Final Results
Sanderson Group PLC
16 November 2005
For immediate release 16 November 2005
Sanderson Group plc
Maiden Annual Results for the year ended 30 September 2005
Sanderson Group plc ('Sanderson' or 'the Group'), the software and IT services
business specialising in commercial markets in the UK and Ireland, announces
maiden annual results for the year ended 30 September 2005. Sanderson provides
software and IT services to businesses with annual revenues between £5 million
and £250 million.
Key Points
• Pro forma* turnover at £15.46 million (2004: £15.43 million).
• Pre forma* operating profit at £2.80 million (2004: £2.79 million).
• Pro forma* profit before tax at £2.70 million (2004: £2.70 million).
• Strong cash generation with net cash flow from operating activities at 106%
of operating profit before amortisation.
• Total net debt reduced from £18.7 million to £1.6 million.
• Statutory turnover for the period was £15.46 million and the loss before
tax was £482,000.
• Proposed Final Dividend of 1.4 pence per ordinary 10p share making a total
for the year of 2.5 pence.
• First acquisition successfully integrated and performing well.
• Over £2 million of orders from new customers, a 17% increase on the previous
year.
Commenting on the results, Christopher Winn, Chairman, said:
'Sanderson continues to generate organic growth in the majority of the markets
it serves, with strong profitability and cash flow underpinning the overall
result. Over the last twelve months, sanderson has been successful in gaining a
number of new clients as well as enhancing the product and service offerings
provided to existing clients. Our first acquisition has been successfully
integrated and is performing well.
'We are pleased to propose a final dividend and we believe that the
continued development of the business and the solid financial performance
provide a strong platform for future growth and enhancement of
shareholder value. Our strategy is to develop the Group by delivering organic
growth with good profitability from the existing business and by making
complementary businesses.'
* Pro forma information shows the results for sanderson as if it had been
trading in its current form for the full twelve month period.
Enquiries:
Christopher Winn, Executive Chairman Tel: 02476 555466
David O'Byrne, Managing Director Tel: 01709 787787
Adrian Frost, Finance Director Tel: 01709 787787
Sanderson Group plc
Paul Vann, Winningtons Financial Tel: 07768 807631
SANDERSON GROUP PLC
Maiden Annual Results for the year ended 30 September 2005
CHAIRMAN'S STATEMENT
Introduction
We are pleased to report our first set of annual results since the
admission of the Company's shares to the Alternative Investment Market ('AIM')
on 16 December 2004.
Trading Results - Pro forma
We have produced pro forma trading results for the year ended 30 September 2005
in order to provide a more meaningful comparison. These results
show trading as if the Group had been a public company for the full 12 month
period. Comparative pro forma information is provided for the previous financial
year. As indicated in our trading update of 17 October 2005 this financial
information shows the Group reporting a slight increase in turnover and
operating profit compared with the year to 30 September 2004. This
pro-forma information does not constitute statutory information and has not been
audited.
Pro forma Pro forma
year ended year ended
30 Sep 2005 30 Sep 2004
(unaudited) (unaudited)
£000 £000
Turnover 15,460 15,430
Cost of sales (3,123) (3,021)
------------ ------------
Gross profit 12,337 12,409
Administrative expenses (9,535) (9,622)
------------ ------------
Adjusted operating profit* 2,802 2,787
Interest payable and similar charges (135) (123)
Interest receivable and similar income 28 40
------------ ------------
Adjusted profit before taxation* 2,695 2,704
Tax on profit on ordinary activities (808) (811)
------------ ------------
Adjusted profit on ordinary activities after
taxation* 1,887 1,893
------------ ------------
Adjusted earnings per share - basic* 4.66p 4.68p
Adjusted earnings per share - diluted* 4.04p 4.06p
* Adjusted operating profit, adjusted profit before taxation and adjusted profit
on ordinary activities after taxation are stated before accounting for LTIP
charges, amortisation of goodwill of £1,255,000 and exceptional items of
£1,076,000 to provide a like for like comparison of the Group's trading
performance (see also notes on the proforma results that follow).
Trading Results - Statutory
The statutory results to 30 September 2005 represent the trading of the Group
from 1 October 2004 to 16 December 2004, when the Group was a private equity
backed business and from 16 December 2004 to 30 September 2005 when the business
traded as a public company. The results of Sanderson PCSL Limited are included
from the date of its acquisition on 6 July 2005. The comparative results for
2004 reflect the trading of the Group from its formation on 23 December
2003 to 30 September 2004.
The results for the year ended 30 September 2005 show turnover of £15.46 million
and operating profit before amortisation, exceptional items, and charges in
respect of the Long Term Incentive Plan (LTIP) of £2.82m. Exceptional items
during the year of £1.08 million represent the expenses and associated
reorganisation costs incurred in relation to the admission of the Company's
shares to AIM on 16 December 2004. The Group's operating profit was £181,000
and the loss for the financial year after taxation amounted to £549,000.
The effective rate of taxation in the year to 30 September 2005 is less than
30% as a result of the recognition of the Group's deferred tax asset,
and the fact that the Group did not pay UK corporation tax until the admission
to AIM in December 2004. The effective rate is expected to increase to 30% in
future periods.
Balance Sheet
The transition from private equity ownership to public listed company has
enabled the Group to strengthen its balance sheet. Net assets at
the year end exceeded £16 million, gross bank debt reduced from £5.2 million to
£2.1 million and total net debt has reduced from £18.7 million to £1.6 million,
leaving the Group with surplus borrowing capacity to pursue further earnings
enhancing acquisitions.
Cash generation remains strong. Cash generated from operations (excluding AIM
admission costs) exceeded 100% of operating profit before amortisation. This
performance is underpinned by the fact that over 50% of recurring revenue
relating to the 2005/06 financial year has been invoiced and is recognised as
deferred income prior to the start of the year.
Dividends
The Board is keen to ensure that shareholders benefit from the trading
performance of the Group through a progressive dividend policy. Subject to
approval at the Annual General Meeting of Shareholders, a final dividend of 1.4p
per ordinary share is proposed and will be paid on 17 February 2006 to
shareholders on the register at the close of business on 27 January 2006.
Together with the interim dividend of 1.1p per ordinary share this represents a
dividend of 2.5p for the year.
Business Review
The Group has built up a large client base over many years and has, during the
last decade, adopted a revenue model based upon retaining and developing clients
by continuously offering new products and associated technology together with
professional services. These provide clients with a good return on investment.
Historically, more than 50% of turnover arises from recurring licence, support
and maintenance contracts, with a further 40% of turnover being derived from
additional products and services to existing clients. The balance is derived
from new customers.
For the year to 30 September 2005, recurring revenues continued to grow and
represented 53% of Group sales. Order intake from new customers, at over
£2 million, was 17% ahead of the previous year,. The level of
discretionary non recurring spend from existing clients was, however, lower and
slowed noticeably in the late summer, most markedly from clients in the
manufacturing sector.
Software Products
The Group's software products are designed to meet all the operational needs of
a broad range of businesses. Products cover functions common to all customers,
from sales and marketing through to finance, human resources, purchasing,
production, supply and distribution whilst also addressing specialist
requirements such as ingredient handling and call centre operations. Sanderson
owns and develops the IPR to its software products and licences their use.
During the year to 30 September 2005, software sales accounted for
75% of Group turnover, compared with 74% during the previous financial year.
Consultancy Services
Customers who contract for a new or upgraded system also contract for
consultancy services. These cover the provision of experienced Sanderson
personnel who assist in the set-up, installation and implementation of the
software as well as the provision of general IT advice. Customers also make
annual payments for ongoing technical support and maintenance services. During
the year to 30 September 2005, consultancy represented 25% of Group turnover.
Markets
Sanderson continues to benefit from the modest growth in IT spend in most of its
target markets which include the following market sectors:
Manufacturing
This sector includes the engineering, plastics, electronics, furniture, printing
and automotive parts industries.
Despite winning a number of new contracts during the year, sales in this sector
were lower than the previous year. This was due to a downturn in discretionary
spend from existing customers during the late summer.
Manufacturing accounted for 37% of Group turnover in the year to 30
September 2005 and this compares with 40% last year.
Food & Process Industries
This sector includes customers in the food, cosmetics and pharmaceutical
industries. Several new contracts were signed during the year and strong demand
for our products has resulted in companies enhancing their existing systems to
improve efficiency and generate improved management information.
Food & Process Industries accounted for 19% of Group turnover in the year to 30
September 2005 and this compares with 19 per cent last year.
Mail Order
The mail order market comprises both Business-to-Business and
Business-to-Consumer operations. Businesses in this market sector often
experience rapid growth and are highly dependent on their IT systems. The launch
during the year, of our new Unity product into this sector has stimulated
considerable interest and will be a key factor in further developing this part
of our business.
Mail order accounted for 21% of Group turnover in the year to 30 September 2005,
unchanged from last year.
Wholesale Distribution
This sector includes customers involved in cash and carry, wines, catering
supplies and frozen food businesses. Increased pressure from the supermarket
chains continues to drive IT spend in this sector. Demands for greater
efficiency, instant marketing feedback and improved management information
will continue to generate revenue growth. A large number of new contract
wins in the year demonstrates the strength of our product and service
offerings.
Wholesale Distribution accounted for 20% of Group turnover in the year
to 30 September 2005, unchanged from last year.
PCSL
In July 2005 we acquired Progressive Computer Systems Limited ('PCSL'), for a
maximum consideration of £1.75million. The business now trades as Sanderson
PCSL and the marketing of the Sanderson brand, particularly within the retail
sector, will generate additional business opportunities. In the three months
since acquisition, trading was slightly above expectations and contributed 3%
to group turnover. PCSL complements the activities of existing Sanderson
businesses, particularly Mail Order, and a number of cross-selling
opportunities are being explored.
Business Model
The Group has a robust model reflecting the large client base built up over
many years. During the year new customers accounted for 12% of turnover
compared with 7% for the previous year.
Strategy
Our strategy is to build upon our leading market position as a specialist
provider of software & services by a combination of organic growth and
the delivery of high levels of profitability from the existing businesses,
as well as pursuing selective acquisitions to enhance the size, profitability
and earnings of the Group. We are pleased with the progress of PCSL
and we are actively developing a number of other acquisition opportunities.
Staff
We would like to thank all our colleagues for their commitment, expertise, and
continued dedication in working with our customers and partners.
Outlook
The continued investment in improving our sales and marketing capability has
increased the level of new client business and we intend to maintain this
progress. In response to a slowdown in the level of discretionary non recurring
spend from some of our clients, we have further enhanced and expanded our
product offering and refocused marketing and management effort to increase
revenues from existing clients.
The Board has a clear strategy to develop the Group by delivering organic growth
with good profitability from the existing businesses, and by making
complementary acquisitions.
Christopher Winn
Chairman
16 November 2005
Consolidated profit and loss account for the year ended 30 September 2005
Continuing Acquisitions Group Group
Year ended Year ended Year ended 46 weeks to
Note 30.09.2005 30.09.2005 30.09.2005 30.09.2004
£000 £000 £000 £000
Turnover 15,025 435 15,460 11,880
Cost of sales (3,121) (2) (3,123) (2,236)
---------- ---------- ---------- ---------
Gross profit 11,904 433 12,337 9,644
Administrative expenses (11,794) (362) (12,156) (8,325)
Operating profit before
amortisation,exceptional
items and LTIP charges 2,751 71 2,822 2,204
LTIP charges 2 (310) - (310) -
Goodwill amortisation 3 (1,255) - (1,255) (885)
Exceptional items 4 (1,076) - (1,076) -
-------- -------- -------- --------
Operating profit 110 71 181 1,319
-------- -------- -------- --------
Interest payable on
bank debt 5 (187) (493)
Non-recurring interest
& loan note interest 5 (504) (1,229)
-------- --------
Interest payable and
similar charges 5 (691) (1,722)
Interest receivable and
similar income 28 75
-------- ---------
Loss on ordinary
activities before
taxation (482) (328)
Tax on loss on ordinary
activities (67) (100)
--------- --------
Loss for the financial
year (549) (428)
Dividends on equity and
non-equity shares 6 (1,017) -
---------- ---------
Retained loss for the year (1,566) (428)
=========== =========
Basic loss per share 7 (1.29p) (0.96p)
Diluted loss per share 7 (1.29p) (0.96p)
Balance sheets
at 30 September 2005
Group Group
2005 2004
£000 £000
Fixed assets
Intangible assets 22,949 22,211
Tangible assets 914 930
--------------- ---------------
23,863 23,141
--------------- ---------------
Current assets
Stocks 103 103
Debtors 4,188 4,145
Cash at bank and in hand 524 1,784
--------------- ---------------
4,815 6,032
Creditors: amounts falling due within one year (9,580) (9,523)
--------------- ---------------
Net current liabilities (4,765) (3,491)
--------------- ---------------
Total assets less current liabilities 19,098 19,650
Creditors: amounts falling due after more than (1,380) (18,331)
one year
Provisions for liabilities and charges (1,173) (1,247)
--------------- ---------------
Net assets 16,545 72
=============== ===============
Called up share capital 4,081 500
Share premium account 14,183 -
Profit and loss account (1,719) (428)
--------------- ---------------
Capital and reserves 16,545 72
=============== ===============
Consolidated cash flow statement
for the year ended 30 September 2005
Year ended 46 weeks to
30.09.2005 30.09.2004
£000 £000
Net cash inflow from operating
activities 1,907 2,846
Returns on investments and servicing
of finance (301) (418)
Taxation (92) -
Capital expenditure and financial
investment (107) (146)
Equity dividends paid (445) -
Acquisitions and disposals (857) 202
------------ ---------
Net cash inflow before financing 105 2,484
Financing
Issue of new shares 5,795 -
Inception of bank loans 2,500 -
Repayment of loans (5,660) (700)
Repayment of loan stock (4,000) -
---------------- ----------------
Net cash outflow from financing (1,365) (700)
---------------- ----------------
Movement in cash (1,260) 1,784
================ ================
Reconciliation of operating profit to net cash inflow from operating activities
for the year ended 30 September 2005
Group Group
Year ended 46 weeks to
30.09.2005 30.09.2004
£000 £000
Group operating profit 181 1,319
Depreciation charges 143 137
Goodwill amortisation 1,255 885
LTIP charges 310 -
(Increase) / decrease in stocks - (8)
Decrease / (increase) in debtors 626 669
(Decrease) / increase in creditors (534) (121)
Decrease in provisions (74) (35)
---------------- ----------------
Net cash inflow from operating activities 1,907 2,846
================ ================
Group operating profit and net cash inflow from operations shown above are
stated after the charge for and payment of costs relating to the admission of
the company's shares on AIM amounting to £1,076,000.
An analysis of movements in net debt is presented in note 8.
NOTES TO THE ACCOUNTS
1. The financial information set out herein does not constitute the Group's
statutory accounts for the year ended 30 September 2005 but is derived from
those financial statements. The statutory accounts will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the registrar of companies
following the Annual General Meeting. The comparative information in respect of
the period ended on 30 September 2004 has been derived from the audited
statutory accounts for the period ended on that date, and upon which an
unqualified audit opinion was expressed and which did not contain a statement
under section 237 (2) or (3) of the Companies Act 1985.
2. LTIP charges represent the amount chargeable to the profit and loss
account in the year in respect of the Long Term Incentive Plan, which was put
into place at the time of the Admission. An assumption has been made that all
awards under the Plan will vest at the end of the three year performance period.
3. The directors consider each acquisition separately for the purpose of
determining the amortisation period of any goodwill that arises. Goodwill
relating to the acquisition of Sonarsend Limited and the Sanderson trade in 2003
is being amortised over a period of 20 years. Goodwill arising on the
acquisition of Sanderson PCSL Limited in 2005 is being amortised over a
period of 5 years. In both cases the directors consider the periods to
approximate to the useful economic lives of the businesses acquired. As
permitted under FRS7 the directors have reviewed the fair value of the assets
acquired on the acquisition of Sonarsend Limited and the Sanderson trade. As a
result an adjustment has been made to the fair value of creditors to reflect
additional liabilities identified during the course of the year.
4. Exceptional items represent the expenses and associated preparation
reorganisation costs incurred in relation to the admission of Sanderson Group
plc to AIM on 16 December 2004.
5. Interest comprises:
Group Group
Year ended 46 weeks to
30.09.2005 30.09.2004
£000 £000
Unsecured loan note discount 329 1,229
Write-off of facility fees 175 -
------------ -----------
Total non-recurring interest 504 1,229
Bank payable interest 187 456
Other interest - 37
------------ -----------
Total interest payable 691 1,722
------------ -----------
The unsecured loan notes were repaid following the Admission.
6. Dividends comprise:
Group Group
Year ended 46 weeks to
30.09.2005 30.09.2004
£000 £000
Interim dividend of 1.1p per share, paid 24.06.2005 445 -
Final dividend proposed of 1.4p per share 572 -
------------ -----------
Total dividend for the period 1,017 -
------------ -----------
7. Actual loss per share is calculated as follows:
Year ended 46 weeks to
30.09.2005 30.09.2004
£000 £000
Loss after taxation (549) (428)
------------ -----------
Weighted average number of shares in issue
Basic 42,406,166 44,479,495
LTIP options 1,433,190 -
Other option arrangements 2,734,668 -
------------ -----------
Diluted 46,574,024 44,479,495
------------ -----------
8. Analysis of net debt
At start Cashflow Non-cash
of period movement
£000 £000 £000
Cash at bank 1,784 (1,260) -
Bank loans
-due within 1 year (5,170) (3,160) (130)
Loan Stock (15,390) 4,000 -
-------- ------- -------
(18,776) 5,900 -
========= ======= =======
Interest Debt to At 30
capitalised/ equity September
loan stock conversion 2005
accruing
discount
£000 £000 £000
Cash at bank - - 524
Bank loans
-due within 1 year - - (2,140)
Loan Stock (329) 11,719 -
------- -------- -------
(329) 11,719 (1,616)
======= ======== ========
Notes to the pro forma (unaudited) results
1. The pro forma results for the year ended 30 September 2005 comprise the
actual results of the Sanderson Group for the period, on the basis of current
accounting policies, before LTIP charges, goodwill amortisation and exceptional
items, which are charged in the statutory results, and on the basis of plc
costs having been incurred for the full year, notional interest calculated as if
the debt level in place post admission to AIm had been in place from 1 October
2004 and at an assumed tax rate of 30%.
A reconciliation from the statutory operating profit to the pro forma operating
profit is set out below:
£000
Statutory operating profit 181
LTIP charges 310
Goodwill amortisation 1,255
Exceptional items (note 4) 1,076
Additional plc costs (20)
------
2,802
======
2. The pro forma results for the year ended 30 September 2004 comprise the
actual results of the Sanderson Group for the period (excluding the PCSL
completion acquired during 2005), on the basis of current accounting policies
before LTIP charges, goodwill amortisation and exceptional items, which are
charged in the statutory results, and on the basis of notional plc costs,
notional interest calculated as if the post admission to AIM debt level of
£1.67 million had been in place for the whole period and at an assumed tax
rate of 30%.
3. Adjusted earnings per share on a pro forma basis have also been included as
the Directors consider that this figure is helpful for a better understanding of
the underlying business. It has been assumed that 40,520,900 (basic) and
46,652,592 (diluted) ordinary shares were in issue during both pro forma
periods.
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