Steve Hare - Chief Financial Officer Stephen Kelly - Chief Executive Officer

Mohammed Moawalla - Goldman Sachs Stacy Pollard - JP Morgan Michael Briest - UBS Charles Brennan - Credit Suisse Vijay Anand - Jefferies Steven Goulden - Deutche Bank David Toms - Numis Securities James Goodman - Barclays John King - Bank of America Merrill Lynch

So hello, and welcome to everyone here for Sage's FY17 results. To those of you who are in the room and those of you who are on the phones please note, first of all, the safe harbor statement which you can find on the screen behind me and in your packs.

The agenda for this morning's presentation is outlined on the screen. So firstly, I'll provide a brief overview of Sage's performance and then I'll handover to our Chief Financial Officer, Steve Hare, who will talk you through the business performance.

Then I'll update you on the progress against our plans and close up with our outlook for FY17 before opening for questions. I think today, before we dive into FY17, I think it would be useful to step back and reflect on what we've achieved together since we announced the transformation plan at the Capital Markets Day in June 2015.

When Steve and I started on our journey together, our immediate task obviously was to run the parallel track of delivering the commitments to the public markets, while conducting a root and branch review of the business which helps us met all the plans for the future. Back in 2015, we found the Sage have been slow to innovate and failed to engage closely with customers and the market.

The organization, as many of you know, is fragmented, misaligned and inefficient, in parts due to the dozens of acquisitions that had not been integrated. The leadership probably lacked the relevant experience for sustainable cloud-based growth ahead.

It was clear that a major overhaul of all parts of Sage's business was needed and we set about sequencing carefully the transformation. As a result of this appraisal, our mission became very clear.

Firstly, we had to reconnect with our existing customers and attract new customers with best-in-class cloud solutions. And as I've said before, rediscover our technology mojo.

Secondly, we have to create simplicity and efficiency in the organization with systems and processes fit for the business and there is a platform for future acquisitions. And thirdly, we needed to create a high performance customer offset leadership team, culture and company.

And it was evident that we needed to address these issues to see the opportunity in front of us, which was to become category leader in a market worth $27 billion, and to truly winning the cloud, where over 50% of financial solutions are set to be by 2020. So what did we do?

In the first phase of the transformation, in FY16 and FY17, our first step was to integrate what was decentralized functions into one unified operating model, what we called as a time one Sage, to create strong support and functions for our market and customer facing colleagues in each country. Alignment of all our Sage colleagues will be critical to our success.

So we undertook a significant rationalization program to reduce costs from the back office and to reinvest in for growth and accelerate the move to subscription. During this phase, we were very deliberate to consider no significant M&A as we shared with you at the time, also that we've wrapped to the go-to-market functions in cotton wall, to protect the customer experience.

The transformation, the whole program was carefully thought through, created, sequenced and executed with great care. With phase one progressing well and the Sage internal platforms considered fit for purpose, we were ready to embark on phase two in October 2016.

And for our FY17, we continued the progress we made in phase one with the appointment of Blair Crump as President. We also started to improve in the go to market organization, which makes up 60% of our headcount to address the inefficiencies in this area.

In FY17, we also commenced selective M&A activities with the acquisition of Sage Intacct, Sage People and Sage Compass. These acquisitions, again, were thoughtfully selected to accelerate the strategy and have allowed Sage to emerge from phrase two with the most complete portfolio of cloud products, now unified by the Sage business cloud, and more to come on this later.

So let’s just put into context what the transformation has delivered against the original objective we set for ourselves. Since June 2005, we’ve consistently achieved at least 6% organic revenue growth and at least 27% underlying operating margin.

This has been achieved whilst restructuring the business and transitioning to subscription, avoiding the double-digit revenue and margins that many software companies have experienced. And whilst we have achieved this growth and profitability, under the surface, we strengthened the Sage Business model, creating the efficiency and simplicity that we targeted.

And you could call it building the plane whilst flying it. Let me share some of these highlights, firstly in the transition to subscription.

Our recurring revenue now stands at 78% of total revenue with software subscription revenue now representing 37% of total revenue, up from 22% three years ago. So focus on customer obsession has resulted in much improved net promoter scores, NPS, the measure of customer advocacy, which has risen from a neutral score at the start of FY15 to a high of plus 25 in the final quarter of FY17.

In the cost transformation, we have identified over £100 million of annualized cost savings and reduced our G&A expense as a proportion of revenue from 19% to under 14%. We have reinvested those savings to drive further growth.

We’ve invested in technology, winning now hosts of awards and joining forces with the best-in-class strategic technology partners, including Amazon, Microsoft, Salesforce and Stripe. From virtually no cloud presence in FY14, we now have a comprehensive suite of cloud products in all our major geographies.

These products are unified under the Sage Business Cloud with £300 million of cloud annualized recurring revenue in FY17 growing us over 80%. We strengthened our position as the market leader in the scale up and enterprise market through the organic growth and the acquisitions of Sage Intacct and Sage People.

And lastly, our focus on developing the senior management has resulted in a high performing driven leadership team, focused on executing on our accelerated growth plans for the future. So as we close the door on phase two, we now have the leadership, organizational alignment, efficiency and a comprehensive suite of innovative cloud platforms to accelerate momentum in our markets.

And I am pleased to confirm that the transformation we outlined in and out in FY15 is now complete. This strategy is clearly working and the path to accelerated growth and superior margins is emerging, powered by the Sage Business Cloud and strengthened by the acquisitions of Sage Intacct and Sage People.

We will continue the progress we’ve made to the shift to the subscription model and the cloud, combined with relentless drive for efficiency and simplification. To be clear, though, there will be no further exceptional charges from the transformation we announced at the Capital Markets Day in 2015.

Now, I’ll give you some color on the strategic progress we’ve made shortly. But I would like to hand over to Steve Hare for the financial and operating performance review.

Steve?

Thanks, Stephen. And I would like to add my welcome to today's result presentation.

The opening message from me today is the same as last year. We've done what we said we would do.

Our guidance was that we would deliver 6% organic revenue growth, including the North America payments business for the period that we owned it, and that we would deliver a 27% underlying margin, including the impact of any acquisitions on disposals; and therefore, including Sage Intacct Sage People and Sage Compass. We have delivered, both the 6% organic revenue growth and the 27% underlying operating margin.

In addition, the level of exceptional charge is below where we indicated at $73 million and we delivered an improved payback with annualized cost savings relating to the transformation of $59 million. We've also maintained strong free cash flow, finishing the year at a leverage of 1.6 times, well within the 1 to 2 times range.

We are one of the only companies in the Fortune 100 to have had a progressive dividend every year since 1999, and we have again, this year, increased the dividend by 9%. Steve and I have always been known for being completely transparent.

So before I go through the details of the results, I do want to spend just a little bit of time on definitions. So I will start first with FY17, the period that we are reporting.

The organic revenue definition for FY17 neutralizes the impacts of foreign currency translations, i. e.

its constant exchange rates. It excludes the contributions from current and prior period acquisitions, any discontinued operations disposals or assets held for sale.

The underlying revenue definition for FY17 also neutralizes the impact of foreign currency but underlying includes, rather than excludes, the contribution from current and prior year acquisitions, discontinued operations, disposals and assets held for sales. Now in FY18, we will include inorganic revenue, the acquired businesses from the beginning of the financial year, following the date of acquisition.

This is to support full alignment between the internal measures and our external guidance. For this purpose, we will therefore make adjustments to the comparative period to present the acquired businesses as though they have been part of the group throughout the period.

These businesses that we acquired in FY17, i. e.

Sage People and Sage Intacct, are all an integral part of the Sage business cloud. So again, for clarity, FY18 organic revenue will include Sage Intacct and Sage People.

But the underlying margin will also include the investments that we will continue to make in these businesses. So let’s now have a look at the FY '17 numbers.

As we said, we achieved 6.6% organic revenue growth in the year and half of the eight regions delivered double-digit revenue growth. We saw an acceleration in Q4 in revenue growth to cover to over 7%, and this was largely driven by the expected recovery in North America where Q4 revenue growth was in line with group rate.

We also saw stabilization in France after what's been a challenging year. And excluding France, organic revenue growth was 7.8%.

Organic adjustments of $24 million include $20 million from the acquired businesses as we guided and a further $4 million from subsidiaries either disposed of in the year or currently held for sale. The $5 million adjustment on the recurring line is the fair value adjustment of the deferred income in Sage Intacct.

As we continue to deliver on cost savings, I am pleased to say we achieved an organic operating margin of 28%, which meant that we could fund the investments in Sage Intacct, Sage People and Sage Compass, and still achieve the 27% underlying operating margin. So turning now to the financial summary.

I've already covered the story on revenue and operating margin, but a few words on the earnings per share. The underlying earnings per share growth is 3.5%.

However, if you adjust to exclude the impact of the acquisitions and disposals and therefore look on a like for like or continuing basis, the growth is 7.4%, reflecting the enhanced organic operating margin. The non-recurring item of $70 million is the exceptional relating to the transformation of $73 million, offset by the gain on the sale of a small German subsidiary that we disposed of during the year.

The recurring item of $49 million relates to the amortization of intangible assets and other acquisition related costs and the organic adjustment is the losses in the acquired businesses. Consistent with the last two years, our share in the organic EBITDA margin, which this year has exceeded 30%.

Just a quick word on tax. The effective underlying tax rate is 26%, in line with where we expect it to be.

This is higher than the UK corporation tax rate as we continue to derive more of our profits from other countries where the tax rate is higher and in which we operate and pay taxes. We would expect to maintain an effective underlying tax rate in the medium term in the range of 25% to 27%.

So let's turn now to the strong capital metrics. Starting with the first column, the underlying cash flow of $470 million represents a cash conversion of 95%, but this is after net CapEx of $52 million.

As I flagged last year, we continued to overinvest in both IT systems and facilities and we will continue to do this in FY18, but we remain committed to driving strong cash conversion just as we’ve always done. Excluding the impacts of over-investment and capital expenditure, we will continue to deliver an operating cash conversion in the region of the 100%.

Free cash flow, as a percentage of revenue, was again 15% as last year within the 15% to 20% range, and this is after we’ve absorbed the exceptional cash outflow of $72 million. As indicated in H1, we remain committed to delivering a strong return on the capital we invest in our business.

And in FY17, we achieved a healthy return on capital employed of 27% and this despite spending over $1 billion on acquired businesses. Going forward, we will continue to report on this long-term metric, a clear signpost place of our focus on efficient capital allocation.

I am moving to the final column, the closing net debt is 1.6 times trailing EBITDA, which as I said well within the range of 1 to 2 times. So let's take a look at the sources of revenue.

Recurring revenue grew 9% and annualized recurring revenue nearly 10%. This was underpinned by software subscription growth of more than 30%.

Recurring revenue growth is slightly down largely to the sales mix, specifically the strong new customer acquisition in enterprise led by Sage X3 revenue growth, which has a large non-recurring element. And we also saw a weaker performance in France.

This is the second year running that we’ve grown software subscription in excess of 30%. As Steven said, recurring revenue is now 78% of total group revenue and software subscription is 37% of total group revenue.

SSRS revenue this year was approximately 300 million and declined more slightly in line with plan non-X3 licenses, which are now less than the third of this category and are still declining double digit. However, this increase was partly offset by new customer acquisition, driven through Sage X3, where we achieved great success growing revenue in excess of 20% and adding over 400 new customers.

In addition, professional services also had a strong year. Processing growth of 2% was driven by Sage Pay, particularly in the UK market where the shift to online commerce remains a key theme, and this was offset by a slower year in U.S.

payroll processing. So we’re continuing to see the migration of our install based customers to subscription, and we’ve also seen some good success in new customer acquisition with Sage X3 and Sage One.

And overall, we continue to increase the proportion of the revenue that is coming from recurring. So let's turn now to a key metric, which is the growth in annualized subscriber base.

In line with last year, we continued to see strong growth of 32% $705 million with almost 70% of this growth coming from Sage and Business Cloud. You can see on this slide the success of the cloud enabled version of Sage 50 and Sage 200, which combined have added $93 million of annualized growth.

Regionally, this is being driven by Northern Europe, USA and Canada. And in FY18, we will have these products available in 12 further countries all in local languages.

It's also very encouraging to see Sage 1 at $22 million of growth. Last year, on this slide, that number was $4 million.

And as we seek to improve the revenue quality, we have achieved an increase in the Sage One average annual contract value of over 34% to exceed £80. Just a note on X3, which is a relatively small number on here, because most of the Sage X3 revenue is on perpetual license.

In H1 in FY17, we successfully launched Sage Live on the same day in three more European countries, introducing multi-language locally compliance accounting on one global platform. In H2 with an expanded Sage Live into Australia and South Africa, whilst also focusing our efforts on better positioning this product, and as a result, seeing customers better suited to this higher value functionally rich product.

Sage business cloud was launched in October this year. And I just want to put some numbers into the context following from what Stephen said.

We have gone from having virtually no cloud presence in FY14, just $2 million of revenue to a comprehensive and unified suite of cloud products. As you can see from this chart, this is driving an annualized recurring revenue of £300 million and this year has grown in excess of 80%.

Now I want to be clear, Sage Business Cloud revenue only includes revenue from Sage One, Sage Live, The Cloud Version of Sage X3 and the Cloud Enabled Versions of Sage 50 and Sage 200. Both Sage People and Sage Intacct are also included here and these two businesses contribute just over $90 million of the ARR and grew this year over 40%.

Whilst I am talking about the two acquired businesses, I wanted to provide an update on how they’re performing. Both Sage People and Sage Intacct, have continued to perform strongly since joining the Sage family.

Sage Intacct has continued to grow in excess of 30% and achieved this year an ARR in excess the $100 million for the first time, further strengthening our position as market leader in the scale-up segment in North America. Sage People's ACV has continued to increase, recording the highest ever ACV in the fourth quarter and signing our largest ever contract for £300,000.

Sage Compass has also continued to make significant progress in providing market insights to customers with total users increasing by 65%. So clear evidence that the benefits we anticipated at the time of the acquisitions are coming through.

So let's move to the regions now. We have grouped the regions together into three as last year.

But I will make comments on the eight sub-regions, these being Northern Europe, Central Europe, France, Iberia, North America, Africa and Middle East, Asian and Australia, and Brazil. And as I said earlier, half of these eight regions are this year growing the revenue double digit.

So let's start with Europe. Although, the recurring revenue penetration has remained constant in Europe at 78%, the subscription, software subscription penetration has increased to 37%.

Both Central Europe and Iberia achieved double digit revenue growth this year with Northern Europe at 7%. Sage 50 and Sage 200 drove growth across Europe with an 86% growth in Sage 50 Cloud, and Northern Europe being a particular highlight.

In Northern Europe, which is essentially UK and Island, we now have £61 million of annualized recurring revenue from Sage Business Cloud, which this year in UKI grew at 8%. As previously indicated, it was a difficult year in France with revenue growth of 1%.

The impact of first year premiums, when customers were migrated to subscription, continues to have an impact. But we do expect to see signs of recovery later in FY18.

Both Sage 1 and Sage X3 delivered strong growth as new customer acquisition picked up. In FY17, in Europe, we recorded over 30 Sage X3 deals in access to £100,000.

There were also 26 product releases in Europe in FY17 with the first sales of Sage Live being achieved in Germany, Spain and France. Software subscription penetration ranges across Europe, starting at 16% in Spain, increasing to 37% in Northern Europe and with France reporting the highest penetration rates at 56%.

So there remains much opportunity for subscription growth in FY18 in Europe as we focus on driving further growth through Sage Business Cloud and through our new leadership in France, where we will focus on the partner channel and accelerating growth in France. So moving now to North America, which now has the highest recurring revenue penetration of all of our three regions; and I do want to make a specific call out for the Canadian team, because this year they achieved both double-digit overall revenue growth and double-digit recurring revenue growth.

The success in North America's recurring revenue penetration has historically being achieved through maintenance and support. And despite the significant increase in software subscription penetration this year from 14% to 25% there remains a considerable growth opportunity in FY18.

We have clear momentum already showing in the Sage 50 Cloud and Sage 200 Cloud products, which fuels software subscription growth in North America of 97%. Now in the past, we called out the Sage 200 family in North America as being on the watch list.

It’s being an area that's being slow to switch to both cloud enabled products and subscription as these products are sold predominantly through the partner channel. And I'm pleased to say, we now have 10,000 cloud enabled Sage 200 family customers in North America driving £30 million of revenue.

This strong growth in both the Sage 200 family and also in Sage Intacct in North America reflects the complementary nature of these solutions. The momentum I talked to in the second half of last year in Sage X3 in North America has continued to strengthen.

In FY17, Sage X3 grew at 20% compared to 7% in FY'16. So in FY18 in North America, we will focus on driving growth with Sage Business Cloud, and in particular in the scale-up and enterprise.

We will also focus on driving growth through our partner channel. And finally, international.

We achieved double digit revenue growth in international and delivered a further increase in software subscription penetration to 56%. Brazil, Africa and Middle East all grew double digit.

With Sage One and Sage X3 growth, we're seeing further evidence of new customer acquisition in this region. We also won our first Sage Live customer in South Africa, as well as growing Sage One revenues in South Africa by 66%.

In Brazil, the team did well to grow the business by 12% in what can only be described as very difficult economic conditions. We do have some continuing headwinds in Brazil due to slower paying customers defaulting on payment, which may impact FY18 as you would expect in any country recovering from recession.

And in other regions in FY'18, we'll continue to focus on winning with Sage Business Cloud. So moving now to what you all know is my favorite subject, financial discipline.

In FY17, we successfully managed our portfolio. We tied it up the underlying business through disposing of operations that were not a core fit to the strategy as evidenced by the disposal of the North American payments business and other smaller subsidiaries throughout the year.

We then identified value accretive investments complementary to the strategy, acquiring Sage Intacct, Sage People and Sage Compass, which collectively have added £91 million of ARR in FY17. Despite investing $1 billion on these acquired assets, we have also funded all the losses and investments in the acquired businesses and delivered a return on capital employed of 27% and an underlying operating margin of 27%.

Throughout the year, we have continued to act in a disciplined manner. And for the second year in a row, have generated annualized savings in excess of £50 million as an improved payback.

This was done through a combination of driving efficiencies in our shared service centers, as well as areas like procurement and productivity in the go-to-market functions. Overall, our organic headcount declined as we planned and general and administrative expenses, as a percentage of revenue, is now 13.8%.

And this will continue to reduce through driving efficiencies and discipline across both our back-office and go-to-market teams. So if you have a look at the profile of the operating margin.

In FY16, the G&A saving was 220 basis points. In FY17, we have achieved a saving of 360 basis points.

Now as I said, going forward, you can expect this to continue to trend towards low double-digit as a percentage of revenue. This year, the reinvestment is very similar with both products and go-to-market benefiting.

In product, we have significantly increased our cloud product investment, delivering 52 country releases of our cloud product. But it isn’t just the case of making the savings and just handing them over to the go-to-market team, we take a data driven approach to allocating the investments.

And I want to give you a specific example of how this is paid off. In FY14, Iberia was growing at 2%, operating as a standalone business, often overlooked with little or no investment in the region and no new product launches since 2010.

Under the leadership of Luis Pardos, who was appointed in FY14, we have made significant progress through focused investments in both marketing and product supported by strong leadership team and an alignment of operations to strategy. In the last two years, we have invested marketing spend to support eight product launches.

In FY17, we took Sage Summit to Spain, delivering the biggest even for SMEs in this region with 2,500 people attending. We’ve also rolled out smaller marketing campaigns to better engage the local market such as recent activity in response to a local VAT change that delivered revenue in excess of £3 million and engaged over 9,000 customers.

So Iberia is a good example of how we’ve been putting our marketing and wider investment to good work. The payback of course being the progressive growth achieved to finish FY17 with Iberia growing their revenue double-digit.

So in summary, I wanted to finish by making three points. Firstly, this is the third year in a row that we have achieved or exceed guidance.

Secondly, we have continued to demonstrate financial discipline and focus on capital allocation as evidenced by both our return on capital employees and our underlying operating margin, both being 27%. We've also delivered, for the second year in a row, savings in excess of £50 million and in FY17, delivering £59 million of savings with an improved payback.

And finally, in the last two years, we have seen annualized software subscriber base grow from $381 million to in access of $700 million in FY18, therefore, providing us with strong revenue momentum. So with that, I would like to thank you and hand back to Stephen.

Thanks, Steve. And actually just if there’s some folks at the back there are some seats at the front if you want to come forward more comfortable hopefully.

So a strong set of results in FY17, given as the platform for acceleration as we move towards the next phase of our growth story. The strategic pillars that we’ve shared with you back when we met for the Capital Markets Day, I just want to take you through now and update you on where we are with progress.

So firstly Customers for Life. We’ve continued to migrate our customer to subscription and this is been a strong growth driver; more now than ever with the introduction of cloud enabled solution in the Sage 50 and Sage 200 families.

These solutions give our customers the flexibility of the cloud, combined with the functionality and the familiarity of the desktop. And give customers access to data from Sage through Microsoft Office 365, as an example.

From here, customers can see client, contact details, check credit scores and even raise invoices from the palm of their hands. So as to notified that these solutions have proven incredibly popular with our customers.

From their launch in FY16, revenue for these solutions is now £133 million, almost 8% of our total organic revenue growing 140%. And almost all of this revenue comes from Northern Europe and North America where the solutions were first launched.

We have another 12 country launches of cloud enable solutions planned for FY18. So expect this revenue stream to continue to be a strong growth driver in the future, both directly and through our partner channel.

The transition to cloud enabled solution continues to increase our software subscription revenues. Software subscription as a proportion of total revenues is now 37%, up from 22% three years ago.

Now this shows us that we made strong progress in the Customers for Life strategy, but also that there is plenty of room to continue to growth, both by migrating the install base to subscription and the cloud and by reactivating off plan customers who don’t currently use recurring contract. Throughout the transformation, we’ve also built a strong culture of customer obsession as we transition towards a software as a service, getting to know our customers better and creating a community of real advocates for the Sage brand.

Now, we've given our customers the choice between digital, phone or self service and unifying the team to meet areas of peak demand for customer service. We also now use artificial intelligence within our own customer services.

For example, at tax year end, we’ve trained Pegg, our smart assistant to answer the 3,000 questions that are asked 95% of the time by customers; making the process smoother and more efficient for all our customers to receive the right answer. So this has resulted in the significant improvement in our net promoter scores, from a neutral score at the start of FY15 to a high of plus 25 in Q4 FY17.

This is up 11 points since FY16. In terms of the focus on FY18, the rollout of the cloud enabled solutions, as part of the Sage Business Cloud into further geographies, will be a continuing priority, as well as the relentless focus on customer obsession.

So now onto the second strategic pillar; winning in the market, new customer acquisition, led again by our President Blair Crump, who heads up all our go-to-market functions, including all customer functions. This year, we've had two priorities here; firstly, to drive successful executive in our go-to-market functions; and secondly, to win in the cloud.

In terms of go-to-market execution, we appointed Blair in April -- August 2016. And I want to show you some of the progress that Blair has made.

Prior to Blair's arrival, our sales function had been fragmented, disparate and operating towards different measures. Blair has made progress here with a focus on raising the standards of leadership.

He's replaced five out of the top eight country leaders in the past 15 months, and actually since Steve and I joined together, our all top leaders in the sub regions have been replaced. Now, this leadership team is highly experienced, competent and highly effective.

And we're confident that we have the right team to drive for the revenue acceleration we strive for, as well as maintaining and enhancing our margins. Now, another big area focus for Blair has been to align and simplify our go-to-market functions.

Throughout our many regions, there was still significant fragmentation and inefficiencies. Just one example, there was a headcount of 900 non-quota bearing colleagues within the sales function.

Blair has now started cutting through and reducing the complexity, so our sales teams can start focusing on customers and winning. Now, there's still more to do here, as I'm sure you'd appreciate, but we're making good progress.

Within every function, we become much better at tracking our return on investment. We'll only continue investing in those areas that drive return.

A great example is the local marketing campaign we delivered in September 2017 right here in London. You may have seen us paint Waterloo and other London station Sage Green, as you can see on the screen behind me now.

This campaign raised awareness of Sage in London by 11% increased Web sessions to Sage.co.uk by 33% and reached 8 million people with the SageStores #celebrating our customers' success. The return on investment led us to invest further in local marketing into FY18.

Let's move on to our second priority for winning in the market, the rollout of our cloud products. So we’ve shared this slide with you before in fact last year and it shows how far we've come from virtually no cloud presence in FY14 with only ₤2 million of revenue in the cloud to rolling out our cloud solutions across the globe, driving ₤300 million of annualized recurring revenues in FY17.

As we continue this rollout and improved the functionality, user experience and in broadly echo system, our cloud revenue will continue to grow. Sage X3 which grew at over 20% in the year with more than 50 contracts signed over ₤100,000.

Sage Live average ACV has risen from under ₤1,000 to ₤3,900 in the year and Sage One average ACV has risen by 34% on the prior year to ₤81 with ARR increases by 76%. This solution now has expanded its market reach as well and it’s suitable for businesses with after 50 employees.

These solutions are old part of the Sage Business Cloud, which is now the primary engine to win and drive new customer acquisition in the cloud. As we continue driving out market, the scale up and lower enterprise segments remained our largest area of revenue generation, provided the sweet spot of strong profitability against fragmented competition where Sage is a clear market leader.

The acquisition of Intacct significantly enhances our position in the upper scale and upper lower enterprise as we now have a cloud-first solution in the space to win in the USA, which represents over 50% of the total addressable market. We also continue our focus on the startup market as well as driving high contract values with strengthen our roots to market with renewed focus and our accountant channel and also on new e-commerce website.

So important work completed to winning the market this year now we’d appreciate that certainly more to do, but we are very clear of some great signs of progress. Four out of our top eight geographies are growing at in excess of 10%.

These midsize regions Iberia, Central Europe, Brazil and from the Middle East were the comparatively smaller size makes it easier to embed operational culture change. Now in our larger region, the transformation talk longer but we’re now confident we have the pathway with the right people, the leadership, the processes and the products through the Sage Business Cloud.

So let’s take a proper look at Sage Business Cloud which we launched in October 2017, the one and only cloud business management platform that, customers will ever need, from startup to enterprise. Sage Business Cloud unifies our portfolio of cloud products to provide the most comprehensive suit of cloud solutions in the market is perfectly aligned to our customer requirements across the golden triangle of Accounting, People & Payroll Payments & Banking.

Supporting these core solutions, we have been developing a thriving ecosystem with marketplace app, powered by developer platforms for application program interface as APIs. We also offered the latest platform services included artificial intelligence and the Pegg framework.

So you may wonder what differentiate us from other cloud platforms, quite simple there is no competitor who offers the sheer breadth of cloud products that Sage does. Products that are global, products that are multilingual that adapt to local legislation, than can serve a sole trader in her kitchen -- on here kitchen table as easy as they can serve multinational international corporations.

Simply put, no one else can do this. Now new and existing customers can join the Sage Business Cloud at any phase of their business journey and carry on growing with Sage.

There is no more expensive hard to implement monolithic ARP systems, Sage Business Cloud is flexible and completely customizable as the customers business grows. A big part of our work around the Sage Business Cloud has been to develop our ecosystem of partners and our payments business has particularly seen exiting developments here.

We talked about the updated payments strategy at H1 FY17. We announced the disposal of the North American payments business in June 2017.

We continue to leverage the power phase pay here in the UK and it sees focus in this year has been building our global partnerships. Following our payments strategy update in May we now have partnerships with the best Fintech providers in the world, companies like Stripe and Go Cardless, and we are together helping to revolutionize the services we can offer our mutual customers.

So imagine an entrepreneur starting their very first business, a process that can be fraught with administration and red tape. Our technology through the cloud simplifies this first step for an entrepreneur.

Within Sage Business Cloud, the customer can access a custom fit solution a suite solution to start trading straight away. Let me give you a couple of examples.

Our partnership with Stripe means the entrepreneur can set up and receive card payment instantly with easy reconciliation. With Go Cardless, the entrepreneur can seamlessly set up direct debits to ensure payments in an out are frictionless, automated and always on time.

In partnership with Liberis, we have piloted new ways of the entrepreneur to get easier access to funding, so our Sage Pay business finance. Now with our new bank and API, we've enabled new bank account information fees with the leading banks in the U.S.

and the UK, making the arduous process of bank account reconciliation much, much, much easier just given back precious time to our customers the entrepreneurs. So Sage is not just providing compliance and allowing access to backward look in accounts.

It's helping entrepreneurs to run their business smarter more efficiently, looking always ahead from the palm of their hands. And as the business grows, the power and the ecosystem of the Sage Business Cloud will continue with them, allowing the business to scale and expand across the golden triangle.

Now Steve earlier touched on the work we've done to achieve annualized cost savings, reaching our mutinous and reducing our G&A margin as a proportion of revenue to 13.8%, 360 basis points below FY16. Now, there is still more to do here and this focus on efficiencies and simplification we will continue beyond the transformation and is now considered business as usual at Sage.

Let's turn our attention to One Sage ensuring that we have the best talent is absolutely critical to our success. We've invested in our leadership and we now have a highly talented highly competent technology driven leadership team.

Our top 150 leaders over 20% of whom come from top tech companies like Google, SAP, Salesforce and Oracle. Another key elements to succeed in our strategy is making sure we embed a culture where our customers feel -- our colleague feel empowered to make a difference and give back to our communities.

Sage Foundation is now beat in heart of our business at Sage. In FY'17, we donated almost £2 million in grants to small charities and Sage colleagues spent 23,000 days paid volunteering in their communities.

The Sage Foundation helps us attract to retain the right talent particularly millennials, it is also the right way to do business and it's something that makes us very proud. So moving onto outlook for FY'18, the organic revenue definition for FY'18 will include acquired businesses from the beginning of the financial year following the date of the acquisition.

Here in FY'17 Sage acquired Sage People and Sage Intact, which will now form part of organic revenue and combine are expected to add around 1% of revenue in FY'18. On this basic, management expects organic revenue growth for FY'18 to be around 8%.

We expect to continue to achieve cost efficiency that will be more than sufficient to absorb losses, as we continue to invest in these businesses as they scale. We are therefore confident of delivering an organic operating margin of around 27.5% in FY'18.

Now you know we provide guidance on an annual basis, however, in the spirit of transparency, I'm particularly keeping investors and analysts informed the progress we will continue with quarterly updates. We started FY'18 invested heavily in sales training and ensuring with set up for success through the year.

Therefore, we would expect to similar phase in to prior financial years as we accelerate momentum through the year towards our strongest performance in Q4. Our guidance today on any basis, our organic revenue margins -- sorry, our organic revenue and our operating margin targets are raised.

So to summarize, the strategy is working and the transformation we announced of the 2015 Capital Markets Day is complete. Throughout this period, we have maintained a competitive investment pace of higher quality recurring revenue, superior operating margin, strong free cash flow, and a progressive dividend.

The work we have done organically and through acquisitions has strengthened our position, as the market leader in the scale up and low rent price. And we now have the leadership, the organizational alignment the brands and a comprehensive suite of cloud products unified through Sage Business Cloud to accelerate momentum in the market.

Today Sage is stronger than ever, supported by the rise in our guided organic revenue and operating margin targets and our 9% increase in the full year ordinary dividends to 15.42 pennies. As a reminder, we will behold in the Capital Markets Day on 20 of the January 2018 here in London.

And we will be excited to give you much more color on Sage's future accelerated growth story. We look forward to seeing you all there.

And with that, I'd love to open to Q&A and as ever I ask the question if you can state your name and your company, and if possible to respect to everybody having the chance to last questions, please stick to one question per analysts. So let's start.

Steve, come down. Thanks.

We'll start, Mo, do you want to kick off. There is mobile mike coming around for everybody.

Steven, can you maybe give us some more color on kind of your assumptions around this sort of 8% organic growth guidance? I mean geographically, France, obviously was a little soft.

What are these are you planning any kind of bounce back in France and then specifically UK? Some other companies are talking about some sort of macro concerns continue maybe isolate the macro versus some of that kind of product cycle and underlying structural drivers around that accelerations where the risks in the guidance are?

That's four questions, so I'll do all that. So at the macro level, we see the continuing acceleration with ARR, obviously around the Sage Business Cloud.

In terms of geographically, I think it's important to say, we have a plan, we got newly distributed on the show during at the start of the month in France. What we shared with you before in terms of the challenge in France last year was around effectively the way we price the subscription and also the partner channel in France.

I think we've got our arms around these case with new leadership, we certainly see more stability in the first half and then momentum in France for the second half. Geographically, actually, we would certainly see broadly continue momentum in all geographies in four obviously out of the eight sub-regions are growing at double digit.

And then your last question related I guess to the UK and the environment in the UK, actually we like our customers are confident we're getting them with running our business. And we despite Brexit and all the noise, we're just focused on getting up every morning and run our business and the outlook for our UK business is continuing growth.

Last year, we grow 7%, you still see broke out the Sage Business Cloud growth in the UK which is a lot of momentum, we see that continuing across the board. And do you want to add, Steve?

Yes, I think. In the UK, despite being our home market and we've done well in the UK.

We still only have 37% subscription penetration in the UK. We have a very large installed base of customers who we think will continue to upgrade to the cloud enabled version particularly Sage 50.

And we've also seeing strong Sage X3 growth in the UK. So and I think we have momentum both in the installed base and but also with new customer acquisition.

Good. Who's holding the mic?

Do you want to try, Stacy? Just mix it up a bit.

Otherwise, what we'll do is take all the questions in future from the front to incentivize you all come to the front, otherwise, go with it Stacy.

Only one question, right?

Yes.

So can Intacct be taken into new geographies where and for what time period?

Obviously, yes, but what we'd like to do is, keep a bit of powder dry because we want you to all come to the Capital Markets Day, and we'll share the plans around internationalization of Intacct as part of the sort of future strategy. So absolutely, but obviously today Intacct's revenues is all in the U.S., even very little in Canada, so fantastic product, market leading product Gartner Magic quadrant; and actually, the key part of the scale up and lower enterprise to complete the Sage Business Cloud.

Another element I'll probably should share with you we've had a lot of market analysts kind a doing a deep dive on Sage Business Cloud, and their feedback after spending the day and half with this going really into the bowels is we're probably two years ahead of the competition and is the most complete and that's why I said the most comprehensive suite of cloud solutions products within a platform. So, there's loads more on that Stacy at the Capital Markets Day.

Michael?

In terms of Sage One, it was -- it added about 70,000 customers in H1 and only about 25,000 in H2. Can you talk about regional picture there and whether you think that will accelerate?

And just a tricky follow-on. In terms of the -- sorry, yes the acquisition contribution, you’re showing Intacct about 90 million, you’re saying about 1% acquired growth you will benefit from that which is about 20 million and not just seems low, this seems to imply growing about 20% rather than the 30% you alluded to.

Can you explain? Thanks.

So let me take that second one quickly. The 90 million is ARR, so it’s slightly higher than the recognized revenue.

And so -- and I think we have guided to about 1%, it could be a little bit more because we are obviously -- what we are looking at the moment is where we allocated capital between the different parts of the business and this is another reason why we want everything to -- we want every part of the revenue to be equal. If we think we can invest more into Sage Intacct and Sage People and get them to grow faster, we will.

But we will do all that within envelop of making the 27.5% margin. So I think the important thing here is that and we are treating both revenue and also costs as equal internally, and it is very important because we are selling through existing channels particularly the Sage People.

But when we are talking to the sales teams they are not saying well I better go and sell this product over here because it’s organic and I am not selling this one because it’s not organic. We need everybody to be selling the best solution for the customers.

So may be and will be open when they come into our results, we will give you an indication of how much of the growth has come from Intacct and People, and it might be because it’s more than 1% but if it, that’s much growth. But it will be because we’ve invested behind it.

So if you look at -- if you think about how that impacts on the margin for example, we have disclosed in the period we have owned them this year. We have already made losses of about 8 million in People and Intacct.

We haven’t said how much we think that will be in ‘18 but you can extrapolate and you can assume that it’s going to be something like 100 to 150 basis points. So saying we are going to make 27.5% margin it means excluding those investments we are probably making something more like 29% in the rest of the business.

So you can see from that, that the confidence that we have in terms of the cost efficiencies and the cost savings in the rest of the business. But we think it’s important that we allocate capital in a way that drives the most progress.

That’s about on the first question.

May be on UK the phase one I think what you referred to is overall 2% of our revenues. So I know that part of the market gets a lot of noise.

However, we are really happy with the progress we’ve made on the raising the ACV and also the ARR and actually Steve mentioned I think 61 million ARR in that marketplace in the UK, and that was grown broadly in line to the 75%, 76% for ARR growth in FY17. The other things that you will see us do more often I referenced to in terms of the local marketing campaigns here and I just noticed we got some of senior management, Amanda, Vicki or Klaus-Michael, our CTO, our Head of Payments and Banking, Seamus; and Neil Morgan who leads Marketing.

You will see us get really, really engaged in the UK as you start see us in terms of what we was called, station domination, where we painted the stations green. And if you go out to Hammersmith, if you want to lighten up Hammersmith, you might look up for the sky and see Sage.

So these is a lot of things in marketing as in big push now in the UK to really slowly reengage with the account and we're seeing a bit shift to the Sage Business Cloud for both our UK and North America customers that really underpinned this very strong growth we saw in AR and Sage Business Clouds. So I think there is, number one I think we did, we said to you I think signals that were three years ago, at that time it was really marketing money, but we found that the business is off quality are actually prepared to pay for the value and there what we see the ACV trending now on Sage One particularly and also that is same story on Sage Live and now we feel that we got all the elements of the product, the distribution, the market place in place to really drive for accountant through marketing and the move to Sage Business Cloud.

We did see -- I think, we said a few years ago, we did some experimentation in the UK, so we did there some deals on Sage One where we were pushing it through £1 a month. So Sage does build up the lower end of Sage One.

And we have encouraged churn at that level and because of the end of the day, we can't up sell and monetize, and model doesn’t really work with the people paying a £1 a month. So, we've seen significant increase in churn in Sage One in the UK, however, the revenue has gone up because we're focused on high quality revenue.

And we've also been churning Brazil, I mentioned in my presentation that we've seen non-payment, an increase in non-payment in Brazil, and so we started turning customers off who were not paying. So, you've asked absolutely seeing a shift as Steven said, we said a few years ago, we didn’t really mind what the ARPU was in the first year or so.

And we're now focusing much more on -- we believe that the product is a premium product, it's the match of anybody else and we intend to charge appropriately forward.

One of the final things, so long answer but two years ago, if you'd ask us about the Sage One, it would have been 30 different code bases, now what we talk about in terms of the UK version French, Spanish, German, U.S. It’s a single code base.

So also have to do a lot Klaus-Michael lead the project with engineering to make sure that we unified it now. We think we're the only company that has a none-English speaking locally compliant, totally legislative to compliant plan, which means that in the future we can go much faster in terms of product innovation and integrating things like AI and Pegg and all those fantastic products as well.

We'll go for Charlie and then we'll come back over here.

Hi, this is Charles Brennan here from Credit Swiss. Can you start with the clarification on the terminology of the guidance, we're used to using words like around sounds surprising and precise you.

Should we continue to enter for that at least? And then just in terms of my question, can I just ask about the CapEx 50 million like a big number?

Can you give us any insight just to whether there is any cost capitalization within that with R&D and self commissions? Thanks

I am sure that's two questions. So if we want to say at least, we would have said, at least.

So we mean around. So why are we saying, around, because we still going through a shift particularly on new customer acquisition and where we're selling X3 on perpetual license and then we're selling the other products on subscription.

So being completely precise about that mix as we go through this year and as we're pushing harder and harder on new customer acquisition, means that you know we just want a bit of flexibility and say you know, we don't want to say that 7.9 was a failure and 8.1 was a success. Something around 8 we think is reasonable and the same with the 27.5.

I mean this year we have managed pretty much precisely to the guidance that we gave, but again whether it’s 27.4 or it’s 27.7 what we're trying to do is give you the color that we are starting to see the acceleration and as we go through the first couple of quarters we'll get a better sense of how that's playing out. Second question -- CapEx, so on CapEx, yes so 50 million that we don't capitalize internal costs cause we do actually, we have an R&D policy which could in certain circumstances allow us to capitalize R&D but we have not done so.

It is IT systems, so we said before that whilst we made progress in the back office on using our own systems like Sage X3 and Sage People we still have a lot more work to do in terms of investing in the CRM systems so we have Salesforce across our enterprise business so for X3 but we have three million customers that the front end CRM reengineering is quite a big project which is -- we're still underway with that. And also we made a deliberate decision two years ago that we would rationalize our entire property portfolio.

So with half the number of locations and to around 70, but in our key sort of Tier 1, Tier 2 locations in pretty much every case now, and we have either moved to new offices or we have upgraded them usually by going to smaller footprints but we are deliberately investing in very quality facility because it's part of how we attract and retain talent. And every time you do that, we obviously capitalize the cost of the refurbishment and these are decent size offices so it runs into the millions of pounds.

We are about to do Newcastle, so those of you who've been to Newcastle,. North Park is a pretty sizeable campus 340,000 square feet and we're going to do a refurbishment of that campus which probably means over the next couple of years we'll probably spend about £30 million doing that, so that's where the money is going.

Thank you, it's Vijay Anand from Jefferies. In the presentation today you outlined a strong focus on financial discipline and return on capital employed, which I suppose is a pleasing message for investors.

But on the other hand change in definition for organic growth might suggest that someday it's probably a greater appetite for M&A going forward, and if acquisitions are like Intacct then it's great for short term growth, but they will dilute returns in the near term. So that feels like a confusing message for investors.

So I wanted to get your thoughts on, are you telling us today that as a business as a management team you're going to prioritize growth over returns or perhaps your sustainability of returns going forward?

So I think we're being very disciplined, I think the fact that we are including we're not just including the revenue, we're including the costs. I mean, remember, if we hadn't have put Sage Intacct and Sage People into organic revenue, we wouldn't have put the losses into organic costs either.

So, we'd be standing here saying here's our revenue but we're now making a 29% organic margin. To me that makes no sense whatsoever we have to have complete transparency and alignment between internal metrics and external metrics.

A pound of revenue is a pound of revenue. We need to be able to say to all our people internally driven growth.

My message to investors is we’re doing all of that and we are enhancing the margin with funding all of this. It’s not like we went out and did an equity raise.

We funded it all through debt and the leverage is already done at 1.6. So I think we are making very attractive use of our free cash flow.

We are delivering to investors accelerated revenue growth and we’re funding it.

Yes I think just actually you talked about the investors I think they are very clear that the Sage story is all about organic growth, superior margins, strong free cash flow as a platform for selective acquisitions and we’ve clearly stated bolt-on acquisition will accelerate the strategy. But the essence and we are doing much, much more about how we achieve this, our Capital Markets Day, is that organic growth engine through winning the market with Sage Business Cloud.

So that’s absolutely a fundamental part of the Sage building.

Steven Goulden from Deutsche Bank. Just on the subscription growth.

You’ve said in the past that obviously growing around 30% company make it up start but slow once you sort of run through the low hanging fruit at the Sage 50 basis tougher sell as you get into the sort of the 200 low products. I just wondered if you had a bit of an update around that and why do you still think that’s going to play out?

And obviously in line with Sage One sort of slowing and customers probably there, are we seeing any kind of material new customer acquisition growth outside of whatever subscribers you’re getting there or may be subscriptions you are getting at Sage Live?

I think on the subscription growth, I think it's probably fair to say that if you compare how we feel today to where we where 12 months ago in terms of the sustainability of the installed base growth, we probably feel a bit more optimistic. I think the cloud-enabled versions of Sage 50, 200, which are integrated into Office 365, are proving to be very popular.

I mean, we've got over globally, and by globally, I really mean the U.K., U.S. and Canada because that's the 3 countries where we've launched it so far.

We already have over 170,000 customers signed up to cloud-enabled versions of Sage 50 and Sage 200. And we have an installed base in the hundreds of thousands that we can still sell that upgrade to.

So I think this has got -- we deliberately quoted the software subscription penetration rates. So although they're high in places like France and South Africa, we still have a huge amount of runway both in the North America and also in Continental Europe, where the products are going to be available during FY '18.

So I think there's a lot of momentum. And on new customer acquisition, both in Sage One and Sage X3, we're starting to see traction.

And so it's early days. We still need to do more on new customer acquisition, but we are continuing to add the number of customers that we have.

And remember, our renewal rates are 86%. So every year, 14% of our customers don't renew, and we still cover that and add more.

So we are doing new customer acquisition. Stephen and I would love to see Sage having 5 million customers, never mind 3 million.

But I think we're seeing some green shoots.

Yes just another thing, and this is much kind of a little teaser maybe for Capital Markets Day, but we'll share with you on when we're moving customers to Sage 50 cloud, on subscription, Office 365. Everything I talked about in terms of payments is fundamental.

So now our customer can go to Liberis and get basically within seconds effectively a facility. They can integrate Stripe.

So it's not just within the Sage Business Cloud; Sage, but it's a much broader ecosystem, and that will drive momentum, and that will drive, obviously, existing customers to move to the cloud but also very attractive for new customers. And I think we've seen that, and the results actually speak for themselves in that respect.

But it's -- on that, it's just the start. We've got another 12 countries this year we're rolling out the cloud-enabled solutions to.

And you'll hear much more at the Capital Markets Day around Sage Business Cloud. Going to David.

It's David Toms from Numis. Can I just ask a quick clarification -- not a question, a clarification on your response to Charlie.

You said you don't capitalize any internal costs. The notes to the accounts say that your IFRS 15 policy is capitalizing internal costs in winning long-term contracts, so can you just quantify that?

Yes, we haven't implemented IFRS 15 yet. So IFRS 15 is -- will be implemented from FY '19 onwards.

And IFRS 15 -- I mean, I -- we've talked for hours about IFRS 15. We're obviously assessing the impacts of what that will have both from a revenue and also from a profitability perspective, but you probably all know the rules under IFRS 15 are somewhat more prescriptive.

And therefore, as the CFO, I've always aired on the side that I don't like capitalizing internal costs unless we're forced to. Under IFRS 15, there are certain areas where we might be forced to.

Now we don't have a lot of long-term contracts. The area where we might start to have to do something different would be an X3 implementation.

So if we prime an X3 implementation, where we sell both the software and the professional services but we're the prime contractor, and let's say that implementation took over a period of time, we would be forced to match the costs to the revenue over that period of time, whereas today, we just -- we treat them as they're incurred.

And then just a question, sales and marketing productivity, my favorite question each year. You spent more money on sales and marketing.

The recurring revenue growth rate is 140 bps lower than last year. The overall growth rate is 10 bps lower.

What's the benefit of all the sales and marketing spend, and how are you tracking the productivity of it?

Yes. So I think with sales and marketing, it's why I sort of did the example I did on Iberia.

We obviously have some expenditure which we sort of drive across the whole of Sage, so brand awareness. But even with things like Sage Summit, whereas last year, we had a big Sage Summit in Chicago; this year, we took Sage Summit on the road and took it to 8 different cities.

So what we've been doing more of this year is focusing the investment on a country-by-country basis. And as Stephen alluded to, what we're seeing is a faster return on that in the smaller countries, so in Central Europe, in Iberia, Africa, Middle East, Latin America, et cetera, where we have more agile sort of leadership where we can make the cultural changes faster.

I think in the bigger countries, what we've seen is we've put money to play in certain areas. So we've seen great success, for example, in North America on the upgrade to C-line.

As I say, I'm very pleased with the Sage 300 family. It's taken a long time to get the partners to really embrace the upgrade to C-line and subscription.

That all requires investment, and these things don't come for free but what the bigger countries have to do as well as those initiatives, like driving C-line and actually driving X3, which has also been a success, we also need to manage all aspects. I mean, the bigger countries tend to have a wider, diverse source of revenue.

So they have some of the older product lines that are growing slow, right? So they have some areas where they're doing well.

But as a whole, their blended growth rates are not going up fast enough because they're not bringing that together and migrating customers to, for example, the Sage Business Cloud as quickly as they should. So we are being very granular about how we allocate the marketing expenditure.

All these product launches that we do, they all require marketing behind them, but it takes a while for it to adopt. So the C-line product is going into 12 countries; Sage Live going into, whatever it is, 9, 10 countries; Sage One, similarly.

This all requires money to support, and then it takes a while for it to set off. But we think we've put in place a lot of the building blocks, and '18 is a pivotal year.

Yes, I think it's at a good question. It's a question we ask internally.

Blair's, I think, got his arms around that. It's interesting, when you look at Sage One, actually, apparently, it's the fastest product ever launched to get to 400,000 customers in that sort of comparable marketplace.

So we talk about that. And it's fair to say, in the early days, you don't see the rapid adoption, but then you see the sort of hockey stick, crossing the chasm, whatever analogy you want to use.

I think with Blair here at our Capital Markets Day, you'll get a real sense of a feel. We think there's a lot more we can do around sales, productivity and efficiency.

And I think that one of the reassurances you can take is we clearly signaled today the transformation we announced back in 2015 is complete, no more exceptionals, but the discipline we're going to drive internally around productivity, around all functions will continue and be relentless.

I mean, we grew the business 7%, and the headcount declined 3%, so we're starting to make some progress in terms of the overall productivity.

Yes. And the go-to-market function, 8,000 people will be at the area of focus.

Maybe a couple more questions. Yes, there, James.

It's James Goodman from Barclays. I mean, you've made a few comments today about having completed the first phase of the transformation for Sage.

And if we look at the guidance and step back from the 8% versus the 6% this year, that's largely a consequence of the acquisitions and the Payments disposal, where the growth slowed. My question is, why do you not have more confidence at this stage that the growth would accelerate?

And not to steal your Capital Markets Day detail, but how confident are you that the organic growth of the underlying Sage business can accelerate? And when will that come through?

I think, James, good question. I think you probably -- you go to a lot of management team presentations.

We haven't talked about Brexit. You probably, hopefully, had a very different term for this management team around confidence in the business and, obviously, raising the targets, but we want to be sensible.

We never want to be a management team that kind of run before we walk, but we're very confident. And you're right with the disposal of North American Payments, it's probably 0.5%.

You got 1% from the acquisitions. But it's still a statement that we're actually seeing an uptick in terms of guidance of the organic growth.

And I think we'll see much more of the how, which is the fundamentally getting under the surface of how we're going to achieve this, and you'll meet a much broader range of the management team members. And you'll see the plans coming together when we meet up in January, the 25th of January.

Anyone?

No, I think we're -- whilst we're signaling the disposal, the transformation is over, changes are constant. There's still a lot to do.

We -- as Stephen said, we haven't talked about any external macro factors at all, but this is -- there's quite a bit of uncertainty around at the moment. We think we have our arms around what we're doing.

But I think we need to see how the next few quarters go. We're very -- we wouldn't be guiding to 8% if we weren't confident around it, but there's still a lot of moving parts.

And we still have one of our largest countries, i.e. France, which only grew 1%.

That's got a new Managing Director. And these things take time, though.

You can't just wave a magic wand. So that's -- as I said in my presentation, if you exclude France, the rest of the business grew 7.8%.

And actually, the recurring revenue would've been 11%. So France is a considerable drag.

And whilst Laurent is a very strong leader, he's going to need some time to get his arms around that. North America showed signs of strength in Q4, but again, there's still some moving parts there that need to come through.

So I think it's important that we just keep it in context. This is a journey.

If we've gone back 3 years, most people didn't believe we could go through this transformation and achieve 6% growth every year without having some sort of double dip. We've achieved 6% growth, we've achieved 27% margin, and we have made substantial changes to this business.

But we need to keep driving that change, and I think we're signaling to you it's heading in the right direction. But there's still stuff to be done.

Right. Maybe final question?

Just 2 rows back. Excellent.

Thanks.

It's John King from Merrill Lynch. Maybe just a follow-up or clarification really on that.

Just the visibility you have more tangibly, obviously, saying Q4 is the strongest quarter. But I guess, Sage typically feels like it has a 1- to 2-quarter visibility, so what it is that you're kind of confident that comes through really in the latter part of the year?

Yes, maybe I'll start, and then you wrap up. I think where -- and with Blair here, I think we have a lot more confidence.

There's a lot more granular discipline, forward-looking pipeline management. There's still improvements to make.

But I think when we actually sit down with the country managers, and we did a call with them last week, we got a very clear picture of the year ahead and how that kind of maps out. So I think the assurance that you can take is that when we provide guidance, it is underpinned by substance from the rollup of the country managers, and Steve's right at the center of that with Blair.

So 78% of the revenue is recurring, and 37% is subscription. The subscription has higher renewal rates, so typically, 90% plus.

So as the subscription -- amount of subscription increases, our visibility improves because we can see that and, as I say, renewing it at a higher rate. We do have good visibility of the remainder of the recurring revenue, i.e.

the maintenance and support. But as I say, the retention rates are not as high.

Now we think with the cloud-enabled products, with Sage Business Cloud and with everything we're doing on Sage 50 and Sage 200. We should be able to drive much more to those higher retention rates, and therefore, we're seeing improved visibility in terms of the installed base.

More of the new customer acquisition at the moment is coming from X3 because they are bigger projects, and it's perpetual license. Although we have good order cover, visibility of the timing of those deals is more volatile, and that is one area that could be impacted by macro because CFOs become cautious when uncertainty is around.

Haven't seen that yet, but that could be the case. So I think we've got a pretty good handle on the momentum and what's happening in the core of the business.

But the rate of adoption in new customer acquisition is always the uncertainty. You can't predict how quickly people will adopt the new things that we're doing.

We got Seamus here in the audience, who is the Head of our Payments and Banking. We're doing a lot of interesting things in that space.

You saw that we signed up with Stripe. There's a lot of things that we're doing.

But again, you don't know how quickly customers will adopt these solutions. So thank you very much for joining us today.

Also, I am really looking forward to seeing you on January 25th. And it will give you a lot of the sort of these answers you started today and much more about the how in terms of medium term and acceleration of Sage Business Cloud and the overall business.

Thank you very much.