Wednesday, 4 February 2009

Currencies hit Sage net debt

(By Anthony Miller). The impact of unfavourable currency movements has added over £100m to Sage’s net debt in the final quarter of 2008, though the company said that the £649m level is “comfortably” within its banking covenants. In today’s trading statement (see here), CEO Paul Walker reiterated earlier comments on ‘volatile’ trading conditions dragging down business, particularly in mainland Europe (35% group revenues and 33% profit) and North America (39% revenues, 29% profit). Sage’s UK business (19% revenues, 30% profit) was ‘resilient’.

No mention, however, of progress with Sage’s fledgling UK SaaS offering, Sage Live, which was quietly pulled late last year. The company has labelled the website “Closed for maintenance”. We continue to get much thoughtful reader feedback on our various comments on the pains of moving from a legacy ‘on-premise’ software model to SaaS and we are sure this is a topic that will continue to stimulate vital interest for the foreseeable future. Whether or not you believe that SaaS is the future of all software delivery is not the point. The point is that SaaS is a fact of life. Sage’s country-based product business model means that, in theory at least, it would need to develop individual SaaS products for each separate market (they sell in 26 countries to date). This rather flies counter to the shared-service model that is core to the basis of profitable SaaS delivery. Fortunately, SaaS is still in its early stages and Sage’s mighty support contract base, the bulk of its 61% recurring revenue stream, will provide a great safety cushion while licence sales remain subdued.

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