Last checked at 17 May 2010 07:00
FOR IMMEDIATE RELEASE 17 MAY 2010
SANDERSON GROUP PLC
Interim Results for the six months ended 31 March 2010
Improved business momentum continues
Sanderson Group plc ("Sanderson" or "The Group"), the software and IT services business specialising in the multi-channel retail and manufacturing markets in the UK and Ireland, announces interim results for the six months ended 31 March 2010.
Highlights
·; Revenue of £13.3m (2009: £13.0m)
·; *Adjusted operating profit of £1.4m (2009: £1.1m)
·; Profit from operating activities of £0.7m (2009: loss of £1.1m)
·; * Adjusted earnings per share of 1.7p (2009: 0.5p)
·; Basic earnings per share of 0.01p (2009: loss per share of 4.6p)
·; Interim dividend per share of 0.25p (2009: 0.2p)
·; Cash generated from operations of £1.8m (2009: £1.5m)
·; Net debt at 31 March 2010 of £9.0m (2009: £9.5m)
·; Order book up by more than 50% to £3.0m when compared with the 30 September 2009 balance of £1.9m.
*Before amortisation of acquisition-related intangibles, and share-based payment charges.
On current trading and outlook, Mr Christopher Winn, Chairman, commented:
"The Group has built up an improved level of business momentum since the late summer of 2009. However, we are mindful that the general economy is still sluggish and moving only slowly out of recession. Many of the Group's customers are continuing to face tough trading conditions and whilst the strong order book at the end of March provides a level of confidence for the Group to achieve a good trading result for the full financial year to 30 September 2010, the Board remains cautious in its outlook."
Enquiries:
Christopher Winn, Chairman
Adrian Frost, Group Finance Director
Sanderson Group plc 02476 555466
Mark Taylor/Ben Johnston
Charles Stanley Securities 020 7149 6000
Paul Vann/Tom Cooper
Winningtons Financial 0117 985 8989 or 07768 807631
SANDERSON GROUP PLC
Interim Results for the six months ended 31 March 2010
Chairman's statement
Introduction
The trading results for the six month period to 31 March 2010 show revenue of £13.3m (2009: £13.0m). Operating profit before the amortisation of acquisition-related intangibles and before the charge in respect of share-based payments improved to £1.4m (2009: £1.1m).
Whilst the Group's trading has continued to be affected by general economic conditions in the UK, reduced operating costs and an improvement in the Group's competitive market position have resulted in a continued recovery from the 'low' of the previous financial year, ending 30 September 2009.
The improved business momentum, experienced from the late summer of 2009 has continued into the current year and increased order intake has resulted in a larger order book at 31 March 2010. We expect the benefit of this increased order intake to be reflected in the result for the second half year, during which many of the projects are scheduled for implementation and delivery.
The Group has continued to manage working capital efficiently and in a prudent manner. Cash generated from operations in the six months to 31 March 2010 amounted to £1.8m (2009: £1.5m). This continued strong cash generation has facilitated a further reduction in bank debt, with net debt at 31 March 2010 of £9.0m (2009: £9.5m). This compares with net debt of £9.9m at 30 September 2009 and a peak of £12.5m at 31 March 2008. Reducing net debt levels remains a key goal.
Business review
Sanderson provides a wide range of software solutions and services to customers in the multi-channel retail and manufacturing markets. These solutions primarily comprise of the Group's own proprietary software often integrated with other market-leading products, which are installed, supported and serviced by Sanderson staff. The new product and service suites of Business Assurance in retail markets and Factory Automation in manufacturing markets introduced towards the end of the previous financial year, have continued to gain traction. The introduction, in March 2010, of solutions based on the latest technologies in the areas of etailing and ecommerce, have further enhanced the range of solutions supplied by the Group.
A cornerstone of the Sanderson business model is the annually pre-contracted recurring revenues consisting of software licences, support services and managed services. In the period to 31 March 2010, recurring revenues of £6.7m (2009: £6.8m) represented 51% of total revenues (2009: 54%).
Notwithstanding slow trading conditions in the UK economy, the Group has continued to build a better level of trading momentum. The Group's competitive market position has been improved by new product introductions, the delivery of a cost-effective, quality service, as well as by increased investment in sales and marketing.
In terms of existing customers, Sanderson has continued to focus on supplying customers with value for money solutions offering a strong return on investment. Enhancements to existing systems are targeted at providing customers with tangible business benefits such as cost savings and incremental efficiencies. Developments have also addressed the continuing, and increasing, need for regulatory and legislative compliance, such as the requirements of the Payment Card Industry ('PCI'). The Group has joined the PCI Security Standards Council as a 'Participating Organization'.
As reported in the AGM statement in March, business from new customers has shown a significant increase. Orders from new customers in the six months to 31st March 2010 totalled £2.1m, comfortably exceeding the aggregate of £1.3m achieved in the whole of the previous financial year to 30 September 2009.
Total order intake was strong at £7.5m (six months to 31 March 2009: £7.0m). The order book at 31 March 2010 was over 50% higher than the level at the end of the previous financial year to 30 September 2009. The order book was £3.0m at 31 March 2010, compared with £1.9m at 30 September 2009. This provides the Group with a level of confidence for a satisfactory trading performance for the full year, with much of the increased order book scheduled for delivery by the end of September 2010.
Review of multi-channel retail
The Group provides end-to-end and comprehensive solutions to businesses operating in retail, mail order, fulfilment and wholesale distribution markets, and increasingly, to those with an online sales presence. Revenues derived from multi-channel retail operations were £10.2m (2009: £10m). Activity levels have generally improved and the lower end of the retail sector, which has been a very sluggish market, has shown some signs of recovery.
A total of eleven new customers were gained in the period (2009: six new customers) and included Hamleys, Aquascutum, David Austin Roses and JoJo Maman Bébé. The average value of new customer contracts was £156k compared with £60k in the prior year. Additionally, large orders were gained from a number of existing customers, including The Factory Shop, Fenwick, Lakeland and English Heritage.
Order intake was much improved at £6.4m for the period (2009 full year: £10.6m) and the order book was strong at 31 March 2010 at £2.6m compared with £1.4m at 30 September 2009. Most of these orders will be delivered in the second half year.
Review of manufacturing
The Group's manufacturing business covers the provision of comprehensive IT solutions to manufacturers who operate primarily in the engineering, plastics, aerospace, electronics, print and food process sectors. Whilst UK manufacturing has been seriously affected by the recessionary trading conditions, revenues were slightly improved at £3.1m (2009 £3.0m). The food sector of the market continued its improvement but the most marked recovery in activity was in the area of general manufacturing, especially printing and aerospace.
New customers were gained across the business and included Bromford Industries (aerospace), Piroto Labelling (print), Susan Day Cakes (food, Australia) and MacSween of Edinburgh (food) - four in total, compared with one, in the first six months to 31 March 2009 and three in the full year to 30 September 2009. Recurring revenues, which showed some fall-off compared with the comparative period in 2009, continue to be strong and now account for 58% of total revenue. Gross margin from this revenue stream covers 86% of divisional overheads.
Balance sheet
The reduction in the level of net debt is a primary focus for management and improved trading supported by good cash generation resulted in the level of net debt falling to £9.0m (30 September 2009: £9.9m).
Strategy
The Group's focus on the core markets of multi-channel retail and manufacturing ensure a total focus on developing specialist solutions to customers and prospective customers in these sectors. In addition to the new products and services already introduced (Business Assurance and Factory Automation) there are further new developments scheduled for introduction during the second half year. We intend to maintain and to enhance market competitiveness and continue to deliver an improved financial performance, which will ensure the further reduction of net debt.
Dividend
Whilst recognising the need to reduce debt, the Group is committed to improve dividend levels and an interim dividend of 0.25 pence per share (2009: 0.20 pence) will be paid on 20 August 2010 to shareholders on the register at the close of business on 23 July 2010.
Management and staff
The Group Operating Board, which was constituted in October 2008, has been instrumental in delivering an improved and improving business performance. In total, the Group employs around 270 staff, most of whom have a high level of experience in the specialist markets which the Group addresses. The commitment of staff to the development of the Sanderson business is crucial and we would like to thank all of our staff for their forbearance, support and commitment in the current challenging business environment.
Outlook
The Group has built up an improved level of business momentum since the late summer of 2009. However, we are mindful that the general economy is still sluggish and moving only slowly out of recession. Many of the Group's customers are continuing to face tough trading conditions and whilst the strong order book at the end of March provides a level of confidence for the Group to achieve a good trading result for the full financial year to 30 September 2010, the Board remains cautious in its outlook.
Christopher Winn
Chairman
17 May 2010
CONSOLIDATED INCOME STATEMENT
|
|
| Unaudited | Unaudited | Audited |
|
|
| Six months | Six months | Year to |
|
|
| to 31/03/10 | to 31/03/09 | 30/09/09 |
|
| Notes | £'000 | £'000 | £'000 |
| Continuing Operations |
|
|
|
|
| Revenue | 2 | 13,313 | 12,956 | 24,896 |
| Cost of sales |
| (4,384) | (3,723) | (6,868) |
| Gross profit |
| 8,929 | 9,233 | 18,028 |
| Other operating expenses |
| (8,267) | (10,380) | (18,361) |
| Results from operating activities |
| 662 | (1,147) | (333) |
|
|
|
|
|
|
| Results from operating activities before amortisation and share based payment charges |
2 |
1,376 |
1,066 |
2,763 |
| Amortisation of acquisition related intangibles |
| (690) | (690) | (1,381) |
| Impairment of goodwill |
| - | (1,499) | (1,499) |
| Exceptional operating costs |
| - | - | (190) |
| Share-based payment charges |
| (24) | (24) | (26) |
| Results from operating activities |
| 662 | (1,147) | (333) |
|
|
|
|
|
|
| Movement in fair value of derivative financial instrument |
|
(8) |
(576) |
(561) |
| Net finance costs |
| (620) | (397) | (1,132) |
| Profit / (loss) before tax |
| 34 | (2,120) | (2,026) |
| Tax |
| (29) | 134 | 841 |
| Profit / (loss) for the period |
| 5 | (1,986) | (1,185) |
|
|
|
|
|
|
| Earnings / (loss) per share |
|
|
|
|
| From continuing operations |
|
|
|
|
| Basic | 3 | 0.01p | (4.6p) | (2.7p) |
| Diluted | 3 | 0.01p | (4.6p) | (2.7p) |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Profit / (loss) for the period | 5 | (1,986) | (1,185) |
|
Other comprehensive income |
|
|
|
| Actuarial result on defined benefit pension schemes | - | - | (2,223) |
| Income tax relating to components of other comprehensive income |
- |
- |
622 |
| Other comprehensive income, net of tax | - | - | (1,601) |
|
|
|
|
|
| Total comprehensive income / (expense) for the period | 5 | (1,986) | (2,786) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|
| Unaudited | Unaudited | Audited |
|
|
| As at | As at | As at |
|
|
| 31/03/10 | 31/03/09 Restated | 30/09/09 |
|
|
| £'000 | £'000 | £'000 |
| Non-current assets |
|
|
|
|
| Goodwill |
| 29,908 | 29,908 | 29,908 |
| Other intangible assets |
| 3,730 | 5,118 | 4,432 |
| Property, plant & equipment |
| 456 | 529 | 491 |
| Employee benefits |
| - | 275 | - |
| Deferred tax asset |
| 1,648 | 1,013 | 1,874 |
|
|
| 35,742 | 36,843 | 36,705 |
| Current assets |
|
|
|
|
| Inventories |
| 362 | 380 | 361 |
| Trade and other receivables |
| 7,210 | 6,779 | 6,171 |
| Income tax receivable |
| 209 | 355 | 506 |
| Cash and cash equivalents |
| 660 | 179 | - |
|
|
| 8,441 | 7,693 | 7,038 |
|
Current liabilities |
|
|
|
|
| Bank overdraft and loans |
| (1,636) | (444) | (1,672) |
| Trade and other payables |
| (4,840) | (4,782) | (3,697) |
| Current tax liabilities |
| (7) | (11) | - |
| Derivative financial instrument |
| (497) | (504) | (489) |
| Deferred income |
| (6,800) | (7,113) | (6,672) |
|
|
| (13,780) | (12,854) | (12,530) |
|
|
|
|
|
|
| Net current liabilities |
| (5,339) | (5,161) | (5,492) |
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
| Deferred income |
| - | (433) | (234) |
| Deferred tax liabilities |
| (974) | (1,487) | (1,178) |
| Pension and other employee obligations |
| (1,735) | - | (1,839) |
| Loans and borrowings |
| (8,072) | (9,212) | (8,286) |
|
|
| (10,781) | (11,132) | (11,537) |
|
|
|
|
|
|
| Net assets |
| 19,622 | 20,550 | 19,676 |
|
|
|
|
|
|
| Equity |
|
|
|
|
| Called-up share capital |
| 4,338 | 4,338 | 4,338 |
| Share premium |
| 4,178 | 15,178 | 15,178 |
| Retained earnings |
| 11,106 | 1,034 | 160 |
| Total equity |
| 19,622 | 20,550 | 19,676 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six month period to 31 March 2010
|
| Share capital £000 | Share premium £000
| Retained earnings £000 | Total Equity £000 |
| At 1 October 2009 | 4,338 | 15,178 | 160 | 19,676 |
| Result for the period | - | - | 5 | 5 |
| Dividend paid | - | - | (87) | (87) |
| Share based payment charge | - | - | 24 | 24 |
| Foreign exchange differences | - | - | 4 | 4 |
| Capital reconstruction (note 4) | - | (11,000) | 11,000 | - |
| At 31 March 2010 | 4,338 | 4,178 | 11,106 | 19,622 |
For the six month period to 31 March 2009
|
| Share capital £000 | Share premium £000
| Retained earnings £000 | Total equity £000 |
| At 1 October 2008 as previously reported | 4,338 | 15,178 | 3,622 | 23,138 |
| Prior year adjustment (note 5) | - | - | (515) | (515) |
| At 1 October 2008 as restated | 4,338 | 15,178 | 3,107 | 22,623 |
| Result for the period | - | - | (1,986) | (1,986) |
| Dividend paid | - | - | (87) | (87) |
| Share based payment charge | - | - | 24 | 24 |
| Foreign exchange differences | - | - | (24) | (24) |
| Balance at 31 March 2009 | 4,338 | 15,178 | 1,034 | 20,550 |
For the year ended 30 September 2009
|
| Share capital £000 | Share premium £000
| Retained earnings £000 | Total equity £000 |
| At 1 October 2008 | 4,338 | 15,178 | 3,107 | 22,623 |
| Result for the period | - | - | (1,185) | (1,185) |
| Actuarial result on employee benefits | - | - | (2,223) | (2,223) |
| Deferred tax on above | - | - | 622 | 622 |
| Dividend paid | - | - | (174) | (174) |
| Share based payment charge | - | - | 26 | 26 |
| Foreign exchange differences | - | - | (13) | (13) |
| At 30 September 2009 | 4,338 | 15,178 | 160 | 19,676 |
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
| Unaudited | Unaudited | Audited |
|
|
| Six months | Six months | Year to |
|
|
| to 31/03/10 | to 31/03/09 | 30/09/09 |
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Cash flows from operating activities |
|
|
|
|
| Profit/(loss) for the period |
| 5 | (1,986) | (1,185) |
| Adjustments for: |
|
|
|
|
| Depreciation and amortisation |
| 837 | 2,343 | 3,228 |
| Share based payment charges |
| 24 | 24 | 26 |
| Net finance expense |
| 628 | 973 | 1,693 |
| Income tax expense/(credit) |
| 29 | (134) | (841) |
| Operating cash flow before working capital movements |
|
1,523 |
1,220 |
2,921 |
| Movement in working capital |
| 274 | 244 | (813) |
| Cash generated by operations |
| 1,797 | 1,464 | 2,108 |
| Payments to defined benefit pension scheme |
| (129) | (117) | (234) |
| Interest paid |
| (718) | (728) | (1,372) |
| Income taxes received |
| 305 | 657 | 653 |
| Net cash from operating activities |
| 1,255 | 1,276 | 1,155 |
|
|
|
|
|
|
| Investing activities |
|
|
|
|
| Purchases of property, plant & equipment |
| (64) | (60) | (129) |
| Expenditure on product development |
| (35) | - | (92) |
| Net cash used in investing activities |
| (99) | (60) | (221) |
|
|
|
|
|
|
| Financing activities |
|
|
|
|
| Equity dividends paid |
| (87) | (87) | (174) |
| Repayment of bank borrowing |
| - | (2,000) | (2,200) |
| Repayment of finance lease principal |
| (8) | (10) | (21) |
| Net cash used in financing activities |
| (95) | (2,097) | (2,395) |
|
|
|
|
|
|
| Increase/(decrease) in cash and cash equivalents |
|
1,061 |
(881) |
(1,461) |
|
|
|
|
|
|
| Cash and cash equivalents at start of the period |
| (401) | 1,060 | 1,060 |
|
|
|
|
|
|
| Cash and cash equivalents at end of the period |
| 660 | 179 | (401) |
Notes to the INTERIM RESULTS
1. Basis of preparation
The Group's interim results for the six month period ended 31 March 2010 are prepared in accordance with the Group's accounting policies which are based on the recognition and measurement principles of International Financial Reporting Standards ('IFRS') as adopted by the EU and effective, or expected to be adopted and effective, at 30 September 2010. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS34 'Interim financial reporting'. These interim results do not constitute full statutory accounts within the meaning of section 434(5) of the Companies Act 2006 and are unaudited. The unaudited interim financial statements were approved by the Board of Directors on 14 May 2010. The consolidated financial statements are prepared under the historical cost convention as modified to include the revaluation of financial instruments. The statutory accounts for the year ended 30 September 2009, which were prepared under IFRS, have been filed with the Registrar of Companies. These statutory accounts carried an unqualified Auditors' Report and did not contain a statement under either Section 498(2) or (3) of the Companies Act 2006.
2. Segmental reporting
The Group is managed as two separate divisions, manufacturing and multi-channel retail. Substantially all revenue is generated within the UK.
|
| Manufacturing | Multi-channel retail | Total | ||||||
|
| Six months 31/03/10 | Six months 31/03/09 | Year ended 30/09/09 | Six months 31/03/10 | Six months 31/03/09 | Year ended 30/09/09 | Six months 31/03/10 | Six months 31/03/09 | Year ended 30/09/09 |
|
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
|
|
|
| Revenue | 3,098 | 2,974 | 5,733 | 10,215 | 9,982 | 19,163 | 13,313 | 12,956 | 24,896 |
|
|
|
|
|
|
|
|
|
|
|
| Operating profit* | 536 | 401 | 758 | 840 | 665 | 2,005 | 1,376 | 1,066 | 2,763 |
|
|
|
|
|
|
|
|
|
|
|
| Amortisation** | - | - | - | (690) | (690) | (1,381) | (690) | (690) | (1,381) |
| Impairment of goodwill | - | (1,499) | (1,499) | - | - | - | - | (1,499) | (1,499) |
| Exceptional operating costs |
- |
- |
(44) |
- |
- |
(146) |
- |
- |
(190) |
| Share based payment charges |
- |
- |
- |
(24) |
(24) |
(26) |
(24) |
(24) |
(26) |
| Operating profit / (loss) | 536 | (1,098) | (785) | 126 | (49) | 452 | 662 | (1,147) | (333) |
| Net finance expense |
|
|
|
|
|
| (628) | (973) | (1,693) |
| Profit / (loss) before tax |
|
|
|
|
|
| 34 | (2,120) | (2,026) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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*Stated before amortisation of acquisition related intangibles and share based payment charges.
** Amortisation of acquisition related intangibles.
Notes to the INTERIM RESULTS (continued)
3. Earnings per share
|
| Six months to | Six months to | Year to |
|
| 31/03/10 | 31/03/09 | 30/09/09 |
| Earnings | £'000 | £'000 | £'000 |
| Profit / (loss) for the period | 5 | (1,986) | (1,185) |
| Adjusted* profit from continuing operations | 719 | 227 | 1,721 |
|
|
|
|
|
| Average number of shares during period | No. '000 | No. '000 | No. '000 |
| In issue at the start of the period | 43,384 | 43,384 | 43,384 |
| Effect of share options | 1,780 | 1,836 | 1,780 |
| Weighted average number of shares (diluted) at period end | 45,164 | 45,220 | 45,164 |
|
|
|
|
|
| Earnings per share | pence | pence | pence |
| Continuing - basic | 0.01 | (4.6) | (2.7) |
| - diluted | 0.01 | (4.6) | (2.7) |
|
|
|
|
|
| Adjusted* - basic | 1.7 | 0.5 | 4.0 |
| - diluted | 1.6 | 0.5 | 3.8 |
Where the result for the period is a loss, the basic loss per share is not further diluted.
*Stated before amortisation of acquisition related intangibles, impairment of goodwill and share based payment charges.
4. Capital reconstruction
During the period an application by the company to reduce its share premium account by £11,000,000 was approved by the Court.
5. Prior year adjustment
Certain prior year balance sheet items have been restated as a result of an adjustment uncovered during a change in internal procedures relating to the calculation of deferred income. Details were reported in the Annual Report and Accounts for the year ended 30 September 2009.
6. Interim report
The Group's interim report will be sent to the Company's shareholders. The report will also be available from the Company's registered office and on the Company's website: www.sanderson.com.