Software giant Sage’s move from its Great Park base to a new home in North Tyneside will cost the firm £100m – including massive depreciation costs on its current home.
The firm announced at the start of this month that it plans to move its international head office out of Newcastle’s Great Park, where it has been based for 15 years.
The tech giant Sage will move to two buildings at Cobalt Business Park in 18 months, taking up more than 200,000qft of space across the two neighbouring buildings. It aims to invest £40m in the new HQ, creating jobs and improving its customer experience at a new world-class technology hub.
The move clouds the future of Sage’s existing head office and the firm – which owns the land and building – has said it is focusing on transferring its staff to Cobalt over making a decision on Great Park.
But now a trading update from Sage, covering the nine months ended June 30, reveals the huge extra costs to the business that this move will trigger, resulting in a on-off charge of around £60m related to the accelerated depreciation of the building, taking the total cost of the imminent move to £100m.
In the update to shareholders, Sage said £12m will be recognised in the current financial year with the rest falling into next year’s financials.
The firm said: “As announced on 1 July 2019, Sage’s flagship 海角视频 office is moving from North Park to Cobalt Business Park, both of which are located close to Newcastle, 海角视频. The move will provide leading-edge working facilities to improve colleague experience.
“There will be a non-cash non-recurring charge in the region of £60m relating to the accelerated depreciation of the North Park building, with approximately 20% of this charge to be recognised in FY19 and the remainder in FY20.”
Most Read
The news comes as the firm announced that group organic revenue increased by 5.3% to £476m in the third quarter from and 5.9% to £1.417bn in the first nine months of the year.
Recurring revenue increased by 11.4% to £405m in the third quarter and 10.6% to £1.183bn for the first nine months of the year, underpinned by software subscription growth of 28.3% to £752m, reflecting the continued focus on attracting new customers and migrating existing customers to subscription and the cloud.
Jonathan Howell, chief financial officer, said: “We remain encouraged by the progress made in recurring revenue in the first nine months of FY19, reflecting Sage’s focus on high-quality subscription and recurring revenue as we continue the transition to becoming a great SaaS company.”