UK FTSE 100 firm Sage (SGE) saw its share price rally nearly 3% on the first trading day of 2021, dragging itself off the 582p floors at which it ended 2020.
At 10.30am, the stock had risen close on 14p to 596p. When compared to today’s 2.8% jump by the FTSE 100 benchmark it would seem that Sage is enjoying no more than the wider optimism of investors as Britain starts to rollout its second Covid vaccine, created by AstraZeneca and Oxford University scientists.
On closer inspection there is a hint today that Sage, the UK’s second largest listed software business, may be mulling vertical expansion that could see the company target the rapid shift of retail to online.
RETAIL ENABLER BRIGHTPEARL
The company has invested £17 million into Brightpearl, which runs an operations platform for retailers and wholesalers. Its back-office solutions provide all sorts of specialist management functions, including financial, inventory and sale order, purchasing and supplier, customer relationship, fulfilment, warehouse and logistics. The platform is connected up to major e-commerce platforms such as Magento, BigCommerce and Shopify.
The cash injection provided by Sage will bolster £25 million of fresh growth funding for Brightpearl, with the balance coming from existing investors Cipio Partners, Notion Capital and Verdane. The deal will also see Sage take a seat on the Brightpearl Board.
According to Megabuyte data, latest Brightpearl accounts to December 2019 show revenues up 24% to £11.2 million and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) losses narrowing from £6.7 million to £6.5 million.
TESTING THE WATERS
What makes Sage’s involvement interesting are the similarities to 2016’s ‘partnership’ initial arrangement with human resources software firm Fairsail.
‘Sage went on to acquire Fairsail entirely around a year later in 2017 and perhaps we could see Brightpearl taking a similar path’, speculated Megabuyte’s Lee Prout today.
If so, that could create a exciting new growth opportunity for Sage. That might be very useful at a time when it is coming under increasing pressure from cloud-based start-ups and other rivals in its core accounting and financial controls mid-market space, which has made for a bumpy ride for the share price.
