MARKET REPORT: Sage plans fail to put its investors on cloud nine

MARKET REPORT: Sage plans fail to put its investors on cloud nine

2020-11-20 22:07:34
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MARKET REPORT: Software group Sage unveils plans for a spending spree – but fails to put its investors on cloud nine

Software group Sage spooked the market by unveiling plans to kick off a spending spree that it hopes will attract customers.

The company, which makes accounting and human resources software for small businesses, wants to pump cash into its Sage Business Cloud division.

This part of the firm offers software stored in the so-called ‘cloud’, meaning the programmes are based online and can be accessed from any computer.

Spending plan: Sage, which makes accounting and human resources software for small businesses, wants to pump cash into its Sage Business Cloud division

Spending plan: Sage, which makes accounting and human resources software for small businesses, wants to pump cash into its Sage Business Cloud division

Subscriptions to the cloud have surged during the pandemic as people have had to stop using their office computers but needed to access all of the same documents remotely – and often using laptops and potentially dicey home broadband.

Cloud software will also make sense in future as it can save firms money on buying bulky computers and other hardware.

But Sage’s plan to lure customers means it will splash out on sales, marketing and research – so much so that it will slow the rate of growth going forward. 

On top of this, it also increased its full-year dividend by 2 per cent to 17.25p per share. 

Stock Watch – Immupharma 

Immupharma got a shot in the arm after its US licensing partner scheduled a meeting with the Food and Drug Administration (FDA).

Avion Pharmaceuticals will discuss the design and approval process of a late-stage trial for Immupharma’s lupus drug with officials from the watchdog on December 4.

Avion will also ask the FDA if Lupuzor could be conditionally approved while the study is under way.

AIM-listed Immupharma rose 15 per cent, or 1.65p, to 12.63p.

The outlays came as Sage’s reported profits rose 3 per cent to £373million in the year to September as revenue dipped £1.9billion. Analysts were dismayed by the outlook.

Shore Capital said Sage ‘remains a game of snakes and ladders for investors’, and the figures were ‘another snake bite of reality around organic growth and margins’.

Stifel analyst George O’Connor was similarly torn, saying the results ‘were fine’ but that Sage was trying to juggle being a ‘part growth and a part income stock, and not doing either of them particularly well’.

Unimpressed investors headed for the exit – with the stock falling by 13.4 per cent, or 91p, to 588.8p by the close, which put it at the bottom of the FTSE 100 leaderboard.

Packaging group Smurfit Kappa was also in the red, falling 1.4 per cent, or 46p, to 3176p after raising £500million by selling new shares. 

It wants to use this to invest in ecommerce and sustainable packing, such as by buying more cutters and gluers so that it can make more corrugated cardboard packages.

It was a subdued day on the wider market, where the FTSE 100 eked out a 0.3 per cent rise, climbing by 17.1 points, to finish at 6351.45.

The FTSE 250 finished virtually flat, falling by just 0.49 points to 19,506.96.

Chemicals group Croda was on the up, rising 0.5 per cent, or 32p, to 6280p, as Citi brokers upgraded the rating on its stock from ‘neutral’ to ‘buy’.

They said its £736million takeover of a Spanish fragrance company would be a ‘step change’ for the company – and also bumped up the price they think its stock is worth from 6,000p to 7,400p. 

Dealmaking was a theme elsewhere too. AIM-listed recruiter Staffline (up 6 per cent, or 2.03p, to 35.78p) sold its apprenticeship business to Babington Business College for a nominal fee.

And Telit Communications – a scandal-hit technology company and Tesla supplier that connects everyday devices to the internet – revealed it has attracted another takeover offer.

Under the 250p per share offer from U-Blox Holding, Telit shareholders would own 53 per cent of the new combined company.

Telit shares surged 17.7pc, or 29.8p, to 198p on the news, which comes weeks after it revealed it was being eyed by other groups Dbay and Lantronix.

Unite Group shareholders were little moved by plans to buy a £150million, 800-bed student accommodation development in London’s Paddington neighbourhood from Travis Perkins (up 0.3 per cent, or 3.5p, to 1315p).

Unite (up 0.2 per cent, or 2p, to 1073p) is hoping it will be open for the 2023-24 academic year.

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