Sopheon – wrong place, wrong time

(By Philip Carnelley, 27 Aug 09, 09:30) Sopheon’s interims today confirmed what it has been saying in its trading statements (Efficiency winning out over innovation): it’s been finding things tough this year. The product innovation software company announced revenues down 5%, to £4.1m for the half year. It turned from profit to loss: –£0.3m at the EBITDA level and a £1m loss before tax. After strong results in 2008 (47% growth and a move into operating profit after some years of losses) this is disappointing, even if not unexpected.

In the current economic climate, product innovation is not top of mind at many companies. Though some will subscribe to the theory that innovation is the best route forward in a recession, most ‘make do and mend’ and focus first on operating efficiency. Another problem for Sopheon is that the majority of its staff are outside the UK and therefore cost more in sterling terms. It exacerbated this by adding staff in response to its 2008 performance (it is now slimming down again). So this could be summed up as ‘wrong place, wrong time.’ Nevertheless, management believes that orders are being deferred, not lost, though even so, most players find deferred orders rarely return at the original contract value. The pipeline is said to remain “strong” and undoubtedly companies’ thoughts will – indeed must – return in the coming months to product innovation. But for Sopheon, the wait is proving rather painful.