2013 Final Results

RNS Number : 9019T

Sanderson Group PLC

26 November 2013

 



FOR IMMEDIATE RELEASE                                                                                                                                           26 November 2013

SANDERSON GROUP PLC

Preliminary Results for the year ended 30 September 2013

"Strong trading momentum maintained; complemented by increased levels of business from new customers"

Sanderson Group plc ('Sanderson'  or  'the Group' ), the software and IT services business specialising in multi-channel retail and manufacturing markets in the UK and Ireland, announces Preliminary Results for the financial year ended 30 September 2013.

Commenting on the results, Chairman, Christopher Winn, said:

"Against a challenging UK economic backdrop, the Group's trading results have produced increased revenue, gross margin and operating profit, together with a high level of pre-contracted recurring revenue.  The value of the order book at the year end has provided a solid platform from which to make further progress in the current year. Sanderson has continued to generate cash, allowing the Board to maintain its progressive dividend policy and two acquisitions, completed either side of the year end, provide the Group with significant growth opportunities.

Highlights - Financial 

§ Total revenue of £13.83 million (2012: £13.37 million).

§ Pre-contracted recurring revenue of £7.94 million (2012: £7.66 million) accounting for approximately 57.4% of total revenue (2012: 57.3%).

§ Increases in multi-channel retail division revenue and operating profits* to £7.23 million (2012: £7.17 million) and £1.28 million (2012: £1.21 million) respectively; increased business from new customers with trend towards bigger orders; five new customers gained.

§ Increase in manufacturing division revenue to £6.59 million (2012: £6.20 million)

§ Gross margins further improved to 87.6% (2012: 83.6%) reflecting increased delivery and installation of proprietary software and other 'owned' services.

§ Increase in operating profit* to £2.22 million (2012: £2.04 million).

§ Profit before tax from continuing operations of £1.94 million (2012: £1.48 million).

§ Adjusted, diluted earnings per share from continuing operations, stated before items relating to acquisitions of 4.2 pence (2012: 3.6 pence)

§ Net cash at year end of £3.66 million (2012: £4.07 million; 2011: net debt of £6.72 million) after paying £500,000 initial cash consideration on the acquisition of Catan Marketing Limited.

§ Proposed final dividend per share of 0.85 pence (2012: 0.7 pence), making total for year of 1.5 pence per share (2012: 1.2 pence).

Highlights - Operational

§ Strong trading momentum maintained and complemented by increased levels of business from new customers;

§ Order book stood at £1.94 million at year end (2012: £1.89 million; 2011: £1.35 million).

§ Manufacturing division added nine new customers during the year and has a very strong order book.

§ Further investment in sales and marketing capability made.

§ Two acquisitions completed, one after the year end; Catan Marketing Limited acquired in August for up to £644,660 cash and One iota Limited acquired in October for up to £5.43 million.

§ Continued investment in proprietary solutions using mobile technologies complemented by recent acquisition of One iota Limited.

§ Successful Share Placing at 55 pence per share in October raised £3.50 million (before costs).

* stated before amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related costs

On strategy, current trading and prospects, Mr. Winn, added:

"The Sanderson Board intends to pursue a growth strategy based upon a conservative financing policy with a strong balance sheet and cash in the bank at its core. The Group will continue to invest across all of its businesses, with particular emphasis on further developing a range of solutions for ecommerce as well as for the food and drink processing sector, while mobile commerce solutions are being developed across all of the Group's target markets.

"The general economic environment, though showing some signs of improvement, is still challenging and accordingly the Board continues to adopt a cautious approach.  However, the strong order book, improved market position and the two recent acquisitions provide the Board with an expectation that Sanderson will achieve significant progress during the current financial year."

Enquiries:                        

Christopher Winn, Chairman                                                                     Telephone: [phone]

Adrian Frost, Finance Director                                                                 

Paul Vann, Winningtons Financial                                                           Telephone: [phone] or 07768 807631

Mark Taylor, Charles Stanley Securities                                                  Telephone: [phone]

SANDERSON GROUP PLC

Preliminary Results for the year ended 30 September 2013

Chairman's statement

Introduction

Sanderson provides a comprehensive and constantly developing range of modern software solutions together with associated services to businesses in the multi-channel retail and manufacturing markets.  The Group's business model has been developed whereby solutions primarily comprising Sanderson proprietary software (sometimes integrated with other market leading products) are marketed, sold under licence, delivered, supported and serviced by expert Sanderson staff.  The Group has been able to deliver a consistent and reliable quality of service which has ensured the development of long-term relationships with customers. 

Financial results

The Group's trading results for the year ended 30 September 2013 ('the period' ) show revenue of £13.83 million (2012: £13.37 million), further improvement in gross margin to 87.6% (2012: 83.6%) as a result of increased emphasis on higher margin Sanderson proprietary software, delivered and installed by our own staff and operating profit before amortisation of acquisition-related intangibles, acquisition costs and share-based payment charges ('operating profit') of £2.22 million (2012: £2.04 million).  The value of the order book at the period end was £1.94 million (2012: £1.89 million, 2011:£1.35 million), providing a solid platform from which to make further progress in the current financial year.

After paying £500,000 of initial consideration relating to the acquisition of Catan Marketing Limited in the period, the net cash balance at 30 September 2013 was £3.66 million (2012: £4.07 million).  

Dividend

The Group has continued to generate cash, enabling the Board to maintain its progressive dividend policy whilst continuing to invest in and to develop the Group's businesses.  Subject to the approval of shareholders at the Annual General Meeting, which is scheduled to be held on 28 February 2014, the Board is proposing a final dividend of 0.85 pence per ordinary share, making a total of 1.50 pence for the year, representing a 25% increase compared with the total dividend of 1.20 pence in 2012.  The final dividend, if approved, will be paid on 28 March 2014 to shareholders on the register at the close of business on 7 March 2014.  The Board intends to continue to pay a progressive dividend based upon the trading and strong cash generation of the Sanderson business.

Business review

Sanderson is an established provider of software and services to the multi-channel retail and manufacturing markets.  With the emergence of the multi-channel retail division as the larger part of the Group's operations so the second half of the financial year now contributes a larger proportion of annual operating profit. This is partly due to the importance of the September to January trading period for customers who operate in the market areas of 'online sales, ecommerce and catalogue sales' ('ecommerce') and as a consequence, many IT investment decisions are not generally considered before February of each year.  The Group's growing number of food and drink processing customers also experience the same 'busy' period.  As a result, the second half of the financial year to 30 September, produced an additional £239,000 of operating profit compared with the first half year to 31 March.

Pre-contracted recurring revenues are a cornerstone of the Sanderson business and provide the Board with good visibility of future earnings.  Sanderson software is licenced to customers, typically on annual contracts and this recurring software licence revenue stream is augmented by consultancy, support and maintenance services.  In the period to 30 September 2013, pre-contracted recurring revenues were £7.94 million representing 57% of total revenues (2012: £7.66 million and 57%).  The gross margin from recurring revenues covered 73% of Group overheads (2012: 76%). 

The Group continued to invest in its products and services and has made further investment in the delivery and services capabilities of the Group's ecommerce businesses, as well as the business which focuses on the food and drink processing sector.  Since 2010, the investment in the Group's sales and marketing activities has been increased by over 10% per annum. 

During the period, 14 new customers were gained (2012: 15 new customers) at an average initial contract value of £119,000 (2012: £99,000).  The value of orders from new customers grew again with the total increasing to £1.67 million (2012: £1.49 million, 2011: £1.33 million).  The annual growth rate being achieved in the ecommerce market continues to be in excess of 10% and this growth, which is being further fuelled by mobile commerce (ecommerce via mobile devices) is expected to continue to provide growth opportunities in the mid-term.  The food and drink processing sector within the UK is growing, as is the Group's own business which addresses this market. 

Sanderson products are continually developed to offer both prospective and existing customers, the opportunity to achieve cost savings and to make business efficiencies utilising the latest technologies.  'Value for money' propositions which demonstrate a good return on investment case are key considerations for UK commercial businesses.  Consistent high quality service and support is also an important factor in retaining customers and building long-term relationships. In August 2013, one of the Group's longstanding customers (since 2000), placed an extension order, worth over £190,000, for the deployment of Sanderson software into a number of its subsidiary businesses including Zambia, Botswana, Namibia, Nigeria and Ghana.

The increased emphasis on higher margin Sanderson proprietary software, delivered and installed by our own staff, has resulted in the further improvement of gross margin to 87.6% in the period, compared with 83.6% in the year ending 30 September 2012 and 82.3% in the previous year, ending 30 September 2011. 

Review of multi-channel retail

Sanderson provides comprehensive IT solutions to businesses operating in the ecommerce sector, wholesale distribution, cash and carry and retail stores.  High levels of activity have been experienced from providing mobile commerce solutions, incorporating the latest 'responsive' web technologies that optimise customers' websites enabling them to adapt to whatever device is being used for optimal viewing, seamless navigation and increased sales.

Revenue in the period was £7.23 million (2012: £7.17 million) and whilst there was continued strong growth in ecommerce businesses, very much reflecting market trends, there was a decline in the Group's business focused on traditional mail order fulfilment.  Completion of a planned investment in the infrastructure and capability of the Group's ecommerce business resulted in operating profit growth being limited to 6% to £1.28 million (2012: £1.21 million).  Revenue from customers operating in the ecommerce market grew to £2.62 million, (2012: £2.40 million, 2011 £2.09 million).  Gross margin improved to 87.6% (2012: 83.7%).  Five new customers were gained in the period compared with nine in the previous year.  The increased level of new customer business has continued with a large order from a new customer, worth almost £250,000, gained at the start of the current financial year.  Sales prospects are strong and it is expected that the investment made in the year ending 30 September 2013 will contribute to faster progress in the coming year.

Review of manufacturing

The part of the Group's business which addresses the general UK manufacturing market experienced a tougher trading environment than in the previous year, whereas the business focused on the food and drink processing sector, benefiting from investment made over the last two years, made very good progress and drove overall growth for the manufacturing division.  The size of the UK food and drink processing market is growing and there is an increase in the number of small and medium businesses in this sector.  The need for traceability through the food and drink distribution, production and supply chain, combined with a continued drive to reduce operational costs has provided the Group with a good opportunity in this market.  The Sanderson food and drink processing business now represents 49% of the Group's manufacturing business (2012: 44%, 2011: 39%).

Full year revenue was £6.59 million (2012: £6.20 million) and operating profit was £932,000 (2012: £831,000). Overall order intake was £3.10 million (2012: £2.74 million).

Nine new customers were gained in the period (2012: six new customers) including Broder Metals Group, COOK Trading Limited, Kolak Snack Foods and Virani Food Products.  The order book is strong and at the period end stood at over £1.2 million (2012: £870,000) with very good sales prospects.

Acquisition

On 12 August 2013, the Group acquired Catan Marketing Limited, trading as PRIAM, for a maximum consideration of £644,660.  PRIAM had revenues of £875,000 in the year to 31 August 2012, employs 14 staff and is based in Rugby.  PRIAM achieved £147,000 of revenue in the period from its acquisition and contributed £6,000 of operating profit.  During the current financial year, management plan to integrate PRIAM into the Group's multi-channel retail division and to invest in the sales and marketing capability of the business. 

Post Period End Events - Acquisition

In October, the Group acquired One iota Limited for a maximum consideration of £5.43 million, made up of initial consideration of £3.13 million and deferred consideration of up to £2.30 million depending on the trading performance of business in the three years to 30 September 2016.  The One iota business is experienced in cloud-based multi-channel solutions and the One iota MESH platform integrates a retailer's back-office and existing systems, with mobile, tablet and in-store sales channels.  In the year to 31 January 2013, One iota produced revenues of £665,000 and profit (before taxation) of £195,000.  One iota offers, in its own right, a significant growth opportunity in the rapidly expanding mobile retail solutions market as well as a synergistic opportunity to accelerate further the development of Sanderson into the provision of integrated mobile solutions.

Post Period End Events - Share Placing

The Sanderson Board remains committed to pursuing a growth strategy based upon a conservative financing policy with a strong balance sheet and cash in the bank at its core.

On 28 October 2013, the Group successfully completed the raising of £3.50 million before costs by way of a placing of 6,363,636 new ordinary shares, issued at 55 pence per share.  The total issued share capital of the Group is now 51,479,218 ordinary shares.

After the Acquisitions and the Share Placing, the cash balance as at 22 November was in excess of £4.5 million.

Management and staff

Sanderson now employs approximately 185 staff, who have a high level of experience and expertise in the market sectors which the Group addresses.  Over the last 15 months, management have looked to recruit graduates and more recently, have been working with Local Enterprise Partnerships to recruit school leavers.  On behalf of the Board, I would like to thank everyone for their hard work, support and dedication to the development of Sanderson over the period of recovery and business transition since 2009 and now into a period of planned sustainable growth.

Strategy

The Board's strategy is to achieve growth by continuing to build upon the Group's businesses operating within the multi-channel retail and manufacturing markets.  Sanderson is a provider of modern and proven software solutions which continue to provide customers with opportunities to gain competitive advantage and to effect cost saving efficiencies.  Our goal is to achieve growth, build value and thereby improve shareholder returns.  Whilst the Group will continue to invest across all of its businesses, particular emphasis will be placed on developing further the range of solutions for ecommerce businesses, as well as, for the food and drink processing sector.  Mobile commerce solutions are being developed across all of the Group's target markets.

Selective acquisition opportunities will continue to be considered to augment organic growth.  However, in the short term, management intends to focus on delivering 'on target' results and on making the PRIAM and One iota acquisitions successful.

Outlook

Whilst the Board is keen to pursue the continued development of Sanderson, the economic environment, though showing some signs of improvement, is still challenging and accordingly the Board continues to adopt a cautious approach.  However, the Group's strong order book, improved market position and the two recent acquisitions provide the Board with an expectation that Sanderson will achieve significant progress during the current financial year ending 30 September 2014.

Christopher Winn

Chairman

26 November 2013

Consolidated income statement

for the year ended 30 September 2013

		Continuing operations	Relating to acquisitions	Total                2013	Total 2012
	Note	£000	£000	£000	£000
Revenue	2	13,681	147	13,828	13,374
Cost of sales		(1,684)	(27)	(1,711)	(2,188)
Gross profit		11,997	120	12,117	11,186
Technical and development costs		(5,239)	(65)	(5,304)	(4,989)
Administrative and establishment expenses		(2,975)	(209)	(3,184)	(2,912)
Sales and marketing costs		(1,657)	-	(1,657)	(1,379)
Results from operating activities		2,126	(154)	1,972	1,906
Results from operating activities before adjustments in respect of the following:	2	2,209	6	2,215	2,038
Amortisation of acquisition-related intangibles		-	(66)	(66)	(67)
Acquisition related costs		-	(94)	(94)	-
Share-based payment charges		(83)	-	(83)	(65)
Results from operating activities		2,126	(154)	1,972	1,906
Finance income	3	489	-	489	465
Finance expenses	4	(518)	-	(518)	(679)
Exceptional finance expense		-	-	-	(227)
Movement in fair value of derivative financial instrument		-	-	-	16
		2,097	(154)	1,943	1,481
Taxation	5	(251)	(1)	(252)	(185)
Profit/(loss) for the year		1,846	(155)	1,691	1,296
Profit on discontinued operations, net of tax		-	-	-	1,110
Profit/(loss) for the year attributable to equity holders of the parent		1,846	(155)	1,691	2,406

Earnings per share

From continuing operations
Basic earnings per share	7	4.2p	(0.3p)	3.9p	3.0p
Diluted earnings per share	7	4.0p	(0.3p)	3.7p	2.8p
From discontinued operations
Basic earnings per share	7	-	-	-	2.5p
Diluted earnings per share	7	-	-	-	2.4p
From profit attributable to the owners of the parent undertaking during the year
Basic earnings per share	7	4.2p	(0.3p)	3.9p	5.5p
Diluted earnings per share	7	4.0p	(0.3p)	3.7p	5.2p

Consolidated statement of comprehensive income

for the year ended 30 September 2013

		2013	2012
		£000	£000
Profit for the year		1,691	2,406
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss
Defined benefit pension plan actuarial losses		(225)	(740)
Deferred taxation effect of defined benefit pension plan items		53	185
		(172)	(555)
Items that will subsequently be reclassified to profit or loss
Change in market value of available for sale financial asset		74	-
Foreign exchange translation differences		(32)	-
Total comprehensive income attributable to equity holders of the parent		1,561	1,851

Consolidated statement of financial position

at 30 September 2013

			2013	2012
			£000	£000
Non-current assets
Property, plant and equipment			307	372
Intangible assets			23,194	22,404
Deferred tax assets			1,388	1,567
			24,889	24,343
Current assets
Inventories			-	9
Trade and other receivables			3,371	3,594
Other short-term financial assets			205	131
Cash and cash equivalents			3,662	4,066
			7,238	7,800
Current liabilities
Trade and other payables			(2,746)	(2,872)
Deferred consideration			(145)	-
Income tax payable			(5)	(9)
Deferred income			(3,886)	(4,599)
			(6,782)	(7,480)
Net current assets			456	320
Total assets less current liabilities			25,345	24,663
Non-current liabilities
Pension obligations			(4,174)	(4,512)
Deferred tax liabilities			(272)	(121)
			(4,446)	(4,633)
Net assets			20,899	20,030

Equity attributable to equity holders of the Parent Company
Share capital			4,380	4,352
Share premium			4,302	4,205
Available-for-sale reserve			74	-
Foreign exchange reserve			(32)	-
Retained earnings			12,175	11,473
Total equity			20,899	20,030

Consolidated statement of changes in equity
for the year ended 30 September 2013

		Share Capital	Share Premium	Available- For -Sale Reserve	Foreign Exchange Reserve	Retained Earnings	Total Equity
		£000	£000	£000	£000	£000	£000
At 1 October 2012		4,352	4,205	-	-	11,473	20,030
Exercise of share options		28	97	-	-	(110)	15
Dividend paid		-	-	-	-	(590)	(590)
Settlement of share options		-	-	-	-	(200)	(200)
Share-based payment charge		-	-	-	-	83	83
Transactions with owners		28	97	-	-	(817)	(692)
Profit for the year		-	-	-	-	1,691	1,691
Other comprehensive income:
Actuarial result on employee benefits		-	-	-	-	(225)	(225)
Deferred tax on above		-	-	-	-	53	53
Foreign exchange translation differences		-	-	-	(32)	-	(32)
Change in fair value of available for sale financial asset		-	-	74	-	-	74
Total comprehensive income		-	-	74	(32)	1,519	1,561
At 30 September 2013		4,380	4,302	74	(32)	12,175	20,899

for the year ended 30 September 2012		Share Capital	Share Premium	Available- For- Sale Reserve	Foreign Exchange Reserve	Retained Earnings	Total Equity
		£000	£000	£000	£000	£000	£000
At 1 October 2011		4,338	4,178	-	-	9,959	18,475
Exercise of share options		14	27	-	-	(41)	-
Dividend paid		-	-	-	-	(413)	(413)
Share-based payment charge - continuing operations		-	-	-	-	65	65
- discontinued operation		-	-	-	-	52	52
Transactions with owners		14	27	-	-	(337)	(296)
Profit for the year		-	-	-	-	2,406	2,406
Other comprehensive income:
Actuarial result on employee benefits		-	-	-	-	(740)	(740)
Deferred tax on above		-	-	-	-	185	185
Total comprehensive income		-	-	-	-	1,851	1,851
At 30 September 2012		4,352	4,205	-	-	11,473	20,030

Consolidated statement of cash flows
for the year ended 30 September 2013

		2013	2012
Cash flows from operating activities		£000	£000
Profit for the year after taxation including discontinued operations		1,691	2,406
Adjustments for:
Amortisation of intangible assets; continuing operations		237	176
Depreciation; continuing operations		124	75
Share-based payment expense; continuing operations		83	65
Post tax profit on discontinued operations		-	(1,110)
Net finance expense		29	441
Movement in fair value of derivative financial instrument		-	(16)
Income tax charge		252	185
Operating cash flow before changes in working capital		2,416	2,222
Movement in trade and other receivables		383	(666)
Movement in inventories		9	26
Movement in trade and other payables		(1,100)	434
Cash generated from continuing operations		1,708	2,016
Discontinued operations - operating cash flow		-	(356)
Payments to defined benefit pension scheme		(677)	(315)
Interest paid		-	(703)
Income tax received		-	377
Net cash flow from operating activities		1,031	1,019
Cash flow from investing activities
Purchase of property, plant and equipment		(45)	(194)
Purchase of investment held for resale		-	(131)
Acquisition of trade and assets, net of cash acquired		-	(173)
Acquisition of subsidiary undertaking, net of cash acquired (note 8)		(440)	-
Dividend received		20	2
Bank interest received		54	-
Disposal of discontinued operations, net of cash disposed		-	11,064
Discontinued operations - investing cash flows		-	(140)
Development expenditure capitalised		(249)	(187)
Net cash flow from investing activities		(660)	10,241
Cash flow from financing activities
Repayment of bank borrowing		-	(7,400)
Issue of shares		15	-
Settlement of share options		(200)	-
Equity dividends paid		(590)	(413)
Net cash flow from financing activities		(775)	(7,813)
Net (decrease)/increase in cash and cash equivalents		(404)	3,447
Cash and cash equivalents at beginning of year		4,066	619
Cash and cash equivalents at the end of the year		3,662	4,066

Notes

1.   Basis of preparation

The Group financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ('IFRS').  The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.  The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.

2.    Segmental reporting

The Group is managed as two separate divisions, providing IT solutions and associated services to the manufacturing and multi-channel retail sectors.  Substantially all revenue is generated within the UK.  The information provided to the CODM is analysed between the divisions as follows:

	Manufacturing		Multi-Channel			Total
	2013             £000	2012             £000	2013            £000	2012              £000	2013            £000		2012              £000
Revenue - external customers	6,594	6,201	7,234	7,173	13,828		13,374
Cost of sales	(817)	(1,019)	(894)	(1,169)	(1,711)		(2,188)
Gross profit	5,777	5,182	6,340	6,004	12,117		11,186
Depreciation charged +	(85)	(56)	(39)	(31)	(124)		(87)
Operating profit before adjustments	932	831	1,283	1,207	2,215		2,038
Amortisation*	(53)	(24)	(13)	(43)	(66)		(67)
Acquisition related costs	-	-	(94)	-	(94)		-
Share-based payment charges	(31)	(7)	(52)	(58)	(83)		(65)
Result from operating activities	848	800	1,124	1,106	1,972		1,906
Net finance expense					(29)		(425)
Taxation					(252)		(185)
Result on discontinued activity net of tax					-		1,110
Profit attributable to equity holders					1,691		2,406

 *Amortisation of acquisition-related intangibles

+ Depreciation charged to operating profit

Revenue, operating profit and profit before tax shown above in respect of the year ended 30 September 2012 show continuing operations only. The CODM uses both gross profit and operating profit measures in assessing the performance of the Group's divisions. The Group disposed of its subsidiary undertaking Sanderson RBS Limited on 20 January 2012. The discontinued operation contributed no revenue or operating profit in the period (2012: £3.53m revenue, £0.50m operating loss stated after amortisation of acquisition related intangibles and shared based payment charges).

Analysis of items contained within the Statement of Financial Position Manufacturing Multi-Channel Total
	2013              £000	2012              £000	2013             £000	2012               £000	2013 £000	2012 £000
Property, plant and equipment	160	222	147	150	307	372
Intangible assets	11,602	11,693	11,592	10,711	23,194	22,404
Deferred tax assets	978	1,197	155	197	1,133	1,394
Inventory	-	3	-	6	-	9
Cash and cash equivalents	2,024	753	3,478	1,726	5,502	2,479
Trade and other receivables	1,688	1,478	1,683	2,116	3,371	3,594
Total assets	16,452	15,346	17,055	14,906	33,507	30,252
Trade and other payables	(1,165)	(1,055)	(1,581)	(1,817)	(2,746)	(2,872)
Deferred income	(1,966)	(2,188)	(1,920)	(2,411)	(3,886)	(4,599)
Income tax	(5)	(9)	-	-	(5)	(9)
Deferred taxation	(38)	(38)	-	-	(38)	(38)
Deferred consideration	-	-	(145)	-	(145)	-
Pension obligations	(4,174)	(4,512)	-	-	(4,174)	(4,512)
Total liabilities	(7,348)	(7,802)	(3,646)	(4,228)	(10,994)	(12,030)
Allocated net assets	9,104	7,544	13,409	10,678	22,513	18,222
Other unallocated assets and liabilities					(1,614)	1,808
Net assets					20,899	20,030

The Group's assets are held in the United Kingdom. No one customer accounts for more than 10% of the sales of either division. Included within other unallocated assets and liabilities are net overdrawn cash balances totalling £1.84m (2012: cash balances of £1.59m) and deferred tax balances in respect of certain shared operations.  Amounts in respect of shared operations cannot be allocated between operating divisions.

Additions to property, plant and equipment during the year amounted to £45,000 (2012: £310,000). A total of £21,000 (2012: £175,000) were attributable to the Manufacturing division, with £24,000 (2012: £135,000) incurred by the Multi-channel retail division. In 2012, Sanderson RBS Limited accounted for £90,000 of additions.

3.    Finance income

	2013 £000	2012   £000
Expected return on defined benefit pension scheme assets	415	463
Bank interest received	54	-
Dividend received	20	2
	489	465

4.    Finance expenses

	2013 £000	2012 £000
Interest on bank overdrafts and loans	-	127
Interest on defined benefit pension scheme obligations	518	552
	518	679

5.    Taxation

Current tax expense	2013 £000	2012 £000
UK corporation tax for the current year	-	-
Overseas corporation tax for the current year	(3)	4
Relating to prior periods	(20)	(23)
Total current tax	(23)	(19)
Deferred tax
Deferred tax for the current year	168	256
Relating to prior periods	(61)	(171)
Relating to change in rate of tax	168	119
Total deferred tax	275	204
Taxation charged to the income statement	252	185

Reconciliation of effective tax rate

The current consolidated tax charge for the period is lower (2012:  lower) than the average standard rate of corporation tax in the UK during the period of 23.5%.  The differences are explained below.

	2013	2012
	£000	£000
Profit before taxation - continuing operations	1,943	1,481
Tax using the average UK Corporation tax rate of 23.5% (2012: 25%)	457	370
Effects of:
Expenses not deductible for tax purposes	56	224
Utilisation of losses not previously recognised	(348)	(334)
Over provision in previous years	(81)	(194)
Change in tax rate	168	119
Total tax in income statement	252	185

6.  Dividends

		2013                            £000		2012                 £000
Interim dividend of 0.65p per share (2012: 0.50p)			285	217
Final dividend relating to previous financial year of 0.70p per share (2012: 0.45p)			305	196
Total dividend for the financial year			590	413

A final dividend of 0.85 pence per ordinary share in respect of the financial year ended 30 September 2013 will be proposed at the Annual General Meeting of the company, expected to be held on 28 February 2014. If approved by shareholders, the total final dividend payment will amount to £437,573.

7.    Earnings per share

Basic and diluted earnings per share are calculated by dividing the result after tax for the year by the weighted average number of ordinary shares at the end of the year and the diluted weighted average number of ordinary shares at the end of the year respectively. In order to better demonstrate the performance of the Group, an adjusted earnings per share calculation has been presented below which adds back items typically adjusted for by users of the accounts. The calculations for earnings and the number of shares relevant to all of the measures of earnings per share described in the foregoing are set out below:

Earnings:	2013	2012
	£000	£000
Result for the year from continuing operations	1,846	1,296
Amortisation of acquisition-related intangibles	-	67
Share-based payment charges	83	65
Exceptional finance costs	-	227
Adjusted profit for the year from continuing operations	1,929	1,655

Result for the year relating to acquisitions	(155)	-
Acquisition related costs	94	-
Amortisation of acquisition-related intangibles	66	-
Adjusted profit for the year relating to acquisitions	5	-

Result for the year relating from discontinued operations	-	1,110
Amortisation of acquisition-related intangibles	-	270
Share-based payment charges	-	52
Adjusted profit for the year from discontinued operations	-	1,432

7.    Earnings per share (continued)

Number of shares:	2013	2012
	No.	No.
In issue at the start of the year	43,525,946	43,383,946
Effect of shares issued in the year	205,907	129,940
Weighted average number of shares at year end	43,731,853	43,513,886
Effect of share options	2,385,565	3,021,787
Weighted average number of shares (diluted)	46,117,418	46,535,673

Earnings per share:	2013 (pence)	2012 (pence)
From continuing operations:
Basic	3.9	3.0
Diluted	3.7	2.8
From discontinued operations:
Basic	-	2.5
Diluted	-	2.4
Total attributable to equity holders of the parent undertaking:
Basic	3.9	5.5
Diluted	3.7	5.2

Earnings per share, adjusted, from continuing operations:
Basic	4.4	3.8
Diluted	4.2	3.6

Subsequent to the year end, ordinary shares were issued pursuant to the acquisition of One iota Limited and a placing. As a result, the total number of ordinary shares in issue at the date of this report is 51,479,218. Had the ordinary shares been issued at the start of the year, the earnings per share reported above would have been reduced. However, the results for the year would have been affected by the result of the subsidiary acquired and the use to which the placing proceeds may have been put.

8.    Acquisitions

On 12 August 2013 the Group acquired the entire issued ordinary share capital of Catan Marketing Limited for cash consideration. The business develops and supplies e-commerce software and related services under the PRIAM trading name. In the period from acquisition to 30 September 2013 the business contributed revenue of £147,000 and a £6,000 operating profit before amortisation of acquisition-related intangibles, share-based payment charges, acquisition-related costs and taxation. If the acquisition had occurred on 1 October 2012, Group revenue would have been £872,000 higher and Group operating profit £10,000 higher. These figures are based on the assumption that fair value adjustments arising on acquisition would have been the same had the acquisition completed on 1 October 2012.

The acquisition had the following effect on the Group's assets and liabilities at the acquisition date:

		Pre-acquisition carrying amount		Fair value adjustment	Recognised value on acquisition
		£000		£000	£000
Property, plant and equipment		14		-	14
Intangible assets		-		468	468
Trade and other receivables		178		(17)	161
Trade and other payables		(191)		(69)	(260)
Deferred taxation		-		(108)	(108)
Net identifiable assets and liabilities		1		274	275
Goodwill on acquisition					310
					585
Cash consideration paid at completion, net of cash balances					440
Deferred cash consideration, paid 4 October 2013					50
Deferred contingent cash consideration					95
Net consideration payable					585

The fair value adjustments relate to the recognition of intangible assets in accordance with IFRS 3: Business combinations, adjustments to deferred income to apply the Group's accounting policy to amounts billed prior to acquisition and adjustments to the accounting for costs relating to deferred income to match the treatment adopted in respect of the income. Fair values have been determined on a provisional basis.

Pre-acquisition carrying amounts were determined based on applicable IFRS, immediately prior to the acquisition.  The values of assets and liabilities recognised on acquisition are their estimated fair values.  In determining the fair value of intangible assets, the Group adopted an income basis with estimated future cash flows discounted at a rate of 12% per annum.

The goodwill recognised on the acquisition is attributable mainly to the skills and technical talent of the workforce of the acquired business and the expected synergies to be achieved from integrating the Company into the Group's existing multi-channel retail operations.

Deferred contingent cash consideration is payable by reference to revenue generated by the acquired entity in the 12 month period ending on 31 August 2014. The maximum amount payable will be £95,000 should revenue exceed £895,000 and management expect this amount to be paid. The deferred conditional consideration is payable within 10 days of the amount being agreed and it is envisaged the payment will be made in September 2014. As the payment date is within 12 months of the year end, the amount payable has not been discounted.

Acquisition costs of £94,000 (2012: £nil) have been charged against operating profit and are included in administrative expenses.

9.    Annual Report & Accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The Consolidated Income Statement, Consolidated Statement of Financial Position, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows, together with associated notes, have been extracted from the Group's 2013 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under section 498(2) or (3) of the Companies Act 2006.

The accounts for the year ended 30 September 2013 will be laid before the Company at the Annual General Meeting, expected to be held at the Company's registered office on 28 February 2014. A copy of this preliminary statement will be available to download on the Group's website www.sanderson.com. Copies of the Annual Report and Accounts will be posted to shareholders in due course at which time the Annual Report and Accounts will be made available to download on the Group's website www.sanderson.com in accordance with AIM Rule 26, and will be delivered to the Registrar of Companies in due course.

 

END

 

 

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