customers to run
their payroll reliably and flexibly, including pensions filing
and HMRC submissions and compliance.
Accessible online anywhere, Sage Payroll allows customers to
quickly and easily create employee records and pay people
in simple steps. It is designed for sole traders and small
businesses operating in any industry.
“ I can manage leave and track my staff,
which makes my work a lot easier.
Sage Payroll played a big role—
it made a big difference.”
Aisha Gassangwa
HR Manager, Newscafe
18
Sage HR
Sage HR is designed to make people management easier and
helps teams perform at their best.
Sage HR is best suited to small and mid-sized businesses for
work on site or on the go. Targeting those that require a turnkey,
modular, low-cost and easy to install solution, Sage HR offers
core record management, leave management, staff scheduling
and expenses services.
The intuitive design carries over to the Sage HR app so that
employees, managers, and HR people can submit and manage
time off, expenses, feedback, payslips and more from a desktop
or mobile device.
“ It was a pretty easy choice to go with
Sage HR; the price was competitive, and
the service was better and more personal
than the competition.”
Elizabete Dikmane
HR Manager, Sonarworks
The Sage Group plc. Annual Report and Accounts 2022 Sage 50cloud and Sage 200cloud
Our range of cloud connected accounting solutions for
small and mid‑sized businesses combine the freedom and
security of the cloud with the power and productivity of the
desktop. The Sage 50cloud and Sage 200cloud franchises
enable customers to control their business and gain
complete visibility over their finances and operations.
Sage 50cloud is targeted at small businesses who seek the
familiarity and trust of desktop software alongside
the connectivity of the cloud.
Mid-sized businesses need access to data insights and analytics
to make the right decisions that enable growth. Sage 200cloud—
a term we use to describe Sage 100cloud, Sage 200cloud and
Sage 300cloud—offers customisable solutions to meet the
needs of mid-sized customers, all connected to the cloud.
“ We needed a multi-currency platform
that could handle the volume and the
multi-warehouse costing. With Sage
300cloud, Simpli Home has scaled to meet
unprecedented demand, as huge amounts
of data can be handled very quickly.”
Yoram Weinreich
Co-President, Simpli Home
Sage X3
Sage X3 provides fast, intuitive and tailored business
management solutions for product‑centric organisations
looking to thrive and stay competitive in the face of growing
complexity. It is designed for customers with 200 to 2,000
employees, or those with more complex operational needs.
This solution transforms how organisations manage people,
processes and operations, allowing them to embrace change
at speed. From procurement to warehousing, production,
sales, customer service, and financial management, Sage X3
introduces better ways to manage your entire business, on
a global scale. It delivers end-to-end business management
across multiple verticals.
With multi-language, multi-legislation and multi-currency
capabilities, Sage X3 delivers comprehensive business
management capabilities from supply chain management
to manufacturing through to HR and payroll management
capabilities. Customers have the option to complement X3
with multiple add-on solutions providing additional industry-
specific functionality, tailored to their needs.
Cloud service offerings include a selection of deployment
options across Private Cloud or Public Cloud. For customers
not wanting to work in the cloud, Sage X3 can also be hosted
or deployed on-premise.
“ Sage X3 gives us the one true view
of what is going on in our environment.
Sage X3 helps us to thrive as it gives us
better visibility of what’s actually going
on in our company.”
Andrew Domino
S&S Hinge
19
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Market review
Our market opportunity
Sage’s market position
Sage has a global market presence, serving a diverse
customer base of SMBs across North America, Europe,
Africa and Asia-Pacific. The breadth and scale of our
business provides us with unique visibility into small and
mid-sized business trends globally, giving Sage a deep
understanding of our customers’ needs. Digitalisation 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 trusted portfolio of accounting, HR and
payroll solutions positions us well to support them.
Global SMB trends
SMBs play a significant role in the global economy,
representing an estimated 99% of firms and 70% of
all jobs in OECD countries. While the current global
macroeconomic environment presents challenges,
including high inflation and skills shortages, most
SMBs are confident in the long term, and investing in
new technology to help them cope with these challenges
remains a key priority. This investment delivers
efficiency and productivity gains that help mitigate
inflationary pressures and ensure SMBs are better
equipped for the future. The trend of digitalisation is
driving strong growth in our markets, as SMBs seek new
ways to connect with customers and to make their
organisations more resilient and flexible.
Our addressable market
The total addressable market (TAM) for Sage is forecast to
be around $47bn in 2023 and over $51bn in 2024, growing
at an annual rate of nearly 10%. Included within this TAM
is accounting and financial management software, ERP,
HR, and payroll applications for businesses with up to
2,000 employees, together with accountant practice
management, taxation and compliance software, across
both cloud and on-premise deployments.
20
Total addressable market and total growth
Source: Company estimate based on external sources
2022
$42.7bn
+10%
2023
$46.9bn
+10%
2024
$51.4bn
+10%
The Sage Group plc. Annual Report and Accounts 2022 Addressing the market opportunity through technology
Our technology strategy reflects the environment in which our customers are operating
and enables us to support them through change. This strategy, built on four key pillars,
helps us capture the current market opportunity while positioning our products and
solutions for long-term success.
1
2
Digital transformation
SMBs continue to invest more in digital technology
as they look to automate processes, gain better
business insights and comply with regulation.
Beyond enhancing competitiveness and efficiency,
digital transformation is also an enabler of new
types of businesses.
The role we play:
The Sage digital network enables transformation
in the digital era by creating connections between
people, technology and data. It connects our
customers to the individuals and organisations
they need to interact with, providing features and
services that facilitate the smooth flow of work
and money.
Elevate human work
By replacing low-value repetitive work, digital
transformation, and its associated technology
empowers humans to work on higher-value tasks
that are more ideally suited to humans, such as
decision making, collaboration, analysis and
managing exceptions.
The role we play:
We create solutions that make our customers’ lives
easier, removing friction from their processes and
delivering insights. By scaling and developing the
Sage Digital Network, more customers generate
more data, which, in turn, powers the insights that
we need to develop more compelling AI-driven
features, leading to better customer experiences.
3
4
Sustainability
As technology develops, becoming more available
and less expensive, there is a responsibility
incumbent upon technology providers to conduct
their business in an environmentally and a socially
responsible way.
The role we play:
We understand the importance of social and
environmental responsibility. Sage’s success
depends on our ability to engage effectively and
work constructively with all of our stakeholders.
As we grow our business, and support our customers
in growing their businesses, we will also use our
time, technology and experience to tackle digital
and economic inequality and the climate crisis.
Trusted technology
Our customers are increasingly aware of the value
of the data they own, and what it can do for them.
Data privacy and security are critical to them and
they expect their data to be handled transparently
and fairly.
The role we play:
The trusted solutions offered by Sage across
finance, HR and payroll position us well to support
our customers. As we increase automation, we
must also increase trust, which is why our digital
network architecture gives individuals far greater
control over the privacy of their own data. The
network itself can also increase trust between
all participants.
21
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Business model
Creating value for
our stakeholders
Inputs
How we attract and retain customers
Customer base
The breadth of our customer
base around the world gives
us a unique insight into the
needs of SMBs.
Trusted advisor
Sage is a trusted brand
providing market-leading
customer service, which in
turn generates loyalty and
advocacy among customers.
People
Caring and engaged
colleagues are committed
to driving success for
our customers.
Ecosystem
Sage is expanding scale and
reach through our ecosystem
of accountants, resellers and
technology partners.
Innovation
We are investing to ensure
our products are ahead of
the curve in a changing
technology landscape.
e w
n
e
5. R
Attra c t s
o
M
r e c ustomers*
l u e capture
a
V
M
o
r
e
v
a
l
u
e
D
e
4
.
E
x
p
a
n
d
l
i
v
ers
Customers
Customer
and User
Use and build trust
n
o
Value cre a t i
More in s i g h t
1. Aw
are
n
e
s
s a
n
d
l
a
n
d
t
p
o
d
2. A
C
r
e
a
t
e
s
*
*
a
t
a
d
e
r
o
M
D rives
3. Servic e
* Customers, end users and
ecosystem participants
** Volume, variety and velocity
Underpinned
by the Digital
Network
More customers
Adding customers, end users and ecosystem
participants will improve the network effect
and allow Sage to scale new value propositions.
Ecosystem participants (attracted by customer
volumes) act as amplifiers of the network effect.
More data
With more data and data types from
network participants, Sage can
capture data flows and transactions
both within and outside the network.
22
The Sage Group plc. Annual Report and Accounts 2022
1. Awareness and land
Attract new customers to Sage through
brand awareness, targeted campaigns and the
sage.com website. Offer guides and trials to
prospective customers.
2. Adopt
Sign new customers up to Sage Business Cloud
on subscription. For some solutions, Sage or its
partners provide training and onboarding to get
customers started.
3. Service
Provide multi-channel digital and human customer
support to enhance the customer experience,
offering regular check-ins and conducting
feedback surveys.
4. Expand
Enable Sage Business Cloud customers to benefit
from our expanding portfolio of cloud-based
solutions and services. This increases the value
of Sage Business Cloud and enables Sage to deepen
customer relationships and scale its business.
5. Renew
Create a seamless experience for customers that
drives higher satisfaction, helps retain customers
and increases adoption of Sage solutions. New
customers are attracted to the network through
recommendations and advocates.
Outputs
Customers
101%
renewal by value
Colleagues
79
eSat (employee satisfaction)
Community
149,409
Sage Foundation volunteer hours spent
helping our communities
Shareholders
9%
high-quality organic
recurring revenue growth
18.40p
total dividend for the year
107%underlying
cash conversion
More insight
Data drives the development of solutions
through a combination of understanding customer
problems and deploying data science capabilities.
This is enabled by a culture of experimentation
and innovation.
More value
Solutions are delivered to enhance the
customer experience, and create value
for customers and Sage.
23
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Strategic priorities
Driving growth
Our five strategic
priorities focus our
activities on key
initiatives that help
drive the growth and
long-term success
of the Group.
Scale Sage
Intacct
Expand medium
beyond financials
Objective
Accelerate the expansion
of Sage Intacct in existing
and new markets
Objective
Broaden the value proposition
for mid-sized businesses
Sage Intacct forms the heart of our
cloud native financial management
proposition for mid-sized businesses,
in a fast-growing market driven by rapid
digital transformation. It provides
finance professionals with a powerful
cloud financial management platform
that brings significant benefits to its
customers in terms of productivity and
business insights.
Growth in Sage Intacct has accelerated
as we have invested in 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
the UK), and expanding distribution
in key markets across the Group.
We will continue to grow the Sage Intacct
customer base and addressable market. We
are deepening its capabilities in existing
verticals, expanding into new verticals—
both directly and with partners—and
accelerating international growth. We’re
also focused on driving earlier adoption
of Sage Intacct, reducing up-front costs for
customers and accelerating time to value,
streamlining the customer journey.
Sage has a well-established position
providing financial management
solutions to mid-sized businesses
around the world. We see a compelling
opportunity to expand into adjacent
areas, in line with the enlarged remit
of today’s CFO, and deliver benefits
to customers beyond core accounting.
We will achieve this by automating and
adding value to a broader set of business
processes, and through delivering
improved data accuracy and insight.
Customers can already benefit from
powerful, integrated tools such as Sage
Intacct Planning to streamline the
budgeting process, as well as a wide
range of add-on modules and services
provided by partners. We have also
launched an AI-driven service to
automate accounts payable processes
for Sage Intacct customers in the US,
while Sage People offers a versatile cloud
HR and people management system.
Through a combination of organic
and inorganic development, Sage will
continue to broaden its value proposition
for mid-sized businesses to support their
digital transformation.
KPIs
Read more page 36 to 37
Success measure
• Growth of Sage Intacct
across the Group
Success measure
•
Renewal rate by value
Sustainability
Underpinned by our strong commitment
to our sustainability strategy
24
Build the small
business engine
Objective
Scale the
network
Objective
Learn
and disrupt
Objective
Create a scalable digital
Increase participation in
Build innovative solutions
‘engine’ to acquire and serve
Sage’s network and accelerate
underpinned by a culture
small business customers
the network effect
of continuous learning
and disruption
Sage has invested significantly in
Sage is focused not only on developing
Innovation is key to the long-term success
building out our Small business suite,
solutions for specific business needs
of Sage. By providing the opportunity to
delivering a differentiated experience
and integrating those solutions
create actionable insights through data,
for both end users and accountants.
to provide a unified digital experience,
the Sage digital network is a key enabler
The benefit of our Small business suite is
that it connects the customer’s business
from the point of product or service
delivery at the front-end, right through
but also on creating a digital network
of innovation. Sage will continue to invest
of connections between businesses and
in the technology and capabilities that
their customers, suppliers, employees
underpin it.
and regulatory bodies.
Sage is accelerating momentum in AI and
to the back-end in terms of financial
Sage has several unique assets and
Machine Learning, and driving disruptive
administration, record keeping, payroll
capabilities to help us rapidly scale this
new technologies. In February, we released
and HR services. The unified look and
digital network and drive sustainable
the first and only mid-market cloud
feel, together with streamlined
competitive advantage. These include its
accounting solution that uses AI to increase
workflows, creates a frictionless
strong and loyal global customer base;
confidence in the accuracy of general
experience for customers.
its vibrant partner, accountant, and ISV
ledger transactions. This solution is
This enables Sage to deliver integrated
insights for better decision making,
supporting small business growth with
network; and its brand and reputation.
enabled by our outlier detection engine.
Complementary acquisitions, such as
We continue to work with partners,
Lockstep, also help us scale the network.
including Tide and Experian, to deliver
innovative services to small businesses
a scalable solution. Investing in solutions
Our priority is to enable and encourage
to help accountants digitise their own
participation in the digital network,
and consumers.
practices serves as a key advocacy tool
migrating customers to Sage Business
As we continuously improve our innovation
for Sage.
We will continue to enhance the customer
experience and focus our efforts on
investment in digital marketing
capabilities. This will allow Sage to
deploy its scalable growth ‘engine’ in
other geographies to leverage economies
of scale and best practice.
Success measure
•
Small segment revenue growth
Cloud so they can enjoy an expanding
capability and culture—complementing
number of cloud-based digital services,
these with partnerships, investments and
delivered either by Sage or through our
acquisitions—we can use early learnings
ISV ecosystem. More digital network
from disruptive trends to help inform our
participants contributing more data
investment choices.
will power the insight we need to build
more innovative customer experiences,
improving our ability to retain existing
and attract new customers.
Success measure
•
•
Sage Business Cloud penetration
Availability and consumption of
cloud-based digital services
Technology acquisitions,
Success measure
Network-powered
solutions launched
•
•
investments and partnerships
The Sage Group plc. Annual Report and Accounts 2022 Expand medium
beyond financials
Objective
Scale Sage
Intacct
Objective
and new markets
Accelerate the expansion
Broaden the value proposition
of Sage Intacct in existing
for mid-sized businesses
Sage Intacct forms the heart of our
Sage has a well-established position
cloud native financial management
providing financial management
proposition for mid-sized businesses,
solutions to mid-sized businesses
in a fast-growing market driven by rapid
around the world. We see a compelling
digital transformation. It provides
opportunity to expand into adjacent
finance professionals with a powerful
areas, in line with the enlarged remit
cloud financial management platform
of today’s CFO, and deliver benefits
that brings significant benefits to its
to customers beyond core accounting.
customers in terms of productivity and
We will achieve this by automating and
business insights.
adding value to a broader set of business
Growth in Sage Intacct has accelerated
as we have invested in the core product,
processes, and through delivering
improved data accuracy and insight.
developing its vertical and geographic
Customers can already benefit from
reach (including through the acquisition
powerful, integrated tools such as Sage
of Brightpearl and the launch of Sage
Intacct Planning to streamline the
Intacct Manufacturing in France and
budgeting process, as well as a wide
the UK), and expanding distribution
range of add-on modules and services
in key markets across the Group.
provided by partners. We have also
We will continue to grow the Sage Intacct
customer base and addressable market. We
are deepening its capabilities in existing
verticals, expanding into new verticals—
both directly and with partners—and
launched an AI-driven service to
automate accounts payable processes
for Sage Intacct customers in the US,
while Sage People offers a versatile cloud
HR and people management system.
accelerating international growth. We’re
Through a combination of organic
also focused on driving earlier adoption
and inorganic development, Sage will
of Sage Intacct, reducing up-front costs for
continue to broaden its value proposition
customers and accelerating time to value,
for mid-sized businesses to support their
streamlining the customer journey.
digital transformation.
Success measure
• Growth of Sage Intacct
across the Group
Success measure
•
Renewal rate by value
Build the small
business engine
Scale the
network
Learn
and disrupt
Objective
Create a scalable digital
‘engine’ to acquire and serve
small business customers
Objective
Increase participation in
Sage’s network and accelerate
the network effect
Sage has invested significantly in
building out our Small business suite,
delivering a differentiated experience
for both end users and accountants.
The benefit of our Small business suite is
that it connects the customer’s business
from the point of product or service
delivery at the front-end, right through
to the back-end in terms of financial
administration, record keeping, payroll
and HR services. The unified look and
feel, together with streamlined
workflows, creates a frictionless
experience for customers.
This enables Sage to deliver integrated
insights for better decision making,
supporting small business growth with
a scalable solution. Investing in solutions
to help accountants digitise their own
practices serves as a key advocacy tool
for Sage.
We will continue to enhance the customer
experience and focus our efforts on
investment in digital marketing
capabilities. This will allow Sage to
deploy its scalable growth ‘engine’ in
other geographies to leverage economies
of scale and best practice.
Success measure
•
Small segment revenue growth
Sage is focused not only on developing
solutions for specific business needs
and integrating those solutions
to provide a unified digital experience,
but also on creating a digital network
of connections between businesses and
their customers, suppliers, employees
and regulatory bodies.
Sage has several unique assets and
capabilities to help us rapidly scale this
digital network and drive sustainable
competitive advantage. These include its
strong and loyal global customer base;
its vibrant partner, accountant, and ISV
network; and its brand and reputation.
Complementary acquisitions, such as
Lockstep, also help us scale the network.
Our priority is to enable and encourage
participation in the digital network,
migrating customers to Sage Business
Cloud so they can enjoy an expanding
number of cloud-based digital services,
delivered either by Sage or through our
ISV ecosystem. More digital network
participants contributing more data
will power the insight we need to build
more innovative customer experiences,
improving our ability to retain existing
and attract new customers.
Success measure
•
•
Sage Business Cloud penetration
Availability and consumption of
cloud-based digital services
Objective
Build innovative solutions
underpinned by a culture
of continuous learning
and disruption
Innovation is key to the long-term success
of Sage. By providing the opportunity to
create actionable insights through data,
the Sage digital network is a key enabler
of innovation. Sage will continue to invest
in the technology and capabilities that
underpin it.
Sage is 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 that uses AI to increase
confidence in the accuracy of general
ledger transactions. This solution is
enabled by our outlier detection engine.
We continue to work with partners,
including Tide and Experian, to deliver
innovative services to small businesses
and consumers.
As we continuously improve our innovation
capability and culture—complementing
these with partnerships, investments and
acquisitions—we can use early learnings
from disruptive trends to help inform our
investment choices.
Success measure
Network-powered
•
solutions launched
Technology acquisitions,
investments and partnerships
•
Protect the Planet
Read more page 47
Tech for Good
Read more page 48
Fuel for Business
Read more page 49
25
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Our five strategic priorities
1. Scale
Sage Intacct
Objective
Accelerate the expansion
of Sage Intacct in existing
and new markets.
From growing start-ups to global
enterprises, Sage Intacct is our
best-of-breed, cloud finance software.
26
The Sage Group plc. Annual Report and Accounts 2022 Award-winning solution
Sage Intacct is recognised as an award-winning
solution, delivering consistent growth in the US and now
expanding internationally. The success of Sage Intacct
is founded on its approach to micro verticals, which
enables us to add capabilities that are very specific
to the needs of customers.
Sage has a clear strategy for future growth across
new and existing verticals using the Sage Intacct
platform as a foundation for connecting customers with
their customers, their suppliers, and their employees,
to automate processes and workflows. Having initially
focused on core financials and the accounting
solutions that businesses need, we have expanded into
planning, analytics, payroll and HR as adjacent and
complementary solutions. Scaling this approach
internationally and driving earlier adoption remains
a key priority for Sage.
Progress update:
• Enhanced Sage Intacct’s vertical and geographical
reach, including through the acquisition of
Brightpearl in retail, new features in construction
and real estate, and the launch of Sage Intacct
Manufacturing in France, the UK and the US
• Sage Intacct Starter Edition launched in the UK,
to accelerate new customer acquisition for Sage
Intacct by attracting SMBs at an earlier stage
• Continued investment in sales and distribution
channels to accelerate growth
• Record number of Sage Intacct new customer
wins in FY22
Sage Intacct recurring revenue—US (£m)
Case study: American
Marketing Association
FY22
FY21
FY20
£231m
£176m
£144m
Sage Intacct recurring revenue—ex-US (£m)
FY22
FY21
FY20
£1m
£4m
£12m
“ With Sage Intacct, we can access
real-time info about gross margin, so
we’ve restructured unprofitable events
and scheduled more successful ones.”
Jeremy Van Ek
COO, American Marketing Association
The American Marketing Association (AMA)
provides an essential community for nearly five
million marketing professionals seeking education,
networking and professional development.
Sage Intacct has enabled AMA to drive a better
membership experience, providing the right
services and resources that its members need.
In addition, AMA increased productivity and lowered
labour costs by 25% with an all-cloud technology
stack. Other benefits include increased ease of
access for reporting that sped up decision making
and the elimination of data extraction in Excel.
27
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report Our five strategic priorities continued
2. Expand
medium beyond
financials
Objective
Broaden the value
proposition for
mid-sized businesses.
Sage has a well-established position
providing financial management
solutions to mid-sized businesses
around the world, which creates
a compelling opportunity to expand
into adjacent areas, in line with the
enlarged remit of today’s CFO.
28
The Sage Group plc. Annual Report and Accounts 2022 Today’s CFOs have diversified
their responsibilities, embracing
non-traditional skills, implementing
emerging technologies and
championing purpose-led initiatives.
Solving for the enlarged remit
of today’s CFO
Sage enriches its existing core financials and
accounting products by expanding beyond financials
with new solutions that address the broader challenges
facing CFOs.
Advantages for customers include a reduced need to
deploy a mix of point solutions and the ability to simplify
their operations. This approach opens opportunities for
significant revenue growth while enhancing customer
loyalty and increasing lifetime value.
Progress update:
• Launched an AI-driven service to automate manual
accounts payable processes for Sage Intacct
customers in the US, significantly reducing invoice
processing costs and data entry error
• Sage People Payroll launched in UK and US in
partnership with Brain and ADP, respectively,
bringing integrated payroll functionality to
Sage People
• Sage Intacct Planning continues to grow rapidly,
surpassing 1,000 customers in the US and Canada
Renewal rate by value
FY22
FY21
FY20
101%
99%
99%
Renewal rate by value on an organic basis. For an explanation
of this metric, see page 36.
Case study: Aegis
“ The move to Sage Intacct has
been a huge turning point for our
organisation. Sage Intacct Planning
gives us great flexibility to expand
our reporting and forecasting and
increase visibility.”
Kyle MacDonald
Director of Finance and Operations, Aegis
Aegis Project Controls supplies consulting services
and technology that help deliver large construction
projects on time and on budget. Aegis selected
Sage Intacct as its accounting platform in 2018
and then adopted Sage Intacct Planning in 2019.
Compared with building budgets in Excel, Aegis
spends 25% less time on budget creation with Sage
Intacct, while incorporating information of greater
scope and detail. Aegis estimates that overall
accounting efficiency has risen 5x, while the
company has instituted more robust monthly
close and reporting processes.
29
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report Our five strategic priorities continued
3. Build the
small business
engine
Objective
Create a scalable
digital ‘engine’ to
acquire and serve small
business customers.
By investing in customer experience
and digital marketing capabilities,
Sage is creating a scalable growth
‘engine’ to leverage economies
of scale and best practice.
30
The Sage Group plc. Annual Report and Accounts 2022 90%
digital direct customer
acquisition in UK
>2,000
UK accountancy practices
using Sage for Accountants
Sage Accounting forms part of our
wider suite of solutions for Small
businesses, with the ability to easily
add capabilities. From HR and payroll
to data automation and forecasting
products, Sage offers our customers
the solutions they need as they grow
in sophistication or size.
“ Time is a big challenge for me in a busy
practice with over 150 small businesses.
Through Sage for Accountants, they are
all in one easy-to-access place and it
allows me to navigate swiftly between
each subscription, from data capture
to tax submission.”
Sarah Riley
Owner, Riley Accountancy
A leading proposition for small businesses
Sage has a strong heritage in the small business segment
and our differentiated small business suite supports
professional users, accountants and business owners.
Our deep understanding of the market uniquely positions
us to deliver on their challenges and needs with our
strategy for growth.
Accountants are a critical component of this ecosystem.
They are central to driving our small business growth
engine, and Sage is committed to helping them digitise
their practices. We acquired GoProposal (client
management) at the end of FY21 and Futrli (cash flow
forecasting) during FY22, to strengthen the portfolio
and deliver a comprehensive end-to-end proposition for
accountants, in turn driving greater advocacy.
Progress update:
• Launched Sage for Accountants in November 2021
which has attracted over 2,000 accountancy practices
in FY22
• Launched SBC Payroll and Sage HR in Canada in
August 2022
•
•
In the UK, Sage was recognised on HMRC’s official list
of software compatible with Making Tax Digital for
Income Tax Self-Assessment
Internationalisation of the UK approach continues,
including in South Africa and Canada
“ Sage has listened to the real-life
challenges. The great thing is that
Sage has worked with accountants
to develop a product for accountants.”
Martin Tregonning
Tregonning and Co. Ltd
31
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report Our five strategic priorities continued
4. Scale the
network
Objective
Increase participation
in Sage’s network
and accelerate the
network effect.
The Sage Digital Network creates
connections across business
ecosystems, enabling data and
work to flow seamlessly. The value
of the network grows for each
participant as the overall number
of participants increases.
32
The Sage Group plc. Annual Report and Accounts 2022 11,000
financial institutions
connected to enable
bank reconciliations
Sage’s Digital Network is here today
Thanks to its global scale and access to data, Sage
has a significant opportunity to expand its digital
network. The network enables Sage to develop and
provide innovative services and solutions, and scaling
the network accelerates this process as it creates
a virtuous circle, with more data enabling better
services to deliver richer experiences.
While removing friction by automating and digitising
processes is a vital part of our ambition, so are the human
relationships, customer support and advice that we provide.
The Sage digital network is an integrated experience of
both digital and human connections.
Progress update:
• Expanded Sage Business Cloud availability,
particularly in International, with recent product
launches including Sage Active in France, Sage
Accounting in Spain, and Sage HR in Germany,
further driving network participation
• Sage Intacct in France launching soon, bringing
the solution to non-English speaking markets for
the first time
• Acquired Lockstep to accelerate the expansion
of our digital network, bringing accounts
receivable automation capabilities and other
innovative features to the Sage digital network
• Created a new Digital Network business unit, led
by Aaron Harris, our Chief Technology Officer,
to implement our network strategy
>20m
employees paid globally
by Sage Payroll products
Sage Business Cloud penetration
FY22
FY21
FY20
75%
67%
60%
Sage Business Cloud penetration on an organic basis.
For an explanation of this metric, see page 37.
Case study: Scaling the network
through the acquisition of Lockstep
In August 2022, Sage completed the acquisition of
Lockstep, a provider of cloud native technology that
automates accounting workflows between companies.
Lockstep, founded in 2019, develops products and
services that streamline accounting processes, allowing
customers to save time, eliminate human error and
improve cash flows. Its solutions include applications
to automate accounts receivable and accounts payable
workflows, deepening the Group’s capabilities in the
office of the CFO, while its API platform expands the
ecosystem by enabling third parties to develop
connected services.
The Lockstep platform enables network connections
into more than 40 different accounting solutions,
and over 26,000 businesses are already part
of its ecosystem.
Lockstep’s highly experienced management team
have joined Sage to help drive the continuing
development of our digital network.
33
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report
Our five strategic priorities continued
5. Learn and
disrupt
Objective
Build innovative solutions
underpinned by a culture
of continuous learning
and disruption.
Innovation is key to the long-term
success of Sage. By continuously
improving our innovation capability
and culture, we can ensure that
we learn from experimentation
and disruption.
34
The Sage Group plc. Annual Report and Accounts 2022 Investing in our innovation capability
Continuous innovation is vital to the long-term success
of Sage. We are driven to create, learn from, and
participate in future disruptive trends. The Sage digital
network—and the data and insight it generates—is a key
enabler of innovation, and Sage will continue to invest
in the technology and capabilities that underpin it.
We continue to grow our team of data scientists and
engineers within our AI team, Sage AI Labs, supporting
the development of new network powered services.
Progress update:
• Released the first and only mid-market cloud
accounting solution that uses AI to increase
confidence in the accuracy of general ledger
transactions, through our outlier detection engine
which has so far attracted over 1,000 customers
• Entered into an expanded partnership with Microsoft,
integrating Teams with Sage Intacct and Sage People
to simplify approval and collaboration workflows,
and making Sage Intacct and Sage Active available
on Microsoft Azure as part of our multi-cloud
access strategy
• Delivered innovative services to consumers through
our partnerships with Experian (wage verification)
and Tide (small business banking and accounting)
• Acquisition of Spherics will enable customers to
leverage AI in order to understand and manage their
carbon emissions
>4m
employees in the digital
network able to access our
employment verification
service in partnership
with Experian
Case study: Acquisition of Spherics
In October 2022, Sage acquired Spherics, a carbon
accounting solution to help businesses easily
understand and reduce their environmental impact.
The acquisition reinforces Sage’s commitment to
sustainability, in line with its purpose of knocking
down barriers so everyone can thrive.
Spherics automates the process of calculating
emissions by ingesting data from a customer’s
accounting software and matching transactions
to emission factors to create an initial estimate
of their carbon footprint. The software then guides
the customer to refine this estimate by submitting
further data for a more accurate calculation—
supporting SMBs on their journey to Net Zero.
Spherics also helps SMBs apply carbon emission
factors to procurement categories (such as delivery,
accommodation, electricity and travel) to estimate
the associated carbon footprint of a transaction.
This approach supports customers with spend-
based analysis and aligns with the Greenhouse
Gas Protocol, the globally agreed standard for
measuring carbon emissions.
35
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report Our key performance indicators
Measuring our progress
Sage has four strategic KPIs that show the impact and
progress of strategic execution. These KPIs are disclosed
every six months to demonstrate Sage’s progress.
Annualised recurring
revenue growth
12%
Renewal rate by value
101%
2022
2021
2020
8%
5%
12%
2022
2021
2020
101%
99%
99%
Definition
Defined as the normalised reported organic recurring
revenue in the last month of the reporting period,
adjusted consistently period to period, multiplied by 12
(FY22: £2,027m ARR).
It represents the annualised value of the organic
recurring revenue base that is expected to be carried
into future periods, and its growth is a forward-looking
indicator of reported organic recurring revenue growth.
Definition
This metric tracks the ARR growth from existing
contracts over the period (through up-sell, cross-sell,
renewal, and migration), offset by churn.
It does not include new customer acquisition or
reactivation of off-plan customers and therefore
measures the strength of the existing customer base.
Progress
ARR increased by 12% in FY22, accelerating across all
regions, reflecting strong growth balanced between
new and existing customers.
Progress
Renewal rate by value of 101% improved from FY21,
reflecting good retention rates and strong sales
to existing customers.
36
The Sage Group plc. Annual Report and Accounts 2022
KEY—STRATEGIC PRIORITIES
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
Sage Business Cloud penetration
Subscription penetration
75%
2022
2021
2020
75%
75%
2022
67%
60%
2021
2020
75%
70%
65%
Definition
Defined as recurring revenue from the Sage Business
Cloud as a proportion of the recurring revenue from the
Future Sage Business Cloud Opportunity. This metric
measures progress in the transition of the business
to the Sage Business Cloud. Find out more about the
portfolio view of revenue on page 82.
Definition
This is measured as software subscription revenue as
a proportion of revenue and shows the progress Sage
is making in migrating its customers to subscription
(FY22: £1,445m organic software subscription revenue).
Progress
The focus on enabling more customers to connect to
Sage’s cloud services and ecosystem has resulted in
Sage Business Cloud penetration of 75% in FY22.
Progress
In FY22, subscription penetration reached 75%,
reflecting continued focus on attracting new
customers and migrating existing customers
and products to Sage Business Cloud.
37
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
Our people
The Sage Culture
We are committed to building an inclusive, high-
performing and accountable culture at Sage. A culture in
which every colleague can perform at their best, and that
helps us attract and retain the talent we need today, and
in the future to achieve sustainable long-term success.
Our listening strategy has been integral to creating our
culture and giving colleagues the opportunity to share their
experiences and insights. Our twice-yearly pulse surveys
help us understand where to focus our efforts to create
outstanding experiences for our colleagues, whilst more
regular, informal feedback channels and engagement
opportunities help us make continual adjustments and
respond to colleagues’ questions and concerns.
Our values underpin our culture, and this year we refreshed
our values to coincide with the launch of our refreshed brand,
and support our evolved purpose and strategic framework.
Colleagues were at the heart of the process to create our
refreshed values—with 10,000 taking part in a crowdsourcing
exercise and many joining focus groups that explored the
values in more depth. Colleagues told us what they love
about our culture, what they want to retain, and what we
need to change to ensure we deliver on our ambition.
‘We do the right thing’ is our core value. It drives
everything we do, and we bring it to life through our
four other values: Human, Trust, Bold and Simplify.
(See pages 124 to 125 for more on our values.)
In FY23 we’ll continue to work with our colleagues
and continue to build the culture we need, to bring
our purpose to life, help our customers solve their
challenges, and deliver on the promise of our brand.
“ We will only execute on our
strategy, and create brilliant
experiences for our customers,
if we have a culture that enables
everyone to perform at their
best. The important thing about
culture is that it’s not owned by
any single person or team. It’s
owned by everyone. Whether you
do it intentionally or not, how we
each behave—how we show up,
work, collaborate with colleagues,
connect with customers—
that’s all part of our culture.”
Amanda Cusdin
Chief People Officer
A number of key metrics help us keep track of how we’re progressing:
79 eSAT
How happy our colleagues
are working at Sage (FY21: 81)
4.2
Glassdoor score—based on
independent reviews from
our colleagues (FY21: 4.2)
36%
Internal fill rate—
how successfully we’re
providing colleagues
with the opportunities
to develop their career
at Sage (FY21: 37%)
33%
The number of leadership
teams meeting our gender
diversity target (FY21: 19%)
38
The Sage Group plc. Annual Report and Accounts 2022
How we attract, develop
and retain the best talent
We believe the most effective way to attract and retain the
best talent is by creating a culture and environment that
people want to be part of. For Sage, this means creating
outstanding colleague experiences, developing everyone to
their full potential, and creating a purpose and environment
that colleagues are proud to be part of, and where they strive
to deliver.
Whom we attract
As a talent-led organisation, whom we attract and how we
select talent is critical to our success. Our employer value
proposition is designed to attract the best talent—people
who align to our values, are inspired by our purpose, and
reflect the vast diversity of our customers. In FY22 we
amplified our employer brand with colleagues as our biggest
advocates, maintaining a competitive Glassdoor score of 4.2.
Developing everyone’s potential
and enhancing performance
To create a future-fit workforce and heighten our
performance culture, we must continually reinvest in our
people to provide them with the tools and environment
to achieve their full potential. In FY22 we evolved our
Learning and Development function to create more
strategic and targeted learning opportunities for all
colleagues. This has increased our focus on internal talent
mobility, succession planning, and targeted development
through our new Learning Academies, such as the Cloud
Academy for our product development teams.
To strengthen our leadership capability and develop leaders
of today, and tomorrow, we broadened our leadership
development programmes, which has enhanced and deepened
our succession pipeline, aligned to our long-term strategic
priorities and commercial focus areas (see table below).
We use a direct sourcing model to find new hires, and
in FY22 continued to expand entry routes into Sage and build
out our emerging talent pools. This includes our graduate,
apprentice and internship programmes, which have scaled
globally, welcoming more early career hires and equipping
them with the skills, confidence and network to accelerate
into future leaders. Sage is now ranked fifth in the Rate my
Apprenticeship Top 100 employers of choice in the UK.
We’ve launched a new Sage internal Talent Marketplace,
to increase talent mobility, enhance workforce agility,
and grow a skills-based workforce that supports our future
business strategy. After a successful pilot in FY22, soon
all colleagues will have access to this online tool to better
understand their skills, values and aspirations, then
match these to internal opportunities, tailored learning
programmes and mentorship.
To increase our diversity and break down barriers to
employment, we have reassessed our entry criteria and
focused on uncovering more talent from under-represented
groups. This includes continuing to grow our global
Pathways programme which helps those facing barriers
to employment, such as people living with a disability or
returning to work after a career break, to achieve work
readiness and access career opportunities. 45 colleagues
were recruited via our Pathways programme this year.
To enhance performance and execute on strategy, we evolved
our goal setting framework introducing Objectives and Key
Results (OKRs). Sharing the Executive Leadership Team’s
OKRs with all colleagues, and weaving the OKR methodology
into performance development and goal-setting, is allowing
colleagues to better connect their contribution to Sage’s
strategy, focus on what matters, and increase performance
through greater accountability.
Measuring our success:
90%
Over 90% of hires
retained beyond
12 months
4.2
Glassdoor score
Our leadership development programmes include:
Measuring our success:
5.7
The average number
of learning days
per colleague in FY22
(against a target of 5)
36%
Internal fill rate
Senior Leadership
Programmes
for VPs and Directors
An Accountability &
Transparency programme
for the Executive Team in year
one, now rolling out to the
broader organisation
A Sage Leadership
Conference
focused on developing Human
skills in relation with our
refreshed Brand and Values
Manager and Director
essentials, and allyship
training
39
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Our people continued
Making Sage a great place to work
Our colleague experience is vital to our success and in
FY22 we focused on identifying key moments that matter
for colleagues, to ensure they embody our new values and
enable an inclusive and high-performance culture. We do
this by listening to colleagues and understanding how
they feel. In FY22, we achieved an 86% response rate
(our highest to date) to our colleague ‘Pulse’ survey.
This insight, alongside data from our ‘Always Listening’
survey, has enabled us to shape our approach to meetings,
flexible working and wellbeing.
Flexible Human Work
Flexible working is about more than just where you work at
Sage. Our vision is to empower our colleagues to make the
most of how, where and when they work so that they can do
the best work of their lives. We are committed to a flexible
future, with a hybrid approach, balancing human
connection and flexibility, to drive high performance,
engagement and wellbeing.
This approach supports three forms of flexibility, and
our vision is to unlock all of these:
• Work mode: How we work, such as from the office,
at home or ‘flex mode’—a blend of both;
• Work location: The geographic location where we
work including working away from our home country
for up to ten weeks in a year in selected locations; and
• Work time: The hours we work, including variable,
part-time or job share.
In FY23 we will be refreshing our approach to hybrid
working, elevating ‘team agreements’ to bring more
colleagues into the office to connect and collaborate on
shared days. In support of this we have started to think
differently about what draws people to the office
environment, and re-design our spaces with colleague
experience and collaboration at the heart.
40
Last year we introduced Work Away, which allows
colleagues to work away from their home country for up to
ten calendar weeks a year. This form of flexibility enables
Sage to support colleague wellbeing, inclusivity and
effectiveness by providing more options to balance
work and travel. In FY22, 750 Work Away opportunities
were approved.
“ I grew up in Australia and the
family are all here so it’s always
great to be back. Previously I could
only go for 2 to 3 weeks at a time,
but now with Work Away I can stay
longer. It has allowed me to enjoy
the best of both worlds. I get to
spend time with the kids and see
family during the day, then I log on
after dinner so that I can interact
with my teams in the UK and US.”
Helen Tran
VP Group Tax
Another key part of flexibility is time, and in FY22 we
began integrating this into job design, with options
including part-time working, variable hours, and job
sharing. This supports attracting and retaining a diverse
workforce and this year we established several job share
partnerships, including in senior leadership positions.
The Sage Group plc. Annual Report and Accounts 2022 Wellbeing
Sage is committed to creating an inclusive culture where
our colleagues feel confident and safe to discuss their
wellbeing, knowing that they will receive the appropriate
support, free of stigma and bias. Putting colleague
wellbeing first helps us attract talent and drives
sustainable high performance.
In FY22 we continued to approach wellbeing holistically,
including a focus on healthy finances in response to the
macro-economic environment. We introduced a wellbeing
policy designed to promote a culture of care and
openness, outline our commitments, and to set out the
services available to colleagues. Sage provides benefits,
resources and networks to support colleague wellbeing,
including occupational health support, Colleague
Assistance Programmes (CAPs), Sage funded access to the
Headspace mindfulness app, healthy mind coaches, and
a wellbeing knowledge hub.
In addition, in FY22 we launched our first UKI Menopause
policy, enhanced our Parental Leave policy in the US, and
offered a new app to provide guidance and support for
prospective and current parents. This shows our commitment
to creating a healthier and more inclusive future of work.
Measuring our success:
79
eSAT
(employee satisfaction)
86%
Response rate to
colleague survey
750
Work Away opportunities approved
Our wellbeing approach
is comprehensive across
four key pillars:
Healthy Mind
focusing on mental health, mindful actions,
mindset, resilience, psychological safety
and inclusion.
Healthy Body
focusing on helping colleagues to
maintain a healthy quality of life.
Healthy Finances
helping colleagues improve their financial
wellbeing by budgeting and managing
their money day to day, planning for the
unexpected and planning for the future.
Healthy Communities
focusing on creating a sense of belonging,
inclusion, alignment to company values,
frequent human interaction and strong
relationships with others.
41
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
Our people continued
Diversity, Equity and Inclusion
As a global company, we must reflect the diverse world we
work in. We are committed to an inclusive workforce that
fully represents the many different cultures, backgrounds,
and viewpoints of our customers, our partners, and our
communities. In December 2021 we published our three-
year Global DEI Strategy, creating a solid foundation with
strong governance and business support at all levels.
The strategy rests on three interconnected pillars.
Our DEI pillars
Diverse Teams
Ensure we have as wide a range
of voices, backgrounds and
experiences as possible, so
leaders can leverage differing
perspectives to make the
right decisions at pace, for
our customers, colleagues
and communities.
Equitable Culture
Create an equitable and
inclusive culture where everybody
is comfortable sharing their
insights, ideas and innovations,
and valued for being the unique
individuals that we all are.
Inclusive Leadership
Build an intentionally inclusive
leadership who are curious to learn,
have the courage to experiment,
and are comfortable knowing they
don’t have all the answers, whilst
building teams that offer different
perspectives and making sure the
right questions are being asked.
42
The Sage Group plc. Annual Report and Accounts 2022 Our inaugural DEI Impact Report, published in December
2022, shows our progress against the DEI targets that are
outlined in the strategy, and highlights what has worked,
what has not worked, what we have learnt, and what we are
going to do differently as a result.
Measuring our success:
33%
The number of leadership teams meeting our
gender diversity target (FY21: 19%)
43%
‘All About Us’ participation (FY21: 11%)
14%
Colleagues engaged in a Colleague Success Network
or ‘DEI Champions Network’ (FY21: 4%)
We have a robust framework in place to deliver on our DEI
commitments. The DEI strategy is governed by the Vision
Statement and our DEI Commitments and delivery is led
by our Global Head of Diversity, Equity, and Inclusion.
Accountability for the delivery of the DEI Strategy rests
with the DEI Accountability Board, which is Chaired by
our Chief Executive Officer and comprises the Executive
Leadership Team (ELT). Ongoing evolution of this strategy
is led by our DEI Advisory Board, which is chaired by our
Chief People Officer, and consists of our seven colleagues
(including six ELT DEI Ambassadors), and a panel of five
external advisors.
In FY22 we made significant progress on our commitment
to increase transparency of DEI data. Our ‘All About Us’
project invites colleagues to voluntarily share more about
themselves, covering topics such as gender identity,
sexual orientation, neurodiversity and underlying health
conditions. In FY22 we increased ‘All About Us’ participation
to 43% (FY21: 11%) allowing us to better understand the
impact of our systems and processes so we can create
a more equitable experience for all. It is this data that
enabled us to report on our UK Ethnicity pay gap with a more
representative sample (alongside our 2022 UK gender pay
gap, which remains well below the tech industry standard).
This year, we also increased engagement with our
Colleague Success Networks (CSN), commonly known as
Employee Resource Groups. In FY22, 14% of colleagues
were engaged with a CSN (FY21: 4%), meaning more
colleagues are coming together to provide support,
education and deliver feedback to the business which
is already driving change.
Sage gender and ethnicity balance
Board
Executive
Leadership Team
Executive
Leadership Team
and direct reports2
All Colleagues
Number of
people
91
10
81
11,574
Female
Male Non-binary Undisclosed
White
Non White
2
(22%)
4
(40%)
33
(41%)
4,832
(42%)
7
(78%)
6
(60%)
47
(58%)
6,553
(57%)
0
(0%)
0
(0%)
0
(0%)
Below
privacy
threshold
0
(0%)
0
(0%)
1
(1%)
167
(1%)
8
(89%)
8
(80%)
52
(64%)
3,435
(30%)
1
(11%)
2
(20%)
Below
privacy
threshold
1,553
(13%)
Not
disclosed
Prefer not
to say
0
(0%)
0
(0%)
19
(23%)
6,331
(55%)
0
(0%)
0
(0%)
Below
privacy
threshold
255
(2%)
Race and ethnicity data is captured through voluntary and confidential self-disclosure in the United Kingdom, Ireland,
the United States, Canada and South Africa, using our ‘All About Us’ data.
1. This data reflects the information as at 30 September 2022. As announced on 15 November 2022, Maggie Chan Jones will be appointed to the Board,
with effect from 1 December 2022, at which time we anticipate there will be ten Directors on the Board.
2. Executive Leadership Team and their direct reports includes the Executive Leadership Team and their direct reports, comprising individuals for
whom they have direct line management responsibility, excluding administrative and support roles (for example personal assistants).
43
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Sustainability and Society
Our approach to sustainability
Knocking down barriers
Our Sustainability and Society Strategy is based on three pillars:
Protect
the Planet
Tackling the climate
crisis, powering
sustainable
business models.
Tech
for Good
Tackling digital
inequality for
innovation, enterprise
and progress.
Fuel for
Business
Tackling economic
inequality by
supporting under-
represented groups.
ESG Fundamentals
Our people
Economy and society
This year we made good progress against the Sustainability and
Society strategy we launched in 2021. Highlights include the
submission of our Science Based Target and further development
of our climate strategy; the acquisition of Spherics, a carbon
accounting solution to support SMBs on their own Net Zero
journey; the launch of the Trust Hub to support Sage customers
in developing confidence in the way they approach data security;
and the work done with our partners like Kiva, The BOSS Network
and FIRST® LEGO® League to knock down barriers so everyone
can thrive.
As the ESG landscape constantly evolves and new risks and
opportunities emerge, we will continue to deliver on our
commitments, whilst developing our strategy to ensure it
responds to our most material issues.
Our materiality assessment (see next page) defines the relative
importance of our material topics to our stakeholders. We have
used this and our ongoing engagement with stakeholders, to
shape and inform the disclosures covered in our report. We also
plan to use any further feedback received and the outcome of
future materiality assessments to evolve our strategy and ensure
it continues to respond to our stakeholders’ expectations,
delivering value for the business, society and the planet.
SBTi
target submitted
CDP
Joining CDP Supply Chain programme
$500,000
Providing $500,000 of capital to entrepreneurs
and local field partners, through our Sage
Foundation Kiva partnership
45
Colleagues recruited via our Pathways programme—
targeting groups facing barriers to employment, such
as people with a disability and the returner community
in the UK, the US, South Africa, India and Spain
For further detail on our commitments and performance,
please see our FY22 Sustainability and Society Report
https://www.sage.com/en-gb/company/sustainability-and-society
44
The Sage Group plc. Annual Report and Accounts 2022 Our approach to sustainability
Materiality
In 2021 we conducted our
first formal materiality
assessment, which enabled
us to better understand our
stakeholders’ expectations
and identify emerging
sustainability issues.
These issues are the
bedrock of our sustainability
strategy and reporting.
For more detail on the
process, please refer to the
FY22 Sustainability and
Society Report.
s
r
e
d
l
o
h
e
k
a
t
s
o
t
e
c
n
a
t
r
o
p
m
I
Key
Environment
Social
Governance
Manage and engage
Excel
1
2
4
6
8
3
5
7
9
10
12
11
13
16
17
15
19
20
14
18
21
22
Maintain expected
position
Build and embed
Level of impact on Sage
Our most material topics
We identified 22 material topics. Of these, eight emerged
as the most material, ranking highest in terms of
importance to stakeholders and their impact on the
business. We also place a high value on actively
supporting societal and environmental activities through
volunteering and philanthropy, as this forges important
community links. We believe Sage has an important role
in tackling inequalities, and we continue to make
a significant investment through Sage Foundation to
knock down barriers in our communities. Further details
Material topics
on our actions and performance against our most material
topics can be found in our FY22 Sustainability and
Society Report (https://www.sage.com/en-gb/company/
sustainability-and-society).
We are committed to conducting regular reviews to ensure
our strategy remains relevant and on track. With this in
mind, we are reviewing our approach and how we map our
organisational impacts and will report on our progress
in 2023.
1 Data protection and security
12 ESG Enablement and Support for SMBs
2 Proper use of customer data
13 Employee Development
3 Attracting and Retaining Talent
14 Risk Management Processes
4 Energy efficiency and low carbon operation
15 Repurpose, reuse and recovery of electronics waste
5 Innovation to support customers
16 Non-product related emissions in the supply chain
6 Business Ethics
17 Tackling Digital Inequality
7 Diversity, equity and inclusion of the workforce
18 Intellectual Property
8 Tax Transparency
9 Ethical Technology
19 Collective bargaining and labour relations
20 Supporting local communities and philanthropy
10 Carbon accounting solutions for SMBs
21 Board composition
11 Emissions from use of Sage products
22 Supporting entrepreneurship and empowering SMBs
45
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
Sustainability and Society continued
Governance and
business ethics
UN SDGs
Read about our contribution to the UN
Sustainable Development Goals in our
FY22 Sustainability and Society Report
page 14
Material topics
6 Business ethics
8 Tax transparency
14 Risk management process
18 Intellectual property
21 Board composition
Sustainability and Society strategy
oversight, governance and responsibility
Our Chief Executive Officer and Executive Leadership
Team are accountable for our Sustainability and
Society strategy.
Our Chief People Officer, Amanda Cusdin, is executive
sponsor for our Sustainability and Society strategy.
Amanda chairs our Sustainability and Society Steering
Committee, which includes senior representation from
across the business, including the General Counsel and
Company Secretary, Chief Risk Officer and Chief
Corporate Affairs Officer. The Sustainability and Society
team established cross-functional working groups for
each of the strategic pillars. The working groups include
members of the Sustainability team and subject matter
experts from relevant business functions. The working
groups collaborate throughout the year and report
on progress to the Sustainability and Society Steering
Committee. In 2022, we appointed an EVP for
Sustainability and Foundation who is responsible
for the design and implementation of our Sustainability
and Society strategy, with support and oversight from
our Sustainability and Society Steering Committee,
which meets every two months.
Our Board provides oversight of the strategic direction
and the progress being made in achieving our intended
outcomes. The Board also has ultimate responsibility
for approving certain sustainability-related policies.
Sustainability risks and opportunities are channelled
through the Global Risk Committee, which reports to
the Executive Leadership Team, and escalates matters
46
to the Audit and Risk Committee where required.
Remuneration incentives—covering Protect the Planet,
Tech for Good and DEI—are in place for our Executive
Leadership Team.
Business ethics
At Sage, we have well-established processes to help
embed ethical business behaviours and culture across
the organisation and in our interactions with all our
stakeholders. Our commitment to do the right thing for
our customers, colleagues and communities comes first
at Sage—and our Code of Conduct is one way in which
we bring this value to life. Our Code of Conduct provides
guidance for all colleagues on how we do the right thing
and sets clear expectations across Sage for compliance
with ethical standards. We also expect our partners and
suppliers to commit to the same high ethical standards
and ask all partners and suppliers to accept our Partner
and Supplier Codes of Conduct.
For further detail on our policies, please refer to the
FY22 Sustainability and Society Report.
Tax transparency
Sage considers that paying tax is part of our corporate
responsibility and our contribution in taxes is one of the
ways in which we help to build and sustain the economy.
By being more transparent about the taxes that Sage pays,
we have an opportunity to assure our stakeholders that
Sage is doing the right thing. We aim to manage our tax
affairs in a responsible and transparent manner in order
to comply with relevant legislation and disclosure
requirements, to file all relevant tax returns on time and
to ensure the timely payment of all relevant tax liabilities.
For full details please see our
Sustainability and Society Report,
pages 9 to 11.
The Sage Group plc. Annual Report and Accounts 2022 Protect
the Planet
UN SDGs
Read about our contribution to the UN
Sustainable Development Goals in our
FY22 Sustainability and Society Report
page 14
Material topics
4 Energy efficiency and low carbon operation
11 Emissions from use of Sage products
12 ESG Enablement and Support for SMBs
15 Repurpose, reuse and recovery of electronics waste
16 Non-product related emissions in the supply chain
At Sage, we are committed to fight climate change and
protect the planet by focusing on:
• Net Zero—halving our own emissions by 2030 and
achieving Net Zero by 2040;
• Supporting SMBs on their journey to Net Zero; and
• Advocating for enabling policies and standards that
support the transition to a low carbon economy
Sage targeting Net Zero by 2040
We submitted our Science-Based Target for validation in
June 2022, committing Sage to a 50% reduction in Scope 1, 2
and 3 emissions by 2030 against a 2019 baseline, and signed
the ‘Business Ambition for 1.5c’ pledge aligning our target
to the most ambitious aim of the Paris Agreement. We are
also committed to reducing carbon emissions throughout
our value chain. We have signed up to the CDP Supply Chain
programme and have updated our Supplier Code of Conduct
to reflect emissions-related requirements.
Our Net Zero strategy sets out a range of actions to deliver
a reduction pathway in line with our proposed Science-based
target. We have four focus areas:
1. Sustainable Supply Chain Strategy
42% of Sage’s carbon footprint is caused by our supply
chain. Our focus in 2022 has been on developing a supply
chain carbon reduction strategy, which will support our
Net Zero commitments and will be implemented in 2023.
2. Sustainable Property
Although our property related emissions represent a small
percentage of our overall carbon footprint, by working
with landlords and partners we can make a direct impact
on our emissions in the short to medium term.
Our Sustainable Property strategy will continue
to improve the energy efficiency of our buildings,
whilst transitioning to clean low carbon sources of energy.
As at the end of FY22, 24 out of 49 office locations are on
renewable energy contracts, accounting for 45% of our
total electricity consumption.
3. Sustainable Colleagues
Enabling our colleagues to make informed sustainable
choices, for example how we work and travel will be critical
to our Net Zero commitments. Emissions influenced by our
colleagues accounted for 8.4% of our 2022 emissions.
4. Sustainable Products
This year we have improved the accuracy of our footprint
by including the indirect carbon emissions related to
the use of our products, which are the second largest
contributor to our carbon footprint. Our Sustainable
Product strategy will educate our customers on the
environmental benefits of hosting our products
and services within cloud environments.
Supporting SMBs to achieve Net Zero
SMBs face significant barriers to decarbonising such
as lack of time, significant costs, and uncertainty about
quantifying emissions. We are committed to supporting
SMBs in overcoming these challenges. Delivering our
first ESG product offering, we recently acquired Spherics,
now branded Sage Earth, a carbon accounting software
solution that enables SMBs to estimate their carbon
footprint and identify emission hotspots in their
activities and supply chains.
Advocating for enabling policies
and standards
SMBs make up 99% of businesses, and many do not have
access to the expertise and resources required to take
impactful action on climate change. Sage has partnered
with Oxford Economics and the International Chamber of
Commerce (ICC) to better understand SMBs’ economic and
environmental footprint in both the UK and South Africa,
and inform recommendations for governments and policy
makers to support SMBs to transition to more sustainable
business models.
For full details please see our
Sustainability and Society Report,
pages 15 to 19.
47
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Sustainability and Society continued
Tech
for Good
UN SDGs
Read about our contribution to the UN Sustainable
Development Goals in our FY22 Sustainability and
Society Report page 14
Material topics
1 Data protection and security
2 Proper use of customer data
5
Innovation to support customers
9 Ethical Technology
17 Tackling Digital Inequality
Data is empowering people across the globe to run
businesses, develop skills, and thrive. We’re knocking
down barriers to ensure everyone has equal opportunities
to access powerful data and technology. At the same
time, we are seeking to take a leading approach to data
protection, security, and the ethical use of customer data.
The work we do under our Tech for Good strategy is
in direct support of one of our most material issues:
Innovation to Support Customers. This means supporting
SMBs and wider communities by developing new products
and functionalities based on their needs, helping them
to adapt to rapidly changing environments.
Data protection and security
Data security is a key business priority for Sage: we take
the privacy and security of our customers’ data very
seriously and adopt a range of robust and well-established
protective measures, based on industry best practice.
Sage’s approach to cyber security is iterative and under
continual review to match the changing nature of threats
to data protection and security.
Sage’s Global Security Team is responsible for overall
information security and is led by the Global Chief
Information Security Officer. A Chief Information
Security Officer report and dashboard with key metrics
is submitted to every Board meeting, with oversight
by the General Counsel and CEO.
48
The dedicated team is supported by a training and
awareness programme for all staff, as well as a network
of Security Champions. This industry best-practice
approach to achieving ‘Secure by Design’ in software
development involves Security Champions sitting within
technical teams, dedicating 10% of their time to security
activities by influencing security decisions, culture
and practices.
Governance and ethical use of data
Data presents a tremendous opportunity for Sage, our
customers, and society. Maintaining trust and doing the
right thing will allow us to maximise the potential value
of data and use data for everyone’s benefit.
We want our customers to know their data will be safe with
us, and handled in a fair and transparent manner, allowing
them to buy with confidence because they have a deep
understanding of Sage’s product security and data
protection compliance.
As the markets we operate in have evolved, we’ve invested
in data compliance and governance, and data ethics.
This has included strengthening our Chief Data Protection
Officer’s data privacy function, and developing a data
protection accountability framework to ensure compliance
with applicable laws, such as the EU and UK General Data
Protection Regulations (GDPR). We want SMBs to thrive
through adopting digitised business processes, while
maintaining data compliance.
In June 2022, we appointed our first Chief Data Officer,
supported by a central Data Office, and a network of data
leaders across the business, to provide a central point of
focus and clarity for all our data colleagues and activities
across Sage. Under their leadership and building on our
position as a trusted network for SMBs, we have engaged
one of the Big Four Consulting Practices to review and
assist us in evolving and formalising our current data
and AI ethics and principles, and related governance
frameworks, in the first half of FY23.
Tackling digital inequality
As part of Sage’s commitment to tackle digital inequality,
we are partnering with Newcastle United Foundation and
the Institution of Engineering and Technology (IET) to
make Science, Technology, Engineering and Maths (STEM)
careers a new reality for schoolchildren, teenagers, and
young adults through inspiring learning experiences.
For more detail please see next page.
The Sage Group plc. Annual Report and Accounts 2022 Fuel for
Business
UN SDGs
Read about our contribution to the UN Sustainable
Development Goals in our FY22 Sustainability and
Society Report page 14
Material topics
20 Supporting local communities and philanthropy
22 Supporting entrepreneurship and
empowering SMBs
13,871
entrepreneurs supported in
developing countries to grow
sustainable businesses
4,750
students received STEM
learning and resources
149,409
Sage Foundation hours spent
helping our communities
Our Fuel for Business Partnerships
Our Fuel for Business pillar is our approach to tackling
economic inequality by supporting underrepresented
groups. It supports programmes that inspire and empower
entrepreneurs, providing access and inclusion to
entrepreneurship across our communities.
Our work in this area is carried out by Sage Foundation.
Established in 2015, Sage Foundation’s purpose is to
knock down barriers in our communities, mobilising our
colleagues, partners, and customers through impactful
and innovative programmes.
together with business advisory services and mentorship
through BOSS University training webinars co-hosted by
Sage experts.
Kiva and Ashoka—Global
In FY22, Sage Foundation’s $500,000 contribution has
impacted 13,871 entrepreneurs directly (of whom 87% are
women) with loan funds. Sage also funded improvements
to Kiva’s technology that increased and improved lending
capacity to 20 social enterprises. Additionally, 3,864
Sage colleagues used their Sage Kiva credit, funding
$172,000 in loans as part of our overall funding.
ACE—USA: Giving businesses the chance
to thrive
ACE (Access to Capital for Entrepreneurs) is a non-profit
and community development financial institution
(CDFI) that closes gender and racial wealth gaps,
particularly for African American and Latinx communities,
providing affordable loans, coaching, and connections
for entrepreneurs in North Georgia and metro Atlanta.
Through our partnership with Ashoka, Sage is supporting
9 Ashoka fellows to drive innovative and lasting social
change. The fellows are located in the UK, US, Canada,
India, Spain, Portugal, France, South Africa and Indonesia.
We’re creating changemakers within Sage too, with 858
Sage colleague engagements with Ashoka to learn more
about their work tackling inequalities and co-leading
solutions for the common good.
Sage awarded a $350,000 grant to ACE in FY22, which was
used to close 58 loans deploying almost $3m in capital.
Our grant was used to bring down interest rates, making
loans more affordable for small business owners.
The BOSS Network–USA
We are currently in year one of our three-year partnership
with The BOSS (Bringing Out Successful Sisters) Network,
which promotes and encourages the small business spirit
and career development of women of colour. Sage funding
supported 35 Black female entrepreneurs, each of whom
received a $10,000 grant to help grow their business,
IET and FIRST® LEGO® League—UK
Sage Foundation has completed the first year of our
three-year partnership with the IET and FIRST® LEGO®
League. Sage’s support provided STEM learning and
resources to 4,750 students in deprived areas across
the North East of the UK.
For full details please see our
Sustainability and Society Report,
pages 25 to 27.
49
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information TCFD disclosure
The Task Force
on Climate-related
Financial Disclosures
We recognise the importance of
identifying and effectively managing
climate-related risks, both physical
and transitional, to our business,
as well as the opportunities that
climate change can create.
Highlights of progress
• We embraced the most ambitious aim of the
Paris Agreement, signing the Business Ambition
for 1.5°C pledge.
• Our Science Based Target was submitted for validation
in June 2022, committing Sage to a 50% reduction
in Scope 1, 2, and 3 emissions by 2030 against
a 2019 baseline.
The journey so far
In alignment with our values and to comply with
TCFD reporting requirements we have embedded the
management of climate risks and opportunities into our
governance, strategy, and risk management arrangements.
In FY21 we provided an initial voluntary disclosure,
aligned with the recommendations of the TCFD framework
within our FY21 Annual Report. This included an update on
the risk and opportunity screening that would support our
full FY22 disclosure.
Since then good progress has been made to build upon
our first report.
In FY22, following the completion of climate scenario
analysis across three physical risks and one transitional
risk, we have reported our alignment to the TCFD
recommendations (see pages 52 to 67).
Whilst this report focuses on our strategy to mitigate the
physical and transitional risks of climate change to our
business, Sage is also taking action to tackle climate
change across our stakeholders, fostering climate
awareness, and knocking down barriers to action.
• We achieved a B CDP rating.
• We announced the acquisition of Spherics, a carbon
accounting solution to help businesses easily
understand and reduce their environmental impact.
The acquisition reinforces Sage’s commitment to
sustainability, in line with its purpose of knocking
down barriers so everyone can thrive.
Key priorities moving forward
• We will continue to evolve and develop our
understanding of climate risks
• We will be transparent on our risk management
process and on key roles and responsibilities for
oversight relating to climate-related risks
and opportunities.
• We will capture, quantify and consider climate-related
issues as part of major capital expenditure reviews,
acquisitions and divestitures.
• We commit to learn from and implement best
practices from other organisations and third
parties with expertise in climate change.
• We will consider how the Board includes climate-
related issues in decision making on strategy and
performance objectives.
• We will continue to invest in projects that reduce
and remove greenhouse gas (GHG) to help create
a more sustainable future and protect the planet.
50
The Sage Group plc. Annual Report and Accounts 2022 TCFD Disclosure Roadmap
We have established a roadmap to continually improve our understanding of climate-related risks and provide
reporting in line with the recommended disclosures of the TCFD.
Our progress
Looking forward
Governance
• Enhanced executive oversight agreed with
sponsorship for Environment, Social, and
Governance related matters now with the
Chief People Officer, within the Executive
Leadership Team.
• ESG governance was enhanced in the Board
and its Committees’ ways of working.
Strategy
• Sage sustainability strategy launched in
June 2021, with Protecting the Planet being
one of the three key pillars.
• Climate risk and opportunity screening
completed, working with multiple stakeholders
across the Sage business.
Governance
• Assess Board climate competencies and
implement appropriate training to address gaps.
• Further integrate ESG and climate-related
considerations into strategic decision making
within the Board and Executive Leadership Team.
Strategy
• Expand climate scenario modelling to further
enhance our understanding of climate risks and
opportunities on strategy and financial planning.
• Extend risk and opportunity screening to a broad
range to external stakeholders, including
external representation.
Risk management
• Extend our risk assessment process to cover
• Climate scenario modelling completed in 2022
quantitative and qualitative impacts.
for three physical risks and one transitional risk.
Risk management
• ESG designated as a Principle Risk and
integrated within our Enterprise Risk
Management Framework.
• Climate risk mitigation and adaptation
actions identified.
Metrics and targets
• Sage committed to Net Zero by 2040, and to
reduce emissions by 50% by 2030 against
a 2019 baseline.
• Climate-related objectives embedded within
our executive remuneration.
• Continue to integrate climate-related risks
and opportunities into existing Enterprise Risk
Management Framework, business planning and
decision making.
Metrics and targets
•
Implement climate specific metrics and
targets in relation to climate-related risks
and opportunities.
•
Identify and implement metrics which
identify the financial and operational
impact of climate change.
• Continue to improve the measurement of our
Scope 1, 2, and 3 emissions, including the use
of primary data where available.
51
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information TCFD disclosure continued
TCFD compliance status
In accordance with LSE Listing Rule 9.8.6(8)R, the table below sets out whether Sage has made
disclosures fully or partially consistent with the TCFD recommendations and recommended
disclosures, and summarises where the relevant disclosures are addressed. Where we have not
included financial disclosures fully consistent with a recommended disclosure, the steps we are
taking to improve our disclosure are set out in the thematic summary sections, referenced below:
TCFD
recommendations
Theme
Disclosures
Governance
Board’s oversight of climate-related risks
and opportunities
Compliance
status
Where in
our TCFD
disclosure is
this addressed?
Link to
future steps
Partial
Page 53
Page 53
Management’s role in assessing and managing
climate-related risks and opportunities
Partial
Page 54
Page 53
Strategy
Climate-related risks and opportunities
(short, medium and long term)
Full
Page 55
Page 55
Impact of climate-related risks and opportunities
on the business, strategy and financial planning
Resilience of the organisation’s strategy,
considering different climate-related scenarios,
including a 2°C or lower scenario
Partial
Page 60
Page 55
Full
Page 60
Page 55
Risk
management
Processes for identifying and assessing
climate-related risks
Processes for managing climate-related risks
Identifying, assessing and managing
climate-related risks, and integration into
overall risk management
Partial
Page 62
Page 62
Full
Full
Page 63
Page 62
Page 63
Page 62
Metrics
and targets
Metrics to assess climate-related risks and
opportunities in line with strategy and risk
management process
Partial
Page 64
Page 64
Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 GHG emissions, and the related risks
Full
Page 66
Page 64
Targets used to manage climate-related risks and
opportunities, and performance against targets
Partial
Page 67
Page 64
52
The Sage Group plc. Annual Report and Accounts 2022
Governance
Disclose the organisation’s governance around climate related risks and opportunities.
Governance summary
What we did in FY22
Next steps
A
B
Cadence on regular updates to the Board and
its Committees have been established and
embedded, including an update on the
implementation of Sage’s climate strategy
and an update on the progress of Sage’s FY22
TCFD disclosures. Further information can
be found on pages 74 and 75.
The Board will engage further on matters in
relation to ESG and climate change, supporting
the effective management of our sustainability
strategy and management of climate risk.
We will focus on further integrating climate
risk and opportunity information into our Board
decision making process, on a regular
agreed frequency.
Chief People Officer given accountability for
ESG and climate-related matters. EVP
Sustainability and Society appointed and
Sustainability team established.
Climate-related targets were included within
executive remuneration.
Climate-related awareness and training will also be
provided to leadership teams to further strengthen
management oversight and monitoring.
We will enhance the reporting of climate-related
risks and opportunities, as part of our broader
non-financial and sustainability reporting.
A
Describe the Board’s oversight of climate-related
risks and opportunities
Our Sustainability Governance Framework
We have a robust governance system to oversee our
Sustainability and Society strategy, and our role in
fighting climate change and protecting the planet.
The CEO and ELT are accountable for our ESG and climate
strategy. Our Board provides oversight of the strategic
direction and the progress being made in achieving its
intended outcomes, as shown in the organisational
chart below.
The Board has delegated authority to the Audit and
Risk Committee to implement appropriate oversight
of ESG risks, ensuring that the Group has appropriate
mitigations or a plan to introduce mitigations to enable
successful development and execution of the Group’s
Sustainability and Society strategy.
The Board has ultimate responsibility for approving
certain sustainability policies, with ESG matters
delegated to the appropriate Committee as required.
The Board retains overall responsibility for setting
Sage’s risk appetite and for risk management and
internal control systems.
Sustainability risks and opportunities are channelled
through the Global Risk Committee, which reports to
the Executive Leadership Team, and escalates matters
to the Audit and Risk Committee, where required.
53
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information TCFD disclosure continued
Our Sustainability Governance Framework*
Board of Directors
Audit and Risk Committee
Remuneration Committee
Chief Executive Officer (CEO)
Executive Leadership Team
Global risk committee
Sustainability and Society Committee
s
e
t
a
d
p
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r
a
l
u
g
e
r
g
n
i
d
i
v
o
r
P
m
a
e
t
y
t
e
i
c
o
S
d
n
a
y
t
i
l
i
b
a
n
i
a
t
s
u
S
e
h
t
y
b
d
e
L
Working Group:
ESG fundamentals
Working Group:
Protect the planet
Working Group:
Tech for Good
Working Group:
Fuel for Business
Representatives from
relevant business units
Representatives from
relevant business units
Representatives from
relevant business units
Representatives from
relevant business units
*
The structure is descriptive of the interactions of the ESG team with the governance mechanisms at Sage. For the full governance structure
at Sage, please refer to page 114.
B
Describe the management’s role in assessing and managing
climate-related risks and opportunities
Working together to deliver
a successful strategy
The Chief Executive Officer and the Executive
Leadership Team receive regular updates on ESG
activities and performance against our Sustainability
and Society strategy.
The Sustainability and Society Committee is chaired by
the Group’s Chief People Officer and includes senior
representation from across the business, including the
General Counsel and Company Secretary, Chief Risk Officer,
Chief Corporate Affairs Officer and the Chief Architect &
Technology Advisor.
Responsibility for Sage’s climate change strategy,
including the approach to TCFD, is devolved to the Chief
People Officer. Day-to-day implementation of our climate
strategy and co-ordination of the approach to TCFD is led
by the Sustainability and Society team in collaboration
with leaders across Sage functions.
The EVP of Sustainability and Society is responsible for
implementation of our Protect the Planet climate action
plan, including the assessment and management of
climate-related risks, with support and oversight from
our Sustainability and Society Committee.
54
In FY22 Sage established a Sustainability team of subject
matter experts to support the design and delivery of Sage
Sustainability and Society strategy. This team reports to the
EVP of Sustainability and Society who is responsible for the
implementation and day to day delivery of our sustainability
strategy, including our climate strategy and approach to
TCFD. The Sustainability team works in close collaboration
with leaders across the business to drive execution.
The Sage Group plc. Annual Report and Accounts 2022
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning where such information is material.
Strategy summary
What we did in FY22
Next steps
A
B
C
Climate risk and opportunity screening
Continue to review our climate risk landscape,
completed with input from key
internal stakeholders.
identifying new and emerging climate risks and
the changing risk profile of existing risks.
A qualitative climate risk impact assessment
Further expand the financial quantification
was performed informing mitigation and
adaptation strategy.
impact of climate change, including the impact
on business strategy and financial planning,
disclosing our strategy, targets, and initiatives
aimed at mitigating these impacts.
Climate scenario analysis completed for
Evolve our use of climate scenario analysis to
three physical risks (Damage to Facilities,
Hosting Resilience, Workforce Productivity)
and one transitional risk (Changing
Customer Behaviour and Needs).
assess the transitional risk of climate change on
our customer, evaluating market, and sectoral data.
A
Describe the climate-related risks and opportunities the organisation
has identified over the short, medium, and long term
We recognise that climate-related risks and opportunities
have the potential to impact our business.
We are therefore committed to taking the necessary steps
recommended by the TCFD to assess the severity of the
risks, and the value of the opportunities, on our business.
In our FY21 Sustainability Report, we identified
six climate-related risks and five climate-related
opportunities as having the potential to materially
impact our business.
In FY22, working with our external environmental
advisors EcoAct, we consolidated the findings from
the climate risk and opportunity screening exercise,
including interviews with key internal stakeholders
across the Group. The process involved exploring the
range of climate impacts that may present material short,
medium, and long-term risks and opportunities to Sage.
Those identified as the most material were taken
forward for further climate scenario analysis. A detailed
description of the risks and opportunities is provided
in the below table.
55
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
TCFD disclosure continued
Key—Stakeholder groups
Our shareholders
Our colleagues
Our customers
Society
Key—Maturity of assessment
Key—Risk assessment period
H High
Quantitative
Climate Scenario
Analysis performed
M Moderate
Good
understanding,
further work
desirable
L Low
Further work is
required to fully
impact, mitigate
and adapt
Short term
1-5 years
Medium term
5-15 years
Longer term
15-30 years
Sage has selected time horizons that are harmonised with those
of national and international climate policy and goals
Business impact
Mitigation and adaptation
Maturity
The Sage business model is closely
linked to economic activity and
the success of SMB markets.
However, SMB markets and
businesses are more exposed and
less resilient to the impacts of
climate change. An increase in
global disruption due to climate
change could reduce economic
activity and lead to a lower
demand for Sage services.
H
Climate change will impact our customers in different
ways, based on their location and the industry in which
they operate. Sage will continue to progress our
modelling to understand these impacts in more detail,
alongside other macroeconomic and market factors.
In addition, through our Sustainability Hub, Sage will
continue to support our customers’ understanding of
sustainability and adapting to the risks and
opportunities of climate change.
We will work with SMBs to ensure climate resilience
measures are embedded in customer businesses, where
possible, and continue to monitor trends in SMB markets
over time. When climate regulations come into force,
Sage will help and guide SMBs to adapt.
Opening offices, providing
hosting services and outsourcing
data centres are energy intensive
operations. If the cost of carbon
increases, this could make the
Group’s operating costs more
expensive. Sage may need to
mitigate costs and consider
where these are absorbed.
2022 has seen extreme volatility in energy prices
and supply globally. As a business, Sage has limited
exposure to high energy prices. However, we will
continually monitor global prices and supply, including
within our supply chain, and respond accordingly.
M
At present, we do not have any short-term plans to offset
our carbon emissions. However, we do recognise that
carbon offsetting will potentially play a part to remove
hard to abate residual emissions as we move towards
our Net Zero goals. Sage plans to undertake a more
comprehensive review of our carbon offsetting approach
in FY23, to allow us to develop a proactive approach.
Stakeholders’ expectations
regarding ambitious carbon
targets and climate advocacy are
increasing. They are applying
greater scrutiny to how Sage aligns
all business activities to its Net
Zero transition plan. Sage may
suffer reputational damage if
targets are missed or if it is not
sufficiently active in this space.
Our customers, colleagues and society in general are
increasingly climate conscious. Sage is committed
to tackling the climate crisis, in line with its purpose
of knocking down barriers so everyone can thrive. Sage
has pledged to fight climate change and help protect
the planet by halving its own emissions by 2030 and
becoming Net Zero by 2040, by supporting SMBs to
get to Net Zero, and by advocating for policy and
regulatory frameworks to support the transition
to a low-carbon economy.
L
Risks and opportunities
identified
Transition risks
Changing Customer
Behaviour and Needs
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Market
Climate scenario
analysis
Increasing Cost of
Energy and Carbon
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Regulation
Reputational
Damage
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Reputation
56
The Sage Group plc. Annual Report and Accounts 2022
Risks and opportunities
identified
Physical risks
Workforce
Productivity
Time horizon
Short term
Stakeholder impact
Sub-Type
Chronic Physical
Climate scenario
analysis
Damage to Facilities
Time horizon
Short term
Stakeholder impact
Sub-Type
Acute Physical,
Chronic Physical
Climate scenario
analysis
Business impact
Mitigation and adaptation
Maturity
An increasing number of
extreme weather events may leave
offices and homes unfit for work.
This could reduce workforce
productivity by making it difficult
for employees to work during
certain times.
Last year, Sage launched Flexible Human Work, our
signature approach to where and when we work at Sage.
It is a principle-based approach that recognises that
no one size fits all, and our leaders remain committed
to it. We are investing in flexible working structures
that support collaboration, whilst also creating and
enhancing opportunities for teams to come together.
Our business continuity plans and supporting
technology infrastructure enabled a transition to
home-working across our organisation during the
pandemic, demonstrating the flexibility of our
workforce to adapt to extreme events. We will continue
to refine our flexible working model “Flexible Human
Work”, including in the areas of climate resilience and
sustainability. Moving forward, Sage will evaluate
resilience measures for our home and hybrid workers,
and how Sage can better enable a safe and sustainable
hybrid working environment.
Extreme weather events have the
potential to disrupt or damage
Sage sites/facilities. Flooding,
heatwaves, wild fires, droughts,
and rising sea levels could all
impact the business. Insufficiently
prepared facilities could be
unable to deal with more frequent
and intense occurrences of
such events.
The dynamic and long-term nature of climate change
has implications for business continuity (BC) and our
broader business objectives. The BC programme seeks
to ensure that effective business continuity practices
are in place, so that our colleagues are better able to
prevent, rapidly respond to, and help the organisation
recover from operational disruptions. Our business
continuity plans will assess the impacts of climate
change, and ensure that Sage is adapting well to
those impacts, with the objective of the long-term
sustainability of the organisation.
Our future property strategy will also incorporate
climate risks, building upon our climate scenario
analysis output. Sage will seek to ensure a positive
customer experience is maintained and limit any
associated financial damage.
H
M
57
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
TCFD disclosure continued
Key—Stakeholder groups
Our shareholders
Our colleagues
Our customers
Society
Key—Maturity of assessment
Key—Risk assessment period
H High
Quantitative
Climate Scenario
Analysis performed
M Moderate
Good
understanding,
further work
desirable
L Low
Further work is
required to fully
impact, mitigate
and adapt
Short term
1-5 years
Medium term
5-15 years
Longer term
15-30 years
Sage has selected time horizons that are harmonised with those
of national and international climate policy and goals
Risks and opportunities
identified
Physical risks
Hosting Resilience
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Acute Physical,
Chronic Physical
Climate scenario
analysis
Business impact
Mitigation and adaptation
Maturity
Sage has a number of centralised
public cloud providers, as well as
hosting services. This infrastructure
could be vulnerable to persistent
and extreme weather events. These
events could become more frequent,
reducing service availability and
customer experience.
H
Sage considers climate risk in the same way as other
risks at hosting sites. As a cloud-based software provider,
we recognise that the resilience and security of our
services are of critical importance to our customers.
Sage works with a variety of hosting providers to provide
hosting services to our customers and to support our
internal enterprise applications, and has limited
visibility of cloud providers’ climate risks and resilience
levels. For hosting sites, an important next step is to
collect and assess actual GPS co-ordinates, risk plans
and availability zones from a climate perspective. Sage
will continue to work with our providers to ensure that all
operations are resilient, and existing business continuity
plans are addressing climate change as a risk factor.
Opportunities
Retaining and Hiring
Superior Talent
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Efficient and Mindful
Workforce
It is increasingly important
for employers to demonstrate
sustainability as a cultural value.
This can help attract and retain
environmentally conscious talent.
A more climate-informative
hiring process can show how
active Sage is in retaining and
attracting talent.
We will continue to focus on Sage’s purpose of knocking
down barriers so everyone can thrive. To do this, we will
continue to create a more sustainable future for our
colleagues, customers, shareholders, and society,
through our Sustainability and Society strategy,
delivering on our values and protecting the planet.
M
58
The Sage Group plc. Annual Report and Accounts 2022
Risks and opportunities
identified
Opportunities
Renewable Energy
Procurement
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Energy Source
Business impact
Mitigation and adaptation
Maturity
Sage could ingrain renewable
energy provision into our facility
management plans. This would
incentivise Sage building
managers, landlords, and hosting
services to develop and innovate
more carbon efficient buildings.
The combined pressure from Sage,
its peers, and society can help
reduce carbon emissions and costs.
Working with our property teams and landlords, our
Sustainable Property strategy will enable Sage to
transition our property estate to clean, low-carbon
sources of energy, supporting our ambition to reduce
emissions by 50% by 2030 and achieve Net Zero
by 2040.
H
Site Strategy
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Resource Efficiency
The Covid-19 pandemic has shown
that office-based work is not
business critical. This presents an
opportunity to consolidate some
sites and facilities due to lower
footfall, ultimately helping to
reduce the business’s carbon
footprint, operational costs,
and vulnerability to extreme
weather events.
Sage will continue to review our property strategy
to reflect changing business needs, including the risks
and opportunities associated with climate change.
M
New Products
and Services
Time horizon
Short to medium term
Stakeholder impact
Sub-Type
Products and Services
Climate change demands are
presenting a new opportunity
for Sage to develop products
and services for its SMB customers’
that will help them tackle the
challenges of climate change
and put sustainability at the core
of their business.
Sage has a unique opportunity to help accelerate global
climate awareness and action, whilst actively managing
and reducing the long-term climate-related risks posed
to the Group.
M
In 2022, we announced the acquisition of Spherics,
a carbon accounting solution to help businesses easily
understand and reduce their environmental impact.
The acquisition reinforces Sage’s commitment to
sustainability, in line with its purpose of knocking
down barriers so everyone can thrive.
Enhanced Brand
Time horizon
Short to medium term
Stakeholder impact
Sage has a unique opportunity to
help SMBs fight climate change
and be their voice for the future,
supporting them when it comes
to lobbying for change.
Sub-Type
Reputation
M
Sage has pledged to fight climate change by halving
its own emissions by 2030 and becoming Net Zero by
2040, by supporting SMBs to get to Net Zero, and by
advocating for policy and regulatory frameworks to
support the transition to a low-carbon economy.
We recognise that it is important we demonstrate
progress against our commitments. Further
information can be found within our FY22
Sustainability and Society Report.
59
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TCFD disclosure continued
B
Describe the impact of climate-related risks and opportunities
on the organisation’s businesses, strategy, and financial planning
Substantial progress has been made under this
thematic area. Building upon the risk and opportunity
screening exercise in FY21, Sage prioritised four material
risks based on impact scale and time horizon: three
physical (Damage to Facilities, Hosting Resilience,
and Workforce Productivity) and one transitional risk
(Changing Customer Behaviour and Needs) which were
modelled under a 1.5˚C and 4˚C warming scenario.
Completed in 2022, the modelling examines the
vulnerability of Sage operations to changing physical
and transitional climate risks (heatwaves, coastal
flooding, river flooding, cyclones, water stress and
climate impact on GDP) across a long-term time horizon
up to 2050.
We will continue to focus on mitigating the climate risks
that emerged as material as part of our scenario analysis
while we also explore the opportunities.
We believe Sage is uniquely positioned to help accelerate
global climate awareness and action, whilst actively
managing and reducing the long-term climate-related
risks posed to our company.
The acquisition of Spherics, a carbon accounting
solution, will help small businesses more easily
understand and reduce their environmental impact.
The acquisition demonstrates Sage’s commitment to
sustainability, and its ambition to knock down barriers for
SMBs and support them in their journey towards Net Zero.
In the table above, we provide an overview of risks,
business impacts, mitigating activities, and
opportunities created through adapting to
certain impacts.
C
Describe the resilience of the organisation’s strategy, taking into consideration
different climate-related scenarios, including a 2°C or lower scenario
Climate modelling approach
Working with our environmental partners EcoAct, climate scenario analysis was undertaken to evaluate our most
material physical and transition risks under high and low-carbon scenarios. We have set out the modelling approach
and identified findings below.
Physical Scenario and Transition Scenario
• To determine the exposure of Sage sites to climate
risks (Hosting Resilience, Damage to Facilities and
Workforce Productivity), we used regional climate
models RCP2.6 (1.6ºC-2ºC) and RCP4.5 (2.1ºC-3ºC)
and RCP8.5 (3.1ºC-4ºC) forecasting to 2050, as
explained in the below graph.
• For the transition risk (Changing Customer Behaviour
and Needs), we used the Network for Greening the
Financial System (NGFS) scenario framework,
analysing results under both low and high-carbon
scenarios using the Below 2 Degrees (1.7°C+
temperature implied) scenario and the Current
Policies scenario (3°C+ temperature impacted)
forecasting impacts until 2100.
• The NGFS model uses these two scenarios to assess
the impacts of GDP under low and high-degree
warming. The model results show a percentage
of GDP change.
• Vulnerability interviews were then performed with
senior stakeholders from across the business,
including Property, Cloud Operations, People and
Product teams, to determine the sensitivity and
adaptability of Sage sites/countries to the risks.
A range of physical indicators were used, including
within our modelling approach:
• Summary of physical indicators
1. Cooling degree days
2. Heatwaves
3. Water stress
4. Cyclones
5. Coastal
6. River flooding
60
The Sage Group plc. Annual Report and Accounts 2022 CMIP5 models, RCP scenarios
Historical (42)
RCP 2.6 (26)
RCP 4.5 (32)
RCP 6.0 (17)
RCP 8.5 (30)
1900
1950
2000
Year
2050
2100
)
C
º
(
g
n
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r
a
w
e
c
a
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u
s
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G
5
4
3
2
1
0
-1
Note:
RCP8.51—Business as usual (~4ºC)
We are currently on a pathway to 3–4°C
of warming above pre-industrial levels
(“business-as-usual”). A 4°C pathway results
from climate inaction and would lead to more
severe physical risks.
RCP4.51—Slowly declining
emissions (~2.4ºC)
According to this scenario, climate policies
are invoked to limit emissions and all nations
undertake emissions reductions simultaneously
and effectively. Reductions would be slower
than in scenario 2.6. A 2-3°C pathway would still
result in an increase in physical climate risks.
RCP2.61—Slowly declining
emissions (~2ºC)
The latest climate science suggests we should
limit warming to well below 2°C, with efforts to
limit this to 1.5°C above pre-industrial levels.
A 2°C pathway results from rapid societal/
political action and strongly declining
emissions. This would still lead to an
increase in physical climate risks.
1. RCP = Representative concentration pathway. RCP2.6, RCP.4.5 and RCP8.5 are projections of greenhouse gas emissions and concentrations defined
by the International Panel on Climate Change (IPCC).
Resilience of our strategy to climate risk
• The work done to date did not highlight severe
strategic risk to Sage resulting from climate change
in the short to medium term. However, we recognise
further work is required to expand the quantification
of the financial impact at this stage. We also
recognise that climate related risks are not static.
We will continue to actively monitor climate related
risks and opportunities as the models and our
understanding evolves.
• Should climate-related risks arise, Sage has a range
of measures and activities in place to manage
identified climate change impacts, as detailed in
the following pages.
• Sage has pledged to fight climate change and help
protect the planet, which includes commitments to
reducing our environmental impact and those of
our value chain. Our commitment to our Protect the
Planet strategy is authentic and we will continue
to transparently report on progress in our TCFD
disclosures and our Sustainability Report.
Climate modelling—What we learnt
Physical risk—Workforce Productivity and Damage
to Facilities: though an analysis across all Sage office
sites, ten of these sites are identified as medium-high
risk of climate impact under a future 4°C warming
scenario, with water stress being the primary factor
across most sites. Sage vulnerability was considered low,
mitigated through proven adoption of hybrid working and
distribution of staff across these sites.
Physical risk—Hosting Sites: a review of 79 Sage product
(supporting our customers) and enterprise (supporting our
internal enterprise applications) hosting locations
identified 36 sites, across all locations, with medium risk
of climate impact under a future 4°C warming scenario,
across all indicators. Stress and extreme heat were
identified as the primary risk factors. Sage’s vulnerability
was considered low-medium, mitigated through the
existing resilience and business continuity plans.
Transition risk—Changing Customer Behaviours and
Needs: the analysis focused on the regional variations in
GDP growth due to climate risk over a long-term (2100)
horizon. This was expressed as a relative percentage
deviation from a baseline GDP growth scenario. GDP
impact is seen to be highest in South Africa and US (6%
relative reduction), with the UK and Ireland impacted
by 1-2% compared with modelled growth forecasts.
Sage’s vulnerability was considered low, given the
limited relative impact of “global” GDP growth on
Sage’s performance.
61
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TCFD disclosure continued
Risk management
Disclose how the organisation identifies, assesses, and manages climate-related risks.
Risk management summary
What we did in FY22
Next steps
A
B
C
External assurance undertaken to review
climate-related risks and opportunities
against industry best practice.
Completed climate scenario analysis across
three physical risks and one transitional risk.
ESG approved as a Principal Risk, and
Climate Change placed as a sub-risk.
Continue to monitor and assess emerging climate
risks across the value chain.
Broaden stakeholder engagement beyond our own
operational environment, taking input from a range
of external parties.
Develop and further integrate climate mitigation
and adaptation actions.
Climate risk vulnerability integrated into
existing risk management and business
continuity planning frameworks.
Continue to improve the maturity and alignment
of climate-related risk for each of our markets and
the Group.
A
Describe the organisation’s processes for identifying and assessing
climate-related risks
In 2021, Sage started to integrate climate-related risks as
part of our Enterprise Risk Management policy and
framework. The process maintains a consistent approach
to the management of climate-related risks, in line with
all other risks managed across the business, including
existing and emerging regulatory requirements.
We recognise the impact and materiality of physical and
transitional risks will be dependent on internal and
external factors, and these will evolve over time.
Physical risks are expected to increase through more
severe and frequent extreme weather events, as
demonstrated through recent heatwaves within Europe
during 2022.
Equally, Sage expects transitional risks to have an
increasing impact on other Principal and emerging risks,
as the pace of transition to Net Zero increases.
In FY21, we identified a list of climate risks and
opportunities, using a combination of regulatory
guidance, risk, and TCFD best practice and internal
expert judgement, supported by our environmental
consultants EcoAct.
During FY22, we completed climate scenario analysis
across four risks to explore and assess the resilience
of our business to climate change.
Recognising the uncertainty around the timing in which
risks from climate change may materialise, initial
prioritisation was given to those physical and transition
risks deemed most material to the Group’s risk profile.
This has helped develop our understanding of which risks
could potentially have the largest impact on Sage across
different time horizons and the steps to better manage
and adapt to these risks.
62
The Sage Group plc. Annual Report and Accounts 2022 B Describe the organisation’s processes for managing climate-related risks
The Board approved ESG as a Principal Risk,
demonstrating the importance of the environment and
climate change to Sage and ensuring its integration
within the Enterprise Risk Management Framework
(see page 103).
Sage operates a formal risk governance structure to
ensure risk management is at the forefront of decision
making. Governance arrangements allow for clear points
of escalation, while ensuring adequate oversight is in
place to manage and mitigate risk exposures.
As a Principal Risk, it is assigned an executive owner,
our Chief People Officer.
The executive owner is responsible for the overall
management of the risk, ensuring that adequate controls
are in place and that the necessary action plans are
implemented should the risk be outside of Sage’s
risk appetite.
More information regarding the Group risk management
approach can be found in the Risk Management section
of this report on pages 90 to 95.
C
Describe how processes for identifying, assessing and managing climate-related
risks are integrated into the organisation’s overall risk management
ESG risks, including the associated climate-related
risks, are managed and assessed as part of our Principal
Risk assessment process, aligned to our Enterprise
Risk Management Framework.
In addition, due to the nature of the climate-related
risks to our business and strategy, many elements are
already captured within other Principal Risks in our
existing Enterprise Risk Management Framework, such
as Understanding Customer Needs and Developing and
Exploiting New Business Models. This approach enables
us to capture a more holistic picture of the climate-
related risks.
Supported by our central Sustainability and Society team,
functions across Sage are responsible for identifying,
assessing, and managing different types of climate-
related risks within their respective areas of responsibility.
For example, climate risks associated with cloud hosting
are considered by the Sage Product team, whereas physical
risks to the built environment resulting from extreme
weather are considered by the Sage Property team.
63
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information TCFD disclosure continued
Metrics & targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Metrics and targets summary
What we did in FY22
Next steps
A
B
C
Developed our Net Zero strategy to underpin
Publish progress against our Science Based
our near-term climate commitments.
Target commitments.
Expanded our emission scope to cover all of
Scope 3 categories, including investments
and use of sold goods.
We will continue to improve the calculation of
GHG emissions, with an increased use of Supplier
primary data sources to improve the accuracy of
our Scope 3 calculations, sample data to support
home-working and commuting calculations,
and the development of a use of sold goods
calculation model.
Submitted our Science Based Target for
We will incorporate additional metrics related to
validation, committing to reducing
emissions across Scope 1, 2, and 3 by 50%
by 2030, from a 2019 baseline.
the physical and transition climate risks managed
under our Enterprise Risk Management Framework.
Metrics under consideration include the
percentage/volume of hosting and office locations
where climate risk is integrated into existing
resilience and business continuity planning.
A
Disclose the metrics used by the organisation to assess climate-related risks and
opportunities in line with its strategy and risk management process
The TCFD recommends that organisations disclose
the metrics and targets they use to assess and monitor
climate-related risks and opportunities, including
their Scope 1, 2, and 3 emissions.
Our strategy is focused on four pillars of activity,
as illustrated in on page 65 which underpin our 2030
commitments, and provide a platform for achieving
Net Zero in 2040.
Our Net Zero strategy is underpinned by our commitment
to become Net Zero in our operations by 2040, and reduce
our emissions by 50% by 2030 across Scope 1, 2, and 3
from a 2019 baseline. To support the achievement of our
near-term commitment, we submitted our target for
verification with the Science Based Targets Initiative
(SBTi) in June 2022.
Sage has been reporting on energy and carbon emissions
since 2018, providing us with a robust baseline from
which to plan our journey to Net Zero. Our carbon
emissions calculations are also subject to independent
limited assurance. Our most recent global emissions
footprint and targets can be found on pages 17 and 49 to 51
of our Sustainability Report.
This strategy will include metrics to monitor progress
against all emissions reductions. Absolute energy and
GHG emissions metrics are currently used to track
progress against emissions targets.
64
Executive remuneration
At the 2022 AGM, shareholders approved the current
Remuneration Policy which incorporates ESG
priorities in the executive long-term incentive plan.
The Performance Share Plan (PSP) outcomes for the
Executive Directors are based on a framework of
performance measures and targets, set each year by
the Remuneration Committee. A proportion of the
Executive Directors’ PSP awards each year are driven
by strategic non-financial measures; in FY23 this
includes a measure relating to climate. This measure
captures a specific GHG reduction ambition, linked to
our 2030 aim of reducing our emissions by 50% from
the FY19 baseline.
Read more in our Directors’ Remuneration Report on
pages 148 to 181.
The Sage Group plc. Annual Report and Accounts 2022 Our Net Zero strategy
Our Net Zero strategy sets out a range of actions to deliver a reduction pathway in line with
the 1.5°C ambition of the Paris agreement. Our primary focus is absolute emissions reductions
to achieve our 2030 50% reduction target in alignment with the SBTi, excluding offsetting.
50%
Scope 1, 2, and
3 emissions reductions
by 2030 against
a 2019 baseline
Net Zero by
2040
Sustainable
Supply Chain
Sustainable Property
Sustainable
Colleagues
Sustainable Products
Objective
Partner with our suppliers
to reduce their emissions
and deliver Net Zero.
Objective
Reduce the carbon and
environmental impact of
our property portfolio.
Enabler
Implementation of
Sustainable Supply Chain
Strategy, combining
people, process, and
technology to accelerate
our suppliers on their
sustainability journey.
Enabler
Transition our energy
supply to low-carbon
renewable sources and
high energy efficiency.
Objective
Harness the power of
our colleagues and the
choices they can make to
tackle climate change.
Enabler
Drive climate awareness
and action among
colleagues, across
home-working, travel,
and commuting.
Objective
Transition our customers
from on-premise to cloud
native or low carbon
alternatives.
Enabler
Educate customers on
the environmental
benefits of cloud hosting,
including improved
visibility of the carbon
impact of our products.
65
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information TCFD disclosure continued
B
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions and
the related risks
Sage calculates and discloses emissions from our Scope 1 and Scope 2, in compliance with Streamlined Energy and
Carbon Reporting (SECR) regulations.
Scope 1 and 2 emissions: UK and global1
Total GHG emissions data
Emissions from activities which the Company owns
or controls, including combustion of fuel and operation
of facilities (Scope 1)/tCO2e
Emissions from the purchase of electricity, heat, steam,
or cooling by the Company for its own use (Scope 2
Indirect) Location-based emissions (tCO2e)
Scope 2 (Indirect) Market-based emissions (tCO2e)
Total gross Scope 1 and location-based Scope 2
emissions (tCO2e)
Energy consumption* used to calculate above
emissions (kWh)
Carbon intensity ratio: location-based
CO2e emissions reported above normalised to
tCO2e per total GBP £1,000,000 revenue (Scope 1 and 2) **
(tCO2e/revenue)
Current reporting year
Oct 2021—Sept 2022
Previous reporting year
Oct 2020—Sept 2021
Previous reporting year
Oct 2019—Sept 2020
Global
(excluding
UK and
offshore
area)
UK and
offshore
area
Global
(excluding
UK and
offshore
area)
UK and
offshore
area
Global
(excluding
UK and
offshore
area)
UK and
offshore
area
250
548
666
395
874
2,110
652
3.3
2,853
2,428
1,110
162
3,216
3,138
1,180
247
5,927
6,004
902
3,401
1,776
3,611
2,054
8,036
4,276,721 10,479,910 8,636,694 9,899,169 9,203,396 21,259,169
2.2
2.2
4.7
2.5
5.4
5.3
1. The table sets out Sage’s mandatory reporting on greenhouse gas emissions and global energy use pursuant to the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008, as amended by the Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 and the SECR under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018.
*
Energy consumption includes all energy use related to Scope 1 and 2.
** Global revenue in FY22 is £1,949m for Sage during the reporting period. It was £1,846m for the previous year’s reporting period.
Sage also screens and discloses emissions across all
relevant Scope 3 categories.
Further detail on our Scope 1,2 and 3 GHG emissions and
protocol aligned methodology and emissions can be
found in our Sustainability and Society Report on
pages 49 to 51.
Energy Efficiency Actions
We continued to manage our sites effectively and
efficiently in FY22. A list of the energy efficiency actions
which took place in FY22 are found below:
• We have completed the first phase of our Sustainable
Building Plan by completing energy audits of key
offices. We are currently developing investment case
options for future energy reduction projects.
• Support for electrification of company cars—
we aim to be fully electric by 2030 and are supporting
colleagues through our Electric Vehicle Salary
Sacrifice Scheme.
• We continue to make changes to our office portfolio
as part of our Office Rationalisation Plan, by moving
to smaller more efficient offices and reducing the size
of current offices e.g. closing our Irvine and Toronto
offices and moving colleagues from Bytom (226 sqm)
in Poland to Katowice (39 sqm), a smaller and therefore
less energy intensive office space.
• We have already transitioned close to half of our
offices to renewable energy contracts. Our Sustainable
Property strategy will continue to improve the energy
efficiency of our buildings, whilst transitioning
buildings to clean low-carbon sources of energy.
Sage has seen a year-on-year increase of certified
renewable energy and for FY22 Sage reached 45%,
an increase of 14% from FY19.
•
In Mohali, India, 200 kWp Solar PV was installed in 2022
with another 100 kWp to be confirmed during FY23.
• The IT department continued their Reuse, Resell,
Recycle policy. This involves collecting old equipment
and ensuring it is upcycled and recycled. Sage sells
66
The Sage Group plc. Annual Report and Accounts 2022 the equipment to an external party and donates the
proceeds to charity. The initiative raised £50k,
meaning we were able to donate £25k to United Nations
High Commissioner for Refugees (The UN Refugee
Agency) and £25k to Polish Humanitarian Action.
• We continue to use LED lighting where possible and
enforce energy saving activities such as sensor
lighting and automation, HVAC control automation
and energy efficiency measures.
Methodology
Our methodology underlying our disclosed emissions
remains consistent with the previous year and is based
on the Environmental Reporting Guidelines: including
mandatory greenhouse gas emissions reporting guidance
(March 2020) issued by the Department for Business,
Energy & Industrial Strategy (BEIS). This methodology
is consistent with the World Resources Institute’s
Greenhouse Gas Protocol Corporate Accounting and
Reporting Standard.
We have also used the UK Government emissions
factors for company reporting (published by BEIS in 2022),
combined with the most recent International Energy
Agency (IEA) international conversion factors (2021) for
non-UK electricity within our reporting methodology.
For Scope 3 emissions sources, we have used a combination
of the Comprehensive Environmental Data Archive
(CEDA version 6) and UK government factors. As our data
collection improves, we aim to collect more supplier
specific data. For the first time in FY22, our purchased
goods and services calculation has used supplier specific
data from CDP. We aim to increase the proportion
further in subsequent years through the CDP supply
chain questionnaire.
In some cases, we have extrapolated total emissions by
using available information from part of a reporting
period and extending it to apply to the full reporting year.
For example, this has occurred where supplier invoices for
the full reporting year were not available prior to the
publication of this year’s Annual Report and Accounts.
Extrapolations have taken place based on a hierarchy
of data availability in line with the Greenhouse Gas
Protocol’s (GHGP) guidance for carbon accounting.
For further details, our methodology document can be
found at www.sage.com/investors.
Reporting period
Our Mandatory Greenhouse Gas reporting period is
1 October 2021 to 30 September 2022 and is aligned
with our financial reporting year.
Organisational boundary & responsibility
We report our emissions data using an operational control
approach to define our organisational boundary which
meets the definitional requirements of The Companies
Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 and the UK Streamlined Energy & Carbon
Reporting (SECR) regulations 2019 in respect of the
energy consumption and emissions for which we are
responsible. Under this approach, we have accounted for
100% of GHG emissions from operations over which Sage
has control.
Carbon intensity
To express our annual emissions in relation to
a quantifiable factor associated with our operational
activities, we have used ‘annual revenue’ in our intensity
ratio calculation as this is the most relevant indication
of our growth and provides for a good comparative
measure over time.
C
Describe the targets used by the organisation to manage climate-related risks
and opportunities and performance against targets
Our strategy is underpinned by our
commitment to Net Zero
We use climate targets across Scope 1, 2, and 3 to measure
and monitor performance in managing climate-related
risks. In 2022 we submitted our targets for validation with
the SBTi.
To demonstrate our commitment to fight climate change
we have embedded climate targets within our Directors’
Remuneration Policy (see pages 148 to 181).
67
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Non-financial information statement
Ethics and
governance
Human rights
Sage expects all colleagues, partners and suppliers
to adhere to international standards on human rights,
including with respect to child and forced labour, land
rights and freedom of association, among other elements.
We take a zero-tolerance approach to slavery and human
trafficking and are strongly committed to ensuring that
all Sage colleagues, as well as the people who work on
our behalf, are protected. Our full expectations are
included in our Partner and Supplier Codes of Conduct
and Modern Slavery Act Statement, which are available
on our website at sage.com/investors/governance.
We conduct appropriate due diligence on our partners,
and all of our partners and suppliers are obliged to
adhere to the principles set out in the Codes, including
on human rights.
Anti-bribery and corruption
Sage has an anti-bribery and corruption policy and
associated whistleblowing procedures designed to ensure
that colleagues and other parties including contractors
and third parties are able to report any instances of poor
practice safely through an independent organisation.
All reports received via this or any other reporting
mechanism are thoroughly investigated and reported to
the Audit and Risk Committee, which reviews each case
and its outcomes. None of our investigations during
FY22 identified any systemic issues or breaches of our
obligations under The Bribery Act 2010. The anti-bribery
and corruption policy is supported by our gifts &
hospitality and conflicts of interest policies and their
supporting declaration and approval procedures, as well
as periodic audits and reminders.
Governance and oversight
We recognise that assurance over our business
activities and those of our partners and suppliers
is essential. During 2022 we monitored and reported
on the completion of our mandatory Personal Data
Protection training for all colleagues. You can read
more about our risk management and principal risks
from page 90 onwards.
Tax strategy
We publish our tax strategy on our website and are
committed to managing our tax affairs responsibly and
in compliance with relevant legislation. Our tax strategy
is aligned to our Code of Conduct and Sage’s Values
and Behaviours and is owned and approved by the
Board annually.
Non-financial information
Information as required by regulation can be found on the
following pages:
Environmental matters
Our employees
Social matters
Human rights
Anti-corruption and anti-bribery
pages 44 to 45, 47,
and 50 to 67
pages 38 to 43,
70 and 71
pages 44 to 46,
48 and 49, and
74 and 75
page 68
page 68
68
Business model
KPIs
Principal risks
pages 22 and 23
pages 36 and 37
pages 96 to 103
The Sage Group plc. Annual Report and Accounts 2022
Stakeholder
Engagement
Ensuring authentic, proactive and
positive stakeholder engagement
across all markets is key to how Sage
operates, and it helps to secure the
Group’s long-term success.
Each stakeholder group requires a distinct approach
in terms of being fostered and to build a foundation of
mutual respect, trust and understanding. Stakeholder
considerations and engagement form a crucial aspect
of Board discussions and decision making. Sage’s
Section 172(1) statement for FY22 on pages 78 to 81
demonstrates how Sage’s stakeholders influenced some
of the decisions taken by the Board during the year.
When preparing the annual Board agenda and the Non-
executive Directors’ engagement plan for FY22, the Board
sought to ensure that it supported delivery of the Board’s
annual objectives by providing good coverage across all
of Sage’s stakeholder groups. Engagement plans are
designed to complement and enhance Board agendas and
ensure the right mix, volume and range of activities were
achieved. Key stakeholder considerations were also
integrated into Sage’s Board papers to enable the Board to
consider these in their discussions and decision making.
The Board reviews Sage’s key stakeholders each year
to ensure the assessment of their needs and interests
remains relevant and aligned with the Group’s
strategy. This year, upon review, and in order to
better align with Sage’s evolved strategic framework
and strategic priorities, the Board has approved
streamlining and simplifying the number of key
stakeholder groups from five to four. The four groups
are Colleagues, Customers, Society and Shareholders,
with Partners having been merged into Customers
to better align with Sage’s strategy.
In addition to the four stakeholder groups, Sage
recognises that other groups of stakeholders are also
relevant to the Group’s activities. The Board has regard for
and engages with such groups to the extent that they are
affected by, and themselves affect, the operations of the
Group. Sage’s suppliers for instance, (including third
party hosting providers), are significant to Sage and its
business, and therefore the Group seeks to develop and
foster relationships with them to maximise value and
efficiency. Through our governance model, which the
Board ultimately oversees, Sage implements a thorough
supplier onboarding process and procurement lifecycle
(including to appropriately manage data privacy and
security matters). A Supplier Code of Conduct has been
developed, which sets out clearly the standards of
behaviour we expect from all our suppliers across a range
of issues, which all suppliers are required to follow.
This defines our expectations of responsible business
and behaviour underlying our strategic focus on customer
needs, in line with the high standards of business conduct
that Sage strives to promote.
The following pages set out key stakeholder categories,
the forms of Board engagement with those stakeholders,
as well as the wider business engagement and the impact
of such activities conducted during the year.
Colleagues
Read more 70
Customers
Read more 72
Society
Read more 74
Shareholders
Read more 76
69
Governance ReportThe Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsStrategic Report Stakeholder engagement continued
Colleagues
We are committed to people, driven by innovation,
energising everyone to make a difference
Why they matter to Sage:
• Colleagues are the lifeblood of Sage. Every day they
How Sage engages at Board level:
• The Board Associate role aims to enhance decision
serve millions of customers around the world through
their innovation, integrity and passion. Sage aims
to provide the best environment for its colleagues,
providing them with the opportunity to grow, innovate
and transform in an inclusive environment, enabling all
colleagues to succeed together
What matters to them:
• Colleagues want to work for a company that values
them, and provides them with an opportunity to be
themselves and thrive. They expect Sage to address
societal issues from diversity and inclusion to the
future of work. Our colleagues are proud of the work we
do in our communities through Sage’s Sustainability
and Society strategy and Sage Foundation
making by the Board, and is a key feature of our chosen
method of engagement with the workforce for the
purposes of the UK Corporate Governance Code 2018
(the “Code”). The Board hears feedback from the Board
Associate at meetings and the Board Associate
undertakes internal initiatives to increase the
visibility of the role and communicate its impact on
Board discussions and decision making. Sage’s new
Board Associate hosted Derek Harding, Non-executive
Director for an engagement day prior to the July
Board meeting at Sage’s office in San Jose. This was
followed by a separate Board engagement day with
the local leadership team focusing on the North
American business
• The Board received regular updates on colleagues,
including on the results of Sage’s bi-annual
colleague surveys
•
•
•
•
•
The Board received regular updates on the
implementation of the Group’s DEI strategy to monitor
progress on delivery and ensure Sage achieves its
three DEI principles of Diverse Teams, Equitable
Culture and Inclusive Leadership
Colleague engagement sessions were held throughout
the year, including talent lunches with the Board in
San Jose and Newcastle
The Chair undertook visits to North America, South
Africa and France during the year to meet with
colleagues in these regions and to gain an
understanding of their work
The Board oversees Sage’s health and safety
performance and approach to monitoring and
reporting of colleague incidents
A key part of Board engagement is the focus on culture
throughout the Group. Further details on how the
Board monitors culture can be found on page 124
• The Board received regular updates on Sage
Foundation colleague engagement and participation
70
The Sage Group plc. Annual Report and Accounts 2022 How Sage engages across the Group:
• Our Code of Conduct provides unambiguous guidance
for all colleagues on how the Group does the right
thing and sets clear expectations across Sage for
compliance with ethical standards
• An independent and anonymous whistleblowing
hotline is provided 24 hours a day, seven days a week.
Calls and email / online reports are monitored by the
external provider and Sage’s hotline representatives,
investigated by Sage’s Risk team and reported to the
Audit and Risk Committee
• Our health and safety and wellbeing policies are
designed to ensure a healthy, safe and supportive
working environment at Sage which protects the
wellbeing of all colleagues
• Sage TV broadcasts presentations on strategy and
quarterly performance updates by the CEO and CFO,
Executive Leadership Team and senior management
• Multimedia channels are used internally for sharing
information and as a depository of internal news
items of interest
• We have a flexible inclusive working structure that
creates opportunities for teams to come together
to connect, collaborate and innovate. Striking the
right balance makes it possible for the Group to
achieve great outcomes for colleagues, customers
and the community
• Our Colleague Success Networks play an important
role in supporting the Group’s DEI journey through
amplifying the voices of underrepresented communities,
providing a platform for sharing experiences and
identifying shared challenges which are fed back
to the DEI team to resolve
•
•
We are proud to have been awarded three Comparably
awards for “Best Company Culture”, “Best Company
for Women” and “Best Company for Diversity”, and
the Glassdoor Employees’ Choice Award in 2022
Sage’s Foundation gives every colleague five days paid
volunteering leave every year to spend time knocking
down barriers locally, supporting causes that are
important to them
Outcomes from engagement:
• Following the results of our colleague survey
in March, action plans were created by senior
management to act upon key themes raised by
colleagues. One such plan led to the launch of
Sage Talent Marketplace to address colleagues’
requests for a single place to help them understand
the opportunities and roles that exist across the
Group and to help them create bespoke career
and development journeys. In the fourth quarter
of FY22, the Group’s Global Rating on Glassdoor
increased back up to 4.2 out of 5 stars, as Sage
continued to act on colleague feedback. We are
proud to have been awarded the Glassdoor
Employees’ Choice Award, which honours the
UK’s best places to work in 2022.
Further information can be found in the People
section on page 39
• High levels of engagement with Sage Foundation
partnerships and programmes with 149,409 hours
volunteered by Sage colleagues, partners, family
and friends in FY22
71
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Stakeholder engagement continued
Customers
We build every experience with human insight
and ingenuity to be the trusted network for SMBs
Why they matter to Sage:
• Our brand promise puts customers at the heart
of everything we do, helping businesses thrive
and flow. SMBs are the growth engine of the global
economy. Accountants are the professionals who
rely on us to help them deliver a great service to their
clients, whatever their size. We recognise that our
customers are a diverse and dynamic group and we
endeavour to build every experience for them with
human insight and ingenuity
• Our partners are also core to the Group’s strategy
and are an extension of the Sage team. Sage works
with an extensive network of partners, who contribute
to our mutual growth and ambition to enable
customer success. Our community of partners
includes accountants, resellers, IP builders and
service providers who represent the Sage brand
in the market. They help bring our solutions to life,
serving customers locally and creating an ecosystem
of complementary solutions and services
How Sage engages at Board level:
• The Board receives regular updates from the CEO
on the operational priorities in place to deliver
a high-quality customer experience
• The Board hears regular updates on and monitors Net
Promoter Scores across the Group and key themes
from customer feedback
• The Board receives a regular CISO report on how the
Group seeks to protect its products against cyber
security risk for the benefit of Sage and its customers
• The Chair attended a Sage Intacct partner roundtable
event in FY22 which provided him with an opportunity
to receive direct feedback from partners on their
experience of working with Sage
• The Board received updates during the year on the
development of Sage’s digital network, with a particular
focus on understanding its benefits for customers
• The Board monitored the roll out of the refreshed
Sage Brand and how Sage intends to deliver against
the customer promises
What matters to them:
• Customers are focused on (i) running and growing
their business; (ii) having products that keep their
business compliant; (iii) quality customer service;
and (iv) having greater visibility into their business
and deriving actionable insights from their data.
Improving efficiencies and productivity remain
priorities, but they are also increasingly interested
in the wellbeing of their staff, the environment
and their role in protecting it
• Partners in Sage’s ecosystem work in collaboration with
Sage to: (i) harness our innovative technology to deliver
customer success through the creation of unique joint
value propositions; (ii) expand their market reach;
(iii) share insights into what Sage’s current and future
customers want, ultimately impacting product strategy
and roadmaps; and (iv) accelerate business growth
through Sage-supported sales and marketing programs,
as well as technical training
How Sage engages across the Group:
• During FY22 our Customer Connect initiative was
enhanced. The initiative includes activities such as
call listening to help colleagues understand Sage’s
customer pain points and assistance needs, whilst
customer visits enable colleagues to meet customers,
ask questions and gather insights directly
• Digital resources are made available to help
customers get the most value from their Sage
solutions, including community discussions
(Sage City), learning opportunities (Sage University)
and technical articles (Sage Knowledgebase).
• Sage People Customer Ideas Hub was launched during
the year, which is a platform for customers to voice
their ideas for future improvements, enhancements
and functionalities that they would like to see within
Sage People. Sage committed to dedicating 20% of
the Sage People product roadmap to ideas raised
by its customers through the platform
72
The Sage Group plc. Annual Report and Accounts 2022 • Sage for Accountants, launched in the UK during
FY22, provides a way of helping Sage deliver an
end-to-end solution for accountant practices. Sage
for Accountants aims to knock down barriers by giving
accountants the tools they need to manage their
clients from one place and only add and pay for
the services they need. In FY22 Sage celebrated
a significant milestone, welcoming its 2,000th
new accountant practice to Sage for Accountants
• We launched other key products during the year,
including Sage Intacct Manufacturing in France,
the UK and US and Sage Active in France. Sage Intacct
Manufacturing supports small and mid-sized
manufacturers to modernise processes and accelerate
digital transformation. Sage Active is an integrated
business management solution built on Microsoft
Azure. This new cloud native solution is purpose-built
to help SMBs manage compliance and operations,
whilst offering the benefits of Azure
• Sage has come together with the Association of
Chartered Certified Accountants and the International
Chamber of Commerce at COP26 to put forward
SMB-friendly recommendations in the Race to Net
Zero. This collaborative report “Think Small First:
Enabling effective climate action by small and
medium-sized businesses” calls for governments
and large companies to do more to urgently simplify
carbon reporting and accounting so SMBs are not left
behind in the Race to Net Zero
•
In FY22 we launched our Sustainability Hub for small
businesses in the UK and Ireland. The hub will provide
owners of small businesses with expertise and actionable
advice on how to reduce the carbon impact of their
operations, play a key part in creating a more sustainable
future and have a positive impact on their communities
• We announced the acquisition of Spherics in October
2022, which automates the process of calculating
emissions by ingesting data from a customer’s
accounting software and matching transactions to
emission factors to create an estimate of their carbon
footprint. The software guides the customer to refine
this estimate by submitting further data for a more
accurate calculation, supporting SMBs on their
journey to Net Zero
Outcomes from engagement:
• Regular monitoring of Net Promoter Scores
across the Group allows Sage to assess customer
sentiment and identify areas where we can refine
the customer experience. This will help address
pain points as well as generate additional value
for customers in areas which would help them most
• The Customer Connect initiative enables Sage
to keep its finger on the pulse with customers,
allowing us to make sure we remain attuned to
their needs and help their businesses to thrive
• The launch of Sage People Customer Ideas
Hub aims to make Sage People customers
feel empowered, valued and listened to—and
at the centre of the Group’s product vision
and strategy
73
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Stakeholder engagement continued
Society
We tackle digital inequality, economic inequality and
the climate crisis, using our time, technology and experience
Why it matters to Sage:
•
In today’s world, not everyone is given an equal chance.
Discrimination, bias, lack of education, and unequal
access to technology are creating barriers for many
people to succeed. It is Sage’s pledge as one of the
UK’s biggest technology companies to knock down
these barriers to create equal opportunity. We are
committed to investing in education, technology,
and environmental change to give individuals,
SMBs and the planet the opportunity to thrive
• We believe that by supporting communities to knock
down barriers to digital and economic equality and
to protect the planet, we can play a role in creating
a more equal society. Research in our communities
shows that starting a business and becoming your
own boss is seen as a route to a better life
• People in underrepresented groups or sectors
hardest hit by crisis need support to start and grow
businesses, as this is a proven route to long term
employment, high job satisfaction and wealth creation
What matters to them:
• For our customers, having a positive societal
and environmental impact, and a commitment to
diversity, matters to their business. 85% of SMBs
see a role for accountancy and HR software providers
in helping them make their businesses more sustainable.
Sustainability is a key issue for society as a whole
and our stakeholders care about the work we do to
tackle digital inequality, economic inequality and
the climate crisis, using our time, technology
and experience
How Sage engages at Board level:
• The Board receives updates on the Sustainability and
Society strategy as part of regular CEO Board briefings
• The Board attended a Sage Foundation volunteer event
in San Jose in July with Access Books so they could see
first hand the impact of the Company’s investments.
Access Books provides quality books to those public
school and community libraries in California where
the majority of students live at or below the poverty
line. A photo taken at the event is included on page 75
• The Board received an update on the implementation
of Sage’s climate strategy, including on the
acquisition of Spherics, a commercial carbon
footprint calculator solution.
• The Board is updated every year on Sage’s position
on non-financial disclosures including GRI and SASB
disclosures and receives the Sustainability and
Society Report before publication
• The Board received an update on the progress of
Sage’s FY22 TCFD disclosures in September. Further
information on TCFD can be found on pages 50 to 67
74
The Sage Group plc. Annual Report and Accounts 2022 How Sage engages across the Group:
• We have made good progress on our Sustainability
and Society strategy. Key highlights include: the
acquisition of Spherics, a carbon accounting solution
that will support SMBs on their own journey to Net Zero;
the submission of Sage’s Science Based Target and
development of a broader climate strategy backed by
robust plans and disclosures that will ensure we can
deliver against the targets. Sage has also strengthened
executive oversight and responsibility over this agenda
with the inclusion of ESG targets (one on climate, one
on products and one on DEI) in leadership incentives
• We proactively consider and manage the impact we
have on local communities as part of the delivery
of long-term sustainable business performance
• Sage Foundation surpassed its fundraising target for
FY22 and in response to the humanitarian crisis in
Ukraine, launched a global match funding appeal
in March, donating almost £650,000 to support the
crisis, thanks to colleagues, customers, partners
and the community at large
• Sage colleagues, partners, family and friends spent
a total of 149,409 hours volunteering in FY22
• Our partnership with the Smart Data Foundry aims
to support the secure sharing of financial data and
trends with the specific purpose of achieving
societal change and supporting the economy
• As part of our commitment to advocate and be the
voice for SMBs, we have entered into a partnership in
the UK with an APPG (All-Party Parliamentary Group)
to help shape this debate
• Sage joined the CDP Supply Chain Program to track
climate impacts in the supply chain and identify
collaborative decarbonisation opportunities with
suppliers. This includes development of Sage’s
Sustainable Supply Chain Strategy and updated
Procurement policy, which will support suppliers
in joining Sage’s Net Zero journey
• Through the Sage Foundation we connect with
the communities within which Sage operates.
Sage volunteers contributed nearly 150,000 hours
through the Foundation and strategic engagement
took place with our partners such as The BOSS
Network, Kiva, Ashoka, ACE, FIRST® LEGO® League
to better understand and address the needs of
local communities. For instance, through the Sage
Foundation, 13,871 entrepreneurs were supported
in developing countries to grow sustainable
businesses and 4,750 students received STEM
learning and resources
75
Outcomes from engagement:
• Our regular materiality assessments help us
engage with internal and external stakeholders
and consider their views on critical ESG risks and
opportunities for the business. We will continue to
deliver on the commitments we have made, whilst
ensuring our strategy responds to emerging risks
and opportunities and captures ongoing feedback
from our stakeholders
• Sage partners and collaborates with various
organisations to help inform the Group’s
sustainability strategy, find innovative solutions
and drive collective action. These include the
World Business Council for Sustainable
Development (WBCSD), International Chamber
of Commerce, TechNation and Oxford Economics
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Stakeholder engagement continued
Shareholders
We target sustainable growth in shareholder value
Why they matter to Sage:
• They are our providers of equity capital without whom
Sage could not grow and invest for future success
How Sage engages at Board level:
• The Board receives Investor Relations updates at
each Board meeting
What matters to them:
•
Investors are interested in our long-term strategy,
operational performance, strategic execution and
investment in the business to drive innovation and
enhance the customer experience. Sage’s financial
performance is important to them, but so is
governance and how our leadership team and Board
make decisions. Increasingly, they are concerned
about broader societal issues and the role Sage
plays in addressing them
• Feedback from investor meetings is also circulated
to the Board after Sage’s full-year and half-year
results announcements, and quarterly trading
updates where relevant
• The Chair and other Non-executive Directors are
available to attend meetings with major shareholders
at the request of either party to gain an understanding
of any issues or concerns
• At Sage’s AGM, all Board directors are present, which
provides a key opportunity for the Board to engage
with shareholders and for shareholders to vote on the
resolutions put to them
• Upon starting in his new role, the Chair held
introductory meetings with the majority of the top
15 shareholders in Sage, providing an opportunity for
discussion around the Group’s strategic progress and
to listen to shareholder feedback
• The Remuneration Committee consulted individually
with Sage’s top shareholders and proxy agencies on the
proposed 2022 Remuneration Policy ahead of the 2022
AGM. Communication included a number of virtual
meetings with shareholders
• The Board approved various acquisitions during
the year which will help to broaden Sage’s product
offerings, including Brightpearl, Futrli and Lockstep
• The Board also oversaw the completion of Sage’s
disposal programme during FY22
76
The Sage Group plc. Annual Report and Accounts 2022 How Sage engages across the Group:
• Shareholder engagement is the responsibility of the
Executive Directors and the principal day-to-day
activity of the Investor Relations team, which develops
and manages Sage’s external relationships with
investors and analysts
• The announcements of the full-year and
half-year results and trading updates are prepared
and published by the Investor Relations team.
Analyst events are held to provide opportunities
to ask questions
• Senior management are also available to meet
investors, and did so during the year, for example
at the webinar events focused on Sage Intacct &
the Digital Network, and Building the Small
Business Engine
• Our website sage.com/investors continues to be
an important channel for communicating with all
stakeholders, including investors
• Sage paid an interim and recommended a final
dividend and completed the share buyback programme
• We provided shareholders with an opportunity
to engage by holding the 2022 AGM as a combined
physical and virtual meeting. Further information
on the 2022 AGM can be found on page 120
Outcomes from engagement:
• We have built constructive relationships with our
top shareholders at multiple levels within the
organisation, including the Chair, CEO and CFO,
Executive Leadership Team and Investor
Relations team
• We have received positive feedback from analysts
and shareholders following engagement events,
including webinars on Sage Intacct & the Digital
Network, and Building the Small Business Engine
• Feedback from investors was considered when
drawing conclusions from the ESG materiality
assessment, which is helping inform the
development and future direction of Sage’s
sustainability strategy
• Engagement with shareholders and analysts has
helped ensure support for the Group’s
management and strategy, and buy-in to capital
allocation decisions, including acquisitions
• We responded to feedback received from
a small number of shareholders in late FY21 and
early FY22, with regard to the 2022 Remuneration
Policy approved at the 2022 AGM
77
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Section 172(1) Statement
Principal decisions during FY22
The Directors believe that during the year under review
they have, individually and together, acted in the way
they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of
shareholders, whilst having due regard to the matters set
out in section 172(1)(a) to (f) of the Companies Act 2006
(“section 172(1)”) and referred to in the UK Corporate
Governance Code 2018 (the “Code”).
The Board is cognisant of its duties under section 172(1)
and the likely long term consequences of any decisions
it makes; the need to foster the Company’s relationships
with all its stakeholders; the interests of its employees;
the impact of the Company’s operations on the
environment and in the local communities; the desire
to maintain a reputation for high standards of business
conduct; and the need to act fairly as between members.
The Board understands that the Company’s wide range
of stakeholders is integral to the sustainability of the
business and balancing their respective needs and
expectations is important.
By listening to, understanding and engaging with
stakeholders, the Board endeavours to live up to their
expectations, by staying true to the Company’s purpose,
acting in accordance with Sage’s values, and delivering
the strategy.
While stakeholder considerations and understanding
competing priorities are integral to the discussions at
Board meetings, it is also fundamental that Sage’s wider
leadership team understands the Board’s responsibilities.
The robust governance structure, which is overseen by the
Board, allows delegation to management on day-to-day
operations so that the principles of section 172(1) are
embedded within the business and how Sage operates.
Section 172(1) limbs
(A) the likely consequences of any
decision in the long term
(B) the interests of the
company’s employees
(C) the need to foster the
company’s business relationships
with suppliers, customers and
others
(D) The impact of the company’s
operations on the community
and the environment
(E) the desirability of the company
maintaining a reputation for high
standards of business conduct
(F) the need to act fairly
as between members of
the company
78
Further information on how Section 172(1) has been applied
by the Directors can be found throughout the Annual Report
Section 172
duties
Consequences
of decisions in
the long term
Interests of
employees
Fostering
business
relationships
with suppliers,
customers and
others
Impact of
operations on
the community
and the
environment
Maintaining
high standards
of business
conduct
Acting fairly
between
members
Read more
Pages
100–101
109
148–149
182–188
11
15
38, 42, 43
70–71
121–123
124–125
126–127
10–11
12–15
22–23
24–35
44–67
68
11
24–35
44–49
50–67
69
96–103
104–105
121–122
130–133
Chair’s statement
Strategic priorities
Our approach to sustainability
TCFD disclosure
Stakeholder Engagement
Principal Risks and uncertainties
Viability Statement
Board activities
Corporate Governance report—
Nomination Committee
Directors’ Remuneration Report
Directors’ Report
Chair’s statement
CEO’s review continued
Our people
Stakeholder engagement continued—
Colleagues
Principal Risks and uncertainties
Chair’s introduction to governance:
Engagement with our stakeholders
Board activities
How the Board monitors culture
Our Board Associate
Chair’s statement
CEO’s review
Business model
Strategic priorities
Our approach to sustainability
Non-financial information
statement—Ethics and governance
Stakeholder Engagement: Customers
& Society
Principal Risks and uncertainties
Governance
Board activities
Chair’s statement
CEO’s review
Our approach to sustainability
TCFD disclosure
Non-financial information
statement—Ethics and governance
Stakeholder engagement—Society
Principal risks and uncertainties
continued
Board activities
Chair’s statement
CEO’s review
Our people
Our approach to sustainability
TCFD disclosure
Non-financial information
statement—Ethics and governance
69
Stakeholder Engagement
121–123
Board activities
124–125
How the Board monitors culture
128–129
Board evaluation
Audit and Risk Committee
138–147
Stakeholder engagement—Shareholders 69, 76–77
120
Engagement with shareholders
122
Board activities
151, 154
Directors’ Remuneration Report
182–185
Directors’ Report
69, 72–73,
74–75
96–103
106
121–123
10–11
12–15
44–67
50–67
68
121, 123
10–11
12–15
38, 42–43
44–49
50– 67
68
74–75
103
The Sage Group plc. Annual Report and Accounts 2022 Principal decisions by the Board
Key—Stakeholder groups
Colleagues
Customers
Society
Shareholders
GBP 400m sterling bond issued
in February 2022
Acquisitions of Brightpearl, Lockstep
and Futrli
Section 172(1) limbs
Section 172(1) limbs
Stakeholders considered
Stakeholders considered
Principal decision by the Board
In February 2022 it was announced that the Company had issued
a GBP 400m sterling bond, which was approved by the Board.
Board considerations
The Board considered that the bond offering extended the
maturity of the Group’s debt portfolio, with the proceeds
intended to repay certain existing indebtedness and for general
corporate purposes. The Board considered that this would
provide the Company with considerable financial flexibility
and significant additional capital, to drive its strategic
objectives, for the benefit of all key stakeholders.
Principal decision by the Board
The acquisitions of Brightpearl, Lockstep and Futrli.
Board considerations
The acquisitions of Brightpearl, Lockstep and Futrli involved
consideration of what was best for customers, colleagues, shareholders
and wider stakeholders by accelerating Sage’s strategy for growth.
The Board considered how each acquisition would accelerate time
to market for key aspects of functionality for the Group’s product
offerings and enhance Sage’s competitive differentiation.
Integration of highly experienced management teams within these
organisations would also help grow the talent pool at Sage and
bring increased technology and innovation skills into the business.
Outcome
After consideration of the interests of relevant
stakeholders, the Board approved the issuance of the bond,
which was successfully launched, priced, and settled in
February 2022. Net cash proceeds from the issuance were
£396m. The Board’s considerations included the interests
of shareholders, alongside further investment in strategic
priorities for the benefit of customers and colleagues,
to ensure an appropriate balance of capital
allocation priorities.
Outcome
The Brightpearl acquisition has extended the Sage Intacct
vertical reach, supporting customers in product-centric
ecommerce organisations. The integration of Brightpearl
into the Group provides customers with access to a broader
portfolio of additional Sage solutions to meet their needs.
The Lockstep acquisition accelerates expansion of the
Group’s digital network by enabling and enhancing
connections between Sage customers and their clients
and suppliers. With this acquisition, we will continue to
knock down barriers by streamlining customer workflows,
deepening our capabilities in the office of the CFO,
improving productivity and efficiency, and enabling
them to focus on more valuable, human work.
The Futrli acquisition develops Sage’s commitment to
supporting accountants with complete end-to-end proposal-
to-advisory services. The acquisition plays an important
role in the way we support customers and their clients to
gain the visibility needed to deliver great advisory services,
as part of the Sage for Accountants solution.
These acquisitions are an important driver for the delivery
of our strategy and underpin our focus on driving value for
our shareholders and wider stakeholders.
79
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
Principal decisions by the Board continued
Key—Stakeholder groups
Colleagues
Customers
Society
Shareholders
Refreshed Sage values
Section 172(1) limbs
Refreshed Sage brand
Section 172(1) limbs
Stakeholders considered
Stakeholders considered
Principal decision by the Board
In February 2022, the Board approved the refreshed Sage values.
Principal decision by the Board
Approval of the launch of the refreshed Sage brand.
Board considerations
Colleagues played a critical role in helping to shape the
refreshed values by providing their views on the commitments
they wanted to see colleagues make to each other, customers
and other stakeholder groups, as part of their formation.
Development of the refreshed values was further enhanced
by colleague surveys; interviews with Sage leaders on culture;
focus groups with colleagues to test themes; and an Executive
Team working session on the behaviours needed to deliver Sage’s
strategic framework. Appreciating this detailed and considered
process gave the Board the ability to understand the areas of
both strength and weakness within Sage’s culture today and
how these refreshed values would serve a key role in its evolution.
Board considerations
The brand transformation journey was first socialised to
the Board in late FY21 and the Board received updates on the
refreshed brand as it evolved through FY22. The refreshed brand
revolves around the concept of simplicity and insight, with
a human touch, to help business flow. Board considerations also
included colleague impact, with the refreshed brand considered
to offer a new source of pride in Sage and ultimately, a showcase
for the values which the brand represents. Society was a further
stakeholder consideration for the Board in its decision making,
in terms of how the refreshed brand emphasises the Company’s
purpose to knock down barriers to enable everyone to thrive.
Outcome
Our values are key to fostering an environment and culture
where colleagues can thrive to enable the successful
delivery of the Company’s strategy for the benefit of
shareholders and wider stakeholder groups as a whole.
The values are at the forefront of how we operate as a Group
both internally and externally on a daily basis, and drive our
commitment to always do the right thing by our colleagues,
customers, society and shareholders. Colleagues can also be
proud of the work we do in our communities to live out the
values through our Sustainability and Society strategy and
Sage Foundation.
Outcome
The refreshed brand reflects how we support customers
globally by removing complexity, delivering insights and
building human connections. The brand design features
a smooth flow, which reflects our focus on removing friction
for customers and automating to create a more digital
experience. Sage has been a trusted brand for SMBs since
it was a start-up over 40 years ago, but the way we support
them has changed, and the refreshed brand enables us to
reflect this consistently across all markets.
80
The Sage Group plc. Annual Report and Accounts 2022
Sage and Microsoft partnership
ESG Board governance
Section 172(1) limbs
Section 172(1) limbs
Stakeholders considered
Stakeholders considered
Principal decision by the Board
In June 2022, the Board approved the expansion of the Company’s
partnership with Microsoft to integrate Microsoft Business
Products, including Microsoft 365 and Microsoft Teams, as
embedded services in Sage products, and make Sage Intacct
and Sage Active available on Microsoft Azure as part of Sage’s
multi-cloud access strategy.
Board considerations
The Board’s decision involved consideration of customers
with the aim of providing them with simplification, improved
reliability, and choice. Shareholders were also considered by
the Board, as becoming a strategic ISV partner to Microsoft
gives Sage the potential to achieve the wider reach and
scale which comes from partnering with the world’s largest
software company.
Principal decision by the Board
Approval of ESG governance responsibilities across the Board
and its Committees, with continued monitoring of Sage’s
Sustainability and Society strategy implementation.
Board considerations
The Board approved how it intends to oversee ESG governance
at the Board and Committees level, with consideration for
the specific role played by each forum in terms of: approving
the Sustainability and Society strategy and monitoring its
performance; understanding Sage’s relevant ESG risks and
opportunities; approving the adoption of certain ESG measures
within executive remuneration plans; and understanding the
wider legal and regulatory compliance environment and
reporting frameworks.
Outcome
As ESG accountabilities span across the Company, it is
important that the Board’s governance framework suitably
covers all elements of ESG with clarity on where relevant
aspects are discussed and debated. The Board ESG
governance framework put in place during FY22 is designed
to provide this coverage and consistency as Sage continues
on its ESG journey.
Outcome
The partnership announced in July 2022 will simplify
workflows for customers, removing friction and helping
them to achieve productivity gains. As customers navigate
a digital world, businesses increasingly rely on the
flexibility and productivity gains that the cloud provides.
The partnership supports Sage in giving customers a choice
of cloud platform, as well as the ability to collaborate and
communicate using well-known collaboration tools.
With Sage as a system of record across financials, people,
and payroll, and Microsoft 365 as the de-facto choice for
millions of businesses around the world, integration
between the two platforms is critical for customers today.
The partnership will deliver streamlined, reliable digital
work experiences helping customers to increase the
productivity and agility of their businesses. As data
becomes a more strategic asset for customers, being able
to upload and download between Microsoft Excel and Sage
will improve workflows, governance, and security.
81
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information
Financial review
Financial review
Organic financial results
In FY22 Sage achieved organic recurring revenue growth
of 9% to £1,824m and organic total revenue growth of
6% to £1,924m. The increase in recurring revenue was
underpinned by a 24% rise in Sage Business Cloud revenue
to £1,261m, reflecting strength from new customer
acquisition, increased sales to existing customers and
continued progress in migrating customers and products
to cloud solutions.
Other revenue (SSRS) declined by 30% to £100m, in line
with our strategy to transition away from licence sales
and professional services implementations.
The Group’s organic operating profit increased by 8%
to £383m, representing an organic operating margin of
19.9%. Organic operating margin has trended upwards
from 19.5% in FY21, driven by operating efficiencies,
as we focus on scaling the Group.
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.
Jonathan Howell
Chief Financial Officer
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 disposals1.
In FY23 Sage intends to evolve its reporting by giving
greater emphasis to underlying measures. Accordingly,
financial metrics and analysis will be provided primarily
on an underlying basis, alongside organic growth rates,
to enable a clearer understanding of both the organic
and inorganic performance of the Group.
Sage also intends to change the presentation of its
regional reporting, to reflect recent changes to the way
in which the Group manages its operations. From FY23,
we will report performance across the following regions:
North America, comprising the US, Sage Intacct and
Canada; UKIA2, comprising Northern Europe and Africa
and APAC; and Europe, comprising France, Central Europe
and Iberia.
These changes will not impact Sage’s primary financial
statements or notes to the accounts.
82
The Sage Group plc. Annual Report and Accounts 2022 Organic Revenue by Portfolio3
Cloud native4
Cloud connected5
Sage Business Cloud
Products with potential to migrate
Future Sage Business Cloud Opportunity6
Non-Sage Business Cloud7
Organic Total Revenue
Sage Business Cloud Penetration
Recurring
FY22
FY21
Growth
£422m
£419m
£842m
£297m
£722m
£1,261m £1,019m
£495m
£1,683m £1,514m
£153m
£1,824m £1,667m
67%
£141m
75%
+41%
+17%
+24%
-15%
+11%
-8%
+9%
FY22
£430m
£852m
£1,282m
£477m
£1,759m
£165m
£1,924m
Total
FY21
£311m
£734m
£1,045m
£580m
£1,625m
£184m
£1,809m
Growth
+38%
+16%
+23%
-18%
+8%
-10%
+6%
Notes:
1. Underlying and organic revenue and profit measures are defined in the Glossary.
2. United Kingdom, Ireland, Africa and APAC.
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.
Recurring revenue from cloud native solutions grew by
41% to £419m, 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 17% to £842m, reflecting continuing growth
in the Sage 50 and Sage 200 franchises driven by existing
and new customers, together with faster migration of
products to Sage Business Cloud through the integration
of cloud functionality.
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.
83
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Financial review continued
Statutory and underlying financial results
Financial Results
North America
Northern Europe
International
Group Total Revenue
Operating Profit
% Operating Profit Margin
Profit Before Tax
Net Profit
Basic EPS
Statutory
Underlying
FY22
£818m
£433m
£696m
£1,947m
£367m
18.9%
£337m
£260m
25.47p
FY21
£687m
£402m
£757m
£1,846m
£373m
20.2%
£347m
£285m
26.33p
Change
+19%
+8%
-8%
+5%
-2%
-1.3 ppts
-3%
-9%
-3%
FY22
£819m
£434m
£696m
£1,949m
£377m
19.4%
£346m
£263m
25.74p
FY21
£734m
£401m
£743m
£1,878m
£368m
19.6%
£343m
£257m
23.79p
Change
+12%
+8%
-6%
+4%
+2%
-0.2 ppts
+1%
+2%
+8%
The Group achieved statutory total revenue of £1,947m,
a 5% increase on the prior year, reflecting good levels
of organic growth in all regions partly offset by disposals,
together with a £47m foreign exchange tailwind
principally relating to the US Dollar in North America,
and a £15m foreign exchange headwind principally
relating to the Euro in the International region.
Underlying total revenue, which normalises the
comparative period for foreign exchange movements,
increased by 4%.
Statutory operating profit decreased by 2% to £367m,
driven mainly by the change in recurring and non-
recurring items (see table below). Underlying operating
profit, which excludes recurring and non-recurring items,
increased by 2% to £377m.
Statutory basic EPS decreased by 3% to 25.47p, reflecting
a higher statutory income tax expense and the post-tax
impact of recurring items, offset by a reduction in the
number of shares outstanding following the Group’s share
buyback programme. Underlying basic EPS increased by
8% to 25.74p.
Underlying and organic reconciliations to statutory
(Reversal of) / restructuring costs
Statutory
Recurring items8
Non-recurring items:
• Gain on disposal of subsidiaries
•
• Office relocation
Impact of FX9
Underlying
Disposals
Acquisitions
Organic
Notes:
FY22
Operating
Profit
Operating
Margin
£367m
£83m
(£53m)
(£20m)
–
–
£377m
(£1m)
£7m
£383m
18.9%
–
–
–
–
–
19.4%
–
–
19.9%
FY21
Operating
Profit
£373m
£40m
Operating
Margin
20.2%
–
(£126m)
£62m
£9m
£10m
£368m
(£15m)
–
£353m
–
–
–
–
19.6%
–
–
19.5%
Revenue
£1,846m
–
–
–
–
£32m
£1,878m
(£69m)
–
£1,809m
Revenue
£1,947m
£2m
–
–
–
–
£1,949m
(£7m)
(£18m)
£1,924m
8. Recurring and non-recurring items are defined in the Glossary and detailed in note 3 of the financial statements.
9. Impact of retranslating FY21 results at FY22 average rates.
84
The Sage Group plc. Annual Report and Accounts 2022 Revenue
Statutory revenue of £1,947m in FY22 was slightly below
underlying revenue of £1,949m, due to a fair value
adjustment to deferred income relating to the acquisition
of Brightpearl. Underlying revenue in FY21 of £1,878m
reflects statutory revenue of £1,846m retranslated at
current year exchange rates, resulting in an FX tailwind
of £32m.
Organic revenue of £1,924m (FY21: £1,809m) reflects
underlying revenue adjusted for £7m of revenue from
businesses sold during the period, including Sage
Switzerland and the South African payroll outsourcing
business, and £18m of revenue from businesses acquired
during the period, primarily Brightpearl. In FY21, revenue
from disposals included £69m of revenue from Sage’s
businesses in Poland, Australia and Asia, Switzerland,
and the South African payroll outsourcing business.
Organic revenue overview
Organic Revenue Mix
Software Subscription Revenue
Other Recurring Revenue
Organic Recurring Revenue
Other Revenue (SSRS)
Organic Total Revenue
Operating profit
The Group achieved a statutory operating profit in
FY22 of £367m (FY21: £373m). Underlying operating
profit of £377m (FY21: £368m) reflects statutory operating
profit adjusted for recurring and non-recurring items.
Recurring items of £83m (FY21: £40m) comprise £42m
of amortisation of acquisition-related intangibles
(FY21: £31m) and £39m of M&A related charges (FY21: £9m),
in addition to a £2m deferred income adjustment relating
to the acquisition of Brightpearl.
Non-recurring items include a £53m gain on disposal,
principally from the sale of Sage’s business in Switzerland
(FY21: £126m gain from the disposal of Sage’s businesses
in Poland, Australia and Asia), together with a £20m
reversal of employee restructuring costs, primarily
relating to the business transformation announced in
September 2021, as some colleagues were redeployed
or left the business.
Organic operating profit of £383m (FY21: £353m) reflects
underlying operating profit adjusted for £1m of operating
profit from Sage’s business in Switzerland and the
South African payroll outsourcing business, and £7m of
operating losses from businesses acquired during the
year. In FY21, operating profit from disposals included
£15m from Sage’s businesses in Poland, Australia and
Asia, Switzerland, and the South African payroll
outsourcing business.
FY22
£m
% of Total
£1,445m
£379m
£1,824m
£100m
£1,924m
75%
20%
95%
5%
100%
FY21
Change
£m
£1,263m
£404m
£1,667m
£142m
£1,809m
% of Total
70%
22%
92%
8%
100%
+14%
-6%
+9%
-30%
+6%
Organic total revenue increased by 6% in FY22 to £1,924m. Organic recurring revenue grew by 9% to £1,824m, supported
by a 14% increase in software subscription revenue to £1,445m, 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 6% to £379m reflects customers migrating from maintenance and support to subscription contracts.
Other revenue (SSRS) declined by 30% to £100m, in line with our strategy to transition away from licence sales and
professional services implementations.
85
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Financial review continued
North America
Organic Revenue by Category
Organic Total Revenue
Organic Recurring Revenue
FY22
FY21
£810m £734m
£779m £685m
Change
+10%
+14%
Northern Europe
Organic Revenue by Category
Organic Total Revenue
Organic Recurring Revenue
FY22
FY21
£425m £401m
£419m £390m
Change
+6%
+7%
% Sage Business Cloud
Penetration
% Subscription Penetration
79%
73%
73%
66%
+6 ppts
+7 ppts
% Sage Business Cloud
Penetration
% Subscription Penetration
90%
93%
86% +4 ppts
+3 ppts
90%
Organic Recurring Revenue
US
Of which Sage Intacct
Canada
FY22
FY21
£581m
£666m
£176m
£231m
£113m £104m
Change
+15%
+31%
+9%
North America achieved organic recurring revenue growth
of 14% to £779m and organic total revenue growth of 10%
to £810m. Sage Business Cloud penetration is now 79%,
up from 73% in the prior year, driven by growth in cloud
native and cloud connected solutions, while subscription
penetration is 73%, up from 66% in the prior year.
Cloud native growth was driven primarily through Sage
Intacct, which delivered strong recurring revenue growth
of 31% to £231m reflecting continued good levels of new
customer acquisition and supported by strong sales to
existing customers through increased cross-sell and up-sell.
Recurring revenue in the US increased by 15% to £666m,
driven by Sage Intacct alongside cloud connected growth
across the Sage 200 and Sage 50 franchises. Total revenue
for the US increased by 11% to £695m.
Northern Europe (UK and Ireland) achieved organic
recurring revenue growth of 7% to £419m and organic total
revenue growth of 6% to £425m. Sage Business Cloud
penetration is now 90%, up from 86% in the prior year,
while subscription penetration is 93%, up from 90% in the
prior year.
Recurring revenue growth primarily 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 strong new customer acquisition in Sage
Accounting, Sage Intacct and Sage People, together
with migrations, principally 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
Organic Total Revenue
Organic Recurring Revenue
FY22
FY21
£689m £674m
£626m £592m
Change
+2%
+6%
In Canada, recurring revenue increased by 9% to £113m
and total revenue by 6% to £115m, driven mainly by Sage 50
cloud and Sage 200 cloud solutions, together with growth
in Sage Intacct and Sage Accounting.
% Sage Business Cloud
Penetration
% Subscription Penetration
Organic Recurring Revenue
Central and Southern
Europe
France
Central Europe
Iberia
Africa and APAC
59%
67%
47% +12 ppts
+5 ppts
62%
FY22
FY21
Change
£486m £466m
£258m £249m
£99m
£108m
£118m
£120m
£126m
£140m
+4%
+4%
+9%
+3%
+10%
86
The Sage Group plc. Annual Report and Accounts 2022 The International region achieved organic recurring
revenue growth of 6% to £626m and organic total revenue
growth of 2% to £689m. Sage Business Cloud penetration
increased significantly to 59%, up from 47% in the prior
year, while subscription penetration is 67%, up from 62%
in the prior year.
In France, recurring revenue increased by 4% to £258m,
with a strong performance in cloud connected, supported
by growth in cloud native solutions. Total revenue in
France was flat at £273m.
Central Europe achieved recurring revenue growth of 9%
to £108m while total revenue increased by 3% to £132m.
Growth in the region is driven by a combination of cloud
connected and local products.
In Iberia, recurring revenue increased by 3% to £120m,
with continued success in migrating customers to
subscription and cloud connected solutions. Total
revenue was flat at £134m.
Africa and APAC delivered strong recurring revenue
growth of 10% to £140m, driven by growth in both cloud
native solutions and local products. Total revenue in
Africa and APAC increased by 8% to £150m compared
with the prior year.
Operating profit
The Group increased organic operating profit by 8% to
£383m (FY21: £353m). Organic operating margin was
19.9% (FY21: 19.5%), trending upwards since last year driven
by operating efficiencies. During the year, the Group
further reassessed its bad debt provision in connection
with Covid-19, releasing the balance of the provision
which resulted in a £7m credit to operating profit
(FY21: £8m credit).
Underlying operating profit was £377m (FY21: £368m),
representing a margin of 19.4% (FY21: 19.6%). The
difference between organic and underlying operating
profit reflects the operating profit or loss from
acquisitions and disposals (as described on page 84).
EBITDA was £468m (FY21: £454m) representing a margin
of 24.0%. The increase in EBITDA principally reflects the
improvement in organic operating profit, partly offset by
the impact of acquisitions and disposals on underlying
operating profit.
FY22
£1m
(£7m)
FY21
Organic Operating Profit £383m £353m
£15m
Impact of disposals
–
Impact of acquisitions
Underlying
Operating Profit
Depreciation and
amortisation
Share based payments
EBITDA
£50m
£36m
£468m £454m
£377m £368m
£55m
£36m
FY22
Margin
19.9%
19.4%
24.0%
Net finance cost
The statutory net finance cost for the period increased
to £30m (FY21: £26m), primarily reflecting the impact
of interest on new debt issuance and is broadly in line
with the underlying net finance cost of £31m (FY21: £25m).
Taxation
The underlying tax expense for FY22 was £83m
(FY21: £86m), resulting in an underlying tax rate of 24%
(FY21: 25%). The statutory income tax expense for FY22
was £77m (FY21: £62m), resulting in a statutory tax rate
of 23% (FY21: 18%).
The difference between the underlying and statutory rate
in FY22 primarily reflects a non-taxable accounting net
gain on disposals. The FY22 underlying tax rate has
decreased due to a reduction in the French corporation
tax rate together with certain non-recurring adjustments.
Earnings per share
Statutory Basic EPS
Recurring items
Non-recurring items
Impact of foreign exchange
Underlying Basic EPS
FY22
25.47p
6.72p
(6.45)p
–
25.74p
FY21
26.33p
3.01p
(6.25)p
0.70p
23.79p
Change
-3%
+8%
Underlying basic EPS increased by 8% to 25.74p,
reflecting higher underlying operating profit and
a reduction in the number of shares outstanding
following the Group’s share buyback programme.
Statutory basic earnings per share decreased by 3%,
with the increase in underlying basic earnings per
share offset by the change in post-tax impact of
recurring items.
87
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Financial review continued
Cash flow
Sage remains highly cash generative with underlying
cash flow from operations of £402m (FY21: £451m),
representing underlying cash conversion of 107%
(FY21: 126%). Importantly, the Group has achieved cash
conversion in excess of 100% for four consecutive years.
This strong cash performance reflects further growth
in subscription revenue and continued strength in
receivables collection, offset by a reduction in payables
driven by the timing of certain payments to third parties
during the year. Free cash flow of £295m (FY21: £339m)
largely reflects good underlying cash conversion.
Cash Flow APMs
Underlying operating profit
Depreciation, amortisation and
non-cash items in profit
Share based payments
Net changes in working capital
Net capital expenditure
Underlying Cash Flow
from Operations
Underlying cash conversion %
Non-recurring cash items
Net interest paid
Income tax paid
Profit and loss foreign exchange
movements
Free Cash Flow
Statutory Reconciliation
of Cash Flow from Operations
Statutory Cash Flow
from Operations
Recurring and non-recurring items
Net capital expenditure
Other adjustment including foreign
exchange translations
Underlying Cash Flow
from Operations
FY22
£377m
FY21
(as reported)
£358m
£51m
£36m
(£40m)
(£22m)
£47m
£36m
£65m
(£55m)
£402m
107%
£451m
126%
(£23m)
(£21m)
(£62m)
(£9m)
(£19m)
(£81m)
(£1m)
£295m
(£3m)
£339m
FY21
(as reported)
FY22
£368m
£55m
(£22m)
£476m
£30m
(£55m)
£1m
–
£402m
£451m
Net debt and liquidity
Group net debt was £733m at 30 September 2022
(30 September 2021: £247m), comprising cash and cash
equivalents of £489m (30 September 2021: £567m) and
total debt of £1,222m (30 September 2021: £814m).
The Group had £1,270m of cash and available liquidity
at 30 September 2022 (30 September 2021: £1,236m).
The increase in net debt in the period is summarised
in the table below.
Net debt at 1 October
Free cash flow
New leases
Disposal of businesses
Acquisition of businesses
M&A and equity investments
Dividends paid
Share buyback
Purchase of shares by Employee
Benefit Trust
FX movement and other
Net debt at 30 September
FY22
(£247m)
£295m
(£6m)
£43m
(£315m)
(£22m)
(£183m)
(£249m)
(£32m)
(£17m)
(£733m)
FY21
(as reported)
(£151m)
£339m
(£8m)
£142m
–
(£39m)
(£189m)
(£353m)
–
£12m
(£247m)
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 £781m (split between US$719m and £135m
tranches). At 30 September 2022, the RCF was undrawn
(FY21: undrawn).
The Group’s USPP loan notes at 30 September 2022
totalled £386m (US$400m and EUR 30m) (FY21: £370m–
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 £400m 12-year bond, issued in February 2022, with
a coupon of 2.875%, and a £350m 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
(£26m) and US$150m (£135m) of the Group’s USPP loan
notes in January 2023 and May 2023, respectively.
88
The Sage Group plc. Annual Report and Accounts 2022 Going concern
The Directors have robustly tested the going concern
assumption in preparing these financial statements,
taking into account the Group’s strong liquidity position
at 30 September 2022 and a number of downside
sensitivities, and remain satisfied that the going concern
basis of preparation is appropriate. Further information is
provided in the Directors’ Report on pages 182 to 188 and
in note 1 of the financial statements on pages 207 to 209.
Foreign exchange
The Group does not hedge foreign currency profit and
loss translation exposures and the statutory results are
therefore impacted by movements in exchange rates.
The average rates used to translate the consolidated
income statement and to normalise prior year underlying
and organic figures are as follows:
Average exchange rates
(equal to GBP)
Euro (€)
US Dollar ($)
Canadian Dollar (C$)
South African Rand (ZAR)
Australian Dollar (A$)
FY22
1.18
1.28
1.63
20.21
1.80
FY21
1.15
1.37
1.73
20.28
1.82
Change
3%
-7%
-6%
–
-1%
Capital allocation
Sage maintains a disciplined approach to capital
allocation, with a focus on accelerating strategic
execution through organic and inorganic investment,
including through acquisitions and partnerships to
enhance Sage Business Cloud and further develop Sage’s
digital network. During the year Sage made acquisitions
of complementary technologies including Brightpearl,
Futrli and Lockstep, and completed its disposal
programme with the sale of the Swiss business and
the South African payroll outsourcing business.
Sage has adopted a progressive dividend policy,
intending to grow the dividend over time while
considering the future capital requirements of the Group.
Reflecting the Group’s strong business performance and
cash generation during the year, we have increased the
total dividend for the year by 4% to 18.40p.
The Group also considers returning surplus capital
to shareholders. On 24 January 2022, Sage completed
a £300m 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 £300m share buyback programme
undertaken during FY21, this brings the total capital
returned to shareholders since March 2021 to £600m.
As a result, the weighted average number of shares in
issue during the year declined by 6% compared to
last year.
Net debt
EBITDA (Last Twelve Months)
Net debt/EBITDA Ratio
FY22
£733m
£468m
1.6x
FY21
(as reported)
£247m
£443m
0.6x
The Group’s EBITDA over the last 12 months was £468m,
resulting in a net debt to EBITDA leverage ratio of 1.6x,
up from 0.6x 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 FY22 was 18%
(FY21 as reported: 19%).
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.
89
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Risk management
Risk Management Framework
I d entify
A
s
s
e
s
s
Our ERM
Framework
n
a
ge
n itor
M o
rt
o
p
e
R
M
a
Our Enterprise Risk Management
(ERM) Framework helps Sage
manage strategic, operational,
commercial, financial, compliance,
change, and emerging risks and
enables a consistent approach to
the identification, management,
and oversight of risks.
This helps us to deliver our strategic objectives and goals
through risk-informed decisions. We seek to continuously
improve the use and adoption of Sage’s ERM Framework,
to ensure it is not a process which is applied to the business
but instead something which is integral to how we make
decisions and work day-to-day.
Using our ERM Framework, all Regions and Functions
are expected to identify risks that could impact the
successful execution of their strategy and operations
while managing any risk exposure, ensuring appropriate
controls and action plans are in place. The ERM Framework
helps focus our efforts on the areas that matter most to
Sage, providing clarity about risk tolerances and appetite
in a way that facilitates effective business decisions and
ensures that Sage is adequately prepared to manage risks.
90
The Sage Group plc. Annual Report and Accounts 2022
Risk reporting and monitoring
We consider risks both individually and collectively in
order to fully understand our risk landscape. By analysing
the correlation between risks, we can identify those that
have the potential to cause, impact, or increase another
risk. This exercise informs our scenario analysis,
particularly the combined scenario used in the
Viability Statement on page 104.
Business risks are consolidated into a Group-wide view
and presented to our senior leaders, who add their own
input from a strategic, functional, and emerging risk
perspective. Business risks are then escalated in line with
the Risk Management Policy and via our ERM Framework to
the Regional and Global Risk Committees. This escalation
process provides organisational visibility to emerging,
strategic, commercial, operational, financial, and
compliance risks, as well as driving action and supporting
accountability for risk management. As part of the
escalation process, the risks are analysed to consider
whether they need to be included in the current set of
Principal Risks or a new Principal Risk should be created.
You can read more about Principal Risks on pages 96
to 103.
Principal Risks are monitored against risk appetite
targets using supporting measures, metrics, and
tolerances, which are evaluated throughout the year to
ensure they remain aligned with our strategic objectives,
and within an acceptable risk tolerance for the Group.
Sage operates a formal risk governance structure to
ensure risk management is at the forefront of decision
making. By having effective governance arrangements
in place, this allows for clear points of escalation, while
ensuring adequate oversight is in place to ensure risks
are managed and mitigated.
How we identify risks
Our risk identification process follows an enterprise-wide
“top-down, bottom-up” approach, which seeks to identify:
• Top-down we focus on Principal Risks that may impact
our ability to achieve our strategic objectives, with
these risks representing the risks that most threaten
delivery of our strategy; and
• Bottom-up we focus on strategic, commercial,
operational, compliance, and change risks (“business
risks”) that occur at a regional and functional level.
These risks pose the greatest threat to the success
of business activities across the Group.
How we assess risks
All identified risks are analysed for likelihood and impact
using a risk assessment criterion tailored for Sage that
considers the impact on our customers and our colleagues
as well as possible financial impact. The analysis
considers risk before any mitigations (i.e. inherent risk)
and after all current mitigations (i.e. residual risk).
This helps enhance decision making at all levels. The key
benefit of assessing inherent risk is that it highlights
the potential risk exposure if mitigation were to fail
completely or not be in place at all.
How we manage risk
We recognise that eliminating risk is often not feasible
or desirable, so we use risk appetite to provide our leaders
with the guidance they need to make decisions on the
level of risk that can be taken or sought to achieve
strategic objectives. Our risk appetite statements are
approved by the Board.
At a Principal Risk level, each risk is assigned an
Executive Owner. The Executive Owner is responsible
for the overall management of risk, ensuring that
adequate controls are in place and that the necessary
action plans are implemented should the risk be outside
of appetite.
In addition to the Principal Risks, business risks are
identified and captured at a regional or functional
level. These risks are owned and managed within their
respective management structures and are reviewed on an
ongoing basis. Formal review of these risks takes place on
a quarterly basis through the Regional Risk Committees
and Corporate Risk Boards, which are described below.
91
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Risk management continued
Risk governance
Top down
Oversight and
assessment of risk
exposures at the
corporate level
The Board
Ultimately responsible for the setting of Sage’s risk appetite
Responsible for risk management and internal control systems
To establish appropriate governance arrangements and act as a champion of “top-down” risk culture
Audit and Risk Committee
Acts as an independent advisor, providing assurance to the Board on the effectiveness of Sage’s approach
to risk management
Oversight of financial reporting and related internal controls
Global Risk Committee
Provides oversight of risk appetite and approach to risk management strategy
Acts as a point of escalation for Regional Risk Committees and Corporate Risk Boards
Provides oversight and approval of Sage’s Principal Risks
Regional Risk Committees
Responsible for reviewing key operational and
strategic risks that could implicate regional
strategy plans or Sage’s Principal Risks
Corporate Risk Boards
Responsible for providing oversight of key
business areas such as Product, Security,
Data Privacy, and IT
Bottom up
Identification
and assessment
of risk exposures
at segment and
function level
Board
The Board has overall responsibility for risk management
and establishing the Group’s risk appetite. It monitors
the risk environment and reviews the relevance and
appropriateness of the Principal Risks to the business.
Audit and Risk Committee
The Audit and Risk Committee (ARC) supports the Board
in setting the Group’s risk appetite and ensuring that
processes are in place to identify, manage, and mitigate
the Group’s Principal Risks. At each meeting, the
Committee reviews the Principal Risks and their
associated appetite targets and metrics, to assess
whether they continue to be relevant, effective, and
aligned to the achievement of Sage’s strategic objectives,
and within an acceptable tolerance for the Group.
Global Risk Committee
The Global Risk Committee is chaired by the General
Counsel and Company Secretary, supported by the EVP
Chief Risk Officer. The membership also includes the
Chief Executive Officer. Other Principal Risk owners
are invited to attend the Global Risk Committee when
relevant. The Committee meets quarterly and has
responsibility for providing direction and support for
92
the management of risk across Sage, including setting
and monitoring the risk appetite of each Principal
Risk and ensuring effective mitigations for these.
The Committee also provides the Board and the ARC
with information to enable them to discharge their
responsibility to review the company’s internal
financial controls and internal control and risk
management systems.
Regional Risk Committees and
Corporate Risk Boards
Every business and function is required to adopt the ERM
Framework. In order to do this, each business area either
has a Regional Risk Committee or a Corporate Risk Board
tasked with reviewing key operational as well as strategic
risks that could implicate the delivery of the regional
strategy plan, while ensuring there are sufficient
mitigation plans in place to prevent those key risks from
materialising. Risks are escalated from the Regional Risk
Committees and Corporate Risk Boards to the Global Risk
Committee where necessary.
The Sage Group plc. Annual Report and Accounts 2022 Three lines
of defence
Three lines of defence
Our three lines of defence governance model defines
clear roles and responsibilities for all colleagues
and establishes accountability for actions and decisions.
It also describes how appropriate oversight, challenge
and assurance are provided over business activities.
First Line
All Colleagues
Identify, Own,
Operate
Second Line
Sage Risk,
Controls, and
Compliance
Guide, Support,
Oversee
Third Line
Sage Assurance
Independent and
Objective
The First Line of defence is all of our colleagues, who
are at the forefront of the business. It is our colleagues
who hold the necessary skills and knowledge to help with
the identification and management of risks within our
business. Colleagues in the First Line have ultimate
accountability for the management and ownership of risk
while ensuring those risks are managed through the wider
Risk Management Framework.
The Second Line of defence consists of the Risk, Internal
Controls and Compliance Team. They are responsible for
setting the framework, policies, tools, and techniques to
enable the First Line to effectively manage risk. As part
of this role, colleagues in the Second Line are on hand
to provide support and guidance to ensure a consistent
approach to managing risk is maintained. This includes
supporting the Global Risk Committee, the Regional Risk
Committees and the Corporate Risk Boards in fulfilling
their responsibilities.
The Third Line of defence is Sage’s Internal Audit/
Assurance team. The main role of our Assurance team
is to ensure the first two lines of defence are operating
effectively. The team does this by conducting risk-based
reviews on the effectiveness of risk management, internal
controls, and governance. The Assurance team is
accountable to the ARC as it needs to provide comfort
to Sage’s leadership team that appropriate controls and
processes are in place and are operating effectively.
The Sage Group plc. Annual Report and Accounts 2022
93
Governance ReportShareholder InformationFinancial StatementsStrategic Report Risk management continued
Risk culture
Sage recognises that culture underpins the effectiveness
of the ERM Framework and supports an effective control
environment. Sage’s Values set out how our strategy
should be executed and help ensure that a culture of
effectively managing risks is linked to daily business
activities and outcomes. Our Code of Conduct reinforces
these Values and sets clear expectations across Sage
for compliance with ethical standards. Behaviour
forms a significant part of our colleague performance
management process, and, in FY22, culture continued
to be managed as a Principal Risk.
During 2022, we continued to deliver our compliance
training programme, with evidence-based and innovative
design principles. Through demonstrating clear alignment
between learning content and Sage Values, we are able to
support accountability and empower values-aligned,
risk-based decision making in the business.
In 2022, we also launched our new Personal Data
Protection education to all colleagues in multiple
languages, supporting Sage’s “Privacy by Design”
principles, and showing how we can effectively protect
our colleague and customer data, while still supporting
new and innovative ideas.
Business case study
Key to embedding a risk management culture is Sage’s
Security Champions Network. The Security Champions
Network is an industry best practice approach to enhance,
embed, and unify security and software engineering to
ensure security and security risk management is baked into
the development process. Security Champions at Sage are
evangelists for security and play a critical role to increase
the security and marketability of Sage’s products and
services. Security Champions are an integral part of how we
deliver a positive security culture and “shift security left”,
which means integrating it into the design of products at
the outset through “good, clean, and secure” code.
Security Champions at Sage sit within product and
technology teams (Testers, Developers, and DevOps) and
dedicate 10% of their time to security activities, with
security goals supported by their managers. Security
Champions are a force multiplier for Sage’s Global
Security Function.
“ Security champions are an
invaluable force multiplier for
the Global Security team. They
use their expertise and knowledge
to identify and mitigate risks
during the development lifecycle
of our products and ensure that
we deliver secure and reliable
products for our customers.
We are very proud of external
feedback and benchmarking that
demonstrates Sage’s Security
Champions programme is
genuinely industry‑leading.”
Ben Aung, EVP
Chief Risk Officer
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The Sage Group plc. Annual Report and Accounts 2022 Emerging risks
Our ERM Framework includes a robust emerging risk
identification and analysis process. Throughout the year,
we run a series of workshops with representatives from all
Sage business areas, including Marketing and Customer
Experience, Product, Security, Sustainability, People,
Finance, Corporate Affairs and Strategy. During the
workshops, we consider current external mega-trends and
global threats and opportunities over the short, medium,
and long term. Through these workshops, we are able to
define a set of scenarios which may have an impact on
Sage as well as the potential time horizon of each scenario.
During 2022, through the emerging risk assessment cycle,
we identified three main themes which we used to define
the emerging risk scenarios:
1. Major technological shifts prompting new
competitors and business models.
2. Maintaining the trust of our stakeholders in a rapidly
changing external environment with continuously
evolving cultural norms.
3. Balancing the need for an efficient business strategy
with the need to be a resilient business to rapidly
respond to major unforeseen global events without
significant disruption to business operations.
We then evaluate the extent of planning and mitigation
Sage needs to put in place to ensure we are adequately
prepared and protected for our key emerging risks.
A changing risk landscape
The current geopolitical and macroeconomic environment
has resulted in a challenging risk landscape for all
organisations. Our ERM Framework equips us to monitor,
understand, and respond to external uncertainties
and events. The external risk landscape is reviewed
regularly by the Global Risk Committee to ensure Sage is
proactively responding to external events with potentially
material impacts.
The war in Ukraine has created uncertainty for our
colleagues, customers, partners, and investors. Following
this unprecedented situation, Sage rapidly evaluated the
risks, determined potential impacts to our business, and
made changes to our Sanctions Policy and supporting
processes, to respond to increasing third-party and
supplier risks. We also used our current cyber security
capabilities and tools to strengthen our resilience against
potential cyber threats that may come from Russia.
Through our risk governance channels, we continue
to monitor the possible wider effects of the conflict.
The Sage Foundation has also been supporting the crisis
through fundraising initiatives. You can find out more
about this work on page 75.
The Global Risk Committee (GRC) reviewed Sage’s
broader approach to resilience, contingency and business
continuity planning, with a focus on preparedness for
potential energy supply issues in Europe during the
2022/2023 winter months. The GRC has also considered
the potential impact on our colleagues, our business
operations and our customers.
Whilst the Covid-19 pandemic has stabilised and much
has returned to normal, we continue to monitor its
long-term effects through the Principal Risk process,
particularly on changing colleagues’ expectations of
flexibility and remote working and the potential impact
on attracting and retaining talent.
The pandemic, the conflict between Russia and Ukraine,
trade war between US and China, energy shortages,
and rising interest rates and inflation have increased
the risk of a recession in many of our key markets.
Our ERM processes have enabled us to proactively monitor
these trends and the resultant effect it may have on our
colleagues, customers, and partners.
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The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Principal Risks
and uncertainties
The Board and the Audit and Risk Committee carried
out a robust and ongoing assessment of the principal
and emerging risks facing the Group throughout the
year. This assessment considered those risks that would
threaten Sage’s business model, future performance,
solvency, or liquidity, and ensured that the risks
continued to align with our business strategy.
The Board retains overall responsibility for setting
Sage’s risk appetite and for risk management and
internal control systems.
In accordance with principles M, N, and O of the Code, in
addition to Paragraph 58 of the FRC guidance (Section 6),
the Board is responsible for reviewing the effectiveness
of the risk management and internal control systems and
confirms that:
KEY
• There is an ongoing process for identifying,
evaluating, and managing the Principal Risks
faced by the Company;
• The systems have been in place for the year under
review and up to the date of approval of the Annual
Report and Accounts;
• They are regularly reviewed by the Board; and
• The systems accord with the FRC guidance on risk
management, internal control, and related financial
and business reporting.
There were no instances of significant control failing
or weakness in the year.
You can read more about our risk management and
internal controls systems in our Strategic Report on pages
90 to 95 and about the associated work of the Audit and
Risk Committee on pages 138 to 147.
The following table provides an overview of the Group’s
Principal Risks and the way these are managed.
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
RISK ENVIRONMENT CHANGE
Improving
Stable
Decreasing
Principal Risk
Risk context
Management and mitigation
As Sage continues to communicate
its refreshed brand and purpose,
understanding of how to attract
new customers whilst retaining its
existing customers is essential.
This requires a deep and continuous
flow of insights supported by
processes and systems.
By understanding the needs of our
customers, Sage will differentiate
itself from competitors, build
compelling value propositions and
offers, leverage key drivers to
identify opportunities, influence
product and process roadmaps,
decrease churn, and drive more
effective revenue generation.
Executive Owner
Chief Marketing Officer
•
•
•
•
•
•
A refreshed brand launched to communicate the
new vision of how Sage will support businesses
Brand health surveys to provide an
understanding of customer perception of the
Sage brand and its products, used to inform
and enhance our market offerings
A Market and Competitive Intelligence team
to provide insights that Sage uses to win in
the market
Proactive analysis of customer activity and
churn data, to improve customer experience
Customer Segmentation Framework and the
customer market analysis by region to help
inform product roadmaps
Customer Advisory Boards, Customer Design
Sessions, and NPS detractor call-back channels
to constantly gather information on
customer needs
1. Understanding
Customer Needs
If we fail to anticipate,
understand, and deliver
against the capabilities and
experiences our current and
future customers need in
a timely manner, they will find
alternative solution providers.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
Existing or New
Market Disruptor
Global Economic Shock
Cloud Operations Failure
96
The Sage Group plc. Annual Report and Accounts 2022
Principal Risk
Risk context
Management and mitigation
We need to execute at pace
a prioritised product strategy that
continues to simplify our product
portfolio and focuses on our drive
to create a digital network that will
benefit our customers.
Executive Owner
Chief Product Officer
2. Execution of
Product Strategy
If we fail to deliver the
capabilities and experiences
outlined in our product
strategy in a timely manner,
we will not meet the needs
of our customers or our
commercial goals.
Trend
Strategic alignment
Link to Viability Scenario
Existing or New
Market Disruptor
Global Economic Shock
Cloud Operations Failure
3. Developing and Exploiting
New Business Models
If we are unable to develop,
commercialise and scale new
business models to diversify
from traditional SaaS,
especially consumption‑based
services and those which
leverage data, we will not meet
the needs of our customers or
our commercial goals.
Trend
We must be able to rapidly deploy
new innovations to our customers and
partners by introducing technologies,
services, or new ways of working.
Innovation requires us to address
how we drive change and
transformation across our people,
processes, and technology, and how
we differentiate our products and
drive customer efficiencies.
Executive Owner
Chief Marketing Officer
Strategic alignment
Link to Viability Scenario
Data Breach
Existing or New
Market Disruptor
Cloud Operations Failure
•
•
A product strategy in line with FY23 strategic
objectives and priorities, based on our market
understanding and customer expectations
A robust product organisation supported by
a governance model to enable the way we
build products
• Migration framework in key countries to
support our customers in their journey to
the cloud
•
Continued expansion of Sage Intacct outside
of North America and for additional product
verticals (i.e. retail with the acquisition
of Brightpearl)
• Digitalisation of Sage products to support
strategic objectives through the integration
of Lockstep.
•
•
•
•
•
•
•
Product design governance to ensure product
development is always driven by our
understanding of our ability to penetrate
key markets
An improved proposition for accountants
Creation of a new Business Unit solely focused
on creating the Sage Digital Network
Continued focus on AI/ML development
coupled with a drive to improve how to exploit
data to provide better management insight to
our customers
Enhanced, consistent digital experience for all
Sage Business Cloud users through the Sage
Design System
Strategic acquisitions and collaboration with
partners to complement and enable
accelerated innovation
Focused colleague engagement to accelerate
innovation across the organisation through
a Continuous Innovation Community
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Principal Risks and uncertainties continued
KEY
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
RISK ENVIRONMENT CHANGE
Improving
Stable
Decreasing
Principal Risk
Risk context
Management and mitigation
• Market data and intelligence is used to support
decision making regarding the best routes
to market
• Dedicated colleagues are in place to support
partners, and to help manage the growth of
targeted channels
•
•
•
•
Sale processes are targeted and configured by
region for key customer segments and verticals
A dedicated On-Boarding Squad to enhance
user journeys to enable customer conversion
Acceleration of new partnerships to support
the Digital Network
Centre of Excellence to support our Indirect
Sales and Third-Party approach
We have a blend of channels to
communicate with our current and
potential customers and ensure
our customers receive the right
information on the right products
and services at the right time.
Our sales channels include selling
directly to customers through digital
and telephony channels, via our
accountant network and through
partners, value added resellers,
and ISVs.
We use these channels to maximise
our marketing and customer
engagement activities. This can
shorten our sales cycle and ensure
that customer retention is improved.
Executive Owner
President EMEA and President NA
4. Route to Market
If we fail to deliver a bespoke
blend of route to market
channels in each country,
based upon common
components, we will not be
able to efficiently deliver
the right capabilities and
experiences to our current
and future customers.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
Existing or New
Market Disruptor
Global Economic Shock
Cloud Operations Failure
98
The Sage Group plc. Annual Report and Accounts 2022
Principal Risk
Risk context
Management and mitigation
5. Customer Experience
If we fail to effectively
identify and deliver ongoing
value to our customers by
focusing on their needs over
the lifetime of their customer
journey, we will not be able to
achieve sustainable growth
through renewal.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
Existing or New
Market Disruptor
Global Economic Shock
Cloud Operations Failure
6. Third-Party Reliance
If we do not embed our
partners as an integral
and aligned part of Sage’s
go‑to‑market strategy in
a timely manner, we will
fail to deliver the right
capabilities and experiences
to our customers.
Trend
Strategic alignment
We must maintain a sharp focus on
the relationship we have with our
customers, constantly focusing on
delivering the products, services,
and experiences our customers need
to be successful. If we do not do this,
they will likely find another provider
who does give them these things.
Conversely, if we do these things
well, these customers will stay with
Sage, increasing their lifetime
value, and becoming our greatest
marketing advocates.
Whilst Sage is known for its quality
customer support, this area requires
constant, proactive focus. By helping
customers to recognise and fully
realise the value of Sage’s products,
we can help increase the value of
these relationships over time and
reduce the likelihood of customer
loss. By aligning our people,
processes and technology with this
focus in mind, all Sage colleagues
can help support our customers to
be successful and in turn drive
increased financial performance.
Executive Owner
Chief Marketing Officer
Sage places reliance on third-party
providers to support the delivery
of our products to our customers
through the provision of cloud
native products.
Sage also has an extensive network of
sales partners critical to our success
in the market, and suppliers upon
whom it places reliance.
Any interruption in these services or
relationships could have a profound
impact on Sage’s reputation in the
market and could result in significant
financial liabilities and losses.
Link to Viability Scenario
None
Executive Owner
Chief Product Officer
•
•
•
•
•
•
Battlecards are in place for key products in
all countries, setting out the strengths and
weaknesses of competitors and their products
A data-driven Customer Success Framework to
enhance the customer experience and ensure
that Sage is better positioned to meet the
current and future needs of the customer
Customer Journey mapping and mapping of
the five core customer processes to ensure
appropriate strategy alignment and alignment
to Target Operating Model
Sage’s “Customer for life” roadmaps,
detailing how products fit together, any
interdependencies, and migration pathways
for current and potential customers
Continuous NPS surveying allows Sage to
identify customer challenges rapidly, and
respond in a timely manner to emerging trends
Launch of Sage Membership, providing
customers with access to curated resources,
tools, and a connected community of
business leaders
•
Centre of Excellence for our Indirect Sales
and Third-Party partners
• Dedicated colleagues in place to support
partners, and to help manage the growth of
targeted channels
•
Standardised implementation plans for
Sage products that facilitate efficient
partner implementation
• Managed growth of the API estate, including
enhanced product development that enables
access by third-party API developers
•
•
•
Enhanced third-party management framework,
to support closer alignment and oversight of
third-party activities
A specialised Procurement function
supporting the business with the selection
of strategic third-party suppliers and
negotiation of contracts
Investing in new types of partnerships to
explore and grow business in new markets
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Principal Risks and uncertainties continued
KEY
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
RISK ENVIRONMENT CHANGE
Improving
Stable
Decreasing
Principal Risk
Risk context
Management and mitigation
7. People and Performance
If we fail to ensure we have
engaged colleagues with the
critical skills, capabilities
and capacity we need to deliver
on our strategy, we will not
be successful.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
•
Extensive focus on hiring channels to ensure
we are attractive in the market through our
enhanced employee value proposition, and
enhanced presence through social media such
as Glassdoor, Comparably, Twitter, LinkedIn,
and Facebook
• Hiring practices focused on the skills we need
in balance with organisational costs supported
by a methodology for upskilling and building
capability in the long term from within
the organisation
•
•
•
Reward mechanisms designed to incentivise
and drive the right behaviour with a focus on
ensuring fair and equitable pay in all markets
Focused development of our leaders (e.g.
a 7-month Senior Leadership Programme)
to ensure they create the environment which
enables colleagues to thrive and perform
at their very best
Implementing an effective hybrid working
model across the organisation
As we evolve our priorities, the
capacity, knowledge, and leadership
skills we need will continue to
change. Sage will not only need to
attract the talent and experience
we will need to help navigate this
change. We will also need to provide
an environment where colleagues
can develop to meet these new
expectations, an environment
where everyone can perform at
their very best.
By empowering colleagues and
leaders to make decisions, be
innovative, and be bold in delivering
on our commitments, Sage will be
able to create an attractive working
environment. By addressing drivers
of colleague voluntary attrition, and
embracing the values of successful
technology companies, Sage can
increase colleague engagement
and create an aligned high-
performing team.
Executive Owner
Chief People Officer
100
The Sage Group plc. Annual Report and Accounts 2022
Principal Risk
Risk context
Management and mitigation
8. Culture
If we do not fully empower our
colleagues and enable them
to take accountability in line
with our shared Values, we will
be challenged to maintain
a culture that meets Sage’s
business ambitions.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
The development of a shared
behavioural competency that
encourages colleagues to always
do the right thing, put customers
at the heart of business and drive
innovation is critical in Sage’s
success. Devolution of decision
making, and the acceptance of
accountability for these decisions,
will need to go hand in hand as the
organisation develops and sustains
its shared Values, and fosters
a culture that provides customers
a rich digital environment.
Sage will also need to create a culture
of empowered leaders that supports
the development of ideas, and that
provides colleagues with a safe
environment allowing for honest
disclosures and discussions. Such
a trusting and empowered environment
can help sustain innovation, enhance
customer success and drive the
engagement that results in increased
market share.
Executive Owner
Chief People Officer
•
•
•
•
•
•
•
•
Refreshed Values launched to align with our
refreshed Sage brand
Integration of Values into all colleague
priorities including talent attraction,
selection, and onboarding as well as
performance management
All colleagues are actively encouraged to take
up to five paid Sage Foundation days each year,
to support charities and provide philanthropic
support to the community
Commitments to DEI including zero tolerance
of discrimination, equal chance for everyone,
inclusive culture and removing barriers
A DEI strategy focused on building diverse
teams, an equitable culture, and fostering
inclusive leadership. This strategy is
supported by measurable plans and metrics
to track progress
A new transparency and accountability
development framework
Code of Conduct communicated to all
colleagues, and subject to certification
every two years
Core elearning modules rolled out across Sage,
with regular refresher training
• Whistleblowing and incident reporting
mechanisms in place to allow issues to be
formally reported and investigated
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Principal Risks and uncertainties continued
KEY
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
RISK ENVIRONMENT CHANGE
Improving
Stable
Decreasing
Principal Risk
Risk context
Management and mitigation
Information is the life blood of
a digital company—protecting the
confidentiality, integrity, and
accessibility of this data is critical
for a data-driven business, and
failure to do so can have significant
financial and regulatory consequences
in the GDPR era. In addition, we need
to use our data efficiently and
effectively to drive improved
business performance.
Executive Owner
General Counsel and Chief Risk
Officer
Data is central to the Sage strategy
to deliver our ambition of a digital
network. The strategy is underpinned
by our ability to innovate and develop
solutions to enhance customer
propositions, improve insight and
decision making, and create new
business models and ecosystems.
The ability to successfully use data
will accelerate our growth and will
be a key driver in helping customers
transform how they run and build
their businesses.
Executive Owner
Chief Data Officer and President
EMEA
9. Cyber Security and
Data Privacy
If we fail to responsibly
collect, process, and store
data, together with ensuring
an appropriate standard of
cyber security across the
business, we will not meet
our regulatory obligations,
and will lose the trust of
our stakeholders.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
Cloud Operations Failure
10. Data Strategy
If we fail to recognise the
value of our data assets,
deliver effective data
foundations, and capitalise on
their use, we will not be able
to realise their full potential
to secure strategically
aligned outcomes.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
Existing or New
Market Disruptor
• Multi-year cyber security programmes in IT and
products to ensure Sage is driving continuous
improvement and cyber risk reduction across
technology, business processes, and culture
Accountability within both IT and Product for
all internal and external data being processed
by Sage. The Chief Information Security
Officer oversees information security, with
a network of Information Security Officers
that directly support the business
The Chief Data Protection Officer oversees
data privacy protection
Formal certification schemes maintained
across the business, and include internal and
external validation of compliance
All colleagues are required to undertake
awareness training for cyber security,
information management, and data protection,
with a focus on the GDPR requirements
A Cyber Security Risk Management
Methodology is deployed to provide objective
risk information on our assets and systems
•
•
•
•
•
• Data strategy across customer, product, and
enterprise data to support the delivery of
customer value and solve customer problems,
including the use of enhanced Artificial
Intelligence/Machine Learning capabilities
•
•
•
•
•
A global data function that drives focus and
alignment across the organisation. In FY22,
Sage appointed it’s first Chief Data Officer
A defined set of Data ethics and principles
to ensure we use customer data responsibly
to achieve our strategy
Plan to increase digital network participation,
which will contribute to more data to support
the delivery of real customer value and solve
real customer problems
The implementation of data architecture and
associated data models that facilitate data
sharing and utilisation
A data asset register, and associated use case
catalogue, to enable effective prioritisation
and value creation
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Principal Risk
Risk context
Management and mitigation
11. Readiness to Scale
If we fail to maintain
a reliable, scalable, and
secure live services
environment, we will be
unable to deliver the
consistent cloud experience
expected by our customers.
Trend
Strategic alignment
Link to Viability Scenario
Data Breach
Cloud Operations Failure
As Sage transitions to a digital
company, we continue to focus on
scaling our current and future
platform services environment in
a robust, agile, and speedy manner
to ensure the delivery of a consistent
and robust cloud platform and
associated digital network.
Sage must provide the right
infrastructure and operations
for all of our customer products,
a hosting platform, together with
the governance to ensure optimal
service availability, performance,
security protection, and restoration
(if required).
Executive Owner
Chief Product Officer
12. Environment, Social,
and Governance
If we fail to fully, and
continually, respond to the
range of environmental
(especially climate), social,
and governance‑related
opportunities and risks, we
may fail to deliver positive
change to social and
environmental issues and
damage the confidence
of our stakeholders.
Trend
Strategic Alignment
We are committed to investing in
education, technology, and the
environment to give individuals,
SMBs, and our planet the opportunity
to thrive.
Internally, it is essential that Sage
understands the potential impact
of climate change to its strategy
and operations and considers
appropriate mitigations.
Societal and Governance related
issues are integral to Sage’s purpose
and Values and to the delivery of
Sage’s strategy.
You can read more about the work
that is being done within ESG in the
Sustainability and Society Report.
Link to Viability Scenario
None
Executive Owner
Chief People Officer
and EVP Sustainability
and Foundation
• Migration of products to public cloud offerings
to improve scalability, resilience, and security
•
•
•
•
Accountability across product owners,
underpinned by ongoing risk assessments
and continuous improvement projects
Formal onboarding process including ongoing
management in Portfolio Management processes
Incident and problem management change
processes adhered to for all products and services
Service-level objectives including uptime,
responsiveness, and mean time to
repair objectives
• Defined Real-Time Demand Management
processes and controls and also Disaster
Recovery Capability and operational
resilience models
•
•
•
•
Improved focus and monitoring of
product availability
A governance framework to optimise
operational cost base in line with key metrics
All new acquisitions are required to adopt
Sage cloud operation standards
A robust Sustainability and Society strategy
which was launched in 2021, focusing on three
pillars: Tech for Good, Fuel for Business, and
Protect the Planet
• Underpinning the strategy is a robust cross-
functional governance framework
•
•
•
•
Tracking tools in place to enable horizon
scanning and to track the Sustainability and
Society strategy’s impact
As part of our broader Sustainability function,
the Sage Foundation, established in 2015,
remains focused on the areas of education,
employment, and entrepreneurship via
the contribution of time, investment,
and capability
An integrated framework for the management
of climate-related risks, including physical
and transitional climate risks as recommended
by the TCFD
An ambitious carbon reduction target and
a robust plan to achieve it.
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Principal Risks and uncertainties continued
Viability Statement
Assessment of prospects and
viability period
In accordance with provision 31 of the 2018 UK Corporate
Governance Code, the Directors set out how they have
assessed the Group’s prospects, the period covered by the
assessment and the Group’s formal Viability Statement.
The Directors have assessed the prospects of the Group
by considering the Group’s current financial position, its
recent and historic financial performance and forecasts,
its business model and strategy (pages 12 and 13 and 22
to 36), and the Principal Risks and uncertainties (pages 96
to 103).
The Group’s operational and financially robust position
is supported by:
• High-quality recurring and subscription-
based revenue;
• A resilient cash generation and robust liquidity
position which is supported by strong underlying
cash conversion of 107%, reflecting the strength
of the subscription business model; and
• A well-diversified small and medium customer base.
The Directors have reviewed the period used for the
assessment and determined that three years remains
suitable. The Directors are of the view that projections
over a three-year period remain appropriate given the
relative predictability of cash flows associated with
Sage’s subscription business during this period. This
period aligns our Viability Statement with our three-year
strategic planning horizon, and is appropriate given the
nature and investment cycle of a technology business.
Projections beyond this period are less reliable due to
the continuously evolving technology landscape in
which Sage operates.
No scenario modelled over the three-year period leads
to a breach in Sage’s debt covenants or results in
insufficient liquidity headroom. The Directors have
no reason to believe the Group will not be viable over
a longer period.
Assumptions
The financial forecasts contained in the Group’s three-year
plan make certain assumptions about composition of the
Group’s product portfolio and the ability to acquire new
customers and maintain a strong renewal rate by value
by providing additional functionalities to our existing
customers. The plan also assumes that the Group continues
to generate resilient cash conversion in excess of 100%,
pays debt instalments as they fall due, and that the existing
borrowing facilities remain available to the Group.
The assessment process
In forming the Viability Statement, the Directors carried
out a robust assessment of the Principal Risks and
uncertainties facing the Group which could impact the
business model. These are reviewed by the Board and the
Audit and Risk Committee quarterly and are a foundation
for the Group’s strategic plan. The risk process is outlined
in more detail on pages 90 to 95 and includes
consideration of the macroeconomic environment.
As part of the assessment, the Group stress tests the
three-year plan using various severe but plausible
scenarios. To achieve this, management reviewed the
Principal Risks and considered which might threaten
the Group’s viability. None of the individual risks would
in isolation compromise the Group’s viability, and so
several different severe scenarios were considered where
Principal Risks arose in combination. The scenarios
were developed with input from the Group’s Global Risk
Committee which comprises representation from key
functions across the business.
Under the stress scenarios, churn assumptions have been
increased by up to 75% and a reduction by up to 50% of new
customer acquisition and sales to existing customers
considered. In all stress scenarios, the Group continues
to have sufficient resources to continue in operational
existence without triggering the need to renegotiate
debt. Scenarios modelled reflect our latest assessment
of the anticipated impact of the risks identified in line
with the prior year.
The scenarios considered to be the most plausible and
significant in performing the assessment of viability and
the combination of Principal Risks involved are shown on
the next page.
104
The Sage Group plc. Annual Report and Accounts 2022 Scenario modelled
(i) Data Breach
The deliberate targeting or accidental release of customer data which
breaches data privacy laws and/or societal expectations in any region
could have a significant impact on Sage’s reputation in the market, as well
as impact its regulatory compliance in the various data protection laws to
which Sage is subject.
Linked Principal Risks
• Understanding Customer Needs
•
• Developing and Exploiting New
Customer Experience
Business Models
Route to Market
People and Performance
Culture
Cyber Security and Data Privacy
•
•
•
•
• Data Strategy
•
Readiness to Scale
(ii) Existing or New Market Disruptor
The entry of a new player, or the expansion of an existing market player in
the financial and accounting management space with a free or very low-cost
offering that significantly disrupts Sage’s total market share. Additionally,
businesses that increasingly act as the intermediary between Sage and the
end customer using our APIs may seek to disintermediate Sage.
(iii) Global Economic Shock
The crystallisation of a global economic shock which leads to a global
economic downturn or an inflationary wage-price spiral, resulting in
increased default of SMBs. This could lead to a significant increase in
customer churn and a reduced ability to sell to new or existing customers.
Additionally, increased labour costs in key markets could make it difficult
for Sage to retain and attract talent.
(iv) Cloud Operations Failure
The risk of an event that causes the live services environment to be brought
down due to the operating environment being changed internally through
product or system changes, external or internal cyber-attack, or a key
third-party provider being compromised.
• Understanding Customer Needs
•
• Developing and Exploiting New
Execution of Product Strategy
Business Models
Route to Market
Customer Experience
•
•
• Data Strategy
Execution of Product Strategy
Route to Market
Customer Experience
•
•
•
• Understanding Customer Needs
• Understanding Customer Needs
•
• Developing and Exploiting New
Execution of Product Strategy
Business Models
Route to Market
Customer Experience
Cyber Security and Data Privacy
Readiness to Scale
•
•
•
•
The monetary impact of each scenario was estimated
by a cross-functional group of senior leaders, including
representatives from Finance, Risk, Cloud Operations, IT,
Product Marketing, and Legal, who evaluated the possible
consequences to the Group should each scenario arise.
Consideration of the impact of the current economic
landscape has been factored into the three-year plan, with
incremental risk reflecting current levels of uncertainty
modelled as part of the global economic shock scenario.
Expected changes in the Group’s product mix through
the ongoing migration towards cloud-based solutions,
as well as the timing of repayment of debt, have been
considered to ensure such matters do not adversely
impact the assessment.
new customer acquisition which would be required to
trigger a breach in the Group’s covenants or exhaust cash
down to minimum working capital requirements. The
result of the reverse stress testing has highlighted that
such a scenario would only arise following a catastrophic
deterioration in performance, well in excess of the
assumptions considered in the viability scenarios set
out above.
In the event that the scenarios set out above were to arise,
management would have a number of options available to
maintain the Group’s financial position, including cost
reduction measures, the arrangement of additional
financing, and a review of the sustainability of the
dividend policy.
As set out in the Audit and Risk Committee’s report on
pages 138 to 147, the Directors reviewed and discussed the
process undertaken by management, and also reviewed
the results of reverse stress testing performed to provide
an illustration of the level of churn and deterioration in
Confirmation of longer-term viability
Based on the assessment explained above, the Directors
confirm that they have a reasonable expectation that the
Group will continue to operate and meet its liabilities,
as they fall due, for at least the next three years.
105
The Sage Group plc. Annual Report and Accounts 2022Strategic ReportGovernance ReportFinancial StatementsShareholder Information Governance
The UK Corporate Governance Code 2018
Compliance Statement
Sage has applied the principles of the UK Corporate
Governance Code 2018 (the “Code”) and complied with all its
provisions throughout FY22.
We believe that a robust corporate governance framework is
important to protect stakeholder value. The Board promotes
a culture of good corporate governance, to provide confidence
in the delivery of Sage’s strategic performance and to ensure
the long-term sustainable success of the business.
The table to the right highlights where key content can be
found in this report to demonstrate how we have applied the
Code principles during FY22.
Colleagues are a key stakeholder for Sage and hearing their
voice in the Boardroom is critical to assess the culture
effectively. In FY22, as permitted by the Code, the Board
continued with its chosen alternative approach to workforce
engagement, through the Board Associate programme. The
programme plays a crucial role in strengthening the colleague
voice in the Boardroom, and educating colleagues on the role
of the Board at Sage. This leads to more informed decision
making by the Board in line with the expectations of the Code.
Following a thorough and rigorous appointment process,
Derek Taylor, Senior VP Client Services and Sales, in Sage
Intacct, was selected as the new Board Associate. Derek Taylor
attends all Board meetings, observes how the Board makes
decisions and introduces a colleague perspective to
discussions. He has a deep knowledge of SaaS and the Sage
Intacct business, and brings a powerful perspective by seeing
things through a customer and colleague lens. Derek Taylor is
based in California and began his 18-month tenure in July 2022.
Further details on the role of the Board Associate can be found
on pages 126 and 127.
The Code is publicly available on the website of the
UK Financial Reporting Council at www.frc.org.uk.
Board Leadership and Company Purpose
Pages
Purpose and culture
Shareholder engagement
Colleague engagement
Other stakeholder engagement
Conflicts of interest
inside front cover, 38 to 43,
101, 124 to 125
76 to 77
38 to 43, 70 to 71, 126 to 127
69 to 81
117
Division of Responsibilities
The role of the Board
The role of the Board Committees
Board composition
Committee composition
Independence of Non-executive Directors
Time commitment
Composition, Succession, and Evaluation
Board composition and succession
Diversity, equity, and inclusion
Annual re-election of Directors
Induction, Director training, and
development programme
Board effectiveness and evaluation
Audit, Risk, and Internal Control
Significant reporting and accounting matters
Fair, balanced, and understandable
Viability statement and going concern
Risk management and internal controls
Internal audit
External auditor
Principal and emerging risks
Remuneration
Remuneration principles
Remuneration Policy
Pension and benefits
Directors’ shareholdings and share interests
External advisors
114
114 to 116
116
118
117
116
130 to 137
134 to 137
116
117
128 to 129
140 to 143
144
142
144
145 to 146
146 to 147
90 to 103
151
158 to 162
174
177
181
106
The Sage Group plc. Annual Report and Accounts 2022
Chair’s introduction
to governance
Andrew Duff
Chair
Our refreshed values
are testament to
our culture
Dear shareholder,
On behalf of the Board, I am pleased to introduce our
Governance Report for the year ended 30 September 2022.
This report sets out our approach to effective corporate
governance and outlines key areas of focus of the Board
and its activities undertaken during the year as we
continue to drive long-term value creation for all
our stakeholders.
During my first year as Chair, I have met with many
Sage colleagues, as well as other key stakeholders, in
order to gain a deeper understanding of Sage’s culture
and business. I visited our operations in North America,
South Africa and France, as well as the UK, where I gained
first hand insight from our local management teams and
colleagues about the opportunities and challenges they
face. These activities have enabled me, over the last
12 months, to build a rapid understanding of Sage and
its customers.
107
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Chair’s introduction to governance continued
I am very grateful to all the colleagues and stakeholders
who have taken time to speak with me during the year and
to share their knowledge and insights. This knowledge is
essential to ensure that I can lead the Board effectively
and create the right conditions to enable us to deliver
on our strategy of sustainable growth.
Drummond Hall will have served on the Board for nine
years, by January 2023. In his role as Senior Independent
Director, Drummond continues to provide constructive
challenge to the senior management team and is
a significant asset to Sage, with his deep knowledge
of the business and workings of the Board.
Board succession and diversity
I reported last year that a key area of Board focus was on
increasing our gender diversity, as this had fallen below
the target levels in FY21, due to appointments which
were made to support the overall evolution of our Board.
In FY22, a key Board priority has been on working towards
rebalancing our gender diversity as we seek to meet
the targets set by the FTSE Women Leaders Review and
the targets specified in recent updates to the FCA’s
Listing Rules, which Sage will report against in FY23.
Currently we meet the targets set by the Parker Review
with regard to ethnic diversity. In May this year the
Nomination Committee initiated a search for a new
Non-executive Director.
In July 2022, Irana Wasti decided to step down from the
Board after two years as a Non-executive Director, to
pursue another executive opportunity. We are grateful
to Irana for the valuable contribution, knowledge and
industry expertise that she brought to her role at Sage.
Irana’s departure from the Board, regrettably, further
impacted our gender balance. The Nomination Committee
commenced a second Non-executive Director search
in August.
I am committed to ensuring that the Board composition
reflects a diverse mix of skills, experience, personal
attributes as well as broader aspects of diversity. This is
whilst also ensuring that all Board appointments are made
on merit and meet the needs of the Board. The Board was
therefore delighted to recently announce that Maggie
Chan Jones will join as a new Non-executive Director on
1 December 2022. Maggie brings with her deep international
marketing and brand experience from her time spent at
some of the world’s largest technology companies and
will highly complement the skills we have already on
the Board.
As stated in the Board’s Diversity, Equity and Inclusion
policy, it remains our priority to minimise any temporary
periods when the Board is unable to meet its diversity
commitments. I look forward to announcing progress
on the remaining Non-executive Director search in the
near future.
The Nomination Committee has assessed Drummond’s
independence and concluded that he continues to show
independence of conduct, character, and judgement.
There have been several changes to the Board in the
last couple of years, including my own appointment
as Chair and the planned appointment of two more
Non-executive Directors. To support continuity
in a period of Board evolution, the Board has resolved
to extend Drummond’s tenure for a one-year period
until January 2024.
The Board considers that this extension does not impair
Drummond’s independence and is confident that he will
continue to contribute the correct balance of expertise,
experience, challenge, and support required. The Board
is grateful to Drummond for offering to serve for one
additional year.
Further information on our Non-executive Director
selection process and extension to Drummond Hall’s
term can be found in the Nomination Committee
Report on pages 130 to 137.
Culture
The Board is responsible for setting the tone from the
top and promoting a culture which creates a positive work
environment where everyone feels respected, motivated
and able to thrive. Our colleagues are essential for the
delivery of our strategic objectives and our continued
success. Their feedback is critical to the Board and we
continue to monitor our culture through surveys, town-hall
sessions, formal and informal engagement activities,
and through hearing the views of our Board Associate.
During the year, the Board considered and approved
Sage’s refreshed values. These values have been
developed with input from colleagues across the business
and reflect those attributes our colleagues already see
represented in our culture today. The Board will continue
to monitor how the evolved values are brought to life for
all our stakeholders and the role they play in helping us
achieve our ambitions.
You can read more about our culture and colleague
engagement activities on pages 38 to 43, 70 to 71,
and 124 to 127.
108
The Sage Group plc. Annual Report and Accounts 2022 Engagement with our stakeholders
I recognise that stakeholder engagement is critical
to the long-term success of our business; the art of
balancing different stakeholder views and needs in
Board discussions and decision making is key.
Looking forward
We will continue as a Board to maintain the highest
standards of corporate governance across the Group,
focus on delivery of our strategy, and continue to promote
and enhance the inclusive culture we are building at Sage.
I encourage all stakeholders to take every opportunity
presented to engage with the Company and I would
welcome you to attend, and in any case vote at, the
forthcoming Annual General Meeting on 2 February 2023.
I am delighted to be part of the Sage team. I would like to
thank my Board colleagues and the Executive Leadership
Team for their support during my first full year as Chair,
as well as for their continued leadership as we build
a business which delivers on the interests of all our
stakeholders and the communities and wider society
in which we operate.
Andrew Duff
Chair
One way in which the Board continues to maintain its
two-way communications between the Board and our
colleagues is through the role of the Board Associate.
In July this year, the Board appointed its fourth Board
Associate, Derek Taylor, who is Senior VP Client Services
and Sales for Sage Intacct, and based in San Jose. The
Board continues to challenge itself on how it can get the
best out of the Board Associate role, to keep its pulse on
colleague sentiment and insight so that it makes better
decisions on matters impacting our key stakeholders.
With a return to a more normal working environment, the
Board has also been able to meet in person this year and
participate in a range of engagement activities at our
offices in Newcastle and San Jose. Such interaction is
critical in aiding the Board’s understanding of Sage,
seeing the outcome of decisions taken in the Boardroom
and assessing how well Sage’s values are being lived
day to day.
Further details on our new Board Associate can be
found on pages 126 and 127. Details on how the Board
has engaged with our stakeholders and discharged
our section 172 duties during the year can be found
on pages 78 to 81.
Board effectiveness
It is very important that the performance of the Board,
its Committees, and individual Directors is rigorously
reviewed and that they embrace the opportunity to
develop, where necessary. This year, an externally
facilitated effectiveness review was conducted
(in accordance with the Code) and supported by the
Company Secretary. The results were insightful and
I am pleased to report that key areas of Board strength
were held to be its strong sense of accountability to
stakeholders and the positive culture within the Board.
Our progress against last year’s areas of focus, as well
as the outcome of this year’s effectiveness review, can
be found on pages 128 and 129.
109
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Our leadership
Board of Directors
The collective leadership of the Directors and the diverse skills, experience,
and personal attributes that they individually possess ensure the effective
operation of the Board.
Key
A
N
R
Audit and Risk
Committee
See pages 138 to 147
Nomination
Committee
See pages 130 to 137
Remuneration
Committee
See pages 148 to 181
Changes to the Board
during FY22 and as at
the date of this report
•
•
Irana Wasti stepped
down from the Board
on 22 July 2022
As announced on
15 November 2022,
Maggie Chan Jones
will be appointed to
the Board with effect
from 1 December 2022
Information on Board
succession planning
activities can be found
on pages 130 to 137.
Further information on
the composition of the
Board can be found on
page 116.
110
N
A
N R
A
A R
A N R
A
Andrew Duff
Chair
Sangeeta Anand
Independent
Non-executive Director
Dr John Bates
Independent
Non-executive Director
Jonathan Bewes
Independent
Non-executive Director
Chair of the Nomination
Committee
Member of the Audit
and Risk Committee
Member of the
Nomination Committee and
the Remuneration Committee
Chair of the Audit and
Risk Committee
Appointed
Independent Non-executive
Director on 1 May 2021 and
Non-executive Chair on
1 October 2021
Gender
Male
Ethnicity
White
Nationality
British
Skills
Andrew has a wealth
of experience as a non-
executive director and chair,
with a strong track record of
transforming high-profile
international businesses.
He is an effective leader
with strategic insights and
international experience.
Andrew has a strong focus
on purpose, culture and
customer-centricity, and
delivering value for
all stakeholders.
Key previous experience
Non-executive chair
of Elementis plc
Non-executive chair
of Severn Trent plc
Non-executive director
of Wolseley plc
Chief executive officer
of npower
Key external commitments
Non-executive director
of UK Government
Investments Ltd (UKGI)
Appointed
1 May 2020
Gender
Female
Ethnicity
Asian
Nationality
American
Skills
Sangeeta is a Silicon
Valley-based senior
technology leader with
extensive experience
in leading P&L and
growth across a range
of public, PE-owned and
startup companies.
She has deep operating
experience in transforming
complex product portfolios
and go-to-market to capture
the cloud opportunity.
Her technology and business
experience includes
cybersecurity, cloud,
enterprise software, SaaS
and application services.
Key previous experience
Chief marketing officer,
Alkira Inc (disruptive SaaS
networking startup)
Senior vice president,
F5 Networks Inc (Listed
on NASDAQ)
General manager and
corporate vice president,
SafeNet (part of
Thales Group)
Vice president,
Cisco Systems
Key external commitments
None
Appointed
1 April 2019
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan has prior
experience of serving as
chair on an audit committee
and a wealth of accounting
and financial experience.
He has strong investment
banking experience gained
over a 25-year career in
the sector.
Jonathan has advised
boards of UK and overseas
companies on a wide
range of financial and
strategic issues, including
financing, corporate
strategy and governance.
Key previous experience
Investment banking
experience with Robert
Fleming, UBS, and Bank
of America Merrill Lynch
Chartered accountant
with KPMG
Key external commitments
Senior independent director
and chair of the audit
committee of Next plc
Vice chairman, corporate
and institutional banking at
Standard Chartered Bank plc
Appointed
31 May 2019
Gender
Male
Ethnicity
White
Nationality
British, American
Skills
John is a visionary
technologist and highly
accomplished business
leader in the field of
technology innovation,
including Artificial
Intelligence and Machine
Learning functionality to
improve customer experience.
He is a pioneer, focusing on
areas such as event-driven
architectures, smart
environments, business
activity monitoring and
evolution of platforms for
digital business.
Key previous experience
Co-founder, president and
chief technology officer
of Apama (now part of
Software AG)
Head of industry solutions
and chief marketing officer
of Software AG
Chief executive officer of
Terracotta, Inc. (a subsidiary
of Software AG)
Executive vice president
of corporate strategy and
chief technology officer
at Progress Software
Chief executive officer at
Plat.One (now part of SAP)
Chief executive officer of
the Eggplant Group, part of
Keysight Technologies Inc
Key external commitments
Chief executive officer of
SER Group Holding GmbH
Annette Court
Independent
Drummond Hall
Senior
Derek Harding
Independent
Steve Hare
Chief Executive
Non-executive Director
Independent Director
Non-executive Director
Officer
Jonathan Howell
Chief Financial
Officer
Appointed
15 May 2013 as a
Non-executive Director and
as CFO on 10 December 2018
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan is a highly
experienced group
finance director and an
experienced chairman and
He has significant financial
and accounting experience,
gained across several
sectors, which allows him to
provide substantial insight
into the Group’s financial
reporting and risk
management processes.
Chair of the Remuneration
Member of the Remuneration
Member of the Audit
Committee and member of
Committee, the Audit and
and Risk Committee
the Audit and Risk Committee
Risk Committee and the
Nomination Committee
Appointed
1 April 2019
Gender
Female
Ethnicity
White
Nationality
British
Skills
Appointed
1 January 2014
Gender
Male
Ethnicity
White
Nationality
British
Skills
Appointed
2 March 2021
Gender
Male
Ethnicity
White
Nationality
British
Skills
Annette has prior experience
Drummond is an experienced
Derek has significant
of serving as chair of
non-executive director and
financial experience,
a remuneration committee.
board chair with a wealth of
including leading business
She has experience in
experience gained across
transformations and sharp
executive and non-executive
a number of customer-focused
financial acumen.
director roles at the highest
blue-chip businesses in the
levels, including as chair
UK, Europe and the US.
He has broad experience
across a range of
Appointed
3 January 2014 as Chief
Financial Officer (CFO)
31 August 2018 as Chief
Operating Officer, and as
Chief Executive Officer
(CEO) on 2 November 2018
Gender
Male
Ethnicity
White
Nationality
British
Skills
Steve has significant
financial, operational and
non-executive director.
He has strong knowledge
commercially focused
of marketing and customer
financial and operational
service and brings deep
insight to how Sage may
expand markets and
delight customers.
roles including strategy,
investor relations, mergers
and acquisitions.
Key previous experience
Key previous experience
Chief financial officer
Senior independent director
at Senior plc
as CFO.
of WH Smith plc
Group finance director
Senior independent director
at Shop Direct
transformation experience,
which includes driving
change programmes in
several of his previous roles.
He has a broad knowledge
of Sage, having joined the
Board in January 2014
Finance director
of Wolseley UK
Key external commitments
Chief financial officer
at Spectris plc
of FirstGroup plc
Chair of Mitchells &
Butlers plc
Chief executive officer
of Dairy Crest Group plc
Majority of career was spent
with Procter & Gamble,
Mars and PepsiCo
Key external commitments
None
Extensive understanding
Jonathan has excellent
of the drivers and priorities
working knowledge of
needed to complete
Sage, having joined as an
Sage’s evolution to a SaaS
independent Non-executive
company and to create
Director and acting as the
a high-performance culture
Chair of the Audit and Risk
Key previous experience
Operating partner and
co-head of the Portfolio
Committee.
Key previous experience
Group CFO of Close Brothers
Support Group at the private
Group plc
equity firm Apax Partners
Chief financial officer for
Invensys plc, Spectris plc
and Marconi plc
Key external commitments
None
Group CFO of London Stock
Exchange Group plc
Non-executive director
of EMAP plc
Chair of FTSE International
Key external commitments
Non-executive director of
Experian plc
of FTSE 100 companies,
and a strong technology
background combined with
a record of using ecommerce
to drive commercial success.
Annette has expertise
in mentoring leaders to
achieve greater clarity
of purpose and provide
a practical approach to
problem-solving.
Key previous experience
Senior independent
director of Jardine Lloyd
Thompson Group
Chief executive officer
of Europe General Insurance
for Zurich Financial Services
Chief executive officer
of the Direct Line Group
Director of the board of
the Association of British
Insurers and Foxtons
Group plc
Key external commitments
Chair and non-executive
director of Admiral Group plc1
Chair-designate and
non-executive director
of WH Smith Plc2
The Sage Group plc. Annual Report and Accounts 2022 This Boardroom dynamic supports decision making, to create sustainable
success for the Company and long-term value for the benefit of all stakeholders.
N
A
N R
A
A R
A N R
A
Andrew Duff
Chair
Sangeeta Anand
Independent
Dr John Bates
Independent
Jonathan Bewes
Independent
Non-executive Director
Non-executive Director
Non-executive Director
Annette Court
Independent
Non-executive Director
Drummond Hall
Senior
Independent Director
Derek Harding
Independent
Non-executive Director
Steve Hare
Chief Executive
Officer
Jonathan Howell
Chief Financial
Officer
Chair of the Remuneration
Committee and member of
the Audit and Risk Committee
Member of the Remuneration
Committee, the Audit and
Risk Committee and the
Nomination Committee
Member of the Audit
and Risk Committee
Appointed
1 April 2019
Gender
Female
Ethnicity
White
Nationality
British
Appointed
1 January 2014
Gender
Male
Ethnicity
White
Nationality
British
Appointed
2 March 2021
Gender
Male
Ethnicity
White
Nationality
British
Skills
Derek has significant
financial experience,
including leading business
transformations and sharp
financial acumen.
He has broad experience
across a range of
commercially focused
financial and operational
roles including strategy,
investor relations, mergers
and acquisitions.
Key previous experience
Chief financial officer
at Senior plc
Group finance director
at Shop Direct
Finance director
of Wolseley UK
Key external commitments
Chief financial officer
at Spectris plc
Skills
Drummond is an experienced
non-executive director and
board chair with a wealth of
experience gained across
a number of customer-focused
blue-chip businesses in the
UK, Europe and the US.
He has strong knowledge
of marketing and customer
service and brings deep
insight to how Sage may
expand markets and
delight customers.
Key previous experience
Senior independent director
of WH Smith plc
Senior independent director
of FirstGroup plc
Chair of Mitchells &
Butlers plc
Chief executive officer
of Dairy Crest Group plc
Majority of career was spent
with Procter & Gamble,
Mars and PepsiCo
Key external commitments
None
Skills
Annette has prior experience
of serving as chair of
a remuneration committee.
She has experience in
executive and non-executive
director roles at the highest
levels, including as chair
of FTSE 100 companies,
and a strong technology
background combined with
a record of using ecommerce
to drive commercial success.
Annette has expertise
in mentoring leaders to
achieve greater clarity
of purpose and provide
a practical approach to
problem-solving.
Key previous experience
Senior independent
director of Jardine Lloyd
Thompson Group
Chief executive officer
of Europe General Insurance
for Zurich Financial Services
Chief executive officer
of the Direct Line Group
Director of the board of
the Association of British
Insurers and Foxtons
Group plc
Key external commitments
Chair and non-executive
director of Admiral Group plc1
Chair-designate and
non-executive director
of WH Smith Plc2
Appointed
3 January 2014 as Chief
Financial Officer (CFO)
31 August 2018 as Chief
Operating Officer, and as
Chief Executive Officer
(CEO) on 2 November 2018
Gender
Male
Ethnicity
White
Nationality
British
Skills
Steve has significant
financial, operational and
transformation experience,
which includes driving
change programmes in
several of his previous roles.
He has a broad knowledge
of Sage, having joined the
Board in January 2014
as CFO.
Extensive understanding
of the drivers and priorities
needed to complete
Sage’s evolution to a SaaS
company and to create
a high-performance culture
Key previous experience
Operating partner and
co-head of the Portfolio
Support Group at the private
equity firm Apax Partners
Chief financial officer for
Invensys plc, Spectris plc
and Marconi plc
Key external commitments
None
Appointed
15 May 2013 as a
Non-executive Director and
as CFO on 10 December 2018
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan is a highly
experienced group
finance director and an
experienced chairman and
non-executive director.
He has significant financial
and accounting experience,
gained across several
sectors, which allows him to
provide substantial insight
into the Group’s financial
reporting and risk
management processes.
Jonathan has excellent
working knowledge of
Sage, having joined as an
independent Non-executive
Director and acting as the
Chair of the Audit and Risk
Committee.
Key previous experience
Group CFO of Close Brothers
Group plc
Group CFO of London Stock
Exchange Group plc
Non-executive director
of EMAP plc
Chair of FTSE International
Key external commitments
Non-executive director of
Experian plc
1. Annette Court will step down from Admiral Group plc at its AGM in 2023.
2. Chair of WH Smith Plc with effect from 1 December 2022.
111
Key
A
Audit and Risk
Committee
See pages 138 to 147
N
Nomination
Committee
See pages 130 to 137
R
Remuneration
Committee
Changes to the Board
during FY22 and as at
the date of this report
•
•
Irana Wasti stepped
down from the Board
on 22 July 2022
As announced on
15 November 2022,
Maggie Chan Jones
will be appointed to
the Board with effect
from 1 December 2022
Information on Board
succession planning
activities can be found
on pages 130 to 137.
Further information on
the composition of the
Board can be found on
page 116.
See pages 148 to 181
Chair of the Nomination
Committee
Member of the Audit
and Risk Committee
Member of the
Chair of the Audit and
Nomination Committee and
Risk Committee
the Remuneration Committee
He is an effective leader
experience in transforming
He is a pioneer, focusing on
with strategic insights and
complex product portfolios
areas such as event-driven
international experience.
and go-to-market to capture
architectures, smart
Appointed
Appointed
Independent Non-executive
1 May 2020
Director on 1 May 2021 and
Non-executive Chair on
1 October 2021
Gender
Female
Ethnicity
Asian
Nationality
American
Skills
Gender
Male
Ethnicity
White
Nationality
British
Skills
Sangeeta is a Silicon
Valley-based senior
technology leader with
extensive experience
in leading P&L and
Andrew has a wealth
of experience as a non-
executive director and chair,
growth across a range
with a strong track record of
of public, PE-owned and
transforming high-profile
startup companies.
international businesses.
She has deep operating
Andrew has a strong focus
on purpose, culture and
customer-centricity, and
delivering value for
all stakeholders.
Key previous experience
Non-executive chair
of Elementis plc
Non-executive chair
of Severn Trent plc
Non-executive director
of Wolseley plc
Chief executive officer
of npower
the cloud opportunity.
Her technology and business
experience includes
cybersecurity, cloud,
enterprise software, SaaS
and application services.
Key previous experience
Chief marketing officer,
Alkira Inc (disruptive SaaS
networking startup)
Senior vice president,
F5 Networks Inc (Listed
on NASDAQ)
General manager and
corporate vice president,
Key external commitments
Non-executive director
of UK Government
Investments Ltd (UKGI)
SafeNet (part of
Thales Group)
Vice president,
Cisco Systems
Key external commitments
None
Appointed
1 April 2019
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan has prior
experience of serving as
chair on an audit committee
and a wealth of accounting
and financial experience.
He has strong investment
banking experience gained
over a 25-year career in
the sector.
Jonathan has advised
boards of UK and overseas
companies on a wide
range of financial and
strategic issues, including
financing, corporate
strategy and governance.
Key previous experience
Investment banking
experience with Robert
Fleming, UBS, and Bank
of America Merrill Lynch
Chartered accountant
with KPMG
Key external commitments
Senior independent director
and chair of the audit
committee of Next plc
Vice chairman, corporate
and institutional banking at
Standard Chartered Bank plc
Appointed
31 May 2019
Gender
Male
Ethnicity
White
Nationality
British, American
Skills
John is a visionary
technologist and highly
accomplished business
leader in the field of
technology innovation,
including Artificial
Intelligence and Machine
Learning functionality to
improve customer experience.
environments, business
activity monitoring and
evolution of platforms for
digital business.
Key previous experience
Co-founder, president and
chief technology officer
of Apama (now part of
Software AG)
Head of industry solutions
and chief marketing officer
of Software AG
Chief executive officer of
Terracotta, Inc. (a subsidiary
of Software AG)
Executive vice president
of corporate strategy and
chief technology officer
at Progress Software
Chief executive officer at
Plat.One (now part of SAP)
Chief executive officer of
the Eggplant Group, part of
Keysight Technologies Inc
Key external commitments
Chief executive officer of
SER Group Holding GmbH
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Our leadership continued
Executive Leadership Team
Steve Hare chairs the Executive Leadership Team and Jonathan Howell is also a member.
Changes to the
Executive Leadership
Team during FY22
• Walid Abu-Hadba
•
•
•
•
joined the Executive
Leadership Team on
1 January 2022
Aziz Benmalek
joined the Executive
Leadership Team on
1 March 2022
Amy Lawson joined the
Executive Leadership
Team on 1 March 2022
Sue Goble stepped
down from the
Executive Leadership
Team on 31 March 2022
Lee Perkins stepped
down from the
Executive Leadership
Team on 31 March 2022
Vicki Bradin
General Counsel and
Company Secretary
Appointed
1 October 2016
Skills and experience
Vicki leads the Legal,
Company Secretariat, Cyber
Security, Risk, Compliance,
Assurance, Procurement and
Business Travel teams.
She has extensive corporate
legal experience, built over
20 years in global and magic
circle law firms and in-house
at large multi-nationals and
UK-Iisted companies.
Vicki contributes in-depth
software and technology
sector knowledge and
experience across a breadth
of legal areas including
M&A, litigation, risk and
intellectual property.
Walid Abu-Hadba
Chief Product
Officer
Aziz Benmalek
President—
North America
Appointed
1 January 2022
Appointed
1 March 2022
Derk Bleeker
President—
EMEA
Appointed
1 October 2019
Skills and experience
Walid has extensive
industry experience and
leadership skills gained in
the technology sector, with
a breadth of sector experience
including software
development and products.
He is passionate about driving
strategy and building the
culture that delivers tangible,
customer-centric solutions.
Walid joined Sage in 2021,
having previously spent
20 years at Microsoft,
where he was corporate vice
president responsible for
the developer and platform
evangelism group, before
joining ANSYS INC as chief
product officer. Most
recently he was senior vice
president, Oracle Developer
Tools. He also holds several
senior board advisor roles in
the technology sector and
patents in the field of AI.
Skills and experience
Aziz leads Sage’s business
across North America and
is accountable for Sage’s
commercial performance
and operations in the US and
Canada. He also leads Sage’s
Partners and Alliances
strategy globally.
Aziz joined Sage in 2020
and has over 20 years of
experience gained in the
technology sector in various
roles, leading the vision,
strategy, sales, marketing,
business development, and
technical enablement.
Skills and experience
Derk leads our business
across Europe, the Middle
East and Africa (EMEA) and
is accountable for Sage’s
commercial performance
and operations in
these regions.
Derk joined Sage in 2014
and has held a number of
commercial, finance, M&A
and strategy leadership
roles, most recently as
Sage’s Chief Development
and Strategy Officer.
He has in-depth experience
as a leader of corporate
development, gained from
working for a global
industrial and medical
technology company.
He also has experience
in private equity and as
an M&A specialist in
investment banking.
Executive Leadership Team composition1
Gender
Experience
Tenure
Female 4
Male 6
Technology and innovation 12.50%
Financial 12.50%
Customer success 31.25%
Marketing 6.25%
Corporate affairs 6.25%
Strategy 12.50%
Colleague success and ESG 12.50%
Legal, risk and governance 6.25%
Less than 1 year 3
1–3 years 2
3–6 years 4
Over 6 years 1
1. The Executive Leadership Team composition data reflects the information as at 30 September 2022 and includes
the Executive Directors who are also members of the Executive Leadership Team. Please see page 42 to 43 for further
diversity information.
112
Amanda Cusdin
Chief People
Officer
Aaron Harris
Chief Technology
Officer
Cath Keers
Chief Marketing
Officer
Amy Lawson
Chief Corporate
Affairs Officer
Appointed
1 October 2017
Appointed
1 April 2019
Appointed
8 September 2020
Appointed
1 March 2022
Skills and experience
Amanda joined Sage in
Skills and experience
Aaron is responsible for
Skills and experience
Skills and experience
Cath is responsible for the
Amy joined Sage in 2015,
March 2015, becoming Chief
Sage’s technology strategy
global strategy and
People Officer in September
and software architecture.
governance across all of
becoming Chief Corporate
Affairs Officer in 2022. She
2018. As well as leading our
global People Function,
Amanda has overall
executive accountability for
Sage’s Sustainability and
Society strategy, which aims
to knock down barriers by
tackling digital inequality,
economic inequality and
the climate crisis.
Before joining Sage,
Amanda spent 18 years
within a number of FTSE
organisations, where she
worked across all aspects of
Human Resources to drive
change and transformation,
with particular focus on
M&A integration.
She is passionate about
developing talent and
leadership, and creating
truly inclusive organisations
which promote diversity.
He has more than 20 years
of high-tech engineering
experience in business
applications and software
development strategies.
Aaron was a founding leader
of Sage Intacct, which was
acquired by Sage in 2017.
He led the company’s
product vision and
technology direction,
Sage’s marketing, including
is responsible for corporate
brand, events, digital
affairs at Sage, including
channels, and marketing
internal and external
operations.
reputation and engagement.
She has valuable knowledge
She sets the global
of digital and customer
experience insights with
a deep understanding
of leveraging sales and
marketing activity to
build successful brands.
communications strategy
across PR, colleague
communications, public
affairs and technology
analyst relations.
Amy is also a former Board
establishing Sage Intacct
Her breadth of sector
Associate at Sage.
as the innovation leader
experience includes retail,
in cloud financial
management solutions.
marketing, and business
development, gained in
commercial roles at large
global businesses.
Cath joined the Sage
Board in July 2017 as an
Prior to joining Sage, Amy
was head of the Cabinet
Office media operation
as a civil servant for the UK
Government and was head
of communications for
Channel 4 News, where
independent non-executive
she was responsible for
director and then served
protecting and promoting
as a non-independent,
the reputation of the
non-executive director from
national news programme,
April 2020 to June 2020.
its journalism and
its presenters.
The Sage Group plc. Annual Report and Accounts 2022
Changes to the
Executive Leadership
Team during FY22
• Walid Abu-Hadba
joined the Executive
Leadership Team on
1 January 2022
•
Aziz Benmalek
•
•
joined the Executive
Leadership Team on
1 March 2022
Amy Lawson joined the
Executive Leadership
Team on 1 March 2022
Sue Goble stepped
down from the
Executive Leadership
Team on 31 March 2022
•
Lee Perkins stepped
down from the
Executive Leadership
Team on 31 March 2022
Walid Abu-Hadba
Chief Product
Officer
Aziz Benmalek
President—
North America
Appointed
1 January 2022
Appointed
1 March 2022
Derk Bleeker
President—
EMEA
Appointed
1 October 2019
Vicki Bradin
General Counsel and
Company Secretary
Appointed
1 October 2016
Skills and experience
Walid has extensive
industry experience and
leadership skills gained in
the technology sector, with
Skills and experience
Aziz leads Sage’s business
across North America and
is accountable for Sage’s
commercial performance
Skills and experience
Derk leads our business
Skills and experience
Vicki leads the Legal,
across Europe, the Middle
Company Secretariat, Cyber
East and Africa (EMEA) and
Security, Risk, Compliance,
is accountable for Sage’s
Assurance, Procurement and
a breadth of sector experience
and operations in the US and
commercial performance
Business Travel teams.
including software
Canada. He also leads Sage’s
and operations in
development and products.
Partners and Alliances
these regions.
He is passionate about driving
strategy globally.
strategy and building the
Aziz joined Sage in 2020
Derk joined Sage in 2014
and has held a number of
She has extensive corporate
legal experience, built over
20 years in global and magic
circle law firms and in-house
culture that delivers tangible,
and has over 20 years of
commercial, finance, M&A
at large multi-nationals and
customer-centric solutions.
experience gained in the
and strategy leadership
UK-Iisted companies.
technology sector in various
roles, most recently as
roles, leading the vision,
Sage’s Chief Development
strategy, sales, marketing,
and Strategy Officer.
Vicki contributes in-depth
software and technology
sector knowledge and
business development, and
technical enablement.
He has in-depth experience
experience across a breadth
as a leader of corporate
of legal areas including
development, gained from
M&A, litigation, risk and
intellectual property.
Walid joined Sage in 2021,
having previously spent
20 years at Microsoft,
where he was corporate vice
president responsible for
the developer and platform
evangelism group, before
joining ANSYS INC as chief
product officer. Most
recently he was senior vice
president, Oracle Developer
Tools. He also holds several
senior board advisor roles in
the technology sector and
patents in the field of AI.
working for a global
industrial and medical
technology company.
He also has experience
in private equity and as
an M&A specialist in
investment banking.
Amanda Cusdin
Chief People
Officer
Aaron Harris
Chief Technology
Officer
Cath Keers
Chief Marketing
Officer
Amy Lawson
Chief Corporate
Affairs Officer
Appointed
1 October 2017
Appointed
1 April 2019
Appointed
8 September 2020
Appointed
1 March 2022
Skills and experience
Aaron is responsible for
Sage’s technology strategy
and software architecture.
He has more than 20 years
of high-tech engineering
experience in business
applications and software
development strategies.
Aaron was a founding leader
of Sage Intacct, which was
acquired by Sage in 2017.
He led the company’s
product vision and
technology direction,
establishing Sage Intacct
as the innovation leader
in cloud financial
management solutions.
Skills and experience
Amanda joined Sage in
March 2015, becoming Chief
People Officer in September
2018. As well as leading our
global People Function,
Amanda has overall
executive accountability for
Sage’s Sustainability and
Society strategy, which aims
to knock down barriers by
tackling digital inequality,
economic inequality and
the climate crisis.
Before joining Sage,
Amanda spent 18 years
within a number of FTSE
organisations, where she
worked across all aspects of
Human Resources to drive
change and transformation,
with particular focus on
M&A integration.
She is passionate about
developing talent and
leadership, and creating
truly inclusive organisations
which promote diversity.
Skills and experience
Cath is responsible for the
global strategy and
governance across all of
Sage’s marketing, including
brand, events, digital
channels, and marketing
operations.
Skills and experience
Amy joined Sage in 2015,
becoming Chief Corporate
Affairs Officer in 2022. She
is responsible for corporate
affairs at Sage, including
internal and external
reputation and engagement.
She has valuable knowledge
of digital and customer
experience insights with
a deep understanding
of leveraging sales and
marketing activity to
build successful brands.
Her breadth of sector
experience includes retail,
marketing, and business
development, gained in
commercial roles at large
global businesses.
Cath joined the Sage
Board in July 2017 as an
independent non-executive
director and then served
as a non-independent,
non-executive director from
April 2020 to June 2020.
She sets the global
communications strategy
across PR, colleague
communications, public
affairs and technology
analyst relations.
Amy is also a former Board
Associate at Sage.
Prior to joining Sage, Amy
was head of the Cabinet
Office media operation
as a civil servant for the UK
Government and was head
of communications for
Channel 4 News, where
she was responsible for
protecting and promoting
the reputation of the
national news programme,
its journalism and
its presenters.
113
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report
Corporate governance report
Our governance framework
The Board provides entrepreneurial leadership and sets
the Company’s purpose, strategy, and values. It is
responsible for the oversight of progress made against
the strategic objectives, approving proposed actions and
monitoring culture. The Board is supported by its
Committees and the Executive Leadership Team, while
retaining exclusive control and oversight of the Matters
Reserved for the Board.
Further details on our governance framework are set
out below:
Board of Directors
The Board is collectively responsible for the long-term sustainable success of the Company and the Group, for the benefit of all
Sage stakeholders and the wider society. The Board provides support and constructive challenge to senior management and
ensures that the Group maintains an effective risk management and internal control system
The Board discharges its responsibilities directly and through its Committees, the Executive Leadership Team and senior
management. Each Committee assists the Board by fulfilling its responsibilities and by reporting to the Board on decisions
and actions taken within its own Terms of Reference. The Committee Terms of Reference are reviewed and approved annually
by the Board
Board Committees
Audit and Risk Committee
Oversees and assesses the integrity
of the Group’s financial reporting,
risk management, and internal control
procedures. It also oversees the
integrity of the Group’s Environmental,
Social, and Governance (ESG) reporting
and measurement and the work of Sage
Assurance (internal audit) and the
external auditor
Remuneration Committee
Sets the Remuneration Policy for the
Executive Directors and determines
the remuneration framework, including
bonus and incentive plans and levels of
remuneration for the Executive Directors,
the Chair, the Company Secretary, and
senior management in line with the
long-term interests of the Company
Nomination Committee
Reviews the structure, size and
composition of the Board and its
Committees and plans for progressive
refreshing of its membership
Considers succession plans for the Board
and senior management, to ensure they
have the correct balance of diversity,
skills, knowledge and experience
Please read Jonathan Bewes’ Audit
and Risk Committee Report
on pages 138 to 147.
Please read Annette Court’s
Directors’ Remuneration Report
on pages 148 to 181.
Please read Andrew Duff’s
Nomination Committee Report
on pages 130 to 137.
The Chairs of the Audit and Risk Committee and the Remuneration Committee provide a formal update on their activities
at each Board meeting. The Chair of the Nomination Committee provides an update on its activities as and when required.
Responsible for the day-to-day management of the Group’s business and performance, and for the development and
implementation of the business strategy approved by the Board
Chief Executive Officer
Please see page 115 for further details on the responsibilities of the CEO.
Responsible for assisting the CEO to implement the strategy, meet commercial objectives and drive improved operating
and financial performance, whilst delivering long-term value creation for stakeholders
Executive Leadership Team
Please see pages 112 and 113 for further information on the Executive Leadership Team.
114
The Sage Group plc. Annual Report and Accounts 2022 Roles and division of responsibilities
The roles of the Chair and the Chief Executive Officer are separate, with each having a distinct and clearly defined
remit, as established and agreed by the Board. While both the Non-executive and Executive Directors have the same
duties as Directors of the Company, they have distinct roles on the Board, which ensures the appropriate
accountability and oversight.
Director
Chair
Andrew Duff
Senior Independent
Director (SID)
Drummond Hall
Independent Non-
executive Directors
Sangeeta Anand,
Dr John Bates, Jonathan
Bewes, Annette Court and
Derek Harding
Responsibility
•
•
•
•
•
•
•
•
•
•
Responsible for the leadership and effective operation of the Board in all aspects of its role
Sets the agenda for Board meetings to support sound decision making in consultation with
the CEO, CFO and the Company Secretary
Ensures that the views of all stakeholders are understood and considered appropriately in
Board discussions and decision making (please see pages 69 to 77 for more information)
Promotes a culture of openness in the Boardroom and encourages active and effective
contribution, debate and engagement by all Directors
Responsible for the promotion of the highest standard of corporate governance, assisted by
the Company Secretary
Provides support and acts as a sounding board for the Chair
Serves as an intermediary for the Non-executive Directors
Acts as an alternative contact for shareholders
Leads the Non-executive Directors in the evaluation of the performance of the Chair
Constructively assist, challenge and monitor the delivery of strategic objectives and
Group performance
• Oversight of internal controls and Enterprise Risk Management Framework to ensure they
are robust
Provide external perspectives, independent insight and support based on relevant experience
Engage with internal and external stakeholders and take their views into account in their
decision making
Perform a key role in succession planning together with the Board Committees, Chair and SID
Serving on various Committees and contributing to the effectiveness of those Committees
•
•
•
•
Chief Executive Officer
• Develops and proposes the corporate strategy for Board consideration, and leads the
Steve Hare
Chief Financial Officer
Jonathan Howell
Company Secretary
Vicki Bradin
•
•
•
•
implementation of the strategy, as approved by the Board
Responsible for delivery of Sage’s strategic priorities and leads the Executive Leadership
Team in overseeing the operational and financial performance of Sage
Ensures that risks are rigorously managed and that Sage maintains a disciplined and robust
internal control environment
Identifies potential acquisitions and disposals and monitors the competitive environment
Ensures that Sage operates in line with its values by doing the right thing and delivering
on its promises
• Manages the Group’s financial affairs
•
•
Supports the CEO in the delivery of corporate strategy and operational performance
Engages with Sage’s stakeholders including managing relationships in the
investment community
Provides insights into the Group’s commercial and financial position from within
the business
Ensures that appropriate and timely information is provided to the Board and its
Committees in order for them to function effectively and efficiently
Ensures good information flow between the Board and its Committees and between senior
management and Non-executive Directors
Advises the Board on legal, compliance and corporate governance matters
Supports the Chair with Board procedures by facilitating
•
• Non-executive Directors’ training and professional development
•
• Non-executive Directors’ engagement plans with the business
Effectiveness reviews and evaluation
The provision of inductions
•
•
•
•
•
The Directors’ terms of appointment are available for inspection at Sage’s Registered Office.
115
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Corporate governance report continued
In addition to the Board Committees, the Disclosure
Committee advises the Board to ensure compliance with
the obligations of the UK Market Abuse Regulation. The
Disclosure Committee supports the Board in assessing
when Sage may have inside information and ensures the
accurate and timely disclosure of any such information.
The Disclosure Committee members include the Chair,
Chief Executive Officer, Chief Financial Officer, Chair of
the Audit and Risk Committee and the Company Secretary.
The Board and its Committees are also supported by
a clearly defined management structure, which reports into
the Committees referenced on page 114. Key decisions
involving financial expenditure, and associated risks are
governed by the Group’s Delegation of Authority matrix
(the “DOA”). The DOA is structured to ensure that day-to-
day operational decisions can be taken efficiently, whilst
ensuring that higher-risk and high-value commitments
are approved through the appropriate channels.
Information flows up and down the governance framework
to ensure that all decision making is well-informed,
transparent and balanced.
The Matters Reserved for the Board and the Terms
of Reference of Board Committees are available
on our website at sage.com.
Board composition
The Directors recognise that a diverse Board, with a range
of views, insights, perspectives and opinions, enhances
decision making and effectiveness. The composition
of the Board is subject to ongoing review and all Board
appointments follow a formal and rigorous search process,
which compliments the comprehensive succession
planning activities. The responsibility for maintaining
the appropriate composition of the Board is delegated
to the skill and expertise of the Nomination Committee.
The Board acknowledged in the FY21 Annual Report, that
its gender diversity levels had fallen below the desired
levels, due to appointments which were made to support
the overall evolution of the Board. In May 2022, the
Nomination Committee initiated a search for a new
Non-executive Director. In July 2022, Irana Wasti stepped
down from the Board after two years as a Non-executive
Director to pursue another executive opportunity and her
departure further impacted the Board’s ability to meet its
target gender diversity levels in FY22. The Nomination
Committee commenced a second Non-executive Director
search in August 2022. On 15 November 2022, Sage
announced that Maggie Chan Jones will be appointed to
the Board with effect from 1 December 2022. The search
for a second Non-executive Director is ongoing and
a further announcement will be made at the
appropriate time.
The Board remains committed to meeting the targets set
by the FTSE Women Leaders Review, and the targets
specified in the recent updates to the FCA’s Listing Rules,
which Sage will report against in FY23, whilst also
ensuring that the Board composition overall, exhibits
a diverse mix of skills, backgrounds and experience as
well as the broader aspects of diversity.
The Board currently meets the target set by the Parker
Review in respect of ethnic diversity and is committed
to continuing to do so.
Please see page 131 for further details of the skills
and experience of the Board and pages 130 to 137
for more information on the Board Diversity, Equity
and Inclusion Policy and the succession planning
activities of the Nomination Committee.
Annual election and re-election
of Directors
In accordance with Sage’s Articles of Association, and the
UK Corporate Governance Code, all Directors who wish to
continue to serve will submit themselves for election and
re-election.
Time commitment
The Non-executive Directors are advised of the
commitments which are expected of their role at Sage
prior to their appointment and are required to devote
such time as necessary to discharge their
responsibilities effectively.
During FY22, the Board considered and approved
a proposed new external commitment for Annette Court,
as a non-executive director and chair designate of
WH Smith plc, with effect from 1 September 2022, and
as chair of WH Smith, with effect from 1 December 2022,
being satisfied that Annette would have time to fulfil
her commitments at Sage. The Board noted that Annette
would be standing down from her role on the board of
Admiral Group plc at its AGM in 2023.
The Company Secretary maintains a register of Directors’
commitments, which is reviewed at every Board meeting.
The Board is satisfied that, given the number of external
positions held by the Directors, no instances of over-
boarding were identified during the year. The Non-
executive Directors devote considerable time to the
Group beyond the programme of Board and Board
Committee meetings. Their activities include
consideration of out-of-cycle papers and reports
submitted to them and discussion with the senior
management and other subject matter experts,
between Board meetings. Their activities also extend
to briefings and training to ensure they maintain an
116
The Sage Group plc. Annual Report and Accounts 2022 in-depth understanding of the business and are kept up
to date with emerging technology, regulations, and other
matters impacting the Group. All Directors also attend
site visits and participate in a formal engagement plan
to meet colleagues and other stakeholders.
Induction
Upon appointment to the Board, each Director engages in
a comprehensive induction programme which is tailored
to their individual needs. The programme consists of
meetings and events, designed to help the new Director
to undertake their role and responsibilities as swiftly as
possible and help them to make a valuable contribution
to the Board. The programme is organised around three
themes: business familiarisation, corporate governance
including Directors’ duties, and Director development.
As part of the business familiarisation theme, the
Directors spend time with members of the Executive
Leadership Team and senior management to gain a deeper
understanding and insight of the operation of relevant
function lines and significant elements of the business.
Structured pre-reading materials are made available in
a personal reading room via Sage’s Board portal, covering:
• The Group’s strategy and performance
• Governance documents including Directors’
legal duties and responsibilities
• Specific information relating to
Committee membership
• Sage policies and procedures
• Other useful information such as meeting schedules,
Sage’s financial calendar and useful contacts
During the induction period, the Director is asked for
regular feedback, so that the programme can be adapted
if needed.
Independence of the
Non-executive Directors
The Board considers all the Non-executive Directors to
be independent in character and judgement.
The independence of the Non-executive Directors is kept
constantly under review by monitoring their external
commitments and interests throughout the year. The
Board considers whether there are relationships or
circumstances which are likely to affect or that could
appear to affect the Non-executive Director’s judgement,
taking into consideration the guidance and specific
independence criteria provided by the Code. The Board
also keeps the length of tenure of all Non-executive
Directors under review.
The Board is mindful that Drummond Hall will have served
on the Board for nine years, by January 2023. In his role
as Senior Independent Director, Drummond provides
constructive challenge to the senior management team
and brings significant and valuable experience to the
Board. The Nomination Committee has rigorously
assessed Drummond’s independence and concluded that
he continues to show independence of conduct, character
and judgement. Therefore, after careful consideration
of Drummond’s independence, and following the
recommendation of the Nomination Committee, the
Board has resolved to extend Drummond’s appointment
for one year until January 2024.
Conflicts of interest
The Board operates a policy to identify and, where
appropriate, manage actual conflicts or potential
conflicts of interest that may arise. At each Board
meeting, the Board formally considers a register
of interests, commitments and potential conflicts
of Directors including new external appointments for
Directors and, when appropriate, gives any necessary
approvals. If any potential conflict exists, Directors
recuse themselves from consideration of the relevant
subject matter.
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Board and Committee meeting attendance and cross-membership
The table below sets out the Board and Committee attendance at scheduled meetings during FY22. Additional ad hoc
meetings were held, and written resolutions were passed as and when required. The table also shows the current
membership of the Committees. The composition of all Committees complied with the Code throughout the year.
Directors
Andrew Duff
C C
Sangeeta Anand
Dr John Bates
Jonathan Bewes
C
Annette Court
C
Drummond Hall
Derek Harding
Steve Hare
Jonathan Howell1
Irana Wasti2
Vicki Bradin3
Key
C
C
Notes:
Board Chair
Committee Chair
Scheduled
Board
Nomination
Committee
Audit and Risk
Committee
Remuneration
Committee
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
4/5
3/3
5/5
3/3
–
3/3
–
–
3/3
–
–
–
–
–
4/4
–
4/4
4/4
4/4
4/4
–
–
–
–
–
6/6
–
6/6
6/6
–
–
–
–
3/3
4/4
6/6
Nomination Committee
Audit and Risk Committee
Remuneration Committee
The maximum number of scheduled meetings held during the year that each Director could attend is shown next to the number attended. In FY22, there
was 100% attendance at all scheduled Board meetings and Committee meetings by its members, except one Board meeting that Jonathan Howell did
not attend for personal reasons.
Committee attendance as set out above reflects attendance by Committee members only.
1. Jonathan Howell did not attend the scheduled Board meeting on 20 September 2022 for personal reasons.
2. Irana Wasti stepped down from the Board on 22 July 2022.
3. The Company Secretary acts as a Secretary to the Board and all the Committees.
Board and Committee members are expected to attend
each scheduled meeting, and, wherever possible, any ad
hoc meetings. If a Director is unable to attend a meeting
due to exceptional circumstances, or pre-existing
commitments, they are encouraged to provide comments
and observations on the relevant Board and Committee
papers, to the Chair of the Board or Committee so that
they may be shared with Directors at the meeting. The
Board aims to hold at least two meetings in different
operating locations, each year. When visiting operating
locations, Directors can meet with a diverse group of
senior business leaders and colleagues, which allows them
to gain further insight into how the business works and
the opportunity to listen to colleague views and ask
questions. This year the Board travelled to Newcastle in
February where Board members had a talent lunch with
colleagues from Cyber, Risk, IT and Data and a cyber deep
dive looking across the Secure Product Development
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The Sage Group plc. Annual Report and Accounts 2022
Lifecycle and the stages of a potential ransomware attack.
In September the Board had an informal lunch with the
UKI leadership team, and participated in engagement
sessions on the execution of UKI strategic plans.
The Board also travelled to San Jose in July, where
Board members engaged with the North American
leadership team and had a deep dive session on
Sage Intacct, participated in a Sage Foundation event
with Access Books and had an informal lunch with
Sage colleagues. The Board and the Committees have
also continued to make use of the available technology
to ensure that meetings are conducted efficiently.
Directors may attend any Board Committee meeting
they wish, irrespective of whether they are a Committee
member. This is subject only to recusal regarding matters
concerning the individual(s) or any conflicts of interests.
There is also a standing paper from the Audit and Risk
Committee and the Remuneration Committee presented
at each subsequent Board meeting highlighting key
strategic Committee decisions taken.
To further assist information flows between the Board
and its Committees, there are cross-memberships of
the Committees as shown in the table on page 114.
Board meeting schedule
- 3 years
Dates and venues of Board meetings are set
- 1 month
The agenda of the meeting is prepared by the
Company Secretary in consultation with the Chair and
CEO. Report writers are sent templates and guidelines
addressing format, which include stakeholder specific
considerations and content required, reminders of the
actions allocated to them and deadlines for submission
of draft and final papers
- 5 working days
Papers are circulated electronically to the Board in
real time via a secure web portal to allow Directors
sufficient time to consider
- 1 year
A rolling calendar of standing and periodic agenda
items for the following 12 months is compiled and
updated whenever appropriate addressing key
developments in the business
- 7 working days
Papers are submitted to the Company Secretary for
final review
Board meeting
+ 10 working days
Minutes and a schedule of actions arising from the
meeting are completed and sent to the Chair for review.
Those responsible for matters arising are asked to provide
an update before the subsequent meeting. The rolling
calendar is updated following each meeting (as required)
and in readiness for the next meeting
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Scheduled Board and Committee meetings timeline
November
Board meeting
Audit and Risk
Committee meeting
Remuneration
Committee meeting
(two meetings are
held in November)
February
Board meeting
Audit and Risk
Committee meeting
Nomination
Committee meeting
Remuneration
Committee meeting
May
Board meeting
Audit and Risk
Committee
meeting
Nomination
Committee meeting
Remuneration
Committee
meeting
July
Board meeting
September
Board meeting
Remuneration
Committee
meeting
Audit and Risk
Committee meeting
Nomination
Committee meeting
Remuneration
Committee meeting
Disclosure
Committee
meeting
January
Disclosure
Committee
meeting
Disclosure
Committee
meeting
Disclosure
Committee
meeting
The scheduled Disclosure Committee meetings are for the purpose of approving financial results and quarterly trading updates.
Engagement with shareholders
Regular and open communication with shareholders
is extremely important for the Board. By maintaining
dialogue with shareholders, the Board can better ensure
that their views are heard and that Sage’s objectives are
understood. Trading updates are published quarterly.
Analysts are invited to attend presentations, and interact
with the Executive Directors following the announcement
of Sage’s interim and final results. The Executive
Directors interact with shareholders, during post-results
roadshows, through a dedicated investor relations
programme and on an ad hoc basis.
Further information regarding engagement
activities with our shareholders can be found
on pages 76 and 77.
Informal Board interactions
In addition to scheduled and ad hoc meetings, the
Board also meets over informal Board dinners to connect
and discuss wider business topics. These informal
interactions help to maintain successful relationships
and promote a culture of collaboration and openness.
Annual General Meeting
The AGM provides a valuable opportunity for the
Board to engage with shareholders and listen to
their feedback. In 2022, the AGM was held in a hybrid
format and shareholders were invited to join the AGM
online, or in person, to listen, vote and ask questions.
Shareholders were also provided with an opportunity to
submit their questions about the business or any matter
pertaining to the AGM, in advance of the meeting. All
Directors joined the AGM physically, together with the
external auditor and senior management. All resolutions
at the 2022 AGM were voted on a poll. Shareholders who
were unable to attend the meeting, were asked to register
their vote in advance of the AGM by appointing the
Chair of the AGM as proxy and providing their voting
instructions. All resolutions were passed with over 94%
of votes cast in favour. Further details on past Annual
General Meetings and other information on AGM
arrangements can be found on our corporate website at
sage.com. The website is the principal means by which
we communicate with shareholders.
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The Sage Group plc. Annual Report and Accounts 2022 Board activities
The table below sets out the key areas of Board focus during the year and how these align with the Group’s strategy
and Principal Risks. It also sets out which of Sage’s key stakeholders have been considered and are relevant in the
Board’s discussions.
Key stakeholder groups
Customers
Colleagues
Shareholders
Society
Principal Risks
1
6
Understanding
Customer Needs
Third Party
Reliance
2
7
Execution of
Product Strategy
People and
Performance
11
Readiness to Scale
12
Environment, Social
and Governance
Strategic priorities
Developing and
Exploiting New
Business Models
Culture
3
8
4
9
Route to Market
5
Customer Experience
Cyber Security &
Data Privacy
10
Data Strategy
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
Strategy and Operations
Key stakeholders considered
Link to Principal Risks
1 2 3 4 5 6 7 8 9 10 11 12
Link to strategic priorities
• CEO review presented to each Board meeting included customers, colleagues, shareholders, society,
technology and innovation updates
• CEO strategic execution dashboard discussed at each Board meeting
• Group structure considerations including M&A strategy, acquisitions and disposals
• Three-year strategic plan discussed, along with updates on Group strategy execution
• Board Strategy Day held to consider in depth the strategic direction, priorities and investment
• Strategic partnerships considered (including approval of the strategic partnership with Microsoft)
• Deep dives on each of Sage’s strategic priorities held during the year
• Brand approval and updates
People and Culture
Key stakeholders considered
Link to Principal Risks
1 2 3 4 5 6 7 8 9 10 11 12
Link to strategic priorities
• Annual Board Talent Review and Succession Planning
• Monitoring progress on the Group’s Global DEI strategy
• Monitoring of colleague sentiment through the Board Associate and colleague engagement activities
• Oversight of Sage Foundation activities
• Refreshed Values approved
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Key stakeholder groups
Customers
Colleagues
Shareholders
Society
Principal Risks
1
6
Understanding
Customer Needs
Third Party
Reliance
2
7
Execution of
Product Strategy
People and
Performance
11
Readiness to Scale
12
Environment, Social
and Governance
Strategic priorities
Developing and
Exploiting New
Business Models
Culture
3
8
4
9
Route to Market
5
Customer Experience
Cyber Security &
Data Privacy
10
Data Strategy
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network
Learn and disrupt
Customers and Innovation
Key stakeholders considered
Link to Principal Risks
7 8 9 10 12
• CEO updates
• Technology strategy deep dive at Board Strategy Day
• Digital Network strategy and measures discussed
• Customer NPS oversight
• Competitor analysis
Link to strategic priorities
Finance
Key stakeholders considered
Link to Principal Risks
4 6 7 12
Link to strategic priorities
Investor relations updates
Interim and full year results and trading updates
• CFO review and financial performance update, at each Board meeting, including KPI Dashboard
•
•
• FY23 budget approvaI
Interim and final dividends
•
• Capital allocation strategy
• Balance sheet, capital structure and liquidity
• Debt finance strategy and currency swap
Risk Management
Key stakeholders considered
Link to Principal Risks
1 2 3 4 5 6 7 8 9 10 11 12
Link to strategic priorities
• Reviews of Principal Risks including risk profile and appetite
• Review of internal controls and Enterprise Risk Management Framework including ongoing process and
control implementation to respond to recommendations of the BEIS audit and governance consultation
• Updates from management on whistleblowing hotline cases
• Emerging Risk trends
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The Sage Group plc. Annual Report and Accounts 2022
Governance
Key stakeholders considered
Link to Principal Risks
7 8 9 12
Link to strategic priorities
• Review of Sage’s core corporate policies and procedures including the Code of Conduct; Anti-Bribery and
Corruption Policy; External Communication Policy; Health and Safety Policy; Whistleblowing Policy;
Board Diversity, Equity and Inclusion Policy; Sanctions Policy and Share Dealing Code
• Review of Matters Reserved for the Board and the Board rolling agenda
• Annual effectiveness review and evaluation
• Review of Board Committee Terms of Reference and ensuring ESG governance is embedded in Board and
Committee ways of working
• Annual Report and Accounts review and approval
• Annual General Meeting
• Annual review of Sage stakeholders
• Litigation updates
• Modern Slavery Statement review and approval
• Review of insurance programme and Directors and Officers liability insurance
ESG
Key stakeholders considered
Link to Principal Risks
1 3 6 7 8 9 10 12
Link to strategic priorities
• Review of Sage’s Sustainability and Society Strategy including ESG frameworks, materiality assessment review
and stakeholder insights
• Sustainability and Society Report received
• Review of climate change risks for Sage
• Annual review of Sage Foundation activities
• Sage Belong update received
Cyber threat
Key stakeholders considered
Link to Principal Risks
1 2 3 4 5 6 7 8 9 10 11 12
Link to strategic priorities
• Chief Information Security Officer Updates
• Engagement sessions with colleagues from Cyber, Risk, IT and Data
• Cyber deep dive looking across the Secure Product Development Lifecycle and the stages of a ransomware attack
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Corporate governance report continued
How the
Board
monitors
culture
Promoting a positive culture
The Board recognises the importance of a good culture
and the role it plays in delivering the long-term success of
the Company. Sage colleagues want to work for a company
that values them and provides them with the opportunity
to be themselves and to thrive. The Board and Executive
Leadership Team strive to create a positive culture at
Sage, providing colleagues with the opportunity to grow,
experiment and innovate in an inclusive environment.
To create the right culture, it is important that colleagues
live and breathe Sage’s values, and this starts with
our leaders. The Board sets the tone from the top to
demonstrate and promote these values, which are
a critical element in achieving our purpose of knocking
down barriers so everyone can thrive. The Board uses
several tools to monitor the culture, listen to colleagues
and act on what they say. This includes colleague
representation at Board meetings through the Board
Associate role and meeting colleagues at all levels of
the business during the Board engagement programme.
The table on the next page highlights some of these tools.
The DEI Accountability Board is chaired by the CEO and
comprised of the Executive Leadership Team, and is
accountable for delivery of the DEI strategy. Sage’s DEI
Advisory Board also plays an important role in helping to
shape an inclusive workforce that represents the different
cultures, circumstances and viewpoints of our colleagues,
customers, shareholders and society. The DEI Advisory
Board is made up of 12 members, including members
of the Executive Leadership Team and external experts,
who meet to discuss and challenge the DEI direction,
and to highlight best external practice to identify ways of
constantly improving and innovating our approach to DEI.
We do the right thing.
Human
We make connections
with customers,
partners and
colleagues, through
empathy and care.
Bold
We are curious,
courageous,
ambitious and
creative.
Trust
We deliver our
promises to
customers,
colleagues, society
and shareholders.
Simplify
We strip away
complexity.
124
The Sage Group plc. Annual Report and Accounts 2022 How the Board monitors culture
Action taken
Link to culture
Regular updates on compliance,
including the annual review
of Sage’s core compliance policies
Key areas of compliance focus are highlighted at Board meetings, which
allows the Board to understand potential issues and target effort in the right
places. Annual review of policies gives the Board visibility of the compliance
culture at Sage.
Your Voice Pulse Surveys
Colleague representation at
Board meetings through the
Board Associate and further
engagement as part of the
Board engagement programme
Speak up for Sage
In September 2022, the highest ever Pulse Survey completion rate was achieved
with 86% of colleagues taking time to share their feedback on Sage’s culture.
Both the core metrics measured in the Pulse Survey, eSat and eNPS, increased
since the survey in March 2022, with eSat up 2 points to 79 and eNPS up
10 points to +28. The survey results support the Board’s understanding of
colleague sentiment across the Group and provide direct feedback to the
Board on areas which can be improved.
The Board Associate plays a crucial role in bringing the colleague voice into
the Boardroom and educating colleagues on the role of the Board at Sage.
You can read more about the role of the Board Associate and Board
engagement activities on pages 126 and 127.
In FY22, colleagues were encouraged to Speak up for Sage by leaving
a Glassdoor review. The Glassdoor data supplements the other methods that the
Board utilises to better understand what is done well and what could be done
differently for colleagues to feel happy, valued, and supported. A positive score
on Glassdoor helps colleagues to feel proud to be part of Sage and also helps to
attract new talent. Together, colleagues have a powerful voice, and during the
Speak up for Sage week in Q4, the Global Rating on Glassdoor increased back up
to 4.2 out of 5 stars. In FY22, for the second year in a row, Sage was awarded the
Glassdoor Employees’ Choice Award, honouring the UK’s Best Places to Work in
2022. This recognition supports the Board’s understanding of the type of culture
that is being experienced by colleagues at Sage everyday.
Deep dive on People Strategy
and Succession Planning
The Board received an update on the People strategy on a regular basis,
including updates on key metrics such as colleague attrition. Sessions on talent
and succession planning for senior management roles also take place.
Informal conversations with
colleagues at engagement
day programmes and in small
group sessions
Informal interactions allow the Board to speak with Sage colleagues directly
and understand what matters most to them. The Board is available to answer
questions from colleagues during engagement sessions. Sage colleagues can
also contact the CEO directly via the AskSteve email address and ask
questions during Sage TV Live Q&A.
Culture case study
Symbols of change—Our values
Sage’s values have implications for all stakeholders and
play a key role in sustaining high performance, driving
innovation and attracting and retaining talent. During
the year the Sage values were evolved and approved by
the Board, to support the strategic framework and the
refreshed brand. Thousands of Sage colleagues took
part in a crowdsourcing exercise to help shape the
refreshed values and behaviours. Almost 10,000 votes
were received from colleagues across the business, which
were combined together with leader interviews, customer
insights and focus groups, to develop four new values:
Human, Trust, Bold, and Simplify. Living these values
starts at the very top at Sage, with the Board and
Executive Leadership Team. The Board recognises that
the values differentiate Sage from its competitors and
most importantly, that they play a huge part in how
Sage truly delivers for all stakeholders to achieve its
purpose and deliver on its strategic priorities. “We do the
right thing” is a core value and will continue to guide
behaviour and how Sage colleagues serve all stakeholders.
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Corporate governance report continued
Our Board Associate
Derek Taylor
Board Associate
The Board Associate role continues
to be a powerful tool to hear the
colleague voice in the Boardroom,
contributing to Board discussions
and decision making.
Derek Taylor, our new Board
Associate, began his 18-month
tenure in July 2022.
During the application stage, an exceptionally
strong pool of Sage colleagues applied for the role
and participated in a rigorous recruitment process,
comprising four rounds. Derek ultimately stood out
with his thoughtfulness and insight, his candour and
his deep knowledge of SaaS and the Sage Intacct
business. He brings a powerful perspective to Boardroom
discussions by seeing things through a business, customer
and colleague lens. Derek joined Sage Intacct in 2012 and
was promoted to Senior VP Customer Services and Sales
in 2021. He leads a team of over 200 colleagues and
focuses on driving process change and innovation to
deliver new products and improve customer satisfaction.
On the next page, he talks about his experience of
being appointed as Sage’s fourth Board Associate,
bringing to life his unique position of being the voice
of Sage colleagues.
126
The Sage Group plc. Annual Report and Accounts 2022 The Board Associate role is a unique and important
position at Sage and the thorough appointment process
reinforced the importance of the role to me. Each stage
of the appointment process was a positive, challenging
and enlightening experience. It required me to think
about other parts of the Sage business where I did not
have in-depth knowledge or understanding (as I do with
Sage Intacct). When the selection process opened in 2022,
the management team received over thirty applications
for the role. Those applicants who made it through to
round two (approximately half of the initial submission
pool), were required to submit a five-minute video in
response to five questions. The next stage of the process
further narrowed down the candidates, with shortlisted
candidates interviewed by Vicki Bradin, General Counsel
and Company Secretary, Amanda Cusdin, Chief People
Officer and Andrew Duff, Chair of the Sage Board.
The final shortlisted candidates were interviewed by
three Non-executive Directors, which culminated in
the appointment of myself, as the new Board Associate.
I was delighted and honoured to be selected for the role.
I found the Board Associate onboarding process to be
comprehensive with a thorough induction, which spanned
across the various pillars of the business. Together with
my board experience gained at other companies, this
helped me to quickly acclimate to the Board Associate
role. I also received overwhelming support, not only from
all Board members and the Executive Leadership Team,
but also from all the other short-listed colleagues.
Since being appointed to the Board Associate role, I have
attended two Board meetings (in July and September
2022) and have had the opportunity to engage in several
one-on-one discussions with all Board members.
In July, I also had the pleasure of hosting Derek Harding,
Non-executive Director, for an engagement day prior to
the July Board meeting in our San Jose office. I was truly
impressed with his level of engagement and interest in
learning about our business. This was demonstrated
by Derek attending various meetings in Sage Intacct
throughout the day, including a Customer Services &
Sales Quarterly Town Hall, our Customer Success monthly
update session and an informal colleague lunch with
the North America team. I have seen how the Board’s
commitment to engaging with colleagues is also
illustrated by their involvement and enthusiasm to
understand more about the Sage business at recent
colleague engagement sessions. At the Board engagement
session after the July Board meeting in San Jose,
Aziz Benmalek, President—North America, and his
leaders (myself included), presented to the Board about
the North American business. After the Board meeting
in September, in Newcastle, Paul Struthers, MD UKI &
EVP UKIA, and his leaders presented to the Board about
the UKI business. At all engagement sessions, the level
of attention and the questions raised by Board members,
demonstrated a desire to truly understand the Sage
business and how the company and colleagues within
it can be more successful.
My role as Board Associate is to provide colleague
feedback to the Board. I will continue to evolve how
I provide the Board with colleague insight on topics
that the Board may want to hear about from colleagues and
that colleagues may want to share with the Board. In FY23,
I intend to develop a clearer mandate to the scheduling
of Board Associate colleague engagement activities
(e.g., roundtables and working groups) with colleagues
from different regions and functions across the Group.
Through written summaries included in upcoming Board
meetings as part of the agenda, I am looking forward to
providing feedback on what I’m hearing, first hand,
to ensure that the role continues to provide a two-way
communication channel with the Board. I believe that this
creates greater understanding of the role of the Board
amongst colleagues and enables the Board to hear more
of our colleagues’ views.
“ I would also like to take this
opportunity to thank all my
previous Board Associate
colleagues, for all the activities
undertaken to bring the voice of
our colleagues to the Boardroom.
It is an honour to be the current
Sage Board Associate and I look
forward to delivering on the
charter outlined for the role!”
Derek Taylor
Board Associate
127
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Board evaluation
External Board effectiveness and evaluation
Each year, the Board undertakes a rigorous review of its
own effectiveness and performance, and that of its
Committees and individual Directors. At least every three
years, the evaluation is externally facilitated. In FY22,
an external effectiveness review was undertaken.
Independent Board Evaluation (“IBE”), an external
independent evaluator, was engaged to carry out this
activity, which took place between May and September
2022. IBE conducted the previous external evaluations in
2016 and 2019. The Board, following the recommendation
of the Nomination Committee, felt that retaining IBE for
a third review cycle would allow progress to be tracked
on priority areas of focus identified in the previous
effectiveness review. This would also enable Sage’s new
Chair, Andrew Duff to get the benefit of assessing Board
performance and progress as against previous external
evaluations. In addition, the Board was of the view that
IBE’s re-appointment was appropriate, taking into
account their knowledge of the Company and the
evolution of the Board, since the 2019 evaluation,
including the change in Board Chair. IBE has no other
connection with the Company or any of the Directors.
The evaluation was conducted according to the guidance
provided in the Code. The Board considered the results
of the evaluation and has separately assessed the
independence and time commitment of each Director.
It concluded that each Director’s performance continues
to be effective and that they demonstrate commitment
to their roles. These findings are fully considered when
making recommendations in respect of their election
or re-election to the Board.
Board evaluation process
1
3
Process planning
Step 1
The Board discussed the approach and the format for the
evaluation which resulted in IBE being appointed to conduct the
external evaluation. A comprehensive brief was provided to the
evaluation team by the Chair, CEO and the Company Secretary in
Spring 2022. The evaluation team conducted its orientation and
finalised dates and a detailed agenda for the Board interviews.
2
Observation and interview process
Step 2
In May, the lead evaluator observed the Board and Committee
meetings and carried out a review of the Board and Committee
papers. Detailed interviews were held with each Board Director
according to the agreed agenda in May and June. The evaluation
team also interviewed five members of the senior management
team and the Company Secretary, as well as the lead external
remuneration advisors and external auditor to gain a broader
perspective of the Board and its workings, including
the Committees.
Evaluation and reporting
Step 3
The findings of the evaluation were discussed with the Chair
and the Company Secretary and finalised into a report. IBE
presented the findings of the effectiveness review at the
September Nomination Committee meeting, which was attended
by the Board1. A report on the Chair’s performance was presented
to the Senior Independent Director and the results discussed
at a meeting of the Non-executive Directors without the Chair
present. The Chair received feedback on individual Directors’
performance, which was followed by one-to-one meetings
between the Chair and each individual Director to discuss
the findings. Feedback on each Committee was presented to
each Committee Chair and was discussed at the relevant
Committee meeting.
4
Agree actions and monitor progress
Step 4
The Board considered the findings of the effectiveness review
and agreed on the priority areas noting that the action plans
would be built into the Board’s objectives, meeting agendas
and engagement activities for FY23, and progress against these
will be monitored and reported in the FY23 Annual Report.
1. Except the CFO, who was unable to attend due to personal reasons.
128
The Sage Group plc. Annual Report and Accounts 2022 Key areas of focus identified in FY21
• Monitor the investments, technology and talent needed to
deliver the new strategic framework across the Group
• Understand execution challenges, key decisions to be taken
and Sage’s performance against its competitors over the
short to medium term. Evolve Sage’s annual Strategy Day
to better meet these objectives
•
Continue Board and executive succession planning, talent
development and embedding of diversity, equity and
inclusion objectives
• Determine the appropriate governance structures for Board
and Board Committees to monitor the performance and
delivery of Sage’s Sustainability and Society strategy
•
Continue to find opportunities for the Directors to spend
time outside meetings with each other and also with senior
management, customers and partners
Progress in FY22
•
Sessions on investment initiatives have enabled the Board
to gain better oversight on investment returns including
cost management, talent hires and alignment with
strategic priorities
•
•
•
•
•
The format of the Strategy Day session was evolved in FY22,
and the Board commented positively on the discussions held
on delivering Sage’s strategic priorities over the short,
medium and long term
Time has been spent on understanding competitive points
of differentiation in Sage products and services and how
these have been reflected in the refreshed brand, launched
in FY22
Board succession planning remained firmly on the agenda
(including gender diversity targets), with the Board
and Nomination Committee having initiated searches for
two new Non-executive Directors. Information on our recent
Board appointment can be found on page 108
The Board and the Committee annual rolling agenda was
adjusted to accommodate appropriate governance oversight
over sustainability. ESG governance was established and
embedded in the Board and its Committees’ ways of working.
The Terms of Reference of each Committee were refreshed to
ensure that the scope and remit are appropriately reflected
Strengthening relationships with all Sage’s stakeholders
continued to be a focus for the Board including the Chair
throughout the year
FY22 Board evaluation key observations
•
The Board provides strong support to and oversight of the
Executive Leadership Team
•
•
•
•
•
Positive Board culture and strong relationships were
highlighted with strong sense of accountability to
Sage’s stakeholders
The importance of increased face to face interactions post
Covid was stressed with a desire to build more informal/
unstructured interactions into Board activities
Induction programme for new Non-executive Directors to
be tailored further, particularly for first time Non-executive
Directors or those with more limited UK PLC experience
Focus on Board process to maximise the contribution
of a diverse Board. Greater visibility on the senior
management talent pool was sought
Providing further visibility on the competitive landscape
and focus on understanding the macro risk environment and
its potential impact on Sage
FY23 Key areas of focus
•
Continue to focus the Board’s time on overseeing execution
of the Group’s strategic priorities. Keep the focus on risk
management and continue to enhance understanding of
external and emerging risks. Maintain focus on Sage’s
competitive performance
•
•
•
Strengthen aspects of the Non-executive Director induction
programme and create ongoing education opportunities for
Board Directors on evolving technical areas (such as climate
change regulation). Provide more opportunities to hear from
non-Sage experts, so as to learn, challenge thinking and give
a fresh perspective
Facilitate increased contact between the Board and the
business, and between the Non-executive Directors and
senior management colleagues. Consider building
unstructured time between Board and Committee sessions
Review Board succession planning activities to ensure an
appropriate balance of skills, knowledge, experience and
diversity. Broaden focus on development of talent and
succession mapping for Executive Leadership Team and
senior management. Maintain focus on exposure of the
Board to future leaders in the Group’s talent pipeline
129
The Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsGovernance ReportStrategic Report Corporate governance report
continued
Nomination
Committee
Andrew Duff
Chair of the Nomination Committee
Committee purpose and responsibilities
The Committee is composed of two independent
Non-executive Directors, Mr Drummond Hall and
Dr John Bates, and is chaired by our Non-executive Chair,
Andrew Duff. There were no changes made to Committee
membership during FY22. Details of the skills and
experience of the Committee members can be found
in their biographies on pages 110 and 111.
Other Nomination Committee members
Dr John
Bates
Drummond
Hall
130
Dear shareholder,
I am pleased to present the report of the Nomination
Committee (the “Committee”), covering both the role of the
Committee and the work it has undertaken during the year.
The Committee has continued to play a critical role
in supporting the Board in discharging its succession
planning responsibilities; ensuring the Board is comprised
of an appropriate and diverse range of skills and experience
to support the Company’s long term success and to deliver
on our strategy for the benefit of our stakeholders.
During the year, a key area of the Committee’s work
has been on Board composition, with a strong focus
on rebalancing our gender diversity as we seek to meet
the targets set by the FTSE Women Leaders Review
and the Financial Conduct Authority Listing Rules, which
Sage will report against in FY23.
Both the Committee and the Board were mindful at
the beginning of FY22 that progress needed to be made
in relation to the level of female representation on the
Board. This had fallen below our diversity aims due
to appointments made in FY21 to support the overall
evolution of our Board. Currently, we meet the targets
set by the Parker Review and we are committed to
continuing to do so. In May this year the Committee
initiated a search for a new Non-executive Director.
In July 2022, Irana Wasti decided to step down from the Board
after two years as a Non-executive Director to pursue another
executive opportunity. Irana’s departure from the Board
impacted our gender balance. The Committee commenced
a second Non-executive Director search in August.
As stated in the Board’s Diversity, Equity and Inclusion
policy, it remains our priority to minimise any temporary
periods when the Board is unable to meet its diversity
commitments. The Committee and the Board fully support
diversity, equity and inclusion in all its dimensions and
recognise the important contribution it makes to high
quality decision making and innovative thinking.
In November 2022, the Committee recommended the
appointment of Maggie Chan Jones as a Non-executive
Director, which the Board subsequently approved. I am
therefore pleased to report that Maggie will be joining
the Sage Board on 1 December 2022. In making its
recommendation, the Committee took account of Maggie’s
skills and experience in the context of the wider Board
capabilities and its composition. Maggie’s independence,
other time commitments and any potential conflicts of
interest were also considered before making the
The Sage Group plc. Annual Report and Accounts 2022 For more information on the Committee’s Terms
of Reference, visit: https://www.sage.com
understanding the steps being taken to develop talent from
within Sage, as well as overseeing promotions and changes
made within the Executive Leadership Team during the year.
Diversity, equity and inclusion remained firmly on the
Committee’s agenda, both at a Board level but also as
regards monitoring progress by the Group in executing
against Sage’s DEI strategy. I am pleased to report on the
progress made during the year in a number of key areas.
These include increasing our knowledge of the diversity
within our colleague base through data collection,
increasing gender diversity levels within teams and
supporting our colleagues to create a more inclusive culture
through our Colleague Success Networks. Further details
on these initiatives and FY22 achievements are set out on
pages 42 to 43 of this report.
This year the Company undertook an external effectiveness
review and evaluation of the Board, its Committees,
individual Directors and the Chair. Further information
on the outcome of the annual evaluation can be found
on pages 128 and 129.
I hope you find the information on the following pages
about the work of the Committee helpful and informative.
Andrew Duff
Nomination Committee Chair
recommendation. The Committee is continuing its search
for a second Non-executive Director to join the Sage Board
and I look forward to announcing progress on that
additional search in the near future.
Drummond Hall will have served as a Non-executive
Director on the Board for nine years by January 2023.
To support continuity in a period of Board evolution,
the Committee (without Drummond being present),
recommended to the Board the extension of Drummond’s
tenure for a further one year period until January 2024.
In making its recommendation, the Committee considered
the significant contribution Drummond brings to the
Board and its Committees, his experience and the valuable
knowledge and insight he has of Sage’s business and
strategy, along with his strong personal attributes. The
Committee also conducted a rigorous review of Drummond’s
independence, mindful of his long service, but also taking
account of his personal attributes and the challenge he
continues to bring to Board discussions. Following this
review, the Committee remains satisfied that Drummond’s
length of tenure does not impact his effectiveness or
independence in any way, that Drummond is independent
in character and judgement, and that he remains an
independent Director of Sage for the purposes of the Code.
In addition to Board succession, the Committee continued
to focus its attention (along with the Board) on succession
planning throughout the business. This included
Directors’ key skills and experience
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131
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report
Corporate governance report continued
Committee purpose and responsibilities
The Committee is responsible for reviewing the structure,
size and composition of the Board, and ensuring that the
Board and its Committees have the most appropriate
balance of skills, knowledge, and experience, taking
account of each individual Director’s time commitment.
The Committee ensures that formal, rigorous, and
transparent procedures are in place for Board
appointments and that plans are in place for orderly
succession planning to Board positions. It oversees the
recruitment process and advises the Board on the
identification, assessment and selection of candidates;
drives the diversity, equity, and inclusion agenda, and
confirms that all appointments are made on merit against
the objective criteria. The Committee also provides
oversight on succession planning activities of senior
management. The importance of effective induction
is recognised by the Committee, and it is responsible
for ensuring that a comprehensive induction programme
is delivered on the appointment of a new Non-executive
Director. The Committee also leads the annual evaluation
process of the Board.
Board and Board Committee composition
The Committee is comprised of two independent Non-
executive Directors, Drummond Hall and Dr John Bates,
and is chaired by our Non-executive Chair, Andrew Duff.
There were no changes made to Committee membership
during FY22. Details of the skills and experience of the
Committee members can be found in their biographies
on pages 110, 111 and 131.
The Committee held three scheduled meetings during
the year, in line with its Terms of Reference. There were
also unscheduled meetings during the year, at which
the Committee considered the developments in its
Non-executive Director succession planning activities.
In FY22, the Committee also considered the length of
service of the members of the Board, and the combined
capabilities, experience, and knowledge of the Directors
and Committees. Details of individual attendance at
scheduled meetings are set out on page 118.
As noted in the Chair’s introduction to governance and
the Chair’s introduction to the Nomination Committee
Report, by January 2023, Drummond Hall will have served
on the Board for nine years. The Committee, without
Drummond Hall present, recommended to the Board the
extension of his tenure as a Non-executive Director for
a further 12 months in order to support continuity in
a period of Board evolution.
The Nomination Committee has considered the
significant contribution Drummond Hall brings, with his
key experience and valuable insights into Sage’s business
and strategy, along with his personal attributes and the
independent challenge he brings to Board discussions.
The Committee believes retaining Drummond Hall on the
Board, in his role as Senior Independent Director, and as
a member of each of the Audit and Risk, Nomination and
Remuneration Committees to be appropriate, and in the
interests of our shareholders during a time of evolution
for the Board. The Committee and the Board remain
satisfied, in accordance with the guidance provided
by the Code, that, based on Drummond’s contributions,
his length of tenure does not impact his effectiveness
or independence in any way, and that Drummond remains
an independent Director.
The process for making new appointments to the Board
is usually led by the Chair, except when the Committee is
dealing with the Board Chair succession. The Committee
has procedures for appointing a new Non-executive and
Executive Director which are clearly set out in its Terms
of Reference, which are reviewed annually to ensure they
remain suitable.
When considering new appointments, all recommendations
to the Board are made on merit against objective criteria
which take into account experience, skills and ensuring
an appropriate diversity, in the broadest sense, in the
resulting membership of the Board. Time commitment,
independence and potential conflicts of interest are
considered before any recommendation is made to the
Board. Any candidates who are shortlisted are interviewed
by the Board Chair, Committee members and other
Directors. The Board is updated on the progress of the
selection process and receives recommendations from
the Committee for appointment.
132
The Sage Group plc. Annual Report and Accounts 2022 The Committee is mindful that progress needs to be made
in relation to the level of gender diversity on the Board
to ensure we meet the recommendations set by the FTSE
Women Leaders Review and targets specified in recent
updates to the Financial Conduct Authority’s Listing
Rules, under which Sage will report in FY23. This has been
a key area of focus for the Committee in FY22. The target
set by the Parker Review continues to be met.
Succession planning for the Executive
Leadership Team and senior management
In order to ensure that there are effective succession
plans in place for the Executive Leadership Team and
senior management, the Board has visibility of a wide
range of colleagues who have been identified as
potential succession candidates in the short, medium
and long term.
With input from the Board, the Nomination Committee
in May 2022 prepared a role specification for a new
Non-executive Director appointment based on skills,
personal attributes and experience, and with due regard
to be given to the benefits of diversity on the Board. Lygon
Group, an external executive search firm, was instructed
to assist with the search. Lygon Group have no other
connection with the Company or with individual Directors
other than to provide recruitment services and have
signed up to the Voluntary Code of Conduct.
In July 2022, after two years on the Board, Irana Wasti
decided to step down to pursue another executive
opportunity. Her resignation further impacted the Board’s
gender balance. The Nomination Committee promptly
initiated a second search process in August 2022 with
Heidrick & Struggles, an external executive search firm.
The Nomination Committee provided Heidrick &
Struggles with a detailed role profile including the skills,
personal attributes, and experience being sought in this
additional new Non-executive Director appointment.
Heidrick & Struggles have no other connection with
the Company or with individual Directors other than
to provide recruitment services and have signed up
to the Voluntary Code of Conduct.
The Committee considered the diverse long list of
candidates provided by each of Lygon Group and Heidrick
& Struggles and the appointment process also includes
one-to one interviews with short-listed candidates.
As announced on 15 November 2022, Maggie Chan Jones
will join the Board on 1 December 2022. The search for
a second Non-executive Director is continuing. Further
information on our recent Board appointment can be
found on page 108.
Developing Sage’s diverse pipeline of internal talent,
and the organisation’s ability to attract, retain and
develop skilled, high-potential individuals is a key focus
of discussion. One aspect considered during the year,
was how individuals identified in the talent pipeline
could be provided with the opportunity to interact with
Board members both informally and through attendance
at Board and Committee meetings to present on specialist
topics. This not only provides valuable experience and
exposure for these individuals to the Board but also
assists the Board when assessing the strength of the
succession plans in place and areas of development need
for relevant individuals. In FY22, a number of Executive
Leadership Team members and the senior management
were invited to present to the Board and its Committees
on topics pertaining to Sage’s strategic priorities,
financials, investor relations, and ESG. Opportunities
for interactions outside of the Board meeting calendar
were also pursued and developed. This will continue to
be an area of focus during FY23 and beyond.
Committee effectiveness and evaluation
The Board is committed to transparency and conducts
a formal and rigorous evaluation of its performance
including the performance of its Committees, individual
Directors and the Chair annually. The Committee’s last
external effectiveness review was conducted in FY19
and, in compliance with the Code, in FY22, an external
effectiveness review and evaluation was carried out.
The Committee discusses the outcome of the review
of its effectiveness annually.
The overall conclusion from this year’s external evaluation
was that the Board and its Committees continue to work
well and are operating effectively.
For further information on the evaluation of the Board,
the Committees and individual Directors, including
details of the evaluation process, outcome and next
steps, please refer to pages 128 and 129.
133
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Corporate governance report continued
Diversity, Equity, and Inclusion
In FY21, the Board adopted the Board Diversity, Equity,
and Inclusion Policy, which is reviewed annually to ensure
it remains fit for purpose. The Board DEI Policy applies
to the Board and its Committees and is available on our
website at sage.com.
The Board acknowledges the importance of diversity in its
broadest sense, as a key element of Board effectiveness
and is fully committed to meeting the targets as set out
by the FTSE Women Leaders Review and recently updated
Financial Conduct Authority Listing Rules, and to
continue meeting the recommendations of the Parker
Review, while ensuring that all appointments are made
on merit. The Board leads in fostering a healthy and
supportive corporate culture by setting the tone from
the top. The Board DEI Policy sits alongside Sage’s
Group-wide Policy, Code of Conduct and associated
global policies, which set out our broader commitment
to diversity, equity and inclusion.
Board DEI Policy
The purpose of the Board DEI Policy is to set out the
approach to diversity, equity and inclusion for the
Board itself and for its Committees with the intention
of supporting the succession planning work of
the Committee in creating and maintaining the
appropriate Board and Committee composition.
The Board and senior management believe diversity
is key to provide the right blend of perspective
required to meet our purpose and strategy.
The Board and the Committee will continue to monitor
progress against the Board DEI Policy to provide
meaningful disclosure in the Annual Report and
Accounts on its implementation and progress in
meeting its objectives.
Allocation of time
32%
45%
13% 10%
Board and Board
Committee composition
Corporate governance
Succession planning
Diversity, equity and
inclusion
134
The Sage Group plc. Annual Report and Accounts 2022 Board composition1
Directors by role
Gender
Chair 1
Non-executive
Directors 6
Executive Directors 2
Female 2 (22%)
Male 7 (78%)
Ethnicity
Tenure
Chair and Non-executive Directors
White 8 (89%)
Asian 1 (11%)
Age
Nationality
40 to 50 1
50 to 60 2
60 to 70 5
Above 70 1
<1 year 0
1–3 years 3
3–6 years 3
>6 years 3
British 7
American 1
American, British 1
1. The Board Composition data reflects the information as at 30 September 2022. As announced on 15 November 2022, Maggie Chan Jones will
be joining the Board on 1 December 2022, at which time we anticipate there will be ten Directors on the Board and the gender balance will be
30% female and 70% male.
135
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Corporate governance report continued
Board policy
Board DEI Policy objectives
All appointments to the Board
should be made on merit against
objective criteria which take into
account experience, skills and the
need to ensure an appropriately
diverse balance in the resulting
membership of the Board
Consider candidates for
appointment to the Board from
as diverse a pool of applicants
as possible, ensuring that the
recruitment and selection process
has been reviewed to mitigate bias
Aim to meet the targets of the
Parker Review and FTSE Women
Leaders Review and the Financial
Conduct Authority’s Listing Rules
as far as possible, recognising
that there may be temporary
periods when this is not possible;
such periods should be minimised
Engage executive search firms who
have signed up to the Voluntary
Code of Conduct on both gender and
ethnic diversity and best practice,
and utilise an open recruitment
process for non-executive roles
Ensure advertisements, role
descriptions and long lists, reflect
the Board’s diversity commitments
in respect of gender, ethnicity,
and the wider aspects of diversity,
as set out in this policy
136
Implementation and progress against objectives
The Board and the Committee are committed to ensuring the composition
of the Board exhibits a diverse mix of skills, professional and industry
backgrounds, expertise, gender, age, tenure and ethnicity.
The Board and Committee are mindful of the fact that the Board is not currently
where it wants to be in terms of gender diversity. However, in undertaking
searches for two Non-executive Directors during FY22, the Committee has
sought to address this and seeks in due course to meet the gender diversity
targets set by the FTSE Women Leaders Review and referred to in recent
updates to the Financial Conduct Authority’s Listing Rules. Information on
our recent Board appointment can be found on page 108.
The Board and the Committee seek a wide and diverse list of candidates
for Board appointments, including in terms of gender, social and ethnic
background, experience (including those with no previous public listed
company non-executive experience), geographical experience, knowledge,
skills and independence of thought, always with the aim of securing the very
best candidate for the position. This objective has been put into practice in
the Board and Committee’s searches for two Non-executive Directors in FY22.
The Board and the Committee are mindful of the recommendation of the Parker
Review to have at least one Board member from an ethnic minority background
and are satisfied that the Board continues to meet this recommendation.
Details of Board composition can be found on page 135.
The Board and the Committee are cognisant that, following recent Board
changes (including the departure of Irana Wasti in July 2022, to pursue another
executive opportunity), the Board has fallen short of the gender diversity aim
as publicly stated in our Board DEI Policy and the expectation of our relevant
stakeholders. We remain committed to minimising the period for which this
is the case. As noted in the Board and Board Committee composition section
on page 133, the Committee initiated a search for two new Non-executive
Directors in FY22, and as announced on 15 November 2022, Maggie Chan Jones
will be appointed to the Board with effect from 1 December 2022. The search for
a second Non-executive Director is ongoing and a further announcement will be
made at the appropriate time. As at 30 September 2022, the Board comprises
two women (22%) and seven men (78%). As at 1 December 2022 when Maggie joins
the Board, we anticipate the gender balance will be 30% female and 70% male.
Sage is strongly committed to ensuring a diverse workforce and to promoting
and fostering a culture of diversity, equity and inclusion across the Group. Our
progress is reflected in the current gender balance of our Executive Leadership
Team and their direct reports, senior leadership and total workforce which can
be found on page 43 and the DEI initiatives listed on page 42.
The Board and the Committee engaged with the Lygon Group and Heidrick &
Struggles, to search for two Board appointments this year. The Lygon Group
and Heidrick & Struggles are executive search firms who have signed up to the
Voluntary Code of Conduct on both gender and ethnic diversity and best
practice and are able to demonstrate a commitment to gender and ethnic
diversity as part of their roles in identifying suitable candidates. The Board
and the Committee utilise an open recruitment process for non-executive roles,
as appropriate.
The Non-executive Director brief provided to each of the Lygon Group and
Heidrick & Struggles reflects the Board’s commitment to consider a broad
and diverse range of candidates.
The Sage Group plc. Annual Report and Accounts 2022 The Board receives updates from members of the Executive Leadership Team and senior management on Group wide
DEI initiatives and monitors progress against DEI objectives. In FY22 the Board was pleased to see progress against the
following targets:
Groupwide Initiative
All About Us colleague participation
target. This is the process colleagues
can use to voluntarily share insights
about themselves. Sage is committed
to a workforce that fully represents the
many different cultures, backgrounds and
viewpoints of its customers, partners and
communities. When all the insights are
joined together, colleagues’ contributions
will provide an accurate view of Sage’s
colleague population and help sharpen
the Company’s focus to remove inequities
Colleague Success Network participation.
This target is about creating a sense of
inclusion. All of Sage’s Colleague Success
Networks have the same overall goal, to
help create and support the Company’s
inclusive culture. Colleague Success
Networks play an important role in
supporting the Company’s DEI journey.
They do this through amplifying the
voices of underrepresented communities,
providing a platform for sharing
experiences and identifying shared
challenges which they feed back to the
DEI team to resolve
Sage Group gender diversity target.
This target is about driving diversity
at all levels of the organisation
Progress in FY22
During FY22, participation grew
to 43% from 11% at the start
of FY22
Target
Participation target of 65% globally
by the end of FY24
At the start of FY22 the Company
had 4% participation and reached
14% by the end of FY22
Three-year Colleague Success
Network participation target of
20% globally by the end of FY24
The Company has made good
progress on this target during
FY22 and currently 33% of
leadership teams are hitting this
target from a starting point of
19% at the beginning of FY22
Target of no more than 60% of any
one gender, in any leadership team,
anywhere at Sage, by the end of FY26
Sage’s FY22 DEI Impact Report is also available on sage.com, which sets out Sage’s review of what has worked and what
has not worked. The report further highlights learnings and what the Company is going to do differently as a result and
will show progress against the DEI targets that are outlined in the Group DEI strategy. Further information is included
in the People section on page 42.
137
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continued
Audit and Risk
Committee
The Committee continues to play
an important role in governing
Sage’s risk management and internal
controls, financial and ESG reporting,
internal and external audit. This
oversight is increasingly important,
keeping pace with the dynamic nature
of change, both within Sage and in the
external economic environment.
Jonathan Bewes
Chair of the Audit and Risk Committee
Dear shareholder,
I am pleased to present the Annual Report of the
Audit and Risk Committee (“the Committee”) for 2022.
This report explains the Committee’s responsibilities
and shows how it has delivered on these, whilst also
considering and responding to how the business has
evolved during the year. In executing its responsibilities,
the Committee closely monitors how the changing
macro-economic outlook may impact the Group’s
performance, risks and controls and considers any
resulting impact on financial reporting. This will
continue to be an area of focus moving into FY23.
Allocation of time
38%
25%
13%
13%
4%
7%
Financial reporting
Internal audit
Incident management and whistleblowing
Risk management and internal control
External audit
Other matters
Composition of the Committee
The Code requires that at least one member of
the Committee has recent and relevant financial
experience. The Disclosure Guidance and Transparency
Rules (DTRs) require that at least one member has
competence in accounting and/or auditing. The
Board is satisfied that this requirement is met,
with Jonathan Bewes being a qualified chartered
accountant and experienced Audit Committee Chair
following 25 years in financial services as a corporate
finance advisor in the investment banking sector.
Derek Harding is also considered to meet this
requirement as a chartered accountant who currently
serves as Chief Financial Officer at Spectris plc.
Further, the Board considers that the Committee
has the necessary competence and broad experience
relevant to the sector in which Sage operates as
required by the Code. Annette Court and Drummond
Hall are both former Chief Executive Officers with
extensive experience of leading complex, customer-
focused businesses and Sangeeta Anand is a senior
software technology leader with an extensive
understanding and knowledge of transforming
product portfolios.
Other Audit and Risk Committee members
Sangeeta
Anand
Annette
Court
Drummond
Hall
Derek
Harding
138
The Sage Group plc. Annual Report and Accounts 2022 Activities and evaluation
During the year, the Committee oversaw the Group’s
financial reporting, risk management and internal
control procedures and the work of its internal and
external auditors.
Fuller details of the Committee’s activities are set
out below. The Committee’s performance was reviewed
as part of the 2022 Board evaluation process. Following
consideration of the findings of the review of the
Committee, the Directors were satisfied that it is
operating effectively.
The Committee operated during the year in accordance
with the principles of the Financial Reporting Council’s
(“FRC”) UK Corporate Governance Code 2018 (the “Code”)
and the associated recommendations set out in the
FRC’s Guidance on Audit Committees.
Role of the Committee
The Committee is an essential part of Sage’s overall
governance framework. The Board has delegated to
the Committee the responsibility to oversee and assess
the integrity of the Group’s financial reporting, risk
management and internal control procedures, the
integrity of the Group’s ESG reporting and the work of
Sage Assurance (internal audit) and the external auditor,
EY. These responsibilities are defined in the Committee’s
Terms of Reference, which were reviewed and approved by
the Committee and the Board in May 2022.
Activities during the year
The Committee held four scheduled meetings during
the year in line with its Terms of Reference. There were
no unscheduled meetings during the year. Details of
individual attendance at scheduled meetings are set out
on page 118. Regular attendees by invitation include the
Chair of the Board, the Chief Executive Officer, the Chief
Financial Officer, the Company Secretary, the EVP Group
Financial Controller, the EVP Chief Risk Officer and the
VP Assurance.
The Chair of the Committee reported to the Board on
key matters arising after each Committee meeting.
At certain meetings, the Committee met with the external
auditor and the VP Assurance, without management being
present. Outside these formal Committee meetings,
the Chair of the Committee met regularly with the Chief
Financial Officer, the external auditor, the VP Assurance,
the EVP Group Financial Controller, the EVP Chief Risk
Officer and the General Counsel and Company Secretary.
Key activities during the year included ongoing
monitoring of risks, controls and operations, the
effectiveness of internal controls and further embedding
of the Enterprise Risk Management Framework including
risk appetite, tolerance and emerging risks. In addition,
the Committee has overseen the preparation of the
financial statements and the application of significant
reporting and accounting matters, which are set out in
further detail below.
During the year, the Committee received, considered and,
where appropriate, challenged:
• Scheduled finance updates on business performance
and significant reporting and accounting matters
from the EVP Group Financial Controller;
• The Group’s half-year results and Annual Report and
Accounts, as well as the accompanying press release,
ahead of their review by the Board;
• A detailed summary of the Group’s tax strategy, which
was presented by the EVP Group Financial Controller,
and subsequently approved by the Committee;
•
•
Regular updates from the EVP Group Financial
Controller on the appropriateness of tax provisions
including developments with regards to the European
Commission’s (“EC”) State Aid ruling;
Scheduled risk updates, including risk dashboards
outlining both principal and any escalated risks.
The Committee also received summary reports and
supplementary briefings from management on
selected Principal Risks and other ‘in-focus’ reviews;
• The assessment of Group and Principal Risk appetites
with consideration of emerging risks;
• Summary reports of escalated incidents and instances
of whistleblowing and fraud, together with status of
investigations and, where appropriate, management
actions to remediate issues identified;
• The Internal Audit plan and subsequently progress
against the plan and results of internal audit
activities, including Sage Assurance and management
reports on internal control and the implementation of
management actions, to remediate issues identified
and make improvements to internal controls;
• The External Audit plan and subsequently updates
on delivery of the external audit and reports from the
external auditor on the Group’s financial reporting
and observations on the internal financial control
environment in the course of their work;
139
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Corporate governance report continued
• Updates on the legal and regulatory frameworks
relevant to the Committee’s areas of responsibility,
including a standing update from the EVP Chief
Risk Officer on information security, cyber and
privacy risk;
• Updates from the EVP Group Financial Controller on
the Group’s response and ongoing activities related to
the BEIS consultation on proposed audit and corporate
governance reforms, with a focus on the Group’s
readiness for adoption;
• Updates from the EVP Sustainability and
Foundation on embedding Environment, Social
and Governance (ESG) risks in our framework and
steps taken to implement the Taskforce for Climate
Related Disclosures.
Financial reporting, including significant
reporting and accounting matters
The agenda for every Committee meeting includes
a formal finance update from the EVP Group Financial
Controller. This informs the Committee about
developments in the Group’s reporting and accounting
environment, and compliance with relevant reporting
standards. During the year, the Committee considered
how these developments were addressed in preparing the
Group’s financial statements, ensuring that applicable
requirements were appropriately reflected. The
Committee assessed the overall quality of financial
reporting through review and discussion of the
significant accounting matters and the interim
and annual financial statements.
The Committee’s review included assessing the
appropriateness of the Group’s accounting policies and
practices, confirming their compliance with financial
reporting standards and relevant statutory requirements,
and reviewing the adequacy of disclosures in the
financial statements. In performing its review of the
Group’s financial reporting, the Committee considered
and challenged the work, judgements and conclusions of
management. The Committee also received reports from
the external auditor setting out its view on the accounting
treatments included in the financial statements.
Significant reporting and accounting matters
During the year, the Committee considered a number of significant reporting and accounting matters which impacted
the Group’s financial statements. The Committee’s response and challenge over these matters is set out below:
Cross reference
See note 3.1 in
the financial
statements on
pages 217 to 219.
Response and challenge
• The Committee continues to oversee management’s
application of revenue recognition policies and
during the year has continued to monitor
compliance with financial reporting and
accounting controls linked to revenue recognition.
During the year there have been no changes to the
Group’s revenue recognition policies.
•
In light of the Group’s acceleration in growth of
cloud-based solutions, the Committee continues
to review the appropriateness of management’s
application of revenue recognition policies.
• As part of the preparation for the interim and annual
financial statements, the Committee obtained
reports from both management and EY which set
out the application of accounting and reporting
treatment against the revenue recognition policy.
• EY provided an update to the Committee on the
nature, extent and findings from its procedures over
revenue recognition during the year.
Significant reporting and
accounting matters
Revenue recognition
Revenue recognition continues to be an
important area of focus for the Group.
The Group has a detailed revenue
recognition policy for each category
of revenue. This includes the
application of rules relating to the
various ways in which the Group sells
its products.
With over a third of the Group’s revenue
generated through sales to partners
rather than end-users, the key
judgement in revenue recognition
is determining whether a business
partner is a customer of the Group.
Considering the nature of Sage’s
subscription products and support
services, this judgement is usually
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. Inherently, this assessment
can be judgemental.
140
The Sage Group plc. Annual Report and Accounts 2022 Significant reporting and
accounting matters
Response and challenge
Carrying value of goodwill
Given the Group’s goodwill balance of
£2,416m and the continuing evolution
of Sage’s business model, the annual
assessment of the recoverability of
goodwill is a significant area of focus
for the Committee.
• The Committee reviewed and considered the
methodology applied and challenged the key
inputs into the impairment model including areas
of estimation and judgement such as forecast cash
flows and discount rates, with consideration to
their appropriateness given the changes in the
macro-economic environment.
Cross reference
See note 6.1 in
the financial
statements on
pages 231 to 233.
During the year, acquisitions have
contributed to an increase in the
goodwill balance. The goodwill
recognised for the Lockstep
acquisition is provisional and will be
finalised when the purchase price
accounting is completed in FY23.
• Where appropriate, the Committee acknowledged
the use of external sources to support and
corroborate management’s inputs.
• The Committee further enquired as to whether
any other reasonable changes in assumptions
would result in a material impairment and
therefore require sensitivity disclosure in the
financial statements. The Committee agreed
with management’s conclusion that a sensitivity
disclosure should be included for the Iberia
business in relation to a reasonably possible
change in revenue growth and discount rate.
• The Committee considered the level at which
goodwill is tested and concluded a consistent
approach to the prior year is appropriate.
141
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Cross reference
The Group’s
going concern
and viability
statements can
be found on pages
182 to 183 and 104
to 105, respectively.
Corporate governance report continued
Significant reporting and
accounting matters
Going concern and
viability assessment
Both the going concern and viability
assessment are key areas of focus for
the Committee due to the level of
management judgement required.
In preparing these assessments,
consideration was given to the macro-
economic environment. The Committee
received a detailed update from
management during the year which
included both reverse and scenario-
specific stress testing.
•
Response and challenge
• The Committee reviewed management’s process
for assessing the Group’s longer-term viability,
including the determination of the period over
which viability should be assessed, the
appropriateness of the viability scenarios
identified in light of the Group’s Principal Risks
and uncertainties and the reasonableness of key
assumptions used by management in calculating
the financial impact of a viability scenario arising.
With consideration to the macro-economic
environment, the Committee reviewed the
key assumptions underpinning management’s
longer-term forecasting, and the sufficiency and
adequacy of future funding requirements. As part
of this review, the Committee considered the level
of available liquidity and covenant compliance
over the forecast period.
• The Committee reviewed the results of
management’s scenario-specific stress testing for
both going concern and viability, as well as reverse
stress testing, which demonstrated the resilience
of the Group’s business model.
•
It was noted that under scenario-specific stress
testing, the Group maintains sufficient available
liquidity and covenant compliance over the forecast
period. The results of reverse stress testing
highlighted that such a scenario would only arise
following a catastrophic deterioration in
performance, well in excess of the assumptions
in the scenario-specific stress testing.
• As part of its review and challenge, the Committee
took into consideration updates provided by the
EVP Chief Risk Officer with respect to the Group’s
Principal and emerging risks.
• The Committee approved the disclosures in
relation to both the going concern and viability
assessment and recommended to the Board the
preparation of the financial statements under
the going concern basis.
142
The Sage Group plc. Annual Report and Accounts 2022 Significant reporting and
accounting matters
Alternative Performance Measures
(APMs)
The Committee closely monitors
management’s interpretation and
definition of Alternative Performance
Measures (APMs), in particular
Annualised Recurring Revenue (ARR).
In addition, the Committee considers
the presentation of APMs in the Group’s
Annual Report and Accounts in the
context of the requirement that they
be fair, balanced and understandable.
Acquisitions
The Committee received an update
on the acquisitions made during
the year, notably the acquisitions
of Brightpearl (January 2022) and
Lockstep (August 2022).
As part of the updates, the Committee
focussed on the accounting and
reporting judgements taken by
management, particularly in
relation to the valuation of acquired
intangible assets.
Cross reference
The definition
of APMs can be
located in the
glossary on pages
289 to 290.
Reconciliations of
statutory revenue,
operating profit
and basic earnings
per share to their
underlying and
organic
equivalents are
in the Financial
review starting
on page 82.
Response and challenge
• The Committee continues to review and challenge
management’s use of APMs and, as part of the
preparation for the interim and annual financial
statements, requests a clear reconciliation between
key APMs and statutory reporting measures.
• There is a continued focus by the Committee on the
ARR APM given its importance as a key measure of
business performance. At each Committee meeting,
an update on ARR performance is provided.
• The Committee has challenged the sufficiency,
adequacy and clarity of disclosures related to APMs
in the Annual Report and Accounts and considers
them to be appropriately disclosed.
• At the request of the Committee, and on behalf of
the Remuneration Committee, EY performed a set
of agreed upon procedures over the mathematical
calculation of ARR. In doing so, EY considered the
appropriateness of the calculation against the
defined policy and reviewed in detail any
proposed adjustments.
• The Committee also reviewed supplementary
information issued alongside the financial
statements, including the Group’s press release,
to ensure consistency in the way APMs are disclosed
and presented on a balanced basis alongside
statutory reporting measures.
• For the acquisitions made during the year,
the Committee considered the outputs from the
independent external valuer with a particular
focus on the key judgements made in the
valuation methodologies.
See note 16
in the financial
statements on
page 268.
• For Brightpearl, key judgements included the
determination of longer-term cash flows, the
discount rate and the long-term growth rate.
In addition, judgement was applied in the
determination of how the goodwill arising on
acquisition was allocated to the Group’s cash-
generating units. The Committee also considered
the basis for which the fair value of acquisition
consideration had been determined. The Committee
subsequently approved the valuation of acquisition
intangibles, along with the allocation of goodwill.
• For Lockstep, the Committee acknowledged the
proximity of the acquisition date to the Group’s
financial year end. Accordingly, a valuation will be
put forward in relation to this acquisition at the
Committee’s next meeting in February 2023.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Corporate governance report continued
Fair, balanced and understandable
Each year, the Committee advises the Board on whether
the Annual Report and Accounts taken as a whole are
fair, balanced and understandable and provide the
information necessary for shareholders to assess Sage’s
position, performance, business model and strategy.
In reaching its conclusion, the Committee considered
the results of management’s assessment of going concern
and viability, reviewed the Annual Report and Accounts as
a whole, and assessed the results of processes undertaken
by management to provide assurance that the Group’s
financial statements were fairly presented.
These processes included an analysis of how the
key events in the year had been described and
presented in the Annual Report and Accounts, how APMs
had been defined and presented, and the outcome of
representations received from country management
teams on the application of a range of financial controls.
The Committee also considered the perspective of the
external auditor.
Risk management and internal controls
The Committee assists the Board in its monitoring of the
Company’s internal control and risk management systems,
and in its review of their effectiveness. This monitoring
includes oversight of all material controls, including
financial, operational, regulatory and compliance
controls, and assessing whether the control systems are
fit for purpose and whether any corrective action is
necessary. The Risk function reports into the EVP Chief
Risk Officer, with the Assurance function reporting
directly to the Committee to maintain independence,
and administratively into the General Counsel and
Company Secretary.
During the year, the Committee:
• Reviewed the Principal Risks, their evolution
during the year, and the associated risk appetites and
metrics, challenging and confirming their alignment
to the continued achievement of Sage’s strategic
objectives. At each meeting, the Committee
considered and challenged the ongoing overall
assessment of each risk, their associated metrics
and management actions and mitigations in place
and planned;
• Reviewed and considered an assessment of the
effectiveness of risk management more broadly,
and reviewed summary reports from Sage Risk and
Controls and Sage Legal on the Group’s adherence to
policies, including Conflicts of Interest, Anti-Money
Laundering, Sanctions, Competition Law, Anti-Bribery
and Corruption and Modern Slavery;
• Reviewed updates from the Sage Risk and Controls
team on the operating effectiveness of controls within
the Sage Business Control Framework;
• Received reports from Sage Assurance and
management on internal control and monitored the
implementation of management actions to remediate
issues identified and make improvements. The
Committee also satisfied itself that management’s
response to any financial reporting or internal
financial control issues identified by the external
auditor was appropriate;
• Received updates from the EVP Group Financial
Controller on the progress made towards
implementation of our internal financial controls
enhancement programme in keeping with key
recommendations from the BEIS consultation;
• Reviewed at each Committee meeting any
escalated incidents and any instances of
whistleblowing and management actions to
remediate any issues identified (see Incident
management, fraud and whistleblowing
paragraph below for further details); and
• Considered individual incidents and associated
actions to assess whether they demonstrated
a significant failing or weaknesses in internal
controls, of which none were identified.
For further details on the Group’s risk management and
internal control systems, its risk-informed decision-
making process and its Principal Risks and uncertainties,
refer to the Risk Management section on pages 90 to 103.
144
The Sage Group plc. Annual Report and Accounts 2022 Specific areas of focus
The Committee spent time on the following specific
areas of focus during the year to consider and challenge
relevant, current and important issues:
• At each Committee meeting, consideration was
given to the Group’s operations, risks and controls.
Specifically, this included consideration of the
impact of the macro-economic environment upon the
Group’s wider Enterprise Risk Management Framework,
emerging risks, business continuity planning strategy
and significant reporting and accounting matters;
• Received updates on how Sage is capturing,
monitoring and embedding ESG risks to ensure
that the Group has prepared for successful execution
of the Group’s Sustainability and Society strategy
and related TCFD disclosures. During the year this
included the appointment of the EVP for
Sustainability & Foundation, who the Committee met
with in September 2022, and working with external
partners to assess compliance with TCFD proposals;
• Received updates from the EVP Group Financial
Controller on the key elements of the BEIS
consultation on proposed audit and corporate
governance reforms. As part of these updates the
Committee was presented with progress made during
the year in the ongoing implementation of processes
and controls to respond to certain recommendations.
Incident management, fraud
and whistleblowing
The Committee considered the suitability and alignment
of the Incident, Emergency and Crisis Management and
Whistleblowing policies and confirmed the effectiveness
of these policies in facilitating appropriate disclosure to
senior executive management and the Committee. At each
meeting, the Committee received a summary report of any
escalated incidents and instances of whistleblowing and,
together with management, considered whether there
were any thematic issues and identified remediating
actions. As part of this reporting process, the Committee
was notified of all whistleblowing matters raised,
including any relating to financial reporting, the
integrity of financial management or that included any
allegations relating to fraud, bribery or corruption. The
Committee was also notified of all non-whistleblowing
incidents exceeding an agreed materiality threshold.
Internal audit
Internal audit is delivered by the in-house Sage Assurance
function. Reporting directly to the Committee and
administratively to the General Counsel and Company
Secretary, its remit is to provide independent and
objective assurance over the Group’s operations and
activities, to assist management and colleagues in
fulfilling their responsibility to develop and maintain
appropriate internal controls.
The specific objectives, authority, scope and
responsibilities of Sage Assurance are set out in more
detail in the Internal Audit Charter, which is reviewed
annually by the Committee. The Committee also considers
and evaluates the level of Sage Assurance resource and its
quality, experience and expertise, supplemented as
appropriate by third-party support and subject matter
expertise, to ensure it is appropriate to provide the
required level of assurance over the Principal Risks,
processes and controls throughout the Group.
Additionally, in line with the Institute of Internal Auditors’
(IIA) Code of Practice, the effectiveness of Sage Assurance
is reviewed by the Committee on an annual basis and is
also subject to a five-yearly external quality assessment
(EQA). The most recent EQA was completed in August 2021
by PwC, feedback from which was positive and noted
conformance with the IIA International Standards for
the Professional Practice of Internal Auditing (IPPF),
therefore an internal effectiveness assessment was
completed in 2022 which noted timely closure of actions
arising from the 2021 EQA and continued conformance
with the above standards. This self-assessment was
presented and discussed at the September 2022
Committee meeting, and the Committee endorsed
these conclusions.
The Committee reviewed and approved the nature and
scope of the work of Sage Assurance, and the Sage
Assurance plan was approved by the Committee at the
beginning of the financial year, along with any subsequent
quarterly updates. Specific consideration was given to the
impact of business changes, including the restructuring
programme in FY21, with no significant or adverse impact
on the business’ internal control environment identified.
Operationally, given key territories’ emergence from the
Covid-19 pandemic during the period, the Assurance
function continued to show flexibility in transitioning
from predominantly remote delivery to a hybrid model,
with an increased focus on on-site delivery including
visits to key locations in the UK, North America, South
Africa and Southern Europe.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Corporate governance report continued
Progress against the plan and the results of Sage
Assurance’s activities, including the quality and
timeliness of management responses, is monitored at
each Committee meeting. This includes consideration
of a summary of report findings against the internal
audit plan, reported at each meeting by Sage Assurance,
as well as an executive summary for each individual
internal audit.
Following its review of the Company’s internal control
systems, the Committee considered whether any matter
required disclosure as a significant failing or weakness
in internal control during the year. No such matters
were identified.
External audit
The Group’s current external auditor is EY. Each year,
the Committee makes a recommendation to the Board
with regard to whether the external auditor should be
reappointed. In making its recommendation, the
Committee considers the auditor’s effectiveness,
including its independence, objectivity and scepticism.
The Committee also reviews the application of, and
compliance with, the Group’s Auditor Independence
Policy, in particular with regard to any non-audit services
provided by EY. The Committee also considers business
relationships between the Group and EY, which primarily
relate to EY’s procurement of Sage products and applications.
Further consideration is given to partner rotation and
any other factors which may impact the Committee’s
judgement regarding the external auditor. EY has now
been Sage’s external auditor for eight years since the
formal tender process conducted in 2014. Kathryn
Barrow was appointed as lead audit partner in 2020
and will continue in her role for the next financial year.
The Company is, and has been throughout the year under
review, in compliance with the requirements of The
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order
2014. In accordance with the terms of this Order, Sage
anticipates that it will conduct a competitive tender
process in respect of the external audit no later than 2024.
This allows for any potential new audit firm to take up the
role for the year ending September 2025. The Committee
believes this approach is in the best interests of
shareholders, as over this period the Group will benefit
from an efficient and effective independent audit.
Auditor effectiveness
The Committee is responsible for assessing the
effectiveness of the external auditor. In doing so, the
Committee considers the independence, objectivity
and level of professional scepticism exercised by the
external auditor, as well as the results of the annual
auditor effectiveness review. To fulfil its responsibility
for oversight of the external audit process, the Committee
reviewed and agreed:
• The terms, areas of responsibility, associated duties
and scope of the audit as set out in the external
auditor’s engagement letter;
• The overall work plan and fee proposal;
•
The issues that arose during the course of the audit
and their resolution;
• Key accounting and audit judgements;
• The level of errors identified during the audit; and
• Control recommendations made by the external auditor.
In addition to the above, specific considerations made
by the Committee during the year included:
• The detail relating to EY’s scoping and audit plan
for FY22 which was presented to the Committee at
its May meeting;
• The findings published by the Financial Reporting
Council (FRC) and their view on the effectiveness
of EY’s audits;
• The experience and expertise demonstrated by the
auditor in its direct communication with, and support
to, the Committee;
• The content, quality of insight and added value
provided by EY’s reports;
• Robustness and perceptiveness of EY in its handling
of key accounting and audit judgements; and
• The interaction between management and the auditor.
The FRC Audit Quality Review (AQR) team, responsible
for monitoring the quality of UK audit firms, reviewed the
EY audit file for the Group’s FY20 year end as part of the
regular cycle of inspections. At the Committee’s May
meeting EY presented the key findings from the review.
EY confirmed that they had acknowledged the AQR
comments and had sufficiently addressed them in both
EY’s FY21 audit and the scope and plan for the FY22 audit.
The Committee was satisfied that matters identified for
improvement were appropriately implemented by EY. The
Committee and management also reviewed the report to
satisfy themselves that the findings did not impact the
Sage financial reporting processes, policies or internal
controls and that no internal remediation was required.
146
The Sage Group plc. Annual Report and Accounts 2022 At certain Committee meetings a separate private
meeting was held between Committee members and the
lead audit partner, Kathryn Barrow, to encourage open
and transparent feedback. The Chair of the Committee
also met with the external auditor outside of Committee
meetings, supporting effective and timely communication.
During the year the Committee also received feedback
from the businesses evaluating the performance of
each assigned audit team. Management’s report to the
Committee included a summary of the findings of a survey
of key Sage colleagues on the quality of EY’s delivery,
communication and interaction with the various finance
teams across the Group. Management concluded that the
working relationship between finance functions and EY
across the Group was effective and the audit had been
carried out in an independent, professional, organised
and constructive manner, with an appropriate level of
challenge and scepticism over management’s treatment
of significant reporting and accounting matters.
Auditor independence
The Committee is responsible for the development,
implementation and monitoring of policies and
procedures to ensure auditor independence. At Sage
this is governed by the Auditor Independence Policy
(the “Policy”). The Policy has been in place throughout the
year. It specifies the role of the Committee in reviewing
and approving non-audit services in order to ensure the
ongoing independence of the external auditor. A summary
of non-audit fees paid to the external auditor is provided
to the Committee on a quarterly basis.
The Policy states that Sage will not use the external
auditor for non-audit services, except in limited
circumstances, and as permitted by the FRC Ethical
Standard, where non-audit services may be provided by
the external auditor with pre-approval by the Committee
unless clearly trivial. This is provided that the approval
process set out in the Policy is adhered to and that
potential threats to independence and objectivity have
been assessed and safeguards applied to eliminate or
reduce these threats to an appropriate level. Any non-
audit services individually in excess of £75,000 require
pre-approval by the Chair of the Committee, as do any
non-audit services where the cumulative total of
previously approved non-audit services in the financial
year exceed £75,000.
The Committee considered the application of the Policy
with regard to non-audit services and confirms it was
properly and consistently applied during the year. The
Policy also requires that the ratio of audit fees to non-
audit fees must be within Sage’s pre-determined ratio,
and non-audit fees for the year must not exceed 70% of the
average of the external audit fees billed over the previous
three years. In 2022, the ratio of non-audit fees to audit
fees was 10% (2021: 8%), principally reflecting the fee
paid for the half-year interim review and permitted
assurance services relating to a bond issuance during
the year as well as a set of agreed upon procedures over
the mathematical calculation of ARR. A breakdown of
total audit and non-audit fees charged by the external
auditor for the year under review is shown in note 3.2
to the financial statements.
The Committee has also considered the independence
of the external auditor’s partners and staff involved in
the audit of Sage. EY has confirmed that all its partners
and staff complied with their ethics and independence
policies and procedures that are consistent with the
FRC’s ethical standards including that none of its
employees working on the audit hold publicly listed
securities issued by Sage. In addition, the Committee
acknowledges management’s internal assessment that
no employee in a key financial reporting oversight role
has a close relationship with any EY employee which
may impact their independence.
Auditor reappointment
Having considered the summary set out above relating
to the effectiveness and independence of EY, the
Committee has recommended to the Board that
a resolution to reappoint EY be proposed at the 2022
AGM which the Board has accepted and endorsed.
Evaluation of the performance
of the Committee
The evaluation of the Committee for the year was
completed as part of the 2022 Board external evaluation
process. The overall conclusion from this year’s external
evaluation was that the Committee continues to operate
effectively. An explanation of how this process was
conducted, the conclusions arising from it and the
action items identified are set out on pages 128 and 129.
The Committee has considered this in the context
of the matters that are applicable to the Committee.
Jonathan Bewes
Chair of the Audit and Risk Committee
147
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report
Remuneration
Committee
During a year of external volatility,
we have delivered strong results
demonstrating consistent and
sustainable growth. Our Remuneration
Policy has operated as intended;
driving high performance linked to
clearly-defined goals fundamental
to our business strategy.
Annette Court
Chair of Remuneration Committee
Dear shareholder,
Composition of the Committee
The Remuneration Committee is composed solely
of independent Non-executive Directors, Drummond Hall
and Dr John Bates, and is chaired by Annette Court.
Details of the skills and experience of the Remuneration
Committee members can be found in their biographies
on pages 110 and 111.
Remuneration updates for Executive
Directors in FY23
Our remuneration principles
page 150
page 151
On behalf of the Remuneration Committee (the
“Committee”), it is my pleasure to present the Directors’
Remuneration Report (the “Report”) for the year ended
30 September 2022.
This Report complies with the requirements of the Large
and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 as amended in 2013, the
provisions of the 2018 UK Corporate Governance Code,
the Companies (Miscellaneous Reporting) Regulations
2018, the Companies (Directors’ Remuneration Policy
and Directors’ Remuneration Report) Regulations 2019,
and the Listing Rules.
The Report is in sections:
Remuneration Committee governance
page 157
• The Directors’ Remuneration Policy (the “Policy”)
Remuneration Policy 2022
page 158
Directors’ Annual Remuneration Report
page 163
Statement of implementation of Remuneration
Policy in the following financial year
page 173
(pages 158 to 162).
• The Directors’ Annual Remuneration Report (pages
163 to 181). This section sets out details of how
the 2022 Policy was implemented for the year ended
30 September 2022 and how we intend the Policy to
apply for the year ending 30 September 2023.
Other Remuneration Committee members
Drummond
Hall
Dr John
Bates
148
The Sage Group plc. Annual Report and Accounts 2022 Objectives and responsibilities
The Committee’s main objective is to determine the
framework, broad policy, and levels of remuneration for
the Group’s Chief Executive Officer, the Group’s Chief
Financial Officer, the Chair of the Company, and other
executives as deemed appropriate, ensuring compliance
with legal and regulatory requirements and striving to
enhance Sage’s long-term development.
This framework includes, but is not limited to,
establishing stretching performance-related elements
of reward and is intended to promote the long-term
success of the Company. We achieve this through:
• Providing recommendations to the Board, within
agreed Terms of Reference, on Sage’s framework
of executive remuneration;
• Determining the contract terms, remuneration and
other benefits for each of the Executive Directors,
including performance share awards, performance-
related bonus schemes, pension rights, and
compensation payments, and aligning such to
the Company’s purpose, values, and culture;
• Reviewing workforce remuneration, and related
policies across the Group and the alignment of
incentives and rewards with culture, taking these
into account when setting the Policy for
Executive Directors;
• Determining remuneration for senior executives
below Board level;
• Approving share awards; and
• Ensuring the Policy promotes long-term shareholdings
by Executive Directors by ensuring share awards
granted are released on a phased basis and subject
to a total vesting and holding period of five years.
For more information on the Committee’s
Terms of Reference, visit:
https://www.sage.com
Context for FY23 remuneration decisions
Sage has delivered a strong set of financial results
for the year in what has continued to be a challenging
operating environment.
Our colleagues have remained resilient and focused,
continuing to work hard to create simplicity out of
complexity and knock down barriers so everyone can
thrive. Colleague engagement has remained high, with
eSAT of +79, and the Company has continued to invest
in areas to innovate and drive growth.
Recent months have presented new challenges with
increasing levels of inflation, and the “cost of living
crisis” is front of mind as we head into FY23. I am proud
that Sage has taken steps to support colleagues by:
• Funding an increased pay review budget for FY23 with
pay review matrices to ensure that budget is focused
on our lowest paid and highest performing colleagues;
• Ensuring the majority of our colleagues are eligible
for annual bonus or commission payments; and
•
Increasing education and communication on the
benefits available to colleagues to raise awareness of
discounts and support (such as free financial coaching
sessions) that colleagues are able to access.
Sage is also an accredited Living Wage Foundation
employer, meaning we pay the real Living Wage to
all colleagues in the UK, and contract with suppliers who
pay the real Living Wage to all regularly contracted staff
who are not employees.
Against this backdrop, the Committee is striving to
ensure that senior executive remuneration remains
aligned to our evolved strategic focus, our external
operating environment, and UK corporate
governance requirements.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Remuneration updates for Executive Directors
in FY23
We are proposing several changes to FY23 remuneration
arrangements:
1) Evolutionary changes to FY23 performance
measures for the Performance Share Plan (PSP)
In FY22, we introduced a reshaped set of strategically-
aligned performance measures for our PSP designed to
align with our strategy of growing Sage Business Cloud
(SBC), with particular focus on accelerated cloud native
growth and to incorporate relevant ESG metrics aligned to
our ambitious Sustainability and Society strategy. These
broad objectives remain of central strategic importance,
so we propose only the following evolutionary changes
to the FY23 PSP:
• As indicated in last year’s Remuneration Report, the
weighting of ESG measures will increase from 15%
to 20%.
•
In conjunction with the evolution of our Sustainability
and Society strategy, the ESG measures will comprise
new metrics linked to our progress in reducing carbon
emissions against a SBTi-approved Net Zero Plan, our
development of products to enable SMBs to address
their own sustainability goals, and key Diversity,
Equity, and Inclusion metrics.
Full details can be found in our statement of
implementation of Remuneration Policy in the following
financial year on page 173 of this Report and further
details in regard to our Sustainability and Society
strategy can be found on pages 44 to 49 and in the 2022
Sustainability Report.
Furthermore, during FY23 the Committee will review the
financial metrics in the PSP to ensure close alignment
with the business strategy as the Digital Network evolves
for FY24.
2) Base salary increase of 4% for the CEO and the CFO
We have undertaken our annual review of salaries and
awarded a 4% salary increase for FY23 to the Executive
Directors. This is a lower increase than our budgeted
UK workforce salary increase for FY23 of 5.8%.
3) PSP opportunity and shareholding guideline
for the CFO
Jonathan Howell is an immensely experienced
professional; he has worked for over 20 years as a CFO
of major listed companies and his contribution since
becoming our CFO in 2018 has been invaluable to
our recent strategic development. In order to more
appropriately reflect his experience and importance to
Sage and to ensure he is paid fairly for his contribution
to our long-term growth, we propose to increase the level
of his PSP award from 200% to 225% of salary (within
the existing Policy limit of 300% of salary) subject to the
stretching performance conditions set out on pages 174
to 175. To further enhance alignment with shareholders,
there will be an accompanying increase in the CFO’s
shareholding requirement from 250% to 275% of
base salary.
No changes are proposed to the CEO’s PSP award level or
shareholding requirement.
4) Shift in measurement of performance measures
from organic to underlying
The business is evolving to give greater emphasis to
underlying measures. To align Executives’ incentives to
key performance indicators, metrics in incentive plans
for FY23 will also be measured on an underlying basis.
This will apply to ARR growth and the underlying
operating profit (UOP) margin underpin in the annual
bonus and the absolute growth, cloud native ARR growth
and Return on Capital Employed (ROCE) underpins in the
FY23 PSP. The Remuneration Committee will review on
a case-by-case basis the impact on underlying measures
of significant acquisitions and disposals and judge
whether to adjust incentive targets our outcomes.
For clarity, there are no changes to the measurement
of performance measures of current in-flight awards.
The full set of annual bonus and PSP measures and
related targets for FY23 are set out on pages 174 to 176.
150
The Sage Group plc. Annual Report and Accounts 2022 Our remuneration principles
Our remuneration principles align with the requirements of the 2018 UK Corporate Governance Code. The principles
apply across our entire workforce and are designed to drive the behaviours and results required to support our short-
and longer-term business strategy as outlined in the Strategic Report.
1
2
3
4
Market
competitive
Simplicity
Reward opportunity aligned
to relevant competitive
markets, recognising wider
context of geographies in
which we operate.
Clarity and simplicity of
design enables transparency
for all stakeholders.
Drives focus on
strategy, purpose,
and culture
Allows the Committee to
give appropriate reward for
achievements that support
delivery of strategic goals
and wider social purpose
through a remuneration
approach that is consistent
with that in place for
colleagues across Sage.
Aligned with
shareholder
interests
Close alignment of reward
outcomes and value created
for shareholders through
material “skin in the game”
for executives; mitigates
against excessive risk-
taking that can arise from
target-based incentive
plans and ensures no reward
for failure.
Principles are underpinned by compliance with corporate governance guidelines and specifically with Provision 40
of the 2018 UK Corporate Governance Code:
Clarity—
should be transparent and promote effective
engagement with shareholders and the workforce.
Simplicity—
should avoid complexity and their rationale and
operation should be easy to understand.
Risk—
should ensure reputational and other risks from
excessive rewards, and behavioural risks that can
arise from target-based incentive plans, are
identified and mitigated.
Predictability—
the range of possible values of rewards and any limits
or discretion should be identified and explained at the
time of approving the policy.
Proportionality—
the link between individual awards, the delivery of
strategy and the long-term performance of the company
should be clear.
Alignment to culture—
incentive schemes should drive behaviours consistent
with company purpose, values, and strategy.
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The Sage Group plc. Annual Report and Accounts 2022Shareholder InformationFinancial StatementsGovernance ReportStrategic Report Directors’ Remuneration Report continued
Delivering our remuneration principles in FY23
We aim to align the total remuneration for our Executive Directors to our business strategy through a combination
of salary, bonus, and long-term incentive schemes underpinned by stretching performance targets.
The table below summarises the remuneration arrangements for our current Executive Directors in FY23 in accordance
with the 2022 Policy. Alignment to our remuneration principles is also denoted.
REMUNERATION PRINCIPLES
1
Drives focus on strategy,
purpose, and culture
2
Market competitive
3
Simplicity
4
Aligned with
shareholder interests
Element of Policy
Purpose
Implementation in FY23
Base salary
1
2
Enables Sage to attract and retain Executive
Directors of the calibre required to deliver the
Group’s strategy.
CEO: £841,500 (4% increase)
CFO: £577,000 (4% increase)
The equivalent average increase for colleagues
eligible for an annual pay award is 5.8% (in respect
of colleagues based in the United Kingdom).
10% of base salary for both the CEO and CFO
Provides a competitive post-retirement benefit, in
a way that manages the overall cost to the Company.
Pension
1
2
3
Benefits
2
Annual bonus
1
2
3
4
Provide a competitive and cost-effective benefits
package to Executive Directors to assist them in
carrying out their duties effectively.
Standard benefits package plus costs of travel,
accommodation, and subsistence for the Executive
Directors and their partners on Sage-related business.
Rewards and incentivises the achievement of annual
financial and strategic targets. A minimum of one
third deferral into shares for three years is
compulsory, with the remainder delivered in cash.
Performance
Share Plan
1
2
3
4
Supports achievement of our strategy by targeting
performance under our key financial performance
indicators. Vesting is after three years, and awards
are subject on vesting to a holding period for two
years before being released.
Maximum 175% of base salary
70% based on ARR growth (with an underlying
operating profit margin underpin), 10% on customer-
related measure inclusive of Net Promoter Score and
20% based on strategic goals.
Face value of 250% of base salary for the CEO
Face value of 225% of base salary for the CFO
50% based on Sage Business Cloud penetration with
cloud native penetration, ROCE, and absolute growth
underpins, 30% based on relative shareholder return
performance, and 20% based on ESG basket
of measures.
All-employee
share plans
Provides an opportunity for Executive Directors to
voluntarily invest in the Company.
Eligible to participate up to the tax-efficient limit
of £500 per month.
Provide an appropriate reward to attract and retain
high-calibre individuals.
See page 176 of this Report for a list
of Non-executive Director fees.
The shareholding guideline for the CEO is 300% of
base salary and 275% for the CFO. Achievement of this
is expected within a maximum of five years from the
time the Executive Director became subject to
the guideline.
The post-employment shareholding guideline
requires Executive Directors to retain shares
following cessation of employment as a Director
in line with Investment Association guidelines.
Shareholding at 30 September 2022 (inclusive
of deferred shares held, net of tax at the current
estimated marginal tax withholding rate and
Sage shares held by an Executive Director’s
Connected Person):
Steve Hare 478% of base salary
Jonathan Howell 311% of base salary.
See page 177 for more information on the
shareholding guideline.
1
Chair and
Non-executive
Director fees
2
Shareholding
guideline
4
152
The Sage Group plc. Annual Report and Accounts 2022 Remuneration at a glance
Our at a glance summary sets out clearly and transparently the total remuneration paid to our Executive Directors
in 2021/2022.
Fixed pay for FY22
Annual bonus for FY22
PSP awards vesting in FY22
•
•
•
base salary
benefits
pension
See page 163
•
•
11.4% ARR growth achieved
NPS of 16.6
50th TSR percentile rank
8.0% CAGR ARR growth achieved
•
•
• ROCE underpin met
See page 164
See page 167
FY22 single figure for total remuneration summary:
Director
Executive Directors
S Hare
J Howell
Non-executive Directors
A Duff1
S Anand
J Bates
J Bewes
A Court
D Hall
I Wasti2
D Harding3
Notes:
2022
Total
£’000
2,481
1,686
400
67
63
81
81
80
50
63
2021
(restated)
Total4
£’000
2,507
1,690
25
60
60
77
77
77
60
35
1. Andrew Duff was appointed as a Non-executive Director on 1 May 2021 and Chair of the Sage Board on 1 October 2021.
2. Irana Wasti stepped down as a Non-executive Director on 22 July 2022.
3. Derek Harding was appointed as a Non-executive Director on 2 March 2021.
4. 2021 values are restated. Full details are provided in the footnotes to the full single figure for total remuneration table on page 163.
Key remuneration outcomes for FY22
Annual
bonus
Measure
ARR growth*
Net Promoter Score (NPS)
CEO performance against personal strategic goals
CFO performance against personal strategic goals
CEO total bonus opportunity achieved
CFO total bonus opportunity achieved
ARR growth**
Performance
Share Plan
Relative Total Shareholder Return (TSR)
Total Performance Share Plan opportunity achieved
Notes:
% of the
overall
maximum
award
Weighting
70%
10%
20%
20%
100%
100%
70%
30%
100%
70%
0%
18%
18.7%
88%
88.7%
14%
6%
20%
*
Payment of a bonus for ARR growth is subject to the achievement of an underpin condition of Group UOP margin of 16%. Group UOP was 19.3% and the
underpin met.
** For any of this portion of the PSP award to vest, a ROCE underpin of 12.0% must be met. ROCE of 18.7% was achieved and the underpin met.
153
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
consulted individually with Sage’s top 20 shareholders
and proxy agencies on the proposed changes to
Performance Share Plan metrics for 2023. This was
initially in written format and included several virtual
meetings to discuss in detail the metrics being proposed.
Colleague Success is critical for Sage and engaging with
the workforce in meaningful, two-way dialogue underpins
this. The CEO hosts frequent “All-Hands” calls for the
whole workforce, during which he provides Company
performance updates explaining how this translates to
the bonus plan.
Colleagues are encouraged to ask questions and the
CEO provides open and transparent answers. Additionally,
Company performance at a Group and regional/functional
level and bonus updates are periodically provided on our
intranet site and by email; this ensures that colleagues
are able to understand how the business is performing
during the financial year and the impact that can have
on their reward package. This is supplemented by
personalised bonus update letters for colleagues three
times a year.
Colleagues receive a detailed personal annual reward
statement annually in December outlining their basic
salary and annual bonus plan structure (where applicable)
for the year.
Colleagues have the opportunity to share their thoughts
and feedback on all topics, including our remuneration
policies and practices, through our “Always Listening”
survey. Originally launched during 2020 in response to
the pandemic, this is a continuous feedback survey
which colleagues can access at any time. Our bi-annual
colleague Pulse Surveys and CEO roundtables also provide
opportunities for colleagues to provide feedback.
A global Reward and Recognition policy is available to
all colleagues and applies across the entire workforce.
Furthermore, colleagues are able to access a more
detailed explanation of executive pay through this
Report and of our equity awards through our
colleague intranet.
Key remuneration outcomes for FY22
2022 bonus: 88.0% to 88.7% of potential payable
88.0 to 88.7%
The 2022 bonus was aligned to our strategy of delivering
annual growth with improving margin, such that 70% of
bonus potential was based on ARR growth with a UOP
margin underpin. 10% of bonus potential was based on
customer NPS to reflect the criticality of maintaining and
improving the experience for Sage customers. ARR growth
of 11.4% (at stretch level) was achieved; the UOP margin of
19.3% met the underpin level. The NPS of 16.6 fell short of
the challenging threshold set. The remaining 20% is
determined by assessments of individual Executive
Directors’ performance against their goals. In summary:
• For the CEO, 88.0% would be payable
• For the CFO, 88.7% would be payable
The Committee determined that the formulaic outcome
is appropriate, therefore no discretion has been applied,
so between 88.0% and 88.7% of maximum bonus will be
payable. Further detail is set out on page 164.
2020 PSP: 20% of the total shares under
award vesting
20%
PSP awards granted in December 2019 were based on
ARR growth (with a ROCE underpin) and relative TSR
performance measured over the three-year performance
period from 1 October 2019 to 30 September 2022.
Reflecting on general business performance, and the
experience of shareholders, customers, and colleagues
over the period, the Committee determined that the
formulaic outcome is appropriate, so 20% of the total
number of shares under award will vest in December 2022,
subject to a two-year holding period for both Executive
Directors. Further detail is set out on page 167.
Engagement with stakeholders
The Committee values input from shareholders and is
committed to ensuring open and transparent dialogue
between parties in regard to executive remuneration.
Where appropriate, the Committee seeks the views of
the largest shareholders individually and others through
shareholder representative bodies when considering any
significant changes to the Policy. Any feedback received
is thoughtfully reviewed and, where appropriate, changes
are implemented. Ahead of the 2023 AGM, the Committee
154
The Sage Group plc. Annual Report and Accounts 2022 Corporate Governance Code considerations
From 1 October 2021, we have been fully compliant with the 2018 UK Corporate Governance Code. When reviewing
the Policy for Executive Directors and determining the approach to pay, in line with the Code, the Committee gives
consideration to the following:
Clarity
Simplicity
Code provision:
remuneration arrangements
should be transparent
and promote effective
engagement with shareholders
and the workforce.
Engaging with stakeholders effectively, in a timely,
transparent, and relevant manner is important for the
Company. Further details on how we engage with stakeholders
can be found on page 69 to 77.
The purpose, strategic alignment, and structure of each
element of pay is provided in the Policy and easily accessible
on our Company website.
Code provision:
remuneration structures
should avoid complexity and
their rationale and operation
should be easy to understand.
Simplicity is one of our remuneration principles and guides
the design of our remuneration structures.
Remuneration arrangements in place for Executive Directors
are not complex: executives are eligible for an annual bonus
and a long-term incentive award under our PSP, the metrics
of which are aligned to the Company’s strategy. Salaries are
reviewed annually across the whole workforce and benefits
are provided in line with local market norms. The pension
provision for Executive Directors is 10% of salary. This policy
was applied for the first time to the appointment of Jonathan
Howell as CFO in December 2018. This Report provides open
and transparent disclosure of executive remuneration for our
workforce and our shareholders.
There is an appropriate mix of fixed and variable pay and
financial and non-financial measures and goals in our
remuneration plans.
There are mechanisms in place to ensure alignment with long-
term shareholder interests and the ongoing performance of
the business; one third of annual bonus is deferred into Sage
shares, a holding period of two years is applicable to the PSP
and Executive Directors are required to build up and maintain
a significant holding of Sage shares both whilst an Executive
Director (300% of salary for the CEO and 275% of salary for the
CFO) and for a two-year period after stepping down from that
position (100% of their “in-employment” guideline for two
years after stepping down as a Director).
The Committee is able to exercise discretion over the
formulaic outcomes of the bonus and PSP to ensure outturns
reflect the performance of the Executive Directors and
the business.
Malus and clawback provisions are applicable to these plans
in the event of a trigger event.
Incentive opportunities are capped with clearly
defined payout schedules, deferral requirements, and
holding periods.
155
Risk
Code provision:
remuneration arrangements
should ensure reputational
and other risks from excessive
rewards, and behavioural risks
that can arise from target-
based incentive plans, are
identified and mitigated.
Predictability
Code provision: the range of
possible values of rewards to
individual directors and any
other limits or discretions
should be identified and
explained at the time of
approving the Policy.
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Proportionality
Code provision: the link
between individual awards,
the delivery of strategy, and
the long-term performance of
the company should be clear.
Outcomes should not reward
poor performance.
Alignment
to culture:
Code provision incentive
schemes should drive
behaviours consistent with
the company purpose, values,
and strategy.
Executive Directors’ total remuneration package is designed
to ensure that remuneration increases or decreases in line
with business performance and aligns the interests of
Executive Directors and shareholders, specifically with the
annual bonus and PSP rewarding over the short and long term.
Stretching targets over an annual (applicable to annual bonus)
and three-year performance period (applicable to the PSP) are
approved by the Committee and assessed at the end of the
respective performance period, taking into account the wider
business performance and the internal and external context.
The Committee has overriding discretion over the formulaic
outcomes of the bonus and PSP to ensure outturns reflect
performance of Executive Directors, the business, and the
shareholder experience, ensuring that poor performance is
not rewarded.
Incentive schemes are aligned to Sage’s culture. The bonus
plan is split between Company performance and achievement
of personal strategic goals, which incorporate non-financial
metrics such as employee engagement, leadership
development, inclusion, diversity, talent development, and
the community. The Company performance measures are
central to the strategic progression of Sage and the personal
goal assessments are completed taking into account outputs
and how they have been delivered in respect of the Company’s
values and behaviours.
The PSP measures align to the Company’s strategic priorities
in addition to the wider shareholder experience through TSR.
The ESG measures first introduced into the PSP in 2022 and
updated for 2023 will drive achievement of the Sustainability
and Society strategy. Full details of the proposed measures
can be found on pages 175 and 176.
In 2022, the Committee undertook a review of
remuneration and related policies for the wider workforce
and deemed that remuneration for Executive Directors
is aligned to the wider workforce. This is achieved by
consistent performance measures in the annual bonus
plan, pay principles that are applicable across the entire
workforce, and application of the annual pay review
process consistently across all colleagues. Additionally,
Save and Share, our all-colleague share plan, generates
Colleague Success through fostering colleagues as
shareholders at all levels across the business. In 2022,
the take-up rate was 32% of eligible colleagues.
The Committee reviewed the implementation of the
Policy over 2022 and judged it to be operating as intended
and with no deviation from the approved Policy.
It determined this through the periodic review of
potential incentive outcomes and their contribution
to the single figure of remuneration; a consideration of
wider business performance including customer metrics;
the experience of shareholders and our TSR; and the
experience of our colleagues.
I hope you find this Report to be clear in understanding
our remuneration practices and that you will be
supportive of the resolutions relating to remuneration
at the 2023 AGM. As ever, the Committee welcomes any
questions or comments from shareholders.
Annette Court
Chair of Remuneration Committee
15 November 2022
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The Sage Group plc. Annual Report and Accounts 2022 Remuneration Committee governance
Committee meetings
Activities of the Committee at a glance
Allocation of time
The Committee held 6 scheduled meetings during FY22.
Details of individual attendance at scheduled meetings
are provided on page 118.
Note:
55%
20%
15%
10%
Allocation of time has been rounded to the nearest 5%
Activities and evaluation
Details of the Committee’s activities are
set out below.
Activities of the Committee
During the year, the Committee focused on the matters summarised in the table below.
Key area of activity
Matters considered
Outcome
Determining the Policy
and its implementation
• Determined bonus targets and
outcomes for 2021 and PSP outcomes
for the 2019 award.
• Reviewed content of 2021 Directors’
Remuneration Report.
•
•
2021 bonus determined at 60.2% to
61% of potential, as disclosed in
last year’s Report.
2019 PSP determined at 33.5% of the
overall award for vesting, as
disclosed in last year’s Report.
• Approved the 2021 Directors’
Remuneration Report.
• At least quarterly, the Committee’s
• Views of shareholders, proxy
Considering the views
on remuneration of our
stakeholders and
reviewing trends in
executive remuneration
advisors presented on market trends,
legislative change, and corporate
governance requirements in
executive remuneration.
voting agencies, and market insight
provided invaluable context for the
Committee’s deliberations on the
implementation of the Policy and
its effectiveness.
Reviewing the
effectiveness of
the Policy
• Reviewed performance against
in-flight incentive plans and the
forecast single figure of remuneration
for Executive Directors.
• Reviewed remuneration-related risks.
• Reviewed the structure of remuneration.
• Discussed the bonus and PSP structure
for 2023.
• Determined that the Policy was
operating as intended for FY22.
Other
• Reviewed the Committee’s Terms
• Determined no change to the
of Reference.
Committee’s Terms of Reference.
• Reviewed workforce remuneration and
related policies.
• Considered the implementation
of the 2022 Policy in light of
workforce remuneration.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Remuneration
Policy 2022
The current Remuneration Policy (the “2022 Policy”) was approved by our shareholders at the 2022 AGM and can be found in full in the
2021 Annual Report, or can be downloaded from www.sage.com/investors.
The table below sets out a summary of key elements of the Policy that shareholders approved at the 2022 AGM on 3 February 2022.
Alignment with
strategy/purpose
Base salary
Supports the
recruitment and
retention of
Executive Directors
of the calibre
required to deliver
the Group’s strategy.
Rewards executives
for the performance
of their role. Set at
a level that allows
fully flexible
operation of our
variable pay plans.
Operation
Normally reviewed annually,
with any increases applied
from January.
When determining base salary
levels, consideration is given
to the following:
•
Pay increases for other
employees in major
operating businesses
of the Group;
The individual’s skills
and responsibilities;
Pay at companies of
a similar size and
international scope to Sage,
in particular those within
the FTSE 100 (excluding
the top 30); and
Corporate and individual
performance.
•
•
•
Performance measures
None, although overall
performance of the
individual is
considered by the
Remuneration
Committee when
setting and reviewing
salaries annually.
Maximum opportunity
Ordinarily, salary
increases will be in line
with increases awarded to
other employees in major
operating businesses of
the Group. However,
increases may be made
above this level at the
Remuneration
Committee’s discretion to
take account of individual
circumstances such as:
•
Increase in scope and
responsibility;
The individual’s
development and
performance in
role (e.g. for a new
appointment where
base salary may be
increased over time
rather than set
directly at the level
of the previous
incumbent or
market level); and
Alignment to
market level.
•
•
Pension
Provides
a competitive
post-retirement
benefit, in a way that
manages the overall
cost to the Company.
Defined contribution plan (with
Company contributions set as
a percentage of base salary).
An individual may elect to
receive some or all of their
pension contribution as
a cash allowance.
Accordingly, no monetary
maximum has been set.
The Company
contribution rate for
Executive Directors is
aligned with the rate
available to the majority
of the workforce (currently
10% of salary).
None.
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The Sage Group plc. Annual Report and Accounts 2022 Operation
Maximum opportunity
Performance measures
Alignment with
strategy/purpose
Benefits
Provide a
competitive and
cost-effective
benefits package
to executives to
assist them to carry
out their duties
effectively.
The Group provides a range
of benefits which may include
a car benefit (or cash equivalent),
private medical insurance,
permanent health insurance,
life assurance, and financial
advice. Additional benefits may
also be provided in certain
circumstances which may
include relocation expenses,
housing allowance, and
school fees.
Other benefits may be offered
if considered appropriate
and reasonable by the
Remuneration Committee.
Annual Bonus
Rewards and
incentivises the
achievement of
financial and
strategic targets
over the year.
An element of
compulsory deferral
provides a link to
the creation of
sustainable long-
term value.
Performance measures,
weightings, and targets are
set and payout levels are
determined by the Remuneration
Committee based on
performance against those
targets. The Remuneration
Committee may, in appropriate
circumstances, override the
formulaic outcome and amend
the bonus payout should this not,
in the view of the Remuneration
Committee, reflect overall
business performance or
individual contribution.
A minimum of one third of
any annual bonus earned by
Executive Directors is delivered
in deferred share awards with the
remainder delivered in cash. The
deferral period will usually be
a minimum of three years.
Set at a level which
the Remuneration
Committee considers:
Appropriately
•
positioned against
comparable roles
in companies of
a similar size and
complexity in
the relevant market;
and
Provides a sufficient
level of benefit
based on the role
and individual
circumstances,
such as relocation.
•
As the costs of providing
benefits will depend on
the Director’s individual
circumstances, the
Remuneration
Committee has not set
a monetary maximum.
175% of salary.
Up to 50% of the
bonus can be paid for
delivering a target level
of performance.
None.
•
•
At least 70% of
the bonus will be
determined by
measure(s) of
Group financial
performance.
No more than 30%
of the bonus will
be based on
pre-determined
financial,
strategic, ESG
or operational
measures
appropriate to the
individual Director.
The measures that will
apply for the financial
year 2023 are described
in the Directors’ Annual
Remuneration Report.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Operation
Maximum opportunity
Performance measures
Awards vest dependent upon the
achievement of performance
conditions measured over
a period of at least three years.
Following the end of the
performance period, the
performance conditions will
be assessed and the percentage
of awards that will vest will
be determined.
The Remuneration Committee
may decide that the shares in
respect of which an award vests
are delivered to participants at
that point or that awards will
then be subject to an additional
holding period before
participants are entitled to
receive their shares. A holding
period will normally last
for two years, unless the
Remuneration Committee
determines otherwise.
The Remuneration Committee
has discretion to decide
whether and to what extent the
performance conditions have
been met and, in appropriate
circumstances, to override
the formulaic outcome. If an
event occurs that causes the
Remuneration Committee
to consider that an amended
or substituted performance
condition would be more
appropriate and not materially
less difficult to satisfy, the
Remuneration Committee
may amend or substitute any
performance condition.
•
•
Awards vest on the
following basis:
Threshold
•
performance: 20%
of the maximum
shares awarded;
Stretch performance:
80% of the maximum
shares awarded;
Exceptional
performance: 100%
of the shares awarded
with straight-line
vesting between each
level of performance;
and
Overall individual
limit of 300% of base
salary under the rules
of the plan.
Implementation for
FY23 is outlined on
page 174 to 176.
•
The Remuneration
Committee retains the
discretion to make awards
up to the individual
limit under the PSP and,
as stated in previous
remuneration reports,
would expect to consult
with significant investors
if awards were to be
made routinely above
current levels.
Vesting will be
subject to performance
conditions as
determined by the
Remuneration
Committee on
an annual basis.
The performance
conditions will initially
be Sage Business Cloud
penetration, relative
TSR, and ESG, although
the Remuneration
Committee will retain
discretion to include
additional or
alternative performance
measures which are
aligned to the
corporate strategy.
At its discretion,
the Remuneration
Committee may elect
to add additional
underpin performance
conditions.
Details of the targets
that will apply for
awards granted in
2023 are set out in
the Directors’ Annual
Remuneration Report.
Alignment with
strategy/purpose
Performance
Share Plan (PSP)
Motivates and
rewards the
achievement
of long-term
business goals.
Supports the
creation of
shareholder
value through
the delivery of
strong market
performance aligned
with the long-term
business strategy.
Supports
achievement
of our strategy
by targeting
performance under
our key financial
performance
indicators.
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The Sage Group plc. Annual Report and Accounts 2022 Alignment with
strategy/purpose
All-employees
share plans
Provide an
opportunity for
Directors (as well
as the general
workforce) to
voluntarily invest
in the Company.
Chair and
Non-executive
Director fees
Provide an
appropriate reward
to attract and retain
high-calibre
individuals.
Non-executive
Directors do not
participate in any
incentive scheme.
Operation
Maximum opportunity
Performance measures
UK-based Executive Directors
are entitled to participate in an
HMRC-approved all-employee
plan, the Save and Share Plan,
under which they can make
monthly savings over a period
of three or five years linked to
the grant of an option over Sage
shares with an option price which
can be at a discount of up to
20% of the market value of
shares on grant.
Options may be adjusted
to reflect the impact of any
variation of share capital.
Overseas-based Executive
Directors are entitled to
participate in any similar
all-employee scheme operated
by Sage in their jurisdiction.
•
Fees are reviewed periodically.
The fee structure is as follows:
The Chair is paid a single,
•
consolidated fee;
The Non-executive Directors
are paid a basic fee, plus
fees for additional
responsibilities or time
commitments such
as chairing (and, where
appropriate, membership) of
Board Committees and to
the Senior Independent
Director; and
Fees are currently paid in
cash but the Company may
choose to provide some of
the fees in shares.
•
Additional travel allowance
payments may be made to
the Chair and Non-executive
Directors for time spent
travelling internationally
on Company business, for
example to attend a Board
meeting. Non-executive Directors
may be eligible for benefits such
as company car, use of secretarial
support, healthcare or other
benefits that may be appropriate
including where travel to the
Company’s registered office is
recognised as a taxable benefit in
which case a Non-executive
Director may receive the grossed-
up costs of travel as a benefit.
None.
UK participation limits
are those set by HMRC
from time to time.
Currently this is £500
per month (or foreign
currency equivalent).
Limits for participants in
overseas schemes are
determined in line with
any local legislation.
None.
•
Set at a level which:
Reflects the
•
commitment and
contribution
that is expected from
the Chair and Non-
executive Directors;
and
Is appropriately
positioned against
comparable roles
in companies of
a similar size,
complexity and
international scope
to Sage, in particular
those within the FTSE
100 (excluding the
top 30).
Overall fees paid to
Directors will remain
within the limit stated
in our articles of
association, currently
£1.25m. Actual fee levels
are disclosed in the
Directors’ Annual
Remuneration Report
for the relevant
financial year.
161
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Alignment with
strategy/purpose
Shareholding
guideline
Aligns the interests
of Executive
Directors and
shareholders and
encourages a focus
on long-term
performance.
Operation
Maximum opportunity
Performance measures
Whilst in employment,
Executives Directors are
expected to build up
a shareholding worth 300%
of salary in respect of the CEO
and 250%1 of salary in respect
of other Executive Directors
over five years from the Director
becoming subject to the
guideline. The Remuneration
Committee will review progress
towards the guideline on an
annual basis and has the
discretion to adjust the
guideline in what it feels are
appropriate circumstances.
None.
Executive Directors are
also expected to remain
compliant with this
guideline or, if lower, their
actual shareholding at
leaving for two years
post-cessation of
employment. Shares
acquired by an Executive
Director in their personal
capacity at any time, or
shares released to an
Executive Director prior to
11 September 2019 are
exempt from this guideline.
The Committee retains
discretion to waive this
guideline if it is not
considered appropriate in
the specific circumstances.
Notes:
• Annual bonus and PSP performance measures and targets are selected each year so as to align with key financial and operational objectives.
• Awards granted under the Deferred Bonus Plan and the PSP may:
a. Be made in the form of conditional awards or nil-cost options and may be settled in cash on vesting;
b. Incorporate the right to receive an amount (in cash or shares) equal to the dividends which would have been paid or payable on the shares that
vest in the period up to vesting (or, where PSP awards are made subject to a holding period, the end of the holding period). This amount may be
calculated assuming the dividends were reinvested in the Company’s shares on a cumulative basis; and
c. Be adjusted in the event of any variation of the Company’s share capital, demerger, delisting, special dividend, rights issue or other event which
may, in the opinion of the Remuneration Committee, affect the current or future value of the Company’s shares.
1. The shareholding guideline for the CFO has been increased to 275% effective from 1 October 2022 as outlined on page 150.
Provisions to withhold (malus) or recover (clawback) sums paid under the annual bonus and PSP in the event of material
negative circumstances, such as a material misstatement in the Company’s audited results, serious reputational
damage or significant financial loss to the Company (as a result of the participant’s conduct), an error in assessing the
performance metrics relating to the award or the participant’s gross misconduct, are incorporated into the PSP, the
annual bonus and the deferred bonus plan. These provisions may apply up to three years from the release date of a PSP
award or three years from the date a cash bonus is paid or a deferred share award is granted. Details of the proposed
implementation of those provisions in the forthcoming year are set out in the Directors’ Annual Remuneration Report.
All Directors submit themselves for re-election annually.
The Remuneration Committee intends to honour any commitments entered into with current or former Directors on
their original terms, including outstanding incentive awards, which have been disclosed in previous remuneration
reports and, where relevant, are consistent with a previous policy approved by shareholders. Any such payments to
former Directors will be set out in the Remuneration Report as and when they occur.
The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office
(including exercising any discretions available to it in connection with such payments) notwithstanding that they are
not in line with the Policy set out above, where the terms of the payment were agreed (i) before the Policy set out above
came into effect, provided that the terms of the payment were consistent with the shareholder-approved Remuneration
Policy in force at the time they were agreed; or (ii) at a time when the relevant individual was not a Director of the
Company and, in the opinion of the Remuneration Committee, the payment was not in consideration for the individual
becoming a Director of the Company. For these purposes “payments” includes the Remuneration Committee satisfying
awards of variable remuneration and, in relation to an award over shares, the terms of the payment are “agreed” at the
time the award is granted.
The Remuneration Committee may make minor amendments to the Policy (for regulatory, exchange control, tax or
administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for
that amendment.
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The Sage Group plc. Annual Report and Accounts 2022 Directors’ Annual
Remuneration Report
Purpose of this section:
• Provides remuneration disclosures for Executive and Non-executive Directors
• Details financial measures for bonus and PSP
•
Illustrates Company performance and how this compares to the pay of Executive Directors
• Outlines implementation of the 2022 Policy for Executive and Non-executive Directors for 2023
Single figure for total remuneration (audited information)
The following table sets out the single figure for total remuneration for Executive Directors for the financial years
ended 30 September 2021 and 2022.
(a) Salary/
fees4
£’000
(b) Benefits5
£’000
(c) Bonus6
£’000
(d) PSP awards7
£’000
(e) Pension8
£’000
Total fixed
remuneration9
£’000
Total variable
remuneration10
£’000
Total11
£’000
Director
2022
2021 2022
2021 2022
2021 2022
2021
(restated) 2022
2021 2022
2021 2022
2021
(restated) 2022
2021
(restated)
Executive Directors
S Hare
J Howell
803
553
785
545
44
7
42 1,237
5
858
827
582
317
220
736
511
80
48
118
47
927
608
945 1,554
1,563 2,481
597 1,078
1,093 1,686
2,507
1,690
Non-executive Directors
A Duff1
S Anand
J Bates
J Bewes
A Court
D Hall
D Harding2
I Wasti3
Notes:
400
63
63
81
81
80
63
50
25
60
60
77
77
77
35
60
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
400
63
63
81
81
80
63
50
25
60
60
77
77
77
35
60
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
400
67
63
81
81
80
63
50
25
60
60
77
77
77
35
60
1. Andrew Duff was appointed as a Non-executive Director on 1 May 2021 and Chair of the Sage Board on 1 October 2021.
2. Derek Harding was appointed as a Non-executive Director on 2 March 2021.
3.
Irana Wasti stepped down as a Non-executive Director on 22 July 2022.
4. Details of salary progression since 2018 for the current Executive Directors are summarised in the “Statement of implementation of Remuneration
Policy in the following financial year” on page 173 of this Report. Following a review of Non-executive Director fees, the basic Non-executive
Director fee, the Audit and Risk Chair additional fee, and the Remuneration Committee Chair additional fee were increased with effect from 1 June
2022; further details are provided on page 176.
5. Benefits provided to the Executive Directors included: car benefits or cash equivalent (Steve Hare only), private medical insurance, permanent health
insurance, life assurance, financial advice and, where deemed to be a taxable benefit, the grossed-up costs of travel, accommodation, and
subsistence for the Directors and their partners on Sage-related business if required. Benefits exclude items subject to tax where they are in the
nature of business expenses. Sangeeta Anand, who is based on the US West Coast, received a £4,000 travel allowance fee for her attendance at the
September Board meeting in the UK, commensurate to the travel time required for her to attend in person.
6. Further information about how the level of FY22 bonus award was determined is provided in the additional disclosures below.
7. The 2022 PSP value for Steve Hare and Jonathan Howell is based on the PSP award granted in financial year 2020 which is due to vest in December
2022. The performance conditions applicable to the awards are outlined on page 167 of this Report. The value is based on the number of shares
vesting under the 2020 PSP award multiplied by the average price of a Sage share between 1 July and 30 September 2022, which was £7.063, plus
dividend equivalents accrued. For Steve Hare, £-21,343 of the value is attributable to movement in the share price between grant and vesting,
and for Jonathan Howell £-14,817 of the value is attributable to movement in the share price between grant and vesting. No discretion has been
exercised by the Committee. Further detail is set out below in the notes to the table. The value of Steve Hare and Jonathan Howell’s 2019 PSP for
2021 has been updated. The change in value is as a result of changes in the share price reported in 2021 in line with the methodology set out in the
2013 Reporting Regulations (£7.204) and the share price actually achieved at vesting (£7.778).
8. Pension emoluments for Steve Hare from his appointment as CEO on 2 November 2018 were equal to 15% of base salary and reduced to 10% of base
salary with effect from 1 October 2021. Pension emoluments for Jonathan Howell were equal to 10% of base salary (less a deduction for Employer
National Insurance Contributions). Both elected to receive them as a cash allowance. Maximum pension contribution levels for the wider workforce
in the UK are 10% of salary, subject to contributions from the colleagues themselves.
9. Total fixed remuneration is inclusive of salary/fees, benefits, and pension.
10. Total variable remuneration is inclusive of bonus and PSP awards.
11. Total remuneration for Directors in 2022 was £5,052,000 compared with £4,668,000 in 2021 (updated from the 2021 Directors’
Remuneration Report).
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Additional disclosures for single figure for total remuneration table (audited information)
Annual bonus 2022
The bonus targets for FY22 were set with reference to the strategy for FY22, in particular the achievement of ARR
growth and customer Net Promoter Score, taking into account the Company’s annual budget and historical
performance in determining the payout curve.
Bonus measure
ARR growth
% weighting
70%
10%
20%
Net
Promoter
Score
Strategic
measures
Total
Threshold
performance
7.0%
(21% of bonus
payable)
26.0
(3% of bonus
payable)
Target performance
8.5%
(35% of bonus
payable)
28.0
(5% of bonus
payable)
Stretch
performance
10.0%
(70% of bonus
payable)
30.0
(10% of bonus
payable)
The assessment of strategic measures is set
out below this table (between 0% and 20% of
bonus payable)
Actual
performance
(at budget
foreign currency
exchange rates)
11.4%
% of maximum bonus payable
70%
16.6
0%
Steve Hare (CEO):
18% of maximum
Jonathan Howell (CFO):
18.7% of maximum
Steve Hare:
88% of maximum bonus
(154% of salary)
Jonathan Howell:
88.7% of maximum bonus
(155.2% of salary)
Notes:
• Payment of a bonus for ARR growth was subject to the achievement of an underpin condition of Group UOP margin. Group underlying operating
profit margin was 19.3%, which exceeded the underpin target of 16%.
• ARR growth and UOP margin are defined on pages 290 and 289 respectively. Actuals have been retranslated at budgeted foreign currency exchange
rates consistent with the basis on which the targets were set. The Committee considered the movement of foreign currency exchange rates over the
year and determined that the effect was immaterial and that the use of like-for-like exchange rates was appropriate.
• One third of bonus is deferred into Sage shares for three years.
• The Remuneration Committee determined, after careful consideration of business performance and the interests of Sage’s stakeholders such
as shareholders, customers, and colleagues, that the calculated outcome was appropriate. Consequently, no discretion has been applied to the
calculated outcome.
164
The Sage Group plc. Annual Report and Accounts 2022 Executive Directors’ personal strategic objectives
Executive Directors’ personal strategic objectives were set by the Committee at the beginning of the financial year,
consistent with the key deliverables within the annual budget. Targets for strategic objectives are considered to be
commercially sensitive and are not disclosed. However, details of performance achievements that were taken into
account by the Committee in coming to its assessment of this measure are set out below.
Steve Hare, CEO
Steve Hare was set a range of goals linked to the execution of the 2022 budget and long-term strategy plan. These were:
• Demonstrate progress against the five strategic priorities (30% weighting);
• Show evidence of progress against the eight transformation enablers and deliver in-year plans, with particular
focus on simplification (15% weighting);
• Demonstrate progress on the Sage promises for our customers, colleagues, society, and shareholders (15% weighting);
• Assess and enhance the organisational capability (30% weighting); and
• Deliver year two of Sage’s Cyber Security Strategy (10% weighting).
Personal strategic
objectives
The Committee took into account the following performance against those goals:
Progress against 5 strategic priorities
30% weighting
Progress against 8 transformation
enablers and deliver in-year plans
15% weighting
Progress on Sage promises for
customers, colleagues, society, and
shareholders 15% weighting
Assess and enhance organisational
capability 30% weighting
Deliver year two of Sage’s Cyber
Security Strategy 10% weighting
Strong progress has been made across all 5 priorities;
in the US Sage Intacct ARR growth of 33% and in the
UK Intacct growth of 140% has been achieved. The
Digital Network business unit has been established
and SBC penetration is above plan at 75%, resulting
in this target being met.
High level of transformation achieved throughout
FY22 with the new operating model. Business units
are working successfully and the ethos of a squad
culture is embedded. The brand launch is complete
to a high quality, with external recognition.
Additionally, several strategic acquisitions have
been made. Overall, the targets were exceeded.
eNPS remains high at +28 and eSAT+79 is delivering
on our colleague promises; our Glassdoor rating
of 4.2 is also positive. Year one sustainability and
society plans delivered, with SBTi submission
made and 149,409 volunteering hours achieved.
Personally, completed in excess of 5 days for society,
sustainability, and volunteering. NPS is below target
and a refreshed approach to customer experience is
being launched for FY23, meaning that this target
was partially met.
The Executive Leadership Team structure has
transitioned and is functioning effectively, with
a new leader for North America also appointed. The
increased focus on talent has significantly improved
succession. Targets were therefore exceeded.
Year two of the strategy has been successfully
delivered. In addition, the security and privacy hub
have also launched, which exceeded the targets set.
In consideration of these factors and the overall performance of the business, the Committee determined that a bonus
of 18% of the maximum 20% for this element was an appropriate award.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Jonathan Howell, CFO
Jonathan Howell was set a range of goals linked to the execution of the 2022 budget and long-term strategy plan.
These were:
• Support the business through enhanced business partnering capability and by delivering data-driven SaaS
insights (20% weighting);
• Ensure robust financial management (15% weighting);
• Enhance the equity story by showing improvement in SaaS KPIs (30% weighting);
• Build skills and capabilities for the future (15% weighting); and
• Ensure compliant, efficient, and scalable financial operations (20% weighting).
Personal strategic
objectives
The Committee took into account the following performance against those goals:
Enhanced business partnering
capability and data-driven SaaS
insights 20% weighting
Robust financial management
15% weighting
Improvement in SaaS KPIs
30% weighting
Build skills and capabilities for the
future 15% weighting
Ensure compliant, efficient, and
scalable financial operations
20% weighting
Salesforce Einstein roll out completed, covering 99%
of Total Group ARR at year end. CAC/LTV and CAA/LTV
metrics are embedded across all key regions and used
as part of monthly business reviews and management
accounts. Refreshed approach to finance business
partnering, with increased focus given to key
functions. The target has been met.
Strong balance sheet maintained. Net debt:EBITDA
ratio of 1.6x, and liquidity of £1.3bn. £400m raised in
UK bond market with attractive terms, particularly
amid current market uncertainty. Maintained credit
rating at BBB+. Cash conversion of 107% at year end
exceeded the targets set.
Improvement in SaaS KPIs, with SBC penetration
of 75% and ARR growth of 12%. Full-year organic
operating margin 19.9%, up from 19.5% in FY21. US
shareholding of 27% of register, up from 17% in FY19.
Two Investor webinars took place in March and
September, c.120 investors and analysts joined.
Overall, the targets set were met.
Internal hire fill rate c.40%, voluntary turnover
remains controlled and within the Group risk
parameters, and colleague engagement remains high.
Ongoing personal volunteering initiatives with
Circle Collective and Chance to Shine—both Sage
Foundation charities. Continued development of key
finance team, with onboarding of regional leadership
team ongoing. The targets were partially met.
Quality, accurate, and on-time reporting delivered
throughout FY22 (MPRs, Management Accounts,
Board/ELT reporting, quarterly, half-year, and
full-year external reporting). FY22 robotics and
automation roadmap in place to continue to deliver
efficiencies and cost savings within the shared
service centres. Since March 2021, 20 robots installed
and achieved saving of 20,000 employee hours. BEIS
readiness assessment undertaken and FY23 project
roadmap planning exceeding the targets set.
In consideration of the above and the overall performance of the business, the Committee determined that a bonus
of 18.7% of the maximum 20% for this element was an appropriate award.
166
The Sage Group plc. Annual Report and Accounts 2022 PSP awards
Awards granted under the PSP to Steve Hare and Jonathan Howell in December 2019 vest depending on performance
against two measures, measured over three years, from 1 October 2019 to 30 September 2022:
•
•
70% annualised recurring revenue growth with an underpin for ROCE.
30% relative TSR performance against the FTSE 100 (excluding financial services and extracting companies).
For each measure, three levels of performance are defined below, with straight-line vesting between each level
of performance: target, stretch, and exceptional.
Measure
Annualised recurring revenue growth
(Compound Annual Growth Rate (CAGR))
Between target (20% vests)
and stretch (80% vests)
Between 8% and 10% (with ROCE of 12%)
Relative TSR
Between median and upper quartile
Between stretch (80% vests)
and exceptional (100% vests)
Between 10% and 11% (or above)
(with ROCE of 12%)
Between upper quartile and upper decile
(or above)
Measure
Annualised recurring revenue growth (CAGR)
Relative TSR
Total
Achieved
8.0%
50th percentile
Vesting
14.0%
6.0%
20.0%
The ROCE was 18.7% (compared with 12%), meaning that the underpin condition was achieved.
The Committee determined, after careful consideration of business performance and the interests of Sage’s
stakeholders such as shareholders, customers, and colleagues, that the formulaic outcome was appropriate.
Consequently, 20.0% of the total award will vest.
Awards are scheduled to vest on 2 December 2022, and for both Executive Directors will be subject to a two-year
holding period and released on 2 December 2024.
167
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
PSP awards granted in FY22 (audited information)
Awards were granted under the PSP on 4 February 2022 at a market value of £7.834 to Executive Directors in the form
of conditional share awards. In alignment with our business strategy for FY22, performance conditions for awards
granted in FY22 are:
Sage Business Cloud
Penetration
TSR
55%of award
30%of award
ESG—Delivering
impact in society
7.5%of award
ESG—ESG strategy
impact
7.5%of award
Underpins met:
TSR percentile ranking:
ROCE of 12.0% per annum
Cloud native penetration
of 25%
Organic revenue growth in
absolute terms at the end of
the performance period
Below median =
0% of award vests
Median =
6% of award vests
Upper quartile =
24% of award vests
Upper decile =
30% of award vests
Yes
No
Sage Business Cloud
penetration in FY24:
Less than 75% =
0% of award vests
75% = 11% of award vests
80% = 44% of award vests
85% = 55% of award vests
This portion
of the award
does not vest
Volunteering hours
(measured in aggregate
over the three-year
performance period):
Below 400,000 =
0% of award vests
400,000 =
0.75% of award vests
500,000 =
3% of award vests
600,000 =
3.75% of award vests
Individuals supported
(measured in aggregate
over the three-year
performance period):
Below 22,000 =
0% of award vests
22,000 =
0.75% of award vests
27,000 =
3% of award vests
32,000 =
3.75% of award vests
ESG process effectiveness
and performance impact
(measured at the end
of the three-year
performance period):
Not achieving GRI CORE
and full SASB alignment =
0% of awards vests
Achieving GRI CORE
and full SASB alignment =
1.5% of awards vests
Achieving GRI
COMPREHENSIVE and full
SASB alignment =
6% of award vests
Achieving GRI
COMPREHENSIVE and full
SASB alignment—and top
10% ranking in at least
3 ESG rating schemes =
7.5% of award vests
168
The Sage Group plc. Annual Report and Accounts 2022 Vesting is on a straight-line basis between the points. The following key areas are highlighted in relation to the
performance measures:
•
55% of the awards being determined by Sage Business Cloud penetration aligns with our medium-term strategy of
growth of Sage Business Cloud in both cloud native and cloud connected solutions. This measure ensures Executive
Directors are rewarded for creating value through the Digital Network opportunity.
• Continued focus on overall Group growth and delivery of shareholder value is achieved by:
• Requiring the achievement of a ROCE underpin of 12.0% p.a., a cloud native underpin of 25%, and organic
revenue growth in absolute terms at the end of the performance period. The Committee will exclude from the
ROCE calculation, where appropriate, any write down that arises from an asset that was acquired prior to the
appointment of the current Executive Directors.
15% of the awards being determined by an ESG basket of measures aligns to our Sustainability and Society strategy.
30% of the awards being determined by relative TSR performance provides shareholder alignment.
•
•
Awards will vest, subject to satisfaction of those performance conditions, in December 2024. A holding period for the
PSPs will apply for two years from the vesting date. No further performance conditions attach to the awards during the
holding period.
Type of award
Performance
shares
Maximum number
of shares
258,169
141,690
Face value
(£)1
2,022,500
1,110,000
Face value
(% of salary)
Threshold vesting
(% of award)
End of
performance period
250%
200%
20% 30 September 2024
20% 30 September 2024
Steve Hare
Jonathan Howell
Note:
1. The face value of the PSP awards has been calculated using the market value (middle market quotation) of a Sage share on 1 December 2021
(the trading day prior to the grant for all eligible colleagues) of £7.834. Awards were granted to Executive Directors on 4 February 2022 following
approval of the 2022 Policy at the 2022 AGM.
169
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Change in remuneration of Directors compared to colleagues
The table below shows the annual percentage change in total remuneration of Directors with colleagues employed
by The Sage Group plc. who are not also Directors of the Group.
% change 2021/2022
% change 2020/2021
% change 2019/2020
Salary/
fees1
Taxable
benefits2
Annual
incentive3
Salary/
fees1
Taxable
benefits2
Annual
incentive3
Salary/
fees1
Taxable
benefits2
Annual
incentive3
2.3%
1.4%
3.8%
36.3%
49.5%
47.4%
1,500%
5.6%
5.6%
5.6%
5.6%
4.3%
(16.2)%
82.1%
4.2%
–%
–%
–%
–%
–%
–%
–%
–%
13.8%
–%
–%
–%
–%
–%
–%
–%
–%
(8.7)%
0.5%
0.5%
–
140%
0%
0%
0%
0%
140%
–
5%
(65)%
(6)%
229%
223%
–
–
–
–
–
–
–
–
29%
–
–
–
–
–
–
–
–
6%
2%
25%
–
–
197%
100%
100%
(6)%
–
–
9%
14%
37%
–
–
–
–
–
–
–
–
37%
(80)%
(75)%
–
–
–
–
–
–
–
–
(10)%
Executive Directors
S Hare
J Howell
Non-executive Directors
A Duff4
S Anand
J Bates
J Bewes
A Court
D Hall
I Wasti 5
D Harding6
Colleagues of the Company
Notes:
• This information was published for the first time in 2020. Over subsequent years, this will build up to a rolling five-year period.
• The change in fees for the Non-executive Directors is reflective of their start dates and, for Irana Wasti, her leave date.
• The change in the Non-executive Directors’ fees are due to the increase in the basic Non-executive Director fee, the Audit and Risk Committee Chair
additional fee, and the Remuneration Committee Chair additional fee that took effect from 1 June 2022. Further information can be found on
page 176.
1. Average colleague pay is based on the dataset used for the CEO pay ratio as set out immediately following this section. It excludes colleagues that
joined within the reporting period, as the dataset for the Company is so small that to leave them in provides a skewed result, making meaningful
judgements difficult. The salary, taxable benefits, and annual incentive are the respective median values in the dataset and may relate to different
incumbents. Salaries and fees for Directors for 2022 are as set out on page 163 of this Report. Salaries for colleagues employed by The Sage Group
plc. are based on the dataset used for the CEO pay ratio as set out immediately below this section.
2. Steve Hare and Jonathan Howell’s taxable benefits for 2022 are as set out on page 163 of this Report. Taxable benefits for colleagues employed by
The Sage Group plc. are based on the dataset used for the CEO pay ratio as set out immediately following this section.
3. The annual incentive values for Steve Hare and Jonathan Howell for 2022 are as set out on page 163 of this Report. Annual incentives for colleagues
employed by The Sage Group plc. are inclusive of bonus and commission and are based on the dataset used for the CEO pay ratio as set out
immediately following this section. Non-executive Directors are not eligible for annual incentives.
4. Andrew Duff was appointed as a Non-executive Director on 1 May 2021 and accordingly no comparison prior to 2021/2022 can be drawn.
The significant change in his fee for 2021/2022 is due to his fee being pro-rated in 2021 to his start date of 1 May 2021 and his change in role
from Non-executive Director to Chair of the Sage Board with effect from 1 October 2021.
5. Irana Wasti stepped down as a Non-executive Director on 22 July 2022 and accordingly her fee was pro-rated to this date.
6. Derek Harding was appointed as a Non-executive Director on 2 March 2021 and accordingly no comparison prior to 2021/2022 can be drawn.
The significant change in his fee for 2021/2022 is due to his fee being pro-rated in 2021 to his start date of 2 March 2021.
170
The Sage Group plc. Annual Report and Accounts 2022 Ratio of the pay of the CEO to that of the UK lower quartile, median, and upper
quartile colleagues
The table below shows the ratio of the pay of the CEO to that of the UK lower quartile, median, and upper quartile
colleagues in 2022, consistent with The Companies (Miscellaneous Reporting) Regulations 2018. As outlined in
the Remuneration Committee Chair’s letter, the treatment of colleagues has provided important context for the
Committee’s decisions on executive remuneration in 2022 and the Committee is consequently satisfied that the
median pay ratio for 2022 is consistent with the pay and progression policies for Sage’s UK employees as a whole.
Year
2022
2021
2020
2019
Pay ratio
Method
25th percentile
(lower quartile)
50th percentile
(median)
75th percentile
(upper quartile)
A
A
A
A
65 : 1
43 : 1
70 : 1
46 : 1
55 : 1
36 : 1
95 : 1
62 : 1
29 : 1 Total remuneration
Salary only
31 : 1 Total remuneration
Salary only
23 : 1 Total remuneration
Salary only
38 : 1 Total remuneration
Salary only
Remuneration values
Y25 (25th
percentile)
Y50 (50th
percentile)
Y75 (75th
percentile)
£38,056
£32,122
£34,807
£29,700
£29,865
£27,955
£26,463
£20,281
£57,421
£41,945
£53,304
£42,103
£45,942
£36,116
£40,385
£34,184
£85,380
£48,854
£79,739
£79,091
£71,524
£56,983
£66,095
£51,087
The change in the pay ratio in 2022 is driven largely by the CEO receiving a pay increase lower than the average
increase for Sage’s UK employees in the year in addition to his pension contribution reducing to 10% of salary.
Notes:
• Under method A, colleague data is based on full-time equivalent pay for UK colleagues as at 30 September 2022. Pay for each colleague is calculated
in accordance with the single figure of remuneration. All components of remuneration except long-term incentives are presented on a full-time
equivalent basis by dividing sums by the average working hours divided by full-time equivalent hours for the portion of the year worked. Colleagues
who worked no hours during the year are excluded from the dataset.
• Method A has been selected as the basis of the disclosure as it is the best reflection of the underlying colleague data required by The Companies
(Miscellaneous Reporting) Regulations 2018.
• Certain benefits have been omitted from the remuneration of colleagues except the CEO. These principally comprise sums paid by way of expenses
allowance chargeable to UK income tax and not paid through the payroll. Such expenses are typically irregular and generally immaterial to
remuneration and are excluded to enable more meaningful comparison of the ratio of underlying colleague remuneration over time.
• The CEO’s pay is based on the single figure of remuneration set out on page 163 of this Report. Because a large portion of the CEO’s pay is variable,
the pay ratio is heavily dependent on the outcomes of variable pay plans and, in the case of long-term share-based awards, share price movements.
Further information on these outcomes for the CEO in FY22 is set out on pages 164 to 167 of this Report.
Historical executive pay and Company performance
The table below summarises the Chief Executive Officer’s single figure for total remuneration, annual bonus payout,
and PSP vesting as a percentage of maximum opportunity for the current year and previous nine years.
CEO
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CEO single figure of
remuneration (in £’000)
Annual bonus payout (as
% maximum opportunity)
PSP vesting (as % of
maximum opportunity)
Steve Hare1
Stephen Kelly2
Guy Berruyer3
Steve Hare
Stephen Kelly
Guy Berruyer
Steve Hare
Stephen Kelly
Guy Berruyer
–
–
1,670
–
–
72%
–
–
0%
–
–
1,616
–
–
55%
–
–
0%
–
1,521
108
–
67%
0%
–
–
64%
–
1,723
–
–
69%
–
–
–
–
–
3,547
–
–
19%
–
–
66%
–
98
1,690
–
0%⁴
0%
–
29%
29%
–
2,495
–
–
94%
–
–
15%
–
–
1,557
–
–
18%
–
–
27%
–
–
2,507 2,481
–
–
88%
–
–
60%
–
–
34%
–
–
–
20%
–
–
Notes:
1. Steve Hare was appointed Interim COO & CFO on 31 August 2018. Whilst Steve Hare’s job title at 30 September 2018 was Interim COO & CFO, not CEO,
he is regarded as being the equivalent of CEO for the purposes of the disclosure.
2. Stephen Kelly stepped down from the position of CEO on 31 August 2018.
3. Guy Berruyer stepped down from the position of CEO on 5 November 2014.
4. Steve Hare waived his entitlement to a bonus in respect of 2018.
171
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Historical Group performance against FTSE 100
The graph below shows the TSR of the Group and the FTSE 100 over the last 10 years. The FTSE 100 index is the index
against which the TSR of the Group should be measured because of the comparable size of the companies which
comprise that index.
Value (£)
350
300
250
200
150
100
50
0
Note:
30-Sep-12
30-Sep-13 30-Sep-14 30-Sep-15 30-Sep-16 30-Sep-17 30-Sep-18 30-Sep-19 30-Sep-20 30-Sep-21 30-Sep-22
Sage
FTSE 100 Index
• This graph shows the value, by 30 September 2022, of £100 invested in The Sage Group plc. on 30 September 2012 compared with the value of £100
invested in the FTSE 100 index. The other points plotted are the values at intervening financial year ends.
Payments to past Directors (audited information)
As reported in the 2020 Annual Report, Blair Crump retains interests in the Company’s PSP and Deferred Shares Bonus
Plan. He is eligible to receive a pro-rated proportion of the PSP awards granted during the 2018 and 2019 financial
years that remained unvested on his retirement date of 31 March 2020. His DSBP award will not be subject to time
pro-rating. The awards vesting are subject to the PSP and DSBP plan rules and compliance with certain post-
termination covenants, including the post-cessation shareholding requirement set out on page 145 of the 2020 Annual
Report. In FY22, his PSP award granted on 28 February 2019 vested on 4 December 2021 on the same basis as other
Executive Directors, as outlined on page 145 of the 2021 Annual Report.
Payments for loss of office (audited information)
No payments were made for loss of office during FY22.
172
The Sage Group plc. Annual Report and Accounts 2022 Relative importance of spend on pay
The charts below show the all-employee pay cost (as stated in the notes to the accounts), profit before tax (PBT) and
returns to shareholders by way of dividends and share buybacks for 2021 and 2022.
The information shown in this chart is based on the following:
• Underlying PBT (underlying as reported)—Underlying profit before income tax taken from the consolidated income
statement on page 200. Underlying PBT has been chosen as a measure of our operational profitability.
• Returns to shareholders—Total dividends taken from note 15.5 on page 268; value of shares purchased during
the year taken from consolidated statement of changes in equity on pages 204 and 205;
• Total colleague pay—Total staff costs from note 3.3 on page 220, including wages and salaries, social security
costs, pension, and share-based payments.
Underlying PBT
(Underlying as
reported in £m)
Returns to shareholder
(£m)
Total dividends
Value of shares purchased
during the year
Total colleague pay
(£m)
+13
3
3
3
6
4
3
-6
9
8
1
3
8
1
-570
2
0
6
1
2
0
2
2
2
0
2
1
2
0
2
2
2
0
2
2
3
2
2
0
2
1
2
0
2
-65
9
2
0
,
1
4
6
9
1
2
0
2
2
2
0
2
Statement of implementation of Remuneration Policy in the following financial year
This section provides an overview of how the Committee is proposing to implement the Policy in 2023.
Base salary
An annual salary review was carried out by the Committee in November 2022. Following that review, the Committee
approved the following:
Salary 1 January 2023 Salary 1 January 2022 Salary 1 January 2021 Salary 1 January 2020
£785,000
(1.9% increase)
£545,000
(1.9% increase)
£809,000
(3% increase)
£555,000
(1.8% increase)
£841,500
(4% increase)
£577,000
(4% increase)
£785,000
(no increase)
£545,000
(no increase)
Salary 1 January 2019
£770,000
(appointed CEO 2 Nov 2018)
£535,000
(appointed CFO 10 Dec 2018)
Steve Hare1
Jonathan
Howell2
Notes:
1. Steve Hare was appointed CEO on 2 November 2018. His 2018 salary reflected his prior role as CFO.
2. Jonathan Howell was appointed CFO on 10 December 2018.
The equivalent average increase for colleagues eligible for an annual pay award is 5.8% (in respect of colleagues
based in the United Kingdom).
173
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
Pension and benefits
The CEO and the CFO will continue to receive a pension provision worth 10% of salary, as a contribution to
a defined contribution plan and/or as a cash allowance. The pension for the wider workforce is 10% of salary.
Executive Directors will also receive a standard package of other benefits and, where deemed necessary, the
costs of travel, accommodation, and subsistence for the Directors and their partners on Sage-related business,
consistent with that in FY22.
Annual bonus
Key features of the Executive Directors’ annual bonus plan for 2023 are as follows:
• The maximum annual bonus potential is 175% of salary;
• One third of any bonus earned will be deferred into shares for three years under the Deferred Bonus Plan; and
• Annual bonuses awarded in respect of performance in 2023 will be subject to potential withholding (malus)
or recovery (clawback) if specified trigger events occur within three years of the payment/award of the annual
bonus. Trigger events will include a material misstatement of the audited results, error in calculation of the
bonus payout, serious reputational damage, or significant financial loss as a result of an individual’s conduct
or gross misconduct which could have warranted an individual’s summary dismissal.
The annual bonus for 2023 for Executive Directors will be determined as detailed below:
As a percentage of maximum bonus opportunity:
Measure1
ARR growth2
Customer-related measure inclusive of Net Promoter Score
Strategic goals
Notes:
70%
10%
20%
1. The business is moving to reporting its key metrics primarily on an underlying basis. Accordingly, Executives’ incentives for FY23 will also
be measured on an underlying basis. This will apply to the ARR growth and the underlying operating profit margin underpin in the annual
bonus. The Remuneration Committee will review on a case-by-case basis the impact on underlying measures of significant acquisitions
and disposals and judge whether to adjust incentive targets or outcomes.
2. Payout is dependent upon the satisfaction of the underpin condition of underlying operating profit margin.
The selection of measures and targets takes into account the Company’s strategic priorities, its internal
budgeting and, where relevant, consensus. The ARR growth measure is based on the definition of ARR set out
on page 290. Strategic goals will include diversity, equity and inclusion metrics. Targets are not disclosed
because they are considered by the Board to be commercially sensitive. Many of the Company’s competitors
are unlisted companies and not required to disclose their targets; the Company’s disclosure could provide
its competitors with a considerable advantage. It is intended for retrospective disclosure to be made in next
year’s Report.
Performance Share Plan
The Committee reviews award sizes annually, taking into account factors such as underlying business
performance, individual performance, and share price movement.
The CEO and CFO will be granted PSP awards in December 2022. Awards will be of shares worth 250% of salary for
the CEO and 225% of salary for the CFO at the date of grant.
Vesting of these awards will be subject to satisfaction of the following performance conditions measured over
the three financial years to 30 September 2025.
The Committee is satisfied that all the targets represent a degree of challenge proportionate to the potential
rewards that may be realised for their achievement.
174
The Sage Group plc. Annual Report and Accounts 2022 Sage Business Cloud penetration (50% of award)
The growth rate in Sage Business Cloud penetration can be expected to decelerate as the portfolio penetration
increases over time, reflecting the additional degree of challenge in shifting the portfolio to the cloud.
The stretching targets set reflect an increase from those in the prior year.
Sage Business Cloud penetration in FY251
% of award vesting2
Below threshold
Threshold
Stretch
Exceptional
Notes:
0.0%
85.0%
89.0%
92.0%
0%
10%
40%
50%
1. The business is moving to reporting its key metrics primarily on an underlying basis. Accordingly, Executives’ incentives for FY23 will also be
measured on an underlying basis. This will apply to the absolute growth, cloud native ARR growth and Return on Capital Employed (ROCE) underpins
in the PSP. The Remuneration Committee will review on a case-by-case basis the impact on underlying measures of significant acquisitions and
disposals and judge whether to adjust incentive targets or outcomes.
2. Vesting of this portion of the PSP award is subject to i) the achievement of 12.0% p.a. ROCE underpin to be met; ii) the achievement of 30% cloud native
penetration underpin; and iii) organic revenue having grown in absolute terms at the end of performance period. ROCE is defined on page 290.
Cloud native penetration is penetration from cloud native solutions, which are defined on page 83. Organic revenue is defined on page 289.
Relative TSR performance condition (30% of award)
Below threshold
Threshold
Stretch
Exceptional
Notes:
TSR ranking
% of award vesting
Below median
Median
Upper quartile
Upper decile
0%
6%
24%
30%
• TSR performance comprises share price growth and dividends paid. Vesting is on a straight-line basis between the points.
• Sage’s TSR performance will be measured relative to the TSR of the constituents of the FTSE 100, excluding financial services and extracting companies.
ESG—Protect the Planet (7.5% of award)
Delivering on our climate change commitment, this metric addresses reduction in Scope 1, 2, and 3 carbon emissions:
Below threshold
Threshold
Stretch
Exceptional
Notes:
% reduction in carbon emissions¹
% of award vesting
Below 6.9%
6.9%
13.8%
20.7%
0%
1.5%
6%
7.5%
1. Targets are for emissions reduction between FY22 and FY25, aligning to our commitment to achieve 50% reduction in emissions by 2030
(from a 2019 baseline) and our Net Zero goal by 2040.
2. Outturns will be independently verified.
Vesting is on a straight-line basis between the points.
ESG—Tech for Good (5% of award)
Enabling customers to become more sustainable and supporting them on their own sustainability journey through
the number of Sage products that have embedded functionality for carbon accounting:
Below threshold
Threshold
Stretch
Exceptional
Note:
Number of Sage products¹
% of award vesting
Below 3 products
3 products
6 products
8 products
0%
1%
4%
5%
1. At the beginning of FY23, Sage had no products or propositions that can support customers on their own sustainability journey. Performance will
be assessed at the end of FY25 when the Remuneration Committee will determine how many products meet the materiality test for inclusion.
Vesting is on a straight-line basis between the points.
175
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
ESG—Diversity, Equity, and Inclusion (7.5% of award)
Progress in the core activities for Diversity, Equity, and Inclusion through the inclusion score in our
Employee Engagement Survey:
Below threshold
Threshold
Stretch
Exceptional
Note:
Inclusion score1
% of award vesting
Below 82
82
84
86
0%
0.75%
3%
3.75%
1. The inclusion score will be measured in Q1 2025 Employee Engagement Survey. The FY22 baseline based on the March 2022 survey is 79.
Vesting is on a straight-line basis between the points.
Percentage of leadership teams in the top four levels of Sage meeting our global gender diversity target
(namely comprising no more than 60% of any one gender):
Below threshold
Threshold
Stretch
Exceptional
Note:
% of teams2
% of award vesting
Below 50%
50%
65%
80%
0%
0.75%
3%
3.75%
2. The % of teams meeting our global gender diversity target will be assessed at the end of FY25. Currently the baseline is that 30% of our most
senior leadership teams meet this target.
Vesting is on a straight-line between the points.
PSP awards granted in FY23 will be subject to potential withholding (malus) or recovery (clawback) if specified
trigger events occur prior to the third anniversary of the release date of an award. Trigger events in respect of
PSP awards will comprise a material misstatement of the audited results, an error in calculation of the extent of
the PSP vesting, serious reputational damage or significant financial loss as a result of an individual’s conduct
or gross misconduct which could have warranted an individual’s summary dismissal, or a material failure of
risk management.
Non-executive Director remuneration
The table below shows the fee structure for Non-executive Directors for 2023. Non-executive fees, except for the fee
for the Chair, are determined by the executive members of the Board plus the Chair. Following a review of the time
commitment and associated responsibilities of the Non-executive Directors, the basic Non-executive Director fee, the
Audit and Risk Committee Chair additional fee, and the Remuneration Committee Chair fee were increased with effect
from 1 June 2022. The fee for the Senior Independent Director did not change. The fee for the Chair of the Board is
determined by the Committee and has not changed.
Chair of the Board all-inclusive fee
Basic Non-executive Director fee
Senior Independent Director additional fee
Audit and Risk Committee Chair additional fee
Remuneration Committee Chair additional fee
2023 fees
£400,000
£70,000
£17,000
£20,000
£20,000
176
The Sage Group plc. Annual Report and Accounts 2022 Directors’ shareholdings and share interests (audited information)
The shareholding guideline for the CFO is 275% of salary and 300% of salary for the CEO. Executive Directors are
expected to build up the required shareholding within a five-year period of the Executive Director becoming subject to
the guideline. As at 30 September 2022, Steve Hare held shares worth 478% of salary and Jonathan Howell held shares
worth 311% of salary. Values include unvested deferred shares net of tax at the estimated marginal withholding rates
and any shares held by the Executive Directors’ connected persons. The values for Executive Directors are derived from
interests in shares valued using the average market price of a share in the three months to 30 September 2022 (the last
trading day of the financial year), which was £7.063, and the Executive Director’s basic salary over the same period.
Additionally, from 11 September 2019 the Committee introduced a requirement for Executive Directors to hold Sage
shares for a two-year period after stepping down from that position. This post-employment shareholding guideline is
aligned to the Investment Association guidance, such that Executive Directors are required to remain compliant with
100% of their “in-employment” shareholding guideline for two years after stepping down as a Director. The Executive
Director’s actual shareholding will include any shares acquired through the vesting or release of shares from share
incentive plans (net of tax, where applicable) after the date the policy was adopted and unvested shares granted under
the Deferred Bonus Plan (net of tax), but excludes shares acquired through purchase and the release of shares under
share incentive plans where the release occurred prior to the Committee’s adoption of the policy. Additionally, PSP
shares vesting after cessation are subject to a two-year holding period at vesting.
On cessation as an Executive Director, the Committee may subject any relevant portion of an unvested share award
preserved for “good leaver” reasons to the fulfilment of the post-cessation shareholding requirement as a condition
of vesting. Furthermore, for awards granted to an Executive Director on or after 1 October 2019, the Committee may as
a condition of grant require an Executive Director to have a relevant portion of a released share award be released into
a nominee account to be held on their behalf until such time as the post-cessation shareholding requirement expires.
Interests in shares
The interests as at 30 September 2022 of each person who was a Director of the Company during the year (together with
interests held by his or her connected persons) were:
Director
S Anand
J Bates
J Bewes
A Court
D Hall
S Hare1
J Howell
I Wasti2
D Harding3
A Duff4
Total
Notes:
Ordinary shares at
30 September 2022
Ordinary shares at
30 September 2021
–
16,735
10,000
6,350
10,000
408,625
146,660
–
10,000
13,150
621,520
–
16,735
10,000
6,350
10,000
382,510
146,660
–
10,000
13,150
595,405
1. Lucinda Cowley is a person closely associated with Mr Hare. The total for 30 September 2022 includes 20,000 shares also held by Lucinda Cowley.
2. Irana Wasti stepped down as a Non-executive Director on 22 July 2022.
3. Derek Harding was appointed as a Non-executive Director on 2 March 2021.
4. Andrew Duff was appointed as Non-executive Director on 1 May 2021.
There have been no changes in the Directors’ holdings in the share capital of the Company, as set out in the table above, between 30 September 2022
and the date of this Report.
Details of the Executive Directors’ interests in outstanding share awards under the PSP, Deferred Bonus, and all-employee share option plans are set
out below.
177
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
All-employee share options (audited information)
All Executive Directors are eligible to join the all-employee share plan, the Sage Save and Share Plan, on the same
terms as all colleagues based in their respective local jurisdiction. See note 15.2 on page 261 to 266 for more detail
of this plan. In the year under review, Steve Hare participated in this scheme. The outstanding all-employee share
options granted to each Director of the Company are as follows:
Exercise price
per share
604p
Shares under
option at
1 October 2021
number
2,980
2,980
Granted
during the year
number
–
–
Exercised
during the year
number
(2,980)
(2,980)
Lapsed
during the year
number
–
–
Shares under
option at
30 September 2022
number
Date exercisable
– 1 August 2022–31
January 2023
–
Director
S Hare
Total
Notes:
• Steve Hare participated in the 2019 Save and Share Plan. Under the UK Save and Share Plan rules, the scheme has a three-year saving period.
No performance conditions apply to options granted under this plan. For the 2019 UK Save and Share grant, the exercise price was set at £6.04,
a 20% discount on the average share price on 20, 21, and 22 May 2019 of £7.546. Steve exercised 2,980 options during 2022 at a fair market value
per share of £7.126; this resulted in a gain of £3,236.28.
• Jonathan Howell did not participate in the 2019 Save and Share Plan.
• The market price of a share of the Company at 30 September 2022 (the last trading day of the financial year) was £6.972 (mid-market average)
and the lowest and highest market prices during the year were £5.956 and £8.538 respectively.
Performance Share Plan (audited information)
The outstanding awards granted to each Executive Director of the Company under the PSP are as follows:
Grant date
4 February 2022
2 December 2020
2 December 2019
28 February 2019
4 February 2022
2 December 2020
2 December 2019
28 February 2019
Under award
1 October 2021
number
–
267,006
208,278
265,975
741,259
–
185,374
144,600
184,801
514,775
Awarded
during the year
number
258,169
–
–
–
258,169
141,690
–
–
–
141,690
Vested
during the year
number
–
–
–
(89,101)
(89,101)
–
–
–
(61,908)
(61,908)
Lapsed
during the year
number
–
–
–
(176,874)
(176,874)
–
–
–
(122,893)
(122,893)
Under award
30 September 2022
number
Vesting date
258,169 2 December 2024
267,006 2 December 2023
208,278 2 December 2022
– 4 December 2021
733,453
141,690 2 December 2024
185,374 2 December 2023
144,600 2 December 2022
– 4 December 2021
471,664
1,256,034
399,859
(151,009)
(299,767)
1,205,117
Director
S Hare
J Howell
Total
Notes:
• No variations were made in the terms of the awards in the year.
• PSP awards for 2022 were granted to Executive Directors on 4 February 2022. The market price of the award was £7.834.
• The performance conditions for awards granted in February 2019, December 2019, and December 2020 and are set out in the respective Reports
for the year of grant and for awards granted in February 2022 on page 168.
• The performance conditions for Steve Hare and Jonathan Howell’s awards that vested during 2022 are set out on page 145 of the 2021 Report.
• Awards for Steve Hare granted in December 2017 and after are subject to a holding period of two years on vesting. Awards for Jonathan Howell
vesting in 2020 and after are subject to a holding period of two years on vesting.
• All PSP awards were granted as conditional awards.
178
The Sage Group plc. Annual Report and Accounts 2022 Deferred shares (audited information)
The outstanding awards granted to each Executive Director of the Company under The Sage Group Deferred Bonus Plan
are as follows:
Grant date
2 December 2021
2 December 2020
2 December 2019
2 December 2021
2 December 2020
2 December 2019
Under award at
1 October 2021
number
–
14,260
55,620
–
10,225
32,102
112,207
Awarded
during the year
number
35,188
–
–
24,754
–
–
59,942
Vested
during the year
number
–
–
–
–
–
–
–
Lapsed
during the year
number
–
–
–
–
–
–
–
Under award
30 September 2022
Vesting date
number
35,188 2 December 2024
14,260 2 December 2023
55,620 2 December 2022
24,754 2 December 2024
10,225 2 December 2023
32,102 2 December 2022
172,149
Director
S Hare
J Howell
Total
Notes:
• Awards are not subject to further performance conditions once granted. The market price of a share on 1 December 2021, the trading day prior to the
date of the awards made in the year ended 30 September 2022, was £7.834.
• No variations were made in the terms of the awards in the year.
There are limits on the number of newly issued and treasury shares that can be used to satisfy awards under the Group’s
share schemes in any 10 year period. The limits and the Group’s current position against those limits as at
30 September 2022 (the last practicable date prior to publication of this Report) are set out below:
Limit
5% of Group’s share capital can be used for discretionary share schemes
10% of Group’s share capital can be used for all share schemes
Current position
3.9%
4.8%
The current position consists of shares released during the period plus committed shares inclusive of dividend
equivalents accrued, with the total adjusted for forfeitures and, where applicable, performance expectations.
The Company has previously satisfied all awards through the market purchase of shares or transfer of treasury shares
and will continue to consider the most appropriate approach, based on the relevant factors at the time.
External appointments
Executive Directors are permitted, where appropriate and with Board approval, to take non-executive directorships
with other organisations in order to broaden their knowledge and experience in other markets and countries. Fees
received by the Directors in their capacity as directors of these companies are retained, reflecting the personal
responsibility they undertake in these roles. The Board recognises the significant demands that are made on Executive
and Non-executive Directors and has therefore adopted a policy that no Executive Director should hold more than one
directorship of other listed companies. Except in exceptional circumstances, where approved in advance by the Chair
of the Committee, if an Executive Director holds non-executive positions at more than one listed company then only
the fees from one such company will be retained by the Director. Jonathan Howell was appointed as independent
non-executive director to the board of Experian plc, with effect from 1 May 2021 and as such receives an annual fee
of €162,250. For the year ended 31 March 2022, he received €159,000, as reported on page 144 of the Experian Annual
Report 2022. This is the only appointment of this nature he holds. Steve Hare does not currently hold any appointments
of this nature.
No formal limit on other board appointments applies to Non-executive Directors under the Policy, but prior approval
(not to be unreasonably withheld) from the Board is required in the case of any new appointment.
179
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Remuneration Report continued
Unexpired term of contract table
Director
Date of contract
Unexpired term of contract
on 30 September 2022, or on
date of contract if later
Notice period under contract
Executive Directors
S Hare
J Howell
Non-executive Directors
S Anand
J Bates
J Bewes
A Court
D Hall
D Harding
A Duff
3 January 2014
10 December 2018
12 months
12 months
12 months from the Company and/or individual
12 months from the Company and/or individual
1 May 2020
31 May 2022
1 April 2022
1 April 2022
1 January 2020
2 March 2021
1 May 2021
7 months
2 years 8 months
2 years 6 months
2 years 6 months
3 months
1 year 5 months
1 year 7 months
1 month from the Company and/or individual
1 month from the Company and/or individual
1 month from the Company and/or individual
1 month from the Company and/or individual
1 month from the Company and/or individual
1 month from the Company and/or individual
1 month from the Company and/or individual
Consideration by the Directors of matters relating to Directors’ remuneration
The following Directors were members of the Committee when matters relating to the Directors’ remuneration for the
year were being considered:
• Annette Court (Chair);
• Drummond Hall; and
• Dr John Bates.
The Committee received assistance from Amanda Cusdin (Chief People Officer), Tara Gonzalez (Executive Vice
President, Reward & Recognition), Vicki Bradin (General Counsel and Company Secretary), and other members of
management (including the CEO and CFO), who may attend meetings by invitation, except when matters relating
to their own remuneration are being discussed.
180
The Sage Group plc. Annual Report and Accounts 2022 External advisors
The Committee continues to receive advice from Deloitte LLP, an independent firm of remuneration consultants
appointed by the Committee after consultation with the Board. During the year, Deloitte’s executive compensation
advisory practice advised the Committee on developments in market practice, corporate governance, institutional
investor views, the development of the Company’s incentive arrangements, and the review of the Policy. Total fees
for advice provided to the Committee during the year were £96,650 (charged on a time spent basis).
The Committee is satisfied that the advice it has received has been objective and independent.
Deloitte is a founding member of the Remuneration Consultants Group and adheres to its code in relation to executive
remuneration consulting in the UK. Other parts of Deloitte have provided tax advice, specific corporate finance
support in the context of merger and acquisition activity, and unrelated corporate advisory services.
Pay Governance LLC provided the Committee with advice on market practice and executive remuneration pay and
incentive structures in the United States. Total fees for advice provided to the Committee in July 2022 were $28,110
(charged on a time spent basis).
Stitch, a Deloitte business, provided the Sage reward team with communication support on colleague reward and share
plan communications during 2022.
Statement of shareholding voting
The table below sets out the results of the vote on the 2022 Policy at the 2022 AGM and the Directors’ Remuneration
Report at the 2022 AGM:
Remuneration Policy
Remuneration Report
Votes for
Number
825,904,476
816,960,269
%
99.12
98.46
Votes against
Number
7,332,300
12,768,964
%
0.88
1.54
Votes
cast
833,236,776
829,729,233
Votes
withheld
189,118
3,696,661
Annette Court
Chair of the Remuneration Committee
15 November 2022
181
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Report
The Directors present their report together with the
audited consolidated financial statements for the
financial year ended 30 September 2022 (the “Annual
Report and Accounts”). The Annual Report and Accounts
contain statements that are not based on current or
historical fact and are forward-looking in nature.
Please refer to the “Disclaimer” on page 187.
Information included in the
Strategic Report
The Directors’ Report, together with the Strategic
Report on pages 1 to 105, represents the management
report for the purpose of compliance with the
Disclosure Guidance and Transparency Rules 4.1.R.
As permitted by legislation, some of the matters
required to be included in the Directors’ Report have
instead been included in the Strategic Report, as the
Board considers them to be of strategic importance.
Specifically, these are:
Subject matter
Page reference
Future business
developments
12 to 15—Chief Executive’s
review (relevant information
is also in the Strategic Report
on pages 24 to 25)
Greenhouse gas
emissions, energy
consumption and
energy-efficiency
action
44 to 45, 47, and 50 to 67—
Sustainability section (relevant
information is also available in
our Sustainability and Society
Report on our website)
Employment of
disabled persons
Engagement with
colleagues
Engagement with
suppliers, customers
and others
38 to 43—People section
78 to 81—section 172(1)
statement, 69 to 77 (relevant
information is also in the
Strategic Report on pages 70
and 71, in the Corporate
Governance Report on pages
124 to 127, and in this Directors’
Report on page 183)
Important events
affecting the Group
after year end
pages 14 and 15 of the Strategic
Report and Note 18 to the
financial statements on
page 275
Corporate governance statement
The DTRs require certain information to be included
in a corporate governance statement in the Directors’
Report. This information can be found in the Corporate
Governance Report on pages 106 to 181, which is
incorporated into this Directors’ Report by reference and,
in the case of the information referred to in DTR 7.2.6,
in this Directors’ Report.
Disclosure of information under
Listing Rule 9.8.4
Sub-section
of Listing
Rule 9.8.4R
7
Detail
Allotments of shares for
cash pursuant to the Group
employee share schemes
Page
reference
261, 262
12, 13
Shareholder waiver of
dividend
186
Results and dividends
The results for the financial year are set out from page 189
to 288. Full details of the proposed final dividend
payment for the year ended 30 September 2022 are set out
on page 268. The Board is proposing a final dividend
of 12.10 pence per share following the payment of an
interim dividend of 6.30 pence per share on 17 June 2022.
The proposed total dividend for the year is therefore
18.40 pence per share.
Going concern
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 these financial statements. Accordingly,
they continue to adopt the going concern basis in preparing
the financial statements. In reaching this conclusion, the
Directors have had due regard to the following:
• The Group has a robust balance sheet with £1.3bn of
cash and available liquidity as at 30 September 2022
and strong underlying cash conversion of 107%,
reflecting the strength of the subscription business
model. Further information on the available cash
resources including the undrawn revolving credit
facility and committed bank facilities is provided
in note 13 to the financial statements on pages 249
to 252.
182
The Sage Group plc. Annual Report and Accounts 2022 • The financial position of Sage, its cash flows,
financial risk management policies and available
debt facilities, which are described in the financial
statements, and Sage’s business activities, together
with the factors likely to impact its future growth and
operating performance, are set out in the Strategic
Report on pages 82 to 89.
articles of association, in respect of all liabilities
incurred in connection with the performance of their
duties as a Director of Sage or any of its subsidiaries.
These indemnities are currently in force. Neither these
indemnities, nor the insurance provides cover in the event
that an indemnified individual is proven to have acted
fraudulently or dishonestly.
• The Directors have reviewed liquidity and covenant
forecasts for the Group for the period to 31 March 2024,
(the going concern assessment period), which reflect
the expected impact of economic conditions on
trading. In reviewing the forecasts, consideration
has been given to the level of debt maturity, which is
considered to be entirely manageable. Stress testing
has been performed with the impact of severe
increases in churn and significantly reduced levels
of new customer acquisition and sales to existing
customers being considered.
Viability Statement
The full Viability Statement and the associated
explanations made in accordance with provision 31
of the Code can be found on pages 104 and 105.
Research and development
During the year, the Group incurred a cost of £302m
(2021: £281m) in respect of research and development.
Please see page 219 (note 3.2 in the financial statements) for
further details.
Political donations
No political donations were made in the year.
Directors and their interests
A list of Directors, their interests in the ordinary
share capital of Sage, their interests in its long-term
Performance Share Plan and Deferred Share Bonus Plan
and details of their options over the ordinary share capital
of Sage are given in the Directors’ Remuneration Report
on pages 148 to 181. No Director had a material interest in
any significant contract, other than a service contract or
contract for services, with Sage or any of its operating
companies at any time during the year.
The names of all persons who, at any time during the year,
were Directors of Sage can be found on pages 110 to 111.
Sage maintains directors’ and officers’ liability insurance
which provides appropriate cover for legal action brought
against our Directors. Sage has also granted indemnities
(which are qualifying third-party indemnity provisions
under the Companies Act 2006) to each member of the
Board, under which it has agreed to indemnify the
Directors to the extent permitted by law and by Sage’s
Employment policy
The Group continues to be committed to pursuing equity,
diversity, and inclusion in all its employment activities
and welcomes the unique culture, identity, and experience
that each person can bring. This applies to recruitment,
training, career development, and promotion, as well as
ensuring that there is no bias or discrimination in the
treatment of persons with disabilities.
Applications for employment are welcomed from
persons with disabilities and adjustments are made
in consultation with the applicant to ensure they can
demonstrate their suitability for the role. Wherever
possible, we will undertake any adjustments or retraining
that is required to retain any colleague who becomes
disabled during their employment within the Group.
Further details of the Board’s diversity policy can be
found on pages 134 to 137, and information regarding
the diversity of the workforce is provided on pages 42
and 43.
Engagement with colleagues
The Group has continued its policy of colleague
involvement by making information available and
consulting, where appropriate, with colleagues on matters
of concern to them. Colleagues regularly receive updates
on the financial and economic factors affecting the
Group, and conversely the Group regularly seeks feedback
from colleagues, including through Pulse Surveys. Many
colleagues participate in Sage’s share option schemes
and a long-term Performance Share Plan. Further details
of colleague engagement and how the Directors have had
regard to colleague interests and the effect of that regard
on principal decisions taken by the Board during the year
(including the role of our Board Associate) are provided on
pages 38 to 43, 70 to 71, and 124 to 127.
Engagement with other stakeholders
Details of engagement with stakeholders, including
customers and others in a business relationship with Sage
and information on how the Directors have had regard to
their interests and the effect of that regard on principal
decisions taken by the Board during the year are provided
on pages 69 to 81.
183
The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Report continued
Major shareholdings
As at 30 September 2022, Sage had been notified,
in accordance with the DTRs, of the following interests
in its ordinary share capital1:
Name
BlackRock, Inc.
Ordinary shares % of capital2
5.90
64,021,267
Lindsell Train
Limited
FIL Limited
Aviva plc & its
subsidiaries
Notes:
54,140,022
55,288,722
37,536,359
5.01
5.10
3.43
Nature of
holding
Direct and
Indirect
Direct
Direct and
Indirect
Direct and
Indirect
1. In the period from 30 September 2022 to the date of this report,
no further notifications were received.
2. % as at date of notification. The DTRs require notification when the
% voting rights (through shares and financial instruments) held by
a person reaches, exceeds or falls below an applicable threshold
specified in the DTRs.
Information provided to Sage under the DTRs is publicly
available via the regulatory information service and on
Sage’s website at sage.com.
Share capital
Sage’s share capital is set out on page 261. Sage has
a single class of share capital which is divided into
ordinary shares of 14/77 pence each.
Rights and obligations attaching to shares
Voting
In a general meeting of Sage, the provisions of the
Companies Act 2006 apply in relation to voting rights,
subject to the provisions of the articles of association
and to any special rights or restrictions as to voting
attached to any class of shares in Sage (of which there
are none). In summary:
• On a show of hands, each qualifying person (being
an individual who is a member of Sage, a person
authorised to act as the representative of a corporation
or a person appointed as a proxy of a member) shall
have one vote, except that a proxy has one vote for and
one vote against a resolution if the proxy has been
appointed by more than one member and has been given
conflicting voting instructions by those members,
or has been given discretion as to how to vote; and
• On a poll, every qualifying person shall have one vote
for every share which they hold or represent.
No member shall be entitled to vote at any general
meeting or class meeting in respect of any shares held
by them if any call or other sum then payable by them in
respect of that share remains unpaid. Currently, all issued
shares are fully paid.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights
in respect of the resolutions to be considered at the
Annual General Meeting to be held on 2 February 2023
will be set out in the Notice of Annual General Meeting.
Dividends and distributions
Subject to the provisions of the Companies Act 2006, Sage
may, by ordinary resolution, declare a dividend to be paid
to the members, but no dividend shall exceed the amount
recommended by the Board.
The Board may pay interim dividends, and also any fixed
rate dividend, whenever the financial position of Sage,
in the opinion of the Board, justifies its payment.
All dividends shall be apportioned and paid pro-rata
according to the amounts paid up on the shares.
Liquidation
If Sage is in liquidation, the liquidator may, with the
authority of a special resolution of Sage and any other
authority required by the statutes (as defined in the
articles of association):
• Divide among the members in specie the whole or
any part of the assets of Sage; or
• Vest the whole or any part of the assets in trustees
upon such trusts for the benefit of members as the
liquidator shall think fit.
Transfer of shares
Subject to the articles of association, any member may
transfer all or any of his or her certificated shares by an
instrument of transfer in any usual form or in any other
form which the Board may approve. The Board may, in its
absolute discretion, decline to register any instrument of
transfer of a certificated share which is not a fully paid
share (although not so as to prevent dealings in shares
taking place on an open and proper basis) or on which
Sage has a lien.
The Board may also decline to register a transfer of
a certificated share unless the instrument of transfer is:
(i) left at Sage’s Registered Office, or at such other
place as the Board may decide, for registration; and
(ii) accompanied by the certificate for the shares to be
transferred and such other evidence (if any) as the Board
may reasonably require to prove the title of the intending
transferor or his or her right to transfer the shares.
The Board may permit any class of shares in Sage to be
held in uncertificated form and, subject to the articles of
association, title to uncertificated shares to be
transferred by means of a relevant system and may revoke
any such permission. Registration of a transfer of an
uncertificated share may be refused where permitted by
the statutes (as provided in the articles of association).
184
The Sage Group plc. Annual Report and Accounts 2022 Repurchase of shares
In line with common practice for listed companies, Sage
requests shareholder authority at its Annual General
Meeting (“AGM”) each year for the Company to buy back its
ordinary shares in the market (the “Buyback Authorities”).
Sage obtained shareholder authority at the AGM held
on 3 February 2022, to buy back in the market up to
102,374,941 ordinary shares (the “2022 Buyback
Authority”). The 2022 Buyback replaced a similar
authority granted at the AGM held on 4 February 2021 in
respect of 109,355,465 ordinary shares, which expired at
the 2022 AGM (the “2021 Buyback Authority”). The 2022
Buyback Authority has not been used and will expire at the
AGM to be held in 2023, but will, subject to shareholder
approval at the AGM, be replaced by another similar
authority. Under the terms of the Buyback Authorities,
the minimum price which must be paid for each ordinary
share is its nominal value and the maximum price is the
higher of an amount equal to 105% of the average of the
middle market quotations for an ordinary share as derived
from the London Stock Exchange Daily Official List for the
five business days immediately before the purchase is
made and an amount equal to the higher of the price of
the last independent trade of an ordinary share and the
highest current independent bid for ordinary shares on
the trading venue where the purchase is carried out (in
each case exclusive of expenses). The 2021 Buyback
Authority was used during FY22 to buy back, under a share
buyback programme, a total of 27,979,129 ordinary shares
of 14/77 pence each in Sage, as explained further below.
Share repurchases are used from time to time as a method
to control the Group’s leverage and decisions are made
against strict price, volume and returns criteria that
are agreed by the Board and regularly reviewed.
On 3 September 2021, Sage had announced that a capital
return of up to £300m would be executed via a new share
buyback programme. The share buyback programme,
executed using the 2021 Buyback Authority, commenced
on 6 September 2021 and ended on 24 January 2022. A total
number of 27,979,129 ordinary shares of 14/77 pence each
in Sage were repurchased between 1 October 2021 and
24 January 2022, as part of the share buyback programme
and were held in treasury, to be utilised to meet
obligations arising from share option programmes, or
other allocation of shares, to colleagues or Directors. The
aggregate amount of the consideration paid by Sage for
these shares was £ 210,458,831.64 and the average price
paid per ordinary share was £7.52. The shares purchased
during FY22 represent approximately 2.54% of the called-
up share capital of the Company, as at 30 September 2022.
The share buyback programme was consistent with the
Group’s disciplined approach to capital allocation and
reflects its medium-term leverage objectives, strong
ongoing cash generation and the sale proceeds from
disposals completed in FY21 and FY22. Please refer to
note 16.2 on pages 273 and 274 for further information
on disposals completed in FY22 and to page 236 of the
FY21 Annual Report for further information on disposals
completed in FY21. For Board considerations setting
out why share buyback was the chosen method of
capital return, please refer to page 97 of the FY21
Annual Report.
All repurchases of ordinary shares under the share
buyback programme were carried out in accordance
with Chapter 12 of the Listing Rules and those provisions
of Article 5(1) of Regulation (EU) No. 596/2014 (as
incorporated into UK domestic law by the European Union
(Withdrawal) Act 2018) and the Commission Delegated
Regulation (EU) 2016/1052 (as incorporated into UK
domestic law by the European Union (Withdrawal) Act
2018) dealing with buyback programmes.
Amendment of Sage’s articles
of association
Any amendments to Sage’s articles of association may be
made in accordance with the provisions of the Companies
Act 2006 by way of special resolution. Sage’s articles of
association were last amended at the Annual General
Meeting held on 4 February 2021.
Appointment and replacement of Directors
Directors shall be not less than two and no more than 15 in
number. Directors may be appointed by Sage by ordinary
resolution or by the Board. A Director appointed by the
Board holds office until the Annual General Meeting and
is then eligible for election by the shareholders, in
accordance with Sage’s articles of association.
The Board may from time to time appoint one or more
Directors to hold employment or executive office for such
period (subject to the provisions of the Companies Act
2006) and on such terms as they may determine and may
revoke or terminate any such appointment.
Under the articles of association, at every Annual General
Meeting of Sage, every Director who held office on the
date seven days before the date of the Notice of Annual
General Meeting, shall retire from office (but shall be
eligible for election or re-election by the shareholders).
Sage may by special resolution (or by ordinary resolution
of which special notice has been given) remove, and the
Board may by unanimous decision remove, any Director
before the expiration of his or her term of office. The
office of Director shall be vacated if: (i) he or she resigns;
(ii) he or she has become physically or mentally incapable
of acting as a director and may remain so for more than
three months and the Board resolves that his or her office
is vacated; (iii) he or she is absent without permission of
the Board from meetings of the Board for six consecutive
months and the Board resolves that his or her office is
vacated; (iv) he or she becomes bankrupt or makes an
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arrangement or composition with his or her creditors
generally; (v) he or she is prohibited by law from being
a director; or (vi) he or she is removed from office
pursuant to the articles of association.
Powers of the Directors
The business of Sage will be managed by the Board
which may exercise all the powers of Sage, subject to
the provisions of Sage’s articles of association, the
Companies Act 2006 and any ordinary resolution of Sage.
Authority is sought from shareholders at each Annual
General Meeting to grant the Directors powers, in line
with institutional shareholder guidelines and relevant
legislation, in relation to the issue and buyback by the
Company of its shares.
Shares held in the Employee Benefit Trust
The trustee of The Sage Group plc. Employee Benefit Trust
(EBT) has agreed not to vote any shares held in the EBT at
any general meeting. If any offer is made to shareholders
to acquire their shares the trustee will not be obliged to
accept or reject the offer in respect of any shares which
are at that time subject to subsisting awards, but will have
regard to the interests of the award holders and will have
power to consult them to obtain their views on the offer.
Subject to the above the trustee may take action with
respect to any offer it thinks fair. The trustee has waived
its right to dividends on the shares held in the EBT.
Significant agreements
The following significant agreements contain provisions
entitling the counterparties to exercise termination or
other rights in the event of a change of control of Sage:
• Under the terms of (i) the £350m 1.625 per cent
guaranteed Notes due 25 February 2031; and (ii) the
£400m 2.875 per cent guaranteed Notes due 8 February
2034, both issued by the Company and guaranteed by
Sage Treasury Company Limited, a Noteholder has the
right to require the Company to redeem or repay its
Notes on a change of control of the Company where at
the time of the occurrence of the change of control:
(i) the Notes then in issue carry, on a solicited basis,
an investment-grade credit rating which is either
downgraded to non-investment grade or withdrawn (so
long as the Notes are not upgraded or reinstated to an
investment-grade rating by the relevant rating agency,
or a replacement investment-grade rating of another
rating agency on a solicited basis is not obtained, in
each case within a set period of time, and the relevant
rating agency confirms that its rating decision
resulted, in whole or in part, from the occurrence of the
change of control), or (ii) the Notes then in issue carry
a non-investment grade credit rating from each rating
agency then assigning a credit rating on a solicited
basis or no credit rating from any rating agency on
a solicited basis. Under the terms of the Notes, “change
of control” is defined as: (i) any person or any persons
acting in concert (as defined in the City Code on
Takeovers and Mergers), other than a holding company
(as defined in Section 1159 of the Companies Act 2006,
as amended) whose shareholders are or are to be
substantially similar to the pre-existing shareholders
of the Company, shall become interested (within the
meaning of Part 22 of the Companies Act 2006, as
amended) in (x) more than 50 per cent. of the issued
or allotted ordinary share capital of the Company or
(y) shares in the capital of the Company carrying
more than 50 per cent. of the voting rights normally
exercisable at a general meeting of the Company; or
(ii) Sage Treasury Company Limited ceases to be
a direct or indirect subsidiary of the Company.
• Under a note purchase agreement dated 20 May 2013
relating to US$150m senior notes, Series F, due 20 May
2023 and US$50m senior notes, Series G, due 20 May
2025 between Sage Treasury Company Limited and
the note holders and guaranteed by the Company, on
a change of control of the Company, the Company will
not take any action that consummates or finalises
a change of control unless at least 15 business days
prior to such action it shall have given to each holder
of notes written notice containing and constituting
an offer to prepay all notes on a date specified in
such offer which shall be a business day occurring
subsequent to the effective date of the change of
control which is not less than 30 days or more than
60 days after the date of the notice of prepayments.
Where a holder of notes accepts the offer to prepay,
the prepayment shall be 100% of the principal amount
of the notes together with accrued and unpaid
interest thereon and shall be made on the proposed
prepayment date. No prepayment under a change of
control shall include any premium of any kind.
• Under a note purchase agreement dated 26 January
2015 relating to €30m senior notes, Series I, due
26 January 2023 and US$200m senior notes, Series J,
due 26 January 2025 between Sage Treasury Company
Limited and the note holders and guaranteed by the
Company, on a change of control of the Company, the
Company will not take any action that consummates
or finalises a change of control unless at least 15
business days prior to such action it shall have given
to each holder of notes written notice containing and
constituting an offer to prepay all notes on the date
specified in such offer which shall be a business day
occurring subsequent to the effective date of the
change of control which is not less than 30 days or
more than 60 days after the date of notice of
prepayments. Where a holder of notes accepts the
offer to prepay, the prepayment shall be 100% of the
principal amount of the notes together with accrued
and unpaid interest thereon and any applicable net
loss and, in each case, including the deduction of
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The Sage Group plc. Annual Report and Accounts 2022 any applicable net gain and shall still be made on the
proposed payment date. No prepayment under a change
of control shall include any premium of any kind.
• Under the terms of the note purchase agreements
Branch
The Group, through various subsidiaries, has a branch in
France. Further details are included in note 19 on pages
275 to 279.
above, “control” is defined as per section 450 of the
Corporation Tax Act 2010, and a “change of control”
occurs if any person or group of persons acting in
concert gains control of the Company.
Financial risk management
The Group’s exposure to and management of capital,
liquidity, credit, interest rate and foreign currency risk
are shown in note 14.6 to the financial statements.
• Under a dual tranche US$719m and £135m five-year
multi-currency revolving credit facility agreement
dated 7 February 2018 (as amended and restated on
15 December 2021) between, amongst others, Sage
Treasury Company Limited and the facility agent, and
guaranteed by the Company, on a change of control,
if any individual lender so requires and after having
consulted with Sage Treasury Company Limited in
good faith for not less than 30 days following the
change of control, the facility agent shall, by not
less than 10 business days’ notice to Sage Treasury
Company Limited, cancel the commitment of that
lender and declare the participation of that lender in
all outstanding loans, together with accrued interest
and all other amounts accrued under the finance
documents, immediately due and payable, whereupon
the commitment of that lender will be cancelled
and all such outstanding amounts will become
immediately due and payable. In respect of this
revolving credit facility agreement, “control” is
defined as per section 840 of the Income and
Corporation Taxes Act 1998.
• The platform reseller agreement dated 31 January 2015
relating to the Company’s strategic arrangements with
Salesforce.com EMEA Limited contains a change of
control right enabling Salesforce to terminate the
agreement in the event there is a change of control in
favour of a direct competitor of Salesforce.com EMEA
Limited. The agreement contains post-termination
requirements upon Salesforce to support a transition
for up to a specified period. In respect of the platform
reseller agreement with Salesforce.com EMEA Limited,
“change of control” occurs where a corporate
transaction results in the owners of the subject entity
owning less than 50% of the voting interests in that
entity as a result of the corporate transaction.
• All of Sage’s employee share plans contain provisions
relating to a change of control of The Sage Group plc.
Outstanding awards and options may vest and become
exercisable on a change of control, subject, where
applicable, to the satisfaction of any applicable
performance conditions and time pro-rating.
Our approach to risk management generally and our
Principal Risks can be found in note 14.6 and on pages 90
to 103.
Disclaimer
The purpose of this Annual Report and Accounts is to
provide information to the members of Sage. The Annual
Report and Accounts has been prepared for, and only for,
the members of Sage, as a body, and no other persons.
Sage, its Directors and employees, agents or advisors do
not accept or assume responsibility to any other person to
whom this document is shown or into whose hands it may
come and any such responsibility or liability is expressly
disclaimed. The Annual Report and Accounts contains
certain forward-looking statements with respect to the
operations, performance and financial condition of
the Group. By their nature, these statements involve
uncertainty since future events and circumstances can
cause results and developments to differ materially from
those anticipated. The forward-looking statements
reflect knowledge and information available at the date
of preparation of this Annual Report and Accounts and
Sage undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report and
Accounts should be construed as a profit forecast.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the
Annual Report and Accounts, including the Directors’
Remuneration Report and the financial statements of the
Group and the Company, in accordance with applicable
laws and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with UK-adopted International Accounting
Standards (UK-IFRS) and the Company financial statements
in accordance with United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice),
including FRS102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland”
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group and
the Company for that period.
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The Sage Group plc. Annual Report and Accounts 2022Financial StatementsShareholder InformationGovernance ReportStrategic Report Directors’ Report continued
In preparing these financial statements the Directors are
required to:
Each Director as at the date of this report further
confirms that:
• Select suitable accounting policies and then apply
them consistently;
• Make judgements and estimates that are reasonable
• So far as the Director is aware, there is no relevant
audit information of which the Group’s and the
Company’s auditors are unaware; and
• The Director has taken all the steps that they ought
to have taken as a Director in order to make himself/
herself aware of any relevant audit information and to
establish that the Group’s and the Company’s auditors
are aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act 2006.
In addition, the Directors as at the date of this report
consider that the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s and the Group’s position,
performance, business model and strategy.
By Order of the Board
Vicki Bradin
Company Secretary
15 November 2022
The Sage Group plc.
Company number 02231246
and prudent;
• State whether, for the Group applicable UK-IFRS have
been followed, subject to any material departures
disclosed and explained in the financial statements;
• State whether, for the Company, applicable United
Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice), including
FRS 102 “The Financial Reporting Standard applicable
in the UK and Republic of Ireland” have been followed,
subject to any material departures disclosed and
explained in the financial statements; and
• Prepare the financial statements on the going concern
basis, unless it is inappropriate to presume that the
Group and the Company will continue in business.
The Directors are responsible for the maintenance and
integrity of Sage’s website. Legislation in the United
Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
Directors’ statement
The Directors as at the date of this report, whose names
and functions are listed in the Board of Directors’ section
on pages 110 to 111, confirm that:
• To the best of their knowledge, the Group’s financial
statements, which have been prepared in accordance
with UK-adopted International Accounting Standards
(UK-IFRS), give a true and fair view of the assets,
liabilities, financial position and profit or loss of
the Group;
• To the best of their knowledge, the Company’s
financial statements, which have been prepared
in accordance with United Kingdom Accounting
Standards (United Kingdom Generally Accepted
Accounting Practice), including FRS 102 “The
Financial Reporting Standard applicable in the UK
and Republic of Ireland”, give a true and fair view of
the assets, liabilities, financial position and profit
or loss of the Company; and
• To the best of their knowledge, the Directors’ Report
and the Strategic Report include a fair review of the
development and performance of the business and the
position of the Group and the Company together with
a description of the principal risks and uncertainties
that it faces.
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Opinion
In our opinion:
• The Sage Group plc’s group financial statements and parent company financial statements (the “financial
statements”) give a true and fair view of the state of the group’s and of the parent company’s affairs as at
30 September 2022 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of The Sage Group plc. (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 30 September 2022 which comprise:
Group
Parent company
Consolidated balance sheet as at 30 September 2022
Company Balance sheet as at 30 September 2022
Consolidated income statement for the year then ended
Company Statement of changes in equity for the year
then ended
Consolidated statement of comprehensive income for the
year then ended
Related notes 1 to 8 to the financial statements including
a summary of significant accounting policies
Consolidated statement of changes in equity for the year
then ended
Consolidated statement of cash flows for the year
then ended
Related notes 1 to 19 to the financial statements, including
a summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the group financial statements is
applicable law and UK adopted international accounting standards. The financial reporting framework that has been
applied in the preparation of the parent company financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic
of Ireland” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company
and we remain independent of the group and the parent company in conducting the audit.
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Independent Auditor’s Report to the members of The Sage Group plc.
continued
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group
and parent company’s ability to continue to adopt the going concern basis of accounting included:
• We understood the process undertaken by management to perform the going concern assessment, including the
Group’s access to available sources of liquidity and any associated covenants;
• We obtained management’s going concern assessment, including the cash flow forecast and covenant calculation for
the going concern period to 31 March 2024 and assessed whether the period applied is appropriate, also considering
the existence of any significant events or conditions beyond this period based on management’s forecasting and
knowledge arising from the audit;
• We assessed the reasonableness of all key assumptions, with a particular focus on New Customer Acquisition (NCA),
churn, margin and working capital. This has been performed by:
• assessing the historical forecasting accuracy of the Group by comparing actual revenue and underlying profit to
forecast for the previous five years;
• checking for consistency of the forecasts with other areas of the audit including the goodwill and other intangibles
impairment assessment; and
• assessing whether the assumptions made were reasonable and appropriately severe, through our own independent
assessment of the impact of the current macro-economic environment and considering whether this contradicted
any of the assumed growth.
• We also considered the impact of Sage’s climate commitments on the cash flow forecasts;
• We reviewed the borrowing facilities to confirm both the availability of the revolving credit facilities (‘RCF’) to the
Group, the forecast loan repayments through the going concern period and to gain an understanding of the applicable
covenants. We reviewed the related covenants by comparing to the underlying agreements and reperforming
management’s forecast covenant ratio compliance calculations to check for breaches of each covenant ratio
throughout the going concern period under each scenario presented by management;
• We reperformed management’s reverse stress test to establish the level of change in revenue necessary to cause
a liquidity or financial covenant breach and whether the reduction in revenue required has no more than a remote
possibility of occurring; and
• We reviewed the appropriateness of management’s going concern disclosure in describing the risks associated
with its ability to continue to operate as a going concern from the date of the approval of the financial statements
to 31 March 2024.
We observed that in management’s base case and in the downside sensitivities, with churn assumptions increasing by
up to 75% and a significant reduction in the level of NCA, management has determined that there is headroom in relation
to both liquidity and covenants without taking the benefit of any identified controllable mitigations. Furthermore,
management’s reverse stress test to model the extent of the EBITDA reduction compared to forecasts required to breach
covenants during the going concern assessment period is considered by the Directors to be remote due to the resilient
nature of the subscription business model, available liquidity and strong cash conversion.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as
a going concern for the period to 31 March 2024.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements
about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report. However, because not all future events or conditions can be predicted, this statement is not
a guarantee as to the group’s ability to continue as a going concern.
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Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of 6 components and audit
procedures on specific balances for a further 4 components.
• The components where we performed full or specific audit procedures accounted for 94%
of adjusted Profit before tax, 94% of Revenue and 98% of Total assets.
Key audit matters
Materiality
• Inappropriate timing of revenue recognition, including cut-off and deferral.
• Recoverability of goodwill and other intangible assets.
• Overall Group materiality of £13.2 million which represents 5% of Profit before tax adjusted
for non-recurring items
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our
audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile, the organisation of the group and effectiveness of group-
wide controls, changes in the business environment and other factors such as recent Internal audit results when
assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial statements, of the 23 reporting components of the Group,
we selected 10 components covering entities within the United Kingdom and Ireland, France, North America, Germany,
Spain and South Africa which represent the principal business units within the Group.
Of the 10 components selected, we performed an audit of the complete financial information of 6 components (“full
scope components”) which were selected based on their size or risk characteristics. For the remaining 4 components
(“specific scope components”), we performed audit procedures on specific accounts within that component that we
considered had the potential for the greatest impact on the significant accounts in the financial statements either
because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 94% (2021: 92%) of the Group’s adjusted
Profit before tax, 94% (2021: 90%) of the Group’s Revenue and 98% (2021: 98%) of the Group’s Total assets. For the current
year, the full scope components contributed 80% (2021: 87%) of the Group’s adjusted Profit before tax, 62% (2021: 61%) of
the Group’s Revenue and 90% (2021: 91%) of the Group’s Total assets. The specific scope component contributed 14%
(2021: 5%) of the Group’s adjusted Profit before tax, 32% (2021: 29%) of the Group’s Revenue and 8% (2021: 7%) of the Group’s
Total assets. The audit scope of these components may not have included testing of all significant accounts of the
component but will have contributed to the coverage of significant accounts tested for the Group.
Of the remaining 13 components that together represent 6% of the Group’s adjusted Profit before tax, none are
individually greater than 2% of the Group’s adjusted Profit before tax. For these components, we performed other
procedures, including analytical review, testing of consolidation journals and intercompany eliminations, obtaining
a sample of additional cash confirmations, and foreign currency translation recalculations to respond to potential risks
of material misstatement to the Group financial statements.
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Independent Auditor’s Report to the members of The Sage Group plc.
continued
The table below illustrates the coverage obtained from the work performed by our audit teams.
Reporting components
Number
2022
% Group
adjusted
Profit
before tax*
% Group
Revenue
% Total
assets
Note
Number
2021
% Group
adjusted
Profit
before tax*
% Group
Revenue
% Total
assets
Full scope
Specific scope
Full and specific scope coverage
Remaining components
Total Reporting components
6
4
10
13
23
80%
14%
94%
6%
62%
32%
94%
6%
90%
8%
98%
2%
100%
100%
100%
1,3
2,3
4
6
4
10
12
22
87%
5%
92%
8%
61%
29%
90%
10%
91%
7%
98%
2%
100%
100%
100%
* Adjusted profit before tax is presented on an absolute basis.
Notes
1. 3 of the 6 full scope components relate to the Parent Company and other corporate entities whose activities include the Group’s treasury management
and consolidation adjustments. The other 3 full scope components are UKI, France and North America (excluding Intacct).
2. Specific scope components are Germany, North America Intacct, Spain and South Africa. The audit scope of these specific scope components may not
have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts selected for
testing by the Primary audit team.
3. The Group audit risk in relation to revenue recognition was subject to audit procedures at each of the full and specific scope locations with significant
revenue streams (being 3 full scope components and 4 specific scope components). The Group audit risk in relation to the recoverability of goodwill
and other intangible assets was tested by the Primary audit team.
4.
In the current year, the remaining 13 components contributed 6% of adjusted profit before tax and the individual contribution of these components
ranged from nil to 2% of the Group’s adjusted profit before tax. For these components, the Primary audit team performed other procedures including
overall analytical review procedures and testing of consolidation journals, intercompany eliminations, a sample of cash confirmations, and foreign
currency translation recalculations to respond to potential risks of material misstatement to the Group financial statements.
Changes from the prior year
The change in the total number of reporting components from 22 to 23 was a result of the disposal of the Swiss business
and the acquisition of Brightpearl Limited and Lockstep Network Holdings, Inc. in the year.
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Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at
each of the components by us, as the primary audit engagement team, or by component auditors from other EY global
network firms operating under our instruction. Of the 6 full scope components, audit procedures were performed on 2
of these directly by the primary audit team. For the 4 specific scope components, where the work was performed by
component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit
evidence had been obtained as a basis for our opinion on the Group as a whole.
Kathryn Barrow continues to be the Senior Statutory Auditor and, together with other group partners and senior members
of the primary audit team, has performed a series of visits to the component teams. During the current year’s audit cycle,
visits were undertaken by the primary audit team to the component teams in the United Kingdom, North America, France
and South Africa. These visits involved, discussing the audit approach with the component team and any issues arising
from their work, meeting with local management, attending closing meetings and reviewing relevant audit working
papers on risk areas. For all components, the primary team interacted regularly with the component teams during
various stages of the audit, reviewed relevant working papers and were responsible for the scope and direction of the
audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence
for our opinion on the Group financial statements.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact companies. The Group has
determined that the most significant future impacts from climate change on their operations will be from extreme
weather events which may have an impact on workforce productivity, damage to facilities, hosting resilience and
changing customer behaviour. These are explained on pages 56 to 59 in the Task Force for Climate related Financial
Disclosures, which form part of the “Other information,” rather than the audited financial statements. Our procedures on
these disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated.
As explained in Note 1 Basis of Preparation to the consolidated financial statements, the Group concluded that there
were no factors identified that would have a material impact on the Group’s critical accounting estimates and
judgements in the current year. Governmental and societal responses to climate change risks are still developing, and
are interdependent upon each other, and consequently financial statements cannot capture all possible future outcomes
as these are not yet known. The degree of certainty of these changes may also mean that they cannot be taken into
account when determining asset and liability valuations and the timing of future cash flows under the requirements of
UK-adopted International Accounting Standards. As described in Note 1, there were no factors identified that would have
a material impact on the Group’s critical accounting estimates and judgements in the current year. The considerations
in relation to goodwill impairment testing are set out in Note 6.1.
Our audit effort in considering climate change was focused on evaluating management’s assessment of the impact of
climate risk, physical and transition, and ensuring that the effects of material climate risks disclosed on pages 56 to 59
have been appropriately reflected by management in reaching their judgements in relation to modelling future cash
flows used in the impairment assessments. We also challenged the Directors’ considerations of climate change in their
assessment of going concern and viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
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Independent Auditor’s Report to the members of The Sage Group plc.
continued
Key observations
communicated to the
Audit and Risk Committee
Based on the
procedures performed,
we consider the timing
of revenue recognition
to be appropriate for
the year ended 30
September 2022. We did
not identify a material
misstatement as a
result of inappropriate
timing of revenue
recognition, cut-off
or deferral.
Risk
Our response to the risk
Inappropriate timing
of revenue recognition,
including cut-off
and deferral
Refer to the Audit and Risk
Committee Report (page
140); Accounting policies
(page 209); and Note 3.1 of
the Consolidated Financial
Statements (pages 217
to 219)
The Group has reported
revenues of £1,947 million
(FY21: £1,846 million) with
deferred income at 30
September 2022 of £742
million (FY21: £621m).
We assessed revenue
recognition as a fraud risk
as revenue forms the basis
for certain of the Group’s
key performance
indicators, both in external
communications and for
management incentives.
The risk specifically relates
to the inappropriate timing
of revenue recognition,
including cut-off and
timing of recognition of
deferred revenue.
Therefore, we assessed that
overstatement of revenue
presented a higher risk and
a key audit matter.
Walkthroughs and controls
• We performed walkthroughs of each significant class of
revenue transactions and assessed the design effectiveness of
key financial controls, however, we did not test the operating
effectiveness of these controls at all components. For two
components, we tested the operating effectiveness of key
controls within the revenue process.
Timing of revenue recognition, including cut-off and deferral
• We evaluated management’s determination of whether the
nature of the Group’s products and services resulted in the
provision of a good or service at a point in time or over a
contractual term, by reviewing a sample of customer contracts
against the requirements of IFRS 15. This included the
assessment of new or one-off transactions, by comparing the
accounting treatment to the Group accounting policy and IFRS
15. The customer contracts take different forms depending
upon the products/services sold and local legal practice. Our
procedures included consideration as to whether this fulfilled
the IFRS 15 definition of a ‘contract with a customer’.
• At all revenue generating full and specific scope components
we adopted a data analysis approach in relation to revenue and
receivables. Our procedures involved testing full populations
of transaction data for all significant revenue streams and
included correlation analysis between invoiced revenue,
receivables and cash, as well as analysis of credit notes. Where
the postings did not follow our expectation, we investigated
and assessed their validity by agreeing a sample of
transactions back to source documentation.
• In respect of deferred income, for products and services where
revenue is earned over a contractual term, we:
• Tested a sample of transactions to determine that the
amount of revenue recognised in the year and the amount
deferred at the balance sheet date were accurately
calculated based on progress of the contract.
• At certain components, with support from EY IT team
members, we utilised data analysis to facilitate independent
reperformance of certain management calculations,
including deferred income. This included testing a sample
of the data inputs against 3rd party evidence, such as the
contract with the customer (as defined above).
• We have performed cut-off testing for a sample of revenue
items and credit notes booked either side of the year end date
to determine that revenue was recognised in the period in
which the performance obligation was fulfilled.
Management override
• Audit teams at full and specific scope components with
significant revenue streams performed specific procedures
to address the risk of management override, including testing
to identify unusual, new or significant transactions or
contractual terms and targeted journal entry testing over
manual journal entries.
Disclosures
• We also considered the adequacy of the Group’s disclosures
relating to revenue recognition in note 1 (critical accounting
estimates and judgments) and note 3.1 (Revenue) in the
consolidated financial statements.
194
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The Sage Group plc. Annual Report and Accounts 2022
Key observations
communicated to the
Audit and Risk Committee
We concluded that no
impairment of goodwill
or other intangible
assets is required in the
current year.
We have concluded that
the methodology
applied is reasonable,
the forecast period is
appropriate and the
impairment models are
mathematically
accurate.
Key inputs such
as; underlying
assumptions, forecast
growth rates, margin
and discount rates have
been determined using
a reasonable basis.
The additional
sensitivity disclosures
in note 6.1 of the Group
financial statements
adequately reflect that
a reasonably possible
change in certain key
assumptions in Iberia
could lead to a
different conclusion
in respect of the
recoverability
of goodwill.
Risk
Our response to the risk
Recoverability of
goodwill and other
intangible assets
Refer to the Audit and Risk
Committee Report (page
141); Accounting policies
(page 209); and Note 6.1 of
the Consolidated Financial
Statements (page 231
to 235)
Goodwill and other
intangible assets of £2,416
million and £294 million
are recognised in the
Group’s consolidated
balance sheet at 30
September 2022,
respectively.
We continue to include the
recoverability of goodwill
and other intangible
assets as a Key Audit
Matter due to:
• the estimation involved
in determining the
future performance of
the Cash Generating
Units (CGUs);
• the magnitude of the
goodwill and other
intangible asset
balances; and
• the audit effort and
executive involvement.
Valuation model
Management performed its annual impairment assessment as at
30 June 2022.
We obtained the impairment assessment and tested the
methodology applied in the value in use calculations for each of
the CGUs as compared to the requirements of IAS 36, Impairment
of Assets, including the appropriateness of the forecast periods,
which were consistent with management’s strategic planning
horizon, and the mathematical accuracy of management’s model.
We considered whether any significant changes occurred between
Management’s assessment date and the year end that would
impact the impairment test conclusion. We did this by reviewing
the ongoing performance of the business and reviewing the
inputs to the discount rate in light of the current macro-
economic environment.
Key assumptions in the valuation
We evaluated the key underlying assumptions used in the
valuations including revenue growth rates, margin and the
discount rates applied.
• We assessed the appropriateness of the key assumptions used
in the FY23 forecasts including new customer acquisition,
upsell/add-ons and level of churn by assessing these against
the results achieved in FY22 and the prior track record
of growth.
• For forecasts for FY23-FY25, we considered the latest market
trends, through reviewing market data such as central bank
macroeconomic projections, to evaluate whether there is
evidence that the forecast growth rates assumed for this
period should be lower than the FY22 current growth rate.
• We tested the reasonableness of long-term growth rates
applied after the forecast period by comparing the rates
used by management to published OECD rates.
• We tested the discount rates, with the involvement of our
internal valuation specialists, by reference to comparable
market data and the specific risk profile relevant to each
respective CGU, compared to the rates used by management.
• We assessed the appropriateness of Management’s forecasts
with respect to inclusion of the impact of climate change.
• We performed downside sensitivity analysis on key
assumptions in the models, including combinations thereof,
to understand the parameters that, should they arise, cause
an impairment of goodwill.
Disclosures
We considered the appropriateness of the related disclosures
provided in note 1 (critical accounting estimates and judgments)
and note 6.1 in the consolidated financial statements, in particular
the sensitivity disclosures.
195
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Independent Auditor’s Report to the members of The Sage Group plc.
continued
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining
the nature and extent of our audit procedures.
We determined materiality for the Group to be £13.2 million (2021: £14.6 million), which is 5% (2021: 5%) of adjusted Profit
before tax. We believe that Profit before tax adjusted for non-recurring items provides us with the most relevant
performance measure to the stakeholders of the entity. Non-recurring items are set out in note 3.6 of the Group’s
financial statements and are summarised in the graphic below.
We determined materiality for the Parent Company to be £40.3 million (2021: £42.6 million), which is 1% (2021: 1%) of
equity. We believe that equity is an appropriate basis to determine materiality given the nature of the Parent Company
as the holding company of the Group. Any balances in the Parent Company financial statements that were relevant to our
audit of the consolidated Group were audited using an allocation of Group performance materiality.
• Total profit before tax of £337m
Starting
basis
• Adjustments for non-recurring items
• Gain on disposal of subsidiaries (£53m)
• Reversal of Restructuring Costs – (£20m)
Adjustments
• Totals £264m
• Materiality of £13.2m (5% of materiality basis)
Materiality
During the course of our audit, we reassessed initial materiality with the only change in the final materiality from
our original assessment at planning being to reflect the actual reported performance of the Group in the year.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our
judgement was that performance materiality was 75% (2021: 75%) of our planning materiality, namely £9.9m (2021:
£10.9m). We have set performance materiality at this percentage due to our assessment of the control environment and
lower likelihood of misstatements.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement
accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for
each component is based on the relative scale and risk of the component to the Group as a whole and our assessment
of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to
components was £1.0m to £8.0m (2021: £1.0m to £6.7m).
196
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The Sage Group plc. Annual Report and Accounts 2022
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess
of £0.7m (2021: £0.7m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and
in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 188, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the group and company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained
during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on pages 182 to 183;
197
197
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Independent Auditor’s Report to the members of The Sage Group plc.
continued
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the
period is appropriate set out on pages 104 to 105;
• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation
and meets its liabilities set out on pages 182 to 183;
• Directors’ statement on fair, balanced and understandable set out on page 188;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on
pages 95 to 103;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on pages 90 to 103; and
• The section describing the work of the Audit and Risk Committee set out on pages 138 to 147.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 187, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with
governance of the company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and
determined that the most significant are those that relate to the reporting framework (IFRS, FRS 102, the Companies
Act 2006 and UK Corporate Governance Code) , the relevant tax compliance regulations in the jurisdictions in which
the Group operates and the EU General Data Protection Regulation (GDPR).
• We understood how the Group is complying with those frameworks by making enquiries of management, internal
audit, those responsible for legal and compliance procedures and the company secretary. We corroborated our
enquiries through our review of board minutes and papers provided to the Audit and Risk Committee and attendance
at all meetings of the Audit and Risk Committee, as well as consideration of the results of our audit procedures across
the Group to either corroborate or provide contrary evidence which was then followed up.
198
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The Sage Group plc. Annual Report and Accounts 2022
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud
might occur by meeting with management from various parts of the business to understand where it considered there
was susceptibility to fraud; and assessing whistleblowing incidences for those with a potential financial reporting
impact. We also considered performance targets and their propensity to influence on efforts made by management to
manage revenue and earnings. We considered the programmes and controls that the Group has established to address
risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those
programs and controls. Where the risk was considered to be higher, including areas impacting Group key performance
indicators or management remuneration, we performed audit procedures to address each identified fraud risk or
other risk of material misstatement. These procedures included those on revenue recognition detailed above, the
assessment of items identified by management as non-recurring and testing manual journals and were designed to
provide reasonable assurance that the financial statements were free from material fraud or error.
• Based on this understanding, we designed our audit procedures to identify non-compliance with such laws and
regulations. Based on our understanding, we designed our audit procedures to identify non-compliance with laws and
regulations, including instructions to full and specific scope component audit teams. At a Group level, our procedures
involved: enquiries of Group management and those charged with governance, legal counsel and internal audit;
journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual
transactions based on our understanding of the business. At a component level, our full and specific scope component
audit team’s procedures included enquiries of component management; journal entry testing; and focused testing,
including as referred to in the key audit matters section above.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit and Risk Committee we were appointed by the company on 3 March
2015, to audit the financial statements for the year ending 30 September 2015 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is 8 years, covering
the years ending 30 September 2015 to 30 September 2022.
• The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
Kathryn Barrow (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
15 November 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 been presented
on the web site.
2) Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation
in other jurisdictions.
199
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Consolidated income statement
For the year ended 30 September 2022
Underlying
2022
£m
Adjustments
(note 3.6)
2022
£m
Note
Statutory
2022
£m
Underlying
as reported*
2021
£m
Adjustments
(note 3.6)
2021
£m
2.1, 3.1
1,949
(138)
1,811
(1,434)
377
1
(32)
346
(83)
263
2.2, 3.2, 3.3, 3.6
3.5
3.5
4
(2)
–
(2)
(8)
(10)
–
1
(9)
6
(3)
1,947
1,846
(138)
1,809
(131)
1,715
(1,442)
(1,357)
367
1
(31)
337
(77)
260
358
1
(26)
333
(83)
250
–
–
–
15
15
–
(1)
14
21
35
Statutory
2021
£m
1,846
(131)
1,715
(1,342)
373
1
(27)
347
(62)
285
263
(3)
260
250
35
285
Revenue
Cost of sales
Gross profit
Selling and administrative expenses
Operating profit
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to:
Owners of the parent
Earnings per share attributable to
the owners of the parent (pence)
Basic
Diluted
5
5
25.74p
25.44p
25.47p
25.17p
23.09p
22.87p
26.33p
26.08p
All operations in the year relate to continuing operations.
Note:
* Underlying as reported is at 2021 reported exchange rates.
200
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The Sage Group plc. Annual Report and Accounts 2022
Consolidated statement of comprehensive income
For the year ended 30 September 2022
Profit for the year
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss:
Fair value gain on reassessment of equity investment
Actuarial gain on post-employment benefit obligations
Note
8
11, 15.4
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations and net investment hedges
15.3
Exchange differences recycled through income statement on sale of foreign operations 15.3, 16.2
2022
£m
260
30
3
33
177
(13)
164
2021
£m
285
–
2
2
(60)
(21)
(81)
Other comprehensive income/(expense) for the year, net of tax
197
(79)
Total comprehensive income for the year
457
206
Total comprehensive income for the year attributable to:
Owners of the parent
457
206
201
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Consolidated balance sheet
As at 30 September 2022
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Equity investments
Trade and other receivables
Deferred income tax assets
Current assets
Trade and other receivables
Current income tax asset
Cash and cash equivalents (excluding bank overdrafts)
Assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Provisions
Deferred income
Liabilities classified as held for sale
Non-current liabilities
Borrowings
Post-employment benefits
Deferred income tax liabilities
Provisions
Trade and other payables
Deferred income
Derivative financial instruments
Total liabilities
Net assets
202
202
Note
6.1
6.2
7
8
9.1
12
9.1
13.3
16.2
9.2
13.4
10
9.3
16.2
2022
£m
2021
£m
2,416
1,877
294
152
4
128
19
190
164
21
113
40
3,013
2,405
355
39
489
–
883
295
37
553
39
924
3,896
3,329
(368)
(13)
(178)
(33)
(734)
–
(592)
(31)
(65)
(68)
(611)
(13)
(1,326)
(1,380)
13.4
(1,044)
(749)
11
12
10
9.3
14.5
(19)
(16)
(20)
(6)
(8)
(60)
(22)
(5)
(49)
(3)
(10)
–
(1,173)
(838)
(2,499)
1,397
(2,218)
1,111
The Sage Group plc. Annual Report and Accounts 2022
Consolidated balance sheet
As at 30 September 2022
Equity attributable to owners of the parent
Ordinary shares
Share premium
Translation reserve
Merger reserve
Retained earnings
Total equity
Note
2022
£m
2021
£m
15.1
15.3
15.3
15.4
12
548
206
61
570
12
548
42
61
448
1,397
1,111
The consolidated financial statements on pages 200 to 279 were approved by the Board of Directors on 15 November 2022
and are signed on their behalf by:
Steve Hare
Chief Executive Officer
203
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Consolidated statement of changes in equity
For the year ended 30 September 2022
At 1 October 2021
Profit for the year
Attributable to owners of the parent
Ordinary
shares
£m
Share
premium
£m
Translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
Note
12
–
548
–
42
–
61
–
448
260
Total
equity
£m
1,111
260
Other comprehensive income/(expense):
Exchange differences on translating foreign
operations and net investment hedges
Exchange differences recycled through income
statement on sale of foreign operations
15.3
15.3, 16.2
Fair value gain on reassessment of equity investment
8
Actuarial gain on post-employment benefit
obligations
Total comprehensive income
for the year ended 30 September 2022
Transactions with owners:
Employee share option scheme — value of employee
services including deferred tax
Proceeds from issuance of treasury shares
Purchase of shares by Employee Benefit Trust
15.4
15.4
15.4
15.4
Dividends paid to owners of the parent
15.4, 15.5
Total transactions with owners
for the year ended 30 September 2022
At 30 September 2022
–
–
–
–
–
–
–
–
–
–
12
–
–
–
–
–
–
–
–
–
–
177
(13)
–
–
164
–
–
–
–
–
548
206
–
–
–
–
–
–
–
–
–
–
177
–
30
(13)
30
3
3
293
457
37
7
37
7
(32)
(32)
(183)
(183)
–
61
(171)
(171)
570
1,397
204
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The Sage Group plc. Annual Report and Accounts 2022
Consolidated statement of changes in equity
For the year ended 30 September 2021
Attributable to owners of the parent
Ordinary
shares
£m
Share
premium
£m
Translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
Note
At 1 October 2020
Profit for the year
Other comprehensive (expense)/income:
Exchange differences on translating foreign
operations and net investment hedges
Exchange differences recycled through income
statement on sale of foreign operations
Actuarial gain on post-employment benefit
obligations
Total comprehensive (expense)/income
for the year ended 30 September 2021
Transactions with owners:
Employee share option scheme — value of employee
services including deferred tax
Proceeds from issuance of treasury shares
Share buyback programme
15.3
15.3
15.4
15.4
15.4
15.4
Dividends paid to owners of the parent
15.4, 15.5
Total transactions with owners
for the year ended 30 September 2021
At 30 September 2021
12
–
548
–
–
–
–
–
–
–
–
–
–
12
–
–
–
–
–
–
–
–
–
548
123
–
(60)
(21)
–
(81)
–
–
–
–
–
42
61
–
908
285
Total
equity
£m
1,652
285
(60)
(21)
2
–
–
2
287
206
36
8
36
8
(602)
(602)
(189)
(189)
–
–
–
–
–
–
–
–
–
61
(747)
(747)
448
1,111
205
205
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Consolidated statement of cash flows
For the year ended 30 September 2022
Cash flows from operating activities
Cash generated from continuing operations
Interest paid
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Proceeds on settlement of non-current asset
Disposal of subsidiaries, net of cash disposed
Acquisition of subsidiaries, net of cash acquired
Purchases of equity investments
Purchases of intangible assets
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Interest received
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Capital element of lease payments
Borrowing costs
Proceeds from issuance of treasury shares
Share buyback programmes
Purchase of shares by Employee Benefit Trust
Dividends paid to owners of the parent
Net cash used in financing activities
Net decrease in cash, cash equivalents and bank overdrafts
(before exchange rate movement)
Effects of exchange rate movement
Net decrease in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts at 1 October
Cash, cash equivalents and bank overdrafts at 30 September
206
206
Note
13.1
16.2
16.1
6.2
7
16.2
3.5
13.2
13.2
13.2
15.4
15.4
15.5
13.2
13.2
13.2
2022
£m
368
(21)
(62)
285
–
42
(285)
–
(40)
(12)
10
1
(284)
516
(166)
(19)
(1)
7
(249)
(32)
(183)
(127)
(126)
48
(78)
567
489
2021
£m
476
(19)
(81)
376
3
135
–
(21)
(17)
(39)
–
1
62
344
(481)
(22)
(1)
8
(353)
–
(189)
(694)
(256)
(25)
(281)
848
567
The Sage Group plc. Annual Report and Accounts 2022
Notes to the consolidated financial statements
1 Basis of preparation and critical accounting estimates and judgements
Accounting policies applicable across the financial statements are shown below. Accounting policies that are specific to
a component of the financial statements have been incorporated into the relevant note.
Basis of preparation
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 (UK-IFRS), 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-IFRS. There was no impact or change in accounting
policies from the transition. This change constitutes a change in accounting framework.
The consolidated financial statements of The Sage Group plc. have been prepared in accordance with UK-IFRS in
conformity with the requirements of the Companies Act 2006 and also prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
UK-IFRS can differ in certain respects from IFRS as issued by the IASB. The differences have no impact on the Group’s
consolidated financial statements for the years presented.
The consolidated financial statements have been prepared under the historical cost convention, except where adopted
IFRS require an alternative treatment. The principal variations from the historical cost convention relate to derivative
financial instruments and equity investments which are measured at fair value. The financial statements of the Group
comprise the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared at
the end of the reporting period. The accounting policies have been consistently applied across the Group. The Company
controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity, which is usually from date of acquisition.
All figures presented are rounded to the nearest £m, unless otherwise stated.
New or amended accounting standards
There are no accounting standards, amendments, or interpretations effective for the first time this financial year that
have had a material impact on the Group. No standards have been early adopted during the year.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance, and
position, are set out in the Strategic Report on pages 4 to 105.
The impact of the economic environment on the Group and its key stakeholders has been considered in the preparation
of the financial statements and has informed the level of stress testing performed. Specifically, consideration has been
given to the risks and uncertainties linked to the changing macro-economic environment, and the possible impact on
the Group’s customer base. In light of this, we note that the Group’s operational and financially robust position is
supported by:
• High-quality recurring and subscription-based revenue;
• Resilient cash generation and robust liquidity position, supported by strong underlying cash conversion of 107%,
reflecting the strength of the subscription business model; and
• A well-diversified small and medium-sized customer base which is geographically diverse.
The Directors have reviewed the liquidity and covenant forecasts for the Group for the period to 31 March 2024 (“the
going concern assessment period”), which reflect the expected impact of economic conditions on trading. In doing so,
the Directors have also reviewed the extent to which the macro-economic environment has been considered in building
assumptions to support the forecasts.
Scenario-specific stress testing has been performed, with the level of churn assumptions increased by 75%, and
a significant reduction in the level of new customer acquisition and sales to existing customers. In these severe stress
scenarios, the Group continues to have sufficient resources to continue in operational existence. If more severe impacts
occur, controllable mitigating actions to protect liquidity, including the reduction of discretionary spend, are available
to the Group should they be required. Stress testing has also been performed as part of the severe but plausible
scenarios (as described within the Viability Statement on pages 104 and 105).
207
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
1 Basis of preparation and critical accounting estimates and judgements continued
Going concern continued
The Directors also reviewed the results of reverse stress testing performed to provide an illustration of the level of churn
and deterioration in new customer acquisition which would be required to trigger a breach in the Group’s covenants or
exhaust cash down to minimum working capital requirements. The result of the reverse stress testing has highlighted
that such a scenario would only arise following a catastrophic deterioration in performance, well in excess of the
assumptions considered in the stress testing scenarios. The probability of these factors occurring is deemed to be
remote given the resilient nature of the subscription 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 throughout the going concern assessment period. Accordingly, the consolidated financial
information has been prepared on a going concern basis.
Further details for adopting the going concern basis are set out in the Directors’ Report on pages 182 to 183.
Foreign currencies
The consolidated financial statements are presented in sterling, which is the functional currency of the parent Company
and the presentation currency for the consolidated financial statements.
Foreign currency transactions are recorded at the rates of exchange prevailing on the dates of the transactions. Foreign
currency monetary items are translated at the rates prevailing at the end of the reporting period. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are
included in profit or loss for the period, except for foreign currency movements on intercompany balances where
settlement is not planned or likely in the foreseeable future, in which case they are recognised in other comprehensive
income. Foreign exchange movements on external borrowings and derivative financial instruments which are designated
as a hedge of the net investment in its related subsidiaries are recognised in the translation reserve.
The assets and liabilities of the Group’s subsidiaries outside the UK are translated into sterling using period-end
exchange rates. Income and expense items are translated at the average exchange rates for the period. Where differences
arise between these rates, they are recognised in other comprehensive income and the translation reserve.
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other
comprehensive income are recycled in the income statement as part of the gain or loss on sale, with the exception of
exchange differences recorded in equity prior to the transition to IFRS on 1 October 2004, in accordance with IFRS 1
“First-time Adoption of International Financial Reporting Standards”.
Climate change
In preparing the consolidated financial statements management has considered the impact of climate change,
specifically with reference to the disclosures included in the Strategic Report and the Group’s stated net zero ambitions.
There were no factors identified that would have a material impact on the Group’s critical accounting estimates and
judgements in the current year. The considerations in relation to goodwill impairment testing are set out in Note 6.1.
The assessment with respect to the impact of climate change will be kept under review by management, as the future
impacts depend on factors outside of the Group’s control, which are not all currently known.
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.
The judgements and management’s rationale in relation to these accounting estimates and judgements are assessed
and, where material in value or in risk, are discussed with the Audit and Risk Committee.
208
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The Sage Group plc. Annual Report and Accounts 2022
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.
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.
The assumptions applied in calculating the value in use of the CGUs being tested for impairment are a source of
estimation uncertainty. The key assumptions applied in the calculation relate to the future performance expectations
of the business—average medium-term revenue growth and long-term growth rate—as well as the discount rate to be
applied in the calculation.
These key assumptions used in performing the impairment assessment, and further information on the level at which
goodwill is monitored, are disclosed in note 6.1.
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.
On 17 January 2022, the Group acquired the remaining 83% of shares in Brightpearl, which constituted a significant
business combination. The key areas of judgement and estimate include the identification and subsequent
measurement of acquired intangible assets. The total fair value of intangible assets (excluding goodwill) acquired
was £110m.
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 cash flow 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 16.1.
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 intends to monitor the performance of the business going forward,
goodwill has been allocated to the Group’s UK & Ireland and North America CGUs.
On 30 August 2022, the Group acquired 100% equity capital and voting rights of Lockstep Network Holdings Inc
(“Lockstep”) which constituted a significant business combination. The key areas of judgement include the
identification and subsequent measurement of acquired intangible assets.
In line with IFRS 3, the initial accounting for the acquisition of Lockstep is provisional. The residual excess of
consideration over the net assets acquired has been provisionally recognised entirely as goodwill. Adjustments to
provisional amounts 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. The acquisition accounting
will be finalised within 12 months of the acquisition date.
209
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
1 Basis of preparation and critical accounting estimates and judgements continued
Future accounting standards
The Directors also considered the impact on the Group of new and revised accounting standards, interpretations,
or amendments which have been issued but were not effective for the Group for the year ended 30 September 2022.
None are expected to have a material impact on the consolidated financial statements when first applied.
2 Segment information
This note shows how Group revenue and Group operating profit are generated across the three reportable segments
in which we operate, being Northern Europe, International—Central and Southern Europe and North America. The
Group’s operations in Africa and the Middle East, and Asia (including Australia) do not meet the quantitative
thresholds for disclosure as reportable segments under IFRS 8, and so are presented together in the analyses and
described as International—Africa & APAC. This is explained further below.
For each geographical region, revenue and operating profit are compared to prior year in order to understand the
movements in the year. This comparison is provided for statutory, underlying, and organic revenue and statutory,
underlying, and organic operating profit.
• Statutory results reflect the Group’s results prepared in accordance with the requirements of IFRS.
• “Underlying” and “underlying as reported” are non-GAAP measures. Underlying measures are adjusted to
exclude items which in management’s judgement need to be disclosed separately by virtue of their size, nature
or frequency. These measures are considered key measures within the business which aid understanding of the
performance for the year and comparability between periods. The items excluded include both: a) Recurring
items which include purchase price adjustments including amortisation of acquired intangible assets and
adjustments made to reduce deferred income arising on acquisitions, acquisition-related items, unhedged
FX on intercompany balances and fair value adjustments; and b) Non-recurring items that management judges
to be one-off or non-operational such as gains and losses on the disposal of assets, impairment charges and
reversals, and restructuring related costs. Management applies judgement in determining which items should
be excluded from underlying performance. See note 3.6 for details of these adjustments.
In addition, underlying measures are presented on a constant currency basis with prior year amounts translated
at current year exchange rates. Prior year underlying amounts at prior year exchange rates are “underlying as
reported”; prior year and current year amounts at current year exchange rates are “underlying”.
• Organic is a non-GAAP measure. In addition to the adjustments made to the underlying measures, the
contributions from discontinued operations, disposals, and assets held for sale of standalone businesses in the
current and prior period are removed so that results can be compared to the prior year on a like-for-like basis.
Results from acquired businesses are excluded in the year of acquisition. Adjustments are made to the
comparative period to present prior period acquired businesses as if these had been part of the Group
throughout the prior period. Acquisitions and disposals which occurred close to the start of the opening
comparative period where the contribution impact would be immaterial are not adjusted.
In addition, the following reconciliations are made in this note:
• Revenue per segment reconciled to the profit for the year as per the income statement.
• Statutory operating profit reconciled to underlying operating profit per segment
(detailing the adjustments made).
Non-GAAP measures should not be viewed in isolation, nor are considered as a substitute for measures reported
in accordance with IFRS.
210
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The Sage Group plc. Annual Report and Accounts 2022
Accounting policy
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 its 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 & 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 reportable segment International – Central and Southern Europe reflects 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 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,
Middle East, Australia, Singapore and Malaysia.
Segment reporting
The tables overleaf show a segmental analysis of the results for continuing operations.
The revenue analysis in the table overleaf 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 categories are defined in note 3.1.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
2 Segment information continued
2.1 Revenue by segment
Year ended 30 September 2022
Change
Statutory
£m
Underlying
adjustments*
£m
Underlying
£m
Organic
adjustments**
£m
Organic
£m
Statutory
Underlying
Organic
Recurring revenue by segment
North America
Northern Europe
International—Central and
Southern Europe
International—Africa & APAC
Recurring revenue
Other revenue by segment
North America
Northern Europe
International—Central and
Southern Europe
International—Africa & APAC
Other revenue
Total revenue by segment
North America
Northern Europe
International—Central and
Southern Europe
International—Africa & APAC
786
427
490
140
1,843
32
6
53
13
104
818
433
543
153
Total revenue
1,947
1
1
–
–
2
–
–
–
–
–
1
1
–
–
2
787
428
490
140
1,845
32
6
53
13
104
819
434
543
153
(8)
(9)
(4)
–
779
419
486
140
(21)
1,824
(1)
–
(1)
(2)
(4)
(9)
(9)
(5)
(2)
31
6
52
11
100
810
425
538
151
1,949
(25)
1,924
23%
9%
(4%)
(8%)
9%
(30%)
(42%)
(28%)
(41%)
(32%)
19%
8%
(7%)
(12%)
5%
15%
10%
(1%)
(9%)
7%
(35%)
(42%)
(26%)
(42%)
(32%)
12%
8%
(4%)
(13%)
4%
14%
7%
4%
10%
9%
(37%)
(52%)
(23%)
(16%)
(30%)
10%
6%
1%
8%
6%
Year ended 30 September 2022
Change
Statutory
£m
Underlying
adjustments*
£m
Organic
Underlying
£m
adjustments**
£m
Organic
£m
Statutory
Underlying
Organic
1,462
381
1,843
2
–
2
1,464
381
1,845
(19)
(2)
(21)
1,445
379
1,824
14%
(7%)
9%
12%
(9%)
7%
14%
(6%)
9%
Total recurring revenue
by type
Software Subscription Revenue
Other Recurring Revenue
Recurring revenue
Notes:
* Adjustments between statutory and underlying numbers are detailed in note 3.6.
** Adjustments relate to the disposal of the Group’s Swiss business and its payroll outsourcing business in South Africa, and the acquisitions of
Brightpearl and Lockstep. See note 16.
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The Sage Group plc. Annual Report and Accounts 2022
Recurring revenue by segment
North America
Northern Europe
International—Central and Southern Europe
International—Africa & APAC
Recurring revenue
Other revenue by segment
North America
Northern Europe
International—Central and Southern Europe
International—Africa & APAC
Other revenue
Total revenue by segment
North America
Northern Europe
International—Central and Southern Europe
International—Africa & APAC
Total revenue
Total recurring revenue by type
Software Subscription Revenue
Other Recurring Revenue
Recurring revenue
Notes:
Statutory and
Underlying
as reported
£m
Impact on
foreign
exchange
£m
Underlying
£m
641
391
509
152
1,693
46
11
74
22
153
687
402
583
174
1,846
44
(1)
(13)
1
31
3
–
(2)
–
1
47
(1)
(15)
1
32
685
390
496
153
1,724
49
11
72
22
154
734
401
568
175
1,878
Year ended 30 September 2021
Organic
adjustments*
£m
–
–
(30)
(27)
(57)
–
–
(4)
(8)
(12)
–
–
(34)
(35)
(69)
Organic
£m
685
390
466
126
1,667
49
11
68
14
142
734
401
534
140
1,809
Year ended 30 September 2021
Statutory and
Underlying
as reported
£m
Impact on
foreign
exchange
£m
Underlying
£m
Organic
adjustments*
£m
1,282
411
1,693
22
9
31
1,304
420
1,724
(41)
(16)
(57)
Organic
£m
1,263
404
1,667
* Adjustments relate to the disposal of the Group’s Swiss business and its payroll outsourcing business in South Africa in the current year, 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 year.
213
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Notes to the consolidated financial statements continued
2 Segment information continued
2.2 Operating profit by segment
Year ended 30 September 2022
Change
Statutory
£m
Underlying
adjustments
£m
Underlying
£m
Organic
adjustments
£m
Organic
£m
Statutory
Underlying
Organic
Operating profit by segment
North America
Northern Europe
International—Central and
Southern Europe
International—Africa & APAC
Total operating profit
116
58
152
41
367
30
47
(61)
(6)
10
146
105
91
35
377
–
7
–
(1)
6
146
112
91
34
383
7%
(18%)
86%
(63%)
(2%)
(1%)
5%
1%
15%
2%
(2%)
12%
13%
37%
8%
Operating profit by segment
North America
Northern Europe
International—Central and Southern
Europe
International—Africa & APAC
Total operating profit
Statutory
£m
Underlying
adjustments
£m
Underlying
as reported
£m
Year ended 30 September 2021
Impact of
foreign
exchange
£m
Underlying
£m
Organic
adjustments
£m
Organic
£m
109
71
82
111
373
28
28
10
(81)
(15)
137
99
92
30
358
11
–
(2)
1
10
148
99
90
31
368
–
–
(9)
(6)
(15)
148
99
81
25
353
The results by segment from continuing operations were as follows:
Year ended 30 September 2022
Revenue
Segment statutory operating profit
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
North
America
£m
Northern
Europe
£m
Note
International
– Central and
Southern
Europe
£m
Total
reportable
segments
£m
International
– Africa &
APAC
£m
818
116
433
58
543
152
1,794
326
153
41
3.5
3.5
4
Group
£m
1,947
367
1
(31)
337
(77)
260
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The Sage Group plc. Annual Report and Accounts 2022
Reconciliation of underlying operating profit to statutory operating profit:
Year ended 30 September 2022
Underlying operating profit
Amortisation of acquired intangible assets (note 3.6)
Adjustment to acquired deferred income (note 3.6)
Other acquisition-related items (note 3.6)
Non-recurring items (note 3.6)
Statutory operating profit
North
America
£m
Northern
Europe
£m
International
– Central and
Southern
Europe
£m
Total
reportable
segments
£m
International
– Africa &
APAC
£m
146
(21)
(1)
(9)
1
116
105
(18)
(1)
(29)
1
58
91
(3)
–
(1)
65
152
342
(42)
(2)
(39)
67
326
35
–
–
–
6
41
The results by segment from continuing operations were as follows:
North
America
£m
687
109
Northern
Europe
£m
402
71
International
– Central and
Southern
Europe
£m
Total
reportable
segments
£m
International
– Africa &
APAC
£m
583
82
1,672
262
174
111
Year ended 30 September 2021
Note
Revenue
Segment statutory operating profit
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
3.5
3.5
4
Reconciliation of underlying operating profit to statutory operating profit:
Year ended 30 September 2021
Underlying operating profit as reported
Amortisation of acquired intangible assets (note 3.6)
Other acquisition-related items (note 3.6)
Non-recurring items (note 3.6)
Statutory operating profit
North
America
£m
Northern
Europe
£m
International
– Central and
Southern
Europe
£m
Total
reportable
segments
£m
International
– Africa &
APAC
£m
137
(19)
(2)
(7)
109
99
(8)
(7)
(13)
71
92
(4)
–
(6)
82
328
(31)
(9)
(26)
262
30
–
–
81
111
Impairment losses of £nil are reported by the Group during the year (2021: £nil).
Group
£m
377
(42)
(2)
(39)
73
367
Group
£m
1,846
373
1
(27)
347
(62)
285
Group
£m
358
(31)
(9)
55
373
215
215
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
2 Segment information continued
2.3 Analysis by geographic location
Management considers countries which generate more than 10% of total Group revenue to be material. Additional
disclosures have been provided below to show the proportion of revenue from these countries.
Revenue by individually significant countries
USA
UK
France
Other individually immaterial countries
2022
£m
702
409
273
563
2021
£m
584
378
281
603
1,947
1,846
Management considers countries which contribute more than 10% to total Group non-current assets to be material.
Additional disclosures have been provided below to show the proportion of non-current assets from these countries.
Non-current assets presented below exclude deferred tax assets and financial instruments.
Non-current assets by geographical location
USA
UK
France
Other individually immaterial countries
3 Profit before income tax
2022
£m
2021
£m
1,846
1,330
588
265
286
454
256
288
2,985
2,328
This note sets out the Group’s profit before tax, by looking in more detail at the key operating costs, including
a breakdown of the costs incurred as an employer, research and development costs, the cost of the external audit of
the Group’s financial statements, and finance costs. This note also sets out the Group’s revenue recognition policy.
In addition, this note explains the accounting applied to leases entered into by the Group as a lessee and analyses
the amounts recognised for leases on the balance sheet and in the income statement.
This note also provides a breakdown of any material recurring and non-recurring items that have been reported
separately on the face of the income statement.
216
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The Sage Group plc. Annual Report and Accounts 2022
3.1 Revenue
Accounting policy
The Group reports revenue under two revenue categories and the basis of recognition for each category is
described below:
Category and examples
Accounting treatment
Recurring revenue
Subscription contracts
Maintenance and
support contracts
Other revenue
Software and software-
related services
• Perpetual software licences
• Upgrades to perpetual
licences
• Professional services
• Training
Recurring revenue is revenue earned from customers for the provision of
a good or service over a contractual term, with the customer being unable to
continue to benefit from the full functionality of the good or service without
ongoing payments.
Subscription revenue is recurring revenue earned from customers for the
provision of a good or service over a contractual term. In the event that the
customer stops paying, they lose the legal right to use the software and the
Group has the ability to restrict the use of the product or service. Recurring
revenue also includes transaction and agent fees for transactions that
customers of our software execute through our digital network.
Subscription revenue and maintenance and support revenue are usually
recognised on a straight-line basis over the term of the contract as control
is transferred to the customer (including non-specified upgrades, when
included). An exception is revenue from term licences embedded within
a subscription contract for software with significant standalone functionality
which are expected to recur upon renewal of the subscription offering.
Revenue for these term licences is recognised when control is transferred at
inception of each subscription contract period.
Perpetual software licences with significant standalone functionality and
specified upgrades revenue are recognised when the control relating to the
licence has been transferred, which is typically when electronic delivery has
taken place.
Other services revenue (which includes the sale of professional services
and training) is recognised when delivered, or by reference to the stage of
completion of the transaction at the end of the reporting period. This
assessment is made by comparing the proportion of contract costs incurred
to date to the total expected costs to completion.
Identification of performance obligations
When the Group enters into an agreement with a customer, goods and services deliverable under the contract are
identified as separate performance obligations (“obligations”) to the extent that the customer can benefit from
the goods or services on their own and that the separate goods and services are considered distinct from other
goods and services in the agreement. Where individual goods and services do not meet the criteria to be identified
as separate obligations they are aggregated with other goods and/or services in the agreement until a separate
obligation is identified.
Typically, the products and services outlined in the categories of revenue section qualify as separate performance
obligations and the portion of the contractual fee allocated (or allocated based on the standalone selling prices) to
them is recognised separately. However, certain on-premise subscription contracts, which combine the delivery of
on-premise software and maintenance and support services, require unbundling. Sage cloud native services
usually do not require unbundling as the terms usually do not provide the customer with a right to terminate the
hosting contract and take possession of the software.
217
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
3 Profit before income tax continued
3.1 Revenue continued
Determination of transaction price and standalone selling prices
The Group determines the transaction price it is entitled to in return for providing the promised obligations to the
customer based on the committed contractual amounts, net of sales taxes and discounts. Contract terms generally
are monthly or annual, and customers either pay up-front or over the term of the related service agreement.
The transaction price is allocated between the identified obligations according to the relative standalone selling
prices (SSPs) of the obligations. The SSP of each obligation deliverable in the contract is determined according to
the prices that the Group would obtain by selling the same goods and/or services included in the obligation to
a similar customer on a standalone basis. 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.
Timing of recognition
Revenue is recognised when the respective obligations in the contract are delivered to the customer and payment
remains probable.
• Licences for standard on-premise software products are typically delivered by providing the customer with
access to download the software. The licence period starts when such access is granted. Licence revenue is
recognised at a point in time or over time depending on whether the Group delivers software with significant
standalone functionality or software which is dependent on updates for ongoing functionality. The Group
recognises revenue for these licences which have significant standalone functionality at the point in time when
the customer has access to and control over the software. For licences which are dependent on updates for
ongoing functionality, the Group recognises revenue based on time elapsed and thus rateably over the term
of the contract. Typically, this includes our payroll and tax compliance software.
• Where the Group’s performance obligation is the grant of a right to continuously access a cloud offering for
a certain term, revenue is recognised based on time elapsed and thus rateably over the term.
• Maintenance and support revenue is typically recognised based on time elapsed and thus rateably over the
term of the support arrangement. Under the standardised maintenance and support services, the Group’s
performance obligation is to stand ready to provide technical product support and unspecified updates,
upgrades, and enhancements on a when-and-if-available basis. The customers simultaneously receive and
consume the benefits of these services.
• Professional services and training revenue are typically recognised over time. Where the Group stands ready to
provide the service (such as access to learning content), revenue is recognised based on time elapsed and thus
rateably over the service period. Consumption-based services (such as separately identifiable professional
services and premium support services, messaging services, and classroom training services) are recognised
over time as the services are utilised, typically following the percentage-of-completion method or rateably.
Identification of contract with the customer
When the Group sells goods or services through a business partner, a key consideration is determining whether the
business partner or the end user is Sage’s customer. 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. See “Critical accounting
estimates and judgements” in note 1 for details.
218
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The Sage Group plc. Annual Report and Accounts 2022
Principal versus agent considerations
When the Group has control of third-party goods or services prior to delivery to a customer, then the Group is the
principal in the sale to the customer. As a principal, receipts from customers and payments to suppliers are
reported on a gross basis in revenue and cost of sales. If the Group does not have control of third-party goods or
services prior to transfer to a customer, then the Group is acting as an agent for the other party and revenue in
respect of the relevant obligations is recognised net of any related payments to the supplier and reported revenue
represents the margin earned by the Group. Whether the Group is considered to be the principal or an agent in the
transaction depends on analysis by management of both the legal form and substance of the agreement between
the Group and its supplier. This takes into account whether Sage bears the price, inventory, and performance risks
associated with the transaction.
Practical expedients
As the majority of contracts have a term of one year or less, the Group has applied the following
practical expedients:
• The aggregate transaction price allocated to the unsatisfied or partially unsatisfied performance obligations
at the end of the reporting period is not disclosed.
• Any financing component is not considered when determining the transaction price.
3.2 Operating profit
Accounting policy
Cost of sales includes items such as third-party royalties, hosting costs, transaction, and credit card fees related
to the provision of payment processing services and the cost of hardware and inventories. These also include the
third-party costs of providing training and professional services to customers. All other operating expenses
incurred in the ordinary course of business are recorded in selling and administrative expenses.
The following items have been included in arriving at operating profit from continuing operations
Note
Staff costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Customer acquisition amortisation expense
Gain on disposal of subsidiaries
Other acquisition-related items
7
6.2
9.1
3.6
3.6
2022
£m
905
41
56
123
(53)
39
2021
£m
968
43
44
101
(126)
9
The Group incurred £302m (2021: £281m) of research and development expenditure in the year, of which £257m
(2021: £242m) relates to total Group staff costs included above. See note 6.2 for the research and development
accounting policy.
In the prior year, depreciation of property, plant and equipment includes £9m of accelerated depreciation charge,
resulting from accelerated depreciation on the Group’s UK North Park office following the announced relocation to
Cobalt Business Park. The Group had reviewed its estimates of the useful lives and residual values of the assets relating
to the previous site in anticipation of the move. As at 30 September 2021, these assets were presented on the balance
sheet within assets held for sale and subsequently sold in October 2021; see note 16.2. The accelerated depreciation
charge is classified as a non-recurring adjustment between underlying and statutory results, as explained in note 3.6.
219
219
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
3 Profit before income tax continued
3.2 Operating profit continued
Services provided by the Group’s auditor and network firms
During the year, the Group obtained the following services from the Group’s auditor at costs as detailed below:
Fees payable to the Group’s auditor for the audit of the Company and the consolidated accounts
Fees payable to the Group’s auditor for the audit of the Company’s subsidiaries
Fees payable to the Group’s auditor for audit-related assurance services*
Total audit and audit-related services
Other non-audit services
Total fees
Note:
*
Includes costs relating to the half-year review.
2022
£m
2021
£m
2
3
–
5
–
5
2
3
–
5
–
5
A summary of the Board’s policy in respect of the procurement of non-audit services for the Group’s auditor is set out
on page 147.
3.3 Employees and Directors
Average monthly number of people employed (including Directors)
By segment:
North America
Northern Europe
International—Central and Southern Europe
International—Africa & APAC
Staff costs (including Directors on service contracts)
Wages and salaries
Social security costs
Post-employment benefits
Share-based payments
2022
number
2021
number
2,640
3,686
3,715
1,187
11,228
2022
£m
802
102
24
36
964
2,671
3,446
4,169
1,499
11,785
2021
£m
868
103
22
36
1,029
Note
11
15.2
Staff costs include a total of £59m of capitalised commission costs which are amortised over the expected contract life
including probable contract renewals (2021: £61m).
Key management compensation
Salaries and short-term employee benefits
Share-based payments
2022
£m
10
5
15
2021
£m
8
4
12
Key management personnel are deemed to be members of the Group’s Executive Leadership Team and the Non-executive
Directors as shown on pages 110 to 113. The key management figures given above include the Executive Directors of
the Group.
220
220
The Sage Group plc. Annual Report and Accounts 2022
3.4 Leases
Accounting policy
The Group as lessee
The Group recognises lease assets and lease liabilities on the balance sheet for most of its leases to account for
the right to use leased items and the obligation to make future lease payments. Lease liabilities are measured
at the present value of future lease payments over the lease term. The lease term is determined as the non-
cancellable term of the lease, together with any periods covered by an option to extend the lease if the option is
reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if the option is
reasonably certain not to be exercised. Lease payments normally include fixed payments (including in-substance
fixed payments), a deduction for any lease incentives receivable and variable lease payments that depend on an
index or a rate. In the event that a lease includes an exercise price for a purchase option that is reasonably certain
to be exercised, or a termination penalty that is reasonably certain to be incurred, these too are included in lease
payments as are any amounts expected to be paid under any residual value guarantees. Variable lease payments
that do not depend on an index or a rate are not included in the lease liability but are recognised as an expense
when incurred.
Lease payments are discounted using the incremental borrowing rate applicable to the lease at the lease
commencement date, as the rate implicit in the lease cannot normally be readily determined. Lease assets are
recognised at the amount of the lease liability, adjusted where applicable for any lease payments made or lease
incentives received before commencement of the lease, direct costs incurred at the commencement of the lease
and estimated restoration costs to be incurred at the end of the lease.
Right-of-use assets are presented within property, plant and equipment, and depreciated on a straight-line basis
over the shorter of their useful life and the lease term. Their carrying amounts are measured at cost less
accumulated depreciation and impairment losses. Lease liabilities are presented within current and non-current
borrowings. Over the lease term, the carrying amounts of lease liabilities are increased to reflect interest on
the liability and reduced by the amount of lease payments made. A lease liability is remeasured if there is
a modification, a change in the lease term or a change in lease payments. The costs of these leases are recognised
in the income statement split between the depreciation of the lease asset and the interest charge on the lease
liability. Depreciation is presented within selling and administrative expenses and interest charges within
finance costs.
This policy applies mainly to the Group’s leases for properties and vehicles. For short-term leases with a lease term
of 12 months or less and leases of low-value items, the Group has elected to apply the exemptions available under
the standard. For these leases, rentals payable are charged to the income statement on a straight-line basis as an
operating expense presented within selling and administrative expenses. Where rent payments are prepaid or
accrued, their balances are reported under prepayments and accruals respectively. The low-value exemption has
been applied to most of the Group’s leases of IT and other office equipment.
The Group leases various office and warehouse properties and vehicles, plant and equipment under non-
cancellable lease agreements. Leases of properties have a range of lease terms, up to a maximum of 15 years.
Other leases are generally for lease terms of 3 or 4 years. Property leases include various contractual terms,
most commonly variable lease payments and termination and extension options.
221
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
3 Profit before income tax continued
3.4 Leases continued
The carrying amounts of right-of-use assets and their movements during the year are presented in note 7.
The carrying amounts of lease liabilities and their movements during the year are below.
At 1 October
• Additions
•
Interest charge in the year
• Payment of lease liabilities
• Exchange movement
At 30 September
Presented as
Borrowings—current
Borrowings—non-current
The maturity analysis of lease liabilities is included in note 13.2.
Amounts recognised in profit and loss for leases are as follows:
Depreciation of right-of-use assets
Interest expense charge on lease liabilities
Lease expense from short-term leases and leases of low-value assets
(included in selling and administrative expenses)
Note
13.4
13.4
Note
3.5
2022
£m
100
6
3
(22)
8
95
17
78
2022
£m
19
3
4
26
2021
£m
113
9
3
(23)
(2)
100
18
82
2021
£m
17
3
3
23
Total cash outflows for leases in the year, including interest payments and outflows related to short-term leases and
leases of low-value assets, was £26m (2021: £26m).
The Group is exposed to potential future increases in variable lease payments that are based on an index or rate, which
are initially measured as at the commencement date, with any future changes in the index or rate excluded from the
lease liability until they take effect. If adjustments to lease payments based on an index or rate take effect, the lease
liability will be reassessed and adjusted against the right-of-use asset.
222
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The Sage Group plc. Annual Report and Accounts 2022
3.5 Finance income and costs
Accounting policy
Finance income and costs are recognised using the effective interest method. Finance costs are recognised in the
income statement simultaneously with the recognition of an increase in a liability or the reduction in an asset.
Derivative financial instruments are measured at fair value through profit or loss, within finance income and costs,
unless they are designated as a hedging instrument. Where derivative financial instruments have been designated
as hedging instruments, gains or losses on those instruments are recognised in finance income and costs only to
the extent the hedging relationship is ineffective. Where the hedging relationship is effective, gains or losses are
accumulated in the foreign currency translation reserve. Foreign currency movements on intercompany balances
are recognised in the profit and loss account unless settlement is not planned or likely in the foreseeable future,
in which case they are recognised in other comprehensive income.
Finance income:
Interest income on short-term deposits
Finance income
Finance costs:
Finance costs on bank borrowings
Finance costs on US senior loan notes and bond notes
Interest charge on lease liabilities
Amortisation of issue costs
Finance costs
2022
£m
1
1
(1)
(26)
(3)
(1)
(31)
2021
£m
1
1
(5)
(16)
(3)
(3)
(27)
Finance costs—net
(30)
(26)
223
223
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
3 Profit before income tax continued
3.6 Adjustments between underlying and statutory results
Accounting policy
The business is managed and measured on a day-to-day basis using underlying results. To arrive at underlying
results, certain adjustments are made for items that are individually important (due to their size, nature,
or frequency).
Management applies judgement in determining which items should be excluded from underlying performance.
Recurring items
These are items which occur regularly, but the exclusion of which management considers necessary to aid
understanding of the underlying results of the Group. These items relate mainly to fair value adjustments on
financial instruments and merger and acquisition (M&A) related activity, although other types of recurring items
may arise. M&A activity by its nature is irregular in its impact and includes amortisation of acquired intangible
assets, adjustments to acquired deferred income and acquisition and disposal-related costs, including integration
costs relating to an acquired business and acquisition-related remuneration (which are typically incurred over
a period of 1 year or more). Unhedged foreign currency movements on intercompany balances that are charged
through the income statement are excluded from underlying results, so that exchange rate impacts do not affect
comparisons. Recurring items are adjusted each year irrespective of materiality to ensure consistent treatment.
Non-recurring items
These are items which are non-recurring and are adjusted on the basis of either their size or their nature. These
items can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and
reversals, and restructuring-related costs. Whilst these items are described as non-recurring, similar costs, for
example in relation to different restructuring programmes or impairments of other assets, may arise in future
periods. As these items are one-off or non-operational in nature, management considers that their exclusion aids
understanding of the Group’s underlying business performance
M&A activity-related items
Amortisation of acquired intangibles
Gain on disposal of subsidiaries
Adjustment to acquired deferred income
Other M&A activity-related items
Other items
(Reversal of)/restructuring costs
Office relocation
Total adjustments made to operating profit
Fair value adjustments
Foreign currency movements on intercompany balances
Total adjustments made to profit before income tax
Recurring
2022
£m
Non-
recurring
2022
£m
Total
2022
£m
Recurring
2021
£m
Non-
recurring
2021
£m
Total
2021
£m
42
–
2
39
–
–
83
–
(1)
82
–
(53)
–
–
(20)
–
(73)
–
–
(73)
42
(53)
2
39
(20)
–
10
–
(1)
9
31
–
–
9
–
–
40
1
–
41
–
31
(126)
(126)
–
–
62
9
(55)
–
–
–
9
62
9
(15)
1
–
(55)
(14)
224
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The Sage Group plc. Annual Report and Accounts 2022
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. Further details
including specific accounting policies in relation to these assets can be found in note 6.2.
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. £14m (2021: £7m) of these costs have
been paid in the year, while the remainder is expected to be paid in subsequent financial years.
Foreign currency movements on intercompany balances occur due to retranslation of unhedged intercompany
balances other than those where settlement is not planned or likely in the foreseeable future and resulted in a gain
of £1m (2021: £nil).
In the prior year, fair value adjustments of £1m were in relation to an embedded derivative asset which related to
contractual terms agreed as part of the US private placement debt. The related US private placement debt matured
during the current year, resulting in the extinguishment of the embedded derivative asset. There were no associated
gains or losses.
Non-recurring items
Net credit in respect of non-recurring items amounted to £73m (2021: net credit £55m).
The gain on disposal of subsidiaries of £53m relates to the disposal of the Group’s Swiss business (£49m) and the Group’s
payroll outsourcing business in South Africa (£4m). In the prior year, the gain on disposal of subsidiaries of £126m
related to the Group’s Polish business (£41m) and the Group’s Australia and Asia Pacific business (£85m). Further details
can be found in note 16.2.
Reversal of restructuring costs of £20m primarily relates to unutilised provisions recognised in the prior year, as some
colleagues were redeployed or left the business (2021: charge £67m). The provision was recognised in the prior year
following the implementation of a business transformation plan to rebalance investment towards the Group's strategic
priorities and simplify the business.
In the prior year, the restructuring costs of £62m were comprised of charges of £67m noted above, offset by the reversal
of £5m of previous restructuring costs related to unutilised Professional Service provisions created in 2020.
In the prior year, office relocation costs of £9m related to the incremental depreciation charge resulting from
accelerated depreciation in the UK North Park office in advance of the relocation to Cobalt Business Park. Further
details can be found in note 3.2.
See note 4 for the tax impact of these adjustments.
225
225
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
4 Income tax expense
This note analyses the tax expense for this financial year which includes both current and deferred tax. Current tax
expense represents the amount payable on this year’s taxable profits and any adjustments relating to prior years.
Deferred tax is an accounting adjustment to recognise liabilities or benefits that are expected to arise in the
future due to differences between the carrying values of assets and liabilities and their respective tax bases.
This note outlines the tax accounting policies, analyses the current and deferred tax expenses in the year and
presents a reconciliation between profit before tax in the income statement multiplied by the UK rate of
corporation tax and the tax expense for the year.
Accounting policy
The taxation expense for the year represents the sum of current tax and deferred tax. The expense is recognised
in the income statement, in the statement of comprehensive income or in equity according to the accounting
treatment of the related transaction.
Current tax is based on the taxable income for the period and any adjustment in respect of prior periods. Current
tax is calculated using tax rates that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases (note 12).
Analysis of expense in the year
Current income tax
Current tax on profit for the year
Adjustment in respect of prior years
Current income tax
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior years
Deferred tax
The current year tax expense is split into the following:
Underlying tax expense
Tax credit on adjustments between the underlying and statutory operating profit
Income tax expense reported in income statement
Note
12
2022
£m
76
(7)
69
3
5
8
83
(6)
77
2021
£m
79
(4)
75
(14)
1
(13)
83
(21)
62
A deferred tax charge of £2m relating to employee benefits has been recognised directly in other comprehensive income
(2021: £nil). A current tax benefit of £6m relating to foreign currency derivatives and share options has been recognised
directly in other comprehensive income (2021: £nil).
226
226
The Sage Group plc. Annual Report and Accounts 2022
The effective tax rate for the year is higher (2021: lower) than the rate of UK corporation tax applicable to the Group of
19% (2021: 19%). The differences are explained below:
Profit before income tax
Statutory profit before income tax multiplied by the rate of UK corporation tax of 19% (2021: 19%)
Tax effects of:
Adjustments in respect of prior years
Foreign tax rates in excess of UK rate of tax
US tax reform
Non-deductible expenses and permanent items
Other corporate taxes (withholding tax, business tax)
Tax incentive claims
Non-taxable gain on disposal
At the effective income tax rate of 23% (2021: 18%)
Income tax expense reported in the income statement
2022
£m
337
64
(2)
19
1
8
8
(12)
(9)
77
77
2021
£m
347
66
(3)
18
(1)
10
6
(14)
(20)
62
62
The underlying effective tax rate for the year is higher (2021: higher) than the rate of UK corporation tax applicable to the
Group of 19% (2021: 19%). The differences are explained below:
Underlying profit before income tax
Underlying profit before income tax multiplied by the rate of UK corporation tax of 19% (2021: 19%)
Tax effects of:
Adjustments in respect of prior years
Foreign tax rates in excess of UK rate of tax
US tax reform
Non-deductible expenses and permanent items
Other corporate taxes (withholding tax, business tax)
Tax incentive claims
At the effective income tax rate of 24% (2021: 25%)
Underlying tax expense
2022
£m
346
66
(2)
19
1
3
8
(12)
83
83
2021
£m
333
63
(1)
23
(1)
7
6
(14)
83
83
The effective tax rate on statutory profit before tax was 23% (2021: 18%), whilst the effective tax rate on underlying profit
before tax on continuing operations was 24% (2021: 25%). The statutory effective tax rate is lower than the underlying
effective tax rate, mainly due to non-taxable accounting net gains on our disposals in the year.
The underlying effective tax rate is higher than the UK corporation tax rate applicable to the Group, primarily due to the
geographic profile of the Group and the inclusion of local business taxes in the corporate tax expense. This net increase
to the rate is offset by innovation tax credits for registered patents and software, and research and development
activities which attract government tax incentives in a number of operating territories. The underlying effective
tax rate was decreased in the year, principally due to a reduction in the French corporation tax rate and certain
non-recurring items.
The Group recognises certain provisions and accruals in respect of tax which involve a degree of estimation and
uncertainty where the tax treatment cannot finally be determined until a resolution has been reached by the relevant tax
authority. This approach resulted in a provision of £24m at 30 September 2022 (2021: £34m). The provision decreased in
the year principally due to developments in the EU State Aid matter, as discussed below.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
4 Income tax expense continued
The tax provision is sensitive to a number of issues which are not always within the control of the Group and are often
dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which the Group operates.
Issues can take many years to resolve and assumptions on the likely outcome have therefore been made by management.
Management has applied the principles set out in IFRIC 23 in determining the measurement of uncertain tax positions.
In making these estimates, management’s judgement was based on various factors including:
• The status of recent and current tax audits and enquiries;
• The results of previous claims; and
• Any changes to the relevant tax environment.
When making this assessment, the Group utilise our specialist in-house tax knowledge and experience of similar
situations. These judgements also, where appropriate, take into consideration specialist tax advice provided by third-
party advisors.
Management continually assesses the impact of legislative developments in the jurisdictions in which we operate. As the
main UK corporation tax rate will increase from 19% to 25% from 1 April 2023, the Group expects its effective tax rate to
increase by 1–2% in the medium term, depending on our future geographic profit mix. The OECD’s two pillar global tax
reform, expected to apply to the Group from the financial year ended 30 September 2025, may also have an impact on the
Group’s tax profile and is actively monitored by management.
EU State Aid
The Group continues to monitor developments following the EU Commission’s decision published on 25 April 2019 that
the UK’s Controlled Foreign Company regime does not comply with EU State Aid rules in certain circumstances.
In the prior year, the Group made a payment to HMRC of £10m following the EU Commission’s decision. This was
recognised in the financial year ended 30 September 2021 as a receivable on the expectation that the UK would be
successful in its appeal. HMRC previously confirmed that if the State Aid appeal is unsuccessful, then this exposure
can be offset against a separate matter, for which the Group holds an uncertain tax provision.
On 8 June 2022, the EU General Court dismissed the UK Government’s appeal and ruled in favour of the EU. Management
have re-assessed the Group’s position on this matter and concluded that it is more likely than not that the EU
Commission’s decision will be upheld.
As a result, a previously recognised receivable of £10m in relation to the matter has been derecognised, offset against
a decrease of a recorded tax provision, with no net impact on the income statement.
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5 Earnings per share
This note sets out how earnings per share (“EPS”) is calculated. EPS is the amount of post-tax profit attributable
to each ordinary share. Diluted EPS shows what the impact would be if all potentially dilutive ordinary shares in
respect of exercisable share options were exercised and treated as ordinary shares at the year end.
This note also provides a reconciliation between the statutory profit figure, which ties to the consolidated income
statement, and the Group’s internal measure of performance, underlying profit. See note 3.6 for details of the
adjustments made between statutory and underlying profit, and note 4 for the tax impact on these adjustments.
Accounting policy
Basic earnings per share is calculated by dividing the profit for the year attributable to owners of the parent by
the weighted average number of ordinary shares in issue during the year, 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, exercisable at the end of the year. 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 year.
Reconciliations of the earnings and weighted average number of shares
Earnings attributable to owners of the parent** (£m)
Underlying
2022
Underlying as
reported*
2021
Underlying
2021
Statutory
2022
Statutory
2021
Profit for the year
263
250
257
260
285
Number of shares (millions)
Weighted average number of shares
Dilutive effects of shares
Earnings per share attributable to owners of the parent**
(pence)
1,020
12
1,032
1,080
10
1,090
1,080
10
1,090
1,020
12
1,032
1,080
10
1,090
Basic earnings per share
25.74
23.09
23.79
25.47
26.33
Diluted earnings per share
25.44
22.87
23.57
25.17
26.08
Note:
* Underlying as reported is at 2021 reported exchange rates.
** All operations in the years relate to continuing operations.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
5 Earnings per share continued
Reconciliation of earnings
Earnings—statutory profit for the year attributable to owners of the parent
Adjustments:
• Amortisation of acquired intangible assets
• Gain on disposal of subsidiaries
• Adjustment to acquired deferred income
• Other M&A activity-related items
• (Reversal of)/restructuring costs
• Office relocation
• Foreign currency movements on intercompany balances
• Fair value adjustments
• Taxation on adjustments between underlying and statutory profit before tax
Net adjustments
Earnings—underlying profit for the year (before exchange movement)
Exchange movement
Taxation on exchange movement
Net exchange movement
2022
£m
260
42
(53)
2
39
(20)
–
(1)
–
(6)
3
263
–
–
–
2021
£m
285
31
(126)
–
9
62
9
–
1
(21)
(35)
250
10
(3)
7
Earnings—underlying profit for the year (after exchange movement) attributable to owners
of the parent
263
257
Exchange movement relates to the retranslation of prior year results to current year exchange rates, as shown in the table
on page 89 within the Financial Review.
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The Sage Group plc. Annual Report and Accounts 2022
6 Intangible assets
This note provides details of the non-physical assets used by the Group to generate revenues and profits.
These assets include items such as goodwill, and other intangible assets such as brands, customer relationships,
computer software, in-process R&D and technology which have predominantly been acquired as part of business
combinations. These assets are initially measured at fair value, which is the price that would be received to sell
an asset in an orderly transaction between market participants at the measurement date.
Goodwill represents the excess of the amount paid to acquire a business over the fair value of the identifiable net
assets of that business at the acquisition date.
This section also explains the accounting policies applied and the specific judgements and estimates made by the
Directors in arriving at the carrying value of these assets.
6.1 Goodwill
Accounting policy
Goodwill arising from the acquisition of a subsidiary represents the excess of the consideration transferred, the
amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity
interest in the acquiree over the fair value of the Group’s total identifiable net assets acquired. Goodwill is carried
at cost less accumulated impairment losses.
Goodwill previously written off directly to reserves under UK GAAP prior to 1 October 1998 has not been reinstated
and is not recycled to the income statement on the disposal of the business to which it relates.
Goodwill is tested for impairment annually and when circumstances indicate that it may be impaired. Goodwill is
assessed for the purpose of impairment testing, at either the individual CGU level or group of CGUs, consistent
with the level at which goodwill is monitored internally. Impairment is determined by assessing the recoverable
amount of each CGU or group of CGUs to which the goodwill relates. When the recoverable amount of the CGU or
group of CGUs is less than its carrying amount, an impairment loss is recognised.
At recognition, goodwill is allocated to those CGUs expected to benefit from the synergies of the combination.
Cost and net book amount at 1 October
Acquisition of subsidiaries
Disposals of subsidiaries*
Transfer to held for sale**
Exchange movement
Cost and net book amount at 30 September
Notes:
Note
16.1
2022
£m
1,877
255
–
–
284
2,416
2021
£m
1,962
–
(11)
(2)
(72)
1,877
*
In 2021, the amount relates to finalisation of the sale of the Group’s Polish business and Australia and Asia Pacific business.
**
In 2021, the amount relates to reassessment of goodwill allocated to held for sale entities.
There were no accumulated impairment charges within goodwill for any of the years presented.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
6 Intangible assets continued
6.1 Goodwill continued
Cash-generating units
The following table shows the allocation of the carrying value of goodwill at the end of the reporting period by CGU or
group of CGUs:
North America
UK & Ireland
France
Iberia
Central Europe
Africa and the Middle East
Unallocated—Lockstep business combination*
Note:
2022
£m
1,542
352
222
133
56
28
83
2021
£m
1,154
295
217
130
53
28
–
2,416
1,877
* Unallocated goodwill relates to Lockstep, which was acquired on 30 August 2022 and calculated on a provisional basis. See note 16.1. In accordance with
IAS 36, goodwill will be allocated before the end of the first annual period beginning after the acquisition date, being by 30 September 2023.
Annual goodwill impairment tests
The recoverable amount of a CGU or group of CGUs is determined as the higher of its fair value less costs of disposal and
its value in use. In determining value in use, estimated future cash flows are discounted to their present value. The Group
performed its annual test for impairment as at 30 June 2022. In all cases, the Group’s three-year financial plan forms the
basis for the cash flow projections for a CGU or a group of CGUs, which is aligned with the Group’s three-year strategic
planning horizon. Net operating cash flows used in the impairment tests reflect the Group’s current assessment of the
impact of climate change and associated commitments the Group has made in the short-term. Specific consideration
has also been given to the potential impacts of climate change on long-term growth rates, with no material impact on
the carrying value of goodwill. Beyond the three-year period, these projections are extrapolated using an estimated
long-term growth rate. The key assumptions in the value in use calculations are the average medium-term revenue
growth rates and the long-term growth rates of net operating cash flows:
• The average medium-term revenue growth rates represent the compound annual revenue growth for the first three
years. The average medium-term revenue growth rate applied to each CGU’s cash flow projections for plan periods of
three years are calculated using the specific rates used in the preparation of those plans and reflect rates applicable
to each territory.
• Long-term growth rates of net operating cash flows are assumed to be equal to the long-term growth rate in the gross
domestic product of the country in which the CGU’s operations are undertaken, reflecting the specific rates for
each territory.
Range of rates used across the different CGUs
Average medium-term revenue growth rates*
Long-term growth rates to net operating cash flows
Note:
2022
2021
8%–17%
4%–13%
1%–3%
1%–3%
* Average medium-term revenue growth rate is calculated on value in use projections that exclude intercompany revenue.
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In accordance with IAS 36, key assumptions for the value in use calculations are disclosed for those CGUs and groups of
CGUs where significant goodwill is held. These are deemed by management to be CGUs or groups of CGUs holding more
than 10% of total goodwill. The discount rate, average medium-term revenue growth rate and long-term growth rate
assumptions used for the value in use calculation for these are shown below:
2022
UK & Ireland
France
North America
2021
UK & Ireland
France
North America
Note:
Local
discount rate
(post-tax)
Approximate
local discount
rate (pre-tax)
equivalent
Long-term
growth
rate
Average
medium-term
revenue
growth rate*
7.8%
7.8%
8.7%
10.4%
10.4%
11.7%
1.2%
1.3%
1.4%
11.4%
7.8%
16.5%
Local
discount rate
(post-tax)
Approximate
local discount
rate (pre-tax)
equivalent
Long-term
growth
rate
Average
medium-term
revenue
growth rate*
7.7%
7.7%
8.6%
10.2%
10.4%
11.4%
2.1%
2.0%
1.9%
11.5%
6.9%
12.7%
* Average medium-term revenue growth rate is calculated on value in use projections that exclude intercompany revenue. Current year average medium-
term revenue growth is based on three (2021: three) year compound annual revenue growth.
Discount rate
The Group uses a discount rate based on a local Weighted Average Cost of Capital (WACC) for each CGU or group of CGUs,
applying local government yield bonds and tax rates to each CGU or group of CGUs on a geographical basis. The discount
rate applied to a CGU or group of CGUs represents a post-tax rate that reflects the market assessment of the time value
of money as at 30 June 2022 and the risks specific to the CGU or group of CGUs.
Use of a post-tax discount rate is consistent with the use of post-tax cash flows in the calculations and produces a result
that is not materially different from applying the equivalent pre-tax rate to pre-tax cash flows. For comparison, the
equivalent pre-tax rate has been estimated by grossing up the post-tax rate and is considered to provide a reasonable
approximation of the rate that would have been used if calculations were on a pre-tax basis considering there are no
significant timing differences. The post-tax discount rates applied to CGUs or groups of CGUs were in the range of 7.0%
(2021: 6.8%) to 16.5% (2021: 17.0%), reflecting the specific rates for each territory.
Sensitivity analysis
A sensitivity analysis was performed for each of the significant CGUs or groups of CGUs and, other than for the Iberia
CGU, management concluded that no reasonably possible change in any of the key assumptions would result in the
carrying value of the CGU or group of CGUs to exceed its recoverable amount.
For the Iberia CGU, a reasonably possible change of a 2% increase in the discount rate combined with a decrease in the
average medium-term revenue growth rate by 8% p.a. against plan for the next three years would reduce the value in use
by £133m down to its carrying value. The Group has concluded that no reasonably possible change in the long-term
growth rate would reduce the recoverable amount to below its carrying value, even considering a reasonably possible
decrease in the average medium-term revenue growth rate.
Impairment charge
No impairment charge was recognised in the year (2021: £nil).
The Group performed its annual test for impairment for all CGUs as at 30 June 2022. The recoverable amount exceeded
the carrying value for each CGU or group of CGUs; accordingly no impairment charge has been recognised in the year.
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Notes to the consolidated financial statements continued
6 Intangible assets continued
6.2 Other intangibles
Accounting policy
Intangible assets arising on business combinations are recognised initially at fair value at the date of acquisition.
Subsequently they are carried at cost less accumulated amortisation and impairment charges. The main intangible
assets recognised are brands, technology, in-process R&D, computer software, and customer relationships.
Amortisation is charged to the income statement on a straight-line basis over their estimated useful lives.
The estimated useful lives are as follows:
Brand names
1 to 20 years
Customer relationships 4 to 15 years
Technology/In-process R&D (IPR&D)
3 to 8 years
Computer software
2 to 7 years
Other intangible assets that are acquired by the Group are stated at cost, which is the asset’s purchase price and
any directly attributable costs of preparing the asset for its intended use, less accumulated amortisation and
impairment losses if applicable.
The carrying value of intangibles is reviewed for impairment whenever events indicate that the carrying value may
not be recoverable.
Internally generated software development costs qualify for capitalisation when the Group can demonstrate all of
the following:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale;
•
•
Its intention to complete the intangible asset and use or sell it;
Its ability to use or sell the intangible asset;
• How the intangible asset will generate probable future economic benefits;
• The existence of a market or, if it is to be used internally, the usefulness of the intangible asset;
• The availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
•
Its ability to measure reliably the expenditure attributable to the intangible asset during development.
Generally, commercial viability of new products is not proven until all high-risk development issues have been
resolved through testing pre-launch versions of the product. As a result, technical feasibility is proven only after
completion of the detailed design phase and formal approval, which occurs just before the products are ready to go
to market. Accordingly, development costs have not been capitalised. However, the Group continues to assess the
eligibility of development costs for capitalisation on a project-by-project basis.
Costs which are incurred after the general release of internally generated software or costs which are incurred in
order to enhance existing products are expensed in the period in which they are incurred and included within
research and development expense in the financial statements.
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The Sage Group plc. Annual Report and Accounts 2022
Internal
IPR&D
£m
Computer
software
£m
Customer
relationships
£m
Cost at 1 October 2021
Additions
Acquisition of subsidiaries
Disposals
Exchange movement
At 30 September 2022
Accumulated amortisation at 1 October 2021
Charge for the year
Disposals
Exchange movement
At 30 September 2022
Brands
£m
Technology
£m
32
195
–
–
–
3
19
75
–
16
35
305
30
1
–
2
33
127
27
–
12
166
Net book amount at 30 September 2022
2
139
3
–
–
–
–
3
3
–
–
–
3
–
Cost at 1 October 2020
Additions
Disposals
Exchange movement
At 30 September 2021
Accumulated amortisation at 1 October 2020
Charge for the year
Disposals
Exchange movement
At 30 September 2021
34
–
–
(2)
32
31
1
–
(2)
30
187
14
–
(6)
195
113
17
–
(3)
127
Net book amount at 30 September 2021
2
68
4
–
(1)
–
3
4
–
(1)
–
3
–
160
10
–
(10)
17
177
109
14
(10)
15
128
164
–
35
–
26
225
95
14
–
12
121
154
16
(5)
(5)
171
–
–
(7)
160
164
105
13
(5)
(4)
109
85
13
–
(3)
95
Total
£m
554
29
110
(10)
62
745
364
56
(10)
41
451
Total
£m
550
30
(6)
(20)
554
338
44
(6)
(12)
364
49
104
294
Brands
£m
Technology
£m
Internal
IPR&D
£m
Computer
software
£m
Customer
relationships
£m
51
69
190
All amortisation charges in the year have been charged through selling and administrative expenses. Of these
amortisation charges, £42m (2021: £31m) has been classified as a recurring adjustment; see note 3.6.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
7 Property, plant and equipment
This note details the physical assets used by the Group to operate the business and generate revenues and profits.
Assets are shown at their purchase price less depreciation, which is an expense that is charged over the useful life
of these assets to reflect annual usage and wear and tear, and impairment.
Accounting policy
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Depreciation on property, plant and equipment is provided on a straight-line basis to write down an asset to its
residual value over its useful life as follows:
Freehold buildings
• Up to 50 years
Long leasehold buildings and improvements
• Shorter of lease term and useful life
Plant and equipment
Motor vehicles
Office equipment
Right-of-use lease assets
Freehold land is not depreciated.
• 2 to 7 years
• 4 years
• 2 to 7 years
• Shorter of lease term and useful life
An item of property, plant and equipment is reviewed for impairment whenever events indicate that its carrying
value may not be recoverable.
Further information on the policy applied to right-of-use lease assets is included in note 3.4.
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The Sage Group plc. Annual Report and Accounts 2022
Land and
buildings
£m
Plant and
equipment
£m
Motor
vehicles and
office
equipment
£m
Right-of-
use assets:
Property
£m
Right-of-
use assets:
Vehicles
£m
Right-of-
use assets:
Total
£m
Total
£m
319
18
2
(50)
22
311
155
41
(50)
13
159
Total
£m
375
49
(22)
(75)
(8)
319
202
43
(21)
(65)
(4)
155
121
6
–
(5)
10
132
36
19
(5)
3
53
121
8
(5)
–
(3)
121
25
17
(4)
–
(2)
36
Cost at 1 October 2021
Additions
Acquisition of subsidiaries
Disposals
Exchange movement
At 30 September 2022
Accumulated depreciation at
1 October 2021
Charge for the year
Disposals
Exchange movement
At 30 September 2022
Net book amount at 30 September 2022
11
–
–
–
3
14
5
–
–
1
6
8
141
11
2
(27)
7
134
77
19
(27)
7
76
46
1
–
(18)
2
31
37
3
(18)
2
24
116
5
–
(5)
10
126
33
17
(5)
3
48
58
7
78
5
1
–
–
–
6
3
2
–
–
5
1
79
152
Land and
buildings
£m
Plant and
equipment
£m
Motor
vehicles and
office
equipment
£m
Right-of-use
assets:
Property
£m
Right-of-use
assets:
Vehicles
£m
Right-of-use
assets:
Total
£m
Cost at 1 October 2020
Additions
Disposals
Transfer to held for sale
Exchange movement
At 30 September 2021
Accumulated depreciation at
1 October 2020
Charge for the year
Disposals
Transfer to held for sale
Exchange movement
At 30 September 2021
Net book amount at 30 September 2021
87
–
–
(75)
(1)
11
61
9
–
(65)
–
5
6
117
38
(11)
–
(3)
141
76
14
(11)
–
(2)
77
50
3
(6)
–
(1)
46
40
3
(6)
–
–
37
114
8
(3)
–
(3)
116
22
16
(3)
–
(2)
33
64
9
83
7
–
(2)
–
–
5
3
1
(1)
–
–
3
2
All depreciation charges in the years presented have been charged through selling and administrative expenses. In the
prior year, £9m of these depreciation charges was classified as a non-recurring adjustment; see note 3.6.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
8 Equity investments
This note provides details of the equity investments held by the Group. These are investments the Group has
made in unlisted entities that it does not control, jointly control, or have significant influence over, and are not
held for trading. Further information is disclosed in note 14.1.
Accounting policy
The Group initially recognises its equity investments at cost on the balance sheet as a non-current asset.
The Group has irrevocably elected to measure the equity investments currently held at fair value through other
comprehensive income, as they are not held for trading. The investments will be measured at fair value at each
reporting date (as required under IFRS 9), with changes in fair value of the investments recognised within other
comprehensive income. Only dividend income will be recognised within the income statement.
Fair value at 1 October
Additions
Fair value revaluation
Derecognition
Fair value at 30 September
2022
£m
21
–
30
(47)
4
2021
£m
–
21
–
–
21
The Group has recognised £nil (2021: £nil) dividend income relating to equity investments held at the balance
sheet dates.
The fair value revaluation related to the Group’s investment in Brightpearl, which arose on acquisition of the remaining
share capital during the year and was subsequently derecognised (see note 16.1). The gain on revaluation of £30m is
recognised in other comprehensive income.
9 Working capital
This note provides the amounts invested by the Group in working capital balances at the end of the financial year.
Working capital is made up of trade and other receivables, trade and other payables, and deferred income.
Trade and other receivables are made up of amounts owed to the Group by customers, amounts that we pay to our
suppliers in advance, and incremental costs to acquire a contract. Trade receivables are shown net of an allowance
for expected credit losses. Our trade and other payables are amounts we owe to our suppliers that have been
invoiced to us or accrued by us. They also include taxes and social security amounts due in relation to our role
as an employer.
This note also gives some additional detail on the age and recoverability of our trade receivables, which provides
an understanding of the credit risk faced by the Group as a part of everyday trading. Credit risk is further disclosed
in note 14.6.
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The Sage Group plc. Annual Report and Accounts 2022
9.1 Trade and other receivables
Accounting policy
Trade receivables and contract assets
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less an allowance for expected credit losses.
The Group uses the term “Trade receivables” for contract receivables. These are recognised when the right to
consideration is unconditional. Typically, the Group invoices fees for perpetual licences on contract closure and
delivery. For performance obligations satisfied over time, judgement is required in determining whether a right
to consideration is unconditional. In such situations, a receivable is recognised for the transaction price of the
non-cancellable portion of the contract when the Group starts satisfying the performance obligation.
When revenue recognised in respect of a customer contract exceeds amounts received or receivable from the
customer a contract asset is recognised.
The carrying amounts of trade receivables and contract assets are reduced by allowances for expected credit losses
using the simplified approach under IFRS 9. The Group uses a matrix approach to determine the allowance, with
default rates assessed for each country in which the Group operates. The default rates applied are based on the
ageing of the receivable, past experience of credit losses, and forward-looking information. An allowance for a
receivable’s estimated lifetime expected credit losses is first recorded when the receivable is initially recognised,
and subsequently adjusted to reflect changes in credit risk until the balance is collected. In the event that
management considers that a receivable cannot be collected, the balance is written off.
Incremental costs of obtaining customer contracts
The incremental costs of obtaining customer contracts are capitalised under IFRS 15. Contract acquisition costs
primarily consist of sales commissions earned by the Group’s sales force and business partners.
Judgement is required in determining the amounts to be capitalised, particularly where the commissions are
based on cumulative targets. The Group capitalises such cumulative target commissions for all customer contracts
that count towards the cumulative target but only if nothing other than obtaining customer contracts can
contribute to achieving the cumulative target.
The capitalised assets are amortised over the period during which the related revenue is recognised, which may
extend beyond the initial contract term where the Group expects to benefit from future renewals as a result of
incurring the costs. Typically, either the Group does not pay sales commissions for customer contract renewals or
such commissions are not commensurate with the commissions paid for new contracts. Consequently, the Group
amortises sales commissions paid for new customer contracts on a straight-line basis over the expected contract
life including probable contract renewals. Judgement is required in estimating these contract lives. In exercising
this judgement, the Group considers respective renewal history adjusted for indications that the renewal history
is not fully indicative of future renewals.
The amortisation periods range from one year to eight years depending on the type of commission arrangement.
Amortisation of the capitalised costs of obtaining customer contracts is reported within selling and
administrative expenses.
239
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
9 Working capital continued
9.1 Trade and other receivables continued
Non-current:
Customer acquisition costs
Other receivables
Prepayments
Current:
Trade receivables
Less: allowance for expected credit losses
Trade receivables—net
Other receivables
Prepayments
Customer acquisition costs
2022
£m
123
4
1
128
2022
£m
241
(14)
227
16
65
47
355
2021
£m
97
15
1
113
2021
£m
223
(22)
201
10
48
36
295
The Group has incurred £144m (2021: £126m) to obtain customer contracts and an amortisation expense of £123m
(2021: £101m) was recognised in operating profit during the year. There were no material contract assets.
In the prior year, an amount of £10m was included within other receivables due greater than one year related to EU State
Aid. In the current year, this receivable has been offset against the corresponding uncertain tax provision. See note 4.
Movements on the Group allowance for expected credit losses of trade receivables were as follows:
At 1 October
Increase in allowance for expected credit losses
Receivables written off during the year as uncollectable
Unused amounts reversed
At 30 September
2022
£m
22
5
(4)
(9)
14
2021
£m
37
12
(8)
(19)
22
The Group’s credit risk on trade and other receivables is primarily attributable to trade receivables. The Group has no
significant concentrations of credit risk since the risk is spread over a large number of unrelated counterparties.
The Group’s businesses implement policies, procedures, and controls to manage customer credit risk. Outstanding
balances are regularly monitored and reviewed to identify any change in risk profile. The Group recognises a loss
allowance against trade receivables using the simplified approach under IFRS 9. The amount of the allowance reflects
the lifetime expected credit losses measured using historical payment default rates determined for each geographical
market in which the Group operates. The historical default rates are adjusted where necessary if they do not reflect the
level of future expected credit losses, for example because of changes in the local economy or other commercial
considerations. The allowance for expected credit losses is calculated using a provision matrix. The amount of the
allowance increases as outstanding balances age. A customer balance is written off when it is considered that there is
no reasonable expectation that the amount will be collected and legal enforcement activities have ceased.
240
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The Sage Group plc. Annual Report and Accounts 2022
Total
£m
–
241
(14)
Total
£m
–
223
(22)
65%
15
(10)
91+ days
overdue
£m
69%
15
(11)
An analysis of the gross carrying amount of trade receivables showing credit risk exposure by age of the outstanding
balance is as follows:
Trade receivables at 30 September 2022
Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss
Not yet due
£m
1–30 days
overdue
£m
31–60 days
overdue
£m
61–90 days
overdue
£m
91+ days
overdue
£m
1%
200
(3)
2%
15
–
7%
6
–
15%
5
(1)
Trade receivables at 30 September 2021
Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss
Not yet due
£m
1–30 days
overdue
£m
31–60 days
overdue
£m
61–90 days
overdue
£m
5%
190
(9)
5%
10
–
11%
34%
5
(1)
3
(1)
Included in selling and administrative expenses in the income statement is a credit of £3m (2021: credit of £6m) in
relation to receivables credit losses.
The maximum exposure to credit risk at the end of the reporting period is the fair value of each class of receivables
mentioned above. The Group held no collateral as security. The Directors estimate that the carrying value of trade
receivables approximated their fair value.
9.2 Trade and other payables
Accounting policy
Trade payables and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
Trade and other payables can be analysed as follows:
Trade payables
Other tax and social security payable
Other payables
Accruals
2022
£m
32
44
44
248
368
2021
£m
39
37
294
222
592
In the prior year, other payables included £249m in relation to the outstanding commitment that the Group was
contractually bound for the purchase of its own shares (including costs of purchase) under the non-discretionary
buyback programme announced on 3 September 2021. The buyback programme completed in 2022. See note 15.4.
241
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
9 Working capital continued
9.3 Deferred income
Accounting policy
If amounts received or receivable from a customer exceed revenue recognised for a contract, a contract liability
is recognised. The Group uses the term “deferred income” for a contract liability. Contract liabilities primarily
reflect invoices due or payments received in advance of revenue recognition. Deferred income is unwound as
related performance obligations are satisfied.
In all material respects, current deferred income at 1 October 2021 was recognised as revenue during the year. Other than
business-as-usual movements, and deferred income acquired on the acquisition of subsidiaries (see note 16.1), there
were no other significant changes in contract liability balances during the year.
10 Provisions
This note provides details of the provisions recognised by the Group, where a liability exists of uncertain timing
or amount. The main estimates in this area relate to legal exposure, employee severance, onerous contracts, and
dilapidation charges.
This section also explains the accounting policies applied and the specific judgements and estimates made by the
Directors in arriving at the value of these liabilities.
Accounting policy
A provision is recognised only when all three of the following conditions are met:
• The Group has a present obligation (legal or constructive) as a result of a past event;
•
It is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation; and
• A reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the present value of the best estimate of the expenditure required to
settle the present obligation at the end of the reporting period, i.e. the present value of the amount that the Group
would rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party.
242
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The Sage Group plc. Annual Report and Accounts 2022
At 1 October 2021
• Additional provision in the year
• Provision utilised in the year
• Unused amount reversed
At 30 September 2022
Maturity profile
< 1 year
1–2 years
2–5 years
> 5 years
At 30 September 2022
Restructuring
£m
Legal
£m
Building
£m
Other
£m
76
–
(33)
(20)
23
23
2
(4)
(5)
16
15
–
(1)
(1)
13
3
–
(2)
–
1
Total
£m
117
2
(40)
(26)
53
Restructuring
£m
Legal
£m
Building
£m
Other
£m
Total
£m
17
6
–
–
23
11
5
–
–
16
4
1
2
6
13
1
–
–
–
1
33
12
2
6
53
Restructuring provisions are for the estimated costs of Group restructuring activities and mainly relate to employee
severance which remains unpaid at the balance sheet date. These provisions will be utilised as obligations are settled
which is currently expected to be within two years. This includes the non-recurring restructuring costs which remain
unpaid at the balance sheet date (see note 3.6).
Legal provisions have been made in relation to ongoing disputes with third parties and other claims against the Group.
The ageing of legal provisions is assessed regularly, based upon internal and external legal advice, as required.
Building provisions relate to dilapidation charges and property-related contracts that have become onerous. The timing
of the cash flows associated with building provisions is dependent on the timing of lease agreement termination.
This includes the non-recurring property restructuring costs recognised in previous years which remain unpaid
at the balance sheet date.
Other provisions comprise mainly those for the costs of warranty cover provided by the Group in respect of products sold
to third parties. The timing of the cash flows associated with warranty provisions is spread over the period of warranty
with the majority of the claims expected in the first year.
243
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
11 Post-employment benefits
This note explains the accounting policies governing the Group’s pension schemes, analyses the deficit on the
defined benefit pension scheme and shows how it has been calculated.
The majority of the Group’s employees are members of defined contribution pension schemes. Additionally,
the Group operates a small defined benefit scheme in France. At 30 September 2021, there was a defined benefit
scheme in Switzerland classified as held for sale, which was disposed of with the rest of the business during the
year ended 30 September 2022.
For defined contribution schemes, the Group pays contributions into separate funds on behalf of the employee and
has no further obligations to employees. The risks associated with this type of plan are assumed by the member.
Contributions paid by the Group in respect of the current period are included within the income statement.
The defined benefit scheme is a pension arrangement under which participating members receive a pension
benefit at retirement determined by the scheme rules, salary and length of pensionable service. The income
statement charge for the defined benefit scheme is the current/past service cost and the net interest cost which
is the change in the net defined benefit liability that arises from the passage of time. The Group underwrites both
financial and demographic risks associated with this type of plan.
Accounting policy
Obligations under defined contribution schemes are recognised as an operating cost in the income statement
as incurred.
The Group also operates a small post-employment benefit scheme in France. The assets of this scheme are held
separately from the assets of the Group. Under French legislation, the Group is required to make one-off payments
to employees in France who reach retirement age while still in employment. The costs of providing benefits under
this scheme are determined using the projected unit credit actuarial valuation method.
The current service cost and gains and losses on settlements and curtailments are included in selling and
administrative expenses in the income statement. Past service costs should be recognised on the earlier of the
date of the plan amendment and the date the Group recognises restructuring-related costs. Interest on the benefit
plan assets and the imputed interest on benefit plan liabilities are included within selling and administrative
expenses in the income statement.
Changes in the post-employment benefit obligation due to experience and changes in actuarial assumptions are
included in the statement of comprehensive income in full in the period in which they arise.
The liability recognised on the balance sheet in respect of the defined benefit scheme is the present value of the
defined benefit obligation and future administration costs at the end of the reporting period, less the fair value
of plan assets. The defined benefit obligation is calculated annually by independent actuaries. The present value
of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest
rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and
that have terms to maturity approximate to the terms of the related benefit obligation liability.
The calculation of the defined benefit obligation of a defined benefit plan requires estimation of future events,
for example salary and pension increases, inflation and mortality rates. In the event that future experience does
not bear out the estimates made in previous years, an adjustment will be made to the plan’s defined benefit
obligation in future periods which could have a material effect on the Group.
A sensitivity analysis has been performed on the significant assumptions. The significant assumptions are deemed
to be the discount rate and salary increases, as these are most likely to have a material impact on the defined
benefit obligations. The analysis has been performed by the independent actuaries.
244
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The Sage Group plc. Annual Report and Accounts 2022
Pension costs included in the consolidated income statement
Defined contribution schemes
Defined benefit plans
Note
3.3
2022
£m
23
1
24
2021
£m
21
1
22
Defined benefit plans
The most recent actuarial valuations of the post-employment benefit plan has been performed during the year for the
year ended 30 September 2022.
Weighted average principal assumptions made by the actuaries
Rate of increase in pensionable salaries
Discount rate
Inflation assumption
Mortality rate assumptions made by the actuaries
Average life expectancy for 65-year-old male
Average life expectancy for 65-year-old female
Average life expectancy for 45-year-old male
Average life expectancy for 45-year-old female
Amounts recognised on the balance sheet
Present value of funded obligations
Fair value of plan assets
Net liability recognised on the balance sheet
2022
%
1.9
3.7
1.9
2022
Years
19
23
36
41
2022
£m
(19)
–
(19)
At 30 September 2022 and 30 September 2021 there were no plan assets held in relation to the post-employment
benefit plan.
Expected contributions to the post-employment benefit plan for the year ending 30 September 2023 are £1m
(2021: expected contributions for the year ended 30 September 2022: £1m).
Amounts recognised in the income statement
Current service cost
Others (Curtailments/Plan amendments)
Total included within staff costs—all within selling and administrative expenses
2022
£m
(2)
1
(1)
2021
%
1.9
0.8
1.9
2021
Years
19
23
36
41
2021
£m
(22)
–
(22)
2021
£m
(2)
1
(1)
245
245
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
11 Post-employment benefits continued
Defined benefit plans continued
Changes in the present value of the defined benefit obligation
At 1 October
Exchange movement
Service cost
Curtailments/Plan amendments
Actuarial gain
At 30 September
Analysis of the movement in the balance sheet liability
At 1 October
Exchange movement
Total expense as recognised in the income statement
Actuarial gain*
At 30 September
Note:
2022
£m
(22)
(1)
(2)
1
5
2021
£m
(23)
2
(2)
1
–
(19)
(22)
2022
£m
(22)
(1)
(1)
5
(19)
2021
£m
(23)
2
(1)
–
(22)
*
In 2021, an actuarial gain of £2m was recognised, relating to the Swiss pension scheme that was classified as held for sale. In the current year, an
actuarial gain of £5m has been recognised, gross of a £2m tax charge. The net impact of £3m has been recognised within other comprehensive income.
See note 4 for the tax impact of the gain.
Sensitivity analysis on significant actuarial assumptions
Discount rate applied to scheme obligations
Salary increases
+/- 0.5% p.a.
+/- 0.5% p.a.
2022
£m
1
1
2021
£m
1
1
246
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The Sage Group plc. Annual Report and Accounts 2022
12 Deferred income tax
Deferred income tax is an accounting adjustment to recognise liabilities or benefits that are expected to arise in
the future due to differences in the carrying value of assets and liabilities and their respective tax bases. In this
note we outline the accounting policies, movements in the year on the deferred tax account and the net deferred
tax asset or liability at the year end.
A deferred tax asset represents a tax reduction that is expected to arise in a future period.
A deferred tax liability represents taxes which will become payable in a future period as a result of a current or
previous transaction.
Accounting policy
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled
or the asset realised based on tax rates that have been enacted or substantively enacted at the end of the
reporting period.
Tax assets and liabilities are offset when there is a legally enforceable right and there is an intention to settle the
balances net.
Deferred tax
At 30 September 2020
Income statement credit/(debit)
Exchange movement
At 30 September 2021
Income statement credit/(debit)
Acquisition or disposal of subsidiaries
Other comprehensive income movement
Exchange movement
At 30 September 2022
Other
intangible
assets
(excluding
goodwill)
£m
(29)
4
1
(24)
7
(26)
–
(4)
(47)
Tax
losses
£m
Accounting
provisions/
accruals
£m
Goodwill
£m
Deferred
revenue
£m
Other
£m
Total
£m
7
–
–
7
3
6
–
1
17
27
4
(1)
30
(22)
–
–
–
8
(21)
1
–
(20)
(1)
–
–
(3)
(24)
18
(1)
1
18
(3)
–
–
–
15
19
5
–
24
8
–
(2)
4
34
21
13
1
35
(8)
(20)
(2)
(2)
3
247
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
12 Deferred income tax continued
The net deferred tax asset at the end of the year is analysed below:
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset
2022
£m
19
(16)
3
2021
£m
40
(5)
35
Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred
tax assets because it is probable that these assets will be recovered. Each of these assets are reviewed to ensure there
is sufficient evidence to support their recognition. Deferred tax liabilities for the taxable temporary differences
associated with the Group’s investments in subsidiaries have been appropriately recognised to the extent that it is
probable that the temporary differences will reverse in the future. Deferred taxes have been provided for the future tax
impact of repatriating the Group’s undistributed earnings, which is consistent with the position in 2021.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as
required by IAS 12 “Income Taxes”) during the year are shown in the above table. Deferred tax assets and liabilities are
only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.
Deferred tax assets and liabilities categorised as “other” in the above table include various balances in relation to the
following items:
Share options and awards
Interest carried forward
R&D capitalisation
Lease liability
Right-of-use lease assets
Other amounts
2022
£m
11
11
12
12
(11)
(1)
34
2021
£m
10
9
2
14
(11)
–
24
The Company has unrecognised carried forward losses of £123m (2021: £109m) available to reduce certain future taxable
profits. Deferred tax assets of £26m (2021: £23m) have not been recognised in respect of these losses due to uncertainty
regarding whether suitable profits will arise in future periods against which the deferred tax asset would reverse.
Of these, £18m (2021: £18m) relate to UK capital losses that are available indefinitely but cannot be used to offset
UK trading profit.
248
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The Sage Group plc. Annual Report and Accounts 2022
13 Cash flow and net debt
This note analyses our operational cash generation, shows the movement in our net debt in the year, and explains
what is included within our cash balances and borrowings at the year end.
Cash generated from operations is the starting point of our consolidated statement of cash flows. This section
outlines the adjustments for any non-cash accounting items to reconcile our accounting profit for the year to the
amount of cash we generated from our operations.
Net debt represents the amount of cash held less borrowings and overdrafts.
Borrowings are mostly made up of fixed-term external debt which the Group has taken out in order to finance
acquisitions in the past. Borrowings also include lease liabilities.
13.1 Cash flow generated from continuing operations
Reconciliation of profit for the year to cash generated from continuing operations
Profit for the year
Adjustments for:
• Income tax
• Finance income
• Finance costs
• Amortisation and impairment of intangible assets
• Depreciation and impairment of property, plant and equipment
• Loss on disposal of property, plant and equipment
• R&D tax credits
• Equity-settled share-based transactions
• Gain on disposal of subsidiaries
• Exchange movement
Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries):
• Increase in trade and other receivables
• (Decrease)/increase in trade and other payables and provisions
• Increase in deferred income
Cash generated from continuing operations
13.2 Net debt
Reconciliation of net cash flow to movement in net debt
Cash outflows in the year (pre-exchange movements)
Cash (inflows)/outflows from loans and lease liabilities
Change in net debt resulting from cash flows
Cash and lease liabilities recognised from acquisitions of subsidiaries or similar transactions
Cash and lease liabilities derecognised on disposals of subsidiaries or similar transactions
Other non-cash movements
Exchange movement
Movement in net debt in the year
Net debt at 1 October
Net debt at 30 September
2022
£m
260
77
(1)
31
56
41
–
(4)
36
(53)
(1)
(50)
(70)
46
368
2022
£m
(124)
(331)
(455)
12
(13)
(7)
(23)
(486)
(247)
(733)
2021
£m
285
62
(1)
27
44
43
1
(2)
36
(126)
(2)
(35)
107
37
476
2021
£m
(233)
160
(73)
–
(16)
(14)
7
(96)
(151)
(247)
249
249
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
13 Cash flow and net debt continued
13.2 Net debt continued
Analysis of change in net debt (inclusive of leases)
Cash and cash equivalents
Cash amounts included in held for sale
Cash, cash equivalents and bank
overdrafts including cash held for sale
Liabilities arising from financing
activities
Loans due within one year
Loans due after more than one year
Lease liabilities due within one year
Lease liabilities after more than one year
Lease liabilities included in held for sale
At
1 October
2021
£m
553
14
Cash flow
£m
(124)
–
567
(124)
(47)
(667)
(18)
(82)
–
46
(396)
19
–
–
(814)
(331)
Acquisition
of
subsidiaries
£m
Disposal of
subsidiaries
£m
Non-cash
movements
£m
Exchange
movement
£m
At
30 September
2022
£m
12
–
12
–
–
–
–
–
–
–
(14)
(14)
–
–
–
–
–
–
–
1
1
(144)
143
(17)
11
–
(7)
48
–
48
(16)
(46)
(1)
(7)
(1)
489
–
489
(161)
(966)
(17)
(78)
–
(71)
(1,222)
Total
(247)
(455)
12
(13)
(7)
(23)
(733)
Analysis of change in net debt (inclusive of leases)
Cash and cash equivalents
Cash amounts included in held for sale
Cash, cash equivalents and bank
overdrafts amounts included in held
for sale
Liabilities arising from financing
activities
Loans due within one year
Loans due after more than one year
Lease liabilities due within one year
Lease liabilities after more than one year
Lease liabilities included in held for sale
Disposal of
subsidiaries
£m
Non-cash
movements
£m
Exchange
movement
£m
At
30 September
2021
£m
At
1 October
2020
£m
831
17
Cash flow
£m
(254)
21
–
(23)
–
–
–
(49)
44
(18)
9
–
(14)
(24)
(1)
553
14
(25)
567
2
28
–
2
–
32
(47)
(667)
(18)
(82)
–
(814)
848
(233)
(23)
–
(877)
(20)
(93)
(9)
–
138
20
–
2
(999)
160
–
–
–
–
7
7
Total
(151)
(73)
(16)
(14)
7
(247)
250
250
The Sage Group plc. Annual Report and Accounts 2022
13.3 Cash and cash equivalents (excluding bank overdrafts and cash amounts included in held for sale)
Accounting policy
For the purpose of preparation of the consolidated statement of cash flows and the consolidated balance sheet,
cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity
period of three months or less. Bank overdrafts that are an integral part of a subsidiary’s cash management are
included in cash and cash equivalents where they have a legal right of set-off and there is an intention to settle
net, against positive cash balances, otherwise bank overdrafts are classified as borrowings. Cash and cash
equivalents are measured at amortised cost.
Cash at bank and in hand
Short-term bank deposits
2022
£m
377
112
489
2021
£m
349
204
553
The credit risk on liquid funds is considered to be low, as the Board-approved Group treasury policy limits the value that
can be invested with each approved counterparty to minimise the risk of loss. The Group policy is to place cash and cash
equivalents with counterparties which are well-established banks with high credit ratings where available. In some
jurisdictions, there is limited availability of such counterparties.
Cash and cash equivalents are classified and measured at amortised cost under IFRS 9 and are therefore subject to the
expected loss model requirements of that standard. However, no material expected credit losses have been identified.
At 30 September 2022, 97% (2021: 97%) of the cash and cash equivalents balance was deposited with financial institutions
rated at least A3 by Moody’s Investors Service. The investment instruments utilised are money market funds, money
market term deposits, and bank deposits.
The Group’s maximum exposure to credit risk in relation to cash and cash equivalents is their carrying amount on the
balance sheet.
13.4 Borrowings (excluding borrowings included in held for sale)
Accounting policy
Interest-bearing borrowings are recognised initially at fair value less attributable issue costs, which are amortised
over the period of the borrowings. Subsequent to initial recognition, interest-bearing borrowings are stated at
amortised cost with any difference between cost and redemption value being recognised in the income statement
over the period of borrowing on an effective interest basis.
Further information on the policy applied to lease liabilities is included in note 3.4.
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Notes to the consolidated financial statements continued
13 Cash flow and net debt continued
13.4 Borrowings (excluding borrowings included in held for sale) continued
Current
US senior loan notes
Lease liabilities
Non-current
US senior loan notes
Sterling denominated bond notes
Lease liabilities
2022
£m
161
17
178
2022
£m
225
741
78
1,044
2021
£m
47
18
65
2021
£m
323
344
82
749
Included in loans above is £386m (2021: £370m) of unsecured loans (after unamortised issue costs).
In the table above, loan notes and sterling denominated bond notes (“bond notes”) are stated net of unamortised issue
and discount costs of £9m (2021: £6m).
Borrowings
US private placement
• USD 150m loan note
• USD 50m loan note
• EUR 55m loan note
• EUR 30m loan note
• USD 200m loan note
GBP 350m bond
GBP 400m bond
Note:
Year issued
Interest
coupon
Maturity
2022
£m
2013
2013
2015
2015
2015
2021
2022
3.71% 20-May-23
3.86% 20-May-25
1.89% 26-Jan-22
2.07% 26-Jan-23
3.73% 26-Jan-25
1.63%* 25-Feb-31
2.88%
8-Feb-34
135
45
–
26
180
350
400
2021
£m
111
37
47
26
149
350
–
* This does not include the impact of the cross currency interest rate swap entered into in the current year in relation to the £350m bond.
The Group’s debt is sourced from a syndicated multi-currency Revolving Credit Facility (RCF), US private placements
(USPP), and the bond notes.
Total USPP loan notes at 30 September 2022 were £386m (USD 400m and EUR 30m) (2021: £370m, USD 400m
and EUR 85m).
The Group’s RCF expires in February 2025 with facility levels of £781m (USD 719m and £135m tranches). At 30 September
2022, £nil (2021: £nil) of the RCF was drawn. The unsecured RCF attracted an average interest rate of 0.8%. In the prior
year, unsecured bank loans that comprised the RCF and the previously held £200m Term Loan attracted an average
interest rate of 1.0%.
In February 2022, the Group issued bond notes for a nominal amount of £400m with an expiry date of February 2034.
Net cash proceeds from the issuance were £396m.
During the prior year, the Group issued bond notes for a nominal amount of £350m with an expiry date of February 2031.
Net cash proceeds from the issuance were £344m.
Further information on lease liabilities is included in note 3.4.
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The Sage Group plc. Annual Report and Accounts 2022
14 Financial instruments
This note shows details of the fair value and carrying value of short- and long-term borrowings, trade and other
payables, trade and other receivables, derivative financial instruments, equity investments, short-term bank
deposits, and cash at bank and in hand. These items are all classified as “financial instruments” under accounting
standards. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
In order to assist users of these financial statements in making an assessment of any risks relating to financial
instruments, this note also sets out the maturity of these items and analyses their sensitivity to changes in key
inputs, such as interest rates and foreign exchange rates. An explanation of the Group’s exposure to, and
management of, capital, liquidity, credit, interest rate, and foreign currency risk is set out in the financial
risk management section at the end of this note.
Accounting policy
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes
a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash flows from the asset have expired, or when the
Group has transferred those rights and either has also transferred substantially all the risks and rewards of the
asset or has neither transferred nor retained substantially all the risks and rewards of the asset but no longer has
control of the asset.
Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled,
or expires.
The Group may use derivative financial instruments to manage its exposures to fluctuating foreign exchange
rates. These instruments are initially recognised at fair value on the date the contract is entered into and are
subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on
whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.
At the inception of designated hedge relationships, the Group documents its risk management objectives and
strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values of hedged items.
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Notes to the consolidated financial statements continued
14 Financial instruments continued
The amounts on the consolidated balance sheet that are accounted for as financial instruments, and their classification
under IFRS 9, are as follows:
IFRS 9 classification
At amortised
cost
£m
Note
Derivatives
used for
hedging
£m
At fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
–
–
–
–
–
–
–
–
–
(60)
(60)
–
3
–
1
–
–
–
–
–
–
4
4
–
–
–
–
–
–
–
–
–
4
Total
£m
4
4
227
16
489
(324)
(178)
(1,044)
(6)
(60)
(872)
As at 30 September 2022
Non-current assets
Equity investments
Trade and other receivables: other receivables
Current assets
Trade and other receivables: trade receivables
Trade and other receivables: other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables excluding other tax and
social security
Borrowings
Non-current liabilities
Borrowings
8
9.1
9.1
9.1
13.3
–
1
227
15
489
9.2
13.4
(324)
(178)
13.4
(1,044)
Trade and other payables: other payables
Derivative financial instruments – cross currency
interest rate swaps
14.5
(6)
–
(820)
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The Sage Group plc. Annual Report and Accounts 2022
As at 30 September 2021
Non-current assets
Equity investments
Trade and other receivables: other receivables
Current assets
Trade and other receivables: trade receivables
Trade and other receivables: other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables excluding other tax and
social security
Borrowings
Non-current liabilities
Borrowings
IFRS 9 classification
At amortised
cost
£m
At fair value
through profit or
loss
£m
At fair value
through other
comprehensive
income
–
13
201
9
553
(555)
(65)
(749)
(593)
–
2
–
1
–
–
–
–
3
21
–
–
–
–
–
–
–
21
Note
9.1
9.1
9.1
13.3
9.2
13.4
13.4
Total
£m
21
15
201
10
553
(555)
(65)
(749)
(569)
14.1 Fair values of financial instruments
The carrying amounts of the following financial assets and liabilities approximate to their fair values: trade and other
payables excluding tax and social security, trade and other receivables excluding prepayments and accrued income,
lease liabilities, and short-term bank deposits, and cash at bank and in hand.
Borrowings (excluding lease liabilities)
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 loan notes is determined by reference to interest rate movements on the USD 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.
Long-term borrowing (excluding lease liabilities)
Short-term borrowing (excluding lease liabilities)
2022
2021
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
(966)
(161)
(753)
(158)
(667)
(47)
(682)
(48)
Note
13.4
13.4
Contingent consideration receivable
The Group recognises contingent consideration receivable of £4m (2021: £3m) relating to the disposal of Sage Payroll
Solutions in the year ended 30 September 2019. This is classified as a financial asset measured at fair value through
profit or loss. Its fair value is determined using a discounted cash flow valuation technique. The main inputs to the
calculation for which assumptions have been made are the discount rate and the period over which the consideration
will be received. This is a level 3 fair value under IFRS 13.
Equity investments
The fair value of the unlisted equity investments held by the Group is determined using a market-based valuation
approach. The significant unobservable inputs used in level 3 fair value measurement are transaction prices paid for
identical or similar instruments of the investee and revenue growth factors.
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Notes to the consolidated financial statements continued
14 Financial instruments continued
14.1 Fair values of financial instruments continued
Derivative financial instruments—Cross currency interest rate swaps
The fair value of the cross currency interest rate swaps held by the Group is determined using a discounted cash flow
valuation technique at market rates and therefore can be considered as a level 2 fair value as defined within IFRS 13.
14.2 Maturity of financial liabilities
The maturity profile of the undiscounted contractual amount of the Group’s financial liabilities (excluding cross
currency interest rate swaps) at 30 September was as follows:
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
192
273
52
825
1,342
20
16
44
28
108
330
1,780
Borrowings:
bank loans,
bond notes and
loan notes
£m
Trade and
other payables
excluding
other tax and
social security
£m
Borrowings:
lease
liabilities
£m
Borrowings:
bank loans,
bond notes and
loan notes
£m
Borrowings:
lease liabilities
£m
Trade and other
payables
excluding other
tax and social
security
£m
2022
Total
£m
536
293
98
853
2021
Total
£m
641
175
255
408
324
4
2
–
555
1
–
–
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
66
154
214
375
809
20
20
41
33
114
556
1,479
The maturity profile of the undiscounted contractual amounts of the Group’s cross-currency interest rate swaps,
including expected interest payments, at 30 September 2022 was as follows:
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
The Group did not hold any cross-currency interest rate swaps at 30 September 2021.
The maturity profile of provisions is disclosed in note 10.
Receipts
£m
Payments
£m
4
6
17
373
400
(7)
(9)
(28)
(423)
(467)
2022
Total
£m
(3)
(3)
(11)
(50)
(67)
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The Sage Group plc. Annual Report and Accounts 2022
14.3 Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 30 September in respect of which all
conditions precedent had been met at that date:
Expiring in more than two years but not more than five years
2022
£m
781
2021
£m
669
The facilities have been arranged to help finance the expansion of the Group’s activities. All these facilities incur
commitment fees at market rates. In addition, the Group maintains overdraft and uncommitted facilities to provide
short-term flexibility and has also utilised the US private placement market.
14.4 Market risk sensitivity analysis
Financial instruments affected by market risks include borrowings and deposits.
The following analysis, required by IFRS 7 “Financial Instruments: Disclosures”, is intended to illustrate the sensitivity
to changes in market variables, being sterling/US Dollar and sterling/Euro exchange rates.
The sensitivity analysis assumes reasonable movements in foreign exchange rates before the effect of tax. Sensitivity
to movements in sterling/US Dollar and sterling/Euro exchange rates of 10% are shown, reflecting changes of reasonable
proportion in the context of movement in those currency pairs over the last year.
Using the above assumptions, the following table shows the illustrative effect on equity resulting from changes in
sterling/US Dollar and sterling/Euro exchange rates:
10% strengthening of sterling versus the US Dollar
10% strengthening of sterling versus the Euro
10% weakening of sterling versus the US Dollar
10% weakening of sterling versus the Euro
14.5 Hedge accounting
2022
2021
Equity
gains/(losses)
£m
Equity
gains/(losses)
£m
62
2
(75)
(3)
27
7
(33)
(8)
Accounting policy
On transition to IFRS 9, the Group elected to continue to apply the hedge accounting requirements of IAS 39.
The Group applies hedge accounting to external borrowings and cross-currency interest rate swap contracts
that are designated as a hedge of a net investment in foreign operations. The portion of the gain or loss on an
instrument used to hedge a net investment in a foreign operation which is determined to be an effective hedge
is recognised in other comprehensive income. The ineffective portion is recognised immediately in profit or loss.
On disposal of the net investment, the foreign exchange gains and losses on the hedging instrument are recycled
to the income statement from equity.
Where borrowings denominated in a currency other than sterling, or cross-currency interest rate swap contracts,
are used to hedge the Group’s exposure to foreign currency exchange movements of its net investment in its
subsidiaries, these relationships are designated as net investment hedges for accounting purposes. The hedges
are documented and assessed for effectiveness on an ongoing basis.
The Group applies hedge accounting to certain exchange differences arising between the functional currencies
of a foreign operation and Parent Company, regardless of whether the net investment is held directly or through
an intermediate parent.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
14 Financial instruments continued
14.5 Hedge accounting continued
The Group hedges the risk exposure to foreign currency exchange movements of its net investment in its subsidiaries in
the US and Eurozone. A proportion of the Group’s external US Dollar denominated borrowings, and the total of its Euro
denominated borrowings, are designated as hedging instruments. The underlying risk of the hedging instruments
exactly matches the hedged risk as the borrowings and net investments in subsidiaries are denominated in the same
currencies, giving a hedge ratio of 1:1. Hedge ineffectiveness will arise if the carrying amount of the net investment falls
below the carrying amount of the designated borrowings.
During the year, the Group has designated USD cross-currency interest rate swap contracts totalling £350m (USD 400m)
(2021: £nil, USD nil) as hedging instruments to hedge risk exposure to foreign currency exchange movements of its net
investment in its subsidiaries in the US. Sources of ineffectiveness on this hedge relationship will arise from
a difference in credit ratings between the counterparties and modifications to the terms of either the hedged item
or the instrument. During the year, £nil (2021: £nil) has been recognised in the income statement as ineffective.
Changes in the carrying amount of the loan notes relate to foreign exchange movements recognised through other
comprehensive income. The change in the carrying amount of the derivative financial instrument is due to fair value
movements also recognised through other comprehensive income.
The impact of the hedging instrument on the consolidated balance sheet is as follows:
As at 30 September 2022
Non-current borrowings
Current borrowings
Current borrowings
USD loan notes
USD loan notes
EUR loan notes
Derivative financial instruments Cross-currency interest rate swap
USD 400m
Nominal amount
Carrying amount
£m
Change in carrying amount
as a result of movements in
the year recognised in OCI
£m
USD 250m
USD 150m
EUR 30m
225
135
26
60
446
39
23
1
60
123
As at 30 September 2021
Non-current borrowings
Non-current borrowings
Current borrowings
USD loan notes
EUR loan notes
EUR loan notes
Nominal amount
Carrying amount
£m
Change in carrying amount as
a result of movements in the
year recognised in OCI
£m
USD 398m
EUR 30m
EUR 55m
296
26
47
369
(13)
(1)
(3)
(17)
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The Sage Group plc. Annual Report and Accounts 2022
The impact of the hedged item on the consolidated balance sheet is as follows:
Net investment in foreign
subsidiaries—USD
Net investment in foreign
subsidiaries—EUR
2022
2021
Change in value of hedged
item used to determine
hedge effectiveness
£m
Foreign currency
translation
reserve
£m
Change in value of hedged item
used to determine hedge
effectiveness
£m
Foreign currency
translation reserve
£m
122
1
123
155
4
159
(13)
(4)
(17)
33
9
42
The hedging movement recognised in other comprehensive income is equal to the change in value for measuring
effectiveness. No ineffectiveness is recognised in profit or loss.
Further information on the Group’s exposure to foreign currency risk and how the risk is managed is included in note 14.6.
14.6 Financial risk management
The Group’s exposure to and management of capital, liquidity, credit, interest rate and foreign currency risk are
summarised below.
Capital risk
The Group’s objectives when managing capital (defined as net debt plus equity) are to safeguard our ability to continue
as a going concern in order to provide returns to shareholders and benefits for other stakeholders, while optimising
returns to shareholders through an appropriate balance of debt and equity funding. The Group manages its capital
structure through regular review by the Board and makes adjustments to it with respect to changes in economic
conditions and our strategic objectives. Priorities for capital allocation are organic and inorganic investment, including
through acquisitions of complementary technology and partnerships to enhance Sage Business Cloud and further
develop the digital network; the progressive growth of the dividend; and additional capital returns to shareholders,
if appropriate. Over the medium term, the Group plans to operate in a broad range of 1–2x net debt to EBITDA, with
flexibility to move outside this range as the business needs require. In the event that the Group needs to adjust its
capital structure, the Group retains the flexibility to adjust capital allocation priorities in response to changing
requirements of the business.
In the prior year, Sage launched two £300m share buyback programmes, one of which was completed in the prior year and
the other was completed on 24 January 2022. The share buyback programmes are consistent with the Group's disciplined
approach to capital allocation and reflect its medium-term leverage objectives, strong ongoing cash generation, and
the sale proceeds from disposals completed during the years.
Liquidity risk
The Group manages its exposure to liquidity risk by reviewing cash resources required to meet business objectives
through both short- and long-term cash flow forecasts. The Group has committed facilities which are available to be
drawn for general corporate purposes including working capital. The Treasury function has responsibility for optimising
the level of cash across the business.
Credit risk
The Group’s credit risk primarily arises from trade and other receivables. The Group has a low operational credit risk due
to the transactions being principally of a high-volume, low-value, and short maturity. The Group has no significant
concentration of operational credit risk, with the exposure spread over a large number of well-diversified counterparties
and customers.
The credit risk on liquid funds is considered to be low, as the Board-approved Group treasury policy limits the value that
can be invested with each approved counterparty to minimise the risk of loss. All counterparties must meet minimum
credit rating requirements or be specifically authorised as an exception.
Further information on the credit risk management procedures applied to trade receivables is given in note 9.1 and to
cash and cash equivalents in note 13.3. The carrying amounts of trade receivables and cash and cash equivalents shown
in those notes represent the Group’s maximum exposure to credit risk.
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Notes to the consolidated financial statements continued
14 Financial instruments continued
14.6 Financial risk management continued
Interest rate risk
The Group is exposed to interest rate risk on floating rate deposits and borrowings. The Group’s borrowings principally
comprise sterling denominated bond notes and US private placement loan notes, which are at fixed interest rates, and
a bank RCF, which is subject to floating interest rates. The Group regularly reviews forecast debt, cash and cash
equivalents, and interest rates to monitor this risk. Interest rates on debt and deposits are fixed when management
decides this is appropriate.
At 30 September 2022, the Group had £489m (2021: £553m) of cash and cash equivalents, while its borrowings comprised:
• Sterling denominated bond notes of £741m (2021: £344m), comprising a £350m bond issued in 2021 and a £400m bond
issued in 2022. During the year, a cross-currency interest rate swap was entered into in relation to the £350m bond,
as a result of which the bond had an effective average fixed interest rate of 1.89% (2021: 1.63%). The £400m bond had
an average fixed coupon of 2.88%.
• US private placement loan notes of £386m (2021: £370m), which attracted an average fixed interest rate of 3.56%
(2021: 3.39%).
• Unsecured bank loans of £nil (2021: £nil), which comprises an undrawn RCF, which had an average interest rate of 0.8%
in 2022, resulting from a drawdown and subsequent repayment during the year. In the prior year, unsecured bank loans
that comprised the RCF and the previously held £200m Term Loan attracted an average interest rate of 1.0%.
Foreign currency risk
Although a substantial proportion of the Group’s revenue and profit is earned outside the UK, operating companies
generally only trade in their own currency. The Group is therefore not subject to any significant foreign exchange
transactional exposure within these subsidiaries.
The Group’s principal exposure to foreign currency lies in the translation of overseas profits into sterling; this exposure
is not hedged.
The Group’s external US Dollar denominated borrowings and Euro denominated borrowings are designated as a hedge
of the net investment in its subsidiaries in the US and Eurozone. The foreign exchange movements on translation of the
borrowings into sterling have therefore been recognised in the translation reserve.
During the year, the Group also entered into a cross-currency swap contract and designated this as a hedge of the net
investment in its subsidiaries in the US. See note 14.5.
Certain of the Group’s intercompany balances have been identified as part of the Group’s net investment in foreign
operations. Foreign exchange effects on these balances that remain on consolidation are also reflected in the
translation reserve. The Group’s other currency exposures comprise those currency gains and losses recognised in
the income statement, reflecting other monetary assets and liabilities of the Group that are not denominated in the
functional currency of the entity involved. At 30 September 2022 and 30 September 2021, these exposures were
immaterial to the Group.
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The Sage Group plc. Annual Report and Accounts 2022
15 Equity
This note analyses the movements recorded through shareholders’ equity that are not explained elsewhere in the
financial statements, being changes in the amount which shareholders have invested in the Group.
The Group utilises share award schemes as part of its employee remuneration package. Share option schemes for
our employees include The Sage Group Performance Share Plan for Directors and senior executives and The Sage
Group Savings-related Share Option Plan (the “SAYE Plan”) for all qualifying employees. The Group incurs costs in
respect of these schemes in the income statement, which is set out below along with a detailed description of each
scheme and the number of options outstanding.
This note also shows the dividends paid in the year and any dividends that are to be proposed and paid post-year
end. Dividends are paid as an amount per ordinary share held.
15.1 Ordinary shares
Accounting policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid,
including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable
to the owners of the Company until the shares are cancelled or reissued.
Issued and fully paid ordinary shares of 14/77 pence each
At 1 October
Cancellation of treasury shares
At 30 September
15.2 Share-based payments
2022
shares
1,120,789,295
(20,000,000)
1,100,789,295
2022
£m
12
–
12
2021
shares
1,120,789,295
–
1,120,789,295
2021
£m
12
–
12
Accounting policy
Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting
conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares
that will eventually vest allowing for the effect of non market-based vesting conditions.
Fair value is measured using the Black-Scholes or the Monte Carlo pricing models, based on observable market
prices. The expected life used in the model has been adjusted, based on management’s best estimate, for the
effects of non-transferability, exercise restrictions and behavioural considerations.
All outstanding Sage Performance Share Plans (PSPs) are subject to some non-market performance conditions.
These are annualised recurring revenue growth and cloud native annualised recurring revenue, Sage Business
Cloud penetration and ESG attainment. The element of the income statement charge relating to market
performance conditions is fixed at the grant date.
At the end of the reporting period, the Group revises its estimates for the number of options expected to vest.
It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding
adjustment to equity.
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Notes to the consolidated financial statements continued
15 Equity continued
15.2 Share-based payments continued
The total charge for the year relating to employee share-based payment plans was £36m (2021: £36m), all of which related
to equity-settled share-based payment transactions.
Scheme
Performance Share Plan
Restricted Share Plan
Share options
Total
2022
£m
5
29
2
36
2021
£m
5
28
3
36
The Sage Group Performance Share Plan
Annual grants of performance shares will normally be made to Executive Directors after the preliminary declaration
of the annual results. Under the Performance Share Plan, 1,036,987 (2021: 452,380) awards were made during the year.
Awards for 2019 and 2020
These performance shares are subject to a service condition and two performance conditions. Performance conditions
are weighted 70% on the achievement of a revenue growth target and 30% on the achievement of a Total Shareholder
Return (TSR) target.
The revenue growth target is based on compound annualised recurring revenue growth. Where annualised recurring
revenue growth is between prescribed target ranges, the extent to which the revenue performance condition is satisfied
will be calculated on a straight-line, pro-rata basis within a defined range.
2019 awards
• Annualised recurring revenue growth (%)
• Performance condition satisfied (%)
2020 awards
• Annualised recurring revenue growth (%)
• Performance condition satisfied (%)
Range 1
Range 2
6.2%–7.7%
7.7%–8.5%
14%–56%
56%–70%
Range 1
Range 2
5.6%–7.0% 7.0%–7.7%
14%–56%
56%–70%
The performance target relating to TSR measures share price performance against a designated comparator group.
Where TSR is between median and upper quartile, the TSR vesting percentage will be calculated on a straight-line, pro-
rata basis between 6% and 24%, and where TSR is between upper quartile and upper decile, TSR vesting percentage will
be calculated on a straight-line, pro-rata basis between 24% and 30%.
The comparator group for awards granted for 2019 and 2020 is the companies comprised in the FTSE 100 Index at the
start of the performance period, excluding financial services and extraction companies.
Awards for 2021
These performance shares are subject to a service condition and three performance conditions. Performance conditions
are weighted 70% on the achievement of revenue targets and 30% on the achievement of a TSR target.
The revenue targets are based on compound annualised recurring revenue growth and Cloud Native annualised recurring
revenue over the performance period. Where annualised recurring revenue is between prescribed target ranges, the
extent to which the revenue performance conditions are satisfied will be calculated on a straight-line, pro-rata basis
within a defined range.
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The Sage Group plc. Annual Report and Accounts 2022
2021 awards
Annualised recurring revenue growth (%)
Performance condition satisfied (%)
Cloud native annualised recurring revenue (£m)
Performance condition satisfied (%)
Range 1
Range 2
6.0%–8.5%
8.5%–10.0%
7%–28%
28%–35%
£600m–£750m
£750m–£900m
7%–28%
28%–35%
The performance target relating to TSR measures share price performance against a designated comparator group.
Where TSR is between median and upper quartile, the TSR vesting percentage will be calculated on a straight-line,
pro-rata basis between 6% and 24%, and where TSR is between upper quartile and upper decile, the TSR vesting
percentage will be calculated on a straight-line, pro-rata basis between 24% and 30%.
The comparator group for awards granted for 2021 onwards is the companies comprised in the FTSE 100 Index at the start
of the performance period, excluding financial services and extraction companies.
Awards for 2022
These performance shares are subject to a service condition and three performance conditions. Performance conditions
are weighted 55% on the achievement of a financial performance target, 30% on the achievement of a TSR target, and 15%
on the achievement of ESG targets.
The financial performance target is based on the achievement of Sage Business Cloud (SBC) Penetration targets for the
final year of the performance period. Where SBC Penetration is between prescribed targets, the extent to which the
financial performance condition is satisfied will be calculated on a straight-line, pro-rata basis within a defined range.
2022 awards
• SBC Penetration (%)
• Performance condition satisfied (%)
Range 1
Range 2
75%–80% 80%–85%
11%–44% 44%–55%
The performance target relating to TSR measures share price performance against a designated comparator group.
Where TSR is between median and upper quartile, the TSR vesting percentage will be calculated on a straight-line, pro-
rata basis between 6% and 24%, and where TSR is between upper quartile and upper decile, the TSR vesting percentage
will be calculated on a straight-line, pro-rata basis between 24% and 30%.
The comparator group for awards granted for 2022 onwards is the companies comprised in the FTSE 100 Index at the start
of the performance period, excluding financial services and extraction companies.
The performance targets relating to ESG are based on the achievement of targets relating to i) the aggregate number of
volunteering hours recorded through the Sage Foundation during the performance period, ii) the aggregate number of
individuals supported through Sage’s Sustainability and Society strategy during the performance period, and iii) Sage’s
ESG Strategy Impact at the end of the performance period. Where aggregate volunteering hours and aggregate
individuals supported are between prescribed targets, the extent to which the ESG performance conditions are satisfied
will be calculated on a straight-line, pro-rata basis within a defined range.
2022 awards
• Volunteering hours (number)
• Performance condition satisfied (%)
• Individuals supported (number)
• Performance condition satisfied (%)
Range 1
Range 2
400,000–500,000
500,000–600,000
0.75%–3%
3%–3.75%
22,000–27,000
27,000–32,000
0.75%–3%
3%–3.75%
Sage’s ESG Strategy Impact will be measured by i) its alignment to the Sustainability Accounting Standards Board’s
(SASB’s) standards, ii) its achievement of Global Reporting Initiative’s (GRI’s) sustainability reporting standards
(GRI CORE and GRI COMPREHENSIVE are the two levels to which Sage can align), and iii) achievement of a top 10% ranking
in at least 3 ESG rating schemes.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
15 Equity continued
15.2 Share-based payments continued
Given an achievement of full SASB alignment, achieving GRI CORE would result in the performance condition being 1.5%
satisfied, while achieving GRI COMPREHENSIVE would result in the performance condition being 6% satisfied. Where the
ESG Strategy Impact is between GRI CORE and GRI COMPREHENSIVE, the extent to which the ESG performance condition
is satisfied will be calculated on a straight-line, pro-rata basis within this defined range of 1.5%–6%.
Given an achievement of full SASB alignment and GRI COMPREHENSIVE, achieving a top 10% ranking in at least 3 ESG
rating schemes would result in the performance condition being 7.5% satisfied. Where a top 10% ranking is between zero
and 3 ESG rating schemes, the extent to which the ESG performance condition is satisfied will be calculated on
a straight-line, pro-rata basis within this defined range of 6%–7.5%.
Awards were valued using the Monte Carlo option pricing model. Performance conditions were included in the fair value
calculations, which were based on observable market prices at grant date. All options granted under performance share
awards have an exercise price of nil. The fair value per award(s) granted and the assumptions used in the calculation are
as follows:
Grant date
Share price at grant date
Number of employees
Shares under award
Vesting period (years)
Expected volatility
Award life (years)
Expected life (years)
Risk-free rate
Fair value per award
Grant date
Share price at grant date
Number of employees
Shares under award
Vesting period (years)
Expected volatility
Award life (years)
Expected life (years)
Risk-free rate
Fair value per award
December
2021
February
2022
7.74
6
7.11
2
18 May
2022
6.51
3
24 May
2022
6.65
1
458,777
399,859
100,225
78,126
3
3
3
3
27.6%
26.6%
28.2%
28.2%
3
3
3
3
3
3
3
3
0.50%
1.04%
6.29
5.82
1.49%
5.72
1.46%
5.70
December
2020
5.79
2
452,380
3
29.0%
3
3
(0.02%)
4.54
The expected volatility is based on historical volatility over the last three years. The expected life is the average
expected period to exercise. The risk-free rate of return is the yield on zero-coupon UK government bonds of a term
consistent with the assumed award life.
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The Sage Group plc. Annual Report and Accounts 2022
A reconciliation of award movements over the year is shown below:
Outstanding at 1 October
Awarded
Forfeited
Exercised
Outstanding at 30 September
Exercisable at 30 September
Range of exercise prices
N/A
2022
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number
’000s
4,260
1,037
(899)
(1,343)
3,055
–
2021
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number
’000s
6,574
452
(2,389)
(377)
4,260
–
2022
Weighted
average
remaining life
years
2021
Weighted
average
remaining life
years
Expected
Contractual
Expected
Contractual
0.9
0.9
0.7
0.7
The Sage Group Restricted Share Plan
The Group’s Restricted Share Plan is a long-term incentive plan issued to senior management across the Group.
These contingent share awards are usually made only with service conditions. Executive Directors are not permitted to
participate in the plan and shares are either purchased in the market or treasury shares are utilised to satisfy vesting
awards. During the year, 10,816,324 (2021: 7,499,399) awards were made. These awards only have service conditions and
their fair values are equal to the share price on the date of grant, ranging from 667 to 783p.
A reconciliation of award movements over the year is shown below:
Outstanding at 1 October
Awarded
Forfeited
Exercised
Outstanding at 30 September
Exercisable at 30 September
Range of exercise prices
N/A
2022
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number
’000s
12,082
10,816
(2,005)
(3,166)
17,727
–
2021
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number
’000s
8,277
7,499
(1,436)
(2,258)
12,082
–
2022
2021
Weighted average
remaining life
years
Weighted average
remaining life
years
Expected
Contractual
Expected
Contractual
2.0
2.0
1.5
1.5
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
15 Equity continued
15.2 Share-based payments continued
Share options
Share options comprise The Sage Global Save and Share Plan (the “Save and Share Plan”) and acquisition options.
These are not considered to be material to the Group’s overall share-based payment arrangements. The key aspects of
the Group’s share option arrangements are explained below.
The Save and Share Plan is a savings-related share option scheme for employees of the Group and is available to
employees in the majority of countries in which the Group operates. The UK plan is an HMRC-approved savings-related
share option scheme, and similar arrangements apply in other countries where they are available. The fair value of the
options is expensed over the service period of three years on the assumption that 30% of options will lapse over the
service period as employees leave the Group.
In the year, 1,628,909 (2021: 1,920,653) options were granted under the terms of the Save and Share Plan.
As part of certain acquisitions, the Group awards certain employees with options proportional to previously held options
in the company acquired. Nil (2021: nil) options have been granted in the year.
A reconciliation of award movements over the year is shown below:
Number
’000s
1,628
(28)
(637)
963
963
2022
Weighted
average
exercise
price
£
2.96
4.88
1.61
3.45
3.45
2022
Number
’000s
3,256
(44)
(1,584)
1,628
1,628
2021
Weighted
average
exercise
price
£
2.13
6.34
1.15
2.96
2.96
2021
Weighted average
remaining life
years
Weighted average
remaining life
years
Expected
Contractual
Expected
Contractual
–
4.0
–
4.9
Outstanding at 1 October
Forfeited
Exercised
Outstanding at 30 September
Exercisable at 30 September
Range of exercise prices
72p–702p
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The Sage Group plc. Annual Report and Accounts 2022
15.3 Other reserves
All components of reserves are presented separately on the face of the consolidated statement of changes in equity.
This note explains the nature and purpose of the translation and merger reserves.
Translation reserve
The translation reserve represents the accumulated exchange differences arising since the transition to IFRS from the
following sources:
• The impact of the translation of subsidiaries with a functional currency other than sterling; and
• Exchange differences arising on hedging instruments that are designated hedges of a net investment in foreign
operations, net of tax where applicable.
Exchange differences arising prior to the IFRS transition were offset against retained earnings.
Merger reserve
Merger reserve brought forward relates to the merger reserve which was present under UK GAAP and frozen on transition
to IFRS.
15.4 Retained earnings
Retained earnings
At 1 October
Profit for the year
Actuarial gain on post-employment benefit obligations, net of tax (note 11)
Employee share option scheme – value of employee services including deferred tax
Proceeds from issuance of treasury shares
Share buyback programme
Fair value gain on reassessment of equity investment
Purchase of shares by Employee Benefit Trust
Dividends paid to owners of the parent (note 15.5)
Total
2022
£m
448
260
3
37
7
–
30
(32)
(183)
570
2021
£m
908
285
2
36
8
(602)
–
–
(189)
448
Treasury shares
Purchase of treasury shares
Shares purchased under the Group’s buyback programme are not cancelled but are retained in issue and represent
a deduction from equity attributable to owners of the parent.
During the year, the Group purchased a total of 27,979,129 Ordinary shares, held as treasury shares, as part of a non-
discretionary share buyback programme entered into on 6 September 2021 and completed on 24 January 2022.
In September 2021, 11,868,392 Ordinary shares were purchased under this share buyback programme. Total consideration
for this share buyback programme was £300m, of which £249m was paid during the current year.
In the prior year, the Group entered into another non-discretionary share buyback programme under which 45,418,600
shares were bought back for a total consideration of £302m, inclusive of stamp duty and related fees. This programme
was completed during the prior year.
During the year, the Group cancelled 20,000,000 treasury shares, which reduced the number of Ordinary shares to
1,100,789,295 at 30 September 2022. See note 15.1.
During the year, the Group agreed to satisfy the vesting of certain share awards, utilising a total of 6,396,278 (2021:
5,544,880) treasury shares.
At 30 September 2022, the Group held 81,168,903 (2021: 79,586,223) treasury shares.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
15 Equity continued
15.4 Retained earnings continued
Employee Benefit Trust
The Employee Benefit Trust holds shares in the Company and was set up for the benefit of Group employees. The
Employee Benefit Trust purchases the Company’s shares in the market or is gifted these by the Company for use in
connection with the Group’s share-based payments arrangements. Once purchased, shares are not sold back into the
market. The Employee Benefit Trust holds 4,610,875 ordinary shares in the Company (2021: 190,962) at a cost of £33m
(2021: £1m) with £32m of shares purchased during the year (2021: £nil), funded by the Company, and a nominal value of
£nil (2021: £nil).
During the year, the Employee Benefit Trust did not utilise any shares it held to satisfy the vesting of certain share
awards (2021: nil). The Employee Benefit Trust did not receive additional funds for future purchase of shares in the
market (2021: £nil).
The costs of funding and administering the scheme are charged to the profit and loss account of the Company in the
period to which they relate. The market value of the shares of the Company held by the Employee Benefit Trust at
30 September 2022 was £32m (2021: £1m).
15.5 Dividends
Accounting policy
Dividends are recognised through equity when approved by the Company’s shareholders or on payment, whichever
is earlier.
Final dividend paid for the year ended 30 September 2021 of 11.63p per share
(2021: final dividend paid for the year ended 30 September 2020 of 11.32p per share)
Interim dividend paid for the year ended 30 September 2022 of 6.30p per share
(2021: interim dividend paid for the year ended 30 September 2021 of 6.05p per share)
2022
£m
119
–
64
–
183
2021
£m
–
124
–
65
189
In addition, the Directors are proposing a final dividend in respect of the financial year ended 30 September 2022 of
12.10p per share, which will absorb an estimated £124m of shareholders’ funds. The Company’s distributable reserves
are sufficient to support the payment of this dividend. If approved at the AGM, it will be paid on 10 February 2023 to
shareholders who are on the register of members on 13 January 2023. These financial statements do not reflect this
proposed dividend payable.
16 Acquisitions and disposals
The following note outlines acquisitions and disposals during the year and the accompanying accounting
policies. Each acquisition or disposal during the year is discussed and the effects on the results of the Group
are highlighted. Additional disclosures are presented for disposals and planned disposals that qualify as
businesses held for sale or for presentation as discontinued operations.
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The Sage Group plc. Annual Report and Accounts 2022
Accounting policy
Acquisitions:
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-
controlling interests in the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is deemed to be an asset or liability are recognised in the
income statement. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement
is accounted for within equity.
Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s total
identifiable net assets acquired. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the difference is
recognised directly in the consolidated income statement. Any subsequent adjustment to reflect changes in consideration
arising from contingent consideration amendments is recognised in the consolidated income statement.
On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair
value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
Acquisition-related items such as legal or professional fees are expensed to the income statement as incurred.
Acquisitions of certain legal entities can be accounted for as an asset acquisition where they do not qualify as a business
combination under IFRS 3 “Business Combinations”, which is often the case where the value of the acquired legal
entity largely comprises a single asset or technology. Where this is applied, no goodwill is recognised as part of the
acquisition accounting.
Businesses held for sale and discontinued operations:
The Group classifies the assets and liabilities of a business as held for sale if their carrying amounts will be recovered
principally through a sale of the business rather than through continuing use. These assets and liabilities are measured at
the lower of their carrying amount and fair value less costs to sell. The criteria for classification as held for sale are met only
when the sale is highly probable and the business is available for immediate sale in its present condition. Actions required
to complete the sale must indicate that it is unlikely that significant changes will be made to the plan or that the decision to
sell will be withdrawn. Management must be committed to the sale and completion must be expected within one year from
the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortised once
classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the
consolidated balance sheet.
A business qualifies as a discontinued operation if it is a component of the Group that either has been disposed of, or is
classified as held for sale, and:
• Represents a separate major line of business or geographical area of operations; and
•
Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area
of operations.
Discontinued operations are excluded from the results of continuing operations in both the current and prior years and are
presented as a single amount in the consolidated income statement as profit or loss on discontinued operations.
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
16 Acquisitions and disposals continued
16.1 Acquisitions
Lockstep
On 30 August 2022, the Group acquired 100% equity capital and voting rights of Lockstep Network Holdings Inc
(“Lockstep”). Lockstep provides cloud native technology that automates accounting workflows between companies.
The acquisition of Lockstep accelerates Sage’s strategy for growth by broadening its value prioritisation for SMBs and
expanding Sage’s digital network.
Summary of acquisition
Cash consideration
Deferred consideration
Holdback consideration
Acquisition-date fair value of consideration
Provisional fair value of identifiable net assets
Provisional goodwill
Total
£m
76
3
1
80
(1)
79
In line with IFRS 3, the initial accounting for the acquisition of Lockstep is provisional. The residual excess of
consideration over the net assets acquired has been provisionally recognised as unallocated goodwill. No goodwill is
expected to be deductible for tax purposes. Adjustments to provisional amounts 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 within 12 months. The results
of the business are allocated to the North America operating segment in line with the underlying operations.
The outflow of cash and cash equivalents on the acquisition is as follows:
Cash consideration
Cash and cash equivalents acquired
Net cash outflow
Total
£m
(76)
1
(75)
Transaction costs of £5m 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 3.6.
Arrangements have been put in place for retention bonus shares to remunerate employees of Lockstep for future
services. The amount recognised to date of £1m is included in selling and administrative expenses, classified as other
M&A activity-related items. The total cost of these arrangements will be recognised in future periods over the retention
period, contingent on employment.
The consolidated income statement includes revenue and loss after tax relating to Lockstep for the period since the
acquisition date, of which both are immaterial. On an underlying basis, revenue would have increased by £3m and profit
after tax would have decreased by £7m, if Lockstep had been acquired at the start of the financial year and included in
the Group’s results for the year ended 30 September 2022. On a statutory basis, revenue would have increased by £3m and
profit after tax would have decreased by £21m, which includes £14m of other M&A activity-related items.
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The Sage Group plc. Annual Report and Accounts 2022
Brightpearl
On 17 January 2022, the Group obtained control of Brightpearl Limited (“Brightpearl”) by acquiring the remaining share
capital for cash consideration of £221m, bringing the Group’s ownership interest to 100%. In January 2021, the Group had
acquired a 17% minority interest in Brightpearl for £17m.
Brightpearl was acquired to deliver retail operations management capabilities and provides a cloud native multi-
channel retail management system for the retail and ecommerce vertical, helping to accelerate the Group’s strategy
for growth.
Summary of acquisition
Cash consideration
Fair value of previously held minority interest
Acquisition-date fair value of consideration
Fair value of identifiable net assets
Goodwill
Total
£m
221
47
268
(92)
176
The fair value of the previously held minority interest has been included in the determination of goodwill, with the gain
on revaluation of £30m recognised in other comprehensive income in line with Sage’s accounting policy.
Fair value of identifiable net assets acquired
Intangible assets
Deferred income
Deferred tax liability
Other net assets
Fair value of identifiable net assets acquired
Goodwill
Total consideration
A summary of the acquired intangible assets is set out below:
Acquired intangible assets
Customer relationships
Technology
Acquired intangible assets
Total
£m
110
(4)
(20)
6
92
176
268
Valuation
£m
Useful
economic life
(years)
9 to 15
8
35
75
110
Acquired goodwill of £176m 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 results of the business are allocated to the North
America and Northern Europe operating segments in line with the underlying operations.
The outflow of cash and cash equivalents on the acquisition is as follows:
Cash consideration
Cash and cash equivalents acquired
Net cash outflow
Total
£m
(221)
11
(210)
271
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
16 Acquisitions and disposals continued
16.1 Acquisitions continued
Transaction costs of £7m 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 3.6.
Arrangements have been put in place for retention payments to remunerate employees of Brightpearl for future services.
The amount recognised to date of £10m is included in selling and administrative expenses, in the consolidated income
statement, as other M&A activity-related items. The total cost of these arrangements will be recognised in future periods
over the retention period, contingent on employment.
The consolidated income statement includes revenue of £17m and loss after tax of £26m reported by Brightpearl for the
period since the acquisition date. The loss after tax includes £22m of other M&A activity-related items.
On an underlying basis, revenue would have increase by £8m and profit after tax would have decreased by £6m, if
Brightpearl had been acquired at the start of the finance year and included in the Group’s results for the year ended
30 September 2022. On a statutory basis, revenue would have increased by £8m and profit after tax would have decreased
by £16m, which includes £10m of other M&A activity-related items.
Futrli
On 12 May 2022, the Group acquired 100% equity capital and voting rights of Futrli Limited (“Futrli”), a company based in
the UK, for total consideration of £17m, comprising £15m payable in cash on completion and £2m deferred consideration.
The Futrli acquisition is accounted for as an asset acquisition, which is an acquisition of a legal entity that does not
qualify as a business combination under IFRS 3 “Business Combinations”. This treatment has been adopted as the value
of the Futrli business largely comprises the rights to the acquired technology, the Futrli software. As a result, no
goodwill has been recognised as part of the acquisition accounting.
The net assets recognised in the financial statements, including the technology intangible, are based on a valuation of
the acquired identifiable net assets as at the acquisition date. The technology intangible has a fair value of £17m and is
recognised as an intangible asset (see note 6.2) which will be amortised over a useful life of 8 years. Other net assets
acquired are negligible.
GoProposal
In the prior year, the Group acquired 100% equity capital and voting rights of GoProposal Limited (“GoProposal”) for total
consideration of £13m, which was accrued at 30 September 2021 and paid in cash during the current year.
The GoProposal acquisition was accounted for as an asset acquisition, which is an acquisition of a legal entity that does
not qualify as a business combination under IFRS 3 “Business Combinations”. As a result, no goodwill was recognised as
part of the acquisition accounting, and a technology intangible of fair value £13m was recognised as an intangible asset
with a useful life of 8 years (see note 6.2).
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The Sage Group plc. Annual Report and Accounts 2022
16.2 Disposals and discontinued operations
Disposals made during the current year
On 30 November 2021, the Group completed the sale of its Swiss business for gross consideration of £54m. Subsequently,
on 4 April 2022 the Group completed the sale of its payroll outsourcing business in South Africa for gross consideration
of £5m. Both businesses were held for sale at 30 September 2021. The gains on disposal are calculated as follows:
Gain on disposal
Cash consideration
Gross consideration
Transaction costs
Net consideration
Net assets disposed
Cumulative foreign exchange differences reclassified from other comprehensive
income to the income statement
Gains on disposal
Net assets disposed comprise:
Goodwill
Property, plant and equipment
Customer acquisition costs
Trade and other receivables
Cash and cash equivalents
Total assets
Trade and other payables
Borrowings
Current income tax liabilities
Post-employment benefits
Deferred income
Total liabilities
Net assets
Payroll
outsourcing
business
(South Africa)
£m
Switzerland
£m
54
54
(3)
51
(15)
13
49
5
5
–
5
(1)
–
4
Payroll
outsourcing
business
(South Africa)
£m
Switzerland
£m
10
2
1
1
14
28
(3)
(1)
(1)
(2)
(6)
(13)
15
1
–
–
–
–
1
–
–
–
–
–
–
1
The gains are reported within continuing operations, as a non-recurring adjustment between underlying and
statutory results.
Total
£m
59
59
(3)
56
(16)
13
53
Total
£m
11
2
1
1
14
29
(3)
(1)
(1)
(2)
(6)
(13)
16
273
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
16 Acquisitions and disposals continued
16.2 Disposals and discontinued operations continued
The net inflow of cash and cash equivalents on the disposals is calculated as follows:
Inflow of cash and cash equivalents on disposal
Cash consideration
Transaction costs
Net consideration received
Cash disposed
Net inflow of cash and cash equivalents on disposal
Payroll
outsourcing
business
(South Africa)
£m
Switzerland
£m
54
(3)
51
(14)
37
5
–
5
–
5
Total
£m
59
(3)
56
(14)
42
Prior to the disposal, the Swiss business formed part of the Group’s International—Central and Southern Europe
reporting segment and the payroll outsourcing business in South Africa formed part of the International—Africa & APAC
reporting segment.
Discontinued operations and assets and liabilities held for sale
There are no assets or liabilities held for sale at 30 September 2022.
Assets and liabilities held for sale at 30 September 2021 included two disposal groups which comprise the Group’s
business in Switzerland and the payroll outsourcing business in South Africa as well as the Group’s North Park property
site assets in the UK.
The two disposal groups were disposed in the year 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.
The Group had no discontinued operations during the year (30 September 2021: none).
17 Related party transactions
This note provides information about transactions between the Group and its related parties. A group’s related
parties include any entities over which it has control, joint control, or significant influence, and any persons who
are members of its key management personnel.
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. Compensation paid to the Executive Leadership Team is disclosed
in note 3.3.
No other related party transactions occurred during the current year or the prior year.
274
274
The Sage Group plc. Annual Report and Accounts 2022
18 Events after the balance sheet date
On 11 October 2022, the Group acquired 100% equity capital and voting rights of Spherics Technology Limited (Spherics)
for total cash consideration of £11m. Spherics provides a carbon accounting solution to help businesses easily
understand and reduce their environmental impact. Due to the timing of the acquisition, being after 30 September 2022,
the results of Spherics are not included in our financial statements for the year ended 30 September 2022 and the
acquisition accounting has not yet been completed. In line with IFRS 3, the purchase price accounting for the
acquisition will be finalised within 12 months of the acquisition date.
19 Group undertakings
While we present consolidated results in these financial statements, our structure is such that there are a number
of different operating and holding companies that contribute significantly to the overall result.
Our subsidiaries are located around the world and each contributes to the profits, assets, and cash flow of the Group.
The entities listed below and on the following pages are subsidiaries of the Company or the Group. The Group
percentage of equity capital and voting rights is 100% for all subsidiaries listed below unless indicated otherwise.
The results for all of the subsidiaries have been consolidated within these financial statements.
Country
Australia
Australia
Australia
Australia
Australia
Australia
Austria
Bahamas
Belgium
Botswana
Canada
France
France
France
France
Germany
Germany
Germany
Germany
Germany
Germany
Name
Registered address
Brightpearl Pty Limited
Suite 60 Level 2, 2 O’Connell Street, Parramatta NSW 2150, Australia
HAMY (Australia) Pty Limited C/o - Fincorp Accountants, Suite 7, 2–4 Northumberland Road,
Caringbah NSW 2229, Australia
Ocrex Australia Pty. Limited Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Sage Business Solutions
Pty Ltd
Sage Intacct Australia
Pty Limited
Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Snowdrop Systems Pty Ltd
Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Sage GmbH
Stella-Klein-Löw-Weg 15, AT-1020, Wien, Austria
Intelligent Apps Holdings Ltd Bayside Executive Park, Building No. 2, West Bay Street & Blake Road,
P.O. Box N-3910, Nassau, The Bahamas
Sage S.A.
Buro & Design Center, Esplanade 1, 1020 Brussels, Belgium
Sage Software Botswana
(Pty) Ltd
Plot 50371, Fairground Office Park, Gaborone, Botswana
Sage Software Canada Ltd
111, 5th Avenue SW, Suite 3100-C, Calgary AB T2P 5L3, Canada
Inventory Planner SAS 5
10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
Sage Holding France SAS
10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
Sage Overseas Limited
(Branch Registration)
10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
Sage SAS
10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
Best Software (Germany) GmbH Franklinstraße 61–63, 60486, Frankfurt am Main, Germany
eWare GmbH
Untere Weidenstr. 5, c/o Raè Becker & Koll., 81543, München, Germany
Sage bäurer GmbH
Josefstraße 10, 78166, Donaueschingen, Germany
Sage CRM Solutions GmbH
Franklinstraße 61–63 60486, Frankfurt am Main, Germany
Sage GmbH
Franklinstraße 61–63 60486, Frankfurt am Main, Germany
Sage Management & Services
GmbH
Franklinstraße 61–63 60486, Frankfurt am Main, Germany
Germany
Sage Services GmbH
Karl-Heine-Straße 109–111, 04229, Leipzig, Germany
275
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
19 Group undertakings continued
Name
Country
Registered address
India
India
India
India
India
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Israel
Kenya
Latvia
Malaysia
Sage Business Technology
(India) Private Limited 3
The Atrium at Quark City, Zone–D, Second Floor, A-45, Industrial Focal
Point, Phase VIII B, Mohali, 160059, India
Intacct Software Private
Limited1, 3
No 501 & 502, Tower C, 5th Floor, The Millenia, No. 1 & 2, Murphy Road,
Bangalore, Karnataka, 560 008, India
Lockstep Network India Pvt.
Ltd. 3
1st and 2nd Flr Sky Loft, Creaticity Mall Opp Golf Course, Shastrinagar
Yerwada, Pune, 411006, India
Sage Software India Pvt Ltd 3 N-34, Lower Ground Floor, Kalkaji, New Delhi, 110 019, India
VV Finly Technology Pvt. Ltd. 3 #S-204, Wilson Court Apts, 6th Cross, 2nd Main, Wilson Garden,
Bangalore, 560027, India
Ocrex Limited
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Sage Global Services (Ireland)
Limited
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Sage Hibernia Limited
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Sage Irish Finance Company
Unlimited Company 4
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Sage Technologies Limited Number One, Central Park, Leopardstown, Dublin 18, Ireland
Sage Treasury Ireland
Unlimited Company
Number One Central Park, Leopardstown, Dublin 18, Ireland
TAS Software Limited 4
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Tonwomp Unlimited Company Number One, Central Park, Leopardstown, Dublin 18, Ireland
Budgeta Technologies Ltd
32 HaBarzel St., Tel Aviv, 6971046, Israel
Sage Software East Africa
Limited
114 & 115, 1st Floor, Nivina Towers, LR NO. 1870/IX/96, Westlands Road,
Nairobi, Kenya
CakeHR SIA
Brivibas iela 40-27, Riga, LV-1050, Latvia
Sage Malaysia Business
Solutions Sdn. Bhd.
Level 11, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral, 50470 Kuala
Lumpur, Malaysia
Morocco
Sage Software SARL
Sage Software Namibia (Pty)
Ltd
Tour Crystal 1, Niveau 9, Bd Sidi Mohamed Ben Abdellah, Casablanca,
20030, Morocco
344 Independence Avenue, Windhoek, P O BOX 1571, Namibia
Sage Software Nigeria
Limited
Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos,
Nigeria
Sage Software Poland sp. z o.o. ul. Towarowa 28, 00-839, Warsaw, Poland
Sage Portugal—Software, S.A. Edifício Olympus II, Av. Dom Afonso Henriques 1462, 4450-013,
Matosinhos, Portugal
Intacct Development
Romania SRL
Bulevardul 21 Decembrie 1989, Nr. 77, camera C.1.2, clădirea C-D, The
Office, Etaj 1, Cluj-Napoca, Judet Cluj, Romania
Singapore
Sage Singapore Pte. Ltd.
7 Straits View # 12-00, Marina One East Tower, Singapore, 018936,
Singapore
South Africa
South Africa
Sage Alchemex (Pty) Ltd
23A Flanders Drive, Mount Edgecombe, Durban, 4321, South Africa
Sage South Africa (Pty) Ltd* Floor 6 Gateway West, 22 Magwa Crescent, Waterfall 5-1R, Midrand,
Gauteng, 2066, South Africa
Sage Spain Holdco, S.L.U.
Moraleja Building One—Planta 1, Parque Empresarial de La Moraleja,
Avenida de Europa no19, 28108 Alcobendas, Madrid, Spain
Sage Spain, S.L.1
Moraleja Building One—Planta 1, Parque Empresarial de La Moraleja,
Avenida de Europa no19, 28108 Alcobendas, Madrid, Spain
Spain
Spain
276
276
Namibia
Nigeria
Poland
Portugal
Romania
The Sage Group plc. Annual Report and Accounts 2022
Country
Name
Registered address
Switzerland
Switzerland
KHK Software AG
c/o Legalis Consulting GmbH, Suurstoffi 29, 6343, Rotkreuz, Switzerland
Sage Bäurer AG
c/o Legalis Consulting GmbH, Suurstoffi 29, 6343, Rotkreuz, Switzerland
United Arab Emirates Sage Software Middle East
Premises: 116–120, Floor: 01, Building: 11, Dubai, United Arab Emirates
FZ-LLC
United Kingdom
ACCPAC UK Limited
3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom
Brightpearl Limited 5
United Kingdom
FUTRLI LTD
Prologue Works, Marsh Street, Bristol, England, BS1 4AX, United
Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
GoProposal Ltd
3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom
HR Bakery Ltd
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Interact UK Holdings Limited * C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
KCS Global Holdings Limited 3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom
Multisoft Financial Systems
Limited
United Kingdom
Ocrex UK Ltd
United Kingdom
Protx Group Limited
3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Protx Limited
3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom
Sage (UK) Ltd
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage CRM Solutions Limited 3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom
Sage Euro Hedgeco 1
United Kingdom
Sage Euro Hedgeco 2
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage Far East Investments
Limited
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage Global Services Limited C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
United Kingdom
United Kingdom
Sage Hibernia Investments
No. 1 Limited
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
Sage Hibernia Investments
No. 2 Limited
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
Sage Holding Company
Limited *
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage Holdings Limited
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage Irish Investments LLP 2 C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
United Kingdom
Sage Irish Investments One
Limited *
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
Sage Irish Investments Two
Limited * 2
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the consolidated financial statements continued
19 Group undertakings continued
Name
Country
Registered address
United Kingdom
Sage Management Limited
3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom
Sage Online Holdings
Limited
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage Overseas Limited.
United Kingdom
Sage People Limited
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage Treasury Company
Limited *
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Sage US LLP
United Kingdom
Sage USD Hedgeco 1
United Kingdom
Sage USD Hedgeco 2
United Kingdom
Sage Whitley Limited
United Kingdom
Sagesoft
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
Snowdrop Systems Limited C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28
9EJ, United Kingdom
United Kingdom
TAS Software Limited
3 Field Court, Gray’s Inn, London, WC1R 5EF, United Kingdom
United States
Brightpearl, Inc.
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Lockstep Network Holdings,
Inc.
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Lockstep Network, Inc.
United States
Ocrex, Inc.
United States
Sage Budgeta, Inc.
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Sage Global Services US, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
United States
Sage Intacct, Inc.
United States
Sage People, Inc.
New Castle DE 19808, United States
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Sage Software Holdings, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Sage Software International,
Inc.
C/o Corporation Service Company, 100 Shockoe Slip, 2nd Floor,
Richmond VA 23219, United States
United States
Sage Software North America C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
United States
Sage Software, Inc.
New Castle DE 19808, United States
C/o Corporation Service Company, 100 Shockoe Slip, 2nd Floor,
Richmond VA 23219, United States
278
278
The Sage Group plc. Annual Report and Accounts 2022
Country
Name
Registered address
United States
Sage Tempus, Inc.
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Softline Holdings USA, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Softline Software USA, LLC C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
C/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
New Castle DE 19808, United States
United States
Softline Software, Inc.
United States
South Acquisition Corp.
Notes:
* Direct subsidiary.
1 Group holding in the subsidiary is >99% and <100%.
2 Accounting date is 30 March 2022.
3 Accounting date is 31 March 2022.
4 Accounting date is 30 December 2022.
5 Accounting date is 31 December 2022.
279
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Contents
Company financial statements
Company balance sheet
Notes to the Company
financial statements
Company statement of changes in equity
Company accounting policies
1. Dividends
2. Fixed assets: investments
3. Cash at bank and in hand
4. Debtors
5. Trade and other payables
6. Borrowings
7. Obligations under operating leases
8. Equity
281
282
283
285
285
285
286
286
286
286
287
280
280
The Sage Group plc. Annual Report and Accounts 2022
Company balance sheet
At 30 September 2022
Non-current assets
Investments
Deferred tax assets
Current assets
Cash at bank and in hand
Debtors
Creditors: amounts falling due within one year
Trade and other payables
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Borrowings
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Profit and loss account
Total shareholders’ funds
Note
2022
£m
2021
£m
2
3,088
3,088
1
–
3,089
3,088
3
4
5
–
1,774
1,774
2
1,781
1,783
(16)
1,758
(269)
1,514
4,847
4,602
6
(741)
(344)
4,106
4,258
8.1
12
548
8.2
(502)
4,048
4,106
12
548
(424)
4,122
4,258
The Company’s profit for the year was £20m (2021: £865m).
The financial statements on pages 281 to 288 were approved by the Board of Directors on 15 November 2022 and are
signed on its behalf by:
Steve Hare
Chief Executive Officer
281
281
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Company statement of changes in equity
At 1 October 2021
Profit for the year
Total comprehensive income for the year ended
30 September 2022
Transactions with owners:
Employee share option scheme—value of
employee services
Utilisation of treasury shares
Proceeds from issuance of treasury shares
Cancellation of treasury shares
Share buyback programme
Purchase of shares by Employee Benefit Trust
Dividends paid to owners of the parent
Total transactions with owners for the year ended
30 September 2022
At 30 September 2022
Attributable to owners of the parent
Called up
share capital
£m
Share
premium
£m
Other
reserves
£m
Profit and loss
account
£m
Total
equity
£m
12
–
–
–
–
–
–
–
–
–
–
12
548
(424)
4,122
4,258
–
–
–
–
–
–
–
–
–
–
–
–
–
41
–
128
(215)
(32)
–
20
20
36
(41)
7
(128)
215
–
(183)
20
20
36
–
7
–
–
(32)
(183)
(78)
(94)
(172)
548
(502)
4,048
4,106
Attributable to owners of the parent
Other
reserves
£m
Profit and loss
account
£m
3,642
865
Total
equity
£m
4,140
865
(62)
–
–
–
25
–
(387)
–
(362)
(424)
865
865
36
(25)
8
(215)
(189)
36
–
8
(602)
(189)
(385)
4,122
(747)
4,258
At 1 October 2020
Profit for the year
Total comprehensive income for the year ended
30 September 2021
Transactions with owners:
Employee share option scheme—value of
employee services
Utilisation of treasury shares
Proceeds from issuance of treasury shares
Share buyback programme
Dividends paid to owners of the parent
Total transactions with owners for the year ended
30 September 2021
At 30 September 2021
Called up share
capital
£m
12
–
–
–
–
–
–
–
–
12
Share
premium
£m
548
–
–
–
–
–
–
–
–
548
282
282
The Sage Group plc. Annual Report and Accounts 2022
Company accounting policies
Company accounting policies
Statement of compliance
These financial statements were prepared in accordance with Financial Reporting Standard 102 (FRS 102) “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”.
Basis of accounting
These financial statements are prepared on the going concern basis, under the historical cost convention, and in
accordance with the Companies Act 2006. A summary of the more important Company accounting policies, which have been
consistently applied, is set out below. These accounting policies have been consistently applied to all periods presented.
The Company is deemed a qualifying entity under FRS 102, and so may take advantage of the reduced disclosures
permitted under the standard. As a result, the following disclosures have not been provided:
• A statement of cash flows and related disclosures under Section 7 Statement of Cash Flows and Section 3 Financial
Statement Presentation paragraph 3.17(d);
• Disclosures about financial instruments under Section 11 Basic Financial Instruments and Section 12 Other Financial
Instruments Issues paragraphs 12.26 (in relation to those cross-referenced paragraphs from which a disclosure
exemption is available), 12.27, 12.29(a), 12.29(b), and 12.29A; this exemption is permitted as equivalent disclosures are
included in the consolidated financial statements of The Sage Group plc.;
• Disclosures about share-based payments under Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21
and 26.23; this exemption is permitted as the Company is an ultimate parent, the share-based payment arrangements
concern its own equity instruments, its separate financial statements are presented alongside the consolidated
financial statements of The Sage Group plc. and equivalent disclosures are included in those consolidated financial
statements; and
• Key management personnel compensation in total under Section 33 Related Party Disclosures paragraph 33.7.
Foreign currencies
The UK is the home country of The Sage Group plc. (a public company limited by shares). Monetary assets and liabilities
expressed in foreign currencies are translated into sterling at rates of exchange prevailing at the balance sheet date.
Transactions in foreign currencies are converted into sterling at the rate prevailing at the dates of the transactions.
All differences on exchange are taken to the profit and loss account.
Investments
Fixed asset investments are stated at cost less provision for any diminution in value. Any impairment is charged to the
profit and loss account as it arises.
Parent Company profit and loss account
No profit and loss account is presented for the Company as permitted by section 408 of the Companies Act 2006.
Details of the average number of people employed by the Parent Company and the staff costs incurred by the Company
are as follows:
Average monthly number of people employed (including Directors)
By segment:
Northern Europe
Staff costs (including Directors on service contracts)
Wages and salaries
Social security costs
2022
number
2021
number
14
15
2022
£m
4
1
5
2021
£m
4
1
5
Staff costs are net of recharges to other Group companies.
Auditor’s remuneration
The audit fees payable in relation to the audit of the financial statements of the Company are £42,000 (2021: £39,000).
283
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Company accounting policies continued
Directors’ remuneration
Details of the remuneration of Executive and Non-executive Directors and their interest in shares and options of the
Company are given in the audited part of the Directors’ Remuneration Report on pages 148 to 181.
Share-based payments
The Company issues equity-settled share-based payments to certain employees and employees of its subsidiaries.
Equity-settled share-based payments granted to employees of the Company are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the
Company’s estimate of the shares that will eventually vest allowing for the effect of non market-based vesting
conditions.
Fair value is measured using the Black-Scholes or the Monte Carlo pricing models. The expected life used in the model
has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
The Company also provides certain employees and employees of its subsidiaries with the ability to purchase the
Company’s ordinary shares at a discount to the current market value at the date of the grant. For awards made to its own
employees, the Company records an expense, based on its estimate of the discount related to shares expected to vest,
on a straight-line basis over the vesting period.
At the end of each reporting period, the entity revises its estimates for the number of options expected to vest. It
recognises the impact of the revision to original estimates, if any, in the profit and loss account, with a corresponding
adjustment to equity.
For awards made to subsidiary employees, the fair value of awards made is recognised by the Company through the
profit and loss account. Intergroup recharges to the employing subsidiary, up to the fair value of awards made to
employees of that subsidiary, subsequently reverse the decrease to the profit and loss account.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value)
and share premium when the options are exercised.
Financial instruments
The Company only enters into basic financial instrument transactions that result in the recognition of basic financial
assets and liabilities, including trade and other receivables and payables and loans to and from related parties. These
transactions are initially recorded at transaction price, unless the arrangement constitutes a financing transaction
where the transaction is measured at the present value of the future receipt discounted at a market rate of interest, and
subsequently recognised at amortised cost.
Financial assets
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of
impairment. If an asset is impaired the impairment loss is the difference between the carrying amount and the present
value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is
recognised in comprehensive income or expense.
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled,
or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party, or (c) control of
the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated
third party without imposing additional restrictions.
Financial liabilities
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation
is discharged, cancelled or expired.
Dividends
Dividends are recognised through equity when approved by the Company’s shareholders or on payment,
whichever is earlier.
Employee Benefit Trust
The Company’s Employee Benefit Trust is considered an extension of the Company and therefore forms part of these
financial statements.
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The Sage Group plc. Annual Report and Accounts 2022
Notes to the Company financial statements
1 Dividends
Final dividend paid for the year ended 30 September 2021 of 11.63p per share
(2021: final dividend paid for the year ended 30 September 2020 of 11.32p per share)
Interim dividend paid for the year ended 30 September 2022 of 6.30p per share
(2021: interim dividend paid for the year ended 30 September 2021 of 6.05p per share)
2022
£m
119
–
64
–
183
2021
£m
–
124
–
65
189
In addition, the Directors are proposing a final dividend in respect of the financial year ended 30 September 2022 of
12.10p per share, which will absorb an estimated £124m of shareholders’ funds. The Company’s distributable reserves
are sufficient to support the payment of this dividend. If approved at the AGM, it will be paid on 10 February 2023 to
shareholders who are on the register of members on 13 January 2023. These financial statements do not reflect this
proposed dividend payable.
2 Fixed assets: investments
Equity interests in subsidiary undertakings are as follows:
Cost
At 30 September 2021
At 30 September 2022
Provision for diminution in value
At 30 September 2021
At 30 September 2022
Net book value
At 30 September 2022
At 30 September 2021
3,224
3,224
136
136
3,088
3,088
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
Subsidiary undertakings, included in the Group financial statements for the year ended 30 September 2022, are
shown in note 19 of the Group financial statements. All of these subsidiary undertakings are wholly-owned, unless
otherwise indicated in note 19 of the Group financial statements. All subsidiaries are engaged in the development,
distribution, and support of business management software and related products and services for small and
medium-sized businesses.
All operating subsidiaries’ results are included in the Group financial statements. The accounting reference date of all
subsidiaries is 30 September, unless otherwise indicated in note 19 of the Group financial statements.
3 Cash at bank and in hand
Cash at bank and in hand
2022
£m
–
2021
£m
2
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Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the Company financial statements continued
4 Debtors
Prepayments and accrued income
Amounts owed by Group undertakings
Of amounts owed by Group undertakings £nil (2021: £nil) is due greater than one year.
5 Trade and other payables
Amounts owed to Group undertakings
Other payables
Accruals
2022
£m
1
1,773
1,774
2022
£m
–
–
16
16
2021
£m
1
1,780
1,781
2021
£m
10
249
10
269
In the prior year, amounts owed to Group undertakings were unsecured and attracted a rate of interest of 0.0% and LIBOR
plus 1.5%.
In the prior year, other payables included £249m in relation to the outstanding commitment to which the Company was
contractually bound for the purchase of its own shares, including costs of purchase under the buyback programme
announced on 6 September 2021. See note 8.2.
6 Borrowings
Sterling denominated bond notes
2022
£m
741
741
2021
£m
344
344
In the current year, bond notes were issued in February 2022 for a nominal amount of £400m and expire in February 2034.
Net cash proceeds from the issuance were £396m.
In the prior year, bond notes were issued in February 2021 for a nominal amount of £350m and expire in February 2031.
Net cash proceeds from the issuance were £344m.
7 Obligations under operating leases
Total future minimum lease payments under non-cancellable operating leases falling due for payment as follows:
Within one year
Later than one year and less than five years
After five years
2022
2021
Property,
vehicles,
plant and
equipment
£m
Property,
vehicles,
plant and
equipment
£m
3
13
14
30
3
13
17
33
The Company leases various offices under non-cancellable operating lease agreements. These leases have various
terms, escalation clauses, and renewal rights.
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The Sage Group plc. Annual Report and Accounts 2022
8 Equity
8.1 Called up share capital
Issued and fully paid ordinary shares of 14/77 pence each
At 1 October
Cancellation of treasury shares
At 30 September
8.2 Other reserves
At 1 October 2021
Utilisation of treasury shares
Cancellation of treasury shares
Share Buyback Programme
Purchase of shares by Employee Benefit Trust
At 30 September 2022
At 1 October 2020
Utilisation of treasury shares
Share Buyback Programme
At 30 September 2021
2022
shares
1,120,789,295
(20,000,000)
1,100,789,295
2022
£m
12
–
12
2021
shares
1,120,789,295
–
1,120,789,295
2021
£m
12
–
12
Treasury
shares
£m
(487)
41
128
(215)
(32)
(565)
Treasury
shares
£m
(125)
25
(387)
(487)
Merger
reserve
£m
Capital
redemption
reserve
£m
Total other
reserves
£m
61
–
–
–
–
61
2
–
–
–
–
2
(424)
41
128
(215)
(32)
(502)
Merger
reserve
£m
Capital
redemption
reserve
£m
Total other
reserves
£m
61
–
–
61
2
–
–
2
(62)
25
(387)
(424)
Treasury shares
Purchase of treasury shares
Shares purchased under the Group’s buyback programme are not cancelled but are retained in issue and represent
a deduction from equity attributable to owners of the parent.
During the year, the Group purchased a total of 27,979,129 Ordinary shares, held as treasury shares, as part of a non-
discretionary share buyback programme entered into on 6 September 2021 and completed on 24 January 2022. In
September 2021, 11,868,392 Ordinary shares were purchased under this share buyback programme. Total consideration
for this share buyback programme was £300m, of which £249m was paid during the current year.
In the prior year, the Group entered into another non-discretionary share buyback programme under which 45,418,600
shares were bought back for a total consideration of £302m, inclusive of stamp duty and related fees. This programme
was completed during the prior year.
During the year, the Group cancelled 20,000,000 treasury shares, reducing the number of Ordinary shares to
1,100,789,295 at 30 September 2022. See note 8.1. The cancellation resulted in a reduction in the profit and loss account
of £128m, and an offsetting increase in the treasury share reserve, representing the excess of the purchase price of the
shares cancelled above their nominal value.
During the year, the Group agreed to satisfy the vesting of certain share awards, utilising a total of 6,396,278 (2021:
5,544,880) treasury shares.
At 30 September 2022, the Group held 81,168,903 (2021: 79,586,223) treasury shares.
287
287
Governance ReportShareholder InformationThe Sage Group plc. Annual Report and Accounts 2022Strategic ReportFinancial Statements
Notes to the Company financial statements continued
8 Equity continued
8.2 Other reserves continued
Employee Benefit Trust
The Employee Benefit Trust holds shares in the Company and was set up for the benefit of Group employees.
The Employee Benefit Trust purchases the Company’s shares in the market or is gifted these by the Company for use
in connection with the Group’s share-based payments arrangements. Once purchased, shares are not sold back into the
market. The Employee Benefit Trust holds 4,610,875 ordinary shares in the Company (2021: 190,962) at a cost of £33m
(2021: £1m), with £32m of shares purchased during the year, funded by the Company, and a nominal value of £nil
(2021: £nil).
During the year, the Employee Benefit Trust did not utilise any shares it held to satisfy the vesting of certain share
awards (2021: nil). The Employee Benefit Trust received £nil (2021: £nil) additional funds for future purchase of shares
in the market.
The costs of funding and administering the scheme are charged to the profit and loss account of the Company in the
period to which they relate. The market value of the shares in the Company held by the Employee Benefit Trust at
30 September 2022 was £32m (2021: £1m).
288
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The Sage Group plc. Annual Report and Accounts 2022
Glossary
Alternative Performance Measures
Alternative Performance Measures are used by the Group to understand and manage performance. These are not
defined under International Financial Reporting Standards (IFRS) or UK-adopted International Accounting Standards
(UK-IFRS) and are not intended to be a substitute for any IFRS or UK-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
(revenue
and profit)
measures
Underlying measures are adjusted to exclude items
which in management’s judgement need to be disclosed
separately by virtue of their size, nature or frequency to
aid understanding of the performance for the year or
comparability between periods:
Underlying measures allow
management and investors to compare
performance without the effects of
foreign exchange movements, one off
or non-operational items.
By including part-period contributions
from acquisitions, discontinued
operations, disposals and assets held
for sale of standalone businesses in
the current and/or prior periods, the
impact of M&A decisions on earnings
per share growth can be evaluated.
Organic measures allow management
and investors to understand the
like-for- like revenue and current
period margin performance of the
continuing business.
• Recurring items include purchase price adjustments
including amortisation of acquired intangible
assets and adjustments made to reduce deferred
income arising on acquisitions, acquisition-related
items, unhedged FX on intercompany balances and
fair value adjustments; and
• Non-recurring items that management judge to be
one-off or non-operational such as gains and losses
on the disposal of assets, impairment charges and
reversals, and restructuring related costs.
Recurring items are adjusted each period irrespective
of materiality to ensure consistent treatment.
Underlying basic EPS is also adjusted for the tax impact
of recurring and non-recurring items.
All prior period underlying measures (revenue and
profit) are retranslated at the current year exchange
rates to neutralise the effect of currency fluctuations.
In addition to the adjustments made for Underlying
measures, Organic measures:
• Exclude the contribution from discontinued
operations, disposals and assets held for sale of
standalone businesses in the current and prior
period; and
• 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.
Organic
(revenue and
profit) measures
Underlying
Cash Flow from
Operations
Underlying Cash Flow from Operations is Underlying
Operating Profit adjusted for non-cash items, net capex
(excluding business combinations and similar items)
and changes in working capital.
To show the cash flow generated by the
operations and calculate underlying
cash conversion.
289
The Sage Group plc. Annual Report and Accounts 2022Governance ReportFinancial StatementsShareholder InformationStrategic Report Glossary continued
Measure
Description
Rationale
Underlying
Cash Conversion
Underlying Cash Flow from Operations divided by
Underlying (as reported) Operating Profit.
EBITDA
EBITDA is Underlying Operating Profit excluding
depreciation, amortisation and share based payments.
Annualised
recurring
revenue
Annualised recurring revenue (“ARR”) is the normalised
organic recurring revenue in the last month of the
reporting period, adjusted consistently period to period,
multiplied by twelve. Adjustments to normalise reported
recurring revenue include those 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).
Cash conversion informs management
and investors about the cash operating
cycle of the business and how
efficiently operating profit is
converted into cash.
To calculate the Net Debt to
EBITDA leverage ratio and to show
profitability before the impact of
major non-cash charges.
ARR represents the annualised value
of the recurring revenue base that is
expected to be carried into future
periods, and its growth is a forward-
looking indicator of reporting
recurring revenue growth.
Renewal Rate
by Value
The ARR from renewals, migrations, upsell and cross-sell
of active customers at the start of the year, divided by
the opening ARR for the year.
As an indicator of our ability to retain
and generate additional revenue from
our existing customer base through
up and cross sell.
Free Cash Flow
Free Cash Flow is Underlying Cash Flow from Operations
minus net interest paid and income tax paid and
adjusted for non-recurring cash items (which excludes
net proceeds on disposals of subsidiaries) and profit
and loss foreign exchange movements.
To measure the cash generated by
the operating activities during the
period that is available to repay debt,
undertake acquisitions or distribute
to shareholders.
% Subscription
Penetration
Organic software subscription revenue as a percentage
of organic total revenue.
% Sage
Business Cloud
Penetration
Organic recurring revenue from the Sage Business Cloud
(native and connected cloud) as a percentage of the
organic recurring revenue of the Future Sage Business
Cloud Opportunity.
Return on
Capital
Employed
(ROCE)
ROCE is calculated as:
• Underlying Operating Profit; minus
• Amortisation of acquired intangibles; the result
being divided by
• 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).
To measure the progress of
migrating our customer base
from licence and maintenance
to a subscription relationship.
To measure the progress in the
migration of our revenue base to the
Sage Business Cloud by connecting our
solutions to the cloud and/or migrating
our customers to cloud connected and
cloud native solutions.
As an indicator of the current period
financial return on the capital invested
in the company. ROCE is used as an
underpin in the FY19, FY20 and FY21
PSP awards.
Net debt
• Net debt is cash and cash equivalents less current
and non-current borrowings.
To calculate the Net Debt to EBITDA
leverage ratio and an indicator of
our indebtedness.
290
The Sage Group plc. Annual Report and Accounts 2022 AGM
Annual General Meeting
AI
Artificial Intelligence
API
Application Program Interface
CAGR
Compound Annual Growth Rate
CDP
Carbon Disclosure Project
CFO
Chief Financial Officer
CGU
Cash Generating Unit
CRM
Customer Relationship Management
DTR
Disclosure Guidance and Transparency Rules
EBITDA
Earnings Before Interest Taxes Depreciation and
Amortisation
ED
Executive Director
EPS
Earnings Per Share
ERP
Enterprise Resource Planning
EU
European Union
FCF
Free Cash Flow
FY19
Financial year ending 30 September 2019
FY20
Financial year ending 30 September 2020
FY21
Financial year ending 30 September 2021
FY22
Financial year ending 30 September 2022
FY23
Financial year ending 30 September 2023
GHG
Greenhouse Gas
HCM
Human Capital Management
HR
Human Resources
IFRS
International Financial Reporting Standards
ISV
Independent Software Vendor
KPI
Key Performance Indicator
LSE
London Stock Exchange
LTIP
Long Term Incentive Plan
ML
Machine Learning
NED
Non-Executive Director
NPS
Net Promoter Score
PBT
Profit Before Tax
PSP
Performance Share Plan
R&D
Research and Development
SBC
Sage Business Cloud
SaaS
Software as a Service
SSRS
Software & Software Related Services
TSR
Total Shareholder Return
291
The Sage Group plc. Annual Report and Accounts 2022Governance ReportFinancial StatementsShareholder InformationStrategic Report Shareholder Information
Shareholder Information
Financial calendar1
Annual General Meeting
Dividend payments2
FY22 Final payable
H1 FY23 Interim payable
Results announcements
Q1 FY23 Trading update
H1 FY23 Interim results
Q3 FY23 Trading update
FY23 Full-Year results
Note:
2 February 2023
10 February 2023
23 June 2023
19 January 2023
17 May 2023
27 July 2023
22 November 2023
1. Please note that these dates are provisional and subject to change. Please access our financial calendar on sage.com, which is updated regularly.
2. All dividend payments are subject to Board and, in the case of the final dividend, shareholders’ approval.
Shareholder information online
Equiniti, the registrar of The Sage Group plc., is able to notify
shareholders by email of the availability of an electronic
version of shareholder information. Whenever new shareholder
information becomes available, such as Sage’s full-year results,
Equiniti can notify you by email and you will be able to access,
read and print documents at your convenience.
To take advantage of this service, please go to
www.shareview.co.uk, where full details of the shareholder
portfolio services are provided. When registering for this
service, you will need to have your 11-character Shareholder
Reference Number to hand, which is shown on your dividend
tax voucher, share certificate or Form of Proxy.
Should you decide at a later date that you do not want to receive
these emails, you may amend your request by accessing your
Shareview Portfolio online and amending your preferred method
of communication from “email” to “post”.
Our corporate website has more information about our business,
products, investors, media, sustainability, and careers at Sage.
Stay up to date at www.sage.com
Annual General Meeting of Shareholders
We consider the Annual General Meeting of shareholders (AGM)
to be an important event in our calendar and a significant
opportunity to engage with our shareholders. The 2023 AGM
will be held on 2 February 2023. Further details will be set out
in the Notice of AGM and on our website at sage.com.
Advisors
Corporate brokers and
financial advisors
J.P. Morgan Cazenove
25 Bank Street,
Canary Wharf,
London, E14 5JP
Morgan Stanley & Co.
International plc
25 Cabot Square,
Canary Wharf,
London, E14 4QA
Solicitors
Allen & Overy LLP
1 Bishops Square,
Spitalfields,
London, E1 6AD
Principal bankers
Lloyds Bank plc.
25 Gresham Street,
London, EC2V 7HN
Independent auditors
EY
1 More London Place,
London, SE1 2AF
Registrars
Equiniti
Aspect House,
Spencer Road, Lancing,
West Sussex, BN99 6DA
www.shareview.co.uk
Tel: 0371 384 2859
(from outside the
UK: +44 (0)121 415 7047)
Lines are open 8.30am
to 5.30pm UK time,
Monday to Friday.
Information for
investors
Information for investors
is provided on the internet
as part of Sage’s website
which can be found at:
www.sage.com/investors
Investor enquiries
Enquiries can be directed
to our Investor Relations
department via our website.
The Sage Group plc.
Registered Office:
C23—5 & 6 Cobalt Park Way
Cobalt Park,
Newcastle Upon Tyne,
United Kingdom,
NE28 9EJ
Registered in England
Company number 02231246
292
The Sage Group plc. Annual Report and Accounts 2022 www.woodlandtrust.org.uk
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Design and production
www.luminous.co.uk
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.
www.sage.com
The Sage Group plc.
C23—5 & 6 Cobalt Park Way,
Cobalt Park,
Newcastle upon Tyne,
NE28 9EJ.
Registered in England
Company number 2231246