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Building
sustainable
growth
Annual Report and Accounts 2023
Building
sustainable growth
Contents
Strategic Report
1 Financial highlights
2 Sage at a glance
4 Our solutions
6 Chair’s statement
8 CEO’s review
12 Market review
14 Business model
18 Our strategy at a glance
20 Strategy in action
22 Our key performance indicators
24 Our people and culture
30 Sustainability and Society
38 TCFD disclosure
46 Non-financial and sustainability information statement
47 Stakeholder engagement
56 Section 172(1) statement
60 Financial review
68 Risk management
74 Principal Risks and uncertainties
Governance Report
84 Governance at Sage
86 Chair’s introduction to Governance
88 Our leadership
92 Corporate governance report
129 Directors’ Remuneration Report
16 4 Directors’ Report
Financial Statements
172 Independent Auditor’s Report to the
members of The Sage Group plc.
182 Consolidated financial statements
188 Notes to the consolidated financial statements
261 Company financial statements
Additional Information
269 Glossary
272 Shareholder information
Supplementary reporting
Sustainability
and Society Report
Read about how we
approachthe most
materialsustainability
issues faced by Sage.
Climate Report
Read about the actions
weare taking to tackle
climate change.
Sage Sustainability Hub
Scan or click
the QR code
for more
information
Sage is a leader in accounting, financial, HRand payroll technology for small and mid-sized
businesses (SMBs), enabling them to streamline operations, make more informeddecisions,
andbe more productive.
By contributing to the success of SMBsandthe people who drive them, Sageisdelivering
benefits to all of our stakeholders including customers, colleagues,society and shareholders,
helpingto build sustainable growth.
Financial highlights
Our year in numbers
Underlying total revenue
2023
2022
£2,184m
£1,982m
Underlying total revenue of £2,184m increased by 10%, driven
bybroad-based growth in cloud solutions across the Group.
Underlying operating profit margin
2023
2022
20.9%
19.5%
Underlying operating profit margin increased to 20.9% from 19.5%,
driven by operating efficiencies as we scale the Group.
Underlying operating profit
2023
2022
£456m
£386m
Underlying operating profit grew by 18% to £456m, driven by sales
growth and a higher underlying operating profit margin.
Underlying basic earnings per share (EPS)
2023
2022
32.3p
26.4p
Underlying basic EPS increased by 22% to 32.3p.
Statutory revenue
2023
2022
£2,184m
£1,947m
Statutory revenue of £2,184m grew by 12%, reflecting good levels
ofunderlying growth in all regions together with a small foreign
exchange tailwind.
Net cash generated from operating activities
2023
2022
£387m
£285m
Net cash generated from operating activities of £387m increased
by36%, reflecting strong underlying cash conversion.
Statutory operating profit
2023
2022
£315m
£367m
Statutory operating profit decreased by 14% to £315m including
one-off gains on business disposals in FY22, together with property
restructuring and M&A-related charges in FY23.
Dividend
2023
2022
19.3p
18.4p
Total dividend for the year increased by 5% to 19.3p.
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 EPS to their underlying and organic equivalents are in the Financial review starting on page 60.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 1
Strategic Report Governance Report Financial Statements Additional Information
Sage at a glance
Helping business flow
What we do
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.
How we do it
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.
Our global reach
1
Our strategic framework
for growth
Our purpose
is to knock down barriers so everyone
can thrive.
Our ambition
is to be the trusted network for
smallandmid-sized businesses—
anintegrated experience of digital
andhuman connections.
Our strategic priorities
We have five strategic priorities, which
underpin our purpose and help us to
achieve our ambition.
See pages 18 and 19
Our stakeholders
Colleagues
We are committed to people,
drivenby innovation, energising
everyone to make a difference.
See pages 48 and 49
Customers
We build every experience with
human insight and ingenuity.
See pages 50 and 51
Society
We tackle digital inequality, economic
inequality and the climate crisis,
using our time, technology and
experience.
See pages 52 and 53
Shareholders
We target sustainable growth
inshareholder value.
See pages 54 and 55
Our values
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.
44%
North America
27%
Europe
29%
UKIA
2
1. Split of total underlying revenue of £2,184m.
2. United Kingdom, Ireland, Africa and APAC.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 20232
Business highlights
19
countries in which we operate
96%
1
recurring revenue
11,326
colleagues globally
4.1
Glassdoor score
Non-financial highlights
AAA
MSCI ESG rating
34%
leadership teams meeting our FY26 gender diversity target
2
154,620
Sage Foundation volunteering hours
Net Zero
targeted by 2040 across Scopes 1, 2 and 3, with a mid-term
goal to halve our emissions by 2030
3
Our approach to sustainability
Sage has an important role in creating value for all
ourstakeholders including colleagues, customers,
society and shareholders. Our Sustainability and
Societystrategy is pivotal to how we deliver on Sage’s
purpose ofknocking down barriers so everyone can
thrive. Through our strategy, we aim to turn barriers into
opportunities, creating positive impact far beyond Sage.
Sage Foundation
Our volunteering, fundraising, grant-giving, skills
training and other charitable and community work
allcome together under the global banner of the 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.
Find out more about our approach to sustainability:
see pages 30 to 37
1. As a percentage of total underlying revenue.
2. Global gender diversity target of no more than 60% of any one gender, in any leadership team, anywhere in Sage, by FY26.
3. Against a 2019 baseline.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 3
Strategic Report Governance Report Financial Statements Additional Information
Our solutions
Focused on
customer needs
Sage serves millions of small and
mid-sized businesses around the world
Our solutions are focused on the needs of customers,
delivering innovative services that automate accounting
workflows. We are continuously enriching 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 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 independent software vendor (ISV) apps and emerging
technology across Artificial Intelligence (AI), machine
learning and automation.
Continued investment to enhance our product offering
enables us to grow Sage Business Cloud. During FY23, we
launched new cloud solutions across our markets, including
Sage Active, a multi-legislation business management
solution now available in France, Spain and Germany.
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.
Sage 50 and Sage 200
The Sage 50 cloud and Sage 200 cloud franchises
enablecustomers to control their business and gain
complete visibility over their finances and operations.
Sage50 is designed for small businesses, while Sage
200offers customisable solutions to meet the needs
ofmid-sized businesses.
Sage X3
Sage X3 provides fast, intuitive and tailored business
management solutions for product-centric organisations.
Ittransforms how organisations manage people, processes
and operations. With multi-language, multi-legislation
andmulti-currency capabilities, Sage X3 delivers
comprehensive business management capabilities.
For more information
scan or click the QR code
For more information
scan or click the QR code
Cloud connected solutions
Cloud connected solutions combine the power
and productivity of the desktop with the freedom
and security ofthe cloud.
Small businesses Mid-sized businesses
Sage 50 Sage X3
Sage 200
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 20234
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 Accounting
Sage Accounting is designed to enable small businesses
operating in any industry, as well as accountants and
bookkeepers, to manage their customer data, accounts
andpeople all in one cloud native solution.
Sage HR
Sage HR is designed to make people management easier and
helps teams perform at their best. Sage HR is best suited
toSMBs 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.
Sage People
Sage People is our cloud HR and people management
solution designed for mid-sized customers. It uses powerful
automation, comprehensive analytics and flexible workflows
to ensure global workforces can adapt and thrive.
Sage Payroll
Sage Payroll, the UK’s number one payroll provider by
marketvalue, isanintuitive, cloud-based solution that
helpssmall businesses to run their payroll reliably and
flexibly, including capabilities such as pensions filing,
HMRCsubmissions andcompliance.
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
For more information
scan or click the QR code
For more information
scan or click the QR code
For more information
scan or click the QR code
For more information
scan or click the QR code
For more information
scan or click the QR code
Additional InformationFinancial StatementsGovernance ReportStrategic Report
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 5
Chair’s statement
A platform for
sustainablegrowth
“ Sage continued to perform
wellinFY23, maintaining good
momentum across the business.
Aclear focus on growth, innovation
and operational efficiency has
resulted in significant revenue
and earningsexpansion.”
Andy Duff
Chair
Introduction
Sage continued to perform well in FY23, maintaining good
momentum across the business. A clear focus on growth,
innovation and operational efficiency has resulted in
significant revenue and earnings expansion. We have made
substantial progress towards our ambition to be the trusted
network for SMBs, leveraging our scale and expertise to provide
more value to customers through new and existing cloud
solutions and services.
This progress has only been possible because of the passion
and commitment that is evident from Sage colleagues every
day. On behalf of the Board, I would like to extend my gratitude
to all our people for their dedicated and enthusiastic approach
to serving SMBs, accountants and partners alike.
Purpose and strategy
Central to the Group’s strategy is our purpose—to knock
downbarriers so everyone can thrive. Sage’s solutions,
backed by human expertise, enable SMBs to automate
accounting and HR workflows, streamline operations and
make more informed business decisions. By contributing
tothe success of SMBs, Sage is also helping to power the
global economy, providing benefits to all our stakeholders
including customers, colleagues, society and shareholders,
and supporting the long-term sustainability of the Group.
Sage’s progress is underpinned by innovation. We have
established the Sage Network to connect SMBs to their
customers, suppliers, banks and other partners, enabling
usto develop and deploy new solutions faster and more
efficiently than before. It provides the data flows to enable
powerful AI-based services that transform the customer
experience. Through innovation, together with the focused
execution of our five strategic priorities, we are building
aplatform for sustainable growth. You can read more
aboutour progress on pages 18 and 19.
Financial performance
Underlying total revenue increased by 10% in FY23, up
from4% in the previous year. Underlying recurring revenue,
which now represents 96% of total, increased by 12%, driven
bybroad-based growth in cloud solutions throughout
theGroup. The quality of the Group’s revenue continues
toimprove, with subscription penetration now at 79%.
Underlying operating margin increased from 19.5% to
20.9%,and underlying basic earnings per share increased
by22% to 32.3p, as we efficiently scale the Group.
Cash generation is a core strength of Sage, with underlying
cash conversion of 116%. During the year, Sage acquired
Spherics, an innovative carbon accounting solution, and
Corecon, a construction project management solution.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 20236
Inline with our progressive dividend policy, the Group
isproposing to increase the total dividend for the year
by5%to 19.3p. In addition, alongside our FY23 results we
announced a share buyback programme of up to £350m,
reflecting the Board’s confidence in the future prospects of
the Group, together with Sage’s strong cash generation and
robust financial position.
Governance and the Board
Good corporate governance is key to long-term, sustainable
success, and we hold ourselves to the highest governance
and ethical standards. Board diversity remains a key priority
at Sage, with a variety of viewpoints contributing to robust
discussions and decision making.
We were delighted to welcome Maggie Chan Jones and
RoisinDonnelly to the Board, with effect from December
2022 and February 2023, respectively. They bring broad
andrich experience, and the Board is already benefitting
from their contributions. We are also pleased that, as recently
announced, Annette Court has agreed to succeed Drummond
Hall as Senior Independent Director when he retires from
theBoard at the end of December 2023. I would like to thank
Drummond for his considerable contribution to Sage over
the last decade and wish him every success for the future.
To engage with and support colleagues, and to better understand
local issues, I have spent considerable time with our people
in locations throughout the Group, including the UK, North
America and Europe. The Board has also travelled to engage
in person with local teams, gain insight into our operations
and monitor culture. Our Board Associate, Derek Taylor, who
has been instrumental in bringing the voice of colleagues
into the Boardroom, is coming to the end of his 18-month
term in the role. With support from senior management,
weare in the process of appointing our next Board
Associateand I look forward to sharing details next year.
Following the conclusion of a formal tender process, Sage
announced in September that, subject to shareholder approval,
KPMG will be appointed to act as the Group’s new external
auditor for the financial year ending 30 September 2025,
replacing the current external auditor, EY.
Our people and values
Also key to our long-term success is our cultural agenda.
Achieving sustainable growth relies on fostering a high-
performance culture that enables everyone to perform at
their best. Our values underpin our culture, and our focus
ondoing the right thing helps ensure that our actions align
with the trust placed in us by our customers, partners and
communities. Sage is committed to building a diverse and
inclusive workforce and in 2023 was listed among The Times
Top 50 Employers forGender Equality.
Sustainability and society
Our Sustainability and Society strategy is pivotal to how
wedeliver on Sage’s purpose, supporting sustainable and
inclusive economic growth so everyone can thrive. This year,
wehave evolved the strategy to better reflect our role in
society, with a strong emphasis on our environmental, social
and governance (ESG) responsibilities. Further information
on the evolved strategy can be found on pages 30 to 37.
Sage is committed to tackling the climate crisis, including
achieving net zero carbon emissions by 2040, with a science-
based target to halve emissions by 2030 against a 2019
baseline. The Sage Foundation continues to play an important
role in mobilising Sage colleagues, their families and our
partners, to support social and environmental causes
through volunteering and fundraising.
We are pleased to continue to receive positive external
recognition for our ESG performance during the year, with
an“AAA” ESG rating from MSCI, inclusion in the FT’s Europe’s
Climate Leaders list, and a top five ranking in IDC’s European
Sustainable Strategies and Technologies index.
Looking forward to FY24 and beyond
This has been a year of continued momentum. Despite
theuncertain economic and geopolitical environment,
Sageremains resilient, with ambitious plans for expansion.
As we look to the year ahead, I am confident that the strength
ofour global business, combined with our focus oninnovating
to meet customer needs, will enable further sustainable
growth for the benefit of 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 56.
Further insight into the activities of the Board
forFY23 can be found on pages 100 to 103.
Andy Duff
Chair
21 November 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 7
Strategic Report Governance Report Financial Statements Additional Information
CEO’s review
Innovating
for our customers
“ We continue to knock down
barriers for millions of SMBs by
providing innovative solutions
that simplify their processes,
streamline their operations
andmake them more resilient
andproductive.”
Steve Hare
Chief Executive Officer
Introduction
Sage delivered a strong performance in FY23, driven by
broad-based growth across all of our regions. We continue
toknock down barriers for millions ofSMBs throughout our
markets by providing innovative solutions that simplify
theiraccounting, payroll and HR processes, streamline their
operations, and make them more resilient and productive.
As a result, despite the ongoing macroeconomic challenges,
we achieved double-digit revenue growth, adding almost
£225m of annualised recurring revenue (ARR) and growing
Group revenue to well over £2bn. We also expanded our
underlying operating margin and delivered strong cash
flow.This was underpinned by further, consistent strategic
progress, as we continue to innovate anddrive more value
forour customers.
During the year we rolled out cloud solutions such as
SageIntacct and Sage Active across more of our markets,
particularly in Europe. We also launched and extended the
availability of cloud services such as accounts payable
automation, leveraging the scale and breadth of the Sage
Network to develop and integrate AI-powered features
intoour solutions.
In addition, we stepped up our service of SMBs in broader
ways, including by championing their interests with policy
makers, for example at forums such as the UK Prime Minister’s
Business Council and COP27, and by providing expertise
andresources to help thousands of entrepreneurs from
underrepresented communities grow their businesses.
None of this would have been possible without the hard
workand dedication of our people, and I would like to
thankeveryone at Sage, together with the partners and
accountants with whom we work, for their contributions
toSage’s ongoing success and their commitment to
ourpurpose.
Financial performance
Sage achieved underlying recurring revenue growth of 12%
to£2,096m. On a regional basis, North America increased
recurring revenue by 16% to £944m, with a strong performance
from Sage Intacct and cloud connected solutions. The UKIA
region grew recurring revenue by 10% to £611m, driven by
further demand for cloud solutions from both new and existing
customers. In Europe, recurring revenue increased by 7% to
£541m, reflecting growth across Sage Business Cloud.
Underlying total revenue increased by 10% to £2,184m.
Importantly, recurring revenue now represents 96% of total,
demonstrating the high quality and resilient nature of
ourbusiness.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 20238
Underlying operating profit increased by 18% to £456m,
while underlying operating margin was 21%, trending
upwards on the prior year driven by revenue growth and
operating efficiencies. Reflecting this strong progress,
underlying basic EPS increased by 22% to 32.3p.
Growth was driven by continued success across Sage
Business Cloud, in accounting, payroll and HR. Sage Intacct
again performed strongly, adding around £100m of ARR
during the year, while other cloud native solutions such as
Sage Accounting, Sage Payroll 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 11% to £2,188m, with growth
balanced between new and existing customers. Thiswas
underpinned by cloud native ARR growth of 28% to£684m.
Intotal, Sage has added £190m of ARR through newcustomer
acquisition in FY23, up from £180m in the prior year.
Across the Group, customer renewal rates have been strong.
Ourrenewal rate by value of 102% 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.
Sage Network is our platform
Our performance is driven by our consistent focus on the
needs of SMBs, and at the heart of this is the SageNetwork.
Established as a single platform to bring businesses together
through connected accounting, the Sage Network isa set of
integrated products and services that enable organisations
to transform their accounting, finance, payroll and HRworkflows.
Theplatform connects SMBs with key stakeholders and
counterparties—for example customers, suppliers, employees,
banks and governments—digitising business relationships
and removing friction from theirprocesses.
The network serves as a powerful platform for innovation
atSage. Through the network, we are able to build services
once, and deploy them to customers of multiple solutions
across Sage Business Cloud, accelerating our development
cycle. And by harnessing the data flows across the network,
we’re able to create sophisticated AI-based services that
learn from the collective activity and data flows of
potentially millions of SMBs globally.
Furthermore, we’ve designed the network based on an open
architecture incorporating standard APIs, enabling our
extensive partner and ISV ecosystem to join the network,
extend the customer proposition and drive further scale
byoffering more cloud-based services to SMBs.
We’re very excited about the potential of the Sage Network
tooffer AI-powered solutions to SMBs that are truly
transformative, automating workflows both within and
between businesses, and forming a strong foundation forthe
continued growth of Sage over the longer term.
Progress towards our strategic priorities
We focus our activities through five strategic priorities that
have the greatest impact on our growth, and we are making
strong progress towards all of them:
• We are scaling Sage Intacct, including by launching
thesolution throughout our geographic markets, and
byexpanding its vertical-specific capabilities. During
theyear we launched Sage Intacct in continental Europe
starting with France, and with Germany tofollow.
• Beyond core financials, we are delivering benefits tomid-
sized businesses including payroll, planning, analytics and
workflow automation. Providing integrations between key
products such as Sage Intacct, Sage Payroll and Sage HR is
helping to drive growth.
• Continued progress in developing our small business
solutions, including Sage Accounting and Sage Active,
isenabling us to build our small business engine. Sage for
Accountants has now been adopted by 8,000 accountants
in the UK, upfrom around 2,000 a year ago, as we help
them digitalise their practices. Sage Active is now
available in France, Spain and Germany.
• We are scaling the network by increasing Sage Business
Cloud penetration, enabling more customers to connect
to the Sage Network, and by introducing new cloud
services. We have also enabled greater network usage by
third-party software providers, generating consumption-
based revenue for Sage while expanding and enriching
the customer experience.
• Investing in disruptive new technologies remains a focus,
as we leverage the Sage Network to embed AI-powered
features across Sage Business Cloud. New and upcoming
solutions include Sage Network Inbox, a connected accounting
workflow management tool, and Sage Copilot, our digital
assistant, both powered by generative AI technology
toenable natural language interaction.
You can read more about our progress towards each
ofthese strategic priorities on pages 18 and 19.
Sharpening our customer focus
Maintaining strong, enduring customer relationships is key
toour growth. While we continue to receive recognition—
forexample, Sage Intacct was rated number one in customer
satisfaction across 19 different categories in the G2 Fall
2023 Reports—we are focused on ensuring this strength
isdeeply embedded throughout the organisation.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 9
Strategic Report Governance Report Financial Statements Additional Information
CEO’s review continued
During the year we revamped our customer experience
strategy, launching a multi-year programme that significantly
broadens our measurement of customer satisfaction across
various solutions and services. Theresults are providing
valuable insights enabling us to address and rectify distinct
customer challenges.
We’re also driving customer perception and brand awareness
in our markets with distinctive global marketing and major
sports partnerships including Major League Baseball,
TheHundred cricket, Six Nations Rugby and the Rugby
WorldCup.
Investing in our talent and culture
Our colleagues are at the heart of our growth strategy. We are
committed to supporting their development and to fostering
a high-performance, inclusive culture that enables them to
thrive. In this way we can recruit, develop and retain the very
best talent, and benefit from a wide diversity of voices and
experiences throughout the organisation.
During the year we invested significantly in the development
of leaders and colleagues. We launched our new Leadership
Academy, with over 350 leaders and aspiring leaders taking
part in various programmes which aim to drive better
recognition, empowerment and engagement. We also
introduced other initiatives for colleagues to gain new
skills,for example through undertaking projects outside
their own business area, while also enhancing talent
mobilityand agility.
Recognising that the current environment presents
challenges, we continue to invest in wellbeing, including
through our Employee Assistance Programme and through
flexible working practices and enhanced benefits. Our
wellbeing approach is focused across four key pillars—
healthy mind, healthy body, healthy finances and healthy
communities—enabling us to extend holistic wellbeing
support across the workforce.
We aim to build an inclusive workforce that fully represents
the world around us, including a recruitment strategy that
targets candidates from a broad set of backgrounds with
multiple entry points into Sage. Currently 34% of leadership
teams meet our FY26 gender diversity target
1
, up from 33%
last year and 19% at the beginning of FY22. In October 2023,
Sage was recognised by Forbes as being among the World’s
Top Companies for Women.
Our employee satisfaction score remains high, in the upper
quartile of the global benchmark. Sage has a strong global
Glassdoor score of 4.1, broadly in line with last year.
Sustainability
We take pride in making a positive impact on society, through
our support for customers, colleagues and communities across
our markets. We believe this approach isinstrumental to our
long-term success, and we are strongly committed to delivering
the objectives of our Sustainability and Society strategy.
Investment case
Building shareholder value
Diversified and differentiated
• Serving a wide range of SMBs across diverse geographies,
with deep expertise across financials, payroll and HR.
• Broad ecosystem of partners, accountants, resellers and
ISVs who enrich and expand the reach of our offering.
• Solutions backed by business advice and human
customer support.
Focused on innovation
• Rolling out global cloud solutions across our markets,
ledby Sage Intacct.
• Adding value to existing and new customers by
deliveringnew cloud services.
• Scaling and leveraging the Sage Network to deliver
innovative AI-powered solutions, transforming the
workflows of SMBs.
19 countries £342m R&D spend
in FY23
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202310
In FY23, we evolved this strategy to integrate sustainability
into everything we do, including our ways of working, the
solutions we build and our culture. We are focused not
onlyonthe benefits of sustainability at Sage, but also
onmultiplying those benefits by helping SMBs globally
toembrace a more sustainable future.
Our progress includes launching a roadmap to drive
netzerocarbon emissions by 2040, while our target of
halving Scope 1, 2 and 3 emissions by 2030 against a 2019
baseline was validated by the SBTi. To support SMBs on
theirown journey to net zero, we joined forces with NatWest
to deliverthe NatWest Carbon Planner, powered by Sage
Earth, which isavailable tohelp all UK businesses reduce
their carbonfootprints.
We also aim to use our technology for good, providing
insights that help governments and regulators make
betterpolicy decisions for SMBs, and buildingdigital trust
inareas such as cyber security anddata privacy. Through
SageFoundation, colleagues, their families and our partners
dedicated more than 150,000 volunteering hoursin FY23
totheir communities, and in conjunction with our charity
partners we helped more than 10,500 underserved
entrepreneurs to grow their businesses.
Delivering efficient, sustainable growth
• Focused on scaling the business, with growth creating
headroom to increase investment and expand margins.
• Growth supported by favourable SMB drivers including
the need to raise productivity through digitalisation
andcompliance.
• Strong commitment to ESG supporting the long-term
sustainability of Sage.
Robust financial model
• High-quality revenue base which is over 96% recurring,
with 79% from software subscription.
• Highly cash generative, low capital intensity business,
with underlying cash conversion over 100% for each of
thelast five years.
• Organic and inorganic investment balanced with
dividends and additional capital returns to
shareholderswhere appropriate.
ARR growth 11%
in FY23
Cash conversion 116%
in FY23
Summary and outlook
Sage had a strong year in FY23, and we enter FY24 with
goodmomentum. Despite the current macroeconomic
andgeopolitical challenges, SMBs continue to digitalise in
order to automate processes and raise productivity. We are
building a resilient platform to deliver sustained, efficient
growth, and I am confident that Sage is well positioned to
take advantage of the market opportunity, this year and in
the longer term.
For FY24, we expect organic total revenue growth in FY24
tobe broadly in line with FY23. Operating margins are
expected to trend upwards in FY24 and beyond, as we
focuson efficiently scaling the Group.
Strategic Report
Our Strategic Report on pages 1 to 83 has been reviewed
andapproved by the Board.
Steve Hare
Chief Executive Officer
21 November 2023
1. Global diversity target of no more than 60% of any one gender,
inanyleadership team, anywhere in Sage, by FY26.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 11
Strategic Report Governance Report Financial Statements Additional Information
2023:
£31bn
2024:
£35bn
2025:
£39bn
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 (APAC). The breadth and scale of our
business provides us with unique visibility into SMB trends
globally, giving Sage adeep understanding of our customers’
needs. Digitalisation is driving the rapid adoption of new
cloud solutions and AI-powered services, 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 98% of firms in our key
marketsand accounting for two thirds of private sector jobs.
While the current global macroeconomic and geopolitical
environment presents challenges for allbusinesses, SMBs
are typically agile in their response andcontinue to invest
innew technology to help them cope with these challenges.
This investment delivers efficiency and productivity gains
that help SMBs to navigate through broader economic
turbulence and better plan for their future.
Our addressable market
Accounting and finance functions continue to evolve
atpace, adding greater value through data-driven
decisionmaking andincreasing connectivity between
organisations. Theaddressable market for Sage,
includingall countries inwhich we sell our solutions
toorganisations with up to2,000employees, is forecast
tobe £35bnin 2024. Includedwithin this is Accounting
&Financial Management, Human Capital Management,
Enterprise Resource Planning, Payroll, Accountant Taxation
&Compliance, and Accounting Practice Management across
both cloud and on-premise deployments.
Source: Company estimate based on external sources
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202312
Powering digital transformation
SMBs continue to invest in software that drives
operational efficiency through the automation of
workflows, provision of better business insights, and
improved accuracy and oversight. Beyond enhancing
SMB competitiveness and efficiency, this technology
breaks down boundaries between sectors and enables
new forms of disruption and new types of businesses.
The role we play
We empower SMBs with our solutions, while providing
advice and human support when customers needit.
Thefoundation of our proposition is the Sage Network,
a set of connected products and services where data
and technology integrate seamlessly, andwhich enable
our customers to transform their accounting, HR and
payroll workflows.
Enabling responsible growth
Technology can play a critical role in creating a more
sustainable future. As technology develops and its
range of applications widens, 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 addressing digital
inequality and tackling environmental responsibility.
We elevate diverse talent, promote inclusive digital
networks and provide the technology solutions that
SMBs need tounderstand and manage their carbon
emissions. Sage’s success depends on our ability to
engage effectively and work constructively with all
ofourstakeholders.
Elevating human work
Digital transformation in the accounting industry
isenabling humans to reduce the time they spend on
low-value repetitive tasks. Using real-time trusted
data, digital technology helps people to focus on
analysis, collaboration anddecision making, while
enabling them to take a more strategic approach in
their roles.
The role we play
Thetrusted products and services available across the
Sage Network, aredesigned to support our customers
byreplacing lengthy, costly and error-prone processes,
so they can focus on higher value work. As we scale the
Sage Network, the growth in connections between
business ecosystems generates more data, which we
can use todevelop new AI capabilities for customers.
Creating trusted technology
In an era of widespread technological innovation
andrapid advances in AI, SMBs are increasingly
awareof the value of the data they own and expect
thehighest standards of data ethics tobeupheld.
The role we play
Sage has a proven track record and is a trusted
partnerto SMBs and accountants around the world.
Weconsistently embrace new technology to enhance
our business solutions, and we do this in a secure
andethical manner that puts customers in control.
Weaim to use AI in a way thatpromotes customer
trustin Sage and our products. Our commitment to
upholding the highest standards is outlined in our
Data and AI Ethics Principles.
Nextmune
Nextmune is a science-driven, global specialty
pharmaceutical company dedicated to improving
the health ofanimals.
“ We ultimately want to move all our
entities onto a single platform …
Sage Intacct Payroll fills that ideal
sweet spot.”
Angela Biermann
Director of Finance and HR
Addressing the market opportunity through our technology
Additional InformationFinancial StatementsGovernance ReportStrategic Report
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 13
Underpinned
bythe Sage
Network
Business model
Creating value
for our stakeholders
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.
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
award-winning 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’s scale and reach is
expanded through our ecosystem
of accountants, resellers and
technology partners.
Innovation
We are investing to ensure our
products are differentiated in
achanging technology landscape.
Attract new customers to Sage through
brandawareness, targeted campaigns,
the sage.com website and partners.
Offer guides and trials toprospective
customers.
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.
Provide digital and human customer
supportto enhance the customer
experience, offering regular check-ins
andconducting feedback surveys.
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.
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.
Awareness
and land
Adopt
Service
Expand
Renew
5
4
3
2
1
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202314
More insight
Data drives the development of AI-powered
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.
Outputs
Customers
102%
renewal by value
Colleagues
76
employee
satisfaction (eSAT)
Community
154,620
Sage Foundation volunteer
hoursspent helping
ourcommunities
Shareholders
19.3p
total dividend for the year
£350m
share buyback announced
Customers
Customer
and User
Build trust
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THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 15
Strategic Report Governance Report Financial Statements Additional Information
Innovation
Accelerating the
pace of innovation
“ We’re proud to offer a digital
first,networked approach
toaccounting that’s truly
scalable. The platform has
anopen architecture to make
development efficient for
Sage,while also enabling
athriving marketplace
ofthird-party solutions.”
Aaron Harris
Chief Technology Officer
Q&A with Aaron Harris
Our Chief Technology Officer discusses
how faster innovation at Sage is helping
customers and powering growth.
Q
What’s driving the pace
of innovation at Sage?
The pace of innovation at Sage is driven by a collective,
relentless ambition to transform the accounting industry.
CFOs, finance leaders and their teams commonly find
themselves immersed in cycles like the monthly close,
quarterly financial reporting, and annual audits. The
problem with these cycles is they only provide point in
time,after the fact visibility and assurance, limiting
SMBsfrom making confident, real-time decisions.
Imagine a world where business leaders have real-time,
trusted information about their organisation’s financial
performance. Achieving a state of continuous accounting
will enable individuals to truly see what’s going on in their
business, make quicker decisions, and better respond to
market conditions. At Sage, our vision is straightforward.
Wewant to propel the industry forward into one that provides
AI-enabled, real-time strategic value to businesses.
Q
What is the Sage Network?
We set up the Sage Network as a single platform to
bring businesses together through connected accounting.
Atits core, the Sage Network is a set of integrated products
and services enabling our customers to digitally transform
their accounting and finance workflows.
The platform connects SMBs to their customers, vendors,
banks, and other partners in the business ecosystem,
automating workflows between businesses (even if they
don’tuse Sage accounting software),and helping them
torunsmoothly and efficiently.
Q
What are the benefits it offers,
bothtocustomers and to Sage?
Customers benefit from digitised and automated workflows
both within and between businesses, minimising the need
for manual data processing. Take accounts payable (AP), for
example, something every business in the world can relate to.
Ourcustomer research tells us SMBs consider it the number
one area where automation is required to gain efficiency
within the accounting team.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202316
We’ve built a collection of services across the Sage Network
to enable that automation, where AI is in place to read data
from invoices, categorise the expenses, match the invoice
topurchase orders and identify potential problems. Our
customers using the platform’s solutions like AP Automation
report a significant improvement in productivity, creating
capacity within their accounting teams to work on more
strategic activities.
We’re proud to offer a digital first, networked approach
toaccounting that’s truly scalable. The platform has an
openarchitecture to make development efficient for Sage,
while also enabling a thriving marketplace of third-party
solutions. Our core AI team builds services within the
context of the Sage Network to meet customer needs like
automating data entry. Our product teams then take those
services and design a product experience that’s appropriate
for their market andtheir customers, including the best
approach for pricing and packaging.
Q
How does the Sage Network enable
Artificial Intelligence?
By connecting Sage customers and products to a common
network of services, we have the potential to harness the
collective activity of millions of SMBs globally. These
network servicesact as data pipelines for training our
machine learning models.
More customer interaction drives continuous improvements
to AI accuracy and efficiency. For example, when many
customers interact with a common vendor, we’re able to
fine-tune our models to achieve a far greater level of
accuracy in reading invoices than is possible using generic
models. The network’s global reach, span of use by SMBs,
andaccess to general ledger data enable us to build a broad
set of AI capabilities that benefit every SMB connected to
the network.
Q
How are you incorporating
AIintoyoursolutions?
We embed AI into our products in a number of different
waysto bring productivity benefits to our customers,
accountants and colleagues. This includes the use of AI
toautomate manual processes such as invoice processing.
For example, one of the investments we made early on
isourOutlier Detection solution—the first real-time
AI-driven tool forgeneral ledger error detection. The
solution learns the typical patterns of business within
individual organisations and, as a result, can identify when
atransaction is anomalous. In this instance, our AI flags
toahuman that atransaction may need additional review.
Then,if a change is applied, that change gets fed backinto
the machine learning models, increasing accuracy and
evolving with business changes.
This solution is reviewing more than 15 million transactions
perweek, helping accounting teams catch and correct
thousands of accounting errors before they are posted.
Thisisimportant when it comes to reporting financials,
ensuringerrors are corrected before reaching stakeholders,
resulting in real-time, accurate and, most importantly,
confident reporting.
Elsewhere, we are using AI to power Sage Earth, our carbon
accounting solution. Here, we use the technology to take
theexpenses and purchases within a business and classify
them according to specific carbon emissions categories,
sowe can more accurately predict their environmental
impact. This is helping SMBs manage and reduce their
carbon emissions.
Q
How can Sage protect
itscustomers’data?
The trust customers place in Sage is vital, so we take the
security of their data very seriously. We follow a set of
protective measures based on recognised industry best
practice and have a global team responsible for cyber
security overseeing this. This team is regularly in touch
withcyber security authorities and privacy regulators
tokeep pace with the changing threat environment.
For more information on
ourdata security principles :
Ethical Principles | Datafor Good |
Security and Privacy | Sage UK
scan or click the QR code
Q
Where do you see innovation
atSageheading in the future?
Our ambition is to have AI in each of our key products to
allow us to go further in elevating the work of humans,
freeing them from repetitive, administrative tasks
andenabling them to contribute through higher-value
activities. Through AI and generative AI we will help
transform the accounting industry into one that provides
continuous strategic value to businesses.
Additional InformationFinancial StatementsGovernance ReportStrategic Report
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 17
Our strategy at a glance
Progress towards
our strategic priorities
Strategic priority Progress in 2023 Future focus Risks (see pages 74 to 81)
Scale Sage Intacct
Accelerate the
expansion of Sage
Intacct in existing
andnew markets.
• Record Sage Intacct ARR growth during the year of around £100m
• Continued growth in the US, with ARR up by almost 30%
• Good progress in the construction vertical, complemented by the acquisition
in May 2023 of Corecon (now Sage Construction Management)
• Strong momentum outside the US, with ARR up by over 80%
• Launched Sage Intacct in continental Europe, starting in France
• Continue to grow Sage Intacct’s customer base and addressable market
• Deepen capabilities in existing verticals
• Drive expansion into new verticals
• Accelerate international growth, with Sage Intacct due to launch in
Germany in 2024
• Execution of
productstrategy
• Route to market
• Customer experience
• Third-party reliance
• People and performance
• Culture
• Cyber security and
data privacy
• Data strategy
• Readiness to scale
Expand medium beyond financials
Broaden the value
proposition for
mid-sizedbusinesses.
• Renewal rate by value up 1 ppt to 102% with higher sales to existing customers
• Integration between Sage Intacct, Sage Payroll and Sage HR launched in Canada and South Africa
to drive cross-sell
• Expanded availability of Sage Planning, a budgeting and planning solution, and Sage Intelligent
Time, an AI-powered time tracking tool, into more markets across the Group
• Deliver benefits to mid-sized businesses beyond core accounting,
including payroll, HR, planning, analytics and workflow automation
• Integrate solutions across our portfolio to create a differentiated
customer offering
• Understanding
customerneeds
• Execution of
productstrategy
• Customer experience
• People and performance
• Culture
Build the small business engine
Create a scalable
digital ‘engine’ to
acquire and serve small
business customers.
• Further growth in key markets across small business solutions including Sage Accounting
andSage 50
• Sage for Accountants now adopted by almost 8,000 accountants in the UK, up from around
2,000ayear ago
• Introduced My Sage, an integrated account management tool, in the UK
• Launched Sage Active, our new multi-legislation business management solution, in France,
Spainand Germany
• Deliver a differentiated experience for both small businesses
andaccountants
• Focus on helping accountants to digitise their businesses with
advanced practice management tools
• Drive Sage Active growth in continental Europe
• Understanding
customerneeds
• Execution of product
strategy
• Route to market
• Customer experience
• Third-party reliance
• People and performance
• Culture
• Cyber security and
dataprivacy
• Data strategy
• Readiness to scale
• Environmental, social
and governance
Scale the network
Increase participation
in Sage’s digital
network and accelerate
the network effect.
• Enabled more customers to connect to the network by increasing Sage Business Cloud penetration
from 75% to 84%.
• Drove network participation by expanding AI-powered cloud services such as accounts payable
automation, which is now growing rapidly
• Enabled greater network usage by third-party software providers, generating consumption-based
revenue for Sage while enriching the customer experience
• Grow network participation, connecting more customers and products
to the ecosystem
• Drive data flows to power new AI features
• Expand the availability of cloud-based digital services delivered
bySage and partners
• Execution of product
strategy
• Route to market
• Third-party reliance
• People and performance
• Culture
• Cyber security and
dataprivacy
• Data strategy
• Readiness to scale
Learn and disrupt
Build innovative
solutions underpinned
by a culture of
continuous learning
and disruption.
• Launched Sage Network Inbox, our connected accounting workflow management tool
• Developing and testing Sage Copilot, our digital assistant
• Incorporated generative AI into our products for the first time to enable natural
languageinteraction
• Deepened our relationships with key partners including Microsoft and AWS
• Continue to invest in disruptive technologies to drive innovation
andaccelerate our development cycle
• Expand the deployment of AI-powered services into products across
Sage Business Cloud
• Understanding
customer needs
• Execution of
productstrategy
• Developing and
exploiting new
businessmodels
• Customer experience
• People and performance
• Culture
• Data strategy
• Environmental, social
and governance
Success
measures
• Growth of
Sage Intacct
• Renewal rate
by value
• Small segment
revenue growth
• Sage Business Cloud penetration
• Availability and consumption of
cloud-based digital services
• Network-powered solutions launched
• Technology acquisitions, investments
andpartnerships
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202318
Strategic priority Progress in 2023 Future focus Risks (see pages 74 to 81)
Scale Sage Intacct
Accelerate the
expansion of Sage
Intacct in existing
andnew markets.
• Record Sage Intacct ARR growth during the year of around £100m
• Continued growth in the US, with ARR up by almost 30%
• Good progress in the construction vertical, complemented by the acquisition
in May 2023 of Corecon (now Sage Construction Management)
• Strong momentum outside the US, with ARR up by over 80%
• Launched Sage Intacct in continental Europe, starting in France
• Continue to grow Sage Intacct’s customer base and addressable market
• Deepen capabilities in existing verticals
• Drive expansion into new verticals
• Accelerate international growth, with Sage Intacct due to launch in
Germany in 2024
• Execution of
productstrategy
• Route to market
• Customer experience
• Third-party reliance
• People and performance
• Culture
• Cyber security and
data privacy
• Data strategy
• Readiness to scale
Expand medium beyond financials
Broaden the value
proposition for
mid-sizedbusinesses.
• Renewal rate by value up 1 ppt to 102% with higher sales to existing customers
• Integration between Sage Intacct, Sage Payroll and Sage HR launched in Canada and South Africa
to drive cross-sell
• Expanded availability of Sage Planning, a budgeting and planning solution, and Sage Intelligent
Time, an AI-powered time tracking tool, into more markets across the Group
• Deliver benefits to mid-sized businesses beyond core accounting,
including payroll, HR, planning, analytics and workflow automation
• Integrate solutions across our portfolio to create a differentiated
customer offering
• Understanding
customerneeds
• Execution of
productstrategy
• Customer experience
• People and performance
• Culture
Build the small business engine
Create a scalable
digital ‘engine’ to
acquire and serve small
business customers.
• Further growth in key markets across small business solutions including Sage Accounting
andSage 50
• Sage for Accountants now adopted by almost 8,000 accountants in the UK, up from around
2,000ayear ago
• Introduced My Sage, an integrated account management tool, in the UK
• Launched Sage Active, our new multi-legislation business management solution, in France,
Spainand Germany
• Deliver a differentiated experience for both small businesses
andaccountants
• Focus on helping accountants to digitise their businesses with
advanced practice management tools
• Drive Sage Active growth in continental Europe
• Understanding
customerneeds
• Execution of product
strategy
• Route to market
• Customer experience
• Third-party reliance
• People and performance
• Culture
• Cyber security and
dataprivacy
• Data strategy
• Readiness to scale
• Environmental, social
and governance
Scale the network
Increase participation
in Sage’s digital
network and accelerate
the network effect.
• Enabled more customers to connect to the network by increasing Sage Business Cloud penetration
from 75% to 84%.
• Drove network participation by expanding AI-powered cloud services such as accounts payable
automation, which is now growing rapidly
• Enabled greater network usage by third-party software providers, generating consumption-based
revenue for Sage while enriching the customer experience
• Grow network participation, connecting more customers and products
to the ecosystem
• Drive data flows to power new AI features
• Expand the availability of cloud-based digital services delivered
bySage and partners
• Execution of product
strategy
• Route to market
• Third-party reliance
• People and performance
• Culture
• Cyber security and
dataprivacy
• Data strategy
• Readiness to scale
Learn and disrupt
Build innovative
solutions underpinned
by a culture of
continuous learning
and disruption.
• Launched Sage Network Inbox, our connected accounting workflow management tool
• Developing and testing Sage Copilot, our digital assistant
• Incorporated generative AI into our products for the first time to enable natural
languageinteraction
• Deepened our relationships with key partners including Microsoft and AWS
• Continue to invest in disruptive technologies to drive innovation
andaccelerate our development cycle
• Expand the deployment of AI-powered services into products across
Sage Business Cloud
• Understanding
customer needs
• Execution of
productstrategy
• Developing and
exploiting new
businessmodels
• Customer experience
• People and performance
• Culture
• Data strategy
• Environmental, social
and governance
Success
measures
• Growth of
Sage Intacct
• Renewal rate
by value
• Small segment
revenue growth
• Sage Business Cloud penetration
• Availability and consumption of
cloud-based digital services
• Network-powered solutions launched
• Technology acquisitions, investments
andpartnerships
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 19
Strategic Report Governance Report Financial Statements Additional Information
Build the small
business engine
Case study: Bee Motion
“ We can work alongside clients in
realtime now. By having instant
oversight oftheir performance
andcashsituation, we can advise
themontheir commercial success.”
Stefan Barrett Founder
Bee Motion provides a one-stop shop for accountancy
services and independent financial advice. Sage
Accounting has revolutionised the business, leading
to a 30% increase in turnover since adoption. The
efficiency and real-time visibility provided by Sage
Accounting, has enabled the team to shift focus from
purely compliance services to value-added business
consultancy and cross-selling its advisory offerings.
The team has also integrated Sage Payroll with Sage
Accounting to further enhance the accuracy of
aclient’s real-time financial status.
Strategy in action
Building
sustainable growth
Scale Sage Intacct
Case study: Pizza Pilgrims
“ Everything is so much quicker as there’s
nomoremanual inputting and downloading
ofspreadsheets, it’s all handled in one
easy-to-usesystem that updates in real time.”
Laura Burns Financial Controller
Founded in 2011, Pizza Pilgrims has grown from atravelling pizza
vanto a group of 20 pizzerias in the UK.Implementing Sage Intacct
provides a solution that can scale with the brand as it grows, support
multi-site operations, streamline reporting processes and integrate
with point-of-sale till systems within each branch. Sage Intacct has
improved the creation of Board reports with more accurate, real-time
data, saving at least half a day a month and freeingup the finance
team to inform better decision making.
Expand medium
beyondfinancials
Case study: Oxford Collection
“ We’ve become a more strategic partner
to the business through the visibility
andautomation we’ve gained through
Sage Intacct for both budgeting
andaccounting.”
Megan Walker VP Accounting and Finance
Oxford Collection is an Oregon-based hotelier,
operating 16 distinctive hotels that offer business
and leisure travellers a premium guest experience.
With Sage Intacct Planning, Oxford Collection’s
monthly forecasts reflect current data, accessible
tostakeholders via Sage Intacct dashboards. Monthly
forecasts now take 20 to 25 minutes to create and
share with hotel managers. As a result, Oxford
Collection has eliminated 20 hours a week of budget-
related work previously handled by a member of its
accounting and finance team.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202320
Learn and disrupt
Case study: Velo
“ We’re favouring local suppliers,
evaluating travel choices in different
ways, and doubling down on flexible
working practices so our team can do its
bit too. The Sage Earth data is essential
to this, as it is guiding the action plan
and helping measure impact.”
Yeni Olubamowo Finance Director
Velo is a specialist B2B marketing agency for global
technology, industrial and professional services
companies. Its ambition is not only to achieve
netzero by 2030, but also to pioneer sustainable
marketing techniques and help tell its clients’
storieswith credibility. Sage Earth easily connected
with Velo’s existing accounting software through
anAPI,calculating an automated carbon footprint
andproviding insight on immediate steps to take.
Asa result, spending in high-impact areas has
fallenby 25%.
Scale the Network
Case study: Johnny’s Selected Seeds
“ Sage Intacct AP automation, especially
itsAIfeatures, has been a game-changer.
TheAI reads and extracts bill data,
allowingforeasier review.”
Michelle Pyle Director of Finance
Johnny’s Selected Seeds is an employee-owned seed
producer and merchant based in Maine, US. Sage Intacct’s
sophisticated accounts payable (AP) automation has taken
awayalot of manual work for the finance team, meaning
thatit only needs to do a simple review of the information
inthe system, as specific vendors orsuppliers are
automatically recognised.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 21
Strategic Report Governance Report Financial Statements Additional Information
Our key performance indicators
Measuring our progress
Underlying ARR growth Renewal rate by value Sage Business Cloud penetration Subscription penetration
2023
2022 12%
2021 4%
11%
2023
2022
102%
101%
2021 99%
2023
2022 75%
2021 66%
84%
2023
2022 75%
2021 69%
79%
Definition
Annualised Recurring Revenue (ARR) is defined as the
normalised reported recurring revenue in the last month
ofthe reporting period, adjusted consistently period to
period, multiplied by 12 (FY23: £2,188m ARR). ARR growth
isstated on a comparable FX basis, with the prior period
ARRretranslated at the current year exchange rates,
toneutralise the effect of currency fluctuations.
Definition
Renewal rate by value is 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.
Definition
Sage Business Cloud penetration is defined as the
underlying recurring revenue from Sage Business Cloud
solutions asapercentage of the underlying recurring
revenue of the Future Sage BusinessCloud Opportunity.
Definition
Subscription penetration is the underlying software
subscription revenue asa percentage of underlying
totalrevenue.
Why we are measuring this
Underlying ARR growth represents the annualised
valueofthe underlying recurring revenue base that is
expected tobe carried into future periods, and its growth
isaforwardlooking indicator of reported underlying
recurring revenuegrowth.
Why we are measuring this
Since it does not include new customer acquisition or
reactivation ofoff-plan customers, renewal rate by value
isan important measure ofthestrength of the existing
customer base.
Why we are measuring this
This metric measures progress in the transition of the
business to SageBusiness Cloud solutions. Find out more
about the portfolio view of revenue onpage 61.
Why we are measuring this
This metric shows the progress Sage is making in migrating
customers tosubscription.
Performance
Underlying ARR increased by 11% in FY23, reflecting
broad-based growthacross all regions balanced between
newand existingcustomers.
Performance
Renewal rate by value of 102% improved from 101% in FY22,
reflecting increased sales to existing customers and good
retention rates.
Performance
SageBusiness Cloud penetration increased to 84% in FY23,
enabling more customers to connect to Sage’s cloud services
and ecosystem via the Sage Network.
Performance
In FY23, subscription penetration reached 79%,
reflectingcontinued growth from subscription contracts.
Sage has four strategic KPIs that show the impact and progress
ofstrategic execution.
Selected non-financial KPIs
Customer experience
Our aim is to differentiate Sage through unique
experiences that delight customers and help drive
growth. In FY23, we commenced a multi-year journey
torefresh our approach to how wecapture, act on and
measure customer feedback, significantly enhancing
theinsights we gather. We have extended the use of
transactional Net Promoter Score
1
(tNPS) beyond sales
and service interactions, to measure a much broader
range of touchpoints, or ‘micromoments’, inthecustomer
journey (for example onboarding). Micromoments are
themoments that matter the most to our customers
andprovide granular understanding of the customer
experience across a variety of different solutions and
services, enabling us to effectively prioritise and
implement targeted, measurable improvements to
bettermeet the needs of our customers.
Main metrics: micromoments, customer experience
improvements, tNPS
1. tNPS measures customer satisfaction at aspecific touchpoint within the customer journey. We also measure relationship NPS (rNPS) which enables
us to gauge overall customer satisfaction regarding Sage.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202322
Underlying ARR growth Renewal rate by value Sage Business Cloud penetration Subscription penetration
2023
2022 12%
2021 4%
11%
2023
2022
102%
101%
2021 99%
2023
2022 75%
2021 66%
84%
2023
2022 75%
2021 69%
79%
Definition
Annualised Recurring Revenue (ARR) is defined as the
normalised reported recurring revenue in the last month
ofthe reporting period, adjusted consistently period to
period, multiplied by 12 (FY23: £2,188m ARR). ARR growth
isstated on a comparable FX basis, with the prior period
ARRretranslated at the current year exchange rates,
toneutralise the effect of currency fluctuations.
Definition
Renewal rate by value is 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.
Definition
Sage Business Cloud penetration is defined as the
underlying recurring revenue from Sage Business Cloud
solutions asapercentage of the underlying recurring
revenue of the Future Sage BusinessCloud Opportunity.
Definition
Subscription penetration is the underlying software
subscription revenue asa percentage of underlying
totalrevenue.
Why we are measuring this
Underlying ARR growth represents the annualised
valueofthe underlying recurring revenue base that is
expected tobe carried into future periods, and its growth
isaforwardlooking indicator of reported underlying
recurring revenuegrowth.
Why we are measuring this
Since it does not include new customer acquisition or
reactivation ofoff-plan customers, renewal rate by value
isan important measure ofthestrength of the existing
customer base.
Why we are measuring this
This metric measures progress in the transition of the
business to SageBusiness Cloud solutions. Find out more
about the portfolio view of revenue onpage 61.
Why we are measuring this
This metric shows the progress Sage is making in migrating
customers tosubscription.
Performance
Underlying ARR increased by 11% in FY23, reflecting
broad-based growthacross all regions balanced between
newand existingcustomers.
Performance
Renewal rate by value of 102% improved from 101% in FY22,
reflecting increased sales to existing customers and good
retention rates.
Performance
SageBusiness Cloud penetration increased to 84% in FY23,
enabling more customers to connect to Sage’s cloud services
and ecosystem via the Sage Network.
Performance
In FY23, subscription penetration reached 79%,
reflectingcontinued growth from subscription contracts.
Our strategic priorities
Read more on pages 18 and 19
Employee satisfaction
Our people bring Sage’s culture to life. One of the ways
wemonitor and understand how happy our colleagues are
working at Sage is to conduct regular colleague surveys,
including measuring employee satisfaction (see page 24).
The survey response rates and the findings provide
insights on colleague sentiment and help to ensure
thatwe act to preserve and enhance our culture.
Main metric: eSAT
Sage Foundation volunteering
Sage Foundation is an integral part of life at Sage, and
isregularly cited by colleagues as one of the reasons
theyenjoy working at Sage. Every colleague is given
fivedays of paid volunteering leave every year to spend
time knocking down barriers locally, connecting with
thecommunities in which we operate. We measure
engagement through the number of Sage Foundation
volunteering hours (see page 30).
Main metric: Sage Foundation volunteering hours
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 23
Strategic Report Governance Report Financial Statements Additional Information
Our people and culture
The Sage culture
Q
How does the culture bring
the purpose and values to life?
We featured colleagues in a range of organic social media
content (#LifeAtSage), sharing their experiences on what
it’slike working at Sage. Our employer brand “mentions”
increased from 39,000 in 2021/22 to 161,000 in 2022/23
(according to data from the latest annual Link Humans
Employer Brand Index report). Seeing our colleagues excited
to share all the great things we’re doing at Sage, embodying
our culture internally and externally, is fulfilling. In terms of
our values, our actions to “Simplify” have led to greater
internal use of AI, creating efficiencies and inclusiveness for
our colleagues via intelligent meeting re-cap and language
translation. We’ve also introduced a payroll excellence
programme that features a digital tool to help colleagues
more easily view and understand their pay. I’m proud of the
launch of our Leadership Academy, focused on developing
“Human” and accountable leaders. Our leaders are key role
models of our values, so much so that we introduced a
customer experience scorecard measure in our FY23 bonus
plan design for leaders, focused on driving improved delivery
of ‘micromoments’ (the touchpoints that customers value), and
outcomes that enhance our customer experience. Through
Sage Foundation, our colleagues, partners, and customers
make a real difference to our communities, and in FY23 total
volunteering hours reached 154,620, including helping to
build routes into education andsupport work readiness for
young people and women.
Q
What actions have we taken to embed
Sage’svalues this year?
We have focused on helping colleagues and leaders personalise
the values for themselves and their teams and translate them
into everyday actions. A significant number of colleagues have
taken part in values workshops and attended values-focused
townhalls and other colleague engagement forums. The
workshops facilitated discussions on what our values mean to
individuals and toteams. They also highlighted the behaviours
that we need to exhibit in order to embed a ‘leader-led’
approach, enabling teams to prioritise the best customer
outcomes while balancing work and flexibility. We allocated
each quarter of the year to focus ona different value. For
example, our last quarter focused on“Human”—how to be a
human leader as well as ensure “human”isat the heart of our
brand and customer experience. Welaunched a variety of
podcasts with senior leaders toshare with colleagues on how
“Human” shows up in our business-related activities, such as
our human-centred design approach to product development
and the ways in which we’re making our chatbots more human.
Q&A with Amanda Cusdin
Chief People Officer
Q
What makes Sage
culture stand out?
Our culture is the personality and character of Sage.
Itdefines how we operate, behave, interact, make decisions,
and get things done. Our culture is not owned by any single
person or any single team; it’s owned by everyone. And it’s
our people who bring Sage’s culture to life. Year after year,
wereceive high response rates and feedback via our
colleague survey (FY23: 85% response rate; 10,400
comments), reflecting colleague sentiment and our
commitment to strengthening our culture. Both our
employeesatisfaction and employee net promoter score
have remained high, in the upper quartile of the global
benchmark, and we recently saw an increase in scores
acrossseven of the ten questions asked of colleagues.
OurGlassdoor presence has remained stable, with our global
score at 4.1, and our Diversity and Inclusion Rating remains
high at 4.3/5, illustrating that we’re doing the right things.
Our culture stands out because it’s built from a great
purpose, weaved into everything we do, and truly represents
the values and behaviours of our organisation.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202324
Q
What are the priorities
fortheyearahead?
In FY23, our colleagues were instrumental in helping Sage
grow and scale, knocking down barriers for customers,
society and shareholders. FY24 is all about building even
further on that momentum—focusing on performance that
delivers extraordinary outcomes. We’re at the start of the
journey, working on the value of “Human” and driving
towardsahigh-performance culture. We will deliver on our
commitment to building an inclusive workplace and drive
tangible impact that is characterised by clarity, alignment,
high levels of accountability, collaboration and
psychological safety.
Our priority is to continue the focus on creating a culture of
accountability, building trust, ensuring the right framework
of support for effective leaders to role model our values,
adapting quickly to change, and driving results for Sage to
scale and grow. Colleague personas (profiles that describe
the needs, values, and behaviours of colleagues) and the
wider employer value proposition (set of benefits and
rewards) aligned to those personas will be launched
internally and externally. We will continue to progress
against our three-year People strategy. As we navigate FY24
and beyond, the ability to put people first, solve problems
creatively, connect emotionally, collaborate effectively, and
never stop learning will beinvaluable.
We recognise colleagues are a critical stakeholder and
essential to our success. Creating a positive colleague
experience is a big part of our culture: prioritising diversity
andwellbeing, and developing skills. In FY23, we evolved
ourthree-year people strategy to prioritise creating flexible
workplaces and working, developing human and accountable
leaders, and delivering scalable colleague experiences.
Key people measures
A number of key metrics help us keep track
ofhowwe’reprogressing:
76
eSat— how happy our colleagues
are working at Sage (FY22: 79)
4.3/5
Glassdoor diversity, equity and inclusion (DEI)
score—howinclusive we are as an organisation
4.1/5
Glassdoor score—based on independent
reviews from our colleagues (FY22: 4.2)
42%
internal fill rate—how successfully we’re
providing colleagues with opportunities
to develop their career at Sage (FY22: 36%)
34%
of leadership teams meeting
our gender diversity target (FY22: 33%)
1
12th
ranking by RateMyApprenticeship as one of the
bestorganisations in the UK for apprenticeships
Top 13%
placing in the Forbes World’s Best Employers 2023
reportofall large blue-chip employers
1. Global gender diversity target of no more than 60% of any one
gender,inanyleadership team, anywhere in Sage, by FY26.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 25
Strategic Report Governance Report Financial Statements Additional Information
Our people and culture continued
Some of our key achievements in FY23
How we attract, develop and retain our talent
We support the business by ensuring we have the right talent
doing the right work, with the right skills when needed. This
has been delivered through increased internal fill rates
(FY23: 42%; FY22: 36%) together with best-in-class direct
sourcing of external candidates from our internal hiring
team. To improve performance in alignment with our strategy
to scale the business, it’s important that we continue to
attract, develop and retain diverse talent. Werefreshed our
employer value proposition toensure it remains aligned to
our values and continues toattract a diverse workforce that
creates opportunities foreveryone. We want Sage to be
aninclusive, energised environment, where amazing people
deliver extraordinary outcomes. We also continue to cooperate
closely with ourWorks Councils and we respect the right to
collective bargaining. All colleagues in the EU are covered by
collective bargaining agreements but none are covered by
such agreements in the UK or North America.
Our focus on entry to Sage through our ‘Pathways’ and Early
Careers programmes provides external apprentice and
graduate scheme opportunities in all our locations across
many functional areas. Our ‘Pathways’ programme has been
instrumental in helping individuals facing employment
barriers, such as those with disabilities, returning
professionals, and veterans, enhancing Sage’s diversity.
InFY23 we welcomed almost 400early careers colleagues
from 12 countries and are looking to expand in FY24 with
thedevelopment ofour“Entry into Sage” strategy, which
willnurture future leaders across diverse backgrounds
andsupport the development of talentpipelines.
Developing everyone’s potential
andperformance
To create a future-fit workforce and high-performance
culture, we must promote colleague development, multi-
phased careers, and career transitions. Development and
continuous growth are part of the culture at Sage, and part
Activated our Flexible
Human Work approach
andlaunched team
agreements globally
Save and Share Programme
(enabling eligible
colleagues to buy
discounted shares)
delivered £7.9m of value
tocolleagues through
shareprice appreciation
Launched ESPP (employee
share purchase plan)
inNorth America with
take-upabove target
at20.7%
Exceeded Sage
Foundation fundraising
target at $777,000
NOVEMBER 2022 MAY 2023 JUNE 2023 SEPTEMBER 2023
ofour ways of working. In FY23, we focused on supporting
colleagues and teams to be high performing by developing
psychological safety, accountability and resilience, and
feedback skills; and by understanding their strengths.
With our increased focus on internal talent mobility and
targeted development, we structured our learning priorities
to better enable Sage’s strategy, expanding our Learning
Academies to include Leadership, Data, Cloud, Innovation/
Design Thinking, AI, Marketing, Collaboration, DEI, and
hybrid working. We also reinforced the importance of our
colleagues doing the right thing by broadening mandatory
training on our core policies, with the highest completion
rates achieved to date at 97%.
We recognise the critical role our managers play in
developing and retaining talent and are committed to
enabling “Human” leaders with the skills they need to foster
recognition, empowerment, and engagement in service
ofhigh performance. In FY23, we launched our Leadership
Academy and welcomed 56 VPs and Directors via our
SeniorLeadership Program (SLP), 379 via our extended
Accountability and Transparency programme, 104 new
peoplemanagers via our Managers Essential programme,
and 132 non-people managers via Aspiring Leaders.
After a successful global launch of Talent Marketplace
(ourinternal site for enhancing workforce agility, increasing
talent mobility, and growing a skills-based workforce),
witha70% adoption rate (percentage of colleagues with
aprofile), weintroduced “Gigs” to help colleagues gain
exposure to newcrafts and grow the skills they need through
projects andopportunities, combining project needs with
career development and enhancing our squad ways of
working. Withover 110 mentor relationships established,
we’restrengthening our culture and deepening our
successionpipeline.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202326
An employee view
Les Ireland
Senior Project Manager
“ Accelerate [Women in Finance Accelerator] has been
instrumental for me in that it has made me realise
that the power is truly within me to do, to feel and to
achieve whatever Iwant. It is an active reminder to
regroup, reset and invest in myself, before I can give
back to others, and it is also an amazing opportunity
to connect, learn and share with other women on
theirjourneys through life and our careers. I have
personally benefitted hugely from the practical
strategies discussed at the workshops, and from
hearing other people’s experiences and tactics to
overcome shared issues and maximise opportunities
available to us. For the first time in 20 years, Ihave
found my confidence to truly be myself in the
workplace, to push past perceived blockers and
believe in what Iknow to be theright thing to do.
Thisempowerment has made me more productive,
deepened my relationships and improved my overall
sense ofwellbeing and happiness. I am now sailing,
notrowing against the tide.”
Every colleague should feel supported in developing their
careers and our aim is to develop world-class leaders for the
future of Sage, so we are ready for tomorrow’s challenges as
well as today’s. We take succession planning seriously and
are committed to investing in our people, offering support
and development to help them grow and succeed. Through
our annual talent review, we identify critical roles and
potential successors for these roles, whilst encouraging
continuous conversations and development plans
foreveryone.
We instituted the CEO Open Circle forum, empowering
high-potential colleagues across all functions to meet with
the CEO six times each year to provide insight, feedback,
andideas as adiverse and inclusive sounding board. We
alsoencouraged Executive Leadership Team (ELT) members
tomeet one-on-one with direct reports of a leader they
manage, to help ensure our leadership team is connected
atmultiple levels of the business. We also facilitated Board
colleague engagement sessions, providing the Board with
greater insights into Sage’s talent and succession pipeline,
while helping key Sage colleagues to better understand the
Board and its expectations.
Creating a colleague experience that
engagesand retains high-performing talent
Sage continues to drive towards becoming a high-
performing organisation, where it consistently meets and
beats the highstandard of objectivesit sets itself, delivering
exceptional outcomes andoutperforming competitors.
High-performing teams aredriven by clear direction, shared
goals and feedback that’s honest, constructive and actionable.
Our goal setting framework, Objectives and Key Results
(OKRs), has enhanced performance and allowed colleagues
tobetter connect their contribution to Sage’s strategy.
Weaved into our approach to performance management and
evolution ofour reward programme, it will support leaders
indriving continuous feedback, having meaningful
conversations, anddriving accountability.
We continue to ensure we’re listening to colleagues and
throughout FY23 we championed our value of “Simplify” by
removing complexities from our onboarding and self-service
processes, and utilising data tools to support colleagues
inprioritising, focusing, learning, and thriving at work.
InFY23, we achieved an 85% response rate to our colleague
“Pulse survey” and used this insight to launch our “Women
inFinance Accelerator”, with a focus on increasing the
gender balance in Finance at the Director, VP, and EVP level.
This six-month programme successfully increased the
profile and morale of female talent for 20 graduates and
weare exploring rolling it out across other areas.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 27
Strategic Report Governance Report Financial Statements Additional Information
Our people and culture continued
Our DEI pillars
Diverse Teams
Ensure we have as wide a range of voices,
backgrounds and experience aspossible,
soleaders can leverage differing perspectives
to make the right decisions 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202328
Wellbeing is a core foundation for Sage, and our holistic
approach to wellbeing involves providing resources and
support across four key pillars: healthy mind; healthy
body;healthy finances; and healthy communities. From
ourWellbeing Hub to an expansion of a Healthy Working
programme, colleagues were provided with financial
resources, parental and caregiver support, and mental
healthfirst aid. The global roll out of our Employee
Assistance Programme is now complete, following the
addition of coverage in Belgium, France, India, Israel, Kenya,
Malaysia, Morocco, Namibia, Nigeria, Romania, andSingapore.
Our progressive hybrid approach continues to balance
human connection and flexibility, centred on increasing
office attendance to drive high performance, engagement
and wellbeing. We held 150 “office magic” events (bringing
colleagues together in our office spaces) globallyacross
36sites, with great colleague engagement andincreased
connection amongst teams. A new workplace value proposition
is currently taking this forward, bringing together culture,
values, and sustainability, to create anenvironment where
colleagues can thrive.
DEI is essential to making us more agile, innovative, and
human. At Sage, we have adeep desire to do the right thing
by our colleagues, customers, society, and shareholders.
Since publishing ourGlobal DEI strategy in FY21, focused
onknocking down barriers so that everyone can thrive, we
setout to drive ourDEI agenda forward in FY22, targeting
increases in the percentage of colleagues enrolled in our
Colleague Success Networks (CSNs), ourgender diversity
inleadership, and more.
Sage gender and ethnicity balance
Board ELT
1
ELT and
Direct
Reports
2
All
Colleagues
3
Number of people 11 10 102 11,326
Gender Female 4 4 49 4,794
Male 7 6 53 6,433
Non-Binary 0 0 0 22
Undisclosed 0 0 0 77
Ethnicity Asian 0 0 4 412
Black/African/Black S. African/Caribbean/Black British/African American 0 0 2 224
I do not wish to self-identify my race or ethnicity 0 0 2 155
Indigenous 0 0 0 94
Multiple Ethnic Groups 0 1 2 122
Other Ethnic Group 2 1 3 90
White 9 8 63 2,871
Undisclosed 0 0 26 7,358
Data as of 30 September 2023
1 Steve Hare and Jonathan Howell are included in both the Board and ELT data.
2 ELT and their direct reports include ELT members and those for whom they have direct line management responsibility, excluding administrative and support roles.
3 We do not report on DEI data for contractors and consultants.
In FY23, we continued our self-declaration data gathering
project, ‘All About Us’, resulting in 55% participation across
UK, Ireland, US, Canada, and South Africa, helping toimprove
our hiring and pay gap analysis. Participation in CSNs
reached 18% during FY23 (FY22: 14%). We aim for continuous
improvement in this area, and we have added three further
CSNs: an Ability Network and a Pride Network in South Africa,
and aFaith Network in North America. Additional information
onour progress against our DEI targets can be found in our
Sustainability and Society Report www.sage.com/en-gb/
company/sustainability-and-society.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 29
Strategic Report Governance Report Financial Statements Additional Information
Sustainability and Society
The Multiplier
Effect
Strategy overview
Sage has an important role in creating value forallour
stakeholders including colleagues, customers, society, and
shareholders. We believe a sustainable business isaresilient
business and are committed to use our tools, knowledge and
insight, to multiply our impact and help everyone to thrive.
Our Sustainability and Society strategy has become
pivotal to how we deliver on Sage’s purpose—knocking down
barriers so everyone can thrive. We want to turn barriers into
opportunities, creating positive impact far beyond Sage.
In 2023, we evolved the Sustainability and Society strategy
to reflect on our role in society, the outcomes of our recent
materiality assessment, and our transition from commitment
to action. Our updated strategy has three keypillars—
Protectthe Planet, Tech for Good, and Human byDesign—
allunderpinned by Sustainability by Design, whichis
aboutintegrating sustainability deep into our business
andoperations. Each of the pillars is supported byclear
priorities and a rigorous plan. This evolved approach
alsoreflects a closer alignment with our strategic
businesspriorities.
For further detail visit:
www.sage.com/en-gb/company/sustainability-and-society
FY23 Sustainability and Society Report
FY23 Climate Change Report
Snapshot of our 2023 highlights
• Named in the FT’s European Climate Leaderslist.
• Sage Earth is now powering NatWest’s Carbon Planner,
making it simpler for UK businesses to understand
their carbon footprint and reduce their emissions.
• Launched Data and AI Ethics Principles.
• Enhanced governance, appointing a Non-executive
Director and Board Sponsor for ESG.
• Sustainability Masterclasses launched to help
customers build green and resilient businesses.
• Underserved Entrepreneurs Research Report
published, aimed atunderstanding the barriers
faced by entrepreneurs from socio-economically
disadvantaged backgrounds.
• We were ranked 12th by RateMyApprenticeship,UK.
154,620
volunteering hours
USD $777,096
funds raised
SBTi
validated near-term
climate ambitions
Top 50
in Gender Equality List
Human by Design
Protect the Planet
Tech for Good
Sustainability by Design Sage Foundation
The Multiplier
Effect
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202330
Strategically
significant
Very important
Foundational
Climate change
Cyber security and data privacy
Diversity, Equity and Inclusion
Innovation to empower customers and SMBs
Colleague development
and retention
Digital equality
Resource use and circular economy
Governance effectivenessBiodiversity and ecosystems
Local community
investment, and support
Tax and regulatory compliance
Human rights
Business conduct
Water and marine resources
Pollution
Wellbeing and colleague
health and safety
Data and AI ethics
Note: Topics are listed in alphabetical order and do not reflect a hierarchy of importance.
Materiality assessment
A robust materiality assessment is the bedrock of a strong
sustainability strategy. It also informs how we manage
riskand harness opportunities to ensure Sage remains
abusiness fit for the future. This year, to help us better
understand our impact on the society and environment
aswell as the related risks and opportunities, our assessment
was informed by the requirements for ‘double materiality’ as
outlined by the European Sustainability Reporting Standards
(ESRS), which underpin the EU Corporate Sustainability
Reporting Directive (CSRD). Our assessment was also
informed by the GRI 2021 Standards.
Using our 2021 material topics as astarting point,
weengaged with 180 internal and external stakeholders,
including our Executive Leadership Team (ELT), colleagues,
investors, customers, and suppliers. We supplemented
thiswith insights from an ESG AI platform (Datamaran)
thatallowed usto scan thousands of financial and non-financial
Topics related to operational management
or ‘business as usual’ or regulatory
requirementsand emerging topics that
mustbeaddressed from a compliance
andongoing management perspective.
Topics that have strategically significant
impact on society or Sage. Thesetopics
areclosely related to Sage’s business
strategy. They are covered by strategic
commitments, reporting strategy, and
riskmanagement approach.
Topics that are very important and
havehigh impact on society or Sage.
Theysupport our business strategy.
We are addressing these by developing
policies, setting targets, and
robustreporting.
reports, regulations in key jurisdictions, andmedia articles.
This enabled us to streamline, mergeandidentify additional
topics in line with stakeholderexpectations.
As a result, we identified 8 topics as ‘strategically significant’
and ‘very important’ to our strategy due to their considerable
impact on society and the environment or on Sage. This work
ensures our approach to sustainability remains focused on
the most material topics.
We continually monitor business developments, risks and
opportunities, sustainability trends, changes in legislation
and the needs and perspectives of our stakeholders so that
our sustainability agenda remains focused on what
mattersmost.
For further detail visit:
www.sage.com/en-gb/company/sustainability-and-
society
FY23 Materiality Methodology
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 31
Strategic Report Governance Report Financial Statements Additional Information
Sustainability and Society continued
Protect the Planet
Climate change is an immediate threat to human wellbeing,
functioning society, and planetary health. Our opportunity
to secure a viable and sustainable future for all is rapidly
closing. Rapid and sustained greenhouse gas (GHG)
emissions reductions across sectors are critical to
limitwarming to 1.5°C.
The Protect the Planet pillar has been a particular focus
inFY23, with the identification of three priority areas:
• Getting Sage to net zero: achieving net zero by 2040
across our value chain.
• Supporting SMBs in achieving net zero: helping
SMBsdecarbonise through our solutions and education.
• Advocating for enabling policies and standards:
advocating to put SMBs at the centre of the
netzerotransition.
We have made good progress across all areas (see next page).
Getting Sage to net zero: this has been a key focus,
aswehave strengthened efforts to build a credible and
ambitious transition plan to net zero that will continue
toreduce emissions.
Supporting SMBs in achieving net zero: welaunched
season 3of the Sage Member Masterclass series on
Sustainability and Resilience, where industry leaders
provided SMBs with talks and articles onsustainability.
InFY23, Sage acquired Spherics, a carbon accounting
tool,that we rebranded to Sage Earth and is now building
momentum. We launched an enhanced customer pilot for
Sage Accounting and Sage 50 customers in the UK, offering
personalised recommendations and actions.
Advocating for enabling policies and standards:
duringCOP27, Sage launched the SME Climate Impact
Report, authored in collaboration with Oxford Economics
and the International Chamber of Commerce. The findings
ofthe report are a call to action for government and
policymakers to help SMBs become more sustainable,
giventhe influential role they play in the economy.
We have also further integrated ESG and climate change
intoour principal and operational risks, as part of our
Enterprise Risk Management framework. All climate risks
andopportunities are captured within our Enterprise Risk
Management system, Riskonnect, and managed as part
ofourESG Principal Risk. Please refer to ESG Principal Risk
(see page 81) and in our TCFD reporting (see pages 38 to 45).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202332
Key achievements
Getting Sage to net zero
• We developed a robust net zero Transition Plan with
aclear glidepath
1
and action plans to make sure we
deliver on our mid-term goal of 50% reductions by 2030.
We have made good progress. Since 2019 our market
based emissions have fallen by 16.4% against an SBTi
glidepath of 18%, reducing from 231,957 tCO
2
e to
193,951tCO
2
e in FY23.
• In collaboration with the Planetary Accounting Network,
we’ve also developed an environmental policy based on
awhole planet approach. Consequently, environmental
considerations have become part of widerSage policies
such as Procurement, Risk Management, Travel and
Expenses, and Flexible Working.
• Working with industry experts on carbon accounting,
weare developing an approach to model the full
lifecyclecarbon impact of our products, starting
withSage 100 and Sage Intacct.
• We have launched carbon literacy training with groups
ofcolleagues in the UK.
• Sustainability and Rewards teams have worked together
todevelop a sustainable rewards strategy to provide
colleagues with benefits that incentivise climateaction.
• We launched an engagement programme with our
highemitting suppliers, to increase accuracy of
carbonemissions data and to align with our carbon
reduction targets.
Supporting SMBs in achieving net zero
• We launched the Sage Member Masterclass series on
Sustainability and Resilience with over 1,000 views
todate.
• Sage and NatWest have joined forces to make it simpler
for UK businesses to understand their carbon footprint,
reduce their emissions and tackle climate change more
effectively. Sage Earth now powers NatWest’s Carbon
Planner to automate a key part of the process of
calculating a company’s emissions.
Advocating for enabling policies andstandards
• Sage is representing SMBs at the All-Party Parliamentary
Group on ESG, ensuring SMBs are part ofthe climate
conversation in the UK.
• In 2023, we started collaborating with Bankers for
Net-Zero (B4NZ) with the aim of helping unlock access
tocapital by automating GHG reporting for every SME
inthe UK.
• In collaboration with the International Chamber of
Commerce, PwC and Strand Partners, Sage launched
anew report at COP28 calling for simplified standards
forSMB sustainability reporting.
What’s next
We have made good progress in a short amount of time,
butwe know our fight against climate change is a long-term
commitment. In FY24, wewill continue to test and strengthen
our net zero transition plan and deepen our understanding of
climate related risks. We will be rolling outfurther training
to colleagues, based on the success ofcarbon literacy
training, and embedding sustainability more closely into
ourproduct strategy. We will also continue to engage with
governments and industry bodies on streamlining reporting
for SMBs.
For further information on TCFD please refer to pages 38 to 45
For further detail visit:
www.sage.com/en-gb/company/sustainability-and-society
FY23 Sustainability and Society Report
FY23 Climate Change Report
FY23 ESG Databook
Performance against targets
Sage to net zero
• Get Sage to net zero by 2040 and reduce absolute Scope 1, 2, and 3 GHGemissions by50%
by2030,from a2019base year aligned toSBTi
On track
Support SMBs in
achieving net zero
• Help ourcustomersreduce their GHG emissions by2030by providing access to carbon
management solutions and expertise
Early stage
Policy and
advocacy for SMBs
• Put SMBs at the forefront ofthe transition tonetzero by making sure theirvoice isheard
and lobbyingforsimplifiedstandards
On track
1. Glidepath—a model that visually plots the impact of each decarbonisation action and how these align with Sage’s current emissions and future targets.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 33
Strategic Report Governance Report Financial Statements Additional Information
Sustainability and Society continued
Tech for Good
Our ambition is to be the trusted network for SMBs, creating
an integrated experience of digital and human connections.
We believe using data and AI ethically is about more than
corporate reputation. It is essential for the success of
ourbusiness.
Tech for Good is about supportingSMBs to thrive by building
trusted and inclusive digital networks and solutions. We have
therefore identified three priority areas:
• Data for good: using data and visualisations to help
progress sustainable development.
• Building digital trust: building trust and security
intoour network while maintaining high levels of
Dataand AI ethics.
• Empowering entrepreneurs: Empowering people
through Sage Foundation to grow businesses and
developthe skills they need.
As a technology company with a global footprint, we have
aresponsibility to help address digital inequality. We are
doing this, over time, by ensuring the accessibility of our
products and byproviding access to opportunity through
digital and STEMlearning. In FY23 we conducted research to
start informing the future direction of the Sage Foundation.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202334
Key achievements
Data for Good
Innovation to empower customers and SMBs
• We published economic reports for multi-stakeholder
audiences around the Sustainable Development Goals
relevant to SMBs, notably Decent Work and Economic
Growth, and Climate Action.
Decent work – www.sage.com/en-gb/company/digital-
newsroom/2022/11/28/shedding-light-on-late-payments
Economic growth – www.sage.com/en-gb/company/
digital-newsroom/2023/06/20/sage-sets-out-blueprint-
for-digital-led-growth-to-strengthen-uk-economy
Climate action – www.sage.com/en-gb/company/digital-
newsroom/2022/11/29/sme-climate-intact-report
• We teamed up with Smart Data Foundry and the Centre
ofEconomics and Business Research to launch the
SageSmall Business Tracker. It analyses anonymised
Sage Accounting and Payroll data to look athowSMBsare
performing in real terms in the current economic climate.
Building digital trust
Cyber security and data privacy
• We expanded our Trust and Security Hub to support
SMBsin going digital safely by 2025—further advice
andguidance for SMBs was added to engage technical
and business leaders according to their requirements
and provide abaseline of guidance.
Data and AI Ethics
• Data and AI Ethics Principles were launched. Data and
AIEthics policy is also in place, including reference
toprivacy and security. The Principles and policy are
overseen by a newly formed Data and AI Ethics Council
that includes members from the ELT.
• In 2023, we published a Blueprint for Digital Led
Growthreport www.sage.com/en-gb/company/digital-
newsroom/2023/08/15/urgent-support-needed-for-
uks-underserved-entrepreneurs/. The report included
policy and strategy recommendations, such as enabling
SMBs totake climate action by simplifying ESG reporting
andensuring that AI regulation does notbecome
overlycomplex so SMBs can safely adopt cutting-edge
technologies. Following the report launch, our CEO,
SteveHare, was invited to join the UK Prime Minister’s
Business Council.
Digital equality
• Two of our products, Accounting Individual and Client
Management, are currently accessible, successfully
passing WCAG 2.1 grade AA automated tests. Roadmap
commitments are being developed for the rest of our
cloud products and we are investing in systems, training,
and strengthening executive sponsorship and oversight.
Empowering entrepreneurs
Local community investment and support
• In 2023, we published theUnderserved Entrepreneurs
Research Report’, conducted with Corporate Citizenship
www.sage.com/en-gb/company/digital-
newsroom/2023/06/20/sage-sets-out-blueprint-for-
digital-led-growth-to-strengthen-uk-economy. This
research project is aimed at understanding the barriers
faced by entrepreneurs from socio-economically
disadvantaged backgrounds and will help us inform
howto amplify SageFoundation’s impact in thefuture.
• Sage colleagues, partners, friends and families
volunteered 154,620 hours and raised USD$777,096.
• A significant benefit for Sage’s partners is that they can
also join Sage Foundation programmes and along with
more than 200 other Sage partners, can achieve their own
social impact goals. Included in the figure above, is the
contribution from our partners who in 2023, volunteered
3,106 hours and raised US $354,933 for non-profit
organisations around the world.
What’s next
We are committed to building a trusted and inclusive digital
network. Through our Tech for Good pillar we will continue
toensure everyone has equal opportunities to access data
and technology, while championing data protection,
security, and the ethical use of data.
Performance against targets
Data for Good
• Support SMBs and advance the UN Sustainable Development Goals (SDGs) byusing our
data tocreate visualisations (reports, trends, analytics)that can inform better decision
making by 2025
On track
Build Digital
Trust
• Expand our Trustand SecurityHubtosupportSMBs in goingdigital safely by 2025
On track
• Embed Data and AI Ethics Principles into the fabric of Sage by 2025
Early stage
• Our 2025 accessibility target is for cloud products to meet Web Content Accessibility
Guidelines (WCAG) criteria
Early stage
Empowering
Entrepreneurs
• Support 34,000 under-served entrepreneurs to scale and grow their businesses and equip
33,000 individuals with skills for greater opportunities through Sage Foundation by 2024
On track
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 35
Strategic Report Governance Report Financial Statements Additional Information
Sustainability and Society continued
Human by Design
Human by Design is our way of putting colleagues at
theheart of our business. Evidence is clear that diverse
businesses that do the right thing are resilient businesses.
Under this pillar we have identified three priority areas:
• Diversity, Equity and Inclusion: promoting diversity,
equity and inclusion at all levels of Sage.
• Future Fit Work: developing an inclusive work culture that
attracts and retains talent and develops skills for the future.
• Wellbeing: promoting a workplace where our colleagues
can feel and perform at their best and thrive.
Key achievements
Diversity, Equity and Inclusion
• Listed in the Business in the Community (BITC)/Times
Top 50 for Gender Equality List.
• Currently 34% of leadership teams are reaching our target
to achieve representation of no more than 60% of any one
gender in leadership teams by FY26.
• We added three new Colleague Success Networks: an
Ability Network and a Pride Network in South Africa,
andaFaith Network in North America.
• We have appointed a Global ELT Ambassador for Race
andEthnicity, setting transparent race and ethnicity
targets to increase representation and progression
intoELT long-term incentive plans.
Future Fit Work
• Over 1000 ‘future skills’ learnings accessed by
colleagues, supporting how we upskill colleagues on
essential skills.
• In FY23 we welcomed almost 400 early careers
colleaguesfrom twelve countries.
Wellbeing
• In 2023, we introduced a Healthy Working programme,
initially in North America and Iberia, and soon to be
rolled out globally. This programme comprises tailored
e-learning, and personal recommendations to improve
colleague health, wellbeing, and comfort at work.
• Additionally, all managers were requested to include
wellbeing within performance reviews of their reports.
What’s next
We will continue to prioritise improving how we gather
andutilise data, drive internal andexternal engagement,
and try and test innovative ways todiversify our teams and
leadership. Focus areas for the year ahead will include,
embedding allyship into essential training for allmanagers
and expansion of ‘All About Us’ scopegeographically and by
function. Our Workplace Value Proposition will be rolled out,
starting with our new North America hub in Atlanta. The
Healthy Working Programme willbe rolled outglobally.
For further information on Colleague development
andretention, please refer to pages 48 and 49
For further detail visit:
www.sage.com/en-gb/company/sustainability-and-society
FY23 Gender Pay Gap Report
FY23 Ethnicity Pay Gap Report
Performance against targets
DEI
• Achieve leadership team representation with no more than 60% of any one gender
byFY26
On track
• Increase ‘All About Us’ participation to 65% across 10 participating countries by 2024
On track
• Foster a greater sense of belonging and inclusion with 20% of colleagues actively
participating in the Colleague Success Network by 2024
On track
Future Fit Work
• Connect 70% of colleagues to our internal Talent Marketplace, increase internal fill
rate to 45% by 2023
On track
• Colleagues to complete 5,000 Future Fit learnings by 2025
On track
• Achieve a 20% YOY increase in Pathways hires up to 2025, with 500+ people receiving
work readiness training each FY
Delayed
Wellbeing
• Roll out our Colleague Assistance Programme to all countries by 2024
On track
• Double the number of Healthy Mind coaches by 2025
On track
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202336
Sustainability by Design
Sustainability by design underpins our strategy as it sets our
ambition to integrate sustainability into everything we do.
Key achievements
Enhanced governance
During the year, we evolved the Sustainability and Society
(S&S) steering group into a formal S&S management
committee comprising ELT members and chaired by our
Chief People Officer, Amanda Cusdin. This improved
governance process helps provide strategic direction
andensures that our targets, objectives and supporting
programmes remain relevant, ambitious and on track
fordelivery.
The Committee advises and aligns on strategic priorities
forimplementation, including policies and processes,
providing strategic direction with a clear mandate to
functional leadership teams for delivery.
The Committee comprises of ELT members and senior leaders,
including the General Counsel and Company Secretary, Chief
Risk Officer and Chief Corporate Affairs Officer. The Committee
ensures there is adequate management and Board oversight
on progress against theS&S strategy, ensuring ESG risks and
opportunities areadequately addressed as well as providing
strategic guidance to the business in order to deliver against
priorities. The Committee meets quarterly, sharing discussion
summaries and outputs with the CEO and broader ELT through
regular briefing sessions, and with the Board through Maggie
Chan Jones, our Non-executive Director responsible for ESG.
FY23 activities included:
• Using the double materiality process, we have assessed
our sustainability risks and opportunities aligned to
ourEnterprise Risk Management (ERM).
• We integrated climate risk into our ERM.
• We undertook a training needs analysis to better
understand the skills and capability needed within Sage
to deliver against our sustainability commitments and
continue to integrate sustainability across the business.
• Delivered a successful Board engagement session to
raise awareness on sustainability and climate change.
• Initiated the process to review our suite of policies
through a sustainability lens.
• Integrating sustainability deliverables into ELT OKRs
andbonus and LTIP structure.
Policies & controls
• We continue to strengthen oursupply chain due
diligenceprocess by setting clear expectations through
the Supplier Code of Conduct, utilising third-party
assessments, monitoring legal andreputational incidents,
and employing ESG questionnaires to better understand
actual performance. We work closely with ourbusiness
partners, agents, and other intermediaries to secure
formal adherence to our third-party Code ofConduct.
• We established a partnership with EcoVadis to
strengthenESG due diligence within our supply chains.
• Our Internal Audit team conducted an audit on our
Anti-Bribery and Corruption policy, resulting in further
enhancements to internal practice, procedures and
governance controls.
• We started further detailed assessment of
salesandbusiness processes to prepare for
implementing additional and enhanced customer
duediligence controls.
What’s next
We are on a journey to integrate sustainability throughout
our business. We have made good progress in 2023, and we
will continue to build on this in 2024 and beyond. This will
include upskilling and educating colleagues, recognising
the importance of empowering colleagues tomake more
sustainable choices. We will also continue toembed how we
manage our sustainability risks, impacts and opportunities,
developing an ESG risk register and continuing to ensure we
have the right policies and controls in place to manage these
risks. Building on the strong foundations this year, we also
plan to further assess human rights across our value chain.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 37
Strategic Report Governance Report Financial Statements Additional Information
TCFD disclosure
The Task Force on Climate-
related Financial Disclosures
Compliance Statement
FCA Listing Rules
In this report, we set out our climate-related financial disclosures
consistent with all of the Task Force on Climate-related Disclosures
(TCFD) recommendations and recommended disclosures pursuant
to Listing Rule 9.8.6 (R) (8). This includes all four of the TCFD pillars
and the 11 recommended disclosures set out in the report entitled
“Implementing the Recommendations of the Task Force on Climate-
related Financial Disclosures’’ published in October 2021 by the
TCFD. In completing this work we made use of TCFD guidance
material including the TCFD technical supplement on the use
ofscenario analysis, TCFD Guidance on Metrics, Targets, and
Transition Plans, and the TCFD Guidance for All Sectors. We are
reporting against the TCFD framework in line with FCA Listing Rules.
In FY24, we plan to continue our progress in reporting against all
four pillars of the recommendations. More detailed information on
FY24 priorities in reporting against TCFD is outlined in the table
below alongside progress made in FY23 and a summary of how we
areconsistent with TCFD recommendations.
Given the extensive nature of our TCFD disclosures, we have
included additional detailed information in our Climate Report.
Companies Act 2006
Our disclosure also meets the Companies (Strategic Report)
(Climate-related Financial Disclosure) Regulations 2022 amended
sections 414C, 414CA, and 414CB of the Companies Act 2006.
UK Climate-related Financial Disclosures (CFD)
Sage is compliant with the new mandatory climate-related financial
disclosure requirements under UK CFD. As stated above, our
disclosures are consistent with all of the TCFD recommendations.
Under the Strategy pillar, we outline the rationale for the chosen
scenarios used to assess the resilience of our business to climate,
and our timeline for refreshing the analysis undertaken so that we
continue to monitor changes over time.
TCFD Compliance Status
TCFD recommendation Summary and FY24 priorities
Governance
a) Describe the Board’s
oversight of climate-related
risks and opportunities
Cross-reference for the
disclosure in the report
• Governance—page 103
Fully aligned with TCFD recommendations
The Board is accountable for our approach to climate-related risks and opportunities and approves
sustainability policies. The Board is ultimately responsibility for setting the Group’s risk appetite and for
risk management and internal control systems, delegating authority to the Audit and Risk Committee in
setting the Group’s risk appetite and implementing appropriate oversight of ESG risks. Updates on ESG
matters, including as relevant to climate change, are provided to the Board and Audit and Risk Committee
viamanagement in addition to the regular updates provided by the CEO Board briefing. The Board was
updated in September on our Net zero plan and progress against our Science Based Targets. This year,
theBoard attended training on Sustainability, Environment and Climate Change.
FY24 priorities
We continue to monitor the training that is in place for the Board and Executive Leadership Team as part of
our sustainability training plan.
b) Describe the management’s
role in assessing and managing
climate-related risks and
opportunities
Cross-reference for the
disclosure in the report
• Governance—page 103
• Remuneration—pages 129 to 163
Fully aligned with TCFD recommendations
The CEO and Executive Leadership Team (ELT) are accountable for the Group’s climate strategy and
approachto TCFD. The Executive Vice President (EVP) of Sustainability and Society is responsible for
theimplementation of Sage’s “Protect the Planet” climate action plan, including the assessment and
management of climate-related risks and opportunities, with oversight from Sage’s Sustainability and
Society Committee.
Sage’s Sustainability and Society Committee includes a subset of ELT members. Sage has also appointed Maggie
Chan Jones as a designated director providing specific board oversight on the ESG agenda. The Sustainability
and Society Committee meets quarterly and progress on the Protect the Planet pillar is a standing agenda item.
The CEO and ELT receive a debrief after each Sustainability and Society Committee meeting with key updates,
matters discussed, and actions. This informs updates provided to the Board by the CEO.
A proportion of the Executive Directors’ Performance Share Plan (PSP) awards each year are driven by
strategic non-financial measures; in FY23 this included a measure relating to climate (see our Remuneration
Policy on pages 129 to 163).
FY24 priorities
We will continue to consider how climate-related issues are integrated into budgets, business plans, performance
objectives, capital expenditure and our investment decisions. Furthermore, we consider climate in our due
diligence approach, including our mergers and acquisitions and energy procurement process.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202338
TCFD recommendation Summary and FY24 priorities
Strategy
a) Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium,
andlongterm
Cross-reference for the
disclosure in the report
• See climate risks and
opportunities table below
Fully aligned with TCFD recommendations
In FY21, Sage conducted a climate risk and opportunity screening exercise, involving interviews with key
internal stakeholders across the Company. The process was used to explore the range of climate impacts that
may have the potential to present material short-, medium-, and long-term risks and opportunities to Sage,
including material financial and non-financial impacts.
In FY22, we disclosed 11 identified climate risks and opportunities, including information on the impact
onour business, maturity of our assessment, relevant time horizons, and mitigation and adaptation plans.
Those identified as the most material were taken forward for further climate scenario analysis.
A full breakdown of our climate risks and opportunities can be found on pages 44 and 45.
In FY23, we conducted further analysis of two of the above transition risks, the increasing cost of energy
andcarbon, and potential economic impact of climate change on the Sage global customers by sector and
geography (changing customer behaviours and needs). The outputs of this work will strengthen our
understanding ofthe effects of climate-related risks and opportunities on the Sage financial statements.
The full results ofthis analysis will be shared in FY24TCFDdisclosures.
FY24 priorities
We will conduct an updated risk and opportunity screening of all climate risk and opportunity categories
outlined in the TCFD framework to ensure they are complete and relevant and to verify underlying
assumptions and scenarios.
b) Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy, and financial planning
Cross-reference for the
disclosure in the report
• See climate risks and
opportunities table below
• Further information can
be found in our Climate Report
Fully aligned with TCFD recommendations
We are well positioned to support global climate awareness and action through our products such as Sage
Earth, whilst managing our own climate-related risks and opportunities. In the table below, we provide an
overview of our climate risks and opportunities; a more detailed breakdown of impact, mitigations, and
adaptations can be found within our Climate Report https://www.sage.com/en-gb/company/sustainability-
and-society/.
We’re working with SMBs to amplify and scale our impact from role-modelling through our own sustainability
journey to sharing our lessons learnt and skills. This year we continued to roll out Sage Earth and launched our
online Sustainability Masterclasses series. Through these initiatives we’ve been able to reach more SMBs and
engage them in sustainability and climate topics—knocking down some of the barriers to effective climate
action they face.
In FY23, we developed a robust Net Zero Transition Plan outlining our pathway to meeting Scope 1, 2, and 3
emissions reduction targets, which is detailed in our Climate Report https://www.sage.com/en-gb/company/
sustainability-and-society/. Sage commissioned anindependent review with ERM, a world-leading sustainability
consultancy, to test our Net Zero Transition plan and projections. This review concluded the Net Zero Transition
Plan and projections were sufficiently ambitious, with realistic, achievable near-term 2030 and 2040 net zero
targets. The review also identified risks and opportunities to strengthen and accelerate our Net Zero Plan.
These have been reviewed with the Sage Audit and Risk Committee, and will be monitored as part of existing
risk management process.
The climate change scenario analyses undertaken in line with TCFD recommendations did not identify any
material impact on the Group’s financial results, going concern, or viability.
However, the impact from climate change and the associated risks are constantly evolving, and the Group
willcontinue to monitor this risk and consequent impact (see note 1 of the Group financial statements on
page 189). Therefore, we will continue to assess how our Transition Plan impacts the financial statements
andalso our longer-term financial performance. Furthermore, our business strategy is informed by the
outputs of the Net Zero Transition Plan.
FY24 priorities
• Continue to monitor how we quantify the financial impacts of our climate risks and opportunities,
andintegrate the outcomes into our strategy and financial planning.
• In our Climate Report, we have outlined our alignment against the framework of the Transition Plan
Taskforce (TPT) and we will continue to progress our alignment in FY24 against the published TPT
framework. This will include refinement of sensitivity analysis and scenario analysis to better understand
the impact of climate on our business, and the activities required to underpin our net zero commitments.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 39
Strategic Report Governance Report Financial Statements Additional Information
TCFD disclosure continued
TCFD recommendation Summary and FY24 priorities
Strategy continued
c) Describe the resilience
oftheorganisation’s strategy,
taking into consideration
different climate-related
scenarios, including a 2°C
orlower scenario
Cross-reference for the
disclosure in the report
• See our Climate Report for
detailed scenario analysis—page 36
Fully aligned with TCFD recommendations
In FY22, climate scenario analysis was undertaken to evaluate the following most material physical and
transition risks under high- and low-carbon scenarios:
• Hosting resilience.
• Damage to facilities.
• Workforce productivity.
• Changing customer behaviour and needs.
The physical risk analysis was carried out using Representative Concentration Pathway (RCP)2.6 (1.6ºC–2ºC),
RCP4.5 (2.1ºC–3ºC), and RCP8.5 (3.1ºC–4ºC) scenarios, forecasting to 2050. The transition risk analysis was
completed using the NGFS “Below 2 Degrees” (1.7ºC plus) and the “Current Policy” (3.0ºC plus) scenarios,
forecasting until 2100. The scenarios have been chosen to provide a range of possible climate outcomes,
including a fast transition scenario in which transition risks are likely to be more pronounced and a “business as
usual” scenario which would lead to more severe physical risks. We acknowledge that the models used in assessing
our risks are inherently uncertain and contain some underlying assumptions which affect their outcome.
In FY23, further climate scenario analysis was undertaken against the transition risk ‘Changing Customer
Needs and Behaviours and Needs’, evaluating the relative impact of climate change against the different
industry sectors and geographies our customers operate in. Working with Oxford Economics, a leader in
global economic forecasting, we reviewed the economic impact of climate change across our customer base,
evaluating different geographies and sectors and relative GDP forecast performance against a range of
climate scenarios, ranging from RCP 1.9 (below 1.5ºC) to RCP 7.0 at the medium to high end of projections.
The output of this work will enable Sage to support our customers on the transitional risks associated with
climate change.
Furthermore, we conducted a detailed analysis evaluating the future cost of carbon, evaluating the options
available to allow Sage to credibly neutralise any residual emissions in support of our 2040 net zero ambition.
Sage will provide a further update on our approach to carbon removal and storage to neutralise the final <10%
of residual scope 1,2, and 3 emissions in due course, while recognising the immediate priority torapidly cut
near-term emissions.
The additional analysis undertaken during FY23 has not highlighted a severe strategic risk to Sage resulting
from climate change in the short to medium term. We will continue to expand the quantification of financial
impact of both risks and opportunities, as our understanding and data evolve.
Sage has a range of measures and activities in place to manage identified climate change impacts,
asdetailed on pages 7 and 8 of our Climate Report.
FY24 priorities
We will reassess which risks we conduct further detailed climate scenario analysis on, including the
frequency of update. In FY24 ,we will review our analysis on the four risks that have currently been modelled.
Risk management
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks
Cross-reference for the
disclosure in the report
• Risk management—page 81
Fully aligned with TCFD recommendations
Identification of climate risks is consistent with our approach to overall risk management. Climate change
isconsidered a sub-risk to our ESG Principal risk and is therefore managed in line with key operational risks
at Group level.
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 external environmental
consultants EcoAct. All climate risks and opportunities are assessed against our ERM framework, including
inherent and residual risk.
In FY22, we disclosed 11 identified climate risks and opportunities, including information on the impact
ofour business, maturity of our assessment, relevant time horizons, and mitigation and adaptation plans.
Those identified as the most material were taken forward for further climate scenario analysis.
In FY23, we conducted a double materiality assessment that was informed by the CSRD and the standards
developed thereunder, being the ESRS. Climate change was identified as one of eight topics defined as
“strategically significant” and “very important” to our strategy due to its considerable impact onsociety
andthe environment and/or on Sage.
This helped us to better understand Sage’s broader impact on the environment and emerging global
regulatory requirements related to climate change as well as the related risks andopportunities.
FY24 priorities
As outlined in our Strategy disclosure above, we will support our ongoing monitoring of climate risks at
function level by conducting a detailed bottom-up review of all climate risk and opportunity categories
outlined in the TCFD framework.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202340
TCFD recommendation Summary and FY24 priorities
Risk management continued
b) Describe the organisation’s
processes for managing
climate-related risks
Cross-reference for the
disclosure in the report
• Risk management—page 81
Fully aligned with TCFD recommendations
Our ERM Framework helps Sage manage ESG and related climate risks, enabling a consistent approach to the
identification, assessment, management, and oversight of risks.
This helps us to deliver our strategic objectives and goals consistently 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.
FY24 priorities
We will continue to consider how we engage with stakeholders across the value chain to aid risk identification
and management.
c) Describe how processes
foridentifying, assessing,
andmanaging climate-related
risksare integrated into the
organisation’s overall
riskmanagement
Cross-reference for the
disclosure in the report
• Risk management—page 81
Fully aligned with TCFD recommendations
Climate-related risks are managed as part of our ERM Framework. This 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.
ESG is classified as a Principal Risk, and in FY22 we added climate change as a sub-risk.
Supported by our central Sustainability and Society team, functions across Sage are responsible for
integrating 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 as part of business continuity planning.
FY24 priorities
As part of our broader sustainability strategy, we will further educate colleagues on the impact of climate
change and what it means for Sage, for different parts of our business and individually. Using the insights
developed from climate scenario analysis the education campaign will support colleagues to practically
consider climate risk and opportunities as part of ongoing risk management practices.
Metrics and targets
a) Disclose the metrics used
bythe organisation to assess
climate-related risks and
opportunities in line with
itsstrategy and risk
management process
Cross-reference for the
disclosure in the report
• See climate risks and
opportunities table below
• Further information can be
found in our Climate Report
Fully aligned with TCFD recommendations
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. In June 2022, our near-term 2030 commitment was validated by the Science Based Targets
Initiative (SBTi). In June 2023, our net zero target was submitted for validation with the SBTi, with completion
expected in H1 FY24, confirming our commitment to become net zero by 2040.
We have made good progress in reducing emissions against our target commitment. Since FY19 our
market-based emissions have fallen by 16.4%, against an SBTi glidepath of 18%, reducing from 231,957 tCO
2
e
to 193,951 tCO
2
e in FY23.
Our Net Zero Transition Plan https://www.sage.com/en-gb/company/sustainability-and-society/ outlines
thespecific actions that will be taken to achieve our near-term 2030 target.
In FY23, we carried out an exercise to reassess the metrics we have in place to monitor and measure our
climate risks and opportunities. The review recommended several qualitative and quantitative metrics and
targets which are described in page 40 to 44 of our Net Zero Transition Plan.
Executive remuneration
In FY22, we introduced a set of performance measures to include relevant ESG metrics. In FY23, the weighting
of ESG measures increased from 15% to 20%, including progress in reducing carbon emissions against our
SBTi-approved Net Zero Transition Plan, which now accounts for 7.5%.
Read more in our Directors’ Remuneration Report on pages 129 to 163.
Our most recent global emissions footprint can be found on page 17 of our Sustainability and Society Report.
FY24 priorities
We will continue to monitor the climate metrics we have in place, providing quantitative disclosures where
appropriate. In addition, a review of internal carbon pricing will be completed to evaluate the role it can
provide in supporting our strategy to achieve net zero.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 41
Strategic Report Governance Report Financial Statements Additional Information
TCFD disclosure continued
TCFD recommendation Summary and FY24 priorities
Metrics and targets continued
b) Disclose Scope 1, Scope 2,
and,ifappropriate, Scope 3
GHGmetrics and the
relatedrisks
Cross-reference for the
disclosure in the report
• Further information can be
found in our Climate Report
Fully aligned with TCFD recommendations
Sage calculates and discloses emissions from Scope 1 and Scope 2, in compliance with Streamlined Energy
and Carbon Reporting (SECR) regulations.
Scope 1 and 2 emissions: UK and global
1
Current
reporting year
Oct 2022—Sept 2023
Previous
reportingyear
Oct 2021—Sept 2022
Previous
reporting year
Oct 2020—Sept 2021
Total GHG emissions data
UK and
offshore
area
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)
Emissions from activities which the
Company owns orcontrols, including
combustion of fuel and operation
offacilities (Scope1)/tCO
2
e 196 1,030 250 548 666 395
Emissions from the purchase of electricity,
heat, steam, or cooling by the Company for
its own use (Scope2 Indirect) Location-
based emissions (tCO
2
e) 738 2,518 652 2,853 1,110 3,216
Scope 2 (Indirect) Market-based emissions
(tCO
2
e) 13.3 1,395 6.1
2
2,035
2
162 3,138
Total gross Scope 1 and location-based
Scope 2 emissions(tCO
2
e) 933 3,548 902 3,401 1,776 3,611
Energy consumption* used to calculate
above emissions (kWh) 4,217,496 12,202,282 4,276,721 10,479,910 8,636,694 9,899,169
Carbon intensity ratio: location-based
CO
2
e emissions reported above normalised
to tCO
2
e per total GBP £1,000,000 revenue
(Scope 1 and 2)** (tCO
2
e/revenue) 2.2 2.0 2.2 2.2 4.7 2.5
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.
2. FY22 figures re-instated following external limited assurance.
* Energy consumption includes all energy use related to Scope 1 and 2.
** Global revenue in FY223 is £2,184m for Sage during the reporting period. It was £1,949m for the previous
year’s reporting period.
Sage also screens and discloses emissions across all relevant Scope 3 categories as covered within our
SBTitarget.
In FY23, limited assurance of our GHG report has been provided by Bureau Veritas; a copy of the statement can
be found in our Sustainability and Society Report on pages 46 and 47.
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 page 17.
Energy efficiency actions
Business travel:
Air travel is the highest source of emissions within business travel (85%). In FY23 a carbon emission’s travel
dashboard was introduced, to engage and build awareness with colleagues across our functions and
geographical regions.
Property related:
We continued to manage our sites effectively and efficiently in FY23. Our Sustainable Property strategy will
continue to improve the efficiency of our property estate, , whilst transitioning buildings to clean low-carbon
sources of energy. Sage has seen a year-on-year increase of certified renewable energy and for FY23 Sage
reached 68%,compared to 45% in FY22. Examples of energy efficiency initiatives include aLED replacement
project within our Johannesburg office, saving 42 metric tonnes of carbon annually.
Reduce, reuse, recycle:
The IT department continued their ‘Re-use’, ‘Resell’, ‘Recycle’ policy. This involves collecting old equipment
and ensuring it is upcycled and recycled. Sage sells the equipment to an external party and donates the
proceeds to charity.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202342
TCFD recommendation Summary and FY24 priorities
Metrics and targets continued
b) Disclose Scope 1, Scope 2,
and,ifappropriate, Scope 3
GHGmetrics and the
relatedrisks continued
Cross-reference for the
disclosure in the report
• Further information can be
found in our Climate Report
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 (GHGP)
Corporate Accounting and Reporting Standard.
We have also used the UK Government emissions factors for company reporting (published by BEIS in 2023),
combined with the most recent International Energy Agency (IEA) international conversion factors (2022) for
non-UK electricity within our reporting methodology. We have also used EcoAct’s emission factors tool for
Well to Tank(WTT) and WTT (Transport & Distribution) for non-UK sites as BEIS/DBT no longer publishes them.
These emission factors are based on the specific fuel mix of each country’s electricity generation. For Scope
3 emissions sources, we have used acombination of the Comprehensive Environmental Data Archive (CEDA
version 6) and UK government greenhouse gas emission factors.
As our data collection improves, we aim to collect more supplier specific data. Our purchased goods and
services calculation has used supplier-specific data from the CDP Supply Chain questionnaire where
relevant. Working with CDP and other partners weaim to increase the proportion further in subsequent years
as more suppliers make use of this service.
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 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 2022 to 30 September 2023 and is aligned with
our financial reporting year.
Organisational boundary and 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
Cross-reference for the
disclosure in the report
• See climate risks and
opportunities table below
• Further information can
be found in our Climate Report
Fully aligned with TCFD recommendations
Targets related to net zero
We have committed to net zero by 2040, and to reduce absolute scope 1, 2, and 3 emissions by 50% by 2030
against a2019 baseline. We are also committed to the SBTi, the UN climate change Race to Zero and the
UNGlobal Compact Business Ambition for 1.5ºC.
We have made good progress. Since FY19 our market-based emissions have fallen by 16.4%, against an SBTi
glidepath of 18%, reducing from 231,957 tCO
2
e to 193,951 tCO
2
e in FY23.
Seeour climate report for more detail on our near-term and net zero target.
Metrics and targets related to our climate risks and opportunities
We have set a number of metrics and targets in relation to our climate risks and opportunities, as outlined
inmore detail within our Climate Report https://www.sage.com/en-gb/company/sustainability-and-society/.
For example, the opportunities for renewable energy procurement will be monitored via the percentage of
electricity sourced from renewable energy contracts and New Products and Services will align to our
executive remuneration target to enable access to carbon accounting functionality via Sage suites.
FY24 priorities
We will continue to monitor the climate targets we have in place, providing quantitative disclosures against
targets where possible.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 43
Strategic Report Governance Report Financial Statements Additional Information
TCFD disclosure continued
Our key climate-related risks and opportunities
Maturity
Time
horizon
Climate
scenario
analysis
Transition risks
Changing Customer
Behaviour and Needs
  
Sub-type
Market
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.
S-M
(2023)
Increasing Cost of
Energy and Carbon
  
Sub-type
Regulation
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 risk through increased carbon
efficiency, and/or consider where these costs are absorbed.
S-M
(2023)
Reputational Damage
  
Sub-type
Reputation
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.
S-M
Physical risks
Workforce
Productivity
  
Sub-type
Chronic physical
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.
S
(2022)
Damage to Facilities

Sub-type
Acute physical,
Chronic physical
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 our
facilities. Insufficiently prepared facilities could beunable
to deal with more frequent and intense occurrences of
suchevents.
S
(2022)
Hosting Resilience

Sub-type
Acute physical,
Chronic physical
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.
S-M
(2022)
Key
High impact
Quantitative
climate scenario
analysis performed
Medium impact
Good understanding,
further work desirable
Low impact
Further work is required
to fully impact, mitigate,
and adapt
Key—Risk assessment period
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
includingthe2015 international Paris Agreement and the three year
strategic plan of the business.
Key—Stakeholder groups
Colleagues Customers Society Shareholders
Maturity
Increase No change Decrease
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202344
Maturity
Time
horizon
Climate
scenario
analysis
Opportunities
Retaining and Hiring
Superior Talent

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.
S-M
Renewable Energy
Procurement
 
Sub-type
Energy source
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.
S-M
Site Strategy
  
Sub-type
Resource efficiency
Our property strategy presents an opportunity to reduce
thebusiness’s carbon footprint, operational costs, and
vulnerability to extreme weather events.
S-M
New Products
andServices
  
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.
S-M
Enhanced Brand
  
Sub-type
Reputation
Sage has an opportunity to help SMBs fight climate
change andbe their voice for the future, supporting
themwhen it comes tolobbying for change.
S-M
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 45
Strategic Report Governance Report Financial Statements Additional Information
Non-financial and sustainability information statement
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 www.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.
Governance and oversight
We recognise that assurance over our business activities
andthose of our partners and suppliers isessential.
DuringFY23 we monitored and reported onthecompletion
ofour mandatory Code of Conduct training for all colleagues.
Youcan read moreabout ourrisk management and Principal
Risks frompage68onwards.
Anti-bribery and corruption
Sage has an anti-bribery and corruption policy, together
withassociated whistleblowing procedures and grievance
mechanisms 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 FY23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. Further details on our policies and
procedures in this area can be found on page 40 of our
Sustainability and Society Report www.sage.com/en-gb/
company/sustainability-and-society.
Tax strategy
We publish our tax strategy on our website (www.sage.com/
investors/governance/tax-strategy) 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.
Ethics and
governance
Non-financial and Sustainability
InformationStatement
Information as required byregulation can be found on the
following pages:
Environmental matters pages 30 to 33, and 38 to 45
Our employees pages 24 to 29, and 48 and 49
Social matters pages 30 to 36, 46, and 52 and53
Human rights page 46
Anti-corruption and anti-bribery page 46
Climate-related disclosures pages 38 to 45
Business model pages 14 and 15
KPIs pages 22 and 23
Principal Risks pages 74 to 81
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202346
Stakeholder engagement
Listening to
our stakeholders
Our key stakeholders
How we define and engage with
our key stakeholders
Engaging regularly with our stakeholders is fundamental
toour strategy. We strive to maintain an open, authentic,
andpositive stakeholder engagement across our stakeholder
community including colleagues, customers, society,
andshareholders.
We keep appropriate coverage across all of our stakeholder
groups by embedding it into our Non-executive Directors’
engagement plan. Each year the Board also reviews the key
stakeholder categories to ensure the assessment of their
needs and interests remain relevant andaligned with the
Group’s strategy. Key stakeholder considerations are
integrated into Sage’s Board papers toenable the Board to
proactively consider them in all discussions and decision
making. Sage’s section 172(1) statement for FY23 on pages
56to 59 demonstrates howSage’s stakeholders influenced
some of the decisions takenby the Board during the year
while recognising that situations will exist where not every
stakeholder interest canbe addressed in full.
In addition to the four key stakeholder groups, we recognise
that other groups of stakeholders are also important 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). Our Supplier
Code of Conduct clearly sets out the standards of behaviour
we expect from all our suppliers across a range of issues,
which all suppliers are required to follow.
The following pages set out key stakeholder categories,
theforms of Board engagement with those stakeholders,
andthe wider business engagement and the impact of such
activities conducted during the year.
Read more on
pages 48 and 49
Read more on
pages 50 and 51
Read more on
pages 52 and 53
Read more on
pages 54 and 55
Colleagues Customers Society Shareholders
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 47
Strategic Report Additional InformationFinancial StatementsGovernance 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 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.
How Sage
engages
atBoard level
• The Board Associate role aims to enhance decision 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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.
• In June 2023, the Board Associate hosted an interview with Drummond Hall, who provided colleagues with
aninsightinto Sage’s transformation since he joined the Board and highlighted the opportunities Sage has
moving forward. The Board Associate also hosted a discussion with Roisin Donnelly and Maggie Chan Jones
inJuly 2023toshare their perspectives with colleagues on their first six months as Sage Board members.
• The Board received regular updates on colleagues, including on the results of Sage’s bi-annual
colleaguesurveys.
• Colleague engagement sessions were also held throughout the year with the Board in Newcastle, Paris, and Atlanta. Andrew Duff
visited the Madrid office in February 2023, where he met with colleagues to gain an understanding of their work, and visited the
Newcastle office in September 2023. Roisin Donnelly visited the Newcastle office as part of her induction to meet the team and gain
further understanding of the Sage business following her appointment to the Board.
• The Board received 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.
• Oversight of 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 pages 104 and 105.
How Sage
engages
across the
Group
• During FY23, we launched a three-week campaign to encourage participation in the All About Us programme,
which helps us identify areas of underrepresentation in the organisation and the barriers that communities
ofcolleagues face. Colleagues were invited to voluntarily and confidentially disclose information about
themselves, which helps us build a much more inclusive Sage and allows us to understand inequities and
createpolicies and initiatives to address the needs of colleagues.
• As part of our ongoing disability inclusion journey, we launched a Free to Focus Hub in North America, which
simplifies the way colleagues request workplace adjustments and accommodations.
• In April 2023, we introduced free premium access to the mindfulness app Calm for Sage colleagues and up to
five friends or family members. So far, 2,923 colleagues have signed up to use Calm since introduction.
• We strengthened our network of Healthy Mind Coaches. These are trained volunteers from around Sage who are
there to lend a listening ear and guide colleagues towards support if they are struggling with their wellbeing
orhave mental health concerns. Sage has over 90 Healthy Mind Coaches and colleagues have access to Healthy
Mind Coaches in any Sage location.
• Our Colleague Success Networks play an important role in supporting the Group’s DEI journey. Events such as
Managing Neurodiversity at Home and in the Workplace were held, as well as the attendance of Sage networks
atvarious events including London Trans+ Pride and Christopher Street Day Pride parade in Frankfurt.
• We delivered on the commitment to ensure all colleagues globally have access to an Employee Assistance Programme (EAP) by the
endof FY23. The EAP provides a confidential 24/7 helpline to support colleagues through whatever is going on in their life at work
orathome.
• 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. All Sage colleagues are required to complete Code of Conduct
training bi-annually.
• An independent and anonymous whistleblowing hotline is provided 24/7. 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 that
protects the wellbeing of all colleagues.
• Sage TV Live broadcasts presentations on strategy and quarterly performance updates by the CEO and CFO, Executive Leadership
Team, andsenior management. Multimedia channels are also used internally for sharing information and as a depository of internal
news items of interest.
Outcomes
from
engagement
• We were listed in the Times Top 50 for Gender Equality List and ranked 12thin RateMyApprenticeship, UK.
Weintroduced a Healthy Working programme, initially in North America and Iberia, and soon to be rolled
outglobally.
• Following its initial roll out in UKIA, during the year we launched Sage Talent Marketplace for colleagues in
anumber of locations. Sage Talent Marketplace is an internal talent mobility tool that empowers colleagues to
take control of their career development. Sage Talent Marketplace’s AI engine matches colleagues to internal
career opportunities, vacancies, learning, mentors, gigs, and projects based on their skills, talents, and values.
So far over 70% of colleagues at Sage are on the platform.
• In May 2023, we introduced the Sage Data Academy. During a Data Pulse Survey, colleagues told us that they
believed data is important to the future success of the Company and to them in their roles, helping them make
informed decisions. The Sage Data Academy has the aim of enhancing our collective data skills and knowledge,
promoting best practices around becoming insight and value driven, and encouraging continuous learning
forcolleagues working in and around data across the Company.
• We conducted Pulse Surveys during the year, which allow the Board greater insight into colleague sentiment across the Group and
provide direct feedback on areas that can be improved. In March 2023, 87% of Sage colleagues completed the Pulse Survey, which
wasthe highest-ever response rate. The highest number of comments was also received (21,400), which included thousands of
ideasabout how to improve both the colleague and customer experience at Sage. The September 2023 PulseSurvey also received
outstanding participation, with 85% of Sage colleagues completing the survey and providing 10,000 comments.
• 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.
For further information, please see the People section on pages 24 to 29
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202348
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 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.
How Sage
engages
atBoard level
• The Board Associate role aims to enhance decision 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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.
• In June 2023, the Board Associate hosted an interview with Drummond Hall, who provided colleagues with
aninsightinto Sage’s transformation since he joined the Board and highlighted the opportunities Sage has
moving forward. The Board Associate also hosted a discussion with Roisin Donnelly and Maggie Chan Jones
inJuly 2023toshare their perspectives with colleagues on their first six months as Sage Board members.
• The Board received regular updates on colleagues, including on the results of Sage’s bi-annual
colleaguesurveys.
• Colleague engagement sessions were also held throughout the year with the Board in Newcastle, Paris, and Atlanta. Andrew Duff
visited the Madrid office in February 2023, where he met with colleagues to gain an understanding of their work, and visited the
Newcastle office in September 2023. Roisin Donnelly visited the Newcastle office as part of her induction to meet the team and gain
further understanding of the Sage business following her appointment to the Board.
• The Board received 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.
• Oversight of 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 pages 104 and 105.
How Sage
engages
across the
Group
• During FY23, we launched a three-week campaign to encourage participation in the All About Us programme,
which helps us identify areas of underrepresentation in the organisation and the barriers that communities
ofcolleagues face. Colleagues were invited to voluntarily and confidentially disclose information about
themselves, which helps us build a much more inclusive Sage and allows us to understand inequities and
createpolicies and initiatives to address the needs of colleagues.
• As part of our ongoing disability inclusion journey, we launched a Free to Focus Hub in North America, which
simplifies the way colleagues request workplace adjustments and accommodations.
• In April 2023, we introduced free premium access to the mindfulness app Calm for Sage colleagues and up to
five friends or family members. So far, 2,923 colleagues have signed up to use Calm since introduction.
• We strengthened our network of Healthy Mind Coaches. These are trained volunteers from around Sage who are
there to lend a listening ear and guide colleagues towards support if they are struggling with their wellbeing
orhave mental health concerns. Sage has over 90 Healthy Mind Coaches and colleagues have access to Healthy
Mind Coaches in any Sage location.
• Our Colleague Success Networks play an important role in supporting the Group’s DEI journey. Events such as
Managing Neurodiversity at Home and in the Workplace were held, as well as the attendance of Sage networks
atvarious events including London Trans+ Pride and Christopher Street Day Pride parade in Frankfurt.
• We delivered on the commitment to ensure all colleagues globally have access to an Employee Assistance Programme (EAP) by the
endof FY23. The EAP provides a confidential 24/7 helpline to support colleagues through whatever is going on in their life at work
orathome.
• 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. All Sage colleagues are required to complete Code of Conduct
training bi-annually.
• An independent and anonymous whistleblowing hotline is provided 24/7. 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 that
protects the wellbeing of all colleagues.
• Sage TV Live broadcasts presentations on strategy and quarterly performance updates by the CEO and CFO, Executive Leadership
Team, andsenior management. Multimedia channels are also used internally for sharing information and as a depository of internal
news items of interest.
Outcomes
from
engagement
• We were listed in the Times Top 50 for Gender Equality List and ranked 12thin RateMyApprenticeship, UK.
Weintroduced a Healthy Working programme, initially in North America and Iberia, and soon to be rolled
outglobally.
• Following its initial roll out in UKIA, during the year we launched Sage Talent Marketplace for colleagues in
anumber of locations. Sage Talent Marketplace is an internal talent mobility tool that empowers colleagues to
take control of their career development. Sage Talent Marketplace’s AI engine matches colleagues to internal
career opportunities, vacancies, learning, mentors, gigs, and projects based on their skills, talents, and values.
So far over 70% of colleagues at Sage are on the platform.
• In May 2023, we introduced the Sage Data Academy. During a Data Pulse Survey, colleagues told us that they
believed data is important to the future success of the Company and to them in their roles, helping them make
informed decisions. The Sage Data Academy has the aim of enhancing our collective data skills and knowledge,
promoting best practices around becoming insight and value driven, and encouraging continuous learning
forcolleagues working in and around data across the Company.
• We conducted Pulse Surveys during the year, which allow the Board greater insight into colleague sentiment across the Group and
provide direct feedback on areas that can be improved. In March 2023, 87% of Sage colleagues completed the Pulse Survey, which
wasthe highest-ever response rate. The highest number of comments was also received (21,400), which included thousands of
ideasabout how to improve both the colleague and customer experience at Sage. The September 2023 PulseSurvey also received
outstanding participation, with 85% of Sage colleagues completing the survey and providing 10,000 comments.
• 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.
For further information, please see the People section on pages 24 to 29
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 49
Strategic Report Additional InformationFinancial StatementsGovernance Report
Stakeholder engagement continued
Customers
We build every experience with human insight and
ingenuity
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.
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 programmes, as well as technical training.
How Sage
engages
atBoard level
• Regular updates from the CEO are provided to the Board on the operational priorities in place to deliver a
high-quality customer experience.
• The Board hears regular updates on and monitors key customer measures across the Group and key themes from
customer feedback.
• Regular Cyber Security updates are provided to the Board and this year the Board’s understanding of Sage’s
work toreduce cyber risks across the business was enhanced by an engagement activity on Cyber Security in
February2023.
• Product demonstrations were provided to the Board during the year to help Board members understand how
Sage’s products were being evolved to meet customer needs.
• In May 2023, the Board received an update on Sage’s UKIA business, with a focus on how Sage was developing its propositions to meet
the needs of small business customers and accountants.
• In July 2023, the Board received an update on Sage’s European business, including areas of focus for new and existing customers and
the newproducts which were being launched in the region.
• The Board received updates during the year on the development of the Sage Network, with a particular focus on understanding its
benefits for customers and how AI services and offerings were being integrated into the customer experience.
• During the year, Andrew Duff visited our Madrid office and attended a customer session with the local leadership team.
• Attended a customer Q&A event with four Sage Intacct partners and customers in Atlanta in September 2023 to help the Board
understand their experiences of working with Sage.
How Sage
engages
across the
Group
• Our Customer Connect initiative continued. 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.
• Following the previous launch of Sage Membership in the UK and US, we launched Sage Membership in South
Africa, which includes expert human support from our Sage product specialists, community forums where
members can hear from industry experts, and Member Masterclasses, which include arange of content, such as
talks and articles from business experts to help with specific business challenges.
• We continued to scale Sage Intacct through product enhancements, extended vertical reach, and geographical
expansion. During the year, Sage Intacct was launched in France, with other European markets due to follow
inFY24.
• In Europe we launched Sage Active, a multi-legislation business management solution for SMBs, into new markets including France,
Spain, and Germany.
• In June 2023, we expanded our partnership with Amazon Web Services (AWS), focusing on helping SMBs speed up their digital
transformation and benefit from the latest technology. As part of this relationship, we will make Sage Intacct available onthe AWS
cloud platform for customers in the US for the first time, which would in turn enable our customers to scale at pace by modernising
their finance function and unlocking efficiencies.
• In April 2023, Sage published “The Human Firm” by Will Farnell, a book that will help accounting professionals looking to build
abetter practice for their clients and their team, to use the best of technology to drive forward a more human, emotional connection
and understanding of clients.
• We introduced the Sage Managed Services Programme that provides partners with a platform to provide client services. Itisdesigned
to help partners scale, by taking on bigger clients and offering higher-value services.
Outcomes
from
engagement
• We have evolved our approach to how we capture, act on, and measure customer feedback. By mapping
micromoments (specific occasions or touchpoints in the customer journey), we aim to capture actionable
insights to help us clearly understand and improve the customer journey.
• 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.
• Furthering our partnership with Microsoft in FY23 meant that we were able to remove friction from day-to-day tasks for customers
submitting and approving accounting and people processes directly through Teams, rather than in the Sage Intacct or Sage People
applications, reducing the need to toggle between solutions.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202350
Customers
We build every experience with human insight and
ingenuity
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.
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 programmes, as well as technical training.
How Sage
engages
atBoard level
• Regular updates from the CEO are provided to the Board on the operational priorities in place to deliver a
high-quality customer experience.
• The Board hears regular updates on and monitors key customer measures across the Group and key themes from
customer feedback.
• Regular Cyber Security updates are provided to the Board and this year the Board’s understanding of Sage’s
work toreduce cyber risks across the business was enhanced by an engagement activity on Cyber Security in
February2023.
• Product demonstrations were provided to the Board during the year to help Board members understand how
Sage’s products were being evolved to meet customer needs.
• In May 2023, the Board received an update on Sage’s UKIA business, with a focus on how Sage was developing its propositions to meet
the needs of small business customers and accountants.
• In July 2023, the Board received an update on Sage’s European business, including areas of focus for new and existing customers and
the newproducts which were being launched in the region.
• The Board received updates during the year on the development of the Sage Network, with a particular focus on understanding its
benefits for customers and how AI services and offerings were being integrated into the customer experience.
• During the year, Andrew Duff visited our Madrid office and attended a customer session with the local leadership team.
• Attended a customer Q&A event with four Sage Intacct partners and customers in Atlanta in September 2023 to help the Board
understand their experiences of working with Sage.
How Sage
engages
across the
Group
• Our Customer Connect initiative continued. 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.
• Following the previous launch of Sage Membership in the UK and US, we launched Sage Membership in South
Africa, which includes expert human support from our Sage product specialists, community forums where
members can hear from industry experts, and Member Masterclasses, which include arange of content, such as
talks and articles from business experts to help with specific business challenges.
• We continued to scale Sage Intacct through product enhancements, extended vertical reach, and geographical
expansion. During the year, Sage Intacct was launched in France, with other European markets due to follow
inFY24.
• In Europe we launched Sage Active, a multi-legislation business management solution for SMBs, into new markets including France,
Spain, and Germany.
• In June 2023, we expanded our partnership with Amazon Web Services (AWS), focusing on helping SMBs speed up their digital
transformation and benefit from the latest technology. As part of this relationship, we will make Sage Intacct available onthe AWS
cloud platform for customers in the US for the first time, which would in turn enable our customers to scale at pace by modernising
their finance function and unlocking efficiencies.
• In April 2023, Sage published “The Human Firm” by Will Farnell, a book that will help accounting professionals looking to build
abetter practice for their clients and their team, to use the best of technology to drive forward a more human, emotional connection
and understanding of clients.
• We introduced the Sage Managed Services Programme that provides partners with a platform to provide client services. Itisdesigned
to help partners scale, by taking on bigger clients and offering higher-value services.
Outcomes
from
engagement
• We have evolved our approach to how we capture, act on, and measure customer feedback. By mapping
micromoments (specific occasions or touchpoints in the customer journey), we aim to capture actionable
insights to help us clearly understand and improve the customer journey.
• 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.
• Furthering our partnership with Microsoft in FY23 meant that we were able to remove friction from day-to-day tasks for customers
submitting and approving accounting and people processes directly through Teams, rather than in the Sage Intacct or Sage People
applications, reducing the need to toggle between solutions.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 51
Strategic Report Additional InformationFinancial StatementsGovernance Report
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
• As part of regular CEO Board briefings the Board receives updates on the Sustainability and Society strategy.
• The Board held a deep dive session and training on ESG in February 2023, including on delivering our current
commitments and evolving our Sustainability and Society strategy and an update on the Sage Foundation.
• During the year we were pleased to appoint Maggie Chan Jones as the Non-executive Director with oversight
onESG.
• An update on Sage’s Net Zero Transition Plan and the progress of Sage’s FY23 TCFD disclosures was provided to
the Board in September 2023. Further information on TCFD can be found on pages 38 to 45.
• The Board receives detailed papers and in-person updates on Sage’s position on non-financial disclosures including regulatory
requirements and voluntary disclosures such as GRI and SASB.
• Updates on Sage Foundation colleague participation were provided to the Board and in September 2023 the Board attended Sage
Foundation “Mini Grow” mentoring sessions with local Atlanta not for profits. A photo taken at the event is included on page 58.
How Sage
engages
across the
Group
• We joined forces with NatWest to make it easier for businesses to understand their carbon footprint.
NatWest’sCarbon Planner is now powered by Sage Earth, automating a key part of the process of calculating
acompany’s emissions.
• We launched the Travel Insights Dashboard. The dashboard is designed to empower colleagues with insights
into their own actions regarding business travel, to help positively adjust behaviour, including reducing
personal CO
2
footprint and contributing directly to reducing Sage’s CO
2
emissions.
• Our Data and AI Ethics Principles were launched, overseen by a new Data and AI Ethics Council that includes
members from the ELT.
• Sage’s Sustainable Supply Chain strategy is a key component of our wider Sustainability and Society strategy.
The strategy enables us to procure goods and services responsibly, ensuring our supply chain is free from risks
such as modern slavery and that suppliers meet our standards of ethical conduct.
• We expanded our Trust and Security Hub to support SMBs to go digital safely.
• During the year we evolved the Sustainability Steering Committee into the Sustainability and Society Committee. This management
committee provides strategic direction and has overall accountability for successful delivery of our Sustainability and Society
strategy, and comprises ELT members and other seniorleaders.
• We announced a new partnership with Morehouse College, a historically black liberal arts college (HBCU) in Atlanta. Sage will invest
inMorehouse’s software engineering programme and Sage experts will help teach a series of new software engineering courses
atMorehouse.
• Through the Sage Foundation we connect with the communities in which we operate.
For further details on achievements, please refer to the Sustainability and Society section on pages 30 to 37
Outcomes
from
engagement
• We were able to make 2 products accessible to people with disabilities by meeting WCAG criteria.
• Sage was able to expand its TCFD disclosures after the progress made in strengthening governance
andtheintegration of climate-related objectives in executive remuneration, leadership performance,
andriskmanagement.
• Sage demonstrates the pathway to achieve 2030 climate commitments through a robust Net Zero
TransitionPlan. Sage’s Net Zero Transition Plan considers the latest guidance from the Transition Plan
Taskforce and industry best practice, enhancing Sage transparency and credibility beyond core
mandatorydisclosure compliance.
• We were named in the FT’s 2023 Europe’s Climate Leaders list.
• In March 2023, Sage Earth received two edie awards nominations (Product Innovation of the Year: Software, systems and services
andBusiness Leader of the Year for Sage’s VP of Carbon Accounting). The edie awards are the UK’s largest sustainability awards,
celebrating leadership across the space, and we are proud to have been recognised.
• The Sage Foundation surpassed its fundraising target for FY23, raising over $750,000, and, in response to the earthquake disaster
inMorocco, launched a scheme to match colleague donations up to £200 (or local equivalent) to support the crisis.
• The Sage Foundation partnered with Kiva, a crowdfunding platform that lends money to unbanked underserved entrepreneurs,
todouble colleagues’ $50 credits to mark Earth Day. So far, 4,827 colleagues have used their Kiva credit, and together with them
wehave supported 17,283 entrepreneurs (15,347 of whom are women) across 63 countries and provided $341,000 of funding.
• Through the Sage Foundation, Sage volunteers contributed 154,620 hours during FY23.
• We conducted a research project with Corporate Citizenship, which will help us understand the barriers faced by entrepreneurs
fromsocio-economically disadvantaged backgrounds and inform us on how to amplify Sage Foundation’s impact in the future.
For further details on Sage Foundation activities, please refer to the People section on pages 24 to 29
Stakeholder engagement continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202352
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
• As part of regular CEO Board briefings the Board receives updates on the Sustainability and Society strategy.
• The Board held a deep dive session and training on ESG in February 2023, including on delivering our current
commitments and evolving our Sustainability and Society strategy and an update on the Sage Foundation.
• During the year we were pleased to appoint Maggie Chan Jones as the Non-executive Director with oversight
onESG.
• An update on Sage’s Net Zero Transition Plan and the progress of Sage’s FY23 TCFD disclosures was provided to
the Board in September 2023. Further information on TCFD can be found on pages 38 to 45.
• The Board receives detailed papers and in-person updates on Sage’s position on non-financial disclosures including regulatory
requirements and voluntary disclosures such as GRI and SASB.
• Updates on Sage Foundation colleague participation were provided to the Board and in September 2023 the Board attended Sage
Foundation “Mini Grow” mentoring sessions with local Atlanta not for profits. A photo taken at the event is included on page 58.
How Sage
engages
across the
Group
• We joined forces with NatWest to make it easier for businesses to understand their carbon footprint.
NatWest’sCarbon Planner is now powered by Sage Earth, automating a key part of the process of calculating
acompany’s emissions.
• We launched the Travel Insights Dashboard. The dashboard is designed to empower colleagues with insights
into their own actions regarding business travel, to help positively adjust behaviour, including reducing
personal CO
2
footprint and contributing directly to reducing Sage’s CO
2
emissions.
• Our Data and AI Ethics Principles were launched, overseen by a new Data and AI Ethics Council that includes
members from the ELT.
• Sage’s Sustainable Supply Chain strategy is a key component of our wider Sustainability and Society strategy.
The strategy enables us to procure goods and services responsibly, ensuring our supply chain is free from risks
such as modern slavery and that suppliers meet our standards of ethical conduct.
• We expanded our Trust and Security Hub to support SMBs to go digital safely.
• During the year we evolved the Sustainability Steering Committee into the Sustainability and Society Committee. This management
committee provides strategic direction and has overall accountability for successful delivery of our Sustainability and Society
strategy, and comprises ELT members and other seniorleaders.
• We announced a new partnership with Morehouse College, a historically black liberal arts college (HBCU) in Atlanta. Sage will invest
inMorehouse’s software engineering programme and Sage experts will help teach a series of new software engineering courses
atMorehouse.
• Through the Sage Foundation we connect with the communities in which we operate.
For further details on achievements, please refer to the Sustainability and Society section on pages 30 to 37
Outcomes
from
engagement
• We were able to make 2 products accessible to people with disabilities by meeting WCAG criteria.
• Sage was able to expand its TCFD disclosures after the progress made in strengthening governance
andtheintegration of climate-related objectives in executive remuneration, leadership performance,
andriskmanagement.
• Sage demonstrates the pathway to achieve 2030 climate commitments through a robust Net Zero
TransitionPlan. Sage’s Net Zero Transition Plan considers the latest guidance from the Transition Plan
Taskforce and industry best practice, enhancing Sage transparency and credibility beyond core
mandatorydisclosure compliance.
• We were named in the FT’s 2023 Europe’s Climate Leaders list.
• In March 2023, Sage Earth received two edie awards nominations (Product Innovation of the Year: Software, systems and services
andBusiness Leader of the Year for Sage’s VP of Carbon Accounting). The edie awards are the UK’s largest sustainability awards,
celebrating leadership across the space, and we are proud to have been recognised.
• The Sage Foundation surpassed its fundraising target for FY23, raising over $750,000, and, in response to the earthquake disaster
inMorocco, launched a scheme to match colleague donations up to £200 (or local equivalent) to support the crisis.
• The Sage Foundation partnered with Kiva, a crowdfunding platform that lends money to unbanked underserved entrepreneurs,
todouble colleagues’ $50 credits to mark Earth Day. So far, 4,827 colleagues have used their Kiva credit, and together with them
wehave supported 17,283 entrepreneurs (15,347 of whom are women) across 63 countries and provided $341,000 of funding.
• Through the Sage Foundation, Sage volunteers contributed 154,620 hours during FY23.
• We conducted a research project with Corporate Citizenship, which will help us understand the barriers faced by entrepreneurs
fromsocio-economically disadvantaged backgrounds and inform us on how to amplify Sage Foundation’s impact in the future.
For further details on Sage Foundation activities, please refer to the People section on pages 24 to 29
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 53
Strategic Report Additional InformationFinancial StatementsGovernance Report
Shareholders
We target sustainable growth in shareholder value
Why they
matter toSage
• Our shareholders are our providers of equity capital without whom Sage could not grow and invest for future
success, andare key beneficiaries in the value we create.
• They provide us with input and feedback concerning the development and implementation of ourstrategy,
andwe consider their views when making investment decisions.
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, together with governance and how our ELT andBoard
makedecisions.
• Increasingly, they are concerned about broader societal issues and the role Sage plays in addressingthem.
How Sage
engages
atBoard level
• At each Board meeting the Board receives Investor Relations updates.
• Market sentiment updates from Sage’s brokers were also provided to the Board during the year.
• Andrew Duff held a round of meetings with most of the top 15 shareholders in Sage, providing an opportunity
todiscuss the Group’s strategic progress and to listen to shareholder feedback.
• 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 of the Remuneration Committee consulted individually with Sage’s top shareholders and proxy
agencies on Sage’s proposed FY24 Executive Director remuneration arrangements.
• The Chair and other Non-executive Directors, including the chairs of the Board Committees, 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.
• Sage’s material communications to investors, including results announcements and the Annual Report, were reviewed and approved
by the Board prior to release.
• The Board recommended an interim and final dividend payment during the year.
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 relationships with investors andanalysts.
• Results announcements are prepared and published by the Investor Relations team.
• Analyst events are also held with senior management to provide opportunities to ask questions.
• Senior management are available to meet investors, and did so during the year, for example at one-on-one
meetings and at the webinar event on Sage’s Product and Innovation strategy in September 2023.
• Shareholder views were sought and considered during the year when conducting our ESG materiality exercise, which is described
onpage 31.
• The Investor Relations team provides updates on the equity markets shareholder views to selected teams throughout Sage on an
ongoing basis.
• Our website www.sage.com/investors continues to be an important channel for communicating with all stakeholders,
includinginvestors.
Outcomes
from
engagement
• Proactive engagement with shareholders and analysts has helped ensure support for the Group’s management
and strategy, and buy-in to capital allocation decisions.
• We have fostered constructive relationships with our top shareholders at multiple levels within the
organisation, including the Chair, CEO and CFO, ELT, and Investor Relations team.
• We have received positive feedback from analysts and shareholders following engagement events, UK and USinvestor roadshows
inNovember/December 2022, May 2023 and September 2023.
• We have proactively targeted new investors, particularly those based in the US, resulting in Sage’s proportion of US institutional
ownership increasing to 38%.
Stakeholder engagement continued
Shareholder
activities
duringFY23:
UK and US investor
roadshows for FY22 results
Annual
General Meeting
NOVEMBER/DECEMBER 2022 FEBRUARY 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202354
Shareholders
We target sustainable growth in shareholder value
Why they
matter toSage
• Our shareholders are our providers of equity capital without whom Sage could not grow and invest for future
success, andare key beneficiaries in the value we create.
• They provide us with input and feedback concerning the development and implementation of ourstrategy,
andwe consider their views when making investment decisions.
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, together with governance and how our ELT andBoard
makedecisions.
• Increasingly, they are concerned about broader societal issues and the role Sage plays in addressingthem.
How Sage
engages
atBoard level
• At each Board meeting the Board receives Investor Relations updates.
• Market sentiment updates from Sage’s brokers were also provided to the Board during the year.
• Andrew Duff held a round of meetings with most of the top 15 shareholders in Sage, providing an opportunity
todiscuss the Group’s strategic progress and to listen to shareholder feedback.
• 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 of the Remuneration Committee consulted individually with Sage’s top shareholders and proxy
agencies on Sage’s proposed FY24 Executive Director remuneration arrangements.
• The Chair and other Non-executive Directors, including the chairs of the Board Committees, 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.
• Sage’s material communications to investors, including results announcements and the Annual Report, were reviewed and approved
by the Board prior to release.
• The Board recommended an interim and final dividend payment during the year.
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 relationships with investors andanalysts.
• Results announcements are prepared and published by the Investor Relations team.
• Analyst events are also held with senior management to provide opportunities to ask questions.
• Senior management are available to meet investors, and did so during the year, for example at one-on-one
meetings and at the webinar event on Sage’s Product and Innovation strategy in September 2023.
• Shareholder views were sought and considered during the year when conducting our ESG materiality exercise, which is described
onpage 31.
• The Investor Relations team provides updates on the equity markets shareholder views to selected teams throughout Sage on an
ongoing basis.
• Our website www.sage.com/investors continues to be an important channel for communicating with all stakeholders,
includinginvestors.
Outcomes
from
engagement
• Proactive engagement with shareholders and analysts has helped ensure support for the Group’s management
and strategy, and buy-in to capital allocation decisions.
• We have fostered constructive relationships with our top shareholders at multiple levels within the
organisation, including the Chair, CEO and CFO, ELT, and Investor Relations team.
• We have received positive feedback from analysts and shareholders following engagement events, UK and USinvestor roadshows
inNovember/December 2022, May 2023 and September 2023.
• We have proactively targeted new investors, particularly those based in the US, resulting in Sage’s proportion of US institutional
ownership increasing to 38%.
UK and US investor
roadshows for
H1 FY23 results
US investor
roadshow
Product and Innovation–
webinar for investors
and analysts
MAY 2023 SEPTEMBER 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 55
Strategic Report Additional InformationFinancial StatementsGovernance Report
Section 172(1) statement
Principal decisions during FY23
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 our 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 Board is mindful 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 believes that in order to truly achieve long-term
sustainable success, the interests of all our key stakeholders
must be considered in Board decision making, which ensures
that the tone is set from the top by living our Values.
The sustainability of the business and balancing
stakeholders’ respective needs and expectations is
important. The Board understands that engagement
withourstakeholders is integral to informing Directors
onthe things that are most important to them and the
potential impact that Board decisions could have on those
stakeholders. The Board seeks theopportunity to engage
with stakeholders and further information on how our Board
and the wider Group engaged with our stakeholders during
FY23 is set out on pages 47 to55.
Our wider leadership team is delegated by the Board to
appropriately manage the day-to-day operations so that
theprinciples of section 172(1) are embedded within the
business and how we operate. For further information on
ourgovernance framework, please refer to page 92.
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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202356
Further information on how section 172(1) has been applied by the Directors can be found throughout the Annual Report:
Section 172 duties Read more Pages
Consequences of decisions
in the long term
Chair’s statement 6
Strategic priorities 18–21
Our approach to sustainability 30–37
TCFD disclosure 38–45
Stakeholder engagement 47–55
Principal Risks and uncertainties 74–81
Viability Statement 82–83
Board activities 100–103
Corporate Governance Report—Nomination Committee 110–117
Directors’ Remuneration Report 129–163
Directors’ Report 164–170
Interests of employees Chair’s statement 6
CEO’s review 8–11
Our people 24–29
Stakeholder engagement—Colleagues 48–49
Principal Risks and uncertainties 74–81
Chair’s introduction to governance: Engagement with our stakeholders 87
Board activities 100–103
How the Board monitors culture 104–105
Our Board Associate 106–107
Fostering business
relationships with suppliers,
customers, and others
Chair’s statement 6
CEO’s review 8–11
Business model 14–15
Strategic priorities 18–21
Our approach to sustainability 30–37
Non-financial information statement—Ethics and governance 46
Stakeholder engagement: Customers and Society 50–53
Principal Risks and uncertainties 74–81
Governance 84–109
Board activities 100–103
Impact of operations on the
community and the environment
Chair’s statement 6
CEO’s review 8–11
Our approach to sustainability 30–37
TCFD disclosure 38–45
Non-financial information statement—Ethics and governance 46
Stakeholder engagement—Society 52–53
Principal Risks and uncertainties 74–81
Board activities 100–103
Maintaining high standards
of business conduct
Chair’s statement 6
CEO’s review 8–11
Our people 24–29
Our approach to sustainability 30–37
TCFD disclosure 38–45
Non-financial information statement—Ethics and governance 46
Stakeholder engagement 47–55
Board activities 100–103
How the Board monitors culture 104–105
Board evaluation 108–109
Audit and Risk Committee 118–128
Acting fairly between members Stakeholder engagement—Shareholders 54–55
Engagement with shareholders 99
Board activities 100–103
Directors’ Remuneration Report 129–163
Directors’ Report 164–170
Additional InformationFinancial StatementsGovernance ReportStrategic Report
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 57
Section 172(1) statement continued
Principal decisions by the Board
Key—Stakeholder groups
Colleagues Customers Society Shareholders
Board considerations
Following the Covid-19 pandemic, ways of working have radically changed to a more flexible hybrid
model that requires a rethink of the future office experience to ensure this provides a dynamic,
motivational destination of choice for existing and future colleagues. The Board is mindful that
Sagemust create anoffice experience in its North America Headquarters that supports our brand,
reflects our culture, enhances colleague performance, and creates connections with our customers.
Sage has a rich history in Atlanta, having established a North American presence there in 1998 with
theacquisition of Peachtree Accounting. In February 2023, Sage senior management commenced an
extensive search to find a new North America Headquarters in the city, one which would provide an
enhanced collaborative experience for hundreds of our colleagues, foster creativity and innovation,
aswell as enable Sage to deliver strong experiences for our customers and partners and connect with
thecommunity.
The proposed new space is in Ponce City Market in the heart of Midtown Atlanta and will provide
opportunities tostrengthen Sage’s engagement within the Atlanta community and allow Sage to actively
participate in the ever-growing tech landscape of Atlanta. Senior management’s proposal to the Board
highlighted that Atlanta offers a diverse talent market and a competitive cost of living, which are critical
components for attraction and retention of top talent. The new North America Headquarters location will
help Sage continue to make its own positive contribution to the city. As part of the relocation decision,
the environmental credentials of the new building were also considered including occupants’
connectivity to the natural environment with the use of natural materials, ventilation, and air quality
improvements, and external and internal views of nature. The Board noted that the new building is built
from Georgia-grown timber, a first for this type of construction in Georgia and one that directly aligns
with our ESG values and strategy.
During the Board visit to Atlanta in September 2023, the Board took the opportunity to make a site visit.
Please see a photo taken during the visit above.
Outcome
In February 2023, the Board approved the capital expenditure to deliver a new North America
Headquarters in Atlanta, Georgia. The Board considered the positive impact on society, including
the building’s environmental credentials, the colleague experience and wellbeing, and the
potential benefits for our customers.
Sage
North America
Headquarters
Section 172(1) limbs
    
Stakeholders considered
 
Principal decision
bythe Board
Approval of capital expenditure
to deliver a new North America
Headquarters
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202358
Board considerations
In line with relevant legislation, Sage is required to conduct an audit tender every 10years. Ernst
&Young LLP (EY) has been Sage’s auditor since 2015, meaning that Sage was required to undertake
anaudit process ahead of the FY25. The Audit and Risk Committee, on behalf of the Board, carried
outatender process in FY23 for its external audit services to provide enough time for an orderly
transition to a new external auditor, if required.
The Board agreed that it was important to run a thorough process and maintain a reputation for high
standards of business conduct, to follow good practice, and to treat allparticipating audit firms
fairlyand transparently. The audit tender process was led by the Audit and Risk Committee Chair,
supported by a Steering Committee made up of Audit and Risk Committee members and senior
management. The Steering Committee was tasked to feed back its findings to the Audit and
RiskCommittee. During the process it was crucial for the Board to consider that stakeholders may
havedifferent objectives. Aligning stakeholder objectives early in the process was important to
ensurethat stakeholder expectations had been considered to make a fully informed decision.
Three firms were invited to participate, of which one was an audit firm outside of the ‘Big Four’.
Theother two‘BigFour’ firms were not invited to participate due to conflicts of interest. After
aninitialmeeting with the Steering Committee, the decision was made to proceed with two of
thethreeaudit firms. The extensive selection processincluded:
• Setting out a clear and objective decision-making criteria.
• Assessment of the tendering firms, including the Lead Partner.
• A number of meetings with formal presentations to the Steering Committee.
• An assessment of the FRC’s annual audit quality inspection results.
The participating firms were assessed over several areas including:
• Audit quality and approach.
• Depth and breadth of capabilities of the team, including audit culture.
• Understanding the business, industry and audit risks.
• Sustainability.
• Audit service, including use of technology in the audit.
• Independence.
For further information on the selection process, please refer to pages 127 and 128.
The Audit and Risk Committee subsequently set out its recommendation to the Board, with a justified
preference for one of the firms. The Board noted that the Audit and Risk Committee’s aim was to identify
the audit firm that would provide the highest-quality and most effective audit.
Outcome
Following the conclusion of a formal competitive audit tender process, having considered the
scoring criteria, key factors, input, and observations from the Audit and Risk Committee, the
Boardapproved the appointment of KPMG as the Company’s external auditor for the financial
yearending 30 September 2025. In coming to its final decision the Board deliberated on the likely
consequences of decisions in the long term for the benefit of our shareholders and colleagues.
Theappointment is subject to receiving shareholder approval at the 2025 AGM and an updated
independence assessment.
For further information on the audit tender process, please refer to pages 127 and 128.
Audit tender process
Section 172(1) limbs
   
Stakeholders considered

Principal decision
bythe Board
Approval of the appointment
ofKPMG LLP (KPMG) as the
Company’s external auditor
forthe financial year ending
30 September 2025. The
appointment is subject to
shareholder approval at
the2025 AGM and an updated
independence assessment.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 59
Strategic Report Governance Report Financial Statements Additional Information
Financial review
Jonathan Howell
Chief Financial Officer
“ Sage performed well in FY23,
driving double-digit growth
through consistent strategic
execution. We continue to invest
in our business, whilst driving
operating efficiencies to
increase profitability. This is
supported by strong cash flows
and a robust balance sheet.”
The Financial review provides a summary of the Group’s
results on a statutory and underlying basis, alongside
itsorganic performance. Underlying measures allow
management and investors to understand the Group’s
financial performance adjusted for the impact of foreign
exchange movements and recurring and non-recurring
items,while organic measures also adjust for the impact
ofacquisitions and disposals.
1
Introduction
Sage performed well in FY23, delivering double-digit
revenue growth, increased profitability and strong
cashflows.
Underlying recurring revenue grew by 12% to £2,096m
andunderlying total revenue grew by 10% to £2,184m.
Theincrease in recurring revenue was driven by a 25%
riseinSage Business Cloud revenue to £1,628m, reflecting
strength from new customer acquisition, higher sales to
existing customers and continued good retention rates.
Organic recurring revenue grew by 11% to £2,095m
(FY22: £1,882m), while organic total revenue grew by 10%
to£2,182m (FY22: £1,986m).
The Group’s underlying operating profit grew by 18% to
£456m. This represents an underlying operating margin
of20.9%, 140 basis points higher than the prior year, driven
by operating efficiencies as we focus on scaling the Group.
The Group also achieved a 22% increase in underlying basic
EPS of 32.3p, together with a 37% increase in free cash flow
to£404m, underpinned by strong cash conversion of 116%.
Statutory and underlying financial results
Financial results
Statutory Underlying
FY23 FY22 Change FY23 FY22 Change
North America £973m £818m +19% £973m £849m +15%
UKIA
2
£627m £586m +7% £627m £575m +9%
Europe £584m £543m +7% £584m £558m +5%
Group total revenue £2,184m £1,947m +12% £2,184m £1,982m +10%
Operating profit £315m £367m -14% £456m £386m +18%
% Operating profit margin 14.4% 18.9% -4.5 ppts 20.9% 19.5% +1.4 ppts
Profit before tax £282m £337m -16% £424m £355m +20%
Profit after tax £211m £260m -19% £329m £269m +22%
Basic EPS 20.7p 25.5p -19% 32.3p 26.4p +22%
1. Underlying and organic revenue and profit measures are defined in the Glossary.
2. United Kingdom & Ireland, Africa and APAC.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202360
The Group achieved statutory and underlying total revenue
of £2,184m in FY23. Statutory total revenue increased by
12%compared to the prior year, reflecting underlying total
revenue growth of 10% together with a 2-percentage point
foreign exchange tailwind, principally relating to the US
Dollar in North America.
Statutory operating profit decreased by 14% to £315m,
reflecting an 18% increase in underlying operating profit
to£456m offset by a £131m increase in recurring and
non-recurring items
3
, including a £53m one-off gain
onbusiness disposals in FY22 together with property
restructuring andM&A-related charges in FY23.
Statutory basic EPS decreased by 19% to 20.7p, reflecting
lower statutory operating profit, slightly higher statutory
netfinance costs and the post-tax impact of non-recurring
items. Underlying basic EPS increased by 22% to 32.3p,
reflecting higher underlying operating profit and a slight
reduction in the Group’s underlying effective tax rate.
Total revenue bridge FY23 FY22 Change
Statutory £2,184m £1,947m +12%
Recurring items – £2m
Impact of FX
4
– £33m
Underlying £2,184m £1,982m +10%
Disposals – (£7m)
Acquisitions (£2m) £11m
Organic £2,182m £1,986m +10%
Statutory and underlying total revenue was £2,184m in FY23.
Underlying revenue in FY22 of £1,982m reflects statutory
revenue of £1,947m retranslated at current year exchange
rates, resulting in a foreign exchange tailwind of £33m,
together with a £2m fair value adjustment to deferred
income relating to the acquisition of Brightpearl.
Organic total revenue in FY23 was £2,182m, reflecting
underlying revenue of £2,184 adjusted for £2m of revenue
from the acquisition of Spherics and Corecon during the
year. Organic revenue in FY22 of £1,986m reflects underlying
revenue of £1,982m, adjusted for £5m of revenue from Sage’s
business in Switzerland and £2m of revenue from the South
African payroll outsourcing business, both of which were
soldduring FY22, and £11m of revenue from Lockstep,
Futrliand Brightpearl which were acquired during FY22.
Revenue by portfolio
The portfolio view breaks down Sage’s underlying recurring
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the Sage Network, leading to deeper customer
relationships and higher lifetime values.
Underlying recurring revenue by portfolio
5
FY23 FY22 Change
Organic
Change
Cloud native
6
£596m £445m +34% +30%
Cloud connected
7
£1,032m £855m +21% +21%
Sage Business Cloud £1,628m £1,300m +25% +24%
Products with potential to migrate £316m £429m -26% -26%
Future Sage Business Cloud Opportunity
8
£1,944m £1,729m +12% +12%
Non-Sage Business Cloud
9
£152m £146m +4% +4%
Underlying recurring revenue £2,096m £1,875m +12% +11%
Sage Business Cloud penetration 84% 75%
3. Recurring and non-recurring items are defined in the Glossary and detailed in note 3.6 of the financial statements.
4. Impact of retranslating FY22 revenue at FY23 average rates.
5. The 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.
6. Recurring 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.
7. Recurring 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.
8. Recurring revenue from customers using products that are part of, or that management believe have a clear pathway to, Sage Business Cloud.
9. Recurring 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 61
Strategic Report Governance Report Financial Statements Additional Information
Financial review continued
Underlying recurring revenue from cloud native solutions
grew by 34% to £596m, driven by Sage Intacct together with
other solutions including Sage Accounting, Sage Payroll
andSage HR, through new customer acquisition and growth
from existing customers. Organic cloud native recurring
revenue growth, which is adjusted for the contribution from
acquisitions in the current and prior year, was 30%.
Underlying recurring revenue from cloud connected
solutions increased by 21% to £1,032m, reflecting growth
inthe Sage 50 and Sage 200 franchises, driven by existing
andnew customers, together with the continued 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, performed strongly with recurring revenue
growth of 12%. The revenue performance of the Non-Sage
Business Cloud portfolio was in line with expectations.
Revenue by type
Underlying revenue mix FY23 FY22 Change
Organic
Change
Software subscription revenue £1,732m £1,484m +17% +16%
Other recurring revenue £364m £391m -7% -7%
Underlying recurring revenue £2,096m £1,875m +12% +11%
Other revenue (SSRS) £88m £107m -18% -18%
Underlying total revenue £2,184m £1,982m +10% +10%
Subscription penetration 79% 75%
Underlying recurring revenue growth of 12% to £2,096m,
wassupported by a 17% increase in software subscription
revenue to £1,732m, 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 7% to £364m reflects customers
migrating from maintenance and support to subscription
contracts. Other revenue (SSRS) declined by 18% to £88m,
inline with our strategy to transition away from licence sales
and professional services implementations.
Revenue by region
North America FY23 FY22 Change
Organic
Change
Underlying total revenue £973m £849m +15% +14%
Underlying recurring revenue £944m £815m +16% +15%
% Sage Business Cloud penetration 86% 79% +7 ppts +7 ppts
% Subscription penetration 78% 73% +5 ppts +5 ppts
Underlying recurring revenue FY23 FY22 Change
Organic
change
US £819m £703m +16% +15%
Of which Sage Intacct £312m £241m +30% +30%
Canada £125m £112m +12% +12%
North America achieved underlying recurring revenue
growth of 16% to £944m and total revenue growth of 15% to
£973m. Adjusting for the impact in the US of the acquisitions
of Brightpearl and Lockstep during FY22, organic recurring
and total revenue growth was 15% and 14%, respectively.
SageBusiness Cloud penetration increased to 86%, up from
79% inthe prior year, driven by growth in cloud native and
cloud connected solutions, while subscription penetration
increased to 78%, up from 73% in the prior year.
Cloud native growth was driven primarily through Sage
Intacct, which delivered strong recurring revenue growth of
30% to £312m, reflecting further progress in attracting new
customers and continued strong sales to existing customers.
Recurring revenue in the US increased by 16% to £819m,
reflecting growth in Sage Intacct alongside growth in cloud
connected solutions, driven by new and existing customers
across the Sage 200 and Sage 50 franchises. Total revenue
for the US increased by 15% to £846m.
In Canada, recurring revenue increased by 12% to £125m
andtotal revenue by 11% to £127m, driven mainly by Sage 50
cloud, and supported by strong growth in Sage Intacct.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202362
UKIA FY23 FY22 Change
Organic
Change
Underlying total revenue £627m £575m +9% +8%
Underlying recurring revenue £611m £557m +10% +9%
% Sage Business Cloud penetration 90% 79% +11 ppts +11 ppts
% Subscription penetration 89% 88% +1 ppts +1 ppts
Underlying recurring revenue FY23 FY22 Change
Organic
Change
UK & Ireland (Northern Europe) £466m £429m +9% +8%
Africa & APAC £145m £128m +13% +13%
In the UKIA region, underlying recurring revenue grew by 10%
to £611m and total revenue grew by 9% to £627m. Adjusting
for the impact in the UK & Ireland of the acquisitions of
Brightpearl and Futrli during FY22, organic recurring and
total revenue growth was 9% and 8%, respectively. Sage
Business Cloud penetration reached 90%, up from 79% in the
prior year, while subscription penetration increased to 89%,
up from 88% in the prior year.
In the UK & Ireland, recurring revenue increased by 9%
to£466m, reflecting growth in cloud native solutions,
supported by further growth in Sage 50 cloud.
Cloudnativerevenue growth was driven by continued growth
in small business solutions, together with Sage Intacct as we
continue to drive scale through both the direct and partner
channels. Total revenue in the UK & Ireland increased by
8%to £471m.
Africa & APAC delivered strong recurring revenue growth
of13% to £145m, driven by growth in cloud native solutions,
including Sage Accounting, Sage Payroll and Sage Intacct,
and supported by local products. Total revenue in Africa &
APAC increased by 11% to £156m.
Europe FY23 FY22 Change
Organic
Change
Underlying total revenue £584m £558m +5% +5%
Underlying recurring revenue £541m £503m +7% +8%
% Sage Business Cloud penetration 73% 64% +9 ppts +8 ppts
% Subscription penetration 70% 65% +5 ppts +5 ppts
Underlying recurring revenue FY23 FY22 Change
Organic
change
France £284m £264m +7% +7%
Central Europe £123m £115m +7% +10%
Iberia £134m £124m +9% +9%
Europe achieved underlying recurring revenue growth
of7%to £541m and total revenue growth of 5% to £584m.
Adjusting for the impact of the Swiss disposal in FY22,
organic recurring revenue growth and total revenue
growthwas 8% and 5%, respectively. Sage Business Cloud
penetration increased to 73%, up from 64% in FY22, while
subscription penetration reached 70%, up from 65% in FY22.
In France, recurring revenue increased by 7% to £284m, with
a strong performance in cloud connected, particularly Sage
200 cloud, supported by growth in cloud native solutions.
Total revenue in France increased by 5% to £295m.
Central Europe achieved recurring revenue growth of 7%
to£123m, while total revenue increased by 1% to £142m.
Adjusting for the disposal of the Swiss business, organic
recurring and total revenue growth in Central Europe was
10%and 5% respectively. Growth in the region was driven
bySage Business Cloud, with a particularly strong
performance in HR solutions.
In Iberia, recurring revenue increased by 9% to £134m, with
further progress in cloud connected supported by growth
incloud native solutions. Total revenue grew by 6% to £147m.
Operating profit
The Group increased underlying operating profit by 18%
to£456m (FY22: £386m). Underlying operating margin
increased by 140 basis points to 20.9% (FY22: 19.5%),
drivenby operating efficiencies as we scale the Group.
Onanorganic basis, adjusting for the full-year impact of
acquisitions and disposals during FY22, operating profit
increased by 22% to £457m (FY22: £374m), and margin
increased by 220 basis points to 21.0% (FY22: 18.8%).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 63
Strategic Report Governance Report Financial Statements Additional Information
Financial review continued
Operating profit—underlying and organic reconciliation to statutory
Operating profit bridge
FY23 FY22
Operating
profit
Operating
margin
Operating
profit
Operating
margin
Statutory £315m 14.4% £367m 18.9%
Recurring items
10
£103m – £83m –
Non-recurring items:
• Property restructuring £32m – – –
• Employee-related costs £9m – – –
• Gain on disposal of subsidiaries – – (£53m) –
• Reversal of restructuring costs (£3m) – (£20m) –
Impact of FX
11
– – £9m –
Underlying £456m 20.9% £386m 19.5%
Disposals – – (£1m) –
Acquisitions £1m – (£11m) –
Organic £457m 21.0% £374m 18.8%
The Group achieved a statutory operating profit in FY23
of£315m (FY22: £367m). Underlying operating profit of
£456m in FY23 reflects statutory operating profit adjusted
for recurring and non-recurring items. Recurring items
of£103m (FY22: £83m) comprise £54m of amortisation
ofacquisition-related intangibles (FY22: £42m) and £49m
ofM&A-related charges (FY22: £39m). In FY22, there was
afurther £2m deferred income adjustment relating to the
acquisition of Brightpearl.
Non-recurring items in FY23 comprise a £32m charge for
aproperty restructuring programme undertaken during the
year, following a strategic review of the Group’s property
portfolio, together with a £9m employee-related charge
forFrench payroll taxes relating to previous years. This is
partly offset by a £3m (FY22: £20m) reversal of employee
restructuring costs. Non-recurring items in FY22also
comprise gains on the disposals of Sage Switzerland
(£49m)and the South African payroll outsourcing
business(£4m).
In addition, the retranslation of FY22 operating profit at
current year exchange rates has resulted in an operating
profit tailwind of £9m in that year. This has led to a 10-basis
point margin tailwind from foreign exchange to 19.5%
(FY22underlying as reported: 19.4%).
Organic operating profit of £457m in FY23 reflects
underlying operating profit of £456m adjusted for £1m
oflosses from Spherics (now rebranded Sage Earth), which
was acquired during the year. Organic operating profit of
£374m in FY22 reflects underlying operating profit of £386m
adjusted for £1m of operating profit from the South African
payroll outsourcing business, which was sold during the
prior year, and £11m of operating losses from businesses
acquired during the prior year.
10. Recurring and non-recurring items are defined in the Glossary and detailed in note 3 of the financial statements.
11. Impact of retranslating FY22 operating profit at FY23 average rates.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202364
EBITDA
EBITDA was £553m (FY22: £477m) representing a margin
of25.3%. The increase in EBITDA principally reflects the
improvement in underlying operating profit.
FY23 FY22 Margin
Underlying
operating profit £456m £386m 20.9%
Depreciation &
amortisation £54m £55m
Share-based payments £43m £36m
EBITDA £553m £477m 25.3%
Net finance cost
The statutory net finance cost for the period increased to
£33m (FY22: £30m), reflecting the impact of interest on new
debt issuances, partly offset by higher interest income on
deposits. The statutory net finance cost is broadly in line
with the underlying net finance cost of £32m (FY22: £31m).
Taxation
The underlying tax expense for FY23 was £95m (FY22: £86m),
resulting in an underlying tax rate of 23% (FY22: 24%).
Thestatutory income tax expense for FY23 was £71m
(FY22: £77m), resulting in a statutory tax rate of 25%
(FY22: 23%). The FY23 underlying tax rate has decreased
dueto the benefit of higher tax incentive claims in the US,
UK, and France, partly offset by an increase in the
UKcorporation tax rate.
Earnings per share
FY23 FY22 Change
Statutory basic EPS 20.7p 25.5p -19%
Recurring items 8.8p 6.7p
Non-recurring items 2.8p (6.5)p
Impact of foreign
exchange – 0.7p
Underlying basic EPS 32.3p 26.4p +22%
Underlying basic EPS increased by 22% to 32.3p, reflecting
higher underlying operating profit. Statutory basic EPS
decreased by 19%, with the increase in underlying basic EPS
offset by the change in post-tax impact of recurring and
non-recurring items, including one-off gains on business
disposals in FY22 together with property restructuring and
higher M&A-related charges in the current year.
Cash flow
Sage remains highly cash generative with underlying cash
flow from operations of £528m (FY22: £402m), representing
underlying cash conversion of 116% (FY22: 107%). This strong
cash performance reflects further growth in subscription
revenue and continued good working capital management.
Free cash flow of £404m (FY22: £295m) reflects strong
underlying cash conversion.
Cash flow APMs FY23
FY22 (as
reported)
Underlying operating profit £456m £377m
Depreciation, amortisation
andnon-cash items in profit £51m £51m
Share-based payments £43m £36m
Net changes in working capital – (£40m)
Net capital expenditure (£22m) (£22m)
Underlying cash flow from
operations £528m £402m
Underlying cash conversion % 116% 107%
Non-recurring cash items (£11m) (£23m)
Net interest paid and derivative
financial instruments (£24m) (£21m)
Income tax paid (£85m) (£62m)
Profit and loss foreign exchange
movements (£4m) (£1m)
Free cash flow £404m £295m
Statutory reconciliation of cash flow
from operations FY23
FY22 (as
reported)
Statutory cash flow from operations £505m £368m
Recurring and non-recurring items £41m £55m
Net capital expenditure (£22m) (£22m)
Other adjustments including
foreign exchange translations £4m £1m
Underlying cash flow from
operations £528m £402m
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 65
Strategic Report Governance Report Financial Statements Additional Information
Financial review continued
Net debt and liquidity
Group net debt was £561m at 30 September 2023
(30 September 2022: £733m), comprising cash and cash
equivalents of £696m (30 September 2022: £489m) and
totaldebt of £1,257m (30 September 2022: £1,222m).
TheGroup had £1,326m of cash and available liquidity
at30 September 2023 (30 September 2022: £1,270m).
The decrease in net debt in the period is summarised in
thetable below:
FY23
FY22 (as
reported)
Net debt at 1 October (£733m) (£247m)
Free cash flow £404m £295m
New leases (£14m) (£6m)
Disposal of businesses – £43m
Acquisition of businesses (£26m) (£315m)
M&A and equity investments (£30m) (£22m)
Dividends paid (£190m) (£183m)
Share buyback – (£249m)
Purchase of shares by Employee
Benefit Trust (£1m) (£32m)
FX movement and other £29m (£17m)
Net debt at 30 September (£561m) (£733m)
The Group’s debt is sourced from a syndicated multi-
currency revolving credit facility (RCF), and from sterling
and euro denominated bond notes. The Group’s RCF was
refinanced in December 2022 into a new facility of £630m
which expires in December 2028, having been extended by
one year in November 2023, with an extension option fora
further year subject to specific provisions. At30 September
2023, the RCF was undrawn (FY22: undrawn).
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.
The Group established a Euro Medium Term Note (EMTN)
programme in January 2023 and issued €500m of 5-year
notes in February 2023, with a coupon of 3.82%. This issuance
funded the repayment of the Group’s outstanding US private
placement loan notes totalling £326m (US$400m) and
enabled the Group both to extend the maturity of its debt
portfolio and to diversify its funding sources.
Sage has an investment grade issuer credit rating assigned
by Standard and Poor’s of BBB+ (stable outlook).
Sage debt maturity profile (£m)
FY28
FY29
FY30
FY32
FY33
FY27
FY23
FY24
FY25
FY26
1,200
1,000800600400200
RCF
0
630
433
FY31
350
FY34
400
Sterling Bond Eurobonds (€500m)
Capital allocation
Sage’s disciplined capital allocation policy is focused
onaccelerating strategic execution through organic and
inorganic investment, and delivering shareholder returns.
DuringFY23 Sage completed the acquisition of Spherics,
aninnovative carbon accounting solution, and Corecon,
aconstruction project management solution.
Sage has a progressive dividend policy, intending to grow
the dividend over time while considering the future capital
requirements of the Group. The final dividend proposed by
the Board is 12.75p per share, taking the total dividend
forthe year to 19.3p, up 5% compared to the prior year
(FY22: 18.4p).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202366
The Group also considers returning surplus capital to
shareholders. Alongside our FY23 results, we have announced
a share buyback programme of up to £350m, reflecting
theBoard’s confidence in the future prospects of the Group,
together with Sage’s strong cash generation and robust
financial position. Sage continues to have considerable
financial flexibility to drive the execution ofits
growthstrategy.
FY23
FY22 (as
reported)
Net debt £561m £733m
EBITDA (last twelve months) £553m £468m
Net debt/EBITDA ratio 1.0x 1.6x
The Group’s EBITDA over the last 12 months was £553m,
resulting in a net debt to EBITDA leverage ratio of 1.0x,
downfrom 1.6x in the prior year. Sage intends to operate in
abroad range of 1x to 2x net debt to EBITDA over the medium
term, with flexibility to move outside this range as business
needsrequire.
Group return on capital employed (ROCE) for FY23 was 19%
(FY22 as reported: 18%).
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 2023 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 164 and 165 and in note 1 of
thefinancial statements on pages 188 and 189.
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) FY23 FY22 Change
Euro (€) 1.15 1.18 -3%
US Dollar ($) 1.23 1.28 -4%
Canadian Dollar (C$) 1.65 1.63 +1%
South African Rand (ZAR) 22.31 20.21 +10%
Future revenue reporting changes
In FY24 we intend to simplify our revenue reporting, to
enable continued, clear understanding of progress and
performance given the recent evolution of the Group.
Thesechanges will include:
• Focusing revenue metrics and analysis on total
ratherthan recurring revenue
12
, as their growth rates
increasingly converge reflecting the reduction in other
revenue (SSRS). ARR will continue to be provided as one
of Sage’s strategic KPIs.
• Reporting revenue performance principally on a regional
basis going forward. Accordingly, the tables relating
torevenue by portfolio and by type will no longer be
provided; however, we will continue separately to provide
cloud native, Sage Business Cloud and subscription
revenue and commentary.
Further details of these changes will be published in
December 2023.
12. Consistent with this change, Sage’s FY24 guidance is based on total revenue, rather than on recurring revenue as in previous years.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 67
Strategic Report Governance Report Financial Statements Additional Information
Our ERM
Framework
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Risk management
Risk Management Framework
Our Enterprise Risk Management
(ERM) Framework helps Sage
manage strategic, operational,
commercial, financial, compliance,
change, and emerging risks, and
enables a consistent approach
toidentifying, managing, and
overseeing risks.
This helps us achieve 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 that is merely applied to the
business but, instead, something that is integral to how
wemake decisions and work day to day.
Using our ERM Framework, we expect all regions and
functions to identify risks that could affect the successful
execution of their strategy and operations while managing
any risk exposure, ensuring appropriate controls and 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 Sage is adequately
prepared to manage risks.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202368
How we identify risks
Our risk identification process follows an enterprise-wide
“top-down, bottom-up” approach, which seeks to identify
thefollowing:
• Top-down, we focus on Principal Risks that may affect
ourability to achieve our strategic objectives, with these
risks representing those that most threaten achievement
of our strategy.
• 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
We analyse all risks for likelihood and impact using arisk-
assessment criterion tailored for Sage, which considers
impact on our customers and colleagues, and 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 for each of our Principal
Risks 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 adequate controls are in place
and that the necessary action plans are implemented should
the risk be outside of risk appetite.
In addition to the Principal Risks, business risks are
identified and recorded 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 quarterly
through Regional and Functional Risk Forums, which are
described in the diagram on the next page.
Risk reporting and monitoring
We consider risks both individually and collectively to fully
understand our risk landscape. By analysing the correlation
between risks, we can identify those that have the potential
to cause, affect, or increase another risk. Thisexercise
informs our scenario analysis, particularly thecombined
scenario used in the Viability Statement on pages 82 and 83.
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 Regional
or Functional Risk Forums and then to the Global Risk
Committee. This escalation process provides organisational
visibility to emerging, strategic, commercial, operational,
financial, and compliance risks, as well as supporting action
and 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 whether a new Principal Risk should
becreated. You can read more about Principal Risks on
pages74to 81.
Principal Risks are monitored through our risk appetite
targets using supporting measures and tolerances, which
weevaluate throughout the year to ensure they remain
aligned with our strategic objectives, and within an
acceptable risk tolerance for the Group.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 69
Strategic Report Governance Report Financial Statements Additional Information
Risk management continued
Risk governance
Top down
Oversight, accountability,
and assessment of
Principal Risks,
significant operational
risks, and emerging risks
Bottom up
Identification
andassessment
ofrisk exposures
atregional and
functional level
The Board
Ultimately responsible for setting Sage’s risk appetite
Responsible for risk management and internal control systems
Establishes appropriate governance arrangements and acts as a champion of “top-down” risk culture
Audit and Risk Committee
Acts as an independent body, 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 and Functional Risk Forums
Provides oversight and approval of Sage’s Principal Risks and their risk appetite statements
Regional and Functional Risk Forums
Responsible for reviewing key operational and strategic risks that could implicate the regional
strategyplansor Sage’s Principal Risks
Responsible for providing oversight of risks from key functions such as Product, Security,
DataPrivacy,and IT
The 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, Chief Executive Officer, and Chief Financial Officer.
Other Principal Risk Owners are invited to attend the Global
Risk Committee when relevant. The Committee meets
quarterly and has the responsibility for providing direction
and support for managing 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 for reviewing
the Company’s internal financial controls and risk
management and internal control systems.
Regional and Functional Risk Forums
All business areas must adopt the ERM Framework. To do this,
each business area either has a Regional or Functional Risk
Forum to review key operational as well as strategic risks
that could implicate the execution of the regional or
functional strategy plan, whileensuring there are sufficient
mitigation plans in place to prevent those key risks from
materialising. Risks are escalated from operational Risk
Owners to the Forums, andon to the Global Risk Committee
where necessary.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202370
Three lines model
Our three lines 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.
Three lines
model
First Line
All colleagues
identify, own,
operate
Second Line
Sage Risk and
Controls
Guide, support,
oversee
Third Line
Sage Assurance
Independent and
objective
Third Line is Sage’s Internal Audit and Assurance team.
Themain role of our Assurance team is to ensure the
firsttwolines of governance are operating effectively.
Theydo this by conducting risk-based reviews of the
effectiveness of risk management, internal controls,
andgovernance. TheAssurance team is accountable to
theARC, to providecomfort to Sage’s leadership team
that appropriate controls and processes are in place and
are operating effectively.
First Line is all our colleagues who are at the
forefrontofthe business. It is our colleagues who hold
thenecessary skills and knowledge to help identify and
manage 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 framework.
Second Line consists of the Risk and Controls team.
Theteam is responsible for setting the framework,
policies, tools, and techniques to enable the First Line
tomanage risk effectively. As part of this role, the team
ison hand to provide support and guidance to ensure
aconsistent approach to managing risk is maintained.
This includes supporting the Global Risk Committee,
andthe Regional and Functional Risk Forums in fulfilling
their responsibilities.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 71
Strategic Report Additional InformationFinancial StatementsGovernance 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 managing
riskseffectively 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. Values form a significant part of our
colleague performance-management process, and in FY23,
culture continued to be managed as a Principal Risk.
During FY23, we continued to deliver our compliance
trainingprogramme, including a refreshed Codeof
Conductlearning module, to existing colleagues, new
starters, andcolleagues joining through acquisition.
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.
Business case study
The Sage strategy is dependent on data and therefore
it’sessential to successfully manage risks that may
arisewhen working with data. This year, we have created
newData and AIEthics principles that are designed to
support our purpose, underpin our ambition, embody
ourValues, and support our strategy. They willprovide
uswith clear guardrails within which tooperate, while
ensuring wemanage risks relating todata privacy,
security,intellectual property, and AIbias.
To define the Principles, we started with customer insight
and a comprehensive understanding of the industry
landscape. Then, a team of experts across our business
evolved the principles from existing frameworks, and took
account of external guidance, to ensure they reflected the
opportunities and risks we see in emerging technology.
There are eight principles that focus on:
Data security and privacy first
Customer choice
Customer benefit
Charging for data
Using data for good
Data quality matters
Diversity management
Human-centric AI
To support the implementation of the principles,
wehaveset up a new Data and AI Ethics Council, which
includes members from the Executive Leadership Team.
The Council will oversee and govern activities relating
to data and AI ethics in line with theseprinciples.
1
2
3
4
5
6
7
8
 You can read more about the eight principles
onour website within the Trust and Security Hub
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202372
Horizon scanning
Global conflicts (e.g. Russia-Ukraine, Israel-Gaza),
tradewarbetween US and China, energy shortages, rising
interestrates and inflation are just some of the events which
may have a material impact on Sage and our customers.
Tomaintain resilience in this continually changing external
landscape, Sage has developed an ongoing horizon scanning
process. This process enables us to monitor external events
and trends and the resultant effect they may have on our
colleagues, customers, and partners. External risks are
reviewed at every Global Risk Committee meeting to ensure
Sage isproactively responding to material events.
Part of our horizon scanning involves looking beyond the
present by considering emerging risks. We run a series of
workshops with representatives of all Sage business areas
including Marketing and Customer Experience, Product,
Security, Sustainability, People, Finance, 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 that may have an impact onSage,
as well as the potential time horizon of each scenario. Key
themes identified during the process are listed in the table
below. 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. The plans and mitigations are considered bythe
GlobalRisk Committee.
Emerging Risk Scenario
Time horizon
1–2 years 3–5 years Over 5 years
1. There is a risk that operating models of SMBs are reshaped through AI and
automation. If Sage products are unable to keep pace with the changes or if Sage
isunable to develop a reputation as a trusted leader in the accounting and payroll
software market in incorporating AI into products, it may have a significant impact
onmarket share and profitability.
2. New regulations can create emerging opportunities (e.g. e-invoicing) as well as risks.
Governments around the world are considering new regulations on data, cyber security,
AI, and digital services. There is a risk that these regulations may introduce stricter
controls and affect our ability to achieve the product strategy.
3. There is a risk that Sage does not achieve the right balance in its investment strategy
between efficiency and profitability, and building resilience, and this limits Sage’s
adaptability and capability to be resilient to external shocks.
4. There is a risk of a public backlash against large tech companies, due to concerns
ondata and AI ethics and erosion of privacy, increasing inequality, and compromising
democratic and institutional systems. This would result in significant reduction in
use of cloud software, including Sage’s cloud solutions.
5. There is a risk that colleagues expect companies to take a stand on contentious or
polarised issues that may have an unintended negative consequence on their
reputation. Organisations face historic challenges within a competitive talent
landscape and Sage will need to ensure the right balance between the needs and
expectations of current and prospective colleagues and external stakeholders.
6. A global economic downturn or an inflationary wage–price spiral, resulting in
increased default of SMBs. This could lead to an 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 73
Strategic Report Governance Report Financial Statements Additional Information
Principal Risks
anduncertainties
The Board and the Audit and Risk Committee carried out
arigorous and ongoing assessment of the principal and
emerging risks facing the Group throughout the year.
Thisassessment considered the 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 UK Corporate
Governance Code 2018 (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:
• 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.
• 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
control systems on pages 68 to 73, and about the associated
work of the Audit and Risk Committee on pages 118 to 128.
The following table provides an overview of the Group’s
Principal Risks and the way we manage these.
Principal Risk Risk context Management and mitigation
1.Understanding
customerneeds
If Sage fails to anticipate,
understand, and deliver
againstthe capabilities and
experiences of current and
future customer needs, then
customers 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
Understanding of how to attract new
customers while retaining existing
customers is essential to building
sustainable growth. 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, use
keydrivers to identify opportunities,
influence product and process roadmaps,
decrease churn, and support more
effective revenue generation.
Executive Owner
Chief Marketing Officer
• 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 closed-loop feedback to constantly
gather information on customer needs.
Key
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network Learn and disrupt
Risk exposure change
Stable Decreasing Increasing
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202374
Principal Risk Risk context Management and mitigation
2.Execution of
productstrategy
If we fail to offer the
capabilities and experiences
outlined in our product
strategy, we will not meet
theneeds of our customers
orcommercial goals.
Trend
Strategic alignment
   
Link to viability scenario
Existing or new
marketdisruptor
Global economic shock
Cloud operations failure
We need to execute rapidly a prioritised
product strategy that continues to
simplify our product portfolio and
focuses on our drive to create the Sage
Network that will benefit our customers.
Executive Owner
Chief Product Officer
• 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 as they move to the cloud.
• Continued expansion of Sage Intacct outside of
North America and for additional product verticals.
• Several successful product launches in key regions
(e.g. Sage Active in Europe).
• Enhancing accessibility of Sage cloud products
toWCAG 2.1 AA standard by the end of 2025.
• A strong focus on accountants through a tailored
Sage for Accountants proposition.
• Launch of Sage Earth, a carbon accounting solution
to help SMBs easily understand and reduce their
environmental impact.
3.Developing and exploiting
new business models
Sage is unable to develop,
commercialise viability
scenario and scale new
business models to diversify
from traditional Software as
aService (SaaS), especially
consumption-based services
and those which leverage data.
Trend
Strategic alignment
Link to viability scenario
Data breach
Existing or new
marketdisruptor
Cloud operations failure
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change and transform our
people,processes viability scenario
andtechnology, and how we
differentiateour products and
increasecustomer efficiencies.
Executive Owner
Chief Marketing Officer
• A business unit solely focused on scaling the
SageNetwork.
• Continued digitalisation and automation of Sage
products through Sage Network and AI services.
• Enhanced, consistent digital experience for
allSage Business Cloud users through the Sage
Design System.
• Strategic acquisition (e.g. Spherics) and
collaboration with partners to complement
andenable accelerated innovation.
• A new Venture Studios team asked to search
fornewbusiness models that may align with
theSagevision.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 75
Strategic Report Governance Report Financial Statements Additional Information
Principal Risks anduncertainties continued
Principal Risk Risk context Management and mitigation
4.Route to market
If we fail to deliver a globally
consistent blend of route to
market channels in each
market, Sage will miss the
opportunity 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
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 telephone channels, via our
accountant network, and through
partners, valued-added resellers, and
independent software vendors (ISVs).
We use these channels to maximise
ourmarketing and customer
engagementactivities. This can
shortenour sales cycle and ensure
weimprove customer retention.
Executive Owner
President North America
andPresidentEMEA
• Market data and intelligence support decision
making regarding the best routes to market.
• Specified 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 specific Onboarding Squad enhances user
journeys to enable customer conversion.
• Acceleration of new partnerships to support the
Sage Network.
• Centre of Excellence to support our indirect sales
and third-party approach.
5.Customer experience
If we fail to provide 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
We must maintain a sharp focus on the
relationship we have with our customers,
constantly offering the products,
services, and experiences they need
forsuccess. If we do not, they are likely
tofind another provider who does.
Conversely, if we meet or exceed
theirexpectations, customers will
staywith Sage, increasing their
lifetimevalue, and becoming our
greatest marketing advocates.
While Sage is known for its high-quality
customer support, this area requires
constant, proactive focus. By helping
customers 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 our customers to be successful and,
in turn, improve financial performance.
Executive Owner
Chief Marketing Officer
• Customer-journey mapping to ensure appropriate
strategy alignment and alignment to Target
Operating Model.
• Introduction of micromoments, which are customer
experiences broken down into moments that matter
most to our customers. We use micromoments to
prioritise improvements.
• “Customer for life” roadmaps, detailing how
products fit together, any interdependencies,
andmigration pathways for current and
potentialcustomers.
• Continuous Net Promoter Score (NPS) surveying
allows us to identify customer challenges rapidly,
and respond in a timely manner to emerging trends.
• Sage Membership offered to all customers,
providing customers with access to curated
resources, tools, and a connected community
ofbusiness leaders.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202376
Principal Risk Risk context Management and mitigation
6.Third-party reliance
If we do not make our partners
an integral and aligned part of
Sage’s go-to-market strategy,
we will failto provide the
right capabilities and
experiences to our customers.
Trend
Strategic alignment
 
Link to viability scenario
Cloud operations failure
Sage relies 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 it relies on.
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.
Executive Owner
Chief Product Officer
• Centre of Excellence for our indirect sales and
third- party partners.
• Specified colleagues in place to support partners,
and to help manage the growth of targeted channels.
• Managed growth of the API estate, including
enhanced product development that enables access
by third-party API developers and optimisation of
API integrations to improve efficiency.
• Enhanced third-party management framework, to
support global alignment, execution, 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,
and the implementation of a Sustainable Supply
Chain Strategy.
7.People and performance
If we fail to ensure we have
engaged colleagues with the
critical skills, capabilities,
and capacity we need to
achieve our strategy,
wewillnot be successful.
Trend
Strategic alignment
   
Link to viability scenario
Data breach
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 right talent to
navigate change, but will also need
toprovide an environment where
colleagues can develop to meet these
newexpectations.
By empowering colleagues and leaders
tomake decisions, be innovative, and
bebold in meeting our commitments,
Sage will be able to create an attractive
working environment. By addressing
whatcauses 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
• 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.
• Reward mechanisms designed to incentivise and
encourage the right behaviour, with a focus on
ensuring fair and equitable pay in all markets.
• A series of Learning Academies and talent
programmes to support the development of internal
talent including sponsorship programmes, and new
Director, graduate, and apprentice programmes.
• An improved OKR framework to define measurable
goals and track outcomes of colleague success.
• Implementation of Talent Marketplace solution
tosupport identification of capabilities and
gaps,talent pipeline, development and career
pathways, and mentoring.
• Adoption of a Strategic Workforce Planning
Framework across the business.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 77
Strategic Report Governance Report Financial Statements Additional Information
Principal Risks anduncertainties continued
Principal Risk Risk context Management and mitigation
8.Culture
If we do not define, shape,
andproactively manage our
culture in line with our Values
and Behaviours, we will find it
difficult to achieve our strategic
priorities and purpose; we will
risk disengaging colleagues,
increasing attrition, and
affecting our ability to attract
and retain diverse talent.
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
improve innovation is critical in Sage’s
success. Devolution of decision making,
and the acceptance of accountability for
those decisions, will need to go hand in
hand as the organisation develops
andsustains its shared Values and
Behaviours, and fosters a culture
thatprovides customers with 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 encourage the engagement
that results in increased market share.
Executive Owner
Chief People Officer
• Integration of Values and Behaviours into all
colleague priorities including talent attraction,
selection, and onboarding as well as OKRs.
• All colleagues are encouraged to take uptofive
paid Sage Foundation days each year, tosupport
charities and provide philanthropic support to
thecommunity.
• A DEI strategy focused on building diverse teams,
an equitable culture, and fostering inclusive
leadership. This is supported by measurable
plansand metrics to track progress, ensuring Sage
meets its commitments, including no tolerance
ofdiscrimination, equal chances for everyone,
aninclusive culture, removing barriers, and
DEIeducation.
• Refreshed Code of Conduct training for all
colleagues (including anti-bribery and corruption
requirements) delivered as snippets, allowing Sage
to signpost relevant training at colleagues’ point
ofneed.
• 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202378
Principal Risk Risk context Management and mitigation
9.Cyber security and
dataprivacy
If we fail to collect, process,
and store data responsibly,
and ensure 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
Information is the lifeblood 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 General Data Protection Regulation
(GDPR) era. In addition, we need to use
ourdata efficiently and effectively
toimprove business performance.
Executive Owner
General Counsel and Company Secretary
• Multi-year cyber security programmes in IT and
Product to ensure Sage is continuously improving,
and reduce cyber risk 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
information protection.
• Formal certification schemes maintained across
the business 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.
10.Data strategy
If we fail to recognise the
value of our data assets,
create 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
Data is central to the Sage strategy
anddeliver ourambition to deliver
sustainable growth by expanding the
Sage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.
Successful ability to use data will
accelerate our growth and will be key
inhelping customers transform how
theyrun and build their businesses.
Executive Owner
Chief of Staff
• A strategy across customer, product, and enterprise
data to support the delivery of customer value and
solve customer problems, including the use of
enhanced AI/ML capabilities.
• A global Data function to increase focus and
alignment across the organisation.
• A defined set of Data and AI Ethics principles
toensure we use customer data responsibly
toachieve our strategy.
• A new Data and AI Ethics Council, which includes
members from the Executive Leadership Team and
will govern activities relating to data and AI ethics.
• Plan to increase participation in the Sage Network,
which will contribute to more data to support the
delivery of real customer value and solve real
customer problems.
• Governance policies, processes and tooling
toenhance and manage the quality and trust
inourdata.
• 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 79
Strategic Report Governance Report Financial Statements Additional Information
Principal Risks anduncertainties continued
Principal Risk Risk context Management and mitigation
11.Readiness to scale
As Sage’s ambition grows,
ifitfails to ensure its cloud
products can build and
operate at an industrial,
global scale it will erode
itscompetitive advantage.
The hosting of products
mustachieve economies of
scale, aligned to ambition,
inparallel with the ability
toaccelerate to market
withquality. Both must
beachievedwith reduced
environmental impact and
nocustomer impact.
If not addressed, Sage’s cloud
products would be less resilient
and less able to respond to its
customers’ expectations.
Trend
Strategic alignment
 
Link to viability scenario
Data breach
Cloud operations failure
As Sage continues to build sustainable
growth, we continue to focus on scaling
our current and future platform-services
environment in a rigorous, agile, and
speedy manner to ensure we provide
aconsistent and healthy cloud platform
and associated network.
Sage must provide the right infrastructure
and operations for all 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
• 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 through ongoing
portfolio management.
• Incident and problem management change
processes adhered to for all products and services.
• Service-level objectives including uptime,
responsiveness, and mean time to repair.
• Defined real-time demand-management processes
and controls, and also disaster-recovery capability
and operational-resilience models.
• A governance framework to optimise operational
cost base in line with key metrics.
• All new acquisitions are required to adopt Sage
cloud operation standards.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202380
Principal Risk Risk context Management and mitigation
12.Environment, social,
andgovernance
If Sage fails to fully, and
continually, respond to the
range of opportunities and
risks associated with ESG
itwill erode its reputation
andcompetitive advantage.
Sage would also be less
resilient and able to respond
to its internal and external
expectations and damage
stakeholder trust. Sage may
also incur higher cost of
capital, and lose credibility
unless it can demonstrate
strong ESG credentials to
themarket.
Trend
Strategic alignment

Link to viability scenario
Global economic shock
We invest 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 on its strategy
andoperations and considers
appropriate mitigations.
Societal and governance-related issues
are integral to Sage’s purpose and
Valuesand to the achievement of
Sage’sstrategy.
You can read more about the work we are
doing on ESG in the Sustainability and
Society Report.
Executive Owner
Chief People Officer
• Sage’s Sustainability and Society strategy,
informed by a rigorous materiality assessment,
focusing on three pillars: Protect the Planet,
TechforGood, and Human by Design.
• Ensuring adequate executive oversight through
theSustainability and Society Committee.
• Enabling accountability through integration on
ESG measures within long-term incentive plans.
• A strict portfolio governance approach
toworkingcross-functionally to meet
sustainabilitycommitments.
• An integrated framework for the management
ofESG-related risk and, in particular, physical
andtransitional climate risks, as detailed by TCFD.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 81
Strategic Report Governance Report Financial Statements Additional Information
Principal Risks anduncertainties continued
Viability Statement
Assessment of prospects and viability period
In accordance with provision Section 4.31 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 14 and 15 and 18 to 21)
and the Principal Risks and uncertainties (pages 74 to 81).
The Group’s operational and financially healthy position
issupported by:
• A high-quality recurring revenue base.
• Resilient cash generation and healthy liquidity position,
which is supported by strong underlying cash conversion
of 116%, reflecting the strength of the subscription
business model.
• A well-diversified small and medium-sized
customerbase.
The Directors have reviewed the period used for the
assessment and determined that 3 years remained suitable.
The Directors are of the view that projections overa3-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 3-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 Sage
operates in.
No scenario modelled over the 3-year period leads
to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 3-year plan
make certain assumptions about composition of the Group’s
product portfolio, 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 and
interest instalments as they fall due and that the existing
borrowing facilities remain available to the Group. Based on
the Group’s current liquidity profile, no debt maturities fall
within the 3-year period.
The assessment process
In forming the viability statement, the Directors carried
outa rigorous assessment of the Principal Risks and
uncertainties facing the Group which could affect 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 68 to 73.
As part of the assessment, the Group stress tests the
3-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.
The monetary impact of each scenario was estimated
byacross-functional group of senior leaders, including
representatives from Finance, Risk and Controls, ESG,
CloudOperations, IT, Product Marketing and Legal,
whoevaluated the possible consequences for the Group
should each scenario arise.
As set out in the Audit and Risk Committee’s report on
page122, 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 new customer
acquisition that would be required to reduce cash to
minimum working-capital requirements. The result of the
reverse stress testing has highlighted that such a scenario
would only arise following a highly significant deterioration
in performance, well in excess of the assumptions considered
in the viability scenarios set out on the next page.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202382
Scenario modelled Linked Principal Risks
(i) Data breach
The deliberate targeting or accidental release of customer data that breaches data privacy laws
or societal expectations in any region, could have a significant impact on Sage’s reputation in
the market, as well as affect its regulatory compliance with the various data-protection laws
Sage is subject to.
• Understanding customer needs
• Customer experience
• New 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 markets 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.
• Understanding customer needs
• Execution of product strategy
• New business models
• Route to market
• Customer experience
• Data strategy
(iii) Global economic shock
The crystallisation of a global economic shock that leads to a global economic downturn
oraninflationary wage-price spiral, resulting in increased default of small- and medium-
sizedbusinesses.
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.
• Execution of product strategy
• Route to market
• Customer experience
• Understanding customer needs
• ESG
• People and performance
(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. The risk also
considers the extent to which hosting infrastructure supporting Sage’s cloud operations
couldbe physically damaged through an adverse climate event.
• Understanding customer needs
• Execution of product strategy
• New business models
• Route to market
• Customer experience
• Cyber security and data privacy
• Readiness to scale
• Third-party reliance
If 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.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 83
Strategic Report Governance Report Financial Statements Additional Information
Governance at Sage
UK Corporate Governance Code 2018
Compliance Statement
The Board continues to assess its approach to corporate
governance by applying the provisions of theUK Corporate
Governance Code 2018 (the “Code”) and ispleased to confirm
compliance with all relevant Code provisions throughout
FY23. Acopy of the Code is publicly available on the website
oftheUK Financial Reporting Council at www.frc.org.uk.
Throughout this corporate governance report, we have
provided an insight into how corporate governance operates
across the Group and how we have applied the principles set
out in the Code.
As permitted by the Code, the Board has 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, leading to more informed decision making by
the Board, as well as educating colleagues on the role of the
Board at Sage.
 Further details onthe role of the Board Associate
and its effectiveness can be found on
pages106and107.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202384
Board Leadership and Company Purpose Pages
Purpose and culture inside front cover, 24 to 29, 78, 104 to 105
Shareholder engagement 54 to 55
Colleague engagement 48 to 49
Other stakeholder engagement 47 to 59
Conflicts of interest 97 and 98
Division of Responsibilities
The role of the Board 92
The role of the Board Committees 92 to 94
Board composition 94
Committee composition 97
Independence of Non-executive Directors 96 to 97
Time commitment 96
Composition, Succession, and Evaluation
Board composition and succession 110 to 117
Diversity, equity, and inclusion 115 to 117
Annual re-election of Directors 96
Induction, Director training, and
development programme 95 to 96
Board effectiveness and evaluation 108 to 109
Audit, Risk, and Internal Control
Significant reporting and accounting matters 121 to 123
Fair, balanced, and understandable 124
Viability Statement and going concern 122
Risk management and internal controls 124
Internal audit 125
External auditor 126 to 128
Principal and emerging risks 74 to 81
Remuneration
Remuneration principles 132 and 133
Remuneration Policy 139 to 143
Pensions and benefits 156
Directors’ shareholdings and share interests 159
External advisors 162
Additional InformationFinancial Statements
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 85
Governance ReportStrategic Report
Chair’s introduction to governance
Dear shareholder,
I am pleased to introduce our Governance Report for the
yearended 30 September 2023, on behalf of the Board.
Good governance is central to the success of the business.
Good processes married to a good culture adds value to,
andis supportive of, a value creating business strategy.
This report sets out our approach to effective corporate
governance and how it contributes to the development
anddelivery of our strategy and protects stakeholder value.
Board composition and succession
The Board, together with the Nomination Committee,
continued to monitor the Board composition, skills matrix
and broader aspects of diversity, with a focus on scheduled
succession planning activities for Non-executive Directors.
On recommendation of the Nomination Committee, the
Board approved the appointment of two new Non-executive
Directors and the succession of the Senior Independent
Director role this year.
We were delighted to welcome Maggie Chan Jones and
RoisinDonnelly to the Board with effect from December 2022
and February 2023 respectively. Maggie’s deep international
marketing and brand experience has contributed richly to
Board discussions and decision making as we continue to
strengthen our brand positioning. Roisin’s appointment
isafurther valuable addition to the Board as she brings
extensive experience on digital transformation and
practicalboard and committee experience.
You can read more about Maggie and Roisin’s first year on
the Board along with their induction process onpages 95 and
96.
In May this year, the Nomination Committee initiated an
internal search for a new Senior Independent Director to
succeed Drummond Hall when he steps down from the Board
atthe end of December 2023. As part of this process, a brief
was prepared outlining the characteristics and experience
being sought in our next Senior Independent Director and
Isubsequently consulted with all members of the Board to
garner views and understand who amongst the Non-executive
Directors may wish to be considered for the role. At the
September Nomination Committee and Board meeting it
wasunanimously agreed that Annette Court should succeed
Drummond as Senior Independent Director, given Annette’s
position as a trusted and valued Board member and her strong
knowledge of the Group. During his tenure, Drummond has
been a significant asset with his deep knowledge of Sage’s
business, and we thank Drummond for his considerable
contribution to Sage and wish him every success for the future.
Further information on our Senior Independent
Director selection process can be found in the
Nomination Committee Report on pages 110 to 117.
Andrew Duff
Chair
Strong governance
to protect
sustainable
growth
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202386
I am pleased to confirm that the Board meets the target set
by the Parker Review with regard to ethnic diversity at Board
level and is on track from January 2024 to meet the targets
set by the FTSE Women Leaders Review, at which point the
Board will meet all three targets specified inthe FCA’s
Listing Rules, which we have reported against this year.
For more information on our Board diversity and
composition, please see page 94.
Purpose, culture and engagement
Our purpose is at the core of our strategy, enabling small
andmedium sized businesses to thrive. It is at the forefront
of our decision-making and strategy development which is
championed by the Board, who consider how the initiatives
progressed by management throughout the year have
advanced our purpose.
The Board plays a leading role in shaping the culture of the
Company by promoting growth-focused and values-based
conduct and ensuring that the long-term sustainable success
of our business remains connected to the interests of our
stakeholders. We believe that in order to progress our strategy,
the Board must consider all stakeholders relevant to a decision
and satisfy themselves that any decision upholds our culture
and values.
“ Good governance is central to
thesuccess of the business.”
This year, I have spent considerable time with our colleagues
and leadership teams across the business in Newcastle,
Madrid, Paris and Atlanta, as I believe that the Board is
responsible for promoting and demonstrating a culture in
which all Sage colleagues feel well-equipped and supported
to perform at their very best. Through the year the Board has
also been presented with excellent insight into colleague
sentiment and views, with several tools used to monitor the
culture, including the role of the Board Associate and our
programme of engagement activities.
You can read more about how the Board monitors
culture and the role of the Board Associate on pages 104
to 107. Further details on how the Board has engaged
with our stakeholders and discharged our section 172
duties during the year can be found on pages 47 to 59.
Focused on ESG
Our ESG initiatives were a constant feature on the Board’s
andits Committees’ agendas throughout FY23, including
anengagement session in February to enhance the Board’s
contribution to Sage’s sustainability and climate strategy.
As ESG initiatives continue to be developed, the Board will
ensure that they remain aligned to our purpose of ensuring
that we play our part in creating long-term sustainable value.
Further information can be found in our Sustainability
and Society Report, visit www.sage.com/en-gb/
company/sustainability-and-society.
Board evaluation and effectiveness
Each year, the performance of the Board, its Committees,
andindividual Directors is reviewed in accordance with the
Code, to ensure they are operating effectively and to identify
development opportunities, where necessary. This year, an
internally facilitated effectiveness review was led by myself
and supported by the Company Secretary. The Board was
pleased by the results of the effectiveness reviews and
concluded that the Board continues to operate effectively,
with a positive culture andstrong sense of accountability
tostakeholders.
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 108 and 109.
Looking forward
As we remain focused on efficiently scaling the Group, our
overarching objective is to be both a successful and also
aresponsible Company with a focus on creating sustainable
value. This isundertaken whilst upholding the highest standards
of corporate governance and promoting an inclusive culture
for our colleagues. I would also like to thankall colleagues
for their hard work and dedication during the year, and my
fellow Board members and the Executive Leadership Team
for continuing to provide strongleadership.
I encourage all stakeholders to take every opportunity
presented to engage with the Company and I would welcome
you to attend the forthcoming Annual General Meeting on
1 February 2024.
Andrew Duff
Chair
Board of Directors
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 87
Financial Statements Additional InformationGovernance ReportStrategic Report
Our leadership
Board of Directors
Key
 Audit and Risk
Committee
See pages
118 to 128
 Nomination
Committee
See pages
110 to 117
 Remuneration
Committee
See pages
129 to 163
C
 Committee Chair
Changes to the Board
and to Board
Committees during
FY23 and as at the date
of this report
• Maggie Chan Jones was
appointed to the Board
on 1 December 2022
• Roisin Donnelly was
appointed to the Board
on 3 February 2023
• Annette Court was
appointed to the
Nomination Committee
on 1 March 2023
• Roisin Donnelly
wasappointed to
theRemuneration
Committee on
1 March2023
• Annette Court will be
appointed as Senior
Independent Director
with effect from
1 January2024
following Drummond
Hall’s retirement on
31 December 2023
Information on Board
succession planning
activities can be found
onpages 110 to 117.
Further information on
the composition of the
Board and its
Committees can be
found on page 94.
C
 
C
C
   
Andrew Duff
Chair
Steve Hare
Chief Executive
Officer
Jonathan Howell
Chief Financial
Officer
Sangeeta Anand
Independent
Non-executive
Director
Dr John Bates
Independent
Non-executive
Director
Jonathan Bewes
Independent
Non-executive
Director
Maggie Chan Jones
Independent
Non-executive
Director
Annette Court
Independent
Non-executive
Director
Roisin Donnelly
Independent
Non-executive
Director
Drummond Hall*
Senior Independent
Director
Derek Harding
Independent
Non-executive
Director
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
andchair of nomination
committee of
Elementisplc
Non-executive chair
andchair of nomination
committee of Severn
Trent plc
Senior independent
director and chair of
remuneration committee
of Wolseley plc
Chief executive officer
of npower
Key external
commitments
Non-executive director
of UK Government
Investments Limited
Appointed
3 January 2014 as
ChiefFinancial Officer,
31 August 2018 as
ChiefOperating
Officerand as Chief
Executive Officer 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. Steve has an
extensive understanding
of the drivers and
priorities needed
forthecommercial
deliveryof Sage’s
strategy and increating
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
ofInvensys plc, Spectris
plc and Marconi plc
Key external
commitments
None
Appointed
15 May 2013 as
aNon-executive
DirectorandasChief
FinancialOfficer
on10 December2018
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan is a highly
experienced group
finance director,
chair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 served as the
Chairof the Audit and
RiskCommittee.
Key previous
experience
Group chief financial
officer of Close Brothers
Group plc
Group chief financial
officer 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
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
cloud opportunity.
Sangeeta’s technology
and business experience
includes cybersecurity,
cloud, enterprise
software, SaaS and
application services.
Key previous
experience
Chief marketing officer
ofAlkira Inc (disruptive
SaaS networking startup)
Senior vice president of
F5Networks Inc
General manager
andcorporate vice
president of SafeNet
(partof Thales Group)
Vice president of
CiscoSystems
Key external
commitments
Independent board
member of Direktiv.IO
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
Director and president
ofSER Group Inc
Appointed
1 April 2019
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan has a wealth
ofaccounting and
financial experience
andhas previously
served as chair on
anaudit committee.
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
Vice-chair, corporate
and institutional
banking atStandard
Chartered Bank plc
Key external
commitments
Senior independent
director and chair of
theaudit committee
ofNextplc
Non-executive director
and chair of the audit
and risk committee of
the Court of the Bank
ofEngland
Appointed
1 December 2022
Gender
Female
Ethnicity
Asian
Nationality
American
Skills
Maggie has deep
international marketing
and brand experience
gained from her time
spent at some of
theworld’s largest
technology companies.
She was SAP’s first
woman chief marketing
officer, responsible
fordriving global
marketing across more
than 180 countries.
Maggie is recognised
asan industry thought-
leader in the marketing
and technology sector
and was previously
named as one of the
‘Most Influential CMO’ in
the world by Forbes.
Key previous
experience
Non-executive director
of Avast plc
Chief marketing officer
of SAP
Key external
commitments
Chief executive
ofTenshey, Inc
Non-executive board
advisor to Ontinue
Non-executive director
and member of the
nomination and
responsible business
committees of
BTGroupplc
Director at large and
member of the audit and
strategic investment
committees of the US
Tennis Association
Appointed
1 April 2019
Gender
Female
Ethnicity
White
Nationality
British
Skills
Annette has experience
of serving as chair
ofaremuneration
committee, as well
asinexecutive and
non-executive director
roles at the highest
levels, including as chair
of FTSE 100 companies.
Annette has 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
Non-executive director
of Foxtons Group plc
Chair of Admiral
Groupplc
Key external
commitments
Chair of WH Smith PLC
Director of Admiral
Europe Compañía
deSeguros
Appointed
3 February 2023
Gender
Female
Ethnicity
White
Nationality
British
Skills
Roisin brings extensive
customer, marketing
andbranding experience
to the Board, gained
during her executive
career atProcter &
Gamble. Shehas a strong
background in digital
transformation and
data,and significant
knowledge and
experience of developing
ESG strategies at
boardlevel.
Key previous
experience
Non-executive director
of Just Eat plc
Non-executive director
of HomeServe Limited
Non-executive director
of Holland & Barrett
Limited
Non-executive director
of Bourne Leisure
Limited
Key external
commitments
Non-executive director
of NatWest Group plc
Non-executive director
of Premier Foods plc
Appointed
1 January 2014
Gender
Male
Ethnicity
White
Nationality
British
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
Key external
commitments
None
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
ofSenior plc
Group finance director
of Shop Direct
Finance director
ofWolseley UK
Key external
commitments
Chief financial officer
ofSpectris plc
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202388
Key
 Audit and Risk
Committee
See pages
118 to 128
 Nomination
Committee
See pages
110 to 117
 Remuneration
Committee
See pages
129 to 163
C
 Committee Chair
Changes to the Board
and to Board
Committees during
FY23 and as at the date
of this report
• Maggie Chan Jones was
appointed to the Board
on 1 December 2022
• Roisin Donnelly was
appointed to the Board
on 3 February 2023
• Annette Court was
appointed to the
Nomination Committee
on 1 March 2023
• Roisin Donnelly
wasappointed to
theRemuneration
Committee on
1 March2023
• Annette Court will be
appointed as Senior
Independent Director
with effect from
1 January2024
following Drummond
Hall’s retirement on
31 December 2023
Information on Board
succession planning
activities can be found
onpages 110 to 117.
Further information on
the composition of the
Board and its
Committees can be
found on page 94.
C
 
C
C
   
Andrew Duff
Chair
Steve Hare
Chief Executive
Officer
Jonathan Howell
Chief Financial
Officer
Sangeeta Anand
Independent
Non-executive
Director
Dr John Bates
Independent
Non-executive
Director
Jonathan Bewes
Independent
Non-executive
Director
Maggie Chan Jones
Independent
Non-executive
Director
Annette Court
Independent
Non-executive
Director
Roisin Donnelly
Independent
Non-executive
Director
Drummond Hall*
Senior Independent
Director
Derek Harding
Independent
Non-executive
Director
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
andchair of nomination
committee of
Elementisplc
Non-executive chair
andchair of nomination
committee of Severn
Trent plc
Senior independent
director and chair of
remuneration committee
of Wolseley plc
Chief executive officer
of npower
Key external
commitments
Non-executive director
of UK Government
Investments Limited
Appointed
3 January 2014 as
ChiefFinancial Officer,
31 August 2018 as
ChiefOperating
Officerand as Chief
Executive Officer 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. Steve has an
extensive understanding
of the drivers and
priorities needed
forthecommercial
deliveryof Sage’s
strategy and increating
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
ofInvensys plc, Spectris
plc and Marconi plc
Key external
commitments
None
Appointed
15 May 2013 as
aNon-executive
DirectorandasChief
FinancialOfficer
on10 December2018
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan is a highly
experienced group
finance director,
chair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 served as the
Chairof the Audit and
RiskCommittee.
Key previous
experience
Group chief financial
officer of Close Brothers
Group plc
Group chief financial
officer 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
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
cloud opportunity.
Sangeeta’s technology
and business experience
includes cybersecurity,
cloud, enterprise
software, SaaS and
application services.
Key previous
experience
Chief marketing officer
ofAlkira Inc (disruptive
SaaS networking startup)
Senior vice president of
F5Networks Inc
General manager
andcorporate vice
president of SafeNet
(partof Thales Group)
Vice president of
CiscoSystems
Key external
commitments
Independent board
member of Direktiv.IO
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
Director and president
ofSER Group Inc
Appointed
1 April 2019
Gender
Male
Ethnicity
White
Nationality
British
Skills
Jonathan has a wealth
ofaccounting and
financial experience
andhas previously
served as chair on
anaudit committee.
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
Vice-chair, corporate
and institutional
banking atStandard
Chartered Bank plc
Key external
commitments
Senior independent
director and chair of
theaudit committee
ofNextplc
Non-executive director
and chair of the audit
and risk committee of
the Court of the Bank
ofEngland
Appointed
1 December 2022
Gender
Female
Ethnicity
Asian
Nationality
American
Skills
Maggie has deep
international marketing
and brand experience
gained from her time
spent at some of
theworld’s largest
technology companies.
She was SAP’s first
woman chief marketing
officer, responsible
fordriving global
marketing across more
than 180 countries.
Maggie is recognised
asan industry thought-
leader in the marketing
and technology sector
and was previously
named as one of the
‘Most Influential CMO’ in
the world by Forbes.
Key previous
experience
Non-executive director
of Avast plc
Chief marketing officer
of SAP
Key external
commitments
Chief executive
ofTenshey, Inc
Non-executive board
advisor to Ontinue
Non-executive director
and member of the
nomination and
responsible business
committees of
BTGroupplc
Director at large and
member of the audit and
strategic investment
committees of the US
Tennis Association
Appointed
1 April 2019
Gender
Female
Ethnicity
White
Nationality
British
Skills
Annette has experience
of serving as chair
ofaremuneration
committee, as well
asinexecutive and
non-executive director
roles at the highest
levels, including as chair
of FTSE 100 companies.
Annette has 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
Non-executive director
of Foxtons Group plc
Chair of Admiral
Groupplc
Key external
commitments
Chair of WH Smith PLC
Director of Admiral
Europe Compañía
deSeguros
Appointed
3 February 2023
Gender
Female
Ethnicity
White
Nationality
British
Skills
Roisin brings extensive
customer, marketing
andbranding experience
to the Board, gained
during her executive
career atProcter &
Gamble. Shehas a strong
background in digital
transformation and
data,and significant
knowledge and
experience of developing
ESG strategies at
boardlevel.
Key previous
experience
Non-executive director
of Just Eat plc
Non-executive director
of HomeServe Limited
Non-executive director
of Holland & Barrett
Limited
Non-executive director
of Bourne Leisure
Limited
Key external
commitments
Non-executive director
of NatWest Group plc
Non-executive director
of Premier Foods plc
Appointed
1 January 2014
Gender
Male
Ethnicity
White
Nationality
British
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
Key external
commitments
None
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
ofSenior plc
Group finance director
of Shop Direct
Finance director
ofWolseley UK
Key external
commitments
Chief financial officer
ofSpectris plc
*Drummond Hall will retire from the Board on 31 December 2023.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 89
Financial Statements Additional InformationGovernance ReportStrategic Report
Steve Hare
Chief Executive
Officerand member
oftheExecutive
Leadership Team
See Board of Directors,
page 88
Jonathan Howell
Chief Financial Officer
and member of the
Executive Leadership
Team
See Board of Directors,
page 88
Walid Abu-Hadba
Chief Product
Officer
Aziz Benmalek
President—
North America
Derk Bleeker
President—
EMEA
Vicki Bradin
General Counsel and
CompanySecretary
Amanda Cusdin
Chief People
Officer
Aaron Harris
Chief Technology
Officer
Cath Keers
Chief Marketing
Officer
Amy Lawson
Chief Corporate
Affairs Officer
Appointed
1 January 2022
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 of Oracle
Developer Tools. He also
holds several senior board
advisor roles inthe
technology sector and
patents in the field of AI.
Appointed
1 March 2022
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.
Appointed
1 October 2019
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.
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.
Appointed
1 October 2017
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 had 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.
Appointed
1 April 2019
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.
Appointed
8 September 2020
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.
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.
Appointed
1 March 2022
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 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.
Our leadership continued
Executive Leadership Team
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202390
Steve Hare
Chief Executive
Officerand member
oftheExecutive
Leadership Team
See Board of Directors,
page 88
Jonathan Howell
Chief Financial Officer
and member of the
Executive Leadership
Team
See Board of Directors,
page 88
Walid Abu-Hadba
Chief Product
Officer
Aziz Benmalek
President—
North America
Derk Bleeker
President—
EMEA
Vicki Bradin
General Counsel and
CompanySecretary
Amanda Cusdin
Chief People
Officer
Aaron Harris
Chief Technology
Officer
Cath Keers
Chief Marketing
Officer
Amy Lawson
Chief Corporate
Affairs Officer
Appointed
1 January 2022
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 of Oracle
Developer Tools. He also
holds several senior board
advisor roles inthe
technology sector and
patents in the field of AI.
Appointed
1 March 2022
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.
Appointed
1 October 2019
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.
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.
Appointed
1 October 2017
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 had 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.
Appointed
1 April 2019
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.
Appointed
8 September 2020
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.
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.
Appointed
1 March 2022
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 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 91
Financial Statements Additional InformationGovernance ReportStrategic Report
1.
The Executive Leadership Team composition data reflects the information as at 30 September 2023
and includes the Executive Directors and the General Counsel and Company Secretary.
2.
Jonathan Howell and Cath Keers’ tenures do not for this purpose include their time as Non-executive Directors.
Executive Leadership Team composition
1
G
ender Experience Tenure
Technology and Innovation 12.50%
Financial 12.50%
Customer success 31.25%
Marketing 6.25%
Corporate affairs 6.25%
Male 6
Female 4
1–3 years 3
3–6 years 5
2
Over 6 years 2
Strategy 12.50%
Colleague success and ESG 12.50%
Legal, risk and governance 6.25%
Corporate governance report
Our governance framework
Shareholders
Our shareholders are the ultimate owners of the Company and play an important part in shaping our governance.
Moreinformationabout shareholder engagement can be found on pages 54 and 55
Board of The Sage Group plc.
The Board provides entrepreneurial leadership setting the Company’s purpose, strategy and Values. Collectively, the Board is
responsible for the strategic direction of the Group, and oversees the alignment with its culture ensuring the long-term success of
the Company, for the benefit of all Sage stakeholders and wider society. This includes ensuring that workforce policies and practices
areconsistent with the Company’s Values and support its long-term sustainable vision. More information about the Board’s
responsibilities can be found in the Matters Reserved for the Board document, available on our website
Executive Leadership Team
Responsible for helping the CEO implement the strategy, meet commercial objectives and improve operating
andfinancialperformance
Chief Executive Officer
Leads the Group’s key strategic and operational activities and leads the Executive Leadership Team. He is also responsible
foroverseeing the development of business strategies for Board approval and achieving timely and effective
implementationwhilecreating long-term value for stakeholders
The Company’s robust, clear and efficient governance
framework ensures the effectiveness of the decision-making
process for the Board, its Committees and senior leadership.
Audit and Risk Committee
To oversee the Group’s financial
reporting, risk management, and
internalcontrol procedures and the work
of Sage Assurance (Internal Audit) and the
external auditor. Responsibilities also
include overseeing the integrity,
accuracy and consistency of the Group’s
Sustainability and Environmental,
Social, and Governance (ESG)
non-financial disclosures
Nomination Committee
To review the composition of the
Boardincluding structure and
diversityof its Committees, and
toplanfor progressive refreshing
ofitsmembership through effective
succession planning. The Committee
ensures adequate Boardtraining
andoversees atalent development
framework for seniormanagement
Remuneration Committee
To establish the Remuneration Policy
forthe Executive Directors. To determine
theremuneration framework, including
bonus and incentive plans, and levels
ofremuneration for the Executive
Directors, the Chair, and other
designated individuals and senior
management, designed to support
strategy and promote the long-term
sustainable success of the Group
Scan the QR code for
further insight into
Sageleadership
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202392
Roles and division of responsibilities
There is a clear and distinct division of the roles of the Chair
and the Chief Executive Officer, with each having a clearly
defined remit, as established and agreed by the Board.
AsDirectors of the Company, both the Non-executive and
Executive Directors have the same duties but they have
distinct roles on the Board, which ensures the appropriate
accountability and oversight.
Andrew Duff
Chair
• Leadership and effective operation of the Board in
directing the Company
• Leads the annual review of the Board’s effectiveness
• Setsthe Board agenda
• Promotes an inclusive and open culture in the
Boardroom, welcoming and encouraging constructive
debate and effective decision making
• Creates conditions for the Board to be effective as
individuals and as a collective
• Ensures the views of all stakeholders are understood and
considered appropriately in Board discussion and
decision making (please see pages 47 to 55 for
moreinformation)
• Promotes the highest standards of corporate governance,
assisted by the Company Secretary and demonstrates
objective judgement
Steve Hare
Chief Executive Officer
• Develops and proposes the corporate strategy for
Boardconsideration, and leads the implementation
ofthe strategy (including sustainability), as approved
bythe Board
• Ensures the Chair and Board are advised and updated
regarding any key matters
• Leads the Executive Leadership Team in overseeing
theoperational and financial performance of Sage
• Ensures risks are rigorously managed and Sagemaintains
a disciplined and strong internal controlenvironment
• Identifies potential acquisitions and disposals and
monitors the competitive environment
• Ensures Sage operates in line with its values by doing
theright thing and keeping its promises
DrummondHall*
Senior Independent Director
• 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,
ifconcerns have not been addressed through normal
channels of communication
• Leads the performance appraisal of the Chair by the
Non-executive Directors
* Annette Court will become Sage’s Senior Independent Director
following Drummond Hall’s retirement on 31 December 2023
Jonathan Howell
Chief Financial Officer
• Manages the Group’s financial affairs including any tax
and treasury matters
• Supports the CEO in implementing the corporate
strategy and overseeing 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
Sangeeta Anand, Dr John Bates, Jonathan
Bewes, Maggie Chan Jones, Annette Court,
Roisin Donnelly and Derek Harding
Independent Non-executive Directors
• Contribute, challenge and monitor the delivery
ofstrategic objectives and Group performance
• Overseeinternal controls and Enterprise Risk
Management Framework and ensure they are rigorous
• 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 Senior
Independent Director
• Serve on Committees and contribute to the effectiveness
of those Committees
• Devote sufficient time to the Company to meet
theirresponsibilities
• Shape our governance and culture across the Group
Vicki Bradin
Company Secretary
• Ensures the Board and its Committees receive relevant
and timely information in order to function effectively
and efficiently
• Ensures clear and timely information flow between
theBoard and its Committees and between senior
management and Non-executive Directors
• Advises and keeps the Board updated on legal,
compliance and corporate governance matters
• Supports the Chair with Board procedures byfacilitating:
• The provision of inductions
• Non-executive Directors’ training and professional
development
• Effectiveness reviews and evaluation
• Non-executive Directors’ engagement plans with
thebusiness
The Non-executive Directors’ terms of appointment are available for inspection at Sage’s Registered Office.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 93
Financial Statements Additional InformationGovernance ReportStrategic Report
Corporate governance report continued
Board governance
The Board is responsible for the overall leadership of the
Group and for setting the tone from the top for the Group’s
Values and standards and ensuring this permeates
throughout the Group. The Board is supported by a further
Board Committee, the Disclosure Committee, which ensures
compliance with the obligations of the UK Market Abuse
Regulation and supports the Board in assessing when Sage
may have inside information and ensures accurate and
timely disclosure. The Disclosure Committee members
include the Chair, Chief Executive Officer, Chief Financial
Officer, Chair of the Audit and Risk Committee and the
General Counsel and Company Secretary.
The Company has established a number of additional
supporting management committees, including two
corporate committees, the Business Investment Committee
and theMergers and Acquisitions Committee. The Business
Investment Committee reviews and decides on matters
relating to purchases over a certain threshold outside
oftheGroup’s Delegation of Authority. The Mergers and
Acquisitions Committee considers proposals to acquire,
divest and/or make investments in businesses at the
appropriate tollgates outlined in the Merger, Acquisition
&Divestiture Policy. There are further management
committees which help drive efficiencies, mandated by
theCEO and CFO and their membership is made up of either
Executive Directors and/or senior management within the
business, accordingly.
The Board and Group’s subsidiary entities operate within
aclearly defined delegated authority framework, which is
fully embedded across the Group. The delegated authority
framework ensures that there is an appropriate level of Board
oversight of, and contribution to, key decisions, and that the
day-to-day business is managed effectively. The delegated
authority framework includes a clearly defined schedule
ofMatters Reserved for the Board.
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 all Board Committees are available on our
website at sage.com.
Board composition
The Board recognises that an optimal board of
directorsshould reflect a diverse range of views, insights,
perspectives and opinions, which facilitates constructive
discussion and enables enhanced 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 complements the
comprehensive succession planning activities. The Board
delegates to the skill and expertise of the Nomination
Committee the responsibility to maintain the appropriate
composition of the Board. The Nomination Committee
ensures diversity features strongly in its work on
successionplanning.
In the FY22 Annual Report, it was noted that Maggie Chan
Jones would join the Board in December 2022 and that there
was an ongoing search for a second Non-executive Director.
We were pleased to announce the appointment of Roisin
Donnelly to the Board with effect from February 2023. As was
also reported in the FY22 Annual Report, Drummond Hall
hadagreed to serve as a Non-executive Director for one
additional year to support Board continuity. This additional
year expires on 31 December 2023 at which point Drummond
Hall will retire and will be replaced by Annette Court as
Senior Independent Director. Annette Court’s appointment
as Senior Independent Director takes effect from 1 January
2024. Her appointment was a result of an internal selection
process, during which it became clear that she was the most
suitable candidate to succeed Drummond Hall in his role as
Senior Independent Director. Annette Court has strong
knowledge of the Group, having served on the Board since
2019 and has a wealth of director experience, having held
senior positions at a number of leading UK-listedcompanies.
The Board’s DEI Policy sets out the approach to diversity,
equity and inclusion for the Board and its Committees and
helps make sure appointments are made on merit set against
objective criteria. While the Board is mindful of the targets
as set out by the FCA’s Listing Rules, and aims to meet them
as far as possible, the Board recognises that there may be
temporary periods when this is not possible. As at
30 September 2023 and the date of this report, the Board
meets the ethnic diversity target set bythe Parker Review
and the FCA’s Listing Rules. As at 30 September 2023 and the
date of thisreport, the Board does not meet either of the
gender diversity targets specified in the FCA’s Listing Rules
(theBoard is currently 36% women and the four senior Board
positions referred to in the FCA’s Listing Rules are all held
bymen). However, from 1 January 2024, following Drummond
Hall’s retirement from the Board and Annette Court’s
appointment to the role of Senior Independent Director, it is
anticipated that Sage will meet all three of the FCA’s Listing
Rule targets, with 40% of Board members being women,
Annette Court holding one of the specified senior Board
positions and two members of the Board being from an
ethnic minority background. Please see page 114 for
furtherdetails of the skills and experience of the Board
andpages 110 to 117 for more information on the Board DEI
Policy and the succession planning activities of the
Nomination Committee.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202394
An interview with our new NEDs
Q&A with Maggie Chan Jones
Independent Non-executive Director
QHow effective have you found your induction
programme in preparing you as a NED and for
theSage Board discussions?
I’ve thoroughly enjoyed my induction programme,
which was broad and comprehensive. I’ve felt very
welcomed by my fellow Board members, in particular
the Chair’s inclusive approach to Board discussion
meant that I could settle into the role very quickly.
Theinduction programme provided me with the
platform to understand Sage’s business in some depth,
gather insight into our customer base and meet the
senior management team. I’ve also visited a few
locations and business areas and participated in
employee talent lunches which enhanced my
understanding of the cultural tone and sentiment
across the business.
QHow important is a company’s culture to
youand what are your views on Sage’s culture?
This is incredibly important. An inclusive culture
where diversity in its broadest sense is embraced,
iskey to achieving success in the long-term. Through
my personal ventures I’ve always focused onelevating
the role of women and underrepresented people into
leadership roles—that’s something that’svery
important to me. At Sage, I’m impressed with the
Group’s drive for nurturing collaboration and
innovation, while continuing to strengthen a human,
inclusive, high-performance culture where the
success of each colleagueis celebrated.
QCan you share your thoughts about Sage’s
brand transformation and what focus we should
have in increasing our business opportunities?
When it comes to brand transformation, I’m really
impressed with what Sage has achieved in terms
ofdriving brand awareness. With all our different
markets, how we drive awareness and how we speak
todifferent audiences is critical. We are a customer-
centric business, and our customers are absolutely
atthe heart of what we do but the key area for our
focus next year would be to continue to focus on our
customers’ end to end journey with Sage and the
experiences we are creating for them.
Q&A with Roisin Donnelly
Independent Non-executive Director
QHow effective have you found your induction
programme in preparing you as a NED and for
theSage Board and committee discussions?
I was delighted with the opportunity to join the Sage
Board in February. My induction process has been
very useful for me to understand the Sage business.
Iwas supported by tailored meetings with the senior
management team which gave me valuable insight
into their roles, the business and the functions. I have
also enjoyed meeting Sage’s leadership teams in
Newcastle, Paris and Atlanta which gave me good
insight into the business and exposure to local talent.
QCan you share your thoughts about Sage’s
Sustainability and Society Strategy and how
wecontinue to drive results?
Sage’s drive and passion on matters pertaining to
sustainability and society was a contributing factor
in my decision to join the Board. Something that
particularly stood out to me when I first read Sage’s
Sustainability and Society Strategy is how our
purpose, values and the sector in which we operate
isdeeply aligned with the business and our strategy.
How we can drive our Sustainability and Society
Strategy further is by keeping it customer centric.
Working with our customers around the world, we can
use platforms such as Sage Earth to bring them value
and help reduce their carbon footprint. To build on
that, sustainability is everybody’s job and we can all
make a positive difference. That’s exciting and we
need to have that mindset to really drive impact and
achieve great results.
QDo you have any other thoughts or ideas you
would like to share with colleagues based on
yourfirst few months on the Board?
Sage is a great company with a very clear purpose,
clear values and a purpose-led strategy. However, I have
observed as I have met colleagues across the business
in different countries, Sage is very humble. We are
achieving great results, we are scaling and growing the
business and our colleagues at Sage should be really
proud of the work they are doing because as a Board, we
are really proud of their work.
Additional InformationFinancial Statements
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 95
Governance ReportStrategic Report
Corporate governance report continued
Annual election and re-election of Directors
In accordance with Sage’s articles of association, and
theCode, all Directors who wish to continue to serve are
subjectto shareholder election or re-election at the
AnnualGeneralMeeting.
Time commitment
The Board takes the time commitment of the Non-executive
Directors seriously and as such, they are advised, prior to
their appointment, of the commitments expected as part
oftheir role at Sage. Non-executive Directors must devote
such time as necessary to discharge their responsibilities
effectively and to seek prior approval of the Board for any
additional external appointments.
The Company Secretary maintains a register of Directors’
commitments, which is reviewed at each Board meeting.
TheBoard assess potential new external appointments on
acase-by-case basis, including whether the appointment
inquestion could negatively affect the Company or the
performance of the Director’s duties to the Group. The Board
carefully considered and approved the appointment of
AnnetteCourt as chair of WH Smith PLC, which took effect on
1 December 2022, having noted, in particular, that she would be
stepping down as chair of Admiral Group Plc from April 2023.
Maggie Chan Jones was appointed to BT Group plc on1 March
2023, which the Board had approved after duly considering her
external appointments as a whole and concluding she would
continue to have sufficient time todevote to her role at Sage.
In May 2023, Dr John Bates’s proposed appointment as Director
and President ofSER Group Inc. was considered and thought
appropriate considering his current appointments with SER
Group and that this additional appointment would not impose
on his time to discharge his duties effectively. Jonathan Bewes
was appointed as non-executive director and chair of the audit
and risk committee of the Court of the Bank of England, which
was carefully considered due to the nature ofthe appointment
and the expected time commitment. Having taken into account
Jonathan Bewes’s other external appointments, and having
noted that he stepped down from his role atStandard
Chartered Bank plc earlier in the year, the Boardwas
assuredthat he would have sufficient time todischarge
hisobligations effectively and commit to his
Sageresponsibilities.
The Board has considered the nature of each of these
appointments carefully to ensure that the effectiveness
ofthe Board would not be compromised and agreed that
theDirectors will have sufficient time to discharge their
obligations satisfactorily. No instances of overboarding
were identified during the year. The Non-executive Directors
devote considerable time to the Group beyond the schedule
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 in-depth
understanding of the business and are kept up to date
withemerging technology, regulations, and other matters
affecting the Group. All Directors also attend site visits
andparticipate in formal engagement plans to meet
colleagues and other stakeholders. For further information
onthe Directors’ activities during FY23 refer to pages 100 to
103.
Induction
Two new Directors were appointed to the Board in the year,
Maggie Chan Jones and Roisin Donnelly. All new Directors
aregiven acomprehensive, formalised induction programme
tailored to their individual needs. These programmes
consist of meetings and events, designed to ensure a smooth
transition for the new Director 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 regularly asked for
feedback, and the programme is adapted as necessary. Please
see interviews with our new Non-executive Directors, including
their feedback on the induction process on page 95.
Independence of the
Non-executive Directors
As part of the annual review, the Board monitors
independence by reviewing their external commitments
andinterests, and tenure of each Non-executive Director.
The Board considers all the Non-executive Directors to be
independent in character and judgement in accordance with
the Code. The Board concluded that the independence of
theNon-executive Directors allows them to sufficiently
andconstructively challenge management.
While Drummond Hall has now served an additional year,
further to his nine-year tenure on the Board, he will be
stepping down at the end of December 2023. As we explained
in the FY22 Annual Report, the Board and the Nomination
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202396
Committee agreed, following a rigorous review in the
context of considering the extension of Drummond Hall’s
term in office by one year, that he remained independent
inboth character and judgement and would provide the
Board witha key point of stability through a time of
transition. TheCommittee and the Board have kept
Drummond Hall’s independence under review throughout
FY23 and up to thedate of this report and remain satisfied,
based on his contributions, that his length of tenure does not
impact hiseffectiveness or independence in any way.
Drummond Hall remains, and until his retirement in
December 2023 will remain, an independent Director
ofSagefor the purposes of the Code.
Conflicts of interest
At each Board meeting, the Board formally considers aregister
of interests, commitments and potential conflictsof the
Directors including potential new external appointments
forDirectors and, when appropriate, gives anynecessary
approvals. If any possible conflict exists, Directors recuse
themselves from consideration of the relevant subject matter.
Schedule of Board meetings
The Board is committed to maintaining a comprehensive
schedule of meetings and a forward agenda to ensure itstime
is used most effectively and efficiently and is supported by
the Company Secretary to facilitate this.Members of the
Board and Committees are expected to attend every
scheduled meeting and any ad hoc meetings, where possible.
If a Director cannot attend ameeting either for exceptional
circumstances or prior commitments, they are encouraged to
provide comments and observations to the Chair of the Board
or Committee, so these can be provided at that meeting. The
Board considers its meetingsan important opportunity also
Directors Scheduled Board
Nomination
Committee
Audit and Risk
Committee
Remuneration
Committee
Andrew Duff
C
C
5/5 3/3 – –
Steve Hare 5/5 – – –
Jonathan Howell 5/5 – – –
Sangeeta Anand
5/5 – 4/4 –
Dr John Bates
5/5 3/3 – 6/6
Jonathan Bewes
C
5/5 4/4 –
Maggie Chan Jones
2
4/4 – – –
Annette Court
3
C
5/5 2/2 4/4 6/6
Roisin Donnelly
4
3/3 – – 3/3
Drummond Hall
5/5 3/3 4/4 6/6
Derek Harding
5/5 4/4
Vicki Bradin
5
5/5 3/3 4/4 6/6
Notes:
1. Attendance at meetings in accordance with the formal schedule of meetings during FY23. The table shows the Committees’ current memberships.
Thecomposition of all Committees complied with the Code throughout the year. The maximum number of scheduled meetings held during the year that
eachDirector could attend is shown next to the number attended. In FY23, there was 100% attendance at all scheduled Board meetings and Committee
meetings by members. Committee attendance as set out above reflects attendance by Committee members only.
2. Maggie Chan Jones was appointed on 1 December 2022 and has attended four scheduled Board meetings.
3. Annette Court was appointed to the Nomination Committee on 1 March 2023.
4. Roisin Donnelly was appointed on 3 February 2023 and has attended three scheduled Board meetings. She was appointed to the Remuneration Committee
on1 March2023.
5. The Company Secretary acts as a Secretary to the Board and all the Committees.
Key
Audit and Risk Committee Nomination Committee Remuneration Committee
C
Board Chair
C
Committee Chair
Board and Committee meeting attendance and cross-membership
1
Scan the QR code for
further insight into Sage
Board Committees
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 97
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to meet colleagues at different operating locations each year
and aims to hold at least two meetings in different locations.
These meetings provide Directors with the opportunity to
meet a diverse group of colleagues, including senior business
leaders, allowing the Board to gainfurther understanding of
the business, to listen to local colleagues in person on their
views and to ask questions.
The Board is presented with standing papers from the prior
meetings ofthe Audit and Risk Committee and Remuneration
Committee, which provide information on the key strategic
decisions taken. At Committee meetings, irrespective
ofwhether a Director isa member or not, they may attend,
subject to recusal if anymatter concerns the individual(s)
orraises a potential conflict of interest.
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 97.
Board meeting schedule
Board meeting
- 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 the content required, reminders of the
actions allocated to them and deadlines for
submission of draft and final papers.
- 5 working days
Papers are circulated to the
Board via a secure web portal,
allowing Directors sufficient
time to consider matters.
- 3 years
Dates and venues of Board
meetings are set.
- 7 working days
Papers are submitted to
the Company Secretary
for final review.
- 1 year
A rolling calendar of standing
and periodic agenda items for
the following 12 months is
compiled and updated when
appropriate, addressing key
developments in the business.
+ 10 working days
Minutes of the meeting and
aschedule of actions are
completed and sent to the Chair
for review. Those responsible
for matters arising are asked to
provide an update prior to the
following meeting. The rolling
calendar is updated after
eachmeeting (as required), in
readiness for the next meeting.
Board Strategy Day
The Board holds a Strategy Day each year, typically
inFebruary. This year the Strategy Day was held at
theNewcastle office and the Board discussed and
reflected on the strategic proposals and considered
the evolution and acceleration of Sage’s strategy.
Senior management provided updates on the current
strategy and the context of the evolving external
environment. Presentations to the Board were provided
on areas including product strategy, customers and the
competitive landscape.
For further information on Board activities, refer
to pages 100 to 103.
Informal Board interactions
The Board appreciates theimportance of informal
opportunities to meet. These include Board dinners, where
the Board meets in an unofficial capacity to discuss business
matters and can connect. The Board also recognises the
importance of meeting colleagues outside of the formal
schedule of meetings, these include “talent lunches” with
senior management colleagues and casual in-person
interactions where Non-executive Directors are individually
paired witheither one or two colleagues to meet independently.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 202398
These unstructured opportunities allow the Board to
buildrelationships with each other and Sage colleagues,
emphasising diversity ofthought and encouraging a culture
of openness.
This year, the Board travelled to Newcastle in January 2023
where Board members had a “talent lunch” with Newcastle-
based colleagues from across different functions. The Board
also held cyber security and ESG engagement sessions. The
cyber security session involved understanding Sage’s cloud
operations strategy and IT strategy as well as the product
and IT cyber security objectives. The ESG session included
how Sage intends to deliver an effective ESG strategy and
adeep dive on Sage’s climate strategy.
The Board travelled to Paris in July 2023 where they held
adinner with the leadership team and a lunch with local
colleagues and participated in engagement sessions on
innovation and products, customers and partners and people
and culture. The Board also travelled to Atlanta in September
2023, where Board members held a Q&A with Intacct partners
& customers, attended a Sage Foundation mentoring session
with local underserved entrepreneurs and attended a panel
discussion with the BOSS Network.
Annual General Meeting
The 2023 AGM was held on 2 February 2023 at Sage’s
Newcastle office, as a hybrid meeting offering
shareholdersthe opportunity to participate either in person
or electronically via a live web portal. Sage also provides
shareholders with the opportunity to submit questions about
the business or any matter pertaining to the business of the
AGM ahead of the meeting, details of which will be provided
to our shareholders in the Notice of Meeting of the 2024 AGM.
The AGM is a key date in the Board’s calendar allowing
animportant opportunity to engage with shareholders.
Allofthe Directors, as well as the external auditor and
seniormanagement, were present in person at the 2023 AGM.
Allresolutions at the 2023 AGM were voted on a poll and
werepassed with over 95% of votes cast in favour. Details
ofour past AGMs can be found on our website, sage.com.
Thewebsite is the principal means bywhich we communicate
with shareholders.
Engagement with shareholders
Maintaining shareholder support by building meaningful
relationships and creating ongoing dialogue is key to
Sage’sstrategy, as our shareholders influence the long-term
direction of the Company. Ongoing dialogue keeps the
Company informed as to the concerns and interests of our
investors and allows the Company to respond, grow, and
perform better. It ensures not only that investor views
areheard but that Sage’s objectives and strategy are
understood. Sage updates shareholders quarterly on trading
performance. Following the announcement of interim and
final results, analysts are invited to attend presentations
and interact with the Executive Directors. The Investor
Relations team hold a dedicated programme for Executive
Directors to engage with shareholders through the post-
results roadshow and on an ad hoc basis.
Further information regarding engagement
activitieswith our shareholders can be found on
pages54 and 55.
Scheduled Board and Committee meetings timeline
November
Audit and Risk
Committee
meeting
Remuneration
Committee
meeting*
Disclosure
Committee
meeting
February
Audit and Risk
Committee
meeting
Nomination
Committee
meeting
Remuneration
Committee
meeting
May
Audit and Risk
Committee
meeting
Nomination
Committee
meeting
Remuneration
Committee
meeting
Disclosure
Committee
meeting
July
Remuneration
Committee
meeting
Disclosure
Committee
meeting
September
Audit and Risk
Committee
meeting
Nomination
Committee
meeting
Remuneration
Committee
meeting
January
Disclosure
Committee
meeting
Board meeting Board meeting Board meeting Board meeting Board meeting
* Two Remuneration
Committee
meetings are
scheduled in
November
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 99
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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 highlights the key stakeholders considered in the Board’s discussions and decision making.
Theprincipal decisions of the Board during FY23 are highlighted in the Strategic Report on pages 56 and 59.
Strategy and operations
Key stakeholders considered
  
• CEO report presented to each Board meeting
withkey stakeholder, 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, withupdates on
Groupstrategicexecution
• Board Strategy Day held toconsider in depth
strategicdirection, priorities and investment
• Deep dives on each of Sage’s strategic priorities
held duringthe year
People and culture
Key stakeholders considered
 
• 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
• Sage Foundation annual update
• Sage Belong annual update
• Sage Values update
Link to Principal Risks
1

2

3

4

5

6

7

8

9

10

11

12
Link to strategic priorities
   
Link to Principal Risks
7

8
Link to strategic priorities
   
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023100
Key stakeholder groups
Customers Colleagues Shareholders Society
Principal Risks
1
Understanding
Customer Needs
2
Execution of
Product Strategy
3
Developing and Exploiting
New Business Models
4
Route to
Market
5
Customer
Experience
6
Third-Party
Reliance
7
People and
Performance
8
Culture
9
Cyber Security
and Data Privacy
10
Data
Strategy
11
Readiness
to Scale
12
Environment, Social,
and Governance
Strategic priorities
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network Learn and disrupt
Customers and innovation
Key stakeholders considered
 
• CEO updates
• Marketing engagement sessions
• Sage Network strategy and measures discussed
• Consumer trends and technologydevelopments
discussed
• Competitor analysis and market share
Link to Principal Risks
1

2

3

4

5

6

9

10

11

Link to strategic priorities
   
Link to Principal Risks
1

2

4

5

6

9

11

12
Link to strategic priorities
   
Finance
Key stakeholders considered

• CFO report and financial performance update
ateach Board meeting, including KPIDashboard
• Investor relations update at each Board meeting
• Interim and full-year results andtrading updates
• Interim and full-year report andaccounts
• Business planning review and FY24
budgetapproval
• Interim and final dividend
• Balance sheet, capital structureand liquidity
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 101
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Board activities continued
Risk management
Key stakeholders considered
  
• Reviews of Principal Risks including risk profile
andappetite
• Review of internal controls framework
• Updates from management on whistleblowing
hotlinecases
• Emerging risk trends
• Macro environment trends
Key stakeholder groups
Customers Colleagues Shareholders Society
Principal Risks
1
Understanding
Customer Needs
2
Execution of
Product Strategy
3
Developing and Exploiting
New Business Models
4
Route to
Market
5
Customer
Experience
6
Third-Party
Reliance
7
People and
Performance
8
Culture
9
Cyber Security
and Data Privacy
10
Data
Strategy
11
Readiness
to Scale
12
Environment, Social
and Governance
Strategic priorities
Scale Sage Intacct
Expand medium
beyond financials
Build the small
business engine
Scale the network Learn and disrupt
Link to Principal Risks
1

2

3

4

5

6

7

8

9

10

11

12
Link to strategic priorities
   
Link to Principal Risks
7

8

9

10

12
Link to strategic priorities
   
Governance
Key stakeholders considered
 
• Review of Sage’s core corporatepolicies
• Review of Matters Reserved forthe Board and
theBoard rolling agenda
• Annual effectiveness review andevaluation
• Review of Board Committee Terms of Reference
• 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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023102
ESG
Key stakeholders considered
  
• ESG deep dive
• Review of Sage’s Sustainability and Society
strategy including ESG frameworks, materiality
assessment review and stakeholder insights
• Sustainability and Society Report
overviewprovided
• Review of climate change risks for Sage and
TCFDdisclosures
Cyber threat
Key stakeholders considered
  
• Deep dive on cyber security
• Chief Information Security Officer updates at
each Board
• Engagement sessions with colleagues from
Cyber,Risk, IT and Data
Link to Principal Risks
1

3

8

11

12
Link to strategic priorities
   
Link to Principal Risks
2

3

5

6

9

10

11

12
Link to strategic priorities
   
Breakdown of Board activities
The proportion of time spent on the Board’s key areas offocus
at its scheduled meetings is set out in the adjacent diagram
with further details of its activities set out on pages 100 to
103.
Strategy
As well as at Board meetings, the Board also holds
aStrategy Day every year; please refer to page 98.
Executive updates
The CEO and CFO provide updates to the Board at each
scheduled meeting.
Governance
The Board receives regular updates of legal and
regulatory matters at each Board meeting, including
ESG and cyber security.
19%
Governance
35%
Executive updates
46%
Strategy
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 103
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How the Board
monitors culture
We do the right thing.
Setting the tone from the top
Colleagues want to work for a company that values
them,andthat provides them with the opportunity to be
themselves and thrive. They expect Sage to address societal
issues fromdiversity and inclusion to the future of work.
The Board recognises the importance of the culture at Sage
and its role in achieving long-term success and value for
allstakeholders. The Board and Executive Leadership Team
focus on creating a positive culture at Sage, providing
colleagues with the opportunity to grow, experiment and
innovate in an inclusive environment in which all our
colleagues feel well equipped and well supported to perform
at their very best. To create the right culture, it is important
that colleagues live and breathe Sage’s Values.
Culture workshops have been rolled out across the
businessand continue to be available on demand to
teams,so theybetter understand and live the Values in
purposefulaction.
The Board uses several tools to monitor culture, listen
tocolleagues and act on what they say. The table on the
nextpage highlights some of the tools and key metrics
ituses to monitor the culture at Sage. These tools are
supplemented by acomprehensive listening strategy across
the colleague lifecycle from onboarding, through critical key
moments, towhen a colleague decides to leave the business.
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
Scan or click the QR code to
viewSage’s Board Diversity,
Equity and Inclusion Policy
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023104
How the Board monitors culture
Action Link to culture
Board effectiveness
review
The Board reviews its own effectiveness to ensure it is functioning optimally toset the correct
culture at the top of the organisation and demonstrates and promotes the Sage Values and
Behaviours which are in turn promoted by leaders throughout the Group. TheDirectors consider
that there is an inclusive culture at Sage, in line with the Sage Values andBehaviours.
Updates on compliance,
including the annual
review of Sage’s core
compliance policies
Regular compliance-focused updates are presented at Board meetings which allow the
Boardtounderstand potential issues and target effort in the right places. The annual review
ofcore compliance policies, including the Group’s Modern Slavery Act Statement and updates
onwhistleblowing reports, give the Board visibility of the compliance culture at Sage.
Your Voice Pulse Surveys
Sage’s Your Voice Pulse Survey is one of the best ways to gather candid feedback from all areas
ofthe organisation, while helping foster a culture of transparency and accountability. The Pulse
Surveys allow the Board greater insight into colleague sentiment across the Group and provide
direct feedback on areas that can be improved. In March 2023, 87% of Sage colleagues completed
the Pulse Survey, which was the highest-ever response rate. The highest number of comments
wasalso received (21,400), which included thousands of ideas about how to improve both the
colleague and customer experience at Sage. In September 2023, 85% of Sage colleagues
completed the Pulse Survey, with 10,400 comments. Since the survey in March FY23, both the core
metrics measured in the Pulse Survey, eSat and eNPS, have remained the same at 76 (eSat) and +23
(eNPS). There was an increase in scores across seven of the ten questions. AMEA, Central Europe,
Iberia, North America, and Southern Europe all saw an increase in both eSat and eNPS.
Colleague engagement
and representation via
the Board Associate
The Board Associate continues to provide meaningful two-way input between the Board and
Sage colleagues, allowing the Board to understand the culture more clearly. Hearing the
colleague voice in the Boardroom strengthens decision making, in line with the expectations
ofthe Code. You can read more about our current Board Associate’s engagement activities
during FY23 on pages 106 and 107.
Deep dives on
Peoplematters
The Board receives regular updates on the People strategy and matters including succession
planning, recruitment, talent, retention, and the development framework for senior
management. InFY23, Sage Talent Marketplace was established to provide career advancement
opportunities within Sage by finding mentors, accessing career development opportunities
and networking. You can read more about this on pages 26 and 48.
Updates on progress
against Sage’s
DEIstrategy
The Board receives regular updates on Sage’s DEI strategy, which is critical to creating an
inclusive culture. The management DEI Accountability Board is responsible for Sage’s DEI
strategy and is chaired by the CEO. It plays an important role in shaping an inclusive workforce
at Sage and updating the Board on progress. In FY23 Sage was recognised on The Times Top 50
Employers for Gender Equality list, which profiles UK businesses making gender equality partof
their business strategy and recognises Sage’s attempts to target inequities in hiring, retention,
andprogression. You can read more about our DEI initiatives and progress on pages116 to 117.
Board engagement
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 and during site visits. To read more about Board engagement sessions
please see pages 48 and 49.
Informal conversations
with colleagues
Sage colleagues can interact with the CEO and other senior leaders directly to ask questions
during Sage TV Live Q&A sessions. This allows access to senior leaders, transparency on a range
of questions, and promotes an open culture. In FY23, Q&A topics included: the role of AI at Sage;
H1 FY23 results explained; and, an early careers special. Localised opportunities for Q&A are
afforded through functional “All Hands” with the Always Listening survey available to
colleagues 365 days per year to provide feedback on any topic important to them. The CEO Open
Circle enables a group of high-potential colleagues across all functions to meet with the CEO
prior to aBoard meeting. The CEO uses this session to get perspectives on matters that are
discussed at Board meetings. The Open Circle provides insight, feedback, and ideas to the CEO
as a diverse and inclusive sounding board. Membership includes the Board Associate.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 105
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Board Associate
The Board Associate programme was first adopted in
2017and works well as Sage’s chosen alternative method
ofcolleague engagement, as permitted by the Code.
Ourcurrent Board Associate Derek Taylor, VP of Client
Services, was appointed to the role in July 2022. He brings
avaluable perspective toBoardroom discussions due to his
strong business and customer experience. He attends Board
meetings in order torepresent Sage colleagues and highlight
their views. He seeks feedback and input about what Sage
colleagues would like to hear about from the Board and
provides updates to colleagues about the Board’s work.
Derek Taylor
Board Associate
The role of the Board Associate continues
tobe an effective tool to hear the colleague
voice in the Boardroom, which contributes
toBoard discussions and effective
decisionmaking.
“ In FY23, Derek has continued
toevolve the role and focused
onfinding new ways of providing
the Board with colleague insights
and raising topics that colleagues
may want to share.”
During the year, Derek Taylor interviewed members
oftheSage Board in his series of “Behind the Board”
videos.Theinformal discussions presented a way for Sage
colleagues to gain visibility and to become familiar with the
Non-executive Directors. The interviews were recorded and
made available on the Sage intranet for colleagues around
the Group to watch when convenient. The session with
Drummond Hall, Senior Independent Director, provided
afascinating perspective on Sage’s transformation over the
last nine years since Drummond Hall joined the Board and
also covered the opportunities that Sage has moving
forward. Derek Taylor also met with two of Sage’s newest
Non-executive Directors, Maggie Chan Jones and Roisin
Donnelly, to share their perspectives on their first six
monthsof being Board members at Sage.
Derek Taylor has developed a clear approach 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 the papers for
Board meetings, he is able to provide feedback on what he
hears first-hand and providing a two-way communication
channel. This creates greater understanding of the role of
the Board amongst colleagues and enables the Board to gain
greater insight into the Sage culture. In FY24, the Board will
continue to strengthen the role of the Board Associate to
ensure that its remit remains appropriate and meaningful.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023106
Outcome of engagement:
Throughout the year, Derek Taylor has been able to see how the Board operates on a personal level and has provided colleagues
withhis insights by sharing his experiences on the Sage internal website. The Board has also valued the opportunity tohear
the colleague voice in the Boardroom, by Derek Taylor addressing their questions and comments.
Engagement activities throughout FY23: Derek Taylor has participated in Board discussions by bringing his
voice into the Boardroom and provided colleagues with his insights by sharing his experience through various
internal platforms. A summary of his engagement activities for FY23 is set out below:
November • Board meeting in London
February • Board meeting in Newcastle
• AGM and colleague engagement sessions
May • Board meeting in London
• Interview with Drummond Hall
• Visit to Sage Austin office to attend ManagementOffsite meeting
• Meeting with Brightpearl team
June • Colleague engagement session in Atlanta offices
July • Board meeting and colleague engagement session inParis
• Interview with Maggie Chan Jones and Roisin Donnelly
September • Board meeting and colleague engagement session inAtlanta
Additional InformationFinancial Statements
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 107
Governance ReportStrategic Report
Board evaluation
Board evaluation process
Each year the Board undertakes a rigorous review of its
ownperformance and effectiveness in accordance with the
guidance set out in the Code. In FY23, the Board carried out
an internal evaluation process using an online evaluation
tool provided by Independent Audit Limited. The objective
was to provide an assessment of the Board’s effectiveness
and governance, including the effectiveness of the Chair, its
Committees and individual Directors. The evaluation gives
the Board an opportunity to reflect and consider key areas
offocus for the year ahead. The evaluation concluded that
the Board, its Committees, the Chair, and the Non-executive
Directors continue to operate effectively. The Chair,
alongside the Company Secretary, will support the
implementation of thekey actions identified for FY24.
The Board agreed that the FY23
internal evaluation would be led by the
Chair and supported by the Company
Secretary, using the online evaluation
tool provided by Independent Audit
Limited, as was the case in the FY20
and FY21 internal evaluations.
(Independent Audit Limited does not
have any additional connection with
the Group or any individual Director).
The Chair and the Company Secretary
agreed thebroad scope of the review
and atailored Board questionnaire was
compiled on similar topics retained
from previous years, in order to monitor
progress against them since the last
internal review.
The evaluation was conducted
as follows:
• All Directors completed the tailored
online questionnaire addressing key
Board matters, including workings
ofthe Board, Board strategy and
internal controls, composition,
diversity, and how effectively
members worked together to achieve
objectives. Inaddition, there were
further questionnaires covering each
of the Board Committees, the Chair’s
performance and other Directors’
individual performance. The
Company Secretary and a selection
of regular meeting attendees were
also invited to respond.
• The respondents rated questions
ona sliding scale score and were
encouraged to provide additional
open feedback in comment boxes.
The findings were analysed and
compiled into detailed reports
withkey themes identified.
The Chair presented the output from
the FY23 evaluation at the September
Board meeting and feedback on each
Committee was discussed at each
Committee meeting. The Chair also
met with each Director individually
todiscuss their performance. The
performance review for the Chair was
led by the Senior Independent Director
without the Chair’s participation and
feedback was then shared with him.
The Board considered the key findings
from the evaluation process and agreed
the key areas of focus for FY24. The
findings are outlined opposite. Progress
against the key areas of focus will be
reported in the FY24 Annual Report.
Stage 1 Stage 2 Stage 3
Board evaluation cycle
FY23 Board evaluation
Evaluation of Chair’s performance
The evaluation of the Chair was highly positive, with
Board members reflecting that he excels in his role and
displays allthe desired skills and behaviours of a very
strong, experienced, inclusive and competent Chair
FY21
Internally facilitated evaluation led by the
Chairandsupported by the Company Secretary
FY23
Internally facilitated evaluation led by the
Chairandsupported by the Company Secretary
FY22
Externally facilitated evaluation carried out by
Independent Board Evaluation (IBE) (which has
noother connection with the Group or any
individualDirector)
Corporate governance report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023108
Key areas of focus identified in
FY22 external Board evaluation
FY23 Board evaluation key observations FY24 areas of focus
Progress made in FY23
• Succession planning will continue to be an area of priority
for the Board, with focus on exposure to the talent pipeline
forthe Non-executive Directors
• Continue to focus on how a high performance, high
productivity culture is being fostered within Sage
• Continue to focus on execution of the Sage Network strategy
• Keep focus on management of risks around data ethics and
data usage within the AI space
• Keep visibility of emerging risks, opportunities, and trends
specific to Sage and the industry, developments and
potential disrupters to Sage’s business
• Maintain focus on the competitor landscape and
understanding of Sage’s performance against its competitors
• Enhance understanding of customer experience, sentiment
and insight
• Continue to monitor return on investment of acquisitions
• Maintain a commitment to ongoing learning and
development opportunities as a Board
• Deep dive sessions held on key business areas, including
cyber security, ESG and marketing
• Non-executive Director induction programme
strengthenedwith positive feedback received from the
newNon-executive Directors
• Market sentiment updates from Sage’s brokers were provided
to the Board during the year
• Greater time scheduled for Board engagement activities
while on trips and in between Board and Committee meetings
• White space time was also built into the agenda to allow for
open discussion and to give Board colleagues time with
eachother
• The Board’s mix of skills, experience, and knowledge was
enhanced with the addition of two new Non-executive
Directors
• Non-executive Directors held Senior Independent Director
succession discussions
• Succession reviews were held for key Executive Leadership
Team roles
• Non-executive Directors held one-on-one mentoring
sessionswith colleagues
• Time was dedicated at Board meetings to deep dive on the
talent pipelines for Executive Leadership Team roles and to
understand Sage’s approach to talent development and
progression, both at entry level and senior roles
• Colleague lunches and connect sessions were held with
high-potential colleague
• The Board functions well and works effectively to achieve
itsobjectives
• The Board has a good line of sight into the business, with
information received at the right time to allow effective
decision making
• The Board considers that there is an inclusive culture at
Sage, in line with the Sage Values and Behaviours
• The ability to understand and mitigate key issues works well,
with the Board objectives noted as a particular strength,
consistent with the responses in previous years
• The Chair and individual Directors are performing well
• Continue to focus the Board’s time on overseeing execution
of the Group’s strategic priorities. Remaining focused on
risk management and continuing to enhance understanding
of external and emerging risks. Maintaining focus on Sage’s
competitive performance
• Strengthening aspects of the Non-executive Director
induction programme and creating ongoing education
opportunities for Board Directors on evolving technical
areas (such as climate change regulation). Providing more
opportunities to hear from non-Sage experts
• Facilitating 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
Additional InformationFinancial Statements
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 109
Governance ReportStrategic Report
Nomination Committee
Andrew Duff
Chair of the Nomination Committee
Committee purpose and responsibilities
The Committee (the “Committee”) is accountable for
reviewing the structure, size, and composition of the
Board, and ensuring that the Board and its Committees
have the most suitable 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 objective criteria.
The Committee also provides oversight on
successionplanning activities of senior management.
The Committee isresponsible for ensuring that
acomprehensive induction programme is delivered on
the appointment of a new Non-executive Director and
leads the annual evaluation process of the Board.
Other Nomination Committee members
Dr John Bates
Drummond Hall
Corporate governance report continued
Allocation of time
Board and Board Committee
Composition 30%
Corporate governance 20%
Succession planning 33%
Diversity, equity and
inclusion 17%
“ During the year, we were pleased
to announce the appointments
ofMaggie Chan Jones and Roisin
Donnelly in December 2022 and
February 2023, respectively.
Theyhave both been very strong
additions to the Board.”
Annette Court
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023110
Dear shareholder,
I am pleased to introduce the report of the Nomination
Committee, which sets out the role of the Committee
anditswork during the year.
As I set out in my introduction to governance on page 86,
theNomination Committee supported the Board with
monitoring the composition of the Board and its
Committees, in ensuring that appropriate attention is
givento succession planning activities of the Board and
setting the tone from the top on all aspects of diversity,
equity, and inclusion. During the year, we were pleased
toannounce the appointments of Maggie Chan Jones and
Roisin Donnelly, who joined us, in December 2022 and
February 2023, respectively. They have both been very
strongadditions tothe Board, bringing in diverse thoughts,
experience, alternative perspectives, and complimentary
experience tothe Board and its discussions.
Following their appointments, Maggie and Roisin each
completed an extensive induction programme, designed to
help them get to grips with the role and responsibilities of
aNon-executive Director at Sage, enabling them to provide
an effective and constructive challenge to the Board and
develop a thorough understanding of the Sage business.
In February 2023, the Committee recommended the
appointment of Roisin to the Remuneration Committee
witheffect from March 2023, given her wide experience
onremuneration committees in other non-executive
roles.TheCommittee was also pleased to recommend
theappointment of Maggie as the ESG Non-executive
Director, also with effect from March 2023. In making
itsrecommendation, the Committee was mindful of her
personal passion for inclusivity, advancing gender
diversity,and wider ESG matters, which strongly resonates
with Sage’s purpose and anumber of the objectives set
outinour ESGstrategy.
With Drummond’s retirement from the Board scheduled
atthe end of December 2023, the Committee has also been
focused on succession planning for the Senior Independent
Director role. An internal search for a new Senior Independent
Director was initiated by the Nomination Committee and as
Chair, I consulted with all Board members to understand
views on potential candidates. Following athorough internal
process, in September the Committee was delighted to
recommend to the Board the appointment ofAnnette Court
as Senior Independent Director with effect from 1 January
2024. Annette’s other significant external commitments,
independence, expertise, and personal attributes were all
carefully considered by the Committee. As previously
announced, Annette had also been appointed to
theNomination Committee with effect from March 2023,
noting her considerable understanding of the Sage business,
culture, and workforce, but recused herself from Committee
discussions in relation to recommending her appointment
tothe Senior Independent Director role.
I am pleased to confirm that with the appointment of
Annetteas Senior Independent Director, we are on track
from1 January 2024 to meet the target set by the FTSE
Women Leaders Review and FCA’s Listing Rules to have at
least one of the senior board positions (Chair, CEO, CFO, or
Senior Independent Director) held by a woman. We are also
cognisant of the target that at least 40% of the Board should
be women and we will also meet this target when Drummond
steps down from the Board in December 2023. We have
already met the target set by the Parker Review and the
FCA’sListing Rules for there to be at least one Board
memberfrom a minority ethnic background.
I am incredibly grateful to Drummond for his significant
contribution to the Board and Nomination Committee
throughout the length of his tenure and for the great
insightshe has brought to the workings of the Board and
theCommittee.
This year, the Committee has also continued to spend
timeon succession planning activities for our Executive
Leadership Team and senior management to ensure that
wecontinue to invest and develop our diverse pool of
high-potential talent to ensure continuity in our ability to
effectively operate across these senior leadership levels.
Following an internally facilitated effectiveness review this
year, I am pleased to report that the process demonstrated
that the Committee continues to operate effectively.
Further information on the outcome of the evaluation
can be found on pages 108 and 109.
Andrew Duff
Nomination Committee Chair
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 111
Financial Statements Additional InformationGovernance ReportStrategic Report
Board and Board Committee composition
The Committee is comprised of three independent
Non-executive Directors, Annette Court, Drummond Hall,
andDrJohn Bates and our Non-executive Chair, Andrew Duff,
who Chairs the Committee.
Details of the skills and experience of the Committee
members can be found in their biographies on pages 88
and89.
The Committee held three scheduled meetings during the
year, in line with its Terms of Reference. Details of individual
attendance at scheduled meetings are set out on page 97.
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 new Non-executive and
Executive Directors, 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 also considered before
any recommendation is made to the Board.
With contribution from the Board, the 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. This led to the Committee’s
recommendation to the Board to appoint RoisinDonnelly as
a Non-executive Director. Lygon Group, anexternal executive
search firm (with no other connection to the Company or any
individual Director), was instructed toassist with the search.
The Committee initiated a second search process in August
2022 providing Heidrick & Struggles (another external
executive search firm with no other connection to the
Company or any individual Director) with adetailed role
profile including the skills, personal attributes, and
experience being sought in this additional new Non-
executive Director appointment. The Committee carefully
considered the list of candidates provided by Heidrick &
Struggles and concluded, on balance, that a further search
should be carried out. The Committee initiated afurther
search process with Lygon Group and again shared the
detailed profile prepared for the role. Lygon Group presented
a diverse list of potential candidates and upon positive
feedback received from the Committee and the Board and
following consideration of Maggie Chan Jones’
independence and time commitments, the Committee
recommended her appointment to the Board as a Non-
executive Director. Further information on this process
canbe found on page 116.
Maggie Chan Jones and Roisin Donnelly were appointed to
the Board in December 2022 and February 2023, respectively,
and undertook a full Board induction programme following
their appointments. Sage’s Non-executive Director induction
programme follows a six-to-nine months programme of
tailored meetings and events, designed to help new Non-
executive Directors to get to grips with their role and
responsibilities as swiftly as possible and help them make a
valuable contribution to the Board. The induction programme
aims to give Non-executive Directors the tools and information
they need in order to gain an in-depth understanding of Sage’s
business, so that they can provide effective challenge and
bring their skills to the Boardroom.
Following the Non-executive Director appointments,
inFebruary 2023 the Committee led a review of the
membership of the Board’s Committees. Board Committee
membership is reviewed periodically to maintain an
optimum combination of skills, experience, knowledge,
anddiversity toenable effective governance and decision
making. The Committee recommended to the Board the
appointment of Roisin Donnelly to the Remuneration
Committee with effect from March 2023, given the wide
experience on remuneration committees that she brings
tothe Board from her other non-executive director roles.
Additionally, the Committee recommended that Maggie Chan
Jones be appointed as Sage’s ESG Non-executive Director
witheffect from March 2023, given her personal passion for
inclusivity, advancing gender diversity, and removing barriers
which strongly aligns with Sage’s purpose and a number of
objectives set out in our Society and Sustainability strategy.
The role of the ESG Non-executive Director is not an official
committee role; however, it was introduced in February 2022 to
further enhance the Board’s reporting structures around ESG,
so that the appointee could attend the management
Sustainability and Society Committee once or twice a year,
with an agenda item reporting back to the Board at the next
relevant Board meeting. Irana Wasti was previously appointed
to the role before she stepped down from the Board (in July
2022).
As part of its review of Committee membership, the
Committee also recommended to the Board the appointment
of Annette Court to the Nomination Committee effective
March 2023. Annette Court, through her role as Chair of the
Remuneration Committee, has considerable understanding
of the Sage business and its links to culture and workforce.
This will further enhance and broaden the knowledge of
theCommittee and assist in its work of deepening Board
capabilities and, in turn, Board education and succession
planning activities.
As noted in the Chair’s introduction to governance and
theChair’s introduction to the Nomination Committee
Corporate governance report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023112
Report, Annette Court was announced as Sage’s new Senior
Independent Director (SID) with effect from 1 January 2024,
ahead of Drummond Hall stepping down from the Board in
December 2023.
After a formal and thorough internal process to consider
thecandidates for the role, the Committee recommended
Annette Court’s appointment inSeptember 2023. In making
its recommendation, the Committee was mindful of what
Annette Court wouldbring to the role including her
understanding of the Sage business, experience as Chair
ofthe Remuneration Committee, contribution as a member
to the Audit and Riskand Nomination Committees, and her
expertise and personal attributes. The Committee also noted
that her appointment would support the Board’s commitment
to diversity and meeting the FCA’s Listing Rules target to
have atleast one of the senior board positions (Chair, CEO,
CFO, orSID) held by a woman.
Succession planning for the Executive
Leadership Team and senior management
In order to ensure that there are suitable succession plans
inplace for the Executive Leadership Team and senior
management, the Committee maintains visibility of a wide
range of colleagues who have been identified as potential
succession candidates in the short, medium, and long term.
Ensuring that Sage maintains a diverse internal pool of
talent and continues to be able to attract and retain skilled
people and develop high-potential talent is a key focus for
the Board. The Board and Committee are committed to
ensuring that high-potential colleagues do not only have
theopportunity to present at meetings, but also have the
opportunity to participate in initiatives outside the
Boardroom (such as Board engagement events orNon-
executive Director mentoring), which offer opportunities
forfurther engagement and interaction with Board and
Committee members.
In FY23, a number of Executive Leadership Team members
and the senior management presented to members of the
Board and its Committees on topics including Sage’s
strategic priorities, financials, investor relations, cyber
security, 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 in the
future, helping the Board when considering the depth of
Sage’s succession plans and identifying development needs
for high-potential individuals. Information on the gender
balance of those in senior management and their direct
reports can be found on page 29.
Committee effectiveness and evaluation
The Board is committed to maintaining the highest
standards and conducts a formal and rigorous evaluation
ofits performance, including the performance of its
Committees, individual Directors, and the Chair annually.
Inaccordance with the provisions of the Code, the Board
alsoconducts an externally facilitated evaluation at least
once every three years. This year the evaluation was internally
facilitated. The outcomes of the evaluation of the Committee
were presented and considered in September 2023.
The overall conclusion from this year’s evaluation was that
the Committee continues to work effectively and is operating
appropriately in line with its Terms of Reference.
Further information on the evaluation of the Board,
theCommittees and individual Directors, as well as
full details on the internal evaluation process, outcome,
and next steps is available on pages 108 and 109.
Diversity, equity, and inclusion
In FY21, the Board adopted the Board DEI 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www.sage.com. The policy
acknowledges the importance of diversity in its broadest
sense, as a key element of Board effectiveness, and that the
Board is fully committed to meeting the targets as set out by
the FTSE Women Leaders Review and the FCA’s Listing Rules,
and the recommendations of the Parker Review. Further
information on this can be found on page 116.
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 DEI.
The purpose of the Board DEI Policy is to set out the approach
to DEI 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 providing the right
blend of perspectives and insights required to meet our
purpose and strategy.
In FY23, the Committee and Board conducted an annual
review of the Board DEI Policy. The policy was evolved further
to include the target to meet Sage’s Global Gender Goal and
to include factors such asrace, ethnicity, sexual orientation,
disability, and socio-economic background in its coverage
to reflect the Board’s diversity commitments.
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.
Scan or click the QR code
fortheBoard DEI policy
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 113
Financial Statements Additional InformationGovernance ReportStrategic Report
* The Board composition data reflects the information as at 30 September 2023. Please refer to the notes on page 115 for information on Board gender balance
after Drummond Hall steps down from the Board at the end of December 2023.
Directors’ key skills
andexperience
Andrew
Duff
Sangeeta
Anand
Dr John
Bates
Jonathan
Bewes
Maggie
Chan Jones
Annette
Court
Roisin
Donnelly
Drummond
Hall
Derek
Harding
Steve
Hare
Jonathan
Howell
Executive and strategic leadership
Financial acumen
Technology and innovation
Remuneration and people
Audit and risk
Sustainability and environment
Strategy and M&A
Customer-centricity
International experience
Corporate governance report continued
Nomination Committee
Board composition*
40 to 50 2
50 to 60 2
60 to 70 6
Above 70 1
Less than a year 2
1 to 3 years 2
3 to 6 years 4
Over 6 years 3
Age
Length of tenure
Female 4
Male 7
Gender
White 9
Asian 2
Ethnicity
British 9
American 2
Nationality
Nationality
Gender
Ethnicity
Age
Length of tenure
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023114
Board and executive management gender
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO, SID
and Chair)
Number in
executive
management
1
Percentage of
executive
management
1
Men 7 64% 4 6 60%
Women 4 36%
2
–
3
4 40%
Not specified/
prefer not to say
– – – – –
Board and executive management ethnicity
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board (Chair, CEO,
CFO, and SID)
Number in
executive
management
1
Percentage of
executive
management
1
White British or other
White (including
minority White groups)
9 82% 4 8 80%
Mixed/Multiple
ethnic groups
– – – 1 10%
Asian/Asian British 2 18% – – 0%
Black/African/
Caribbean/Black British
– – – – 0%
Other ethnic group,
including Arab
– – – 1 10%
Not specified/
prefer not to say
– – – – –
below is as at 30 September 2023 and there have beenno
changes in the period between then and the date ofthis
report. Footnotes 2 and 3 provide information on changes
from the time Drummond Hall steps down from the Board
atthe end of December 2023.
Further information on gender balance of those in senior
management and their direct reports can be found on page29.
Board and executive management diversity
The data contained in the tables on this page was collected
as part of the annual declaration process, whereby the Board
and the Executive Leadership Team confirmed the details
through the internal DEI dashboard, or through self-
declaration. The data is used for statistical reporting
purposes and is provided with consent. The data in the tables
1. As per the FCA’s Listing Rules, executive management within Sage includes the Executive Leadership Team, including the Company Secretary.
2. When Drummond Hall steps down from the Board at the end of December 2023, the Board will be 40% female.
3. With effect from 1 January 2024, Annette Court will be the Senior Independent Director.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 115
Financial Statements Additional InformationGovernance ReportStrategic Report
Board policy
Board DEI Policy objectives Implementation and progress against 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
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, race, and ethnicity.
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
The Board and the Committee seek a wide and diverse list of candidates for Board
appointments, including in terms of gender, social (background), race, sexual orientation,
disability, socio-economic 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 new Non-executive Directors, which resulted in the
appointments of Maggie Chan Jones and Roisin Donnelly in December 2022 and February
2023, respectively. This approach was further implemented during the internal search
process to appoint a new Senior Independent Director in FY23.
Meet the targets of the Parker Review
andFTSE Women Leaders Review, the
FCA’s Listing Rules, and our internal
Global Gender Goal as far as possible,
recognising that there may be temporary
periods when this is not possible; such
periods should be minimised
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 by2024 and are
satisfied that the Board continues to meet this recommendation. Details of Board
composition can be found on page 114. In line with the latest Parker Review recommendations,
Sage has set a target tomeet by December 2027, for 20% of senior management (which in
this context means theExecutive Leadership Team plus their direct reports) to be people
who self-identify asbeing from a historically underrepresented race or ethnic group (from
a position of 11% at the end of FY23). This is further aligned with the ESG DEI target within
the FY24 Performance Share Plan for Executive Leadership Team members.
We have remained committed to minimising the period for which our gender diversity
targets set out in our Board DEI Policy are not met. For the end of FY23 our gender diversity
percentage is at 36%; however, when Drummond Hall steps down from the Board in
December 2023, at least 40% of the Board will be female, meaning that Sage will meet
thetarget for Board gender balance set by the FCA’s Listing Rules.
Following the announcement that Annette Court will become Senior Independent Director
effective 1 January 2024, Sage is also on track to meet the target set by the FCA’s Listing Rules
and by the FTSE Women Leaders Review to have oneof the senior Board positions (Chair, CEO,
CFO, or SID) held by a woman.
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
During FY23, the Board completed the process of appointing two new Non-Executive
Directors, Maggie Chan Jones and Roisin Donnelly. Further information on the appointment
process is available on page 112. The Lygon Group and Heidrick & Struggles are executive
search firms (with no other connection to the Company or any individual Director) 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.
Further information on our Board and Board Committee composition can be found on
pages88 and 89.
Ensure advertisements, role descriptions
and long lists, reflect the Board’s diversity
commitments in respect of gender, race,
ethnicity, and the wider aspects of
diversity, as set out in this policy
The role briefs provided to each firm reflected the Board’s policy of consideringa diverse
pool of candidates with different backgrounds.
Corporate governance report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023116
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 FY23 the Board was pleased to see progress against the following targets:
Group-wide Initiative Progress in FY23 Target
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
During FY23, participation grew to 55% from 43% at the start ofFY23. Participation
target of 65%
globally by the
end of FY24
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
At the start of FY23 the Company had 14% participation and reached
18%by the end of FY23.
Three-year
Colleague
Success Network
participation
target of 20%
globally by the
end of FY24
Sage Group gender diversity target.
Thistarget is about driving diversity
atalllevels of the organisation
The Company has made some improvement during FY23, however,
recognises there is more to be done on this very important topic.
Currently, 34% of leadership teams are meeting this target, from
astarting point of 33% in FY22. Sage’s FY24 approach is to work with
individual teams to understand their representation data, skills
challenges, hiring opportunities, progression opportunities,
successionpipelines, engagement, onboarding and offboarding.
The expected outcome over the next year is that the learnings from
theactivities will feed into best practice playbooks that can be utilised
by teams all over the world to support the achievement of the goal.
Target of no
more than 60%
of any one
gender, in any
leadership
team, anywhere
at Sage, bythe
end of FY26
Other Group-wide Initiatives
Allyship training The Company’s VP of DEI and Wellbeing ran allyship sessions in every
quarter of FY23 to frame the business case for DEI, spotlight our goals,
and clarify where the accountability sits. All members of the Executive
Leadership Team received this training.
Executive
Leadership
Team and above
‘Free to Focus’ workplace
adjustmentsprocess
Recommendations from our external global partner Business Disability
Forum and feedback from colleagues supported us to redesign and
simplify our workplace adjustment process. We have provided a single
online hub, published office accessibility information, implemented
anew ergonomics tool for self-service, centralised budgets, and
embedded all of this with learning and regular communications.
Using a staged regional roll out, the new experience is now available
inthe US, Canada, Spain, and Portugal.
The next phase
will see this
rolled out in the
UK & Ireland
during FY24
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 117
Financial Statements Additional InformationGovernance ReportStrategic Report
Audit and Risk Committee
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 FY23. 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 macroeconomic outlook may
impact the Group’s performance, risks and controls and
considers any resulting impact on financial reporting.
Ernst and Young LLP (EY) has been Sage’s external
auditorsince 2015 and during FY23 a decision was made
totender the external audit for the financial year ending
30 September 2025, in line with regulation. Consequently,
one of the key activities of the Committee during the year
was the audit tender, withasignificant proportion of time
devoted to this process.Following a very comprehensive,
high quality andcompetitive tender process, the Committee
has recommended the appointment of KPMG LLP (KPMG)
asauditor, subject to approval at the 2025 Annual General
Meeting (AGM) and an updated independence assessment.
Jonathan Bewes
Chair of the Audit and Risk Committee
Other Audit and Risk Committee members
Sangeeta Anand
Annette Court
Drummond Hall Derek Harding
Corporate governance report continued
“ The Committee continues to fulfil
an important role in governing
Sage’s risk management and
internal controls, financial and
ESG reporting, internal and
external audit. During the year,
the Committee led a competitive
external audit tender process
towhich a significant amount
oftime was devoted.”
Allocation of time
Financial reporting
29%
Risk management and
internal control 19%
Internal audit 13%
External audit 20%
Incident management
and whistleblowing 7%
Other matters 12%
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023118
Activities and evaluation
During the year, the Committee oversaw the Group’s
financial and ESG reporting, risk management and internal
control procedures and the work of Sage Assurance (internal
audit) and the external auditors. The Committee has also led
a comprehensive external audit tender process during the
year. Fuller details of the Committee’s activities are set
outbelow.
During the year, the Committee’s performance was subject
toan internal evaluation with responses being received
fromthe Committee’s standing members as well as other
regular attendees. The internal evaluation, shared with both
the Chair of the Board and the Chair of the Committee,
supported the performance and effectiveness of
theCommittee.
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, internal
controlsand risk management (including risk appetite,
tolerance and strategy), whistleblowing, anti-bribery and
fraud, as well as the work of Sage Assurance (internal audit)
and the external auditor. With respect to ESG, the Committee
is responsible for monitoring the integrity, accuracy and
consistency of both ESG and sustainability-related non-
financial disclosures.
These responsibilities are defined in the Committee’s Terms
of Reference, which were reviewed and approved by the
Committee and the Board in May 2023.
Composition
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
these requirements are 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 these
requirements 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.
There have been no changes in the composition of the
Committee during the year.
Activities during the year
The Committee held four scheduled meetings during the
year in line with its Terms of Reference. Details of individual
attendance at scheduled meetings are set out on page 97.
Regular attendees by invitation include the Chair of the
Board, the Chief Executive Officer, the Chief Financial
Officer, the General Counsel and Company Secretary, the
EVPGroup Financial Controller, the EVP Chief Risk Officer
and the VP Assurance. All Committee meetings are attended
by the external auditor, EY. By invitation, other members of
management are invited to present.
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 Committee’s standing
attendees, as well as the external auditor.
Key activities during the year included a comprehensive
external audit tender process, as well as ongoing monitoring
of the Group’s risks, controls and operations. 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, including
going concern, 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;
• 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;
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 119
Financial Statements Additional InformationGovernance ReportStrategic Report
Corporate governance report continued
• 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 reports on internal control
andthe implementation of remedial management
actions, to address issues identified and make internal
control improvements;
• 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;
• Updates on the legal and regulatory frameworks relevant
to the Committee’s areas of responsibility;
• A joint update from the EVP Group Financial Controller
and the EVP Chief Risk Officer with respect to the Group’s
viability statement, including detail behind the risk
scenarios identified and the quantification of their
potential impact;
• Updates from the EVP Group Financial Controller on the
Group’s response and ongoing activities related to the
UK’s proposed audit and corporate governance reforms,
with a focus on the Group’s readiness for adoption,
notwithstanding the UK government’s October 2023
withdrawal of draft corporate reporting regulations;
• Updates from the EVP Sustainability and Foundation on
Sage’s Net Zero transition strategy and further progress
with respect to the Task Force on Climate-Related
Financial Disclosure (TCFD), as well as other ESG
relatedreporting matters.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023120
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:
Significant reporting and accounting matters Response and challenge Cross reference
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 judgment 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judgmental.
• 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.
• During the year, the Committee received an update on
theGroup’s strategy for creating value from the Sage
Network. More specifically, this update included a review
of the current reporting practices for consumption
(orusage) based billing arrangements, as well as the
appropriateness of the related disclosures provided
inthe financial statements.
• EY provided an update to the Committee on the nature,
extent and findings from its procedures over revenue
recognition during the year.
See note 3.1 in
the financial
statements on
pages 198 to 200.
Carrying value of goodwill
Given the Group’s goodwill balance of
£2,245m 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.
During the year, the Group acquired
Spherics and Corecon, which have
collectively increased goodwill by £11m.
Other movements during the year include
the finalisation of the purchase price
accounting for the Lockstep acquisition
and foreign exchange movements.
• 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 (including the application of inflation), with
consideration to their appropriateness given the
changesin the macro-economic environment.
• Where appropriate, the Committee acknowledged the
useof external specialists 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 given the
performance of the Iberia business over recent years,
including its future plans, the sensitivity disclosure
would be removed given that no reasonably possible
changes may result in an impairment being recognised.
This decision is also supported by the extent of available
headroom in the impairment valuation model.
• The Committee considered the level at which goodwill is
tested and concluded a consistent approach to the prior
year is appropriate.
See note 6.1 in
the financial
statements on
pages 212 to 214.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 121
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Corporate governance report continued
Significant reporting and accounting matters Response and challenge Cross reference
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.
• 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 over the forecast period.
• In reviewing the Group’s going concern and viability
assessment, the Committee noted that following the
refinancing activities undertaken during the year,
theGroup is no longer subject to financial covenants
underpinning any of its financing arrangements.
• The Committee reviewed the results of management’s
scenario-specific stress testing for both going concern
and viability, as well as reverse stress testing, the result
of 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 over
the forecast period. The results of reverse stress testing
highlighted that such ascenario would only arise
following a highly significant 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.
The Group’s
going concern
and viability
statements can
be found on
pages 164 and
165, and 82 and
83, respectively.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023122
Significant reporting and accounting matters Response and challenge Cross reference
Alternative Performance Measures
(APMs)
The Committee closely monitors
management’s interpretation and
definition of 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.
• 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. This included the decision to
evolve financial reporting in the year by giving greater
emphasis to underlying revenue and profit measures.
Previously, such emphasis was on an organic basis which
adjusted for the impact of acquisitions and disposals.
• 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.
The definition
ofAPMs can be
located in the
glossary on
pages 270
and271.
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 60.
Property restructuring
The Committee received a detailed update
on the Group’s property restructuring
programme which was implemented
during the year. As a result, the Group has
recognised a non-recurring charge of
£32m in the financial statements.
• The Committee understood management’s rationale
forreporting the charge as a non-recurring item.
Management noted that the property restructuring
programme followed a strategic review of the Group’s
property portfolio, which would be completed by the
endof the financial year FY23.
• The Committee further understood that previous
property restructuring exercises were undertaken prior
tothe pandemic and changes in ways of working had led
to the strategic review being performed.
• The Committee challenged the decision to report the
property restructuring plan as a non-recurring item,
including obtaining the view of the external auditor.
Based on the nature and size of the property plan the
committee agreed with the decision to record the plan
asa non-recurring item.
• At each meeting during the year, the Committee was
provided with an update of progress against the
restructuring plan, and received a detailed summary
ofthe accounting treatment applied.
See note 3.6 in
the financial
statements on
pages 205
and206.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 123
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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
Sage Assurance (internal audit) function reporting, via
theVP Assurance, 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;
• At the request of the Committee, the EVP Chief Risk
Officer provided an update in relation to the
management of risks related to AI and ML.
Anupdatewasprovided, acknowledging that this is
adeveloping area, with respect to information from
experts both inside and outside the business, as well
aswider external monitoring. Both AI and ML related
riskswill be reviewed as part of the ongoing review of
principal and operational risks;
• 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, and
broader preparedness for the UK’s proposed audit and
corporate governance reforms, notwithstanding the UK
Government’s subsequent decision inOctober 2023 to
withdraw draft corporate reportingregulations;
• 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 68 to 81.
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:
• The Committee led a competitive and comprehensive
external audit tender process, to which a significant
amount of time was devoted. Further information on
thisprocess is provided below.
• The Committee received a briefing on data privacy,
morespecifically anupdate on General Data Protection
Regulation (GDPR) compliance maturity, a summary ofdata
privacy compliance maturity work in other key geographies
andawider data privacy work insight, aligned to Sage’s
strategic business initiatives, including scaling the Sage
Network, and the development of AI and MLcapabilities.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023124
• The Committee was updated on Sage’s progress towards
its Net Zero transition plan, including the associated
risks and mitigating actions. In addition, the Committee
received an update on the process made with respect to
Sage meeting the key recommendations and disclosures
of the TCFD, including the plan to continue to address
both physical and transitional climate related risks.
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 of the Group.
Additionally, in line with both the requirements of the UK
Corporate Governance and the Institute of Internal Auditors’
(IIA) International Standards for the Professional Practice
ofInternal Auditing (IPPF), the effectiveness of Sage
Assurance is reviewed by the Committee on an annual basis.
This issupplemented by an independent external quality
assessment (EQA) at least once every five years, with the
lastEQA completed by PwC in August 2021. The next EQA is
currently planned for FY25. Feedback from the 2021 EQA was
positive and noted conformance with the IPPF, together with
the IIA Code of Ethics and Code of Practice, a position which
was reaffirmed by this year’s annual internal effectiveness
assessment. This review was presented and discussed at
theSeptember 2023 Committee meeting, at which the
Committee endorsed these conclusions.
The Committee reviews and approves 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 coverage of
principal risks and the impact of business changes, with
nosignificant or adverse impact on the business’ internal
control environment identified. Operationally, following
emergence from the Covid-19 pandemic in the prior period,
the Assurance function has now returned to a fully hybrid
model, with an increased focus on on-site delivery
encompassing visits to key locations in the UK, North
America, South Africa, Southern and Central Europe, and
Asia-Pacific.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 125
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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 re-
appointed. 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 nine years since their initial
appointment in 2015. Kathryn Barrow was appointed aslead
audit partner in 2020 and will continue inher role forthe
next financial year.
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
FY23 which was presented to the Committee at its
Maymeeting;
• The findings published by the Financial Reporting
Council (FRC) into 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, including professional scepticism, and
perceptiveness of EY in its handling of key accounting
and audit judgements; and
• The interaction between management and the auditor.
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
various stakeholders across 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 the 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 Group’s 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 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 SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023126
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2023, the ratio of non-audit fees to audit fee was 10%
(2022: 10%), 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 re-appointment
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 re-appoint EYbe proposed at the 2024
AGM,forthe yearending30 September 2024, which
theBoardhasaccepted and endorsed.
External audit tender
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 following EY’s initial appointment
asexternal auditor in 2015, Sage conducted a comprehensive
and competitive tender process during the year, for the
external audit for the financial year ending 30 September
2025. This timing was chosen to provide sufficient time to
allow for an orderly transition in the event of a change
inauditor.
The audit tender process was led by the Chair of the Audit
and Risk Committee, supported by a Steering Committee
which comprised Jonathan Bewes (Chair of the Audit and Risk
Committee), DerekHarding (a member of the Audit and Risk
Committee), the Chief Financial Officer and the EVP Group
Financial Controller. Following the Committee’s May meeting,
three firms were formally invited to participate in the audit
tender process. This included two Big Four firms, including
EY, and one challenger audit firm. Two other Big Four firms
were not invited to participate due to conflicts of interest.
May
Timeline finalised
bythe Committee
Invitations to tender
issued to three audit
firms, including one
challenger firm
Invited audit firms
confirmed their
independence and that
they had no potential
conflict of interest
Steering Committee
metwith the
threeaudit firms
June
Steering Committee
decided to proceed
with two audit firms
RFP was issued to
theaudit firms and
anonline data room
was opened
Clear assessment
criteria were
established and
communicated
totheaudit firms
August
Follow up meetings
were held between the
audit firms and the
Steering Committee
July
Both audit firms met
with management
(including key
auditstakeholders)
through a series of
meetings, which were
internallyscored
Management were
invited by both audit
firms to attend an
on-site technology
presentation
Responses to
atechnical challenge
were submitted
September
Proposal documents
were submitted
Final presentations
were delivered to the
Steering Committee
The Committee
concluded the process,
presenting both audit
firms to the Board for
consideration of
awarding the tender,
recommending the
appointment of KPMG
Audit Tender Timeline 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 127
Financial Statements Additional InformationGovernance ReportStrategic Report
Corporate governance report continued
All three firms accepted the invitation to participate in the
audit tender, and confirmed their independence. Following
this, the Steering Committee met with the proposed lead
partners from each of the firms. Atthis stage, the decision
was made to proceed with two audit firms. Subsequently,
aRequest for Proposal (RFP) was issued to both firms and
theformal process commenced, which included:
• A formal meeting between members of both firms
(including senior team members) and the
steeringcommittee;
• Several management meetings allowing both firms
access to key audit stakeholders in the business;
• Access to key information through an online data room;
• A written technical challenge to ascertain the firm’s
experience in making judgemental decisions similar
toSage’s key accounting and reporting judgments;
• A thorough review of the Financial Reporting Council’s
(FRC) Annual Audit Quality Inspection Results;
• Meetings to better understand the use of technology,
data and analytics in the audit approach, which included
on-site visits to both firms; and
• A submission of a written document and final
presentation to the steering committee.
The non-discriminatory selection criteria against which
both firms were assessed included the following:
• Understanding of Sage as a business and the industry
within which it operates
• Quality of the audit team and personnel
• Appropriateness of the audit approach
• Audit service, including reporting and deliverables
• Audit quality
• Sustainability (own firm sustainability and the
sustainability related audit approach)
Having considered the selection criteria, as well as
inputfrom other members of management and the firms’
performance at the final presentation, the Committee
presented both audit firms to the Board for consideration.
The Committee recommended to the Board that KPMG be
appointed as the Group’s external auditor for the financial
year ending 30 September 2025, on the basis of KPMG’s
strong performance against the selection criteria, input
andobservations from the Steering Committee and the
presentations made. The Group’s Auditor Independence
Policy, noted above will be applied to KPMG for the year
ending FY24 to ensure a robust cooling-in period.
Evaluation of the performance
oftheCommittee
The evaluation of the Committee for the year was completed
as part of the 2023 Board evaluation process. An explanation
of how this process was conducted, the conclusions arising
from it and the action items identified are set out on pages
108 and 109. 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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023128
Remuneration Committee
Annette Court
Chair of the Remuneration Committee
Directors’ Remuneration Report
Composition of the Committee
The Remuneration Committee is composed solely ofindependent
Non-executive Directors, Drummond Hall, Dr John Bates, and Roisin
Donnelly, 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 88 and 89.
Remuneration updates for Executive Directors in FY24 page 130
Our remuneration principles page 132
Remuneration Committee governance page 138
Remuneration Policy 2022 page 139
Directors’ Annual Remuneration Report page 144
Statement of implementation of
Remuneration Policyin the following financial year page 155
“ During a year of continued external
volatility, wehave delivered a robust
set of 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.”
Other Remuneration Committee members
Dr John BatesDrummond Hall
Roisin Donnelly
Additional InformationFinancial Statements
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 129
Governance ReportStrategic Report
Directors’ Remuneration Report continued
Dear shareholder,
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 2023.
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UK Corporate Governance Code 2018, 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:
• The Directors’ Remuneration Policy (the “2022 Policy”)
(pages139 to 143).
• The Directors’ Annual Remuneration Report (pages 144
to163). This section sets out details of how the 2022
Policy was implemented for the year ended 30 September
2023 and how we intend the Policy to apply forthe year
ending 30 September 2024.
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.
• 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.
•
Scan or click the QR code for more
information on the Committee’s
TermsofReference
Context for FY24 remuneration decisions
Sage has delivered “a strong set of results despite
continueduncertainty due to economic volatility and
inflationary pressures”.
The Company has continued to invest in innovation and
growth whilst striving to build every customer experience
with human insight and ingenuity.
Our colleagues have demonstrated resilience and dedication
in delivering on our purpose of knocking down barriers so
everyone can thrive. Colleague engagement has remained
high, with eSat of +76, and support for colleagues during
thistime of continued economic uncertainties has been
ofparamount importance. To facilitate colleague wellbeing,
aglobal Employee Assistance Programme has been rolled
out and, for the second consecutive year, an increased pay
review budget has been deployed with pay review matrices to
ensure that budget is focused on our lowest-paidand highest
-performing colleagues. Sage continues tobe anaccredited
Living Wage Foundation employer. Additionally, Save and
Share, our all-colleague share plan, enables colleagues
tobecome shareholders at all levels across the business;
participants of the plan maturing in2023 realised significant
gains due to share price appreciation over the savings period.
In June 2023, our localised Colleague Share Purchase Plan
(CSPP) launched its first enrolment in the USwith a take-up
rate of 21% of eligible colleagues. Total participation across all
all-colleague plans in 2023 was 33% of eligible colleagues.
In view of the above, the Committee is striving to balance
the need for remuneration to reward high performance and
strategic delivery, remain market competitive and align
tothe external operating environment and UK corporate
governance requirements.
Remuneration updates for
ExecutiveDirectorsin FY24
We are proposing several changes to FY24 remuneration
arrangements, all of which are consistent with the current
Remuneration Policy:
1) CEO remuneration in FY24
Sage has delivered the second successive year of increasing
revenue growth and profitability with strong free cash flow,
growth in the strategically important Sage Business Cloud
penetration, and a progressive dividend. Strong financial
performance has been matched by high share price growth.
Since Steve Hare’s appointment as CEO in 2018 Sage has
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023130
significantly outperformed the FTSE 100 with 98% return
toshareholders compared to 30% return from the FTSE 100
Index, in absolute terms, over £6bn of shareholder value
hasbeen created over this 5-year period and Sage is now a
constituent of the FTSE 50. The historical Group performance
against the FTSE 100 chart onpage 154 also highlights
Sage’s outperformance of theFTSE 100.
As a technology business, Sage must compete in a global
talent market which provides retention and attraction
challenges for talented leaders. We operate across 19
countries and 65% of colleagues are based outside of the UK
and Ireland. In financial terms, 78% of our recurring revenues
are generated outside the UK and Ireland, and 45% of our
recurring revenues come directly from North America. Within
the technology sector therehas been intense competition for
talent, and with digitisation we now also face pressure from
outside our core competitor base. We recognise that whilst
there are no direct UK peers forSage that could inform
benchmarking, the UK market continues to represent an
important reference point from agovernance perspective.
Steve Hare’s remuneration arrangements currently offer a
target and maximum opportunity of around 80% of the FTSE
100 market median. We view this as uncompetitive for a
high-performing CEO ina FTSE 50 technology business with
significant presence inthe US and operating in a US-dominated
industry, where total remuneration levels are significantly
higher than in theUK. In addition, there is ascarcity of
UK-based CEOs qualified to lead a digital business of Sage’s
size and complexity and, at this pivotal stage of Sage’s
growth, retention and stability are of keyimportance.
In order more appropriately to reflect his performance,
experience, and criticality to Sage, and to minimise
retention risks, Steve Hare’s base salary will increase to
£925,000 (9.9%). This will be the first above inflationary
increase in salary since his appointment as CEO in 2018.
1
His
Performance Share Plan (PSP) award will increase from 250%
to 300% of salary (within the existing Policy limit of 300% of
salary) subject to the stretching performance conditions set
out onpages 156 to 158. To further enhance alignment with
shareholders, there will be an accompanying increase in
theCEO’s shareholding requirement from 300% to 350%
ofbasesalary. Whilst these changes do not significantly
close the gap with our US competitors, they bring the CEO’s
remuneration opportunity closer to a UK mid-market
position, which the Committee currently views as an
acceptable position. The longer-term appropriateness of
this market positioning will be considered as part of our
standard triennial Remuneration Policy review in FY24.
2) Base salary increase of 5% for the CFO
We have undertaken our annual review of salaries and
awarded a 5% salary increase for FY24 to the CFO. This
isaligned to our budgeted UK workforce salary increase
forFY24 of 5%.
3) Changes to FY24 performance measures for the
Performance Share Plan
Performance metrics for FY22 and FY23 PSP awards were
aligned with the strategy of creating sustainable value for
our broad base of stakeholders by efficiently growing the
business. As this strategy remains unchanged, we propose
only the following evolutionary changes to the FY24 PSP:
• As indicated in last year’s Remuneration Report, we have
reviewed the financial metrics used in the PSP to ensure
continued close alignment with the business strategy.
The primary financial metric used in FY22 and FY23
PSPawards was growth in Sage Business Cloud (SBC)
penetration. Due to the significant growth achieved in
this metric over the past two years, SBC penetration is
now at a level where any further growth is likely to be
materially slower than in the past. Accordingly, underlying
earnings per share (EPS) will be the main financial metric
for FY24 PSP awards. Targets have been set at an ambitious
level commensurate to the proposed increase in quantum
for the CEO.
• In conjunction with the continued evolution of our
Sustainability and Society strategy, the ESG measures
will include a new metric linked to race and ethnicity
(with targets for this metric aligned with the Parker
Review) and an evolved Tech for Good measure linked to
enabling access to carbon accounting functionality via
Sage suites. This will complement existing ESG metrics
linked to (i) reduction in carbon emissions against
aSBTi-approved Net Zero Plan and (ii) gender diversity.
Full details can be found in our statement of implementation
of the Remuneration Policy in the following financial year
onpages 156 to 158 of this Report and further details in
regard to ourSustainability and Society strategy can be
found on pages 30 to 37 and in the 2023 Sustainability
Report.
The full set of annual bonus and PSP measures and related
targets for FY24 are set out on pages 156 to 158.
Looking forward, we will be engaging with shareholders
during 2024 in a review of our Directors’ Remuneration
Policy in order to ensure remuneration arrangements
continue to support the business over the medium term.
Therevised Policy will be submitted to a binding shareholder
vote at the2025 AGM, when our current Policyexpires.
1. Steve Hare salary since appointment as CEO Nov 2018: £770,000;
Jan2020£785,000 (+1.9%); Jan 2021 £785,000 (-); Jan 2022 £809,000 (+3%);
Jan 2023 £841,500 (+4%).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 131
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
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.
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.
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.
Close alignment of reward
outcomes and value created
for shareholders through
material share participation
for executives; mitigates
against excessive risk-
taking that can arise from
target-based incentive
plans and ensures no
rewardfor failure.
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.
Principles are underpinned by compliance with corporate governance guidelines and specifically with
Provision 40 of the 2018 UK Corporate Governance Code:
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.
Drives focus on
strategy, purpose,
and culture
Market
competitive
Simplicity Aligned with
shareholder
interests
1 2 3 4
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023132
Element of Policy Purpose Implementation in FY24
Base salary
1 2
Enables Sage to attract and retain Executive
Directors of the calibre required to deliver the
Group’s strategy.
CEO: £925,000 (9.9% increase)
CFO: £606,000 (5% increase)
The equivalent average increase for colleagues eligible
foran annual pay award is 5% (in respect of colleagues
based in the UK).
Pension
1 2 3
Provides a competitive post-retirement benefit, in
a way that manages the overall cost to the Company.
10% of base salary for both the CEO and CFO in line with
thepension benefit for the UK wider workforce.
Benefits
2
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.
Annual bonus
1 2 3 4
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.
Maximum 175% of base salary
70% based on Annualised Recurring Revenue (ARR) growth
(with an underlying operating profit margin (UOP)
underpin), 10% on customer-related measureinclusive
ofNet Promoter Score, and 20% based onstrategic goals.
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 of two
years before being released.
Face value of 300% of base salary for the CEO
Face value of225% of base salary for the CFO
50% based on underlying EPS with Return on Capital
Employed (ROCE) underpin, 30% based on relative
shareholder return performance, and20% based on ESG
basket of measures.
All-employee
share plans
1
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.
Chair and
Non-executive
Director fees
2
Provide an appropriate reward to attract and retain
high-calibre individuals.
See page 158 of this Report for a list of
Non-executiveDirector fees.
Shareholding
guideline
4
The shareholding guideline for the CEO is 350%
ofbase salary and for the CFO is 275% of base salary.
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 2023 (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):
CEO 708% of base salary
CFO 468% ofbase salary
See page 159 for more information on the
shareholdingguideline.
Delivering our remuneration principles in FY24
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 FY24 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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 133
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
Remuneration at a glance
Our at a glance summary sets out clearly and transparently the total remuneration paid to our Executive Directors
in2022/2023.
FY23 single figure for total remuneration summary
Director
2023
Total
£’000
2022
(restated)
Total
3
£’000
Executive Directors
S Hare 4,000 2,524
J Howell 2,722 1,716
Non-executive Directors
A Duff 400 400
S Anand 82 67
J Bates 70 63
J Bewes 90 81
M Chan Jones
1
70 –
A Court 90 81
R Donnelly
2
46 –
D Hall 87 80
D Harding 70 63
Notes:
1. Maggie Chan Jones was appointed as Non-executive Director on 1 December 2022.
2. Roisin Donnelly was appointed as Non-executive Director on 3 February 2023.
3. 2022 values are restated to reflect the change in share price reported in 2022 in line with the methodology set out in the 2013 Reporting Regulations (£7.063)
and the share price actually achieved at vesting (£8.018).
Fixed pay for FY23
• Base salary
• Benefits
• Pension
PSP awards vesting in FY23
• 69th Total Shareholder Return (TSR) percentile rank
• 10.2% Compound Annual Growth Rate (CAGR) ARR
growthachieved
• £681.5m Cloud native (CN) ARR achieved
• ROCE underpin met
Notes:
* Payment of a bonus for ARR growth is subject to the achievement of an underpin condition of Group underlying operating profit (UOP) margin of 17.5%.
GroupUOP was 20.7% 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 18.6% was achieved and the underpin met.
Key remuneration outcomes for FY23
Measure Weighting
% of the
overall
maximum
award
Annual
bonus
ARR growth*
70% 44.5%
Customer experience scorecard
10% 6.6%
CEO performance against personal strategic goals
20% 17.0%
CFO performance against personal strategic goals
20% 18.0%
CEO total bonus opportunity achieved
100% 68.1%
CFO total bonus opportunity achieved
100% 69.1%
Performance
Share Plan
ARR growth**
35% 35.0%
CN ARR**
35% 18.4%
Relative Total Shareholder Return (TSR)
30% 19.7%
Total Performance Share Plan opportunity achieved
100% 73.1%
Annual bonus for FY23
• 11.4% ARR growth achieved
• Customer experience scorecard
• Personal strategic goals
See page 144 See page 145 See page 149
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023134
Key remuneration outcomes for FY23
2023 bonus: 68.1% to 69.1% of potentialpayable
68.1 to 69.1%
The 2023 bonus was aligned to our strategy of efficiently
growing the business, such that 70% of bonus potential
wasbased on ARR growth with a UOP marginunderpin. 10%
ofbonus potential was based on the customer experience
framework to reflect the criticality ofmaintaining and
improving the experience for Sage customers. ARR growth
of11.4% (between target and stretchlevel) was achieved; the
UOP margin of 20.7% met the underpin level. The outcome
forthe customer experience framework of 6.6% reflects the
significant strides made in improving our customer journey
during FY23. The remaining 20% is determined by assessments
of individual Executive Directors’ performance against their
goals. In summary:
• For the CEO, 17% would be payable
• For the CFO, 18% would be payable
The Committee determined that 68.1% and 69.1% ofmaximum
bonus will be payable for the CEO and CFOrespectively.
Further detail is set out on page 145.
2021 PSP: 73.1% of the total shares under
awardvesting
73.1%
PSP awards granted in December 2020 were based on
ARRgrowth, CN ARR (with a ROCE underpin applicable
tothese financial measures) and relative TSR performance
measured over thethree-year performance period from
1 October 2020 to30 September2023.
Reflecting on general business performance, and the
experience of shareholders, customers, and colleagues over
the period, the Committee determined that the calculated
outcome is appropriate, so 73.1% of thetotal number of
shares under award will vest in December 2023, subject to
atwo-year holding period for both Executive Directors.
Further detail is set out on page 149.
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 2024 AGM, the Committee consulted individually
with Sage’s top 20 shareholders and proxy agencies on the
proposed changes to Executive Director remuneration and
the PSP metrics for 2024. This was initially in written format
and included virtual meetings to discuss the proposals in
detail. Shareholders that responded indicated support for
the proposals, and regarded them as appropriate in the
context of business performance, strong support for the
CEO,and pressure from the US talent market.
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 have a high response rate, demonstrating that
colleagues welcome the opportunity to share their thoughts,
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 135
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
Corporate Governance Code considerations
From 1 October 2021, we have been fully compliant with the UK Corporate Governance Code 2018 (the “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 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 pages 47 to 55.
The purpose, strategic alignment, and structure of each element
ofpay is provided in the Policy and easily accessible on our
Companywebsite.
Simplicity 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.
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.
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 (350% 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.
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.
Incentive opportunities are capped with clearly defined payout
schedules, deferral requirements, and holding periods.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023136
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.
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(applicable to the PSP) three-year performance period 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.
Alignment
to culture
Code provision:
incentive schemes should
drive behaviours consistent
with the company purpose,
values, and strategy.
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 Total
Shareholder Return (TSR). The ESG measures first introduced into
the PSP in 2022 and updated for 2024 will drive achievement of the
Sustainability and Society strategy. Full details of the proposed
measures can be found on pages 156 and158.
In 2023, 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.
The Committee reviewed the implementation of the Policy
over 2023 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 for 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 2024 AGM.
Asever, the Committee welcomes any questions or
commentsfrom shareholders.
Annette Court
Chair of the Remuneration Committee
21 November 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 137
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Directors’ Remuneration Report continued
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 2022 and PSP outcomes
forthe 2020 award.
• Reviewed content of 2022 Directors’
Remuneration Report.
• 2022 bonus determined at 88.0%
to88.7% of potential, as disclosed
in last year’s Report.
• 2020 PSP determined at 20%
oftheoverall award for vesting,
asdisclosed in last year’s Report.
• Approved the 2022 Directors’
Remuneration Report.
Considering the views on
remuneration of our stakeholders
and reviewing trends in
executive remuneration
• At least quarterly, the Committee’s
advisors presented on market trends,
legislative change, and corporate
governance requirements in
executiveremuneration.
• Views of shareholders, proxy
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 for remuneration for
Executive Directors.
• Reviewed remuneration-related risks.
• Reviewed the structure of remuneration.
• Discussed the base salaries, the bonus
and PSP structure for2024.
• Determined that the Policy was
operating as intended for FY23.
Other
• Reviewed the Committee’s Terms
ofReference.
• Reviewed workforce remuneration
andrelated policies.
• Determined no change to the
Committee’s Terms of Reference.
• Considered the implementation
ofthe2022 Policy in FY24 in light
ofworkforceremuneration.
Remuneration Committee governance
Committee meetings
The Committee held six scheduled meetings during FY23.
Details of individual attendance at scheduled meetings
areprovided in the table below.
Activities of the Committee at a glance
Allocation of time
65% 10% 10% 15%
Note:
Allocation of time has been rounded to the nearest 5%.
Committee members 3 November 2022 10 November 2022 9 February 2023 15 May 2023 11 July 2023 26 September 2023
Annette Court (Chair)
Drummond Hall
Dr John Bates
Roisin Donnelly
1
1. Roisin Donnelly joined the Remuneration Committee on 1 March 2023.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023138
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 Operation Maximum opportunity Performance measures
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.
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.
• Corporate and individual
performance.
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).
• Alignment to
marketlevel.
Accordingly, no monetary
maximum has been set.
None, although overall
performance of the
individual is considered
by the Remuneration
Committee when
settingand reviewing
salaries annually.
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.
The Company
contribution rate for
Executive Directors
isaligned with the rate
available to the majority
of the workforce
(currently10% of salary).
None.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 139
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Directors’ Remuneration Report continued
Alignment with
strategy/purpose Operation Maximum opportunity Performance measures
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.
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.
• 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.
None.
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.
175% of salary.
Up to 50% of the
bonuscanbe paid for
delivering atarget level
ofperformance.
• 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 FY24 are
described inthe
Directors’ Annual
Remuneration Report.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023140
Alignment with
strategy/purpose Operation Maximum opportunity Performance measures
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.
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.
• Overall individual
limit of 300% of base
salary under the rules
of the plan.
Implementation for
FY24 is outlined on
pages 156 to 158.
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 measures
and targets thatwill apply
for awardsgranted in 2024
are set out in the
Directors’ Annual
Remuneration Report.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 141
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Directors’ Remuneration Report continued
Alignment with
strategy/purpose Operation Maximum opportunity Performance measures
All-employees
shareplans
Provide an opportunity
forDirectors (as well as
thegeneral workforce)
tovoluntarily invest in
theCompany.
UK-based Executive Directors
areentitled to participate in an
HMRC-approved all-employee
plan, the Sage Save and Share
Plan, under which they can make
monthly savings over a period
ofthree 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.
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.
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.
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.
• 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.
Set at a level which:
• Reflects the
commitment and
contribution that
isexpected from
theChair and
Non-executive
Directors.
• 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.
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.
None.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023142
Alignment with
strategy/purpose Operation Maximum opportunity Performance measures
Shareholding guideline
Aligns the interests of
Executive Directors and
shareholders and
encourages afocus on
long-term performance.
Whilst in employment, Executive
Directors are expected to build
up ashareholding worth 300%
1
ofsalary in respect of the CEO
and 250%
2
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.
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.
None.
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.
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 CEO has been increased to 350% effective from 1 October 2023 as outlined on page 131.
2. The shareholding guideline for the CFO has been increased to 275% effective from 1 October 2022 as outlined on page 150 of the 2022 Annual Report and Accounts.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 143
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
Directors’ Annual
Remuneration Report
Purpose of this section:
• Provides remuneration disclosures for Executive and Non-executive Directors.
• Details financial measures for the annual bonus plan 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 2024.
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 2023 and 2022.
Director
(a) Salary/
fees
3
£’000
(b) Beneﬁts
4
£’000
(c) Bonus
5
£’000
(d) PSP awards
6
£’000
(e) Pension
7
£’000
(f) Other
8
£’000
Total fixed
remuneration
9
£’000
Total variable
remuneration
10
£’000
Total
11
£’000
2023 2022 2023 2022 2023 2022 2023
2022
(restated) 2023 2022 2023 2022 2023 2022 2023
2022
(restated) 2023
2022
(restated)
Executive
Directors
S Hare 833 803 65 44 993 1,237 2,021 360 83 80 5 – 981 927 3,019 1,597 4,000 2,524
J Howell 571 553 8 7 691 858 1,403 250 49 48 – – 628 608 2,094 1,108 2,722 1,716
Non-executive
Directors
A Duff 400 400 – – – – – – – – – – 400 400 – – 400 400
S Anand 70 63 12 4 – – – – – – – – 82 67 – – 82 67
J Bates 70 63 – – – – – – – – – – 70 63 – – 70 63
J Bewes 90 81 – – – – – – – – – – 90 81 – – 90 81
M Chan Jones
1
58 – 12 – – – – – – – – – 70 – – – 70 –
A Court 90 81 – – – – – – – – – – 90 81 – – 90 81
R Donnelly
2
46 – – – – – – – – – – – 46 – – – 46 –
D Hall 87 80 – – – – – – – – – – 87 80 – – 87 80
D Harding 70 63 – – – – – – – – – – 70 63 – – 70 63
Notes:
1. Maggie Chan Jones was appointed as a Non-executive Director on 1 December 2022.
2. Roisin Donnelly was appointed as a Non-executive Director on 3 February 2023.
3. Details of salary progression since 2020 for the current Executive Directors are summarised in the “Statement of implementation of Remuneration Policy
inthe following financial year” on page 155 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 of the 2022 Annual Report and Accounts.
4. 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. In addition, £20,734 of Steve Hare’s benefits value related to the grossed-up cost of
travel, accommodation, and subsistence for his hosting Platinum Elite, an internal event for high-performing colleagues, which is deemed by HMRC to be
ataxable benefit. Benefits exclude items subject to tax where they are in the nature of business expenses. Sangeeta Anand and Maggie Chan Jones, who
arebased on the US West Coast, each received a £4,000 travel allowance fee for their attendance at each Board meeting which required travel with a flight
time of more than nine hours (total of three meetings), commensurate to the travel time required for attendance in person.
5. Further information about how the level of FY23 bonus award was determined is provided in the additional disclosures below.
6. The 2023 PSP value for Steve Hare and Jonathan Howell is based on the PSP award granted in financial year 2021 which is due to vest in December 2023.
Theperformance conditions applicable to the awards are outlined on page 149 of this Report. The value is based on the number of shares vesting under
the2021 PSP award multiplied by the average price of a Sage share between 1 July and 30 September 2023, which was £9.596, plus dividend equivalents
accrued. ForSteve Hare, £782,482 of the value is attributable to movement in the share price between grant and vesting, and for Jonathan Howell,
£543,242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 values of Steve Hare’s and Jonathan Howell’s 2020 PSPs for 2022 have been restated. The change
in value is as aresult of changes inthe share price reported in 2022 in line with the methodology set out in the 2013 Reporting Regulations (£7.063) and the
share price actually achieved at vesting (£8.018).
7. Pension emoluments for Steve Hare were equal to 10% of base salary and 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.
8. Steve Hare’s award under the Save and Share plan has been valued as the number of options multiplied by the difference on the grant date (16 June 2023)
between the share price (at close on the day prior to grant) of £8.74 and the option price of £6.90. Further details are set out on page 160.
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 2023 was £7,727,000 compared with £5,075,000 in 2022 (updated from the 2022 Directors’ Remuneration Report).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023144
Additional disclosures for single ﬁgure for total remuneration table (audited information)
Annual bonus 2023
The bonus targets for FY23 were set with reference to the strategy for FY23, in particular the achievement of ARR growth
andimproving the customer experience, taking into account the Company’s annual budget and historical performance
indetermining the payout curve.
Bonus measure % weighting
Threshold
performance Target performance
Stretch
performance
Actual
performance
(atbudget
foreigncurrency
exchange rates) % of maximum bonus payable
ARR growth 70% 9.0%
(21%ofbonus
payable)
10.8%
(35%ofbonus
payable)
13.0%
(70%ofbonus
payable)
11.4% 44.5%
Customer
experience
scorecard
10% The assessment of the customer experience
scorecard is set outbelow this table (between
0% and 10% of bonus payable)
6.6%
Strategic
measures
20% The assessment of strategic measures is set
outbelow this table (between 0% and 20% of
bonus payable)
Steve Hare (CEO):
17.0% of maximum
Jonathan Howell (CFO):
18.0% of maximum
Total Steve Hare:
68.1% of maximum bonus
(119.2% of salary)
Jonathan Howell:
69.1% of maximum bonus
(120.9% of salary)
Notes:
• Payment of a bonus for ARR growth was subject to the achievement of an underpin condition of Group UOP margin. Group UOP margin was 20.7%, which
exceeded the underpin target of 17.5%.
• ARR growth and UOP margin are deﬁned on pages 271 and 270 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.
Customer experience scorecard (10% weighting)
A customer experience scorecard measuring ‘micromoments’ (touchpoints in the customer journey which reflect the moments
that matter the most to customers), customer experience improvements, and transactional Net Promoter Score (tNPS) was set
by the Committee at the beginning of the financial year toalign to our evolved approach to measuring customer experience
as outlined in the Strategic Report, page 22. Whilst tNPS remains a key measure of customer experience, in order to deliver
onour stakeholder promise to customers that “we build every experience with human insight and ingenuity”, the scorecard
focuses on multiple touchpoints in the customer journey, and improvements to these moments in addition to tNPS. tNPS is
alead measure of our customers’ sentiments providing rich customer insight, rather than relationship Net Promoter Score
(rNPS) which has previously been assessed and is a lag measure of customer sentiment.
The experiences we deliver for customers will continually evolve as we strive to deliver on our brand promise that puts customers
at the heart of everything we do, helping businesses thrive and flow. During FY23, a number of improvements have been
delivered enabling customers to focus on what matters the most to them. Customer experience targets were set at an individual
business unit level and are regarded as commercially sensitive by the Board. Details ofthe achievements that were considered
by the Committee in coming to its assessment of this measure are set out below. The Committee gave consideration to both the
number of micromoments and customer experience improvements that were delivered and the impact that these had in driving
successful outcomes for the business. The overall outcome therefore reflects an element ofjudgement by the Remuneration
Committee, rather than a purely mechanistic target-driven approach.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 145
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Directors’ Remuneration Report continued
Measure Performance commentary
1
Identification and implementation
ofmicromoments across the Company’s
main business units, to focus on the
occasions or touchpoints in the
customerjourney that are meaningful
tothe customer.
Identifying and setting up critical microments is
foundational to the success of our evolved approach to
measuring customer experience, as this identifies the
touchpoints that matter the most to customers. Significant
work has been undertaken in FY23 to implement
micromoments across the Company’s main business units
atmany stages of the customer journey. An “Onboarding”
micromoment has been established in Sage Accounting,
Client Management, Sage Payroll, and Sage People, which
uncovers the customers’ experience when onboarding
themselves or through supported implementation. The
“Initialadoption and usage” micromoment set up in Sage
Business Cloud Accounting and Sage Active highlights the
customers’ experience when initially using the product and
the “Support” micromoment seeks to understand how well
customers are supported when using the product. The
micromoments quickly identify customer pain points, which
can then be reviewed and remediated through acustomer
experience improvement. Overall this target wasexceeded.
2
Implementation of customer experience
improvements to drive strategic and
impactful change that is “value-added”
forcustomers.
Micromoments have provided new insight into priority
areasfor customer experience improvements. A number
ofimprovements have been implemented across the
Company in FY23—for example, within Sage Accounting,
wehave addressed the ability to self-serve email address
changes, which had previously generated c.600 queries a
month; within Sage for Accountants, we added the ability
toimport a client record, providing efficiencies for
Accountants which enables import as opposed to manually
inputting client records; within Sage People, we have made
enhancements to the people management workflow to
improve the team member search saving time for users; and
within X3, we have adjusted the release cadence from four
releases to tworeleases per year in response to feedback
that the release cadence was too frequent, thus not allowing
sufficient time to implement and leverage new features
ahead of the next release. Progress varied across all of the
Company’s main business units, therefore this target was
partially met.
3
tNPS isa lead indicator of customer
experience and gives immediate insight
toacustomer’s experience following
aspecific customer touchpoint.
Measurement of tNPS within the
Company’smain business units to
understand customers’ feedback and
generate improvement opportunities.
tNPS has been a focus across all business units in FY23
andscores have varied. Key themes have emerged, such
as“Customer Service” and “Delivery”, both of which have
high sentiment scores. Other areas such as “Channel”,
“Resolution”, and “Usability” show a slight increase in
negative sentiment providing further opportunity for future
improvement. Accordingly, this target was partially met.
In consideration of these factors and the overall experience for our customers, the Committee determined that a bonus
of6.6% of the maximum 10% for this element was an appropriate award.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023146
Executive Directors’ personal strategic objectives (20% weighting)
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 2023 budget and long-term strategy plan. These were:
• Grow and scale Sage (25% weighting).
• Enable the Sage Network through Service Fabric (15% weighting).
• Activate and scale the Sage Network (25% weighting).
• Inspire a winning mindset (25% weighting).
• Deliver Sage’s Cyber Security Strategy (10% weighting).
Personal strategic
objectives
The Committee took into account the following performance against those goals:
 Grow and scale Sage
25% weighting
Strategic progress has been made; the UKI Small
segment has grown and cloud native share has
increased year-on-year. Sage Intacct in North
Americashowed recurring revenue growth of 30%.
Overall, the targets were met.
 Enable the Sage Network
through Service Fabric
15%weighting
Access tothe Sage Network, via Service Fabric, our
microservices architecture, has improved by 8%
during the year, enabling greater network participation.
On balance, this target was partially met.
 Activate and scale
the Sage Network
25%weighting
Significant progress has been made with 12.2 million
unique network individuals and increased Sage
Network transactional volume by 67% for the year,
resulting in this target being met.
 Inspire a winning mindset
25% weighting
Steve Hare has established a strong leadership team
and has grown Sage’s diverse talent pipeline. A
number of senior appointments this year have further
strengthened the leadership capability. His Executive
Leadership Team have demonstrated high
performance delivering strong growth. Externally he
has undertaken a number of engagements to raise
Sage’s external profile including attendance at the
Prime Minister’s Business Council. Internally, eSat at
76and Glassdoor at 4.1 with 70% positive sentiment
points to an engaged colleague base. Importantly,
scores have increased in our colleague Pulse survey
question, ‘I understand how Sage plans to achieve its
goals’, demonstrating the strong alignment between
strategy and execution. Steve Hare and his leadership
team continue to drive higher performance
expectations across the organisation with work
launched on a high performance culture programme
throughout all levels of leadership. Targets were met.
 Deliver Sage’s Cyber
SecurityStrategy
10%weighting
The Trust and Security hub launched on time
toinclude Data Principles. The Risk Appetite
andAccelerate Programme for 40 products has been
implemented and all critical IT assets aremicro-
segmented. Overall, the targets wereexceeded.
In consideration of these factors and the overall performance of the business, the Committee determined that a bonus
of17.0% of the maximum 20% for this element was an appropriate award.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 147
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
Jonathan Howell, CFO
Jonathan Howell was set a range of goals linked to the execution of the 2023 budget and long-term strategy plan. These were:
• Deliver insights to empower growth and scale (25% weighting).
• Enhance shareholder value (25% weighting).
• Robust financial fundamentals (25% weighting).
• A diverse team of empowered finance professionals (25% weighting.
Personal strategic
objectives
The Committee took into account the following performance against those goals:
 Deliver insights to
empowergrowthandscale
25%weighting
A high-quality and effective three- year plan and
FY24budget process was successfully
undertaken. Enhanced M&A integration processes
have beenimplemented to provide rigorous
monthly performance measurement against plan.
Salesforce Einstein 2.0 (improved analytics tool
to measure and track SaaS KPIs) has been
successfully rolled out. Additionally, a refined
Customer Lifetime Value (LTV)/Customer
Acquisition Cost (CAC) methodology hasbeen
implemented to align with econometrics
modelling. Overall, thetargets set were met.
 Enhance shareholder value
25%weighting
Consistent, high-quality communication with
shareholders has been delivered with effective
quarterly reporting. Significantly increased US
representation on the shareholder register during
the year. Strong engagement with US targets—
multiple in person roadshows in the US conducted
in FY23, meaning this target was met.
 Robust financial fundamentals
25%weighting
Achieved record level of overdue Days Sales
Outstanding (DSO) days, ahead of internal target.
Rating maintained at BBB+. Balance sheet
funding, liquidity, and leverage well managed.
Overall, thetargets were exceeded.
 A diverse team of empowered
financeprofessionals
25% weighting
Strong accountability, execution, and leadership
across Sage and the finance team. High-quality
internal succession and development
opportunities with increased global mobility.
eSat improved, at +80, which is ahead of the
company average, meaning the targets set have
been exceeded.
In consideration of these factors and the overall performance of the business, the Committee determined that a bonus
of18.0% of the maximum 20% for this element was an appropriate award.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023148
PSP awards
Awards granted under the PSP to Steve Hare and Jonathan Howell in December 2020 vest depending on performance against
three measures, measured over three years, from 1 October 2020 to 30 September 2023:
• 35% annualised recurring revenue growth
• 35% cloud native recurring revenue
• An underpin for ROCE applies to both measures outlined above.
• 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
Between threshold (20% vests)
and stretch (80% vests)
Between stretch (80% vests)
and exceptional (100% vests)
Annualised recurring revenue growth (CAGR) Between 6% and 8.5%
(with ROCE of 12%)
Between 8.5% and 10% (or above)
(with ROCE of 12%)
Cloud native recurring revenue Between £600m and £750m
(with ROCE of 12%)
Between £750m and £900m
(with ROCE of 12%)
Relative TSR Between median and upper quartile Between upper quartile and upper decile
(or above)
Measure Achieved Vesting
Annualised recurring revenue growth (CAGR) 10.2% 35.0%
Cloud native recurring revenue £681.5m 18.4%
Relative TSR 69th percentile 19.7%
Total 73.1%
The ROCE was 18.6% (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 calculated outcome was appropriate. Consequently, 73.1% of the
total award will vest.
The Committee noted that it had satisfied itself at the time of grant that there was no issue of windfall gains in respect of
thisaward. This conclusion had been reached following analysis of the number of share granted in previous awards to the CEO.
Consequently, the Committee was satisfied that no further adjustment was required in this respect at the time of vesting.
Awards are scheduled to vest on 2 December 2023, and for both Executive Directors will be subject to a two-year holding
period and released on 2 December 2025.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 149
Financial Statements Additional InformationGovernance ReportStrategic Report
Yes No
Underpins met:
ROCE of 12.0% per
annum
Cloud native
penetration of 30%
Organic revenue grown
in absolute terms
atthe end ofthe
performance period
TSR percentile
ranking:
Below median = 0%
ofaward vests
Median = 6% of award
vests
Upper quartile = 24%
of award vests
Upper decile = 30%
ofaward vests
Reduction in Scope
1, 2, and 3 carbon
emissions:*
Below 6.9% = 0% of
award vests
6.9% = 1.5% of award
vests
13.8% = 6% of award
vests
20.7% = 7.5% of award
vests
* Reduction between
FY22 and FY25.
Sage Business Cloud
penetration in FY25:
Less than 85% = 0%
ofaward vests
85% = 10% of award
vests
89% = 40% of award
vests
92% = 50% of award
vests
This portion
of the award
does not vest
Protect
the Planet
Number of Sage
products that have
embedded
functionality for
carbon accounting:*
Below 3 products =
0%of award vests
3 products = 1% of
award vests
6 products = 4% of
award vests
8 products = 5% of
award vests
* Performance assessed
at the end of FY25.
Tech for
Good
Inclusion score
in Employee
Engagement Survey
(3.75% of award):*
Below 82 = 0% of
award vests
82 = 0.75% of award
vests
84 = 3% of award vests
86 = 3.75% of award
vests
* Measured in Q1
2025Employee
Engagement Survey.
Percentage of
leadership teams
inthe top four levels
of Sage meeting
ourglobal gender
diversity target
(3.75% of award):
(namely comprising
nomore than 60% of
anyone gender):*
Below 50% = 0% of
award vests
50% = 0.75% of award
vests
65% = 3% of award
vests
80% = 3.75% of award
vests
* Assessed at the end
ofFY25.
Diversity, equity,
and inclusion
7.5%
of award
5%
of award
7.5%
of award
ESG—ESG
Strategy Impact
20%
of award
TSR
30%
of award
Sage Business
Cloud Penetration
50%
of award
1. Context for the PSP measures selected for FY23 was provided on page 150 of the 2022 Annual Report and Accounts.
PSP awards granted in FY23 (audited information)
Awards were granted under the PSP on 2 December 2022 at a market value of £8.116 to Executive Directors in the form
ofconditional share awards. In alignment with our business strategy for FY23, performance conditions for awards
grantedinFY23 are:
1
Directors’ Remuneration Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023150
Vesting is on a straight-line basis between the points. The following key areas are highlighted in relation to the
performancemeasures:
• 50% 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 Sage 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 30%, 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.
• 20% 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 2025. 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
Maximum number
ofshares
Face value
(£)
1
Face value
(%ofsalary)
Threshold vesting
(% of award) End of performanceperiod
Steve Hare Performance 259,210 2,103,750 250% 20% 30 September 2025
Jonathan Howell shares 159,961 1,298,250 225% 20% 30 September 2025
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 2022 (the trading day
prior to the grant for all eligible colleagues) of £8.116.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 151
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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 2022/2023 % change 2021/2022 % change 2020/2021 % change 2019/2020
Salary/
fees
1
Taxable
benefits
2
Annual
incentive
3
Salary/
fees
1
Taxable
benefits
2
Annual
incentive
3
Salary/
fees
1
Taxable
benefits
2
Annual
incentive
3
Salary/
fees
1
Taxable
benefits
2
Annual
incentive
3
Executive
Directors
S Hare 3.8% 48.3% (19.7%) 2.3% 3.8% 49.5% 0.5% (65%) 229% 2% 14% (80%)
J Howell 3.3% 7.7% (19.4%) 1.4% 36.3% 47.4% 0.5% (6%) 223% 25% 37% (75%)
Non-executive
Directors
A Duff
4
–% –% –% 1,500% – – – – – – – –
S Anand
5
10.5% 200.0% –% 5.6% – – 140% – – – – –
J Bates 10.5% –% –% 5.6% – – 0% – – 197% – –
J Bewes 10.7% –% –% 5.6% – – 0% – – 100% – –
M Chan Jones
6
–% –% –% – – – – – – – – –
A Court 10.7% –% –% 5.6% – – 0% – – 100% – –
R Donnelly
7
–% –% –% – – – – – – – – –
D Hall 8.3% –% –% 4.3% – – 0% – – (6%) – –
D Harding
8
10.5% –% –% 82.1% – – – – – – – –
Colleagues of
theCompany 4.1% 2.4% 24.4% 4.2% 13.8% (8.7%) 5% 29% 6% 9% 37% (10%)
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.
• The change in the Non-executive Directors’ fees for 2021/2022 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
of the 2022 Annual Report and Accounts.
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 2023 are as set out on page 144 of this Report.
2. Steve Hare’s and Jonathan Howell’s taxable benefits for 2023 are as set out on page 144 of this Report. The increase in Steve Hare’s taxable benefits is due to
his hosting the Platinum Elite event for high-performing colleagues as described on page 144 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 2023 are as set out on page 144 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. The significant change in Sangeeta Anand’s taxable benefits reflects the travel allowance she received for attending three Board meetings during FY23 as
set out on page 144 of thisReport.
6. Maggie Chan Jones was appointed as a Non-executive Director on 1 December 2022 and accordingly no comparison to prior years can be drawn.
7. Roisin Donnelly was appointed as a Non-executive Director on 3 February 2023 and accordingly no comparison to prior years can be drawn.
8. 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023152
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2023, 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 2023 and the Committee is consequently satisfied that the median pay ratio for 2023 is consistent
with the pay and progression policies for Sage’s UK employees as a whole.
Pay ratio Remuneration values
Year Method
25th percentile
(lower quartile)
50th percentile
(median)
75th percentile
(upper quartile)
Y25 (25th
percentile)
Y50 (50th
percentile)
Y75 (75th
percentile)
2023 A 101:1 68:1 46:1 Total remuneration £39,536 £58,417 £87,553
Salary only £32,073 £47,669 £57,887
2022 A 65 : 1 43 : 1 29 : 1 Total remuneration £38,056 £57,421 £85,380
Salary only £32,122 £41,945 £48,854
2021 A 70 : 1 46 : 1 31 : 1 Total remuneration £34,807 £53,304 £79,739
Salary only £29,700 £42,103 £79,091
2020 A 55 : 1 36 : 1 23 : 1 Total remuneration £29,865 £45,942 £71,524
Salary only £27,955 £36,116 £56,983
2019 A 95 : 1 62 : 1 38 : 1 Total remuneration £26,463 £40,385 £66,095
Salary only £20,281 £34,184 £51,087
The year-on-year change in the pay ratio is largely driven by variation in business performance-related pay outcomes, such
as the PSP and annual bonus. As the CEO has a larger proportion of his total remuneration linked to business performance
than other colleagues based in the UK, the ratio has increased compared with last year due to a significantly higher performance
outcome for the FY21 PSP vesting on 2 December 2023 as set out on page 149 of this Report, compared with the FY20 PSP
which vest on 2 December 2022 and is included in the 2022 ratio. There has also been significant share price appreciation
since the grant of the FY21 PSP award as detailed on page 144 of this Report. Combined, these two factors diminish the
impact of a lower bonus outcome this year and result in a higher value used for the CEO’s remuneration.
Notes:
• Under method A, colleague data is based on full-time equivalent pay for UK colleagues as at 30 September 2023. Pay for each colleague is calculated in
accordance with the single figure for 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 for remuneration set out on page 144 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 FY23 is set out on pages 145 to 149 of this Report.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 153
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Remuneration Report continued
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 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
CEO single ﬁgure for
remuneration (in £’000)
Steve Hare
1
– – – – 98 2,495 1,557 2,507 2,524 4,000
Stephen Kelly
2
– 1,521 1,723 3,547 1,690 – – – –
Guy Berruyer
3
1,616 108 – – – – – – –
Annual bonus payout (as
%maximum opportunity)
Steve Hare – – – – 0% 94% 18% 60% 88% 68%
Stephen Kelly – 67% 69% 19% 0% – – –
Guy Berruyer 55% 0% – – – – – – –
PSP vesting (as % of
maximum opportunity)
Steve Hare – – – – 29% 15% 27% 34% 20% 73%
Stephen Kelly – – – 66% 29% – – – –
Guy Berruyer 0% 64% – – – – – – –
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.
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.
0
50
100
150
200
250
300
350
400
Value (£)
30-Sep-13
Sage
FTSE 100 Index
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
30-Sep-23
Note:
• This graph shows the value, by 30 September 2023, of £100 invested in The Sage Group plc. on 30 September 2013 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
(DSBP). 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 FY23, his DSBP
award granted on 2 December 2019 vested on 2 December 2022.
Payments for loss of office (audited information)
No payments were made for loss of office during FY23.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023154
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 FY24.
Base salary
An annual salary review was carried out by the Committee in November 2023. Following that review, the Committee
approved the following:
Salary 1 January 2024 Salary 1 January 2023 Salary 1 January 2022 Salary 1 January 2021 Salary 1 January 2020
Steve Hare
1
£925,000
(9.9% increase)
£841,500
(4%increase)
£809,000
(3% increase)
£785,000
(no increase)
£785,000
(1.9% increase)
Jonathan Howell
2
£606,000
(5% increase)
£577,000
(4%increase)
£555,000
(1.8% increase)
£545,000
(no increase)
£545,000
(1.9% increase)
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% (in respect of colleagues based
inthe UK).
Relative importance of spend on pay
The charts below show the all-employee pay cost (as stated in the notes to the Group financial statements), proﬁt before
tax(PBT), and returns toshareholders by way of dividends and share buybacks for 2022 and 2023.
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 182. Underlying PBT has been chosen as a measure of our operational profitability.
• Returns to shareholders—Total dividends taken from note 15.5 on page 252; value of shares purchased during the year
takenfrom consolidated statement of changes in equity on pages 184 and 185.
• Total colleague pay—Total staff costs from note 3.3 on page 201, including wages and salaries, social security costs,
pension, and share-based payments.
Underlying PBT
(Underlying as
reportedin £m)
+£78m
FY22 (as reported)
FY23
346
424
Total colleague pay
(£m)
+£156m
FY22
FY23
964
1,120
Dividends paid to
shareholders (£m)
Total dividends
Value of shares
purchased during
theyear
+£7m -£31m
FY22
FY23
183
190
FY22
FY23
32
1
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 155
Financial Statements Additional InformationGovernance ReportStrategic Report
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 FY23.
Annual bonus
There are no changes to the annual bonus structure; key features of the Executive Directors’ annual bonus plan for FY24
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.
• Annual bonuses awarded in respect of performance in FY24 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 FY24 for Executive Directors will be determined as detailed below:
As a percentage of maximum bonus opportunity:
Measure
1
ARR growth
2
70%
Customer-related measure inclusive of Net Promoter Score 10%
Strategic goals 20%
Notes:
1. Executives’ incentives for FY24 will be measured on an underlying basis. This will apply to the ARR growth and the UOP 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 UOP 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 271. 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.
FY24 PSP awards will be granted over shares worth 300% of salary for the CEO and 225% of salary for the CFO (based on
salaries effective 1 January 2024 as set out on page 155).
Vesting of these awards will be subject to satisfaction of the following performance conditions measured over the three
ﬁnancial years to 30 September 2026.
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.
Directors’ Remuneration Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023156
Underlying earnings per share (EPS) (50% of award)
1
EPS in FY26 % of award vesting
2
Below threshold Below 37.0p 0%
Threshold 37.0p 10%
Stretch 43.0p 40%
Exceptional 46.0p 50%
Notes:
1. EPS is measured as the amount of post-tax profit attributable to each ordinary share on an underlying basis.
2. Vesting of this portion of the PSP award is subject to the achievement of 12.0% p.a. ROCE underpin to be met. ROCE is defined on page 270. ROCE will be
measured on an underlying basis. The 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. The impact of share buybacks will be included.
Relative TSR performance condition (30% of award)
TSR ranking % of award vesting
Below threshold Below median 0%
Threshold Median 6%
Stretch Upper quartile 24%
Exceptional Upper decile 30%
Notes:
• 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:
% reduction in carbon emissions¹ % of award vesting
Below threshold Below 8.1% 0%
Threshold 8.1% 1.5%
Stretch 16.2% 6%
Exceptional 24.3% 7.5%
Notes:
1. Targets are for emissions reduction between FY23 and FY26, aligning to our commitment to achieve 50% reduction in emissions by 2030 (from a 2019
baseline) and our Net Zero goal by 2040.
Outturns will be independently verified.
Vesting is on a straight-line basis between the points.
ESG—Tech for Good (5% of award)
Supporting customers on their sustainability journey through enabling access to carbon accounting functionality via
Sage suites (Sage solutions combined into suites targeting small businesses, mid-sized (medium) businesses and
accountants):
Access to carbon accounting functionality through Sage suites in FY26
1
% of award vesting
Below threshold No suites 0%
Threshold Sage for Small Business suite 1%
Stretch Sage for Small Business suite and Sage for Accountants suite 4%
Exceptional Sage for Small Business suite, Sage for Accountants suite, and Sage
for Medium Business suite
5%
Note:
1. At the beginning of FY24, Sage had no suites enabling access to carbon accounting functionality. Performance will be assessed at the end of FY26
whenthe Committee will determine how many suites enable access to carbon accounting functionality.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 157
Financial Statements Additional InformationGovernance ReportStrategic Report
Non-executive Director remuneration
The table below shows the fee structure for Non-executive Directors for FY24. 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 additional fee will increase with effect from
1 January 2024. The additional fee for the Senior Independent Director will not change. The fee for the Chair of the Board is
determined by the Committee and will increase with effect from 1 January 2024.
Fees effective from
1January 2024
Fees effective prior to
1 January 2024
Chair of the Board all-inclusive fee £420,000 £400,000
Basic Non-executive Director fee £73,500 £70,000
Senior Independent Director additional fee £17,000 £17,000
Audit and Risk Committee Chair additional fee £25,000 £20,000
Remuneration Committee Chair additional fee £25,000 £20,000
ESG—Diversity, equity, and inclusion (7.5% of award)
Percentage of ethnically diverse colleagues in senior leadership teams (Executive Leadership Team (ELT) and one level
below theELT):
% ethnically diverse colleagues
1
% of award vesting
Below threshold Below 13.0% 0%
Threshold 13.0% 0.75%
Stretch 16.5% 3%
Exceptional 20.0% 3.75%
Note:
1. The percentage of ethnically diverse colleagues will be assessed at the end of FY26. Current baseline is that 11% of the ELT and ELT -1 are ethnically
diverse. Thisaligns with our Parker Review commitment of 20% ethnically diverse senior leaders in FY27.
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):
% of teams
1
% of award vesting
Below threshold Below 50% 0%
Threshold 50% 0.75%
Stretch 65% 3%
Exceptional 80% 3.75%
Note:
1. The percentage of teams meeting our global gender diversity target will be assessed at the end of FY26; the gender composition of each team in the top
four levels of Sage will be assessed and then the overall % of teams calculated. Currently the baseline is that 34% of our most senior leadership teams
meet this target.
Vesting is on a straight-line between the points.
PSP awards granted in FY24 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.
Directors’ Remuneration Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023158
Directors’ shareholdings and share interests (audited information)
The shareholding guideline for the CEO is 350% of salary and 275% of salary for the CFO. 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 2023, Steve Hare held shares worth 708% of salary and Jonathan Howell held shares worth 468% 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 2023 (the last trading day of the financial year),
which was £9.596, 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 2023 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
Ordinary shares at
30September 2023
Ordinary shares at
30September 2022
S Anand – –
J Bates 16,735 16,735
J Bewes 10,000 10,000
M Chan Jones
1
10,000 –
A Court 6,350 6,350
R Donnelly
2
10,000 –
D Hall 10,000 10,000
S Hare
3
488,580 408,625
J Howell 189,416 146,660
D Harding 10,000 10,000
A Duff 13,150 13,150
Total 764,231 621,520
Notes:
1. Maggie Chan Jones was appointed as a Non-executive Director on 1 December 2022.
2. Roisin Donnelly was appointed as a Non-executive Director on 3 February 2023.
3. Lucinda Cowley is a person closely associated with Mr Hare. The total for 30 September 2023 includes 30,000 shares also held by Lucinda Cowley.
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 2023 and the
date of this Report.
Details of the Executive Directors’ interests in outstanding share awards under the PSP, Deferred Bonus Plan, and all-employee share option plans are set
outbelow.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 159
Financial Statements Additional InformationGovernance ReportStrategic Report
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 to the Group Financial statements on pages 244 to 249
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:
Director
Exercise price
pershare
Shares under
option at
1October 2022
number
Granted
duringthe year
number
Exercised
during the year
number
Lapsed
duringthe year
number
Shares under option at
30September 2023
number Date exercisable
S Hare 690p – 2,608 – – 2,608 1 August 2026—
Total – 2,608 – – 2,608 31 January 2027
Notes:
• Steve Hare participated in the 2023 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 2023 UK Save and Share grant, the exercise price was set at £6.90, a 20% discount on the average
share price on 18 May 2023, 19 May 2023, and 22 May 2023 of £8.614.
• Jonathan Howell did not participate in the 2023 Save and Share Plan.
• The market price of a share of the Company at 29 September 2023 (the last trading day of the financial year) was £9.89 (mid-market average) and the lowest
and highest market prices during the year were £6.798 and £10.390 respectively.
Performance Share Plan (audited information)
The outstanding awards granted to each Executive Director of the Company under the PSP are as follows:
Director Grant date
Under award
1October 2022
number
Awarded
duringthe year
number
Vested
duringthe year
number
Lapsed
duringthe year
number
Under award
30September 2023
number Vesting date
S Hare 2 December 2022 – 259,210 – – 259,210 2 December 2025
4 February 2022 258,169 – – – 258,169 2 December 2024
2 December 2020 267,006 – – – 267,006 2 December 2023
2 December 2019 208,278 – (41,655) (166,623) – 2 December 2022
733,453 259,210 (41,655) (166,623) 784,385
J Howell 2 December 2022 – 159,961 – – 159,961 2 December 2025
4 February 2022 141,690 – – – 141,690 2 December 2024
2 December 2020 185,374 – – – 185,374 2 December 2023
2 December 2019 144,600 – (28,920) (115,680) – 2 December 2022
471,664 159,961 (28,920) (115,680) 487,025
Total 1,205,117 419,171 (70,575) (282,303) 1,271,410
Notes:
• No variations were made in the terms of the awards in the year.
• PSP awards for 2023 were granted to Executive Directors on 2 December 2022. The market price of the award was £8.116.
• The performance conditions for awards granted in December 2019, December 2020, and February 2022 are set out in the respective Reports for the year
ofgrant and for awards granted in December 2022 on page 150.
• The performance conditions for Steve Hare’s and Jonathan Howell’s awards that vested during 2023 are set out on page 167 of the 2022 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.
Directors’ Remuneration Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023160
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:
Director Grant date
Under award at
1October 2022
number
Awarded
duringthe year
number
Vested
duringthe year
number
Lapsed
duringthe year
number
Under award
30September 2023
number Vesting date
S Hare 2 December 2022 – 50,785 – – 50,785 2 December 2025
2 December 2021 35,188 – – – 35,188 2 December 2024
2 December 2020 14,260 – – – 14,260 2 December 2023
2 December 2019 55,620 – (55,620) – – 2 December 2022
105,068 50,785 (55,620) – 100,233
J Howell 2 December 2022 – 35,221 – – 35,221 2 December 2025
2 December 2021 24,754 – – – 24,754 2 December 2024
2 December 2020 10,225 – – – 10,225 2 December 2023
2 December 2019 32,102 – (32,102) – – 2 December 2022
67,081 35,221 (32,102) – 70,200
Total 172,149 86,006 (87,722) – 170,433
Notes:
• Awards are not subject to further performance conditions once granted. The market price of a share on 1 December 2022, the trading day prior to the date
ofthe awards made in the year ended 30 September 2023, was £8.116.
• 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 2023
(thelast practicable date prior to publication of this Report) are set out below:
Limit Current position
5% of Group’s share capital can be used for discretionary share schemes 4.19%
10% of Group’s share capital can be used for all share schemes 5.18%
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 €170,500. He was subsequently appointed as
Audit Committee Chair with effect from 1 July 2022 and receives an annual fee of €51,500 accordingly. For the year ended
31 March 2023, he received €220,000, as reported on page 138 of the Experian Annual Report 2023. 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 161
Financial Statements Additional InformationGovernance ReportStrategic Report
Unexpired term of contract table
Director Date of contract
Unexpired term of contract
on 30 September 2023, or on
date of contract if later Notice period undercontract
Executive Directors
S Hare 3 January 2014 12 months 12 months from the Company and/or individual
J Howell 10 December 2018 12 months 12 months from the Company and/or individual
Non-executive Directors
S Anand 1 May 2023 2 years 7 months 1 month from the Company and/orindividual
J Bates 31 May 2022 1 year 8 months 1 month from the Company and/or individual
J Bewes 1 April 2022 1 year 6 months 1 month from the Company and/or individual
M Chan Jones 1 December 2022 2 years 2 months 1 month from the Company and/or individual
A Court 1 April 2022 1 year 6 months 1 month from the Company and/or individual
R Donnelly 3 February 2023 2 years 4 months 1 month from the Company and/or individual
D Hall 1 January 2023 3 months 1 month from the Company and/or individual
D Harding 2 March 2021 5 months 1 month from the Company and/or individual
A Duff 1 May 2021 7 months 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.
• Dr John Bates.
• Roisin Donnelly.
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.
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 £99,075 (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.
Stitch, a Deloitte business, provided the Sage reward team with communication support on colleague reward and share plan
communications during 2023.
Directors’ Remuneration Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023162
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 2023 AGM:
Votes for Votes against
Votes
cast
Votes
withheldnumber % number %
Remuneration Policy 825,904,476 99.12 7,332,300 0.88 833,236,776 189,118
Remuneration Report 820,692,437 98.77 10,256,316 1.23 830,948,753 722,356
Annette Court
Chair of the Remuneration Committee
21 November 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 163
Financial Statements Additional InformationGovernance ReportStrategic Report
Directors’ Report
The Directors present their report together with the
auditedconsolidated financial statements for the financial
year ended 30 September 2023 (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 169.
Information included in the Strategic Report
The Directors’ Report, together with the Strategic Report
onpages 1 to 83, represents the management report for the
purpose of compliance with the Disclosure Guidance
andTransparency Rules (“DTRs”)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
8 to 11—Chief Executive Officer’s
review (relevant information is also
in the Strategic Report on pages 18
to 19)
Greenhouse gas
emissions, energy
consumption and
energy-efficiency
action
30 to 31, 32 to 33, and 38 to 45—
Sustainability section (relevant
information is also available in our
Sustainability and Society Report
on our website, sage.com)
Employment of
disabled persons
Engagement
withcolleagues
Engagement with
suppliers, customers
and others
24 to 29—People section
56 to 59 —section 172(1) statement,
47 to 55 (relevant information is
also in the Strategic Report on
pages 48and 49, in the Corporate
Governance Report on pages 104 to
107, and in this Directors’ Report on
page 165)
Important events
affecting the Group
after year end
7 and 15 of the Strategic Report and
Note 18 of the financial statements
on page 257
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 84 to 163, 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 Detail
Page
reference
7 Allotments of shares for cash
pursuant to the Group employee
share schemes
244, 245
12, 13 Shareholder waiver of dividend 168
Results and dividends
The results for the financial year are set out on page 171 to
268. Full details of the proposed final dividend payment for
the year ended 30 September 2023 are set out on page 252.
The Board is proposing a final dividend of 12.75 pence per
share following the payment of an interim dividend of
6.55pence per share on 23 June 2023. The proposed total
dividend for the year is therefore 19.3 pence per share.
Going concern
After making enquiries, the Directors have a reasonable
expectation that Sage has adequate resources to continue
inoperational existence over the 18 months to 31 March 2025
(the going concern assessment period). 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 2023 and
strong underlying cash conversion of 116%, reflecting the
strength of the subscription business model. Further
information on the available cash resources including
the undrawn committed revolving credit facility is
provided in note 13 of the financial statements on pages
230 to 233.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023164
• 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 affect its future growth and operating
performance, which are set out in the Strategic Report on
pages60 to 67.
• The Directors have reviewed liquidity forecasts for the
Group for the period to 31 March 2025, (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. 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 82 and 83.
Research and development
During the year, the Group incurred a cost of £342m
(2022: £302m) in respect of research and development.
Please see page 200 (note 3.2 of 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 129 to
163. 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 88 to 89.
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 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.
Employment policy
The Group continues to be committed to pursuing diversity,
equity, 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, Sage 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 DEI policy can be found on
pages 115 to 117, and information regarding the diversity
of the workforce is provided on pages 28 and 29.
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 choose to
participate in the Company’s voluntary all employee share
plans and/or may be awarded free shares under the
Company’s discretionary share plans including 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 24 to 29,
48 to 49, and 102 to 107.
Engagement with other stakeholders
Details of stakeholder engagement, including with
customers, partners and others in a business relationship
with Sage and information on how the Directors have
considered their interests and the effect of that
consideration on principal decisions taken by the
Boardduring the year are provided on pages 47 to 59.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 165
Financial Statements Additional InformationGovernance ReportStrategic Report
Major shareholdings
As at 30 September 2023, Sage had been notified, in
accordance with the DTRs, of the following interests in its
ordinary share capital:
1
Name Ordinary shares % of capital
Nature of
holding
FMR LLC 51,544,929 5.02% Indirect
FIL Limited 50,373,561 4.92%
Direct and
Indirect
Aviva plc 40,661,335 3.97% Direct
Notes:
1. In the period from 30 September 2023 to the date of this report, no further
notifications were received.
2. % as at date of notification. The DTRs require notification when the %
ofvoting 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 244. Sage has asingle
class of share capital which is divided into ordinary shares
of1
4/77
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 1 February 2024 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 and may fix the time for payment of such
dividend, 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 but no member shall be compelled to
accept any assets upon which there is any liability.
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.
Directors’ Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023166
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).
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
2 February 2023 to buy back in the market up to 102,351,092
ordinary shares (the “2023 Buyback Authority”), replacing
similar authority granted at the AGM held in 2022. No shares
were purchased during the year under review, and the
2023Buyback Authority has not been used as at the date
ofsigning this report. However, alongside our FY23 results
wehave announced a share buyback programme of up to
£350 million, running from [22] November 2023 and expected
to end no later than [23 April 2024] (the “2023/2024 Buyback
Programme”). The 2023 Buyback Authority will expire at the
AGM to be held in 2024, 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
2023/2024 Buyback Programme is consistent with the
Group’s disciplined capital allocation policy, and reflects
the Board’s confidence in Sage’s future prospects, together
with Sage’s strong cash generation and robust financial
position. Sage continues to have considerable financial
flexibility to drive the execution of its growth strategy.
Shares repurchased under the 2023/2024 Buyback Programme
will be cancelled. Information on transactions in own
shareswill be made publicly available via the regulatory
information service and on Sage’s website at sage.com.
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 by special resolution at
theAGM 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 AGM 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 AGM of Sage, every
Director who held office as at 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 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 AGM 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 167
Financial Statements Additional InformationGovernance ReportStrategic Report
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 €500m 3.820 per cent guaranteed
Notes due 15 February 2028 (issued under Sage’s EMTN
Programme); (ii) the £350m 1.625 per cent guaranteed
Notes due 25 February 2031; and (iii) the £400m 2.875 per
cent guaranteed Notes due 8 February 2034, which are all
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 £630m five-year multi-currency revolving credit
facility agreement dated 13 December 2022 and made
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 Sections 450 and 451 of the Corporation
Taxes Act 2010.
• 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.
Directors’ Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023168
Branch
The Group, through various subsidiaries, has a branch in
France. Further details are included in note 19 on pages 257
to 260.
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 of the financial statements.
Our approach to risk management generally and our
Principal Risks can be found in note 14.6 and on pages 68
to81.
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.
In preparing these financial statements the Directors are
required to:
• Select suitable accounting policies and then apply
themconsistently;
• Make judgements and estimates that are reasonable
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 169
Financial Statements Additional InformationGovernance ReportStrategic Report
The Directors as at the date of this report, whose names
andfunctions are listed in the Board of Directors’ section
onpages 88 to 89, 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.
Each Director as at the date of this report further
confirmsthat:
• 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
21 November 2023
The Sage Group plc. Company number 02231246
Directors’ Report continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023170
Financial statements
Pages
Independent Auditor’s Report to the members
of The Sage Group plc. 172
Consolidated financial statements
Consolidated income statement 182
Consolidated statement of comprehensive income 183
Consolidated balance sheet 184
Consolidated statement of changes in equity 185
Consolidated statement of cash flows 187
Notes to the consolidated financial statements
1. Basis of preparation and accounting
estimates and judgements 188
2. Segment information 191
3. Profit before income tax 197
4. Income tax expense 207
5. Earnings per share 210
6. Intangible assets 212
7. Property, plant and equipment 217
8. Equity investments 219
9. Working capital 219
10. Provisions 223
11. Post-employment benefits 225
12. Deferred income tax 228
13. Cash flow and net debt 230
14. Financial instruments 234
15. Equity 244
16 Acquisitions and disposals 253
17. Related party transactions 256
18. Events after the balance sheet date 257
19. Group undertakings 257
Additional InformationGovernance Report
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 171
Strategic Report Financial Statements
Independent Auditor’s
Report to the members
ofThe Sage Group plc.
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 2023 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 2023 which comprise:
Group Parent company
Consolidated balance sheet as at 30 September 2023 Company Balance sheet as at 30 September 2023
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.
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;
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023172
• We obtained management’s going concern assessment, including the cash flow forecast for the going concern period to
31 March 2025. We assessed whether the period applied is appropriate, through considering the existence of any
significant events or conditions beyond this period based on management’s forecasting and knowledge arising from the
audit that should be taken into account in the going concern assessment;
• We confirmed the Group’s access to available sources of liquidity and the relevant maturity dates;
• 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, 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 reperformed management’s reverse stress test to establish the level of change in revenue necessary to cause a
liquidity breach and considered 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2025.
We observed that in both 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 new customer acquisitions and sales to existing customers, management has
determined that there is liquidity headroom without taking the benefit of any identified controllable mitigations.
Furthermore, management’s reverse stress test identifies the revenue reduction compared to forecasts required to breach
minimum liquidity thresholds during the going concern assessment period. The occurrence of a revenue reduction of this
magnitude 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 a period to 31 March 2025.
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.
Overview of our audit approach
Audit scope • We performed an audit of the complete financial information of 7 components and audit
procedures on specific balances for a further 3 components.
• The components where we performed full or specific audit procedures accounted for 94%
ofAdjusted Profit before tax*, 93% of Revenue and 99% of Total assets.
Key audit matters • Inappropriate timing of revenue recognition, due to cut-off errors or incorrect deferral
• Recoverability of goodwill
Materiality
• Overall group materiality of £16.0m which represents 5% of Profit before tax adjusted for
non-recurring items.
* Adjusted profit before tax is presented on an absolute basis
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 173
Governance Report Additional InformationFinancial StatementsStrategic Report
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, the potential impact of climate change and other factors such as recent Internal audit
results when assessing the level of work to be performed at each component.
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 24 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 7 components (“full scope
components”) which were selected based on their size or risk characteristics. For the remaining 3 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% (2022: 94%) of the Group’s Adjusted Profit
before tax*, 93% (2022: 94%) of the Group’s Revenue and 99% (2022: 98%) of the Group’s Total assets. For the current year, the
full scope components contributed 82% (2022: 80%) of the Group’s Adjusted Profit before tax*, 75% (2022: 62%) of the Group’s
Revenue and 95% (2022: 90%) of the Group’s Total assets. The specific scope component contributed 12% (2022: 14%) of the
Group’s Adjusted Profit before tax, 18% (2022: 32%) of the Group’s Revenue and 4% (2022: 8%) 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 14 components that together represent 6% of the Group’s Adjusted Profit before tax*, none are individually
greater than 3% 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 any potential risks of material misstatement to
the Group financial statements.
The table below illustrate the coverage obtained from the work performed by our audit teams.
2023 2022
Reporting components Number
% Group
Adjusted
Profit
before
tax*
% Group
Revenue
% Total
assets Note Number
% Group
Adjusted
Profit
before
tax*
% Group
Revenue
% Total
assets
Full scope 7 82% 75% 95% 1,3 6 80% 62% 90%
Specific scope 3 12% 18% 4% 2,3 4 14% 32% 8%
Full and specific
scopecoverage 10 94% 93% 99% 10 94% 94% 98%
Remaining components 14 6% 7% 1% 4 13 6% 6% 2%
Total Reporting components 24 100% 100% 100% 23 100% 100% 100%
* Adjusted profit before tax is presented on an absolute basis
Notes
1. There has been an increase in number of full scope components in the current period from 6 to 7 - Intacct is now included as a full scope component in the
current year (FY22: specific scope) as the component contributes a more significant part of Group Adjusted Profit before tax. 3 of the 7 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 4 full scope components are - Intacct, UKI, France and North America (excluding Intacct).
2. Specific scope components are Germany, 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 four full scope components and three specific scope components). The Group audit risk in relation to the recoverability of goodwill
was tested by the Primary audit team.
4. In the current year, the remaining 14 components contributed 6% of Adjusted Profit before tax* and the individual contribution of these components ranged
from nil to 3% 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.
Independent Auditor’s Report to the members of The Sage Group plc.
continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023174
Changes from the prior year
The change in the total number of reporting components from 23 to 24 is a result of the acquisition of Corecon Technologies,
Inc. during the period. As discussed above, the number of full scope components has increased from 6 to 7 in the current period.
Intacct is now included as a full scope component following continued growth within the component and its increasing
significance to overall group revenue and profits. This has reduced the number of specific scope components from4 to 3.
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 7 full scope components, audit procedures were performed on 2 of these directly by
the primary audit team. For the 5 full scope components and 3 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.
The Group audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior
Statutory Auditor, Kathryn Barrow, together with other group partners and senior members of the primary audit team, visits
aseries of 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. The primary team interacted regularly with
thecomponent teams, where appropriate, 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, increasing cost of energy and carbon, hosting resilience and
changing customer behaviour. These are explained on pages 44-45 in the Task Force for Climate related Financial Disclosures
and on pages 74 to 81 in the principal risks and uncertainties. They have also explained their climate commitments on pages
32 to 33 in “Sustainability and Society”. All of these disclosures form part of the “Other information,” rather than the audited
financial statements. Our procedures on these unaudited 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, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
The group has explained in Note 1 Basis of Preparation to the consolidated financial statements how they have reflected the
impact of climate change in their financial statements. 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 means that they cannot be taken into account
when determining asset and liability valuations 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 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 the impact of climate change on the financial statements was focused on evaluating
management’s assessment of the impact of climate risk, physical and transition, their climate commitments, and ensuring that
the effects of material climate risks disclosed on page 44 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 risks in their assessment of going concern and viability and associated disclosures.
Based on our work, we have not identified the impact of climate change on the financial statements to be a key audit matter
orto impact a key audit matter.
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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 175
Governance Report Additional InformationFinancial StatementsStrategic Report
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.
Risk Our response to the risk
Key observations
communicated
totheAudit and
RiskCommittee
Inappropriate
revenue
recognition due
tocut-off errors or
incorrect deferral
Refer to the Audit and
Risk Committee
Report (page 121);
Accounting policies
(page 190);
andNote3.1 ofthe
Consolidated
Financial Statements
(page 198-200)
The Group has
reported revenues
of£2,184 million
(FY22: £1,947 million)
with deferredincome
at30September 2023
of£752 million
(FY22:£742million).
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, due to
cut-off errors or
incorrect deferral.
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 alongside
related IT controls, however we did not test the operating effectiveness
ofthese controls atall components. For two components, we tested the
operating effectiveness of certain key controls within the revenue process.
Timing of revenue recognition, due to cut-off errors orincorrect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 (accounting estimates and judgments) and note
3.1 (Revenue) in the consolidated financial statements.
We performed full and specific scope audit procedures over this risk area in 10
locations, which covered 93% of the risk amount, with the remaining 7% of revenue
being covered by review scope procedures. These procedures included updating
our understanding of the business alongside key processes, management
enquiries and analytical review relative to budgets and prior periods.
Based on the
procedures
performed,
weconsider
thetiming
ofrevenue
recognition to
beappropriate for
the year ended
30September
2023. We did not
identify a material
misstatement
asaresult of
inappropriate
revenue
recognition due
tocut-off errors or
incorrect deferral.
Independent Auditor’s Report to the members of The Sage Group plc.
continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023176
Risk Our response to the risk
Key observations
communicated
totheAudit and
RiskCommittee
Recoverability of
goodwill
Refer to the Audit and
Risk Committee
Report (page 121);
Accounting policies
(page 190); andNote
6.1 of the
Consolidated
FinancialStatements
(pages212-214)
Goodwill of £2,245m
isrecognised in the
Group’s consolidated
balance sheet at 30
September 2023
(FY22:£2,391m).
We continue to
include the
recoverability of
goodwill 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
• the audit effort
andexecutive
involvement.
Valuation model
Management performed its annual impairment assessment as at 30June2023.
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 FY24
forecasts including new customer acquisition, upsell/add-ons and level of
churn by assessing these against the results achieved in FY23 and the prior
track record of growth.
• For forecasts for FY24-FY26, 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 FY23 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
(accounting estimates and judgments) and note 6.1 (goodwill) in the consolidated
financial statements. We considered whether any reasonably possible change
disclosures were required based upon the headroom within the sensitivity
analysis. This included the removal of the sensitivity disclosure for Iberia,
compared to prioryear.
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.
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 £16.0 million (2022: £13.2 million), which is 5% (2022: 5%) of Adjusted Profit
before tax*. We believe that Profit before tax adjusted for non-recurring items provides us with the most relevant
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 177
Governance Report Additional InformationFinancial StatementsStrategic Report
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. Adjustments for non-recurring items in 2023 include property
restructuring costs £32m, employee related costs £9m with a reversal of restructuring costs (£3m). In 2022 non-recurring
items included a gain on disposal of subsidiaries (£53m) and the reversal of restructuring costs (£20m).
We determined materiality for the Parent Company to be £40.2 million (2022: £40.3 million), which is 1% (2022: 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.
Starting
basis
• Total profit before tax of £282m
Adjustments
• Adjustments for non-recurring items
• Property restructuring costs- £32m
• Employee-related costs - £9m
• Reversal of restructuring costs -(£3m)
Materiality
• Totals £ 320m
• Materiality of £16m (5% of materiality basis)
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% (2022: 75%) of our planning materiality, namely £12.0m (2022: £9.9m). 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£2.4m to £8.6m (2022: £1.0m to £8.0m).
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
£0.8m (2022: £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.
Independent Auditor’s Report to the members of The Sage Group plc.
continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023178
Other information
The other information comprises the information included in the annual report set out on pages 1- 170, 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 164-165;
• 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 82-83;
• 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 164-165;
• Directors’ statement on fair, balanced and understandable set out on page 170;
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 179
Governance Report Additional InformationFinancial StatementsStrategic Report
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
onpages74-81;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on pages 68-81; and
• The section describing the work of the audit committee set out on pages 118-128.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 169-170, 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 Sage Group plc 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.
• 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.
Independent Auditor’s Report to the members of The Sage Group plc.
continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023180
• Based on this understanding, we designed our audit procedures to identify non-compliance with such 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 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 9 years, covering the
years ending 30 September 2015 to 30 September 2023.
• 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
21 November 2023
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 181
Governance Report Additional InformationFinancial StatementsStrategic Report
Consolidated statement of comprehensive income
For the year ended 30 September 2023
182
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
Note
Underlying
2023
£m
Adjustments
(note 3.6)
2023
£m
Statutory
2023
£m
Underlying
as reported*
2022
£m
Adjustments
(note 3.6)
2022
£m
Statutory
2022
£m
Revenue 2.1, 3.1 2,184
– 2,184
1,949
(2
)
1,947
Cost of sales (156)
–
(156
)
(138)
– (138)
Gross profit
2,028
–
2,028
1,811
(2
)
1,809
Selling and administrative expenses (1,572)
(141) (1,713)
(1,434)
(8
)
(1,442)
Operating profit 2.2, 3.2, 3.3, 3.6
456
315
377
(10
)
367
Finance income 3.5
12 – 12
1
– 1
Finance costs 3.5
(44) (1)
(45
)
(32)
1 (31)
Profit before income ta
x
424
(142) 282
346
(9
)
337
Income tax expense 4 (95)
24
(
71
)
(83)
6 (77)
Profit for the
y
ear 329
(118) 211
263
(3
)
260
Profit attributable to:
Owners of the parent
329
(118) 211
263
(3) 260
Earnings pe
r share attributable to the owners of the parent (pence
)
Basic 5
32.25p
20.75p
25.74p
25.47p
Diluted 5
31.75p
20.43p
25.44p
25.17p
All operations in the year relate to continuing operations.
Note:
* Underlying as reported is at 2022 reported exchange rates.
(141)
Consolidated statement of comprehensive income
For the year ended 30 September 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
183
Note
2023
£m
2022
£m
Profit for the
y
ear
211 260
Items of other comprehensive income that will not be reclassified to profit or loss:
Fair value gain on reassessment of equity investment 8
– 30
Actuarial gain on post-employment benefit obligations 11, 15.4
– 3
– 33
Items that ma
y
be reclassified to profit or loss:
Exchange differences on translating foreign operations and net investment hedges 15.3 (82
)
177
Cash flow hedges 15.3
4 –
Exchange differences recycled through income statement on sale of foreign operations 15.3, 16.2
– (13)
(78
)
164
Other comprehensive (expense)
/
income for the
y
ear, net of ta
x
(78
)
197
Total comprehensive income for the
y
ear
133 457
Total comprehensive income for the
y
ear attributable to:
Owners of the parent
133 457
Consolidated balance sheet
As at 30 September 2023
184
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
Note
2023
£m
2022
Restated
*
£m
Non-current assets
Goodwill 6.1
2,245 2,391
Other intangible assets 6.2
274 320
Property, plant and equipment 7
104 152
Equity investments 8
4 4
Trade and other receivables 9.1
138 128
Deferred income tax assets 12
56 19
Derivative financial instruments 14.5
1 –
2,822 3,014
Current assets
Trade and other receivables 9.1
376 355
Current income tax asset
42 39
Cash and cash equivalents (excluding bank overdrafts) 13.3
696 489
1,114 883
Total assets
3,936 3,897
Current liabilities
Trade and other payables 9.2
(378) (368)
Current income tax liabilities
(25) (13)
Borrowings 13.4
(14) (178)
Provisions 10
(23) (33)
Deferred income 9.3
(745) (734)
(1,185) (1,326)
Non-current liabilities
Borrowings 13.4
(1,243) (1,044)
Post-employment benefits 11
(19) (19)
Deferred income tax liabilities 12
(18) (17)
Provisions 10
(24) (20)
Trade and other payables 9.2
(13) (6)
Deferred income 9.3
(7) (8)
Derivative financial instruments 14.5
(20) (60)
(1,344) (1,174)
Total liabilities
(2,529) (2,500)
Net assets
1,407
1,397
Equit
y
attributable to owners of the parent
Ordinary shares 15.1
12 12
Share premium
548 548
Other reserves 15.3
189 267
Retained earnings 15.4
658 570
Total equit
y
1,407 1,397
Notes:
* Restated for finalisation of the fair value of assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16).
The consolidated financial statements on pages 182 to 260 were approved by the Board of Directors on 21 November 2023 and
are signed on their behalf by:
Jonathan Howell
Chief Financial Officer
Consolidated statement of changes in equity
For the year ended 30 September 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
185
Attributable to owners of the parent
Note
Ordinary
shares
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 October 2022
12 548 267 570 1,397
Profit for the
y
ear
– – – 211 211
Other comprehensive (expense)
/
income:
Exchange differences on translating foreign operations
and net investment hedges 15.3
– –
(82)
–
(82)
Cashflow hedges 14.5, 15.3
– – 4 – 4
Total comprehensive (expense)
/
income
for the year ended
30 September 2023
– –
(78)
211 133
Transactions with owners:
Employee share option scheme—value of employee
services including deferred tax 15.4
– – –
57 57
Proceeds from issuance of treasury shares
15.4
– – – 11 11
Purchase of shares by Employee Benefit Trust 15.4
– – –
(1
)
(1
)
Dividends paid to owners of the parent 15.4, 15.5
– – – (190) (190)
Total transactions with owners for the
y
ear ended
30 September 2023
– – – (123) (123)
At 30 September 2023
12 548 189 658 1,407
Consolidated statement of changes in equity
For the year ended 30 September 2023
186
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
Attributable to owners of the parent
Note
Ordinary
shares
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 October 2021 12 548 103 448 1,111
Profit for the
y
ear – – – 260 260
Other comprehensive income/(expense):
Exchange differences on translating foreign operations
and net investment hedges 15.3 – – 177 – 177
Exchange differences recycled through income statement
on sale of foreign operations 15.3 – – (13) – (13)
Fair value gain on reassessment of equity investment 8 – – – 30 30
Actuarial gain on post-employment benefit obligations 15.4 – – – 3 3
Total comprehensive income for the
y
ear ended
30 September 2022 – – 164 293 457
Transactions with owners:
Employee share option scheme—value of employee
services including deferred tax
15.4 – – – 37 37
Proceeds from issuance of treasury shares 15.4 – – – 7 7
Purchase of shares by Employee Benefit Trust 15.4 – – – (32) (32)
Dividends paid to owners of the parent 15.4, 15.5 – – – (183) (183)
Total transactions with owners for the
y
ear ended
30 September 2022 – – – (171) (171)
At 30 September 2022 12 548 267 570 1,397
Consolidated statement of cash flows
For the year ended 30 September 2023
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
187
Note
2023
£m
2022
£m
Cash flows from operating activities
Cash ge
nerated from continuing operations 13.1
505 368
Interest paid
(33
)
(21)
Income tax paid
(85) (62)
Net cash generated from operating activities
387 285
Cash flows from investing activities
Disposal of subsidiaries, net of cash disposed – 42
Acquisition of subsidiaries, net of cash acquired 16.1
(26
)
(285)
Purchases of intangible assets 6.2
(17
)
(40)
Purchases of property, plant and equipment 7
(5
)
(12)
Proceeds from disposals of property, plant and equipment 16.2
– 10
Interest received 3.5
12
1
Net cash used in investing activities
(36
)
(284)
Cash flows from financing activities
Proceeds from borrowings 13.2 440 516
Repayments of borrowings 13.2
(353
)
(166)
Capital element of lease payments 13.2
(18
)
(19)
Borrowing costs
(3
)
(1)
Proceeds from issuance of treasury shares
11
7
Share buyback programmes 15.4
– (249)
Purchase of shares by Employee Benefit Trust 15.4
(1
)
(32)
Dividends paid to owners of the parent 15.5
(190
)
(183)
Net cash used in financing activities
(114
)
(127)
Net increase/
(
decrease
)
in cash and cash equivalents
(before exchange rate movement)
237 (126)
Effects of exchange rate movement 13.2
(30
)
48
Net increase/
(
decrease
)
in cash and cash equivalents 207 (78)
Cash, cash equivalents and bank overdrafts at 1 October 13.2 489 567
Cash, cash equivalents and bank overdrafts at 30 September 13.2 696 489
Notes to the consolidated financial statements
188
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
1 Basis of preparation and 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
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.
In July 2023, the UK Endorsement Board adopted 'International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12) as
issued by the IASB. The Amendments introduce a temporary mandatory exception from accounting for deferred taxes arising
from the Pillar Two model rules, effective immediately and retrospectively, and the Group has applied this exception.
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 2023.
None are expected to have a material impact on the consolidated financial statements when first applied.
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 1 to 83.
In preparing these financial statements, the Directors have reviewed and approved a going concern assessment which considers
the liquidity forecast of the Group for the period through to 31 March 2025 (the going concern assessment period). The liquidity
forecast reflects the expected impact of the economic environment, including the current inflationary environment. More
specifically, full consideration has been given to the potential 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, supported by strong underlying cash conversion of 116%, reflecting the
strength of the subscription business model; and
• A well-diversified small and medium-sized customer base which is geographically diverse.
In preparing the going concern assessment scenario-specific stress testing has been performed, with the level of churn
assumptions increasing by 75%, and a significant reduction in the level of new customer acquisition and sales to existing
customers. Under these scenarios, the Group continues to have sufficient resources to continue in operational existence
without the need to drawdown on its revolving credit facility or seek additional financing. If more severe impacts occur there
are further controllable mitigating actions which can be taken to protect liquidity, including the reduction of discretionary
spend. Stress testing has also been performed as part of the severe but plausible scenarios (as described within the Viability
Statement on pages 82 and 83).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
189
The Directors have 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 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 highly
significant deterioration in performance, well in excess of the assumptions considered in the stress testing scenarios above.
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 and parent Company
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 164 to 165.
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. Foreign exchange movements on
derivative financial instruments which are designated in cash flow hedge relationships are included in the profit or loss for the
period, to offset foreign currency movements in the hedged item.
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 provided in the Strategic Report (see pages 30 to 45).
As a business, we are committed to reducing our carbon emissions and target achieving net zero by 2040. We support our
customers, small and mid-sized businesses, in achieving net zero by sharing the knowledge, technology and skills to be a
driving force for change. We also support more broadly by advocating for enabling policies and standards that support a
transition to a low-carbon economy.
We recognise the importance of identifying and effectively managing the physical and transitional risks that climate
change poses to our operations and consider the impact of climate-related matters, including legislation, on our business.
The climate change scenario analyses undertaken in line with Task Force on Climate-related Financial Disclosures (TCFD)
recommendations did not identify any material impact on the Group’s financial results, going concern or viability. More
specifically:
• In preparing the viability assessment, consideration has been given to the potential impact of climate change over the next
three years, as set out in the Strategic Report.
• Climate change related factors on matters including residual values, useful lives and depreciation and amortisation periods
which relate to non-current assets have also been considered, with no impact identified at this stage.
• In our future forecasts used for goodwill impairment and the going concern assessment, we have considered the extent to
which costs associated with our climate related commitments have been considered, as well as broader societal
commitments. These commitments do not have a material impact.
Notes to the consolidated financial statements continued
190
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
1 Basis of preparation and accounting estimates and judgements continued
Climate change continued
• We have also considered the extent to which climate change could impact longer-term economic growth, which may impact
long-term growth rates used in the goodwill impairment test. Sensitivity testing demonstrates that all cash-generating units
(CGUs) retain sufficient headroom.
Accounting estimates and judgements
The preparation of financial statements requires the use of accounting estimates and judgements by management. It also
requires management to exercise its judgement in the process of applying the accounting policies. We continually evaluate our
estimates and judgements based on available information.
Management has determined that there are no areas of estimation uncertainty that could be significant under IAS 1,
‘Presentation of Financial Statements’, being areas of estimation uncertainty with a significant risk of a material change to the
carrying value of assets and liabilities within the next financial year.
Other key estimates are made when preparing the financial statements, which, while not meeting the definition of a significant
estimate under IAS 1, involve the measurement of certain material assets or a higher degree of complexity.
Significant judgements are those made by management in applying our accounting policies that have a material impact on the
amounts presented in the financial statements.
Management’s rationale in relation to these key accounting estimates and significant judgements are regularly assessed and,
where material in value or in risk, are discussed with the Audit and Risk Committee. These areas are discussed in further detail
below:
Revenue recognition (judgement)
Over a third of the Company’s revenue is generated from sales to business partners rather than end users. The key judgement is
determining whether the business partner is a customer of the Group. The key criterion 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 (see note 9.1).
Goodwill impairment (estimate)
The estimates applied in calculating the value in use of the CGUs being tested for impairment are a source of estimation
uncertainty. The key estimates considered in the calculation relate to the future performance expectations of the business and
include the average medium-term revenue growth rate, the long-term growth rate of net operating cash flows and the discount
rate.
Further information on these key estimates, as well as the level at which goodwill is monitored and the results of sensitivity
analysis are disclosed in note 6.1.
Business combinations (judgement and estimate)
During the year, the Group finalised the purchase price accounting for Lockstep Network Holdings Inc (“Lockstep”), for which
the Group acquired 100% of the equity capital and voting rights in August 2022. At the end of the prior year, the amounts
recognised relating to the acquisition were provisional. During the current year, the purchase price accounting has been
finalised, therefore certain adjustments have been recognised in the year. These adjustments include the recognition of
intangible assets and deferred tax liabilities, offset by a reduction in the amount of goodwill provisionally recognised in the
prior year. Further explanation of the changes are set out in note 16.
Key areas of judgement and estimation include the identification and subsequent measurement of acquired intangible assets,
for which an external expert was engaged to support the exercise. The recognised intangible assets included technology and
customer relationships. The fair value of the acquired technology was determined using the relief from royalty method and the
customer relationship was determined using a discounted cashflow approach. These valuation techniques incorporate several
key estimates including revenue forecasts and the application of an appropriate discount rate to state future cash flows at their
present value. In addition, the relief from royalty method requires the use of an appropriate royalty rate, which was corroborated
against the Group's own royalty rates used for internal transfer pricing purposes as well as external benchmark data.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
191
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 UK & Ireland, North America and Europe. 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 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 and unhedged FX on intercompany balances; 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:
• Statutory revenue per segment reconciled to the statutory 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.
Notes to the consolidated financial statements continued
192
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
2 Segment information continued
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.
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 (ELT) 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
ELT 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, UK & Ireland, Central Europe (Germany and
Austria), 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
• UK & Ireland
• Europe (Central Europe, France, and Iberia)
The remaining operating segments of Africa and the Middle East, and Asia (including Australia) do not meet the
quantitative thresholds for presentation as separate reportable segments under IFRS 8, and so are presented together and
described as Africa & APAC. They include the Group’s operations in South Africa, the Middle East, Australia, Singapore and
Malaysia.
In previous years, the UK & Ireland reportable segment was presented as Northern Europe, the Europe reportable segment
was presented as International—Central and Southern Europe, and the Africa & APAC segment was presented as
International—Africa & APAC.
The reportable segment 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 customers are in countries within the EU.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
193
2.1 Revenue by segment
Year ended 30 September 2023 Change
Statutory
£m
Underlying
adjustments
£m
Underlying
£m
Organic
adjustments
*
£m
Organic
£m Statutory Underlying Organic
Recurring revenue b
y
segment
North America
944 – 944 (1) 943 20% 16% 15%
UK & Ireland
466 – 466 – 466 9% 9% 8%
Europe
541 – 541 – 541 10% 7% 8%
Africa & APAC
145 – 145 – 145 4% 13% 13%
Recurring revenue
2,096 – 2,096 (1) 2,095 14% 12% 11%
Other revenue b
y
segment
North America
29 – 29 – 29
(11%
)
(14%
)
(15%
)
UK & Ireland
5 – 5
(1
)
4
(20%
)
(20%
)
(39%
)
Europe
43 – 43 – 43
(19%
)
(21%
)
(21%
)
Africa & APAC
11 – 11 – 11
(17%
)
(12%
)
2%
Other revenue
88 – 88 (1) 87
(16%
)
(18%
)
(18%
)
Total revenue b
y
segment
North America
973 – 973
(1)
972 19% 15% 14%
UK & Ireland
471 – 471
(1)
470 9% 8% 7%
Europe
584 – 584 – 584 7% 5% 5%
Africa & APAC
156 – 156 – 156 2% 11% 12%
Total revenue
2,184 – 2,184
(2)
2,182 12% 10% 10%
Year ended 30 September 2023 Change
Statutory
£m
Underlying
adjustments
£m
Underlying
£m
Organic
adjustments
*
£m
Organic
£m Statutory Underlying Organic
Total recurring revenue
by type
Software Subscription Revenue
1,732 – 1,732 (1) 1,731 19% 17% 16%
Other Recurring Revenue
364 – 364 – 364
(4%
)
(7%
)
(7%
)
Recurring revenue
2,096 – 2,096 (1) 2,095 14% 12% 11%
Other revenue
88 – 88 (1) 87
(16%
)
(18%
)
(18%
)
Total revenue
2,184 – 2,184 (2) 2,182 12% 10% 10%
Notes:
* Adjustments relate to the acquisitions of Spherics and Corecon (see note 16).
Notes to the consolidated financial statements continued
194
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
2 Segment information continued
2.1 Revenue by segment continued
Year ended 30 September 2022
Statutory
£m
Underlying
adjustments
*
£m
Underlying
as reported
£m
Impact of
foreign
exchange
£m
Underlying
£m
Organic
Adjustments*
*
£m
Organic
£m
Total recurring revenue b
y
t
y
pe
Software Subscription Revenue 1,462 2 1,464 20 1,484 8 1,492
Other Recurring Revenue 381 – 381 10 391 (1
)
390
Recurring revenue 1,843 2 1,845 30 1,875 7 1,882
Other revenue 104 – 104 3 107 (3
)
104
Total revenue 1,947 2 1,949 33 1,982 4 1,986
Notes:
* Adjustments between statutory and underlying numbers are detailed in note 3.6.
** Adjustments relate to the acquisition of Brightpearl, Lockstep and Futrli, and disposal of the Group’s Swiss business and its payroll outsourcing business in
South Africa in the prior year.
Year ended 30 September 2022
Statutory
£m
Underlying
adjustments
*
£m
Underlying
as reported
£m
Impact of
foreign
exchange
£m
Underlying
£m
Organic
Adjustments*
*
£m
Organic
£m
Recurring revenue b
y
segment
North America 786 1 787 28 815 6 821
UK & Ireland 427 1 428 1 429 5 434
Europe 490 – 490 13 503 (4
)
499
Africa & APAC 140 – 140 (12
)
128 – 128
Recurring revenue 1,843 2 1,845 30 1,875 7 1,882
Other revenue b
y
segment
North America 32 – 32 2 34 – 34
UK & Ireland 6 – 6 – 6 – 6
Europe 53 – 53 2 55 (1
)
54
Africa & APAC 13 – 13 (1
)
12 (2
)
10
Other revenue 104 – 104 3 107 (3
)
104
Total revenue b
y
segment
North America 818 1 819 30 849 6 855
UK & Ireland 433 1 434 1 435 5 440
Europe 543 – 543 15 558 (5
)
553
Africa & APAC 153 – 153 (13
)
140 (2
)
138
Total revenue 1,947 2 1,949 33 1,982 4 1,986
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
195
2.2 Operating profit by segment
Year ended 30 September 2023 Change
Statutory
£m
Underlying
adjustments
£m
Underlying
£m
Organic
adjustments
£m
Organic
£m Statutory Underlying Organic
Operating profit b
y
segment
North America
1
27 71
1
98 –
1
98 9% 30% 36%
UK & Ireland
59 55
1
14
1
1
15 2% 6% 14%
Europe
1
08
1
0
1
18 –
1
18 (29%
)
25% 26%
Africa & APAC
21 5 26 – 26 (49%
)
(21%
)
(21%
)
Total operating profit 315
1
41 456
1
457 (14%
)
18% 22%
Year ended 30 September 2022
Statutory
£m
Underlying
adjustments
£m
Underlying as
reported
£m
Impact of
foreign
exchange
£m
Underlying
£m
Organic
adjustments
£m
Organic
£m
Operating profit b
y
segment
North America 116 30 146 6 152 (6
)
146
UK & Ireland 58 4
7
105 1 106 (5
)
101
Europe 152 (61) 91 4 95 – 95
Africa & APAC 41 (6) 35 (2
)
33 (1
)
32
Total operating profit 367 10 377 9 386 (12
)
374
The results by segment from continuing operations were as follows:
Year ended 30 September 2023 Note
North
America
£m
UK & Ireland
£m
Europe
£m
Total
reportable
segments
£m
Africa &
APAC
£m
Group
£m
Revenue 973 471 584 2,028
1
56 2,184
Segment statutor
y
operating profit
1
27 59
1
08 294 21 3
1
5
Finance income 3.5
1
2
Finance costs 3.5
(45
)
Profit before income tax 282
Income tax expense 4
(
71
)
Profit for the
y
ear 2
1
1
Notes to the consolidated financial statements continued
196
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
2 Segment information continued
2.2 Operating profit by segment continued
Reconciliation of underlying operating profit to statutory operating profit:
Year ended 30 September 2023
North
America
£m
UK & Ireland
£m
Europe
£m
Total
reportable
segments
£m
Africa &
APAC
£m
Group
£m
Underlying operating profit
1
98
1
14
1
18 430 26 456
Amortisation of acquired intangible assets (note 3.6) (26
)
(23
)
(3
)
(52
)
(2
)
(54
)
Other acquisition-related items (note 3.6)
(19
)
(26
)
(1
)
(46
)
(3
)
(49
)
Non-recurring items (note 3.6)
(26
)
(6
)
(6
)
(
38
)
–
(
38
)
Statutor
y
operating profit
1
27 59
1
08 294 21 315
The results by segment from continuing operations were as follows:
Year ended 30 September 2022 Note
North
America
£m
UK & Ireland
£m
Europe
£m
Total
reportable
segments
£m
Africa &
APAC
£m
Group
£m
Revenue 818 433 543 1,794 153 1,947
Segment statutor
y
operating profit 116 58 152 326 41 367
Finance income 3.5 1
Finance costs 3.5 (31)
Profit before income tax 337
Income tax expense 4 (77)
Profit for the
y
ear 260
Reconciliation of underlying operating profit to statutory operating profit:
Year ended 30 September 2022
North
America
£m
UK & Ireland
£m
Europe
£m
Total
reportable
segments
£m
Africa &
APAC
£m
Group
£m
Underlying operating profit 146 105 91 342 35 377
Amortisation of acquired intangible assets (note 3.6) (21) (18) (3) (42) – (42)
Adjustment to acquired deferred income (note 3.6) (1) (1) – (2) – (2)
Other acquisition-related items (note 3.6) (9) (29) (1) (39) – (39)
Non-recurring items (note 3.6) 1 1 65 67 6 73
Statutor
y
operating profit 116 58 152 326 41 367
Impairment losses of £22m (2022: £nil) reported by the Group, and included as a non-recurring item, relate to the impairment of
assets arising from the property restructuring programme. See note 3.6.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
197
2.3 Analysis by geographic location
Management considers countries which generate 10% or more 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
2023
£m
2022
£m
USA 846 702
UK 443 409
France
295 273
Other individually immaterial countries
600 563
2,184 1,947
Management considers countries which contribute 10% or more 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
2023
£m
2022
Restated
*
£m
USA
1
,657 1,848
UK 566 588
France
264 265
Other individually immaterial countries
270 286
2,757 2,987
Notes:
* Restated for finalisation of the fair value assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16.1).
3 Profit before income tax
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.
Notes to the consolidated financial statements continued
198
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
3 Profit before income tax continued
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 revenue
Other recurring revenue
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. Included within subscription revenue are
transaction and agent fees for transactions that customers of our software
execute through our digital network, some of which is billed on a consumption basis.
Other recurring revenue primarily comprises maintenance and support revenue
provided over a contractual term. In the event that the customer stops paying, they
l
ose access to technical product support as well as any non-specified updates,
upgrades and enhancements.
Subscription revenue and other recurring 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. Digital
network transaction and agent fees, to the extent billed on a consumption basis, are
recognised as the services are utilised.
Other revenue
Software and software-
related services
• Perpetual software licences
• Upgrades to perpetual licences
• Professional services
• Training
Revenue relating to perpetual software licences with significant standalone
functionality and upgrades to such licenses is recognised when the control relating
to the licence has been transferred, which is typically when electronic delivery has
taken place.
Professional services and training revenue is usually 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 do not require
unbundling as the terms do not provide the customer with a right to terminate the hosting contract and take possession of
the software.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
199
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 classroom training revenue are typically recognised as they are delivered. 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 (including digital network transaction and agent fees) are recognised as the services are
provided.
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 criterion 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.
Notes to the consolidated financial statements continued
200
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
3 Profit before income tax continued
3.1 Revenue continued
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
2023
£m
2022
£m
Staff costs
1
,048 905
Depreciation of property, plant and equipment 7 39 41
Impairment of property, plant and equipment 3.6, 7
22 –
Amortisation of intangible assets 6.2
69 56
Customer acquisition amortisation expense 9.1
1
47 123
Gain on disposal of subsidiaries 3.6
– (53)
Other M&A activity-related items 3.6
49 39
The Group incurred £342m (2022: £302m) of research and development expenditure in the year, of which £295m (2022: £257m)
relates to total Group staff costs included above. See note 6.2 for the research and development accounting policy.
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:
2023
£m
2022
£m
Fees payable to the Group’s auditor for the audit of the Company and the consolidated accounts 3 2
Fees payable to the Group’s auditor for the audit of the Company’s subsidiaries 3 3
Total fees
6 5
Fees payable to the Group’s auditor for audit-related assurance services (including costs relating to the half year review) and
other non-audit services were £nil (2022: £nil).
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 pages 126 and 127.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
201
3.3 Employees and Directors
Average monthly number of people employed (including Directors)
2023
number
2022
number
By segment:
North America 2,823 2,640
UK & Ireland
3,998 3,686
Europe
3,490 3,715
Africa & APAC
1
,254 1,187
1
1,565 11,228
Staff costs (including Directors on service contracts) Note
2023
£m
2022
£m
Wages and salaries 922 802
Social security costs
1
19 102
Post-employment benefits 11
30 24
Share-based payments 15.2
49 36
1
,120 964
Staff costs include a total of £72m of capitalised commission costs which are amortised over the expected contract life
including probable contract renewals (2022: £59m), see note 9.1.
Key management compensation
2023
£m
2022
£m
Salaries and short-term employee benefits
1
0 10
Share-based payments 7 5
1
7 15
Key management personnel are deemed to be members of the Group’s Executive Leadership Team and the Non-executive
Directors as shown on pages 88 to 91.
Notes to the consolidated financial statements continued
202
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
3 Profit before income tax continued
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
203
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.
Note
2023
£m
2022
£m
At 1 October 95 100
• Additions
1
5 6
• Disposals
(1
)
–
• Interest charge in the year
3 3
• Payment of lease liabilities
(21
)
(22)
• Exchange movement
(5
)
8
At 30 September 86 95
Presented as
Borrowings—current 13.4
1
4 17
Borrowings—non-current 13.4
72 78
The maturity analysis of lease liabilities is included in note 13.2.
Amounts recognised in profit and loss for leases are as follows:
Note
2023
£m
2022
£m
Depreciation of right-of-use assets
1
9 19
Impairment of right-of-use assets
1
9 –
Interest expense charge on lease liabilities 3.5
3 3
Lease expense from short-term leases and leases of low-value assets
(included in selling and administrative expenses)
5 4
46 26
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 (2022: £26m). Cashflows in relation to short-term leases and leases of low values assets are reported
as part of cash flows from operating activities.
Impairment of right-of-use assets of £19m (2022: £nil) relates to the property restructuring costs incurred in the year, with an
additional £3m (2022: £nil) of impairment costs incurred for other related fixed assets (see note 3.6).
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.
Notes to the consolidated financial statements continued
204
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
3 Profit before income tax continued
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 in a cash flow hedge, and the
hedging relationship is effective, gains and losses on those instruments are accumulated in the cash flow hedge reserve.
The amount accumulated in the hedging reserve is reclassified to finance income or costs in the same period or periods
during which the expected future cash flows affect the profit or loss. Any ineffective portion of changes in the fair value of
the derivative financial instrument is recognised immediately in finance income or costs.
Where derivative financial instruments have been designated as hedging instruments in a net investment hedge, 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.
2023
£m
2022
£m
Finance income:
Interest income on short-term deposits
1
2 1
Finance income
1
2 1
Finance costs:
Finance costs on bond notes
(31
)
(13
)
Finance costs on US senior loan notes
(6
)
(13)
Finance costs on bank borrowings
(4
)
(1)
Interest charge on lease liabilities
(3
)
(3)
Amortisation of issue costs
(1
)
(1)
Finance costs (45
)
(31)
Finance costs—net (33
)
(30)
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
205
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 mainly relate to merger and acquisition (M&A) related activity. By its
nature, M&A activity is variable in its impact but is likely to include 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 one 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.
Recurring
2023
£m
Non-
recurring
2023
£m
Total
2023
£m
Recurring
2022
£m
Non-
recurring
2022
£m
Total
2022
£m
M&A activit
y
-related items
Amortisation of acquired intangibles 54 – 54 42 – 42
Gain on disposal of subsidiaries
– – – – (53
)
(53
)
Adjustment to acquired deferred income
– – – 2 – 2
Other M&A activity-related items
49 – 49 39 – 39
Other items
Property restructuring costs
– 32 32 – – –
Employee-related costs
– 9 9 – – –
Reversal o
f
restructuring costs –
(
3) (3
)
– (20
)
(20
)
Total adjustments made to operating profit
1
03 38
1
41 83 (73
)
10
Foreign currency movements on intercompany balances
1
–
1
(1) – (1)
Total adjustments made to profit before income ta
x
1
04 38
1
42 82 (73
)
9
Notes to the consolidated financial statements continued
206
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
3 Profit before income tax continued
3.6 Adjustments between underlying and statutory results continued
Recurring items
Acquired intangibles are assets which have previously been recognised as part of business combinations or similar
transactions. These assets are predominantly 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 in the prior year represents the additional revenue that would have been recorded
in the year 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 and directly attributable integration costs. £18m
(2022: £14m) 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 loss of £1m (2022: gain £1m).
Non-recurring items
Net charges in respect of non-recurring items amounted to £38m (2022: net credit £73m).
Property restructuring costs relate to the reorganisation of a number of leased properties following a strategic review of the
Group’s property portfolio, as a result of which certain of the Group’s properties were either exited or downsized as part of a
consolidated plan. Costs of £32m consist of impairment of £22m of right-of-use assets and other related fixed assets that are no
longer in use and therefore fully impaired, as well as a provision of £10m for directly attributable future running costs
associated with the properties. The programme was fully completed in the current year, with no further costs expected to be
incurred in the following year.
Employee-related costs of £9m (2022: £nil) relate to a charge for French payroll taxes relating to previous years.
The gain on disposal of subsidiaries in the prior year of £53m relates to the disposal of the Group’s Swiss business (£49m) and
the Group’s payroll outsourcing business in South Africa (£4m).
Reversal of restructuring costs of £3m (2022: £20m) largely relates to unutilised provisions recognised in the year ended 30
September 2021 following the implementation of a business transformation plan. In the prior year, this largely resulted from
fewer colleagues leaving the business as they were redeployed into other roles.
See note 4 for the tax impact of these adjustments.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
207
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 Note
2023
£m
2022
£m
Current income tax
Current tax on profit for the year
1
06 76
Adjustment in respect of prior years
(5
)
(7)
Current income ta
x
1
01 69
Deferred ta
x
Origination and reversal of temporary differences
(33
)
3
Adjustment in respect of prior years
3 5
Deferred ta
x
12
(
30
)
8
The current year tax expense is split into the following:
Underlying tax expense
95 83
Tax credit on adjustments between the underlying and statutory operating profit
(
24
)
(6)
Income tax expense reported in income statement
71 77
A deferred tax benefit of £6m relating to employee benefits has been recognised directly in other comprehensive income (2022:
charge £2m). A current tax benefit of £6m relating to foreign currency derivatives and share options was recognised directly in
other comprehensive income in 2022.
Notes to the consolidated financial statements continued
208
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
4 Income tax expense continued
The effective tax rate for the year is higher (2022: higher) than the rate of UK corporation tax applicable to the Group of 22%
(2022: 19%). The differences are explained below:
2023
£m
2022
£m
Profit before income ta
x
282 337
Statutory profit before income tax multiplied by the rate of UK corporation tax o
f
22% (2022: 19%) 62 64
Tax effects of:
Adjustments in respect of prior years
(
2
)
(2)
Foreign tax rates in excess of UK rate of tax
1
0 19
US tax reform
(5
)
1
Non-deductible expenses and permanent items
1
2 8
Other corporate taxes (withholding tax, business tax)
6 8
Tax incentive claims
(16
)
(12)
Corporate restructuring
4 –
Non-taxable gain on disposal
– (9)
At the effective income tax rate of 25% (2022: 23%)
71 77
Income tax expense reported in the income statement 71 77
The underlying effective tax rate for the year is higher (2022: higher) than the rate of UK corporation tax applicable to the Group
of 22% (2022: 19%). The differences are explained below:
2023
£m
2022
£m
Underl
y
ing profit before income ta
x
424 346
Underlying profit before income tax multiplied by the rate of UK corporation tax o
f
22% (2022: 19%) 93 66
Tax effects of:
Adjustments in respect of prior years
(
3
)
(2)
Foreign tax rates in excess of UK rate of tax
1
3 19
US tax reform
(5
)
1
Non-deductible expenses and permanent items
7 3
Other corporate taxes (withholding tax, business tax)
6 8
Tax incentive claims
(16
)
(12)
At the effective income tax rate of 23% (2022: 24%) 95 83
Underl
y
ing tax expense 95 83
The effective tax rate on statutory profit before tax was 25% (2022: 23%), whilst the effective tax rate on underlying profit before
tax on continuing operations was 23% (2022: 24%).
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 reduced in the
year, principally due to the benefit of increased tax incentive claims in the US, UK, and France, which were partly offset by the
impact of an increase in the UK corporate tax rate.
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 £31m at 30 September 2023 (2022: £24m). The provision increased in the year principally due
to developments in the Group’s tax audits.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
209
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 22% to 25% for the year ended 30 September 2024, the Group expects its effective tax
rate to increase by 1% in the medium term, depending on our future geographic profit mix. The OECD’s two pillar global tax
reform will apply to the Group from the financial year ended 30 September 2025. An initial assessment of this legislation has
been completed and it is not expected to materially impact the Group’s effective tax rate in future periods.
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.
On 8 June 2022, the EU General Court dismissed the UK Government’s appeal and ruled in favour of the EU. As a result of this
decision, management assessed that it was more likely than not that the EU Commission’s decision will be upheld. Therefore
the £10m advance payment that the Group had made to HMRC in 2021 was treated in the FY22 Annual Report and Accounts as an
advance payment in respect of the Group’s likely tax liability.
The Group continues to consider its options in relation to this matter, including a position that management consider would
eliminate the State Aid exposure whilst ensuring the Group’s total exposure remains at £10m.
Notes to the consolidated financial statements continued
210
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
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 and held
by the Employee Benefit Trust, which are treated as cancelled, until reissued.
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 which 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, where the vesting criteria are achieved at year-end.
Reconciliations of the earnings and weighted average number of
shares
Underlying
2023
Underlying as
reported
*
2022
Underlying
2022
Statutory
2023
Statutory
2022
Earnings attributable to owners of the parent** (£m)
Profit for the
y
ear 329 263 269 2
1
1
260
Number of shares (millions)
Weighted average number of shares
1
,020 1,020 1,020
1
,020 1,020
Dilutive effects of shares
1
6 12 12
1
6 12
1
,036 1,032 1,032
1
,036 1,032
Earnings per share attributable to owners of the parent** (pence)
Basic earnings per share 32.25 25.74 26.39 20.75 25.47
Diluted earnings per share 31.75 25.44 26.08 20.43 25.17
Note:
* Underlying as reported is at 2022 reported exchange rates.
** All operations in the years relate to continuing operations.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
211
Reconciliation of earnings
2023
£m
2022
£m
Statutory profit for the year attributable to owners of the parent 2
1
1
260
Adjustments:
• Amortisation of acquired intangible assets
54 42
• Other M&A activity-related items
49 39
• Adjustment to acquired deferred income
– 2
• Property restructuring costs
32 –
• Employee-related costs
9 –
• Reversal of restructuring costs
(3
)
(20)
• Gain on disposal of subsidiaries
– (53)
• Foreign currency movements on intercompany balances
1
(1)
• Taxation on adjustments between underlying and statutory profit before tax
(
24
)
(6)
Net adjustments
1
1
8 3
Underlying profit for the year (before exchange movement) 329 263
Exchange movement – 8
Taxation on exchange movement
– (2
)
Net exchange movement – 6
Underlying profit for the year (after exchange movement) attributable to owners of the parent 329 269
Exchange movement relates to the retranslation of prior year results to current year exchange rates, as shown in the table on
page 67 within the Financial Review.
Notes to the consolidated financial statements continued
212
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
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 cash generating unit (“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.
Note
2023
£m
2022
Restated
*
£m
Cost and net book amount at 1 October 2,391 1,877
Acquisition of subsidiaries 16.1
1
1 230
Exchange movement
(157
)
284
Cost and net book amount at 30 September
2,245 2,391
Note:
* Restated for finalisation of the fair value assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16.1).
There were no accumulated impairment charges within goodwill for any of the years presented.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
213
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:
2023
£m
2022
Restated
*
£m
North America
1
,462 1,600
UK & Ireland 354 352
France
219 222
Iberia
1
31 133
Central Europe
55 56
Africa and the Middle East
24 28
2,245 2,391
Note:
* Restated for finalisation of the fair value of assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16.1) and allocation of
previously unallocated goodwill to the North America CGU (£25m), with the remainder allocated to other intangible assets and deferred tax liabilities (see note
16.1).
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 over a three-year period are discounted to their present
value, with a terminal value based on the cash flows in the third year and an assumed long-term growth rate. The Group
performed its annual test for impairment as at 30 June 2023. In all cases, the financial forecasts contained in the Group’s three-
year financial plan form 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 over the three-year plan period reflect the Group’s current assessment of climate change for each CGU
or group of CGUs. This includes the potential impact on both revenue and cost, including the cost of any associated
commitments made by the Group, which at this stage are not material. Consideration has also been given to the potential
longer-term impacts which are reflected in the long-term growth rates since they are based on independently sourced longer-
term growth rates of gross domestic product (GDP). Reasonably possible changes in the long-term growth rates, considering the
potential impact of climate change, do not materially impact the impairment test.
The key assumptions in the value in use calculations include the discount rate, 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 the Group’s three-year plan and reflects 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 GDP of the
country in which the CGU’s operations are primarily undertaken, reflecting the specific rates for each territory.
Average medium-term operating margins are equal to the expected operating margin across the three-year plan period. The
operating margins over the three-year plan period are based on historical margins specific to each CGUs with modest
improvements from expected efficiencies in scaling the business.
Range of rates used across the different CGUs 2023 2022
Average medium-term revenue growth rates* 9%–
1
8% 8%–17%
Long-term growth rates to net operating cash flows
1
%–3% 1%–3%
Note:
* Current year average medium-term revenue growth is based on three (2022: three) year compound annual revenue growth and excludes intercompany revenue.
Notes to the consolidated financial statements continued
214
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
6 Intangible assets continued
6.1 Goodwill continued
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 10% or more 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:
2023
Local
discount rate
(post-tax)
Approximate
local
discount
rate (pre-tax)
equivalent
Long-term
growth
rate
Average
medium-
term revenue
g
rowth rate*
U
K
& Ireland 8.9%
1
1.9%
1
.2%
1
2.4%
France 8.7%
1
1.6%
1
.2% 9.0%
North America
9.4%
1
2.5%
1
.4%
1
8.1%
2022
Local
discount rate
(post-tax)
Approximate
local discount
rate (pre-tax)
equivalent
Long-term
growth
rate
Average
medium-term
revenue
growth rate*
U
K
& Ireland 7.8% 10.4% 1.2% 11.4%
France 7.8% 10.4% 1.3% 7.8%
North America 8.
7
% 11.
7
% 1.4% 16.5%
Note:
* Current year average medium-term revenue growth is based on three (2022: three) year compound annual revenue growth and excludes intercompany revenue.
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 bond yields and specific tax rates to each CGU or group of CGUs. 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 2023
and the risks specific to the CGU of group of CGUs, through the inclusion of a country risk premium. As the net operating cash
flows for each CGU or group of CGUs include the expected impact of inflation, a nominal post-tax discount rate is used.
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 group of CGUs were in the range of 8.2% (2022: 7.0%) to 17.9% (2022: 16.5%), 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 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
exceeding its recoverable amount. Sensitivity testing assumed a reasonably possible reduction in both average medium-term
revenue growth rates and average medium-term operating margins, as well as an increase in the discount rate.
Impairment charge
No impairment charge was recognised in the year (2022: £nil).
The Group performed its annual test for impairment for all CGUs as at 30 June 2023. The recoverable amount exceeded the
carrying value for each CGU or group of CGUs; accordingly no impairment charge has been recognised in the year.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
215
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.
Notes to the consolidated financial statements continued
216
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
6 Intangible assets continued
6.2 Other intangibles continued
Brands
£m
Technology
£m
Internal
IPR&D
£m
Computer
software
£m
Customer
relationships
£m
Total
£m
Cost at 1 October 2021 32 195 3 160 164 554
Additions – 19 – 10 – 29
Acquisition of subsidiaries* – 98 – – 38 136
Disposals – – – (10) – (10)
Exchange movement 3 16 – 17 26 62
At 30 September 2022 restated* 35 328 3 177 228
7
71
Accumulated amortisation at 1 October 2021 30 127 3 109 95 364
Charge for the year 1 27 – 14 14 56
Disposals – – – (10) – (10)
Exchange movement 2 12 – 15 12 41
At 30 September 2022 33 166 3 128 121 451
Net book amount at 30 September 2022 restated* 2 162 – 49 107 320
Note:
* Restated for the finalisation of the fair value of assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16.1).
All amortisation charges in the year have been charged through selling and administrative expenses. Of these amortisation
charges, those relating to acquired intangibles of £54m (primarily Brands, Technology and Customer relationships) has been
classified as a recurring adjustment (2022: £42m); see note 3.6.
Brands
£m
Technology
£m
Internal
IPR&D
£m
Computer
software
£m
Customer
relationships
£m
Total
£m
Cost at 1 October 2022 restated* 35 328 3
1
77 228 771
Additions – – –
1
7 –
1
7
Acquisition of subsidiaries
–
1
4 – –
1
1
5
Disposals
– – – (2
)
– (2
)
Exchange movement
(1
)
(9
)
– (8
)
(13
)
(31
)
At 30 September 2023 34 333 3
1
84 216 770
Accumulated amortisation at 1 October 2022 33
1
66 3
1
28
1
21 451
Charge for the year
1
37 –
1
5
1
6 69
Disposals
– – – (2
)
– (2
)
Exchange movement
(1
)
(7
)
– (7
)
(7
)
(22
)
At 30 September 2023 33
1
96 3
1
34
1
30 496
Net book amount at 30 September 2023
1
1
37 – 50 86 274
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
217
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 • 2 to 7 years
Motor vehicles • 4 years
Office equipment • 2 to 7 years
Right-of-use lease assets • Shorter of lease term and useful life
Freehold land is not depreciated.
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.
Notes to the consolidated financial statements continued
218
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
7 Property, plant and equipment continued
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
Cost at 1 October 2021 11 141 46 116 5 121 319
Additions – 11 1 5 1 6 18
Acquisition of subsidiaries – 2 – – – – 2
Disposals – (27) (18) (5) – (5) (50)
Exchange movement 3 7 2 10 – 10 22
At 30 September 2022 14 134 31 126 6 132 311
Accumulated depreciation a
t
1
October 2021 5 77 37 33 3 36 155
Charge for the year – 19 3 17 2 19 41
Disposals – (27) (18) (5) – (5) (50)
Exchange movement 1 7 2 3 – 3 13
At 30 September 2022 6 76 24 48 5 53 159
Net book amount at 30 September 2022 8 58 7 78 1 79 152
All depreciation charges in the years presented have been charged through selling and administrative expenses.
All impairment charges in the years presented have been charged through selling and administrative expenses, as well as being
classified as a non-recurring adjustment within property restructuring costs; see note 3.6.
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
Cost at
1
October 2022
1
4
1
34 31
1
26 6
1
32 311
Additions – 5 –
1
3 2
1
5 20
Disposals
– (9) (3) – (1
)
(1) (13)
Exchange movement
(1
)
(6
)
(1
)
(5
)
– (5
)
(13
)
At 30 September 2023
1
3
1
24 27
1
34 7
1
41 305
Accumulated depreciation a
t
1
October 2022 6 76 24 48 5 53
1
59
Charge for the year
–
1
8 2
1
8
1
1
9 39
Impairment
– 2
1
1
9 –
1
9 22
Disposals
– (9) (3) – – – (12)
Exchange movement
– (4
)
(1
)
(2
)
– (2
)
(7
)
At 30 September 2023 6 83 23 83 6 89 201
Net book amount at 30 September 2023 7 41 4 51
1
52
1
04
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
219
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.
2023
£m
2022
£m
Fair value at 1 October 4 21
Fair value revaluation – 30
Derecognition
– (47)
Fair value at 30 September 4 4
The Group has recognised £nil (2022: £nil) dividend income relating to equity investments held at the balance sheet dates.
The fair value revaluation of £30m in the prior year related to the Group’s investment in Brightpearl, which arose on acquisition
of the remaining share capital during 2022; the equity investment in Brightpearl of £47m was subsequently derecognised. The
gain on revaluation of £30m was 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 amounts due in relation to taxes and social security from 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.
Notes to the consolidated financial statements continued
220
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
9 Working capital continued
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
221
Current:
2023
£m
2022
£m
Trade receivables 259 241
Less: allowance for expected credit losses
(
1
0
)
(14)
Trade receivables—net
249 227
Other receivables
1
2 16
Prepayments
66 65
Customer acquisition costs
49 4
7
376 355
The Group has incurred £167m (2022: £144m) to obtain customer contracts and an amortisation expense of £147m (2022: £123m)
was recognised in operating profit during the year. There were no material contract assets.
Movements on the Group allowance for expected credit losses of trade receivables were as follows:
2023
£m
2022
£m
At 1 October
1
4 22
Increase in allowance for expected credit losses 4 5
Receivables written off during the year as uncollectable
(
5
)
(4)
Unused amounts reversed
(2) (9)
Exchange movement
(
1
)
–
At 30 September
1
0 14
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.
Non-current:
2023
£m
2022
£m
Customer acquisition costs
1
33 123
Other receivables 4 4
Prepayments
1
1
1
38 128
Notes to the consolidated financial statements continued
222
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
9 Working capital continued
9.1 Trade and other receivables continued
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 2023
Not yet due
£m
1–30 days
overdue
£m
31–60 days
overdue
£m
61–90 days
overdue
£m
91+ days
overdue
£m
Total
£m
Expected credit loss rate
1
% 3% 7%
1
6% 61% –
Estimated total gross carrying amount at default 224
1
4 6 3
1
2 259
Expected credit loss
(2) – – (1) (7) (10)
Trade receivables at 30 September 2022
Not yet due
£m
1–30 days
overdue
£m
31–60 days
overdue
£m
61–90 days
overdue
£m
91+ days
overdue
£m
Total
£m
Expected credit loss rate 1% 2%
7
% 15% 65% –
Estimated total gross carrying amount at default 200 15 6 5 15 241
Expected credit loss (3
)
– – (1
)
(10
)
(14)
Included in selling and administrative expenses in the income statement is a debit of £4m (2022: credit of £3m) 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 carrying value of trade receivables approximate 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.
Current trade and other payables can be analysed as follows:
2023
£m
2022
£m
Trade payables 35 32
Other tax and social security payable 42 44
Other payables
60 44
Accruals
241 248
378 368
Non-current trade and other payables can be analysed as follows:
2023
£m
2022
£m
Other payables
1
3 6
1
3 6
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
223
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 2022 was recognised as revenue during the year. Other than the
recognition and unwind of deferred income from the sale of subscription and maintenance and support contracts, there were no
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.
Notes to the consolidated financial statements continued
224
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
10 Provisions continued
Restructuring
£m
Legal
£m
Building
£m
Other
£m
Total
£m
Maturity profile
< 1 year 5
1
6
1
1
23
1–2 years
3 3 4 –
1
0
2–5 years
– – 8 – 8
> 5 years
– – 6 – 6
At 30 September 2023 8
1
9
1
9
1
47
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 recognised in previous years, of which £10m
was utilised in the year, which remain unpaid at the balance sheet date.
Legal provisions have been made in relation to ongoing disputes with third parties and other claims against the Group. The
amount and ageing of legal provisions is assessed regularly, based upon internal and external legal advice, as required. This
includes the non-recurring employee-related costs, of which there were £9m additions in the year, which remain unpaid at the
balance sheet date (see note 3.6). The unused amounts reversed in the year (£6m) relate to a number of different legal claims.
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, of which there were £10m additions in the year, which remain unpaid at the balance
sheet date (see note 3.6).
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.
Restructuring
£m
Legal
£m
Building
£m
Other
£m
Total
£m
At 1 October 2022 23
1
6
1
3
1
53
• Additional provision in the year –
1
1
1
0 – 21
• Provision utilised in the year
(12
)
(2) (2) – (16
)
• Unused amount reversed
(
4
)
(6) (2) – (12
)
• Exchange movement
1
– – –
1
At 30 September 2023 8
1
9
1
9
1
47
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
225
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.
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.
Notes to the consolidated financial statements continued
226
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
11 Post-employment benefits continued
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 2023.
Weighted average principal assumptions made by the actuaries
2023
%
2022
%
Rate of increase in pensionable salaries
1
.9 1.9
Discount rate 4.1 3.7
Inflation assumption
1
.9 1.9
Mortality rate assumptions made by the actuaries
2023
Years
2022
Years
Average life expectancy for 65-year-old male
1
9 19
Average life expectancy for 65-year-old female 23 23
Average life expectancy for 45-year-old male
36 36
Average life expectancy for 45-year-old female
41 41
Amounts recognised on the balance sheet
2023
£m
2022
£m
Present value of funded obligations (19
)
(19)
Fair value of plan assets – –
Net liabilit
y
recognised on the balance sheet
(
1
9
)
(19)
At 30 September 2023 and 30 September 2022 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 2024 are £1m (2022: expected
contributions for the year ended 30 September 2023: £1m).
Amounts recognised in the income statement
2023
£m
2022
£m
Current service cost (2) (2)
Others (Curtailments/Plan amendments)
1
1
Total included within staff costs—all within selling and administrative expenses
(
1
)
(1)
Pension costs included in the consolidated income statement Note
2023
£m
2022
£m
Defined contribution schemes 29 23
Defined benefit plans
1
1
3.3 30 24
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
227
Analysis of the movement in the balance sheet liability
2023
£m
2022
£m
At 1 October
(
1
9
)
(22
)
Exchange movement
1
(1)
Total expense as recognised in the income statement
(
1
)
(1
)
Actuarial gain*
– 5
A
t
30 September
(
1
9
)
(19
)
Note:
* In the current year, an actuarial gain of £nil (2022: £5m) has been recognised, gross of a £nil (2022: £2m) tax charge. The net impact of £nil (2022: £3m) has been
recognised within other comprehensive income. See note 4 for the tax impact of the gain in the prior year.
Sensitivity analysis on significant actuarial assumptions
2023
£m
2022
£m
Discount rate applied to scheme obligations +
/
- 0.75% p.a. 2 1
Salary increases +
/
- 0.75% p.a. 2 1
Changes in the present value of the defined benefit obligation
2023
£m
2022
£m
At 1 October (19) (22
)
Exchange movement
1
(1)
Service cost
(2) (2
)
Curtailments/Plan amendments
1
1
Actuarial gain
– 5
At 30 September (19) (19)
Notes to the consolidated financial statements continued
228
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
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
Other
intangible
assets
(excluding
goodwill)
£m
Tax
losses
£m
Accounting
provisions/
accruals
£m
Goodwill
£m
Deferred
revenue
£m
Share
options
and awards
£m
Capitalised
R&D
£m
Other
£m
Total
£m
At 30 September 2021 (24) 7 30 (20) 18 10 2 12 35
Income statement credit/(debit) 7 3 (22
)
(1) (3) 1 9 (2
)
(8)
Acquisition or disposa
l
of subsidiaries* (32
)
11 – – – – – – (21
)
Other comprehensive income movement – – – – – – – (2) (2)
Exchange movement (4) 1 – (3) – – 1 3 (2)
At 30 September 2022 restated* (53
)
22 8 (24) 15 11 12 11 2
Income statement credit/(debit) 3 2 2 (1) 4 3 25 (8
)
30
Acquisition or disposa
l
of subsidiaries (3) – – – – – – – (3)
Other comprehensive income movement
– – – – – 6 – – 6
Exchange movement
8 (1
)
–
1
(3
)
– – (2
)
3
At 30 September 2023 (45) 23
1
0 (24)
1
6 20 37
1
38
Note:
* Restated for the finalisation of the fair value of assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16.1).
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
229
Note:
* Restated for the finalisation of the fair value of assets acquired and liabilities assumed in the acquisition of Lockstep (see notes 1 and 16.1).
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 2022.
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:
2023
£m
2022
£m
Interest carried forward – 11
Unremitted earnings (7
)
(5
)
Lease liability
1
0 12
Right-of-use lease assets
(
4
)
(11)
Other amounts
2 4
1
11
The Company has unrecognised carried forward losses of £111m (2022: £113m, restated for completion of Lockstep purchase price
accounting) available to reduce certain future taxable profits. Deferred tax assets of £26m (2022: £24m) 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 (2022: £18m) relate to UK capital losses that are available indefinitely
but cannot be used to offset UK trading profit.
The net deferred tax asset at the end of the year is analysed below:
2023
£m
2022
Restated
*
£m
Deferred tax assets 56 19
Deferred tax liabilities
(
1
8
)
(1
7
)
Net deferred tax asset
38 2
Notes to the consolidated financial statements continued
230
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
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
2023
£m
2022
£m
Profit for the year 2
1
1
260
Adjustments for:
• Income tax
71 77
• Finance income
(
1
2
)
(1
)
• Finance costs
45 31
• Amortisation of intangible assets
69 56
• Depreciation and impairment of property, plant and equipment
61 41
• R&D tax credits
(
3
)
(4
)
• Share-based payments
49 36
• Gain on disposal of subsidiaries
– (53
)
• Exchange movement
(4) (1)
Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries):
• Increase in trade and other receivables
(58
)
(50
)
• Increase/(decrease) in trade and other payables and provisions
22 (70)
• Increase in deferred income
54 46
Cash generated from continuing operations 505 368
13.2 Net debt
Reconciliation of net cash flow to movement in net debt
2023
£m
2022
£m
Cash inflows/
(
outflows
)
in the
y
ear (pre-exchange movements) 236 (124)
Cash inflows from loans and lease liabilities (69
)
(331)
Change in net debt resulting from cash flows
1
67 (455)
Cash and lease liabilities recognised from acquisitions of subsidiaries or similar transactions
1
12
Cash and lease liabilities derecognised on disposals of subsidiaries or similar transactions
– (13
)
Other non-cash movements
(15
)
(7)
Exchange movement
1
9 (23)
Movement in net debt in the
y
ear
1
72 (486
)
Net debt at 1 October (733
)
(247)
Net debt at 30 September (561
)
(733
)
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
231
Analysis of change in net debt
At
1 October
2022
£m
Cash flow
£m
Acquisition of
subsidiaries
£m
Non-cash
movements
£m
Exchange
movement
£m
At
30 September
2023
£m
Cash and cash equivalents 489 236
1
– (30
)
696
Liabilities arising from financing activities
Loans due within one year (161)
1
48 – –
1
3 –
Loans due after more than one year (966)
(235
)
– (1
)
31 (1,171
)
Lease liabilities due within one year (17)
1
8 – (16
)
1
(14
)
Lease liabilities after more than one year (78)
– – 2 4 (72
)
(1,222)
(69
)
– (15
)
49 (1,257
)
Total (733)
1
67
1
(15
)
1
9 (561
)
Analysis of change in net debt
At
1 October
2021
£m
Cash flow
£m
Acquisition of
subsidiaries
£m
Disposal of
subsidiaries
£m
Non-cash
movements
£m
Exchange
movement
£m
At
30 September
2022
£m
Cash and cash equivalents 553 (124) 12 – – 48 489
Cash amounts included in held for sale 14 – – (14) – – –
Cash and cash equivalents including cash
held for sale 567 (124) 12 (14) – 48 489
Liabilities arising from financing activities
Loans due within one year (4
7
)
46 – – (144) (16) (161)
Loans due after more than one year (66
7
)
(396) – – 143 (46) (966)
Lease liabilities due within one year (18
)
19 – – (17) (1) (17)
Lease liabilities after more than one year (82
)
– – – 11 (7) (78)
Lease liabilities included in held for sale – – – 1 – (1) –
(814
)
(331) – 1 (7) (71) (1,222
)
Total (24
7
)
(455) 12 (13) (7) (23) (733
)
Notes to the consolidated financial statements continued
232
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
13 Cash flow and net debt continued
13.3 Cash and cash equivalents (excluding bank overdrafts)
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.
2023
£m
2022
£m
Cash at bank and in hand 249 377
Short-term bank deposits 447 112
696 489
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 treasury policy is to place cash and cash
equivalents with counterparties which are well-established banks with high credit ratings where available.
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
2023, 99% (2022: 97%) of the cash and cash equivalents balance was deposited with financial institutions rated at least A- by
Standard & Poor’s.
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
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
233
Non-current
2023
£m
2022
£m
US senior loan notes – 225
Sterling denominated bond notes 742 741
Euro denominated bond notes
431 –
Lease liabilities
72 78
Unamortised RCF loan costs
(2
)
–
1
,243 1,044
In the prior year, included in US senior loan notes above was £386m of unsecured loans (after unamortised issue costs).
In the table above, US senior loan notes, sterling denominated bond notes and euro denominated bond notes (“bond notes”) are
stated net of unamortised issue and discount costs of £10m (2022: £9m).
Borrowings Year issued
Interest
coupon
*
Maturity 2023
£m
2022
£m
Bonds
• GBP 350m bond notes
2021 1.63% 25-Feb-31
350
350
• GBP 400m bond notes
2022 2.88% 8-Feb-34
400
400
• EUR 500m bond notes 2023 3.82% 15-Feb-28 433 –
US private placement
• USD 150m loan note 2013 3.71% 20-Ma
y
-23 – 135
• USD 50m loan note 2013 3.86% 20-Ma
y
-25 – 45
• EUR 30m loan note 2015 2.07% 26-Jan-23
– 26
• USD 200m loan note 2015 3.73% 26-Jan-25
– 180
Note:
* This does not include the impact of cross currency interest rate swaps entered into in relation to the GBP 350m bond notes and EUR 500m bond notes.
The Group’s debt is sourced from sterling and euro denominated bond notes, with a syndicated multi-currency Revolving Credit
Facility (RCF) also available.
During the year, the Group issued euro denominated bond notes under its newly established Euro Medium Term Note (EMTN)
programme, for a nominal amount of EUR 500m and an expiry date of February 2028. Cash proceeds from the issuance, net of
transaction costs, were EUR 498m (£442m).
Bond notes at 30 September 2023 were £1,173m (30 September 2022: £741m), comprised of sterling denominated bond notes
£742m (30 September 2022: £741m) and euro denominated bond notes £431m (30 September 2022: £nil).
The Group’s RCF was refinanced in December 2022, with facility levels of £630m, and maturity in December 2027, with an
extension option for up to two further years subject to specific provisions. In November 2023, after the balance sheet date, a
one-year extension was agreed, resulting in a new maturity in December 2028. An extension option for a further year remains
available subject to specific provisions. At 30 September 2023, £nil of the RCF was drawn down and associated unamortised
costs of £2m had been paid and capitalised.
The previously held RCF was undrawn at 30 September 2022.
Total US senior loan notes at 30 September 2023 were £nil following the repayment of the remaining balance during the current
year (30 September 2022: £386m comprising USD 400m and EUR 30m).
Further information on lease liabilities is included in note 3.4.
Current
2023
£m
2022
£m
US senior loan notes – 161
Lease liabilities
1
4 17
1
4 178
Notes to the consolidated financial statements continued
234
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
1 4 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 and
foreign currency cash flows in relation to external borrowings. 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
235
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
As at 30 September 2023 Note
At
amortised
cost
£m
Derivatives
used for
hedging
£m
At fair
value
through
profit or
loss
£m
At fair value
through other
comprehensive
income
£m
Total
£m
Non-current assets
Equity investments 8 – – – 4 4
Trade and other receivables: other receivables 9.1
2 – 2 – 4
Derivative financial instruments—cross currency
interest rate swaps – 1 – – 1
Current assets
Trade and other receivables: trade receivables 9.1
249 – – – 249
Trade and other receivables: other receivables 9.1
1
1
–
1
–
1
2
Cash and cash equivalents 13.3
696 – – – 696
Current liabilities
Trade and other payables excluding other tax and
social security 9.2
(336) – – – (336)
Borrowings 13.4
(14) – – – (14
)
Non-current liabilities
Borrowings 13.4
(1,243) – – – (1,243
)
Trade and other payables: other payables
(13
)
– – – (13
)
Derivative financial instruments—cross currency
interest rate swaps 14.5
– (20) – – (20)
(648
)
(19) 3 4 (660
)
IFRS 9 classification
As at 30 September 2022 Note
At amortised
cost
£m
Derivatives
used for
hedging
£m
At fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Total
£m
Non-current assets
Equity investments 8 – – – 4 4
Trade and other receivables: other receivables 9.1 1 – 3 – 4
Current assets
Trade and other receivables: trade receivables 9.1 227 – – – 227
Trade and other receivables: other receivables 9.1 15 – 1 – 16
Cash and cash equivalents 13.3 489 – – – 489
Current liabilities
Trade and other payables excluding other tax and
social security 9.2 (324) – – – (324)
Borrowings 13.4 (178) – – – (178)
Non-current liabilities
Borrowings 13.4 (1,044) – – – (1,044)
Trade and other payables: other payables (6) – – – (6)
Derivative financial instruments—cross currency
interest rate swaps 14.5 – (60) – – (60)
(820) (60) 4 4 (872)
Notes to the consolidated financial statements continued
236
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
14 Financial instruments continued
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 and euro denominated bond notes are 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 held in the prior year 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 Group does not hold any financial liabilities whose fair value would be considered as a level 3 fair value as defined within
IFRS 13.
The respective book and fair values of bond notes and loan notes are included in the table below.
2023 2022
Note
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
Long-term borrowing (excluding lease
l
iabilities) 13.4 (1,171) (1,0
1
4
)
(966) (753)
Shor
t
-term borrowing (excluding lease liabilities) 13.4 – – (161) (158)
Contingent consideration receivable
The Group recognises contingent consideration receivable of £3m (2022: £4m) 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.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
237
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:
2023
Borrowings:
bank loans
and bond
notes
£m
Borrowings:
lease
liabilities
£m
Trade and
other
payables
excluding
other tax and
social
security
£m
Total
£m
In less than one year 35
1
5 336 386
In more than one year but not more than five years 562 56
1
3 631
In more than five years
825 23 – 848
1
,422 94 349
1
,865
2022
Borrowings:
bank loans,
bond notes
and loan notes
£m
Borrowings:
lease
liabilities
£m
Trade and
other payables
excluding
other tax and
social security
£m
Total
£m
In less than one year 192 20 324 536
In more than one year but not more than five years 325 60 6 391
In more than five years 825 28 – 853
1,342 108 330 1,780
The maturity profile of the undiscounted contractual amounts of the Group’s cross-currency interest rate swaps, including
expected interest payments, at 30 September 2023 was as follows:
2023
Receipts
£m
Payments
£m
Total
£m
In less than one year 27 (33) (6)
In more than one year but not more than five years 640
(
668
)
(
28
)
In more than five years
367 (378) (11)
1
,034 (1,079) (45)
2022
Receipts
£m
Payments
£m
Total
£m
In less than one year 4 (7) (3)
In more than one year but not more than five years 23 (3
7
)
(14
)
In more than five years 373 (423) (50)
400 (467) (67)
Notes to the consolidated financial statements continued
238
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
14 Financial instruments continued
14.3 Borrowing facilities
The Group has the following undrawn committed borrowing facility available at 30 September in respect of which all conditions
precedent had been met at that date:
2023
£m
2022
£m
Expiring in more than one year but not more than five years 630 781
The facility has been arranged to help finance the expansion of the Group’s activities. This facility incurs commitment fees at
market rates. In November 2023, after the balance sheet date, a one-year extension was agreed to the facility, resulting in a new
maturity in December 2028. One extension option remains available for a further year subject to specific provisions.
14.4 Market risk sensitivity analysis
Financial instruments affected by market risks include borrowings and deposits.
The following analysis 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:
2023 2022
Equity
gains/(losses)
£m
Equity
gains/(losses)
£m
10% strengthening of sterling versus the US Dollar 51 62
10% strengthening of sterling versus the Euro (9
)
2
10% weakening of sterling versus the US Dollar
(63) (75)
10% weakening of sterling versus the Euro
1
0 (3)
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
239
14.5 Hedge accounting
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 and accumulated in the foreign currency translation reserve. 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.
The Group applies cash flow hedge accounting to cross-currency interest rate swap contracts that are designated as a
hedge of cash flows arising from foreign currency denominated borrowings. The effective portion of changes in the fair
value of such a derivative is recognised in other comprehensive income and accumulated in the hedging reserve. The
effective portion of changes in fair value of the derivative that is recognised in other comprehensive income is limited to
the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge.
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. If the
hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging
reserve are immediately reclassified to profit or loss.
The Group designates the change in fair value of the forward element of forward exchange contracts as the hedging
instrument in cash flow hedging relationships. The amount accumulated in the hedging reserve is reclassified to profit or
loss in the same period or periods as the hedged expected future cash flows affect profit or loss.
Notes to the consolidated financial statements continued
240
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
14 Financial instruments continued
14.5 Hedge accounting continued
Net investment hedges
The Group hedges the risk exposure to foreign currency exchange movements of its net investment in its subsidiaries in the US
and Eurozone.
Until repayment of the US senior loan notes during the year, a proportion of the Group’s external US Dollar denominated
borrowings, and the total of its euro denominated borrowings, were designated as hedging instruments. Subsequent to
repayment of the US senior loan notes, a portion of the Groups external euro denominated borrowings, relating to the newly
issued EUR 500m bond was 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 £614m (USD 750m) (2022:
£350m, USD 429m) 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 (2022: £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 2023
Nominal amount
Carrying
amount
*
£m
Change in carrying
amount as a result of
movements in the year
recognised in OCI
£m
Non-current borrowings EUR bond notes EUR 156m
1
36 (3
)
Derivative financial instruments Cross-currency interest rate swap USD 429m
1
8 (42
)
Derivative financial instruments Cross-currency interest rate swap USD 321m
(1
)
(1
)
N/A USD loan notes** USD 250m
– (21
)
N/A USD loan notes** USD 150m
– (12
)
1
53 (79
)
Note:
* Liability/(asset) position
** Repaid during the year (see note 13.4)
As at 30 September 2022
Nominal amount
Carrying amount
£m
Change in carrying amount
as a result of movements in
the year recognised in OCI
£m
Non-current borrowings USD loan notes USD 250m 225 39
Current borrowings USD loan notes USD 150m 135 23
Current borrowings EUR loan notes EUR 30m 26 1
Derivative financial instruments Cross-currency interest rate swap USD 429m 60 60
446 123
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
241
The impact of the hedged item on the consolidated balance sheet is as follows:
2023 2022
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
Net investment in foreign subsidiaries—USD (76
)
79 122 155
Net investment in foreign subsidiaries—EUR (3
)
1
1 4
(79
)
80 123 159
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.
Cash flow hedges
The Group hedges the risk exposure to foreign currency exchange movements of its foreign currency borrowings.
During the year, the Group issued euro-denominated bond notes for a nominal amount of EUR 500m. With respect to EUR 300m
of this balance, the Group has designated cross currency swap contracts (to receive fixed euro and pay fixed sterling) as the
hedging instruments in a cash flow hedge relationship to mitigate the risk of changes in the denominated cash flows related to
the euro borrowings attributable to changes in the exchange rate, for which hedge accounting has been applied.
The underlying risk of the hedging instruments exactly matches the hedged risk as the hedging instrument and euro borrowings
are arranged on the same payment profile, for the same interest rate and nominal amount, giving a hedge ratio of 1:1. Hedge
ineffectiveness will arise if the carrying amount of the euro borrowings falls below the amount of the cross currency swap
contract, for example on early repayment of the euro borrowings.
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 hedged item or instrument. At 30 September 2023, £nil (2022: £nil) has been recognized
in profit or loss due to ineffectiveness. The hedges are documented and are assessed for effectiveness on an ongoing basis.
Gains and losses recognised in other comprehensive income on currency swap contracts are recognised in profit or loss (within
finance costs) in the periods in which the hedged forecast transaction affects profit or loss. A reconciliation of movements in
the hedging reserve in relation to the cash flow hedging instrument is provided in note 15.3.
The impact of the hedging instrument on the consolidated balance sheet is as follows:
As at 30 September 2023
Nominal amount
Carrying
amount
*
£m
Change in carrying
amount as a result of
net movements in
the year recognised
in OCI
£m
Change in carrying
amount as a result of
net movements in
the year recognised
in P&L
£m
Derivative financial
instruments
Cross-currency
interest rate swap EUR 300m
2 (4) 6
2 (4
)
6
Note:
* Liability position.
The Group did not apply any cash flow hedging in the previous year.
Further information on the Group’s exposure to foreign currency risk and how the risk is managed is included in note 14.6.
Notes to the consolidated financial statements continued
242
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
14 Financial instruments continued
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 its ability to continue as a
going concern in order to provide returns to shareholders and benefits for other stakeholders, while maintaining 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; the
progressive growth of the dividend; and the return of surplus capital 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.
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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
243
Interest rate risk
The Group’s borrowings at 30 September 2023 principally comprise sterling and euro denominated bond notes, which are at
fixed interest rates, and a bank RCF, which is subject to floating interest rates. Additionally, the Group is exposed to interest
rate risk on floating rate deposits. 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 2023, the Group had £696m (2022: £489m) of cash and cash equivalents, while its borrowings comprised:
• Sterling denominated bond notes of £742m (2022: £741m), comprising a £350m bond issued in 2021 and a £400m bond issued
in 2022. The Group is also party to a cross-currency interest rate swap in relation to the £350m bond, as a result of which the
bond had an effective average fixed interest rate of 2.45% (2022: 1.89%). The £400m bond had an average fixed coupon of
2.88% (2022: 2.88%).
• Euro denominated bond notes of £433m (2022: £nil). The Group is also party to cross-currency interest rate swaps in relation
to a part of this EUR 500m bond, as a result of which the bond had an effective average fixed interest rate of 4.43% (2022: nil).
• Unsecured bank loans of £nil (2022: £nil), which comprises an undrawn RCF.
At 30 September 2022, the Group also held US private placement loan notes of £386m which attracted an average fixed interest
rate of 3.56%
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.
A portion of the Group’s external euro denominated borrowings (EUR 156m of a nominal EUR 500m) are designated as a hedge of
the net investment in its subsidiaries in the Eurozone. The foreign exchange movements on translation of the portion of these
borrowings into sterling have therefore been recognised in the translation reserve. In the prior year, all of the Group’s external
US Dollar denominated borrowings and euro denominated borrowings were similarly designated as a hedge of the net
investment in its subsidiaries in the US and Eurozone.
During the current year, the Group entered into cross-currency swap contracts to both receive fixed sterling and pay fixed US
dollars (£264m, USD 321m), as well as receive fixed euros and pay fixed sterling (EUR 300m, £264m).
The euro-sterling swap contacts have been designated as the hedging instruments in a cash flow hedge relationship to mitigate
the risk of changes in the cash flows related to the remaining euro denominated borrowings attributable to changes in
exchange rate. The average interest rate of the euro-sterling swap contracts is 4.98%, fixed for the lifetime of the instrument.
See note 14.5.
The US Dollar-sterling swap contracts have been designated as a hedge of the Group’s net investment in its subsidiaries in the
US. See note 14.5.
During the prior year, the Group also entered into cross-currency swap contracts to receive fixed sterling and pay fixed US
dollars (£350m, USD 429m), 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 2023 and 30 September 2022, these exposures were immaterial to the Group.
Notes to the consolidated financial statements continued
244
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
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 schemes for our employees
primarily include The Sage Group Performance Share Plan for Directors and senior executives, The Sage Group Restricted
Share Plan for senior management and the Sage Save and Share Plan (the “SAYE Plan”). 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 shares 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 1
4/77
pence each
2023
shares
2023
£m
2022
shares
2022
£m
At 1 October
1
,100,789,295
1
2 1,120,789,295 12
Cancellation of treasury shares – – (20,000,000
)
–
At 30 September
1
,100,789,295
1
2 1,100,789,295 12
15.2 Share-based payments
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. 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 awards 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
245
The total charge for the year relating to employee share-based payment plans was £49m (2022: £36m), all of which related to
equity-settled share-based payment transactions.
Scheme
2023
£m
2022
£m
Performance Share Plan 4 5
Restricted Share Plan 42 29
Share options
3 2
Total 49 36
£6m of the charge for the year (2022: £nil) relates to acquisition related remuneration and is reported as a recurring adjustment
within other M&A activity-related items. See note 3.6.
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, 857,978 (2022: 1,036,987) awards were made during the year.
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.
2021 awards Range 1 Range 2
Annualised recurring revenue growth (%) 6.0%–8.5% 8.5%–10.0%
Performance condition satisfied (%) 7%–28% 28%–35%
Cloud native annualised recurring revenue (£m) £600m–£750m £750m–£900m
Performance condition satisfied (%) 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 Range 1 Range 2
• SBC Penetration (%) 75%–80% 80%–85%
• Performance condition satisfied (%)
1
1%–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.
Notes to the consolidated financial statements continued
246
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
15 Equity continued
15.2 Share-based payments continued
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 Range 1 Range 2
• Volunteering hours (number) 400,000–500,000 500,000-600,000
• Performance condition satisfied (%) 0.75%–3% 3%–3.75%
• Individuals supported (number) 22,000–27,000 27,000-32,000
• Performance condition satisfied (%) 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.
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 for 2023
These performance shares are subject to a service condition and three performance conditions. Performance conditions are
weighted 50% on the achievement of a financial performance target, 30% on the achievement of a TSR target, and 20% 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.
2023 awards Range 1 Range 2
• SBC Penetration (%) 85%–89% 89%–92%
• Performance condition satisfied (%)
1
0%–40% 40%–50%
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 2023 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) a Protect the Planet condition,
(ii) a Tech for Good condition, and (iii) two Diversity, Equity and Inclusion conditions. Where attainment of each of the ESG
condition 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 defined ranges as detailed below.
The Protect the Planet condition will be measured by reference to the reduction in the Group’s Scope 1, 2 and 3 carbon emissions
during the performance period.
2023 awards Range 1 Range 2
• Reduction in carbon emissions (%) 6.9%–
1
3.8%
1
3.8%–20.7%
• Performance condition satisfied (%)
1
.5%–6% 6%–7.5%
The Tech for Good condition will be measured by reference to the number of Sage products that have embedded functionality
for carbon accounting at the end of the performance period.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
247
The Diversity, Equity and Inclusion conditions will be measured by reference to (i) the inclusion score in the employee
engagement survey undertaken in the last financial year of the performance period, and (ii) the percentage of leadership teams
meeting Sage’s global gender diversity target at the end of the performance period.
2023 awards Range 1 Range 2
• Inclusion score (number) 82–84 84–86
• Performance condition satisfied (%) 0.75%–3% 3%–3.75%
• Percentage of teams (%
)
50%–65% 65%–80%
• Performance condition satisfied (%) 0.75%–3% 3%–3.75%
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
December
2022
Share price at grant date 8.02
Number of employees 9
Shares under award
857,978
Vesting period (years)
3
Expected volatility
28.4%
Award life (years)
3
Expected life (years)
3
Risk-free rate
3.29%
Fair value per award
6.55
Grant date
December
2021
February
2022
18 May
2022
24 May
2022
Share price at grant date 7.74 7.11 6.51 6.65
Number of employees 6 2 3 1
Shares under award 458,777 399,859 100,225 78,126
Vesting period (years) 3 3 3 3
Expected volatility 27.6% 26.6% 28.2% 28.2%
Award life (years) 3 3 3 3
Expected life (years) 3 3 3 3
Risk-free rate 0.50% 1.04% 1.49% 1.46%
Fair value per award 6.29 5.82 5.72 5.70
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.
2023 awards Range 1 Range 2
• Number of products (number) 3–6 6–8
• Performance condition satisfied (%)
1
%–4% 4%–5%
Notes to the consolidated financial statements continued
248
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
15 Equity continued
15.2 Share-based payments continued
A reconciliation of award movements over the year is shown below:
2023 2022
Number
’000s
Weighted
average
exercise
price
£
Number
’000s
Weighted
average
exercise
price
£
Outstanding at 1 October 3,055 – 4,260 –
Awarded 858 – 1,037 –
Forfeited
(
536
)
– (899) –
Exercised
(
930
)
– (1,343) –
Outstanding at 30 September 2,447 – 3,055 –
Exercisable at 30 September – – – –
2023
2022
Weighted
average
remaining
life years
Weighted
average
remaining
life years
Range of exercise prices Expected Contractual Expected Contractual
N/A
1
.2
1
.2 0.9 0.9
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 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. These awards
only have service conditions and their fair values are equal to the share price on the date of grant. During the year 6,553,637
(2022: 10,816,324) awards were made, with fair values ranging from 8.12p to 8.43p.
A reconciliation of award movements over the year is shown below:
2023 2022
Number
’000s
Weighted
average
exercise
price
£
Number
’000s
Weighted
average
exercise
price
£
Outstanding at 1 October
1
7,727 – 12,082 –
Awarded 6,554 – 10,816 –
Forfeited
(
1
,527
)
– (2,005) –
Exercised
(
4,120
)
– (3,166) –
Outstanding at 30 September
1
8,634 – 17,727 –
Exercisable at 30 September – – – –
2023 2022
Weighted average
remaining life
years
Weighted average
remaining life
years
Range of exercise prices Expected Contractual Expected Contractual
N/A
1
.6
1
.6 2.0 2.0
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
249
Share options
Share options comprise The Sage 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, with a forfeiture assumption included for any anticipated lapses as employees leave
the Group.
During the year, 1,579,315 (2022: 1,628,909) options were granted under the terms of the Save and Share.
As part of certain acquisitions, the Group awards certain employees with options proportional to previously held options in the
company acquired. Nil (2022: nil) options have been granted in the year.
A reconciliation of award movements over the year is shown below:
2023 2022
Number
’000s
Weighted
average
exercise
price
£
Number
’000s
Weighted
average
exercise
price
£
Outstanding at 1 October 963 3.45 1,628 2.96
Forfeited
(
1
5
)
3.20 (28
)
4.88
Exercised
(
243
)
3.95 (63
7
)
1.61
Outstanding at 30 September 705 3.28 963 3.45
Exercisable at 30 September 705 3.28 963 3.45
2023 2022
Weighted average
remaining life
years
Weighted average
remaining life
years
Range of exercise prices Expected Contractual Expected Contractual
72p–702p – 3.0 – 4.0
Notes to the consolidated financial statements continued
250
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
15 Equity continued
15.3 Other reserves
All components of other reserves are presented on a consolidated basis on the face of the consolidated statement of changes
in equity.
Other reserves can be analysed as follows:
Translation
reserve
£m
Hedging
reserve
£m
Merger
reserve
£m
Total
£m
At 1 October 2022 206 – 61 267
Exchange differences on translating foreign operations
and net investment hedges
(82)
–
–
(82)
Cash flow hedges
– 4 – 4
At 30 September 2023
1
24 4 61
1
89
Other reserves can be analysed as follows:
Translation
reserve
£m
Merger
reserve
£m
Total
£m
At 1 October 2021
42 61 103
Exchange differences on translating foreign operations
and net investment hedges
177
–
177
Exchange differences recycled through income statement on sale of foreign operations
(13) – (13)
At 30 September 2022
206 61 267
This note further explains the nature and purpose of the translation, hedging 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.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used
in cash flow hedges pending subsequent recognition in profit or loss.
Merger reserve
Merger reserve brought forward relates to the merger reserve which was present under UK GAAP and frozen on transition to IFRS.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
251
15.4 Retained earnings
Retained earnings
2023
£m
2022
£m
At 1 October 570 448
Profit for the year 2
1
1
260
Actuarial gain on post-employment benefit obligations, net of ta
x
(note 11) – 3
Employee share option scheme—value of employee services including deferred tax
57 37
Proceeds from issuance of treasury shares
1
1 7
Fair value gain on reassessment of equity investment
– 30
Purchase of shares by Employee Benefit Trust
(1
)
(32)
Dividends paid to owners of the parent (note 15.5)
(190
)
(183
)
At 30 September 658 570
Treasury shares
At 30 September 2023, the Group held 73,906,470 (2022: 81,168,903) treasury shares.
During the year, the Group agreed to satisfy the vesting of certain share awards, utilising a total of 7,262,433 (2022: 6,396,278)
treasury shares.
During the prior 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.
Shares purchased under the Group’s buyback programme are either cancelled or are retained in treasury and reissued in the
future. Where the shares are retained as treasury shares, they represent a deduction from equity attributable to owners of
the parent.
In the prior year, the Group purchased a total of 27,979,129 Ordinary shares, initially 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.
Consideration of £249m for this share buyback programme was paid in the prior year.
Notes to the consolidated financial statements continued
252
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
15 Equity continued
15.4 Retained earnings continued
Employee Benefit Trust
The Employee Benefit Trust (“EBT”) holds shares in the Company and was set up for the benefit of Group employees. The EBT
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 EBT holds 4,419,478 ordinary
shares in the Company (2022: 4,610,875) at a cost of £34m (2022: £33m) with £1m of shares purchased during the year (2022:
£32m), funded by the Company, and a nominal value of £nil (2022: £nil).
During the year, the EBT utilised 258,505 shares it held to satisfy the vesting of certain share awards (2022: nil). The EBT did not
receive additional funds for future purchase of shares in the market (2022: £nil).
The costs of funding and administering the EBT 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 EBT at 30 September 2023 was £44m (2022: £32m).
15.5 Dividends
Accounting policy
Dividends are recognised through equity when approved by the Company’s shareholders or on payment, whichever
is earlier.
2023
£m
2022
£m
Final dividend paid for the year ended 30 September 2022 of 12.10p per share
1
23 –
(2022: final dividend paid for the year ended 30 September 2021 of 11.63p per share) – 119
Interim dividend paid for the year ended 30 September 2023 of 6.55p per share
67 –
(2022: interim dividend paid for the year ended 30 September 2022 of 6.30p per share)
– 64
1
90 183
In addition, the Directors are proposing a final dividend in respect of the financial year ended 30 September 2023 of [12.75]p per
share, which will absorb an estimated £131m 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 9 February 2024 to shareholders who are on the
register of members on 12 January 2024. These financial statements do not reflect this proposed dividend payable.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
253
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.
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, rather than a business combination, when they
satisfy the ‘concentration test’ exemption under IFRS 3 “Business Combinations”. This 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.
Notes to the consolidated financial statements continued
254
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
16 Acquisitions and disposals continued
16.1 Acquisitions
Corecon
On 5 May 2023, the Group acquired 100% equity capital and voting rights of Corecon Technologies Inc (“Corecon”), a company
based in the US, for total cash consideration of £13m. Corecon is a cloud native subscription-based software company used to
streamline and manage project operations focused on the construction industry.
Summary of acquisition
Total
£m
Acquisition-date fair value of consideration 13
Fair value of identifiable net assets (12)
Deferred tax liability 2
Goodwill 3
Acquired intangible assets comprises technology, at a fair value of £10m, which will be amortised over a useful economic
life of 8 years, in line with comparable previously acquired technology and Sage policy range of 3 to 8 years, and customer
relationships at a fair value of £1m which will be amortised over a useful economic life of 5 years consistent with Sage policy.
A summary of the acquired intangible assets is set out below:
Acquired intangible assets
Valuation
£m
Useful
economic life
(years)
Customer relationships
1
5
Technology
1
0 8
Acquired intangible assets
1
1
Acquired goodwill of £3m 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 North America. No goodwill is expected to be deductible
for tax purposes. 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:
Total
£m
Cash consideration (13)
Cash and cash equivalents acquired 1
Net cash outflow
(
1
2
)
Transaction costs of £3m 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 Corecon for future services. The
amount recognised to date of £1m is included in selling and administrative expenses, in the consolidated income statement,
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 Corecon for the period since the acquisition
date, of which both are immaterial.
On an underlying and statutory basis, the impact on revenue and profit after tax would have been immaterial, if Corecon had
been acquired at the start of the financial year and included in the Group’s results for the year ended 30 September 2023.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
255
Spherics
On 11 October 2022, the Group acquired 100% equity capital and voting rights of Spherics Technologies Limited (“Spherics”), a
company based in the UK, for total cash consideration £11m. Spherics provides a carbon accounting software solution to help
businesses easily understand and reduce their environmental impact.
Summary of acquisition
Total
£m
Acquisition-date fair value of consideration 11
Fair value of identifiable net assets (4)
Deferred tax liability 1
Goodwill 8
Acquired intangible assets comprises technology, at a fair value of £4m, which will be amortised over a useful economic life of
8 years.
Acquired goodwill of £8m 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 UK & Ireland CGU where the underlying benefit arising from the
acquisition is expected to be realised. No goodwill is expected to be deductible for tax purposes. The results of the business are
allocated to the UK & Ireland operating segment in line with the underlying operations.
The outflow of cash and cash equivalents on the acquisition is as follows:
Total
£m
Cash consideration (11)
Cash and cash equivalents acquired –
Net cash outflow (11)
Transaction costs of £1m 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 Spherics for future services.
The amount recognised to date of £5m 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 reported by Spherics for the period since the acquisition date, includes an immaterial
amount of revenue and loss after tax.
On an underlying and statutory basis, the impact on revenue and profit after tax would have been immaterial, if Spherics had
been acquired at the start of the financial year and included in the Group’s results for the year ended 30 September 2023.
Measurement adjustments to business combinations reported using provisional amounts—Lockstep
On 30 August 2022, the Group acquired 100% equity capital and voting rights of Lockstep Network Holdings Inc (“Lockstep”) for
total cash consideration of £80m, of which £3m was deferred and paid in the current year.
The acquired net assets as recognised in the financial statements at 30 September 2022 were based on a provisional assessment
of their fair value while the Group undertook a valuation of the acquired intangible assets. During the year, the purchase price
accounting has been approved and completed.
Notes to the consolidated financial statements continued
256
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
16 Acquisitions and disposals continued
16.1 Acquisitions continued
The intangible assets identified and subsequently valued as at the date of acquisition include:
Acquired intangible assets
Valuation
£m
Useful
economic life
(years)
Customer relationships 3 8
Technology 23 8
Acquired intangible assets 26
The comparative information for the financial year 2022 has been restated to reflect the adjustment to the provisional amounts.
As a result of the recognition of intangible assets of £26m, and net deferred tax liability of £1m, there was a corresponding
decrease of £25m to goodwill. The remaining balancing £54m goodwill 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 North America CGU
where the underlying benefit arising from the acquisition is expected to be realised. No goodwill is expected to be deductible
for tax purposes. The results of the business are allocated to the North America operating segment in line with the
underlying operations.
No other adjustments have been made to the provisional fair value of assets and liabilities reported at 30 September 2022,
as set out below:
Fair value of identifiable net assets acquired
Previously
reported
provisional fair
values
£m
Measurement
adjustments
£m
Final fair
values
£m
Intangible assets – 26 26
Deferred tax liability – (1
)
(1
)
Other identifiable net assets 1 – 1
Fair value of identifiable net assets acquired
1
25 26
Goodwill 79 (25
)
54
Total consideration 80 – 80
The increased amortisation charge on the intangible assets from the acquisition date to 30 September 2022 was not material
and therefore no adjustment has been made for this. No changes have been identified to the directly attributable acquisition
related costs which were included during the financial year ended 30 September 2022 in relation to the acquisition.
16.2 Disposals and discontinued operations
Discontinued operations and assets and liabilities held for sale
There are no assets or liabilities held for sale at 30 September 2023 (30 September 2022: none).
The Group had no discontinued operations during the year (30 September 2022: 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.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
257
18 Events after the balance sheet date
On 21 November 2023, The Sage Group plc approved a share buyback programme of its ordinary shares of up to £350m, which is
expected to commence on 22 November 2023 and end no later than 23 April 2024.
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 Name Registered address
Australia Brightpearl Pty Limited Suite 60 Level 2, 2 O’Connell Street, Parramatta NSW 2150, Australia
Australia HAMY (Australia) Pty Limited C
/
o—Fincorp Accountants, Suite 7, 2–4 Northumberland Road, Caringbah
NSW 2229, Australia
Australia Ocrex Australia Pty. Limited Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Australia Sage Business Solutions Pt
y
Ltd Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Australia Sage Intacct Australia
Pty Limited
Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Australia Snowdrop Systems Pty Ltd Level 17, 100 Barangaroo Avenue, Barangaroo NSW 2000, Australia
Austria Sage GmbH Stella-Klein-Löw-Weg 15, AT-1020, Wien, Austria
Bahamas Intelligent Apps Holdings Ltd Bayside Executive Park, Building No. 2, West Bay Street & Blake Road, P.O
Box N-3910, Nassau, The Bahamas
Belgium Sage S.A. Buro & Design Center, Esplanade 1, 1020 Brussels, Belgium
Botswana Sage Software Botswana
(Pty) Ltd
Plot 50371, Fairground Office Park, Gaborone, Botswana
Canada Sage Software Canada Ltd 111, 5th Avenue SW, Suite 3100-C, Calgary AB T2P 5L3, Canada
France Inventory Planner SAS
5
10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
France Sage Holding France SAS 10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
France Sage Overseas Limited
(Branch Registration)
10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
France Sage SAS 10 Place de Belgique, 92250, La Garenne-Colombes, Paris, France
Germany Best Software (Germany) GmbH Franklinstraße 61–63, 60486, Frankfurt am Main, Germany
Germany eWare GmbH
5
Untere Weidenstr. 5, c/o Raè Becker & Koll., 81543, München, Germany
Germany Sage bäurer GmbH Josefstraße 10, 78166, Donaueschingen, Germany
Germany Sage CRM Solutions GmbH Franklinstraße 61–63 60486, Frankfurt am Main, Germany
Germany Sage GmbH Franklinstraße 61–63 60486, Frankfurt am Main, Germany
Germany Sage Management & Services
GmbH
Franklinstraße 61–63 60486, Frankfurt am Main, Germany
Germany Sage Services GmbH Kar
l
-Heine-Straße 109–111, 04229, Leipzig, Germany
India 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
India Corecon Technologies India
Private Limited
3
B-M.C.F-97/B, ARYA NAGAR MOHNA ROAD,, BALLABGARH, FARIDABAD,
Haryana, 121004, India
India Intacct Software Private
Limited
1, 3
No 501 & 502, Tower C, 5th Floor, The Millenia, No. 1 & 2, Murphy Road,
Bangalore, Karnataka, 560 008, India
India Lockstep Network India Pvt.
Ltd.
3
1
st
and 2
nd
Flr Sky Loft, Creaticity Mall Opp Golf Course, Shastrinagar
Yerwada, Pune, 411006, India
India Sage Software India Pvt Ltd
3
N-34, Lower Ground Floor, Kalkaji, New Delhi, 110 019, India
India VV Finly Technology Pvt. Ltd.
3
#S-204, Wilson Court Apts, 6
th
Cross, 2
nd
Main, Wilson Garden, Bangalore,
560027, India
Notes to the consolidated financial statements continued
258
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
19 Group undertakings continued
Country Name Registered address
Ireland Ocrex Limited Number One, Central Park, Leopardstown, Dublin 18, Ireland
Ireland Sage Global Services (Ireland)
Limited
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Ireland Sage Hibernia Limited Number One, Central Park, Leopardstown, Dublin 18, Ireland
Ireland Sage Irish Finance Company
Unlimited Company
4
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Ireland Sage Technologies Limited Number One, Central Park, Leopardstown, Dublin 18, Ireland
Ireland Sage Treasury Ireland
Unlimited Company
Number One, Central Park, Leopardstown, Dublin 18, Ireland
Ireland TAS Software Limited
4
Deloitte House, 29 Earlsfort Terrace, Dublin, Dublin 2, D02 AY28
Ireland Tonwomp Unlimited Compan
y
Deloitte House, 29 Earlsfort Terrace, Dublin, Dublin 2, D02 AY28
Israel Budgeta Technologies Ltd
5
32 HaBarze
l
St., Tel Aviv, 6971046, Israel
Kenya Sage Software East Africa
Limited
114 & 115, 1st Floor, Nivina Towers, LR NO. 1870/IX/96, Westlands Road,
Nairobi, Kenya
Latvia CakeHR SIA Brivibas iela 40-27, Riga, LV-1050, Latvia
Malaysia Sage Malaysia Business
Solutions Sdn. Bhd.
Level 11, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral, 50470 Kuala
Lumpur, Malaysia
Morocco Sage Software SARL
1
Tour Crystal 1, Niveau 9, Bd Sidi Mohamed Ben Abdellah, Casablanca,
20030, Morocco
Namibia Sage Software Namibia
(Pty) Ltd
344 Independence Avenue, Windhoek, P O BOX 1571, Namibia
Nigeria Sage Software Nigeria
Limited
Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos,
Nigeria
Poland Sage Software Poland sp. z o.o.
5
ul. Towarowa 28, 00-839, Warsaw, Poland
Portugal Sage Portugal—Software, S.A. Edifício Olympus II, Av. Dom Afonso Henriques 1462, 4450-013,
Matosinhos, Portugal
Romania Intacct Development
Romania SRL
5
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 Sage Alchemex (Pty) Ltd 23A Flanders Drive, Mount Edgecombe, Durban, 4321, South Africa
South Africa Sage South Africa (Pty) Ltd* Floor 6 Gateway West, 22 Magwa Crescent, Waterfall 5-1R, Midrand,
Gauteng, 2066, South Africa
Spain Sage Spain Holdco, S.L.U. Moraleja Building One—Planta 1, Parque Empresarial de La Moraleja,
Avenida de Europa no19, 28108 Alcobendas, Madrid, Spain
Spain Sage Spain, S.L.
1
Moraleja Building One—Planta 1, Parque Empresarial de La Moraleja,
Avenida de Europa no19, 28108 Alcobendas, Madrid, Spain
Switzerland Sage Bäurer AG c/o Legalis Consulting GmbH, Suurstoffi 29, 6343, Rotkreuz, Switzerland
United Arab Emirates Sage Software Middle East
FZ-LLC
Premises: 116–120, Floor: 01, Building: 11, Dubai, United Arab Emirates
United Kingdom ACCPAC UK Limited 3 Field Court, Gra
y
’s Inn, London, WC1R 5EF, United Kingdom
United Kingdom Brightpearl Limited C23 – 5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom FUTRLI LTD
2
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom GoProposal Ltd
5
3 Field Court, Gra
y
’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 Ocrex UK Ltd
6
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
259
Country Name Registered address
United Kingdom Protx Group 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 Euro Hedgeco 1 C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sage Euro Hedgeco 2 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 Sage Hibernia Investments
No. 1 Limited
3 Field Court, Gray's Inn, London, WC1R 5EF, United Kingdom
United Kingdom Sage Hibernia Investments
No. 2 Limited
3 Field Court, Gray's Inn, London, WC1R 5EF, United Kingdom
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 Sage Irish Investments One
Limited*
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sage Irish Investments Two
Limited*
2
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
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. C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sage People Limited 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 C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sage USD Hedgeco 1 C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sage USD Hedgeco 2 C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sage Whitley Limited C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United Kingdom Sagesoft 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 Spherics Technology Ltd
3
C23—5 & 6 Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ,
United Kingdom
United States Brightpearl, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington, New
Castle DE 19808, United States
United States Corecon Technologies, Inc. 5912 Bolsa Avenue Suite 109, Huntington Beach, CA 92649
United States Ocrex, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington, New
Castle DE 19808, United States
United States Sage Budgeta, Inc. 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, New
Castle DE 19808, United States
Notes to the consolidated financial statements continued
260
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
19 Group undertakings continued
Country Name Registered address
United States Sage Intacct, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington, New
Castle DE 19808, United States
United States Sage People, Inc. 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, New
Castle DE 19808, United States
United States Sage Software, Inc. C
/
o Corporation Service Company, 100 Shockoe Slip, 2nd Floor, Richmond
VA 23219, United States
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
United States Softline Software, Inc. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington, New
Castle DE 19808, United States
United States South Acquisition Corp. C/o Corporation Service Company, 251 Little Falls Drive, Wilmington, New
Castle DE 19808, United States
Notes:
* Direct subsidiary.
1 Group holding in the subsidiary is >99% and <100%.
2 Accounting date is 30 March 2023.
3 Accounting date is 31 March 2023.
4 Accounting date is 30 December 2023.
5 Accounting date is 31 December 2023.
6 Accounting date is 30 June 2023.
Contents
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
261
Compan
y
financial statements Company balance sheet [271]
Company statement of changes in equity [272]
Company accounting policies [273]
Notes to the Compan
y
financial statements
1. Dividends [275]
2. Fixed assets: investments [275]
3. Cash at bank and in hand [275]
4. Debtors [276]
5. Trade and other payables [276]
6. Borrowings [276]
7. Obligations under operating leases [276]
8. Equity [27
7
]
Company balance sheet
At 30 September 2023
262
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
Note
2023
£m
2022
£m
Non-current assets
Investments 2 3,088 3,088
Debtors 4
433
Deferred tax assets
3 1
3,524 3,089
Current assets
Cash at bank and in hand 3
1
–
Debtors 4
1
,726 1,774
1
,727 1,774
Creditors: amounts falling due within one
y
ear
Trade and other payables 5
(
31
)
(16
)
Net current assets
1
,696 1,758
Total assets less current liabilities 5,220 4,847
Creditors: amounts falling due after one
y
ear
Borrowings 6
(
1
,173) (741
)
Net assets 4,047 4,106
Capital and reserves
Called up share capital 8.1
1
2 12
Share premium account
548 548
Other reserves 8.2
(
452
)
(502
)
Profit and loss account
3,939 4,048
Total shareholders’ funds 4,047 4,106
The Company’s profit for the year was £71m (2022: £20m).
The financial statements on pages 262 to 268 were approved by the Board of Directors on 21 November 2023 and are signed on its
behalf by:
Jonathan Howell
Chief Financial Officer
Company’s registered number 02231246
Company statement of changes in equity
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
263
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
At 1 October 2022
1
2 548 (502) 4,048 4,106
Profit for the
y
ear – – – 71 71
Total comprehensive income for the
y
ear ended
30 September 2023
– – – 71 71
Transactions with owners:
Employee share option scheme—value of employee services – – – 50 50
Utilisation of treasury shares
– – 51
(
51
)
–
Proceeds from issuance of treasury shares
– – –
1
1
1
1
Purchase of shares by Employee Benefit Trust
– –
(
1
)
–
(
1
)
Dividends paid to owners of the parent
– – –
(
1
90
)
(
1
90
)
Total transactions with owners for the
y
ear ended
30 September 2023
– – 50 (180) (130)
At 30 September 2023
1
2 548
(
452
)
3,939 4,047
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
At 1 October 2021 12 548 (424
)
4,122 4,258
Profit for the
y
ear – – – 20 20
Total comprehensive income for the
y
ear ended
30 September 2022 – – – 20 20
Transactions with owners:
Employee share option scheme—value of employee services – – – 36 36
Utilisation of treasury shares – – 41 (41
)
–
Proceeds from issuance of treasury shares – – – 7 7
Cancellation of treasury shares – – 128 (128) –
Share buyback programme – – (215) 215 –
Purchase of shares by Employee Benefit Trust – – (32) – (32)
Dividends paid to owners of the parent – – – (183
)
(183
)
Total transactions with owners for the
y
ear ended
30 September 2022 – – (78) (94) (172)
At 30 September 2022 12 548 (502
)
4,048 4,106
Company accounting policies
264
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
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. The going concern basis is set out in Note 1 of the Group consolidated finance statements. 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 Sage Group plc. (a public company limited by share) is a UK registered company with both a functional and presentational
currency of sterling. 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)
2023
number
2022
number
By segment:
UK & Ireland
1
4 14
Staff costs (including Directors on service contracts)
2023
£m
2022
£m
Wages and salaries 5 4
Social security costs
1
1
6 5
Staff costs are net of recharges to other Group companies.
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
265
Auditor’s remuneration
The audit fees payable in relation to the audit of the financial statements of the Company are £46,000 (2022: £42,000).
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 129 to 163.
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.
Notes to the Company financial statements
266
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
1 Dividends
2023
£m
2022
£m
Final dividend paid for the year ended 30 September 2022 of 12.10p per share
1
23 –
(2022: final dividend paid for the year ended 30 September 2021 o
f
11.63p per share) – 119
Interim dividend paid for the year ended 30 September 2023 of 6.55p per share
67 –
(2022: interim dividend paid for the year ended 30 September 2022 of 6.30p per share)
– 64
1
90 183
In addition, the Directors are proposing a final dividend in respect of the financial year ended 30 September 2023 of [12.75]p per
share, which will absorb an estimated £131m 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 9 February 2024 to shareholders who are on the
register of members on 12 January 2024. These financial statements do not reflect this proposed dividend payable.
2 Fixed assets: investments
Equity interests in subsidiary undertakings are as follows:
2023
£m
2022
£m
Cost 3,224 3,224
Provision for diminution in value
(
1
36
)
(136
)
Net book value
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 2023, 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
2023
£m
2022
£m
Cash at bank and in hand
1
–
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
267
4 Debtors
2023
£m
2022
£m
Prepayments and accrued income – 1
Amounts owed by Group undertakings 2,159 1,773
2,159 1,774
Of amounts owed by Group undertakings £433m (2022: £nil) is due greater than one year. Amounts owed by group undertakings
are unsecured and attract a rate of interest of 0.0% and SONIA plus 1.6% (2022: 0.0% and SONIA plus 1.6%).
5 Trade and other payables
2023
£m
2022
£m
Accruals 31 16
31 16
6 Borrowings
2023
£m
2022
£m
Sterling denominated bond notes 742 741
Euro denominated bond notes 431 –
1
,173 741
In the current year, bond notes were issued in February 2023 for a nominal amount of EUR 500m and expire in February 2028. Net
cash proceeds from the issuance were EUR 498m (£442m). For further information, see note 13.4 of the Group consolidated
financial statements.
In the prior 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.
7 Obligations under operating leases
2023 2022
Total future minimum lease payments under non-cancellable operating leases falling due for payment as
follows:
Property,
vehicles,
plant and
equipment
£m
Property,
vehicles,
plant and
equipment
£m
Within one year 3 3
Later than one year and less than five years
1
2 13
After five years
1
1 14
26 30
The Company leases various offices under non-cancellable operating lease agreements. These leases have various terms,
escalation clauses, and renewal rights.
Notes to the Company financial statements continued
268
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023
8 Equity
8.1 Called up share capital
Issued and fully paid ordinary shares of 1
4/77
pence each
2023
shares
2023
£m
2022
shares
2022
£m
At 1 October
1
,100,789,295
1
2 1,120,789,295 12
Cancellation of treasury shares – – (20,000,000) –
At 30 September
1
,100,789,295
1
2 1,100,789,295 12
See note 15.1 of the Group consolidate financial statements.
8.2 Other reserves
Treasury
shares
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
Total other
reserves
£m
At 1 October 2022 (565
)
61 2 (502
)
Utilisation of treasury shares 51 – – 51
Purchase of shares by Employee Benefit Trust
(1
)
– – (1
)
At 30 September 2023
(515
)
61 2 (452
)
Treasury
shares
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
Total other
reserves
£m
At 1 October 2021 (48
7
)
61 2 (424)
Utilisation of treasury shares 41 – – 41
Cancellation of treasury shares 128 – – 128
Share Buyback Programme (215) – – (215)
Purchase of shares by Employee Benefit Trust (32) – – (32)
At 30 September 2022 (565
)
61 2 (502
)
Treasury shares
Purchase of treasury shares
At 30 September 2023, the Group held 73,906,470 (2022: 81,168,903) treasury shares.
During the year, the Group agreed to satisfy the vesting of certain share awards, utilising a total of 7,262,433 (2022: 6,396,278)
treasury shares.
During the prior 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.
Shares purchased under the Group’s buyback programme are either cancelled or are retained in treasury and reissued in the
future. Where the shares are retained as treasury shares, they represent a deduction from equity attributable to owners of
the parent.
In the prior year, the Group purchased a total of 27,979,129 Ordinary shares, initially 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. Consideration of
£249m for this share buyback programme was paid in the prior year.
Employee Benefit Trust
The Employee Benefit Trust (“EBT”) holds shares in the Company and was set up for the benefit of Group employees. The EBT
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 EBT holds 4,419,478 ordinary
shares in the Company (2022: 4,610,875) at a cost of £34m (2022: £33m) with £1m of shares purchased during the year (2022:
£32m), funded by the Company, and a nominal value of £nil (2022: £nil).
During the year, the EBT utilised 258,505 shares it held to satisfy the vesting of certain share awards (2022: nil). The EBT did not
receive additional funds for future purchase of shares in the market (2022: £nil).
The costs of funding and administering the EBT 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 EBT at 30 September 2023 was £44m (2022: £32m).
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:
• 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,
and unhedged FX on intercompany balances; 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.
Underlying measures allow management and
investors to compare performance without
theeffects of foreign exchange movements
orrecurring or non-recurring 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
(revenueand
profit) measures
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 measures allow management and
investors to understand the like-for-like
revenue and current period margin
performance of the continuing business.
Underlying
CashFlow from
Operations
Underlying Cash Flow from Operations is Underlying
Operating Profit adjusted for non-cash items, net
capital expenditure (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.
Glossary
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 269
Governance Report Financial Statements Additional InformationStrategic Report
Measure Description Rationale
Underlying
CashConversion
Underlying Cash Flow from Operations divided by
Underlying (as reported) Operating Profit.
Cash conversion informs management and
investors about the cash operating cycle of
the business and how efficiently operating
profit is converted into cash.
EBITDA EBITDA is Underlying Operating Profit excluding
underlying depreciation, amortisation and share
basedpayments.
Underlying depreciation and amortisation is the
statutory equivalent measure, adjusted for the
amortisation of acquired intangibles. Underlying share
based payments is the statutory equivalent measure,
adjusted for M&A-related share based payment charges
included within other M&A activity related items.
To calculate the Net Debt to EBITDAleverage
ratio and to show profitability before the
impact of majornon-cashcharges.
Annualised
recurring
revenue
Annualised recurring revenue (“ARR”) is the normalised
recurring revenue in the last month of the reporting
period, adjusted consistently period to period, multiplied
by twelve. Adjustments to normalise reported recurring
revenue involve excluding certain components (such as
non-refundable contract sign up fees) to ensure the
measure reflects that part of the revenue base which
(subject to ongoing use and renewal) can reasonably be
expected to repeat in future periods.
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, derivative financial
instruments 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
Underlying software subscription revenue as a
percentage of underlying total revenue.
To measure the progress of migratingour
customer base fromlicence and maintenance
toasubscription relationship.
% Sage
BusinessCloud
Penetration
Underlying recurring revenue from the Sage Business
Cloud as a percentage of the underlying recurring
revenue of the Future Sage Business Cloud Opportunity.
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.
Return on
Capital
Employed
(ROCE)
ROCE is calculated as underlying operating profit,
minus amortisation of acquired intangibles, the result
being divided by capital employed, which is the average
(of the opening and closing balance for the period) total
net assets excluding net debt, derivative financial
instruments, provisions for non-recurring costs,
financial liability for purchase of own shares and tax
assets or liabilities.
As an indicator of the current period financial
return on the capital invested in the company.
ROCE is used as an underpin in the FY21, FY22
and FY23 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.
Glossary continued
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023270
AGM
Annual General Meeting
AI
Artificial Intelligence
API
Application Program Interface
CAGR
Compound Annual Growth Rate
CDP
Carbon Disclosure Project
CEO
Chief Executive Officer
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
ELT
Executive Leadership Team
EPS
Earnings Per Share
ERP
Enterprise Resource Planning
EU
European Union
FCF
Free Cash Flow
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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023 271
Governance Report Financial Statements Additional InformationStrategic Report
Shareholder Information
Financial calendar
1
Annual General Meeting 1 February 2024
Dividend payments
2
FY23 Final payable 9 February 2024
H1 FY24 Interim payable 28 June 2024
Results announcements
Q1 FY24 Trading update 18 January 2024
H1 FY24 Interim results 16 May 2024
Q3 FY24 Trading update 30 July 2024
FY24 Full-Year results 20 November 2024
Note:
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 2024 AGM will be held on
1 February 2024. 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
One Bishops Square,
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: +44 (0)371 384 2859
Lines are open 8.30 am
to 5.30 pm UK time,
Monday toFriday (excluding
public holidays in England
and Wales).
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
THE SAGE GROUP PLC. ANNUAL REPORT AND ACCOUNTS 2023272
Design and production
www.luminous.co.uk
This report is printed onto carbon neutral
paper, which is certified carbon balanced
byThe Woodlands Trust.
Blackdog Digital is a carbon neutral
company and is committed to all round
excellence and improved environmental
performance is an important part of our
‘GoGreen’ strategy.
Luminous are certified in using Carbon
Balanced paper for The Sage Group plc
Annual Report. This support will enable
TheWoodlands Trust to maintain protection
of critically threatened woodland and
forestry areas by planting trees which can
absorb carbon that would otherwise be
released into the atmosphere.
www.woodlandtrust.org.uk
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
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.