This is why London-listed companies are undervalued – Sage CEO
Businesses listed on the London Stock Exchange need to tell their stories better and deliver for investors if they are to boost their valuations, the CEO of FTSE 100 technology giant Sage has said.
Steve Hare, speaking on an up-coming episode of Morning Wire‘s Boardroom Uncovered, said a lower number of competitors listed in London means that investors frequently have to look across the Atlantic to compare a firm’s performance.
The CEO added that public companies can combat investor confusion by making sure that they have a clearer message which can then be delivered on – something which he said will lead to valuations in London being improved.
Newcastle-headquartered Sage is currently worth around £10.7bn, which its CEO has said is a fair valuation.
The London Stock Exchange has been under the cosh in recent years for companies having lower valuations than their US counterparts which has made firms vulnerable to takeovers.
‘UK-listed firms need to tell their stories better to boost their valuations’, Sage boss
Speaking on the up-coming Boardroom Uncovered episode, the CEO of Sage said: “I think maybe the thing that makes the London market a little bit more difficult is you don’t have the same peer groups.
“If you take Sage, we are the only technology company really now listed on the FTSE and we’re certainly the only software technology company.
“So what that means is that when people are looking at comparators, they do have to look to the US.
“I think if investors don’t understand the story, then you can start to get dislocation in terms of the valuation.”
When asked what his company does differently, Hare added: “So the approach we take in Sage is we put a very significant amount of effort into explaining what we’re doing, what our growth story is, what our investment cases are, both to investors but also to analysts.
“What’s really important is that the story is consistent.
“We don’t have one story for investors, one story for colleagues.
“There is a story that is pretty clear in terms of what we’re trying to achieve and therefore it makes it easy for investors to understand and buy into whether they believe in that.
“And therefore I think today we are very fairly valued for what we have achieved.”
Why Rolls-Royce gets all the credit
Hare pointed to Rolls-Royce, which has become the darling of the FTSE 100 in recent years, as an example of a story actually being delivered on.
The CEO said that it’s one thing updating investors and telling them what a company’s intentions are and it’s another to actually follow through.
Rolls-Royce recently was valued at more than £100bn for the first time in its history thanks to its share price rocketing since the Covid-19 pandemic.
Hare said: ““The only argument would be, should we be getting any credit for what’s coming in the future?
“My view on that is once you start delivering it, you get credit.
“I think if you look at these other stocks in the FTSE 100, I think Rolls-Royce is probably the best example.
“Their valuation really, really sunk. Then the new CEO came in and he has delivered.
“And as he’s delivered the shares have gone up tenfold.”