Key Performance Indicators

Our progress on our strategic objectives is monitored by the Board of Directors by reference to the key performance indicators (”KPIs”) applied on a Group-wide basis. Our regional businesses also set individual KPIs tailored to their local business operations.

Selection

The Board has debated which KPIs provide the most accurate view of our business, taking into account Sage’s decentralized organisational structure. The KPIs selected are regularly reviewed to ensure that they provide a true picture of our business performance. KPIs relating to the environment are kept under review, but are not considered relevant, as our businesses have limited environmental impact.

Performance

Performance in 2008 is set out in the table below, together with the prior year’s performance data. No changes have been made to the source of the data or calculation methods used in the year. In both years the results are calculated on an IFRS basis.

Notes

Adjusted earnings per share growth

Adjusted EPS represents income for the financial year, prior to the amortisation of intangible assets, divided by the weighted average number of ordinary shares in issue during the year. This is after the neutralisation of foreign exchange movements.

Organic revenue growth

Organic revenues are derived from our core business operations, excluding the contribution from acquisitions made in the current and prior year, along with non-core products. Current year revenue is compared to the prior financial year translated on consistent exchange rates to eliminate distortions due to fluctuations in exchange rates.

EBITA margin

EBITA is defined as earnings before interest, tax and amortisation. This measure excludes the effects of amortisation of acquired intangible assets and the net amortisation or capitalisation of software development expenditure. The EBITA margin represents EBITA divided by revenue for the year.

Cash generation from operations

Cash flows from operating activities divided by EBITDA provide a measure of the ability of the Group to yield cash from its on-going business to reinvest and fund liabilities. The Group aims to maintain positive cash generation from operations.

Renewal rates on maintenance and support contracts

Customer retention is an important measure of competitiveness in the market. Renewal rates are calculated as the number of maintenance and support contracts, which were renewed in the in the period divided by the number of contracts which were potentially renewable in the period.

* Foreign currency results for the year ended 30 September 2007 have been reinstated based on the average exchange rates for the year ended 30 September 2008 of $1.97/£1 and €1.31/£1 to facilitate the comparison of results.

† Earnings before interest, tax and amortisation of intangible fixed assets (EBITDA).

** Pre-tax profit and earnings per share figures stated prior to amortisation of intangible fixed assets, and after neutralisation of foreign exchange movements.