Last checked at 25 Nov 2014 07:00
FOR IMMEDIATE RELEASE 25 November 2014
SANDERSON GROUP PLC
Preliminary Results for the year ended 30 September 2014
"Further significant progress, a strong performance from One iota and a healthy order book"
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 2014.
Commenting on the results, Chairman, Christopher Winn, said:
"The Group has achieved further significant progress during the year. Sanderson continues to convert substantially all of its profit into cash and this strong cash generation has enabled us to maintain a progressive dividend policy whilst continuing to invest in and develop the Group's businesses. The balance sheet has also been further strengthened with net cash at the year-end standing at £6.16 million equating to over 11 pence per share. The Multi-channel retail division performed very well, in particular, One iota, acquired in October 2013, which secured its largest order to date in September valued in excess of £400,000. Across the Group, order intake rose by over 10% on a like-for-like basis while the value of contracts signed by new customers during the year rose by more than 15% to £1.9 million."
Highlights - Financial
§ Revenue increased to £16.41 million (2013: £13.83 million).
§ Pre-contracted recurring revenue of £8.76 million (2013: £7.94 million), approximately 53% of total revenue.
§ Significant increases in Multi-channel retail division revenue and operating profits* to £9.68 million (2013: £7.23 million) and £1.89 million (2013: £1.28 million) respectively; these results reflect increased business from new customers and a significant contribution from One iota.
§ Modest increase in Manufacturing division revenue and operating profit* to £6.74 million (2013: £6.59 million) and £0.95 million (2013: £0.93 million) respectively.
§ Gross margin of 85%, reflecting high proportion of delivered and installed proprietary software and other "owned" services.
§ Operating profit* increased to £2.84 million (2013: £2.22 million).
§ Profit before tax of £1.92 million (2013: £1.94 million).
§ Basic earnings per share of 3.1 pence (2013: 3.9 pence); **Adjusted eps of 4.6 pence (2013: 4.4 pence)
§ Net cash at year-end increased to £6.16 million (2013: £3.66 million).
§ Proposed final dividend of 1.0 pence per share (2013: 0.85 pence; 2012: 0.7 pence) giving total for year of 1.8 pence per share (2013: 1.5 pence; 2012: 1.2 pence).
Highlights - Operational
§ Strong trading momentum maintained, complemented by increased levels of new business and successful integration of acquisitions.
§ Healthy order book of £2.41 million at year-end (2013: £1.94 million)
§ Ten new multi-channel retail customers during the year and seven new manufacturing customers.
§ Continued investment in proprietary solutions using mobile technologies generating high levels of interest and development activity.
* Operating profit is stated before amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related costs
** Adjusted for amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related costs
On current trading and prospects, Mr Winn, added:
"Whilst the Group plans to continue to invest across all of its businesses, particular emphasis is expected to be placed on developing further the range of solutions for ecommerce and mobile commerce businesses, as well as, for the food and drink processing sector. Selective acquisition opportunities will continue to be carefully considered to augment organic growth but the management priority is to focus upon delivering 'on target' results and on making the previous acquisitions successful.
Amongst small and medium-sized businesses, we believe that, to date, business sentiment has continued to show some improvement but prospective and existing customers remain cautious in their outlook. The Group's strong order book does provide the Board with a reasonable level of confidence, at this early stage, that the Group will make further progress in the current year."
Enquiries:
Christopher Winn, Chairman Telephone: 0333 123 1400
Adrian Frost, Finance Director
Ian Newcombe, Managing Director, Multi-channel retail division
Paul Vann, Winningtons Financial Telephone: 0117 985 8989
or 07768 807631
Mark Taylor, Charles Stanley Securities Telephone: 020 7149 6000
(Nominated Advisor)
SANDERSON GROUP PLC
Preliminary Results for the year ended 30 September 2014
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 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
Revenue for the year ended 30 September 2014 ('the year' or 'year-end') was £16.41 million (2013: £13.83 million) and operating profit (stated before amortisation of acquisition-related intangibles, acquisition-related costs and share-based payment charges) was £2.84 million (2013: £2.22 million). The value of the order book at the year-end was £2.41 million (2013: £1.94 million), which provides a solid platform from which to achieve further progress in the current financial year ending 30 September 2015.
The net cash balance at 30 September 2014 was £6.16 million (2013: £3.66 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, scheduled to be held on 3 March 2015, the Board is proposing a final dividend of 1.00 pence per ordinary share, making a total of 1.80 pence for the year. This represents a 20% increase compared with the total dividend of 1.50 pence in 2013. The final dividend, if approved, will be paid on 20 March 2015 to shareholders on the register at the close of business on 6 March 2015.
Business review
Sanderson is an established provider of software and services to the multi-channel retail and manufacturing markets. As with previous years, the second half of the financial year now contributes the larger proportion of annual operating profit producing an additional £409,000 (2013: £239,000) of operating profit, compared with the first half.
Sanderson software and cloud-based licences and services are provided to customers on an ongoing annual contractual basis. This recurring revenue stream is augmented by consultancy, support and maintenance services. In the year ended 30 September 2014, pre-contracted revenues were £8.76 million representing 53% of total revenues (2013: £7.94 million, representing 57%). The gross margin from recurring revenues covered 71% of total Group overheads in the year (2013: 73%).
The Group continues to invest in both its products and services as well as in its sales, delivery and customer service capabilities. Mobile delivery platforms and the next generation of products in the wholesale distribution sector have been particular areas of investment across the Group, but all of the Group's products are developed on a continuous and evolutionary basis, in anticipation of and in response to, market demand from both prospective and existing customers. The investment driver for customers is to utilise and to adopt latest technologies with the aim of delivering business growth and increased efficiency, enabling customers to make cost savings and thus achieve an attractive and timely return on investment.
During the year, 17 new customers were gained (2013: 14 new customers) at an average initial contract value of £116,000 (2013: £119,000). The total value of orders from new customers grew to £1.97 million (2013: £1.67 million, 2012: £1.49 million).
The gross margin was 84.9% of revenue compared with 87.6% in the prior year. The Manufacturing division delivered two large infrastructure projects as the initial phase of potentially larger software and services projects. The underlying gross margin excluding the large infrastructure projects was 86.8% reflecting the Group's continuing emphasis on higher margin Sanderson proprietary software, delivered and installed by the Group's own staff.
Review of Multi-channel retail
Sanderson products and services provide comprehensive IT solutions to businesses operating in the ecommerce, mobile commerce, wholesale distribution, cash and carry and retail sectors of the UK. Continued high levels of activity have been experienced from the provision of ecommerce and mobile commerce solutions. The annual growth rate being achieved in the ecommerce and mobile commerce (ecommerce via mobile devices) markets continues to be in excess of 10%.
Revenue was £9.68 million (2013: £7.23 million). Growth in the Group's ecommerce and wholesale distribution business was partially offset by a fall in the Group's business which focuses on the traditional mail order fulfilment market, but boosted by a growing revenue contribution from One iota of £1.66 million, acquired in October 2013. Revenue from the Group's business operating in the ecommerce and mobile commerce markets now accounts for £4.53 million, representing 47% of divisional revenues and is expected to grow further in the future.
The division's operating profit was £1.89 million which included a contribution (before amortisation and charges in respect of share-based payments, group management services and taxation) from One iota of £420,000. Priam, which was acquired in the previous financial year, has been restructured and fully integrated into the Group and whilst its profit contribution was minimal in the year, an improved contribution is expected in the current year. Ten new customers were gained in the year compared with five in the previous year. The challenge of delivering a very large order book in the Group's ecommerce business has held back profitability in the year, but now offers a good opportunity to further boost profitability in the current year.
Review of Manufacturing
The Group's business which addresses the general UK manufacturing market continued to experience slow trading. However, a recently launched product, UnityExpress, aimed at smaller manufacturing businesses has a number of good and promising prospects in the sales pipeline. The Group business focused on the food and drink processing sector, benefiting from investment made over the last two years, has continued to make progress and drove overall growth for the Manufacturing division. The size of the UK food and drink processing market continues to grow and there are increasing numbers of small and medium-sized ('SMEs') 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 continues to provide the Group with a good opportunity in this market. The Sanderson food and drink processing business now accounts for 50% of divisional revenue (2011: 39%). This growth trend is expected to continue.
Revenue was £6.74 million (2013: £6.59 million) with operating profit of £952,000 (2013: £932,000). Overall order intake was £2.89 million (2013: £3.10 million).
Seven new customers were gained in the year (2013: nine new customers) and going into the new financial year, the order book is good and at the year-end stood at over £926,000 (2013: £1.24 million) with good sales prospects in the pipeline.
Acquisition - One iota
In October 2013, 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 retail solutions and the One iota MESH platform integrates a retailer's back-office and existing systems, with mobile, tablet and in-store sales channels.
One iota has performed very well and the management team has continued to drive growth, doubling both revenue and profit when compared to its last full financial year, prior to acquisition. In September, following a successful pilot implementation, One iota secured its largest order to date, worth over £400,000. The order is expected to be installed, delivered and deployed over the course of the current financial year ending 30 September 2015.
Management and staff
Sanderson now employs approximately 190 staff, who have a high level of experience and expertise in the market sectors which the Group addresses. 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 forward 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 make cost savings. Whilst the Group plans to continue to invest across all of its businesses, particular emphasis is expected to be placed on developing further the range of solutions for ecommerce and mobile commerce businesses, as well as, for the food and drink processing sector.
Selective acquisition opportunities will continue to be carefully considered to augment organic growth but the management priority is to focus upon delivering 'on target' results and on making the previous acquisitions successful.
Outlook
Whilst the Board is keen to pursue the continued development of Sanderson, the Board remains cautious in its approach. Amongst small and medium-sized businesses, we believe that, to date, business sentiment has continued to show some improvement but prospective and existing customers remain cautious in their outlook. The Group's strong order book does provide the Board with a reasonable level of confidence, at this early stage, that the Group will make further progress in the current financial year ending 30 September 2015.
Consolidated income statement
for the year ended 30 September 2014
2014 |
2013 | ||
Note | £000 | £000 | |
Revenue | 2 | 16,411 | 13,828 |
Cost of sales | (2,483) | (1,711) | |
Gross profit | 13,928 | 12,117 | |
Technical and development costs | (6,322) | (5,304) | |
Administrative and establishment expenses | (3,731) | (3,184) | |
Sales and marketing costs | (1,827) | (1,657) | |
Results from operating activities | 2,048 | 1,972 | |
Results from operating activities before adjustments in respect of the following: | 2,839 | 2,215 | |
Amortisation of acquisition-related intangibles | (387) | (66) | |
Acquisition-related costs | (303) | (94) | |
Share-based payment charges | (101) | (83) | |
Results from operating activities
| 2,048 | 1,972 | |
Finance income | 3 | 28 | 489 |
Finance expenses | 4 | (160) | (518) |
Profit before taxation | 1,916 | 1,943 | |
Taxation | 5 | (318) | (252) |
Profit for the year | 1,598 | 1,691 |
All operations are continuing.
All of the profit for the year is attributable to equity holders of the parent undertaking.
Earnings per share
From profit attributable to the owners of the parent undertaking during the year |
| |||||
Basic earnings per share | 7 | 3.1p | 3.9p |
| ||
Diluted earnings per share | 7 | 2.9p | 3.7p |
| ||
| ||||||
Consolidated statement of comprehensive income
for the year ended 30 September 2014
2014 | 2013 | ||
£000 | £000 | ||
Profit for the year | 1,598 | 1,691 | |
Other comprehensive income | |||
Items that will not subsequently be reclassified to profit or loss | |||
Re-measurement of net defined benefit liability | (834) | (225) | |
Deferred taxation effect of defined benefit pension plan items | 183 | 53 | |
(651) | (172) | ||
Items that will subsequently be reclassified to profit or loss | |||
Change in fair value of available for sale financial asset | 17 | 74 | |
Foreign exchange translation differences | 23 | (32) | |
Total comprehensive income attributable to equity holders of the parent | 987 | 1,561 |
Consolidated statement of financial position
at 30 September 2014
2014 | 2013 | |||
Non-current assets | £000 | £000 | ||
Property, plant and equipment | 294 | 307 | ||
Intangible assets | 28,514 | 23,194 | ||
Deferred tax assets | 1,145 | 1,388 | ||
29,953 | 24,889 | |||
Current assets | ||||
Inventories | 4 | - | ||
Trade and other receivables | 4,706 | 3,371 | ||
Other short-term financial assets | 222 | 205 | ||
Cash and cash equivalents | 6,159 | 3,662 | ||
11,091 | 7,238 | |||
Current liabilities | ||||
Trade and other payables | (3,355) | (2,746) | ||
Deferred consideration | (815) | (145) | ||
Income tax payable | (47) | (5) | ||
Deferred income | (4,412) | (3,886) | ||
(8,629) | (6,782) | |||
Net current assets | 2,462 | 456 | ||
Total assets less current liabilities | 32,415 | 25,345 | ||
Non-current liabilities | ||||
Pension obligations | (4,804) | (4,174) | ||
Deferred consideration | (1,213) | - | ||
Deferred tax liabilities | (581) | (272) | ||
(6,598) | (4,446) | |||
Net assets | 25,817 | 20,899 |
Equity attributable to equity holders of the parent company | ||||
Share capital | 5,406 | 4,380 | ||
Share premium | 8,809 | 4,302 | ||
Available for sale reserve | 91 | 74 | ||
Foreign exchange reserve | (9) | (32) | ||
Retained earnings | 11,520 | 12,175 | ||
Total equity | 25,817 | 20,899 |
Consolidated statement of changes in equity
for the year ended 30 September 2014
| Share capital | Share premium | Available for sale reserve | Foreign exchange reserve | Retained earnings | Total equity |
£000 | £000 | £000 | £000 | £000 | £000 | |
At 1 October 2013 | 4,380 | 4,302 | 74 | (32) | 12,175 | 20,899 |
Exercise of share options | 258 | 1,206 | - | - | (830) | 634 |
Issue of shares | 768 | 3,482 | - | - | - | 4,250 |
Costs incurred in respect of share issue | - | (181) | - | - | - | (181) |
Dividend paid | - | - | - | - | (873) | (873) |
Share-based payment charge | - | - | - | - | 101 | 101 |
Transactions with owners | 1,026 | 4,507 | - | - | (1,602) | 3,931 |
Profit for the year | - | - | - | - | 1,598 | 1,598 |
Other comprehensive income: | ||||||
Remeasurement of net defined benefit liability | - | - | - | - | (834) | (834) |
Deferred tax on above | - | - | - | - | 183 | 183 |
Foreign exchange translation differences | - | - | - | 23 | - | 23 |
Change in fair value of available for sale financial asset | - | - | 17 | - | - | 17 |
Total comprehensive income | - | - | 17 | 23 | 947 | 987 |
At 30 September 2014 | 5,406 | 8,809 | 91 | (9) | 11,520 | 25,817 |
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: | ||||||
Remeasurement of net defined benefit liability | - | - | - | - | (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 |
Consolidated statement of cash flows
for the year ended 30 September 2014 | 2014 | 2013 | |
£000 | £000 | ||
Cash flows from operating activities | |||
Profit for the year after taxation | 1,598 | 1,691 | |
Adjustments for: | |||
Amortisation of intangible assets | 630 | 237 | |
Depreciation | 135 | 124 | |
Share-based payment charge | 101 | 83 | |
Net finance expense | 132 | 29 | |
Income tax charge | 318 | 252 | |
Operating cash flow before changes in working capital | 2,914 | 2,416 | |
Movement in trade and other receivables | (1,076) | 383 | |
Movement in inventories | (4) | 9 | |
Movement in trade and other payables | 856 | (1,100) | |
Cash generated from operations | 2,690 | 1,708 | |
Payments to defined benefit pension scheme | (360) | (677) | |
Interest paid | (2) | - | |
Net cash flow from operating activities | 2,328 | 1,031 | |
Cash flow from investing activities | |||
Purchase of property, plant and equipment | (113) | (45) | |
Acquisition of subsidiary undertaking, net of cash acquired | (2,046) | (440) | |
Payment of deferred consideration in respect of subsidiary undertakings | (100) | - | |
Dividend received | 15 | 20 | |
Bank interest received | 13 | 54 | |
Development expenditure capitalised | (680) | (249) | |
Net cash flow from investing activities | (2,911) | (660) | |
Cash flow from financing activities | |||
Issue of shares, net of costs | 3,953 | 15 | |
Settlement of share options | - | (200) | |
Equity dividends paid | (873) | (590) | |
Net cash flow from financing activities | 3,080 | (775) | |
Net increase/(decrease) in cash and cash equivalents | 2,497 | (404) | |
Cash and cash equivalents at beginning of year | 3,662 | 4,066 | |
Cash and cash equivalents at the end of the year | 6,159 | 3,662 |
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 chief operating decision maker ('CODM') is analysed between the divisions as follows:
Manufacturing | Multi-Channel | Total | ||||
2014£000 | 2013 £000 | 2014£000 | 2013 £000 | 2014£000 | 2013 £000 | |
Revenue - external customers | 6,736 | 6,594 | 9,675 | 7,234 | 16,411 | 13,828 |
Cost of sales | (1,190) | (817) | (1,293) | (894) | (2,483) | (1,711) |
Gross profit | 5,546 | 5,777 | 8,382 | 6,340 | 13,928 | 12,117 |
Depreciation + | (73) | (85) | (62) | (39) | (135) | (124) |
Operating profit before adjustments | 952 | 932 | 1,887 | 1,283 | 2,839 | 2,215 |
Amortisation* | (53) | (53) | (334) | (13) | (387) | (66) |
Acquisition related costs | - | - | (303) | (94) | (303) | (94) |
Share-based payment charges | (22) | (31) | (79) | (52) | (101) | (83) |
Result from operating activities | 877 | 848 | 1,171 | 1,124 | 2,048 | 1,972 |
Net finance expense |
|
|
|
| (132) | (29) |
Taxation |
|
|
|
| (318) | (252) |
Profit attributable to equity holders |
|
|
|
| 1,598 | 1,691 |
*Amortisation of acquisition-related intangibles
+ Depreciation charged to operating profit
The CODM uses both gross profit and operating profit measures in assessing the performance of the Group's divisions.
2. Segmental reporting (continued) | ||||||
Analysis of items contained within the Statement of Financial Position | ||||||
Manufacturing
| Multi-Channel | Totals | ||||
2014£000 | 2013 £000 | 2014£000 | 2013 £000 | 2014£000 | 2013 £000 | |
Property, plant and equipment | 110 | 160 | 184 | 147 | 294 | 307 |
Intangible assets | 11,598 | 11,602 | 16,916 | 11,592 | 28,514 | 23,194 |
Deferred tax assets | 1,137 | 978 | 8 | 155 | 1,145 | 1,133 |
Inventory | - | - | 4 | - | 4 | - |
Cash and cash equivalents | 2,111 | 2,024 | 2,972 | 3,478 | 5,083 | 5,502 |
Trade and other receivables | 1,891 | 1,688 | 2,815 | 1,683 | 4,706 | 3,371 |
Total assets | 16,847 | 16,452 | 22,899 | 17,055 | 39,746 | 33,507 |
|
|
|
|
|
| |
Trade and other payables | (1,568) | (1,165) | (1,787) | (1,581) | (3,355) | (2,746) |
Deferred income | (2,181) | (1,966) | (2,231) | (1,920) | (4,412) | (3,886) |
Income tax | - | (5) | (47) | - | (47) | (5) |
Deferred taxation | (27) | (38) | (554) | - | (581) | (38) |
Deferred consideration | - | - | (2,028) | (145) | (2,028) | (145) |
Pension obligations | (4,804) | (4,174) | - | - | (4,804) | (4,174) |
Total liabilities | (8,580) | (7,348) | (6,647) | (3,646) | (15,227) | (10,994) |
Allocated net assets | 8,267 | 9,104 | 16,252 | 13,409 | 24,519 | 22,513 |
Other unallocated assets and liabilities |
|
|
|
| 1,298 | (1,614) |
Net assets |
|
|
|
| 25,817 | 20,899 |
Included within other unallocated assets and liabilities are net overdrawn cash balances totalling £0.70 million (2013: £1.84 million) and deferred tax balances in respect of certain shared operations. Amounts in respect of shared operations cannot be allocated between operating divisions.
3. Finance income
2014£000 | 2013£000 | |
Expected return on defined benefit pension scheme assets | - | 415 |
Bank interest received | 13 | 54 |
Dividend received | 15 | 20 |
28 | 489 |
4. Finance expenses
2014£000 | 2013£000 | |
Other interest | 4 | - |
Net interest on defined benefit pension scheme deficit | 156 | - |
Interest on defined benefit pension scheme obligations | - | 518 |
160 | 518 |
5. Taxation
Current tax expense | 2014£000 | 2013£000 |
UK corporation tax for the current year | - | - |
Overseas corporation tax for the current year | (6) | (3) |
Relating to prior periods | - | (20) |
Total current tax | (6) | (23) |
Deferred tax | ||
Deferred tax for the current year | 315 | 168 |
Relating to prior periods | 9 | (61) |
Relating to change in rate of tax | - | 168 |
Total deferred tax | 324 | 275 |
Taxation charged to the income statement | 318 | 252 |
5. Taxation (continued)
Reconciliation of effective tax rate
The current consolidated tax charge for the period is lower (2013: lower) than the average standard rate of corporation tax in the UK during the period of 22%. The differences are explained below.
2014 | 2013 | |
£000 | £000 | |
Profit before taxation - continuing operations | 1,916 | 1,943 |
Tax using the average UK Corporation tax rate of 22% (2013: 23.5%) | 422 | 457 |
Effects of: | ||
Expenses not deductible for tax purposes | 62 | 56 |
Utilisation and recognition of losses | 149 | (348) |
Tax relief arising on option exercise | (272) | - |
Over provision in previous years | 9 | (81) |
Change in tax rate | (52) | 168 |
Total tax in income statement | 318 | 252 |
6. Dividends
2014£000 | 2013 £000 | ||
Interim dividend of 0.80p per share (2013: 0.65p) | 432 | 285 | |
Final dividend relating to previous financial year of 0.85p per share (2013: 0.70p) | 441 | 305 | |
Total dividend for the financial year | 873 | 590 | |
A final dividend of 1.00 pence per ordinary share in respect of the financial year ended 30 September 2014 will be proposed at the Annual General Meeting of the Company, expected to be held on 3 March 2015. If approved by shareholders, the total final dividend payment will amount to £540,638.
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: | 2014 | 2013 |
£000 | £000 | |
Result for the year | 1,598 | 1,691 |
Amortisation of acquisition-related intangibles | 387 | 66 |
Share-based payment charges | 101 | 83 |
Acquisition- related and restructuring costs | 303 | 94 |
Adjusted profit for the year | 2,389 | 1,934 |
Number of shares: | 2014 | 2013 |
No. | No. | |
In issue at the start of the year | 43,800,946 | 43,525,946 |
Effect of shares issued in the year | 8,057,990 | 205,907 |
Weighted average number of shares at year end | 51,858,936 | 43,731,853 |
Effect of share options | 2,328,723 | 2,385,565 |
Weighted average number of shares (diluted) | 54,187,659 | 46,117,418 |
Earnings per share: | 2014(pence) | 2013(pence) |
Total attributable to equity holders of the parent undertaking: | ||
Basic | 3.1 | 3.9 |
Diluted | 2.9 | 3.7 |
Earnings per share, adjusted, from continuing operations: | ||
Basic | 4.6 | 4.4 |
Diluted | 4.4 | 4.2 |
8. Acquisitions
On 7 October 2013 the Group acquired control of One iota Limited by purchasing the entire issued ordinary share capital (and thereby 100% of the voting rights) for a maximum aggregate consideration of £5.43 million. Cash consideration of £2.38 million was paid at completion and a further £750,000 of consideration was satisfied at completion by the issue of 1,314,636 ordinary shares at a price of 57.05 pence. Deferred consideration of £300,000 will be paid unconditionally in six equal instalments of £50,000 over the three year period immediately following completion. Further conditional deferred consideration of up to £2.00 million will be payable subject to One iota achieving certain performance targets over the three years ending 30 September 2016. Having applied a discount rate of 8% to future cash flows, management has estimated the fair value of consideration to amount to £4.78 million net of cash balances acquired, of which £750,000 has been satisfied by the issue of shares at completion and the remainder to be satisfied in cash.
The business provides cloud-based, multi-channel solutions via new mobile, tablet and in-store devices. For the year ended 31 January 2013 One iota had unaudited revenue of £665,000 (2012: £502,000) and profit before taxation of £195,000 (2012: £158,000). At 31 January 2013 One iota's net assets were £848,000. In the 51 weeks to 30 September 2014 the subsidiary contributed £1.66 million to consolidated revenue and £0.16 million to consolidated profit before taxation (stated after charging amortisation of acquired intangibles and share based payment expense).
It is estimated that 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 | 18 | (9) | 9 | |
Intangible assets | 639 | 2,023 | 2,662 | |
Trade and other receivables | 259 | (5) | 254 | |
Cash and cash equivalents | 334 | - | 334 | |
Trade and other payables | (224) | (73) | (297) | |
Income tax payable | - | (47) | (47) | |
Deferred taxation | - | (411) | (411) | |
Net identifiable assets and liabilities | 1,026 | 1,478 | 2,504 | |
Goodwill on acquisition | 2,608 | |||
5,112 | ||||
Cash consideration paid at completion | 2,380 | |||
Issue of 1,314,636 ordinary shares of 10p, fully paid, at completion | 750 | |||
Deferred cash consideration payable by instalments | 263 | |||
Deferred contingent cash consideration | 1,719 | |||
Net discounted consideration payable | 5,112 | |||
8. Acquisitions (continued)
Deferred consideration of £300,000 is payable unconditionally in six equal instalments of £50,000 over the three year period immediately following completion. Further conditional deferred consideration of up to £2.00 million is payable in three instalments in December 2014, December 2015 and December 2016 subject to One iota achieving certain performance targets over the three years ending 30 September 2016. The deferred consideration shown in the table above has been discounted to present value in accordance with IAS 39 using a discount rate of 8% based on management's estimate of the internal cost of capital appropriate to the investment.
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 10% 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.
One iota offers 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.
Costs relating to the acquisition of £125,000 (2013: £94,000) 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 2014 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 2014 will be laid before the Company at the Annual General Meeting, expected to be held at the Company's registered office on 3 March 2015. 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.