Sondrel Plc Regulatory News (SND)

FOR IMMEDIATE RELEASE 9 JUNE 2014

SANDERSON GROUP PLC

Interim Results for the six months to 31 March 2014

"Further improved performance, a strong order book and a good start made by recent acquisition, One iota"

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 its interim results for the six month period to 31 March 2014.

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

"The Group has made continued progress with revenue improving to £7.94 million (2013: £6.37 million) and operating profit rising by over 20% to £1.21 million (2013: £0.99 million). The Group achieved a very good sales order intake in the period, very much reflecting the investment in the sales and marketing capability and capacity which has been made during the two previous years. Sanderson continues to convert substantially all of its profit into cash and at 31 March had a net cash balance of £5.07 million (2013: £4.50 million), which represents approximately 10 pence per ordinary share."

Highlights - Financial

§ Revenue increased to £7.94 million (2013: £6.37 million).

§ Pre-contracted recurring revenue of £4.41 million (2013: £3.96 million), approximately 56% of total revenue.

§ Increases in multi-channel retail division revenue and operating profits* to £4.71 million (2013: £3.40 million) and £0.85 million (2013: £0.65 million) respectively; increased business from new customers with trend towards bigger orders; includes revenue and operating profits contribution of £0.79 million and £0.15 million from One iota.

§ Increase in manufacturing division revenue and operating profits* to £3.23 million (2013: £2.97 million) and £0.37 million (2013: £0.34 million).

§ Gross margin maintained at 87%, reflecting high proportion of delivered and installed proprietary software and other "owned" services.

§ Operating profit* increased 20% to £1.21 million (2013: £0.99 million).

§ Profit before tax from continuing operations of £0.78 million (2013: £0.85 million).

§ Basic earnings per share of 1.4 pence (2013: 1.8 pence).

§ Net cash at period-end increased to £5.07 million (2013: £4.50 million).

§ Interim dividend up 20% to 0.8 pence per share (2013: 0.65 pence; 2012: 0.5 pence).

Highlights - Operational

§ Strong trading momentum maintained, complemented by increased levels of new business

§ Strong order book of £2.47 million at period end (2013: £1.58 million)

§ Seven new multi-channel retail customers during period, including WCF Home Shopping, Astley Clarke and Cloggs; five new customers added by manufacturing including Prima Foods UK and Rathfinny Estate.

§ Continued investment in proprietary solutions using mobile technologies generating high levels of interest and development activity.

* Operating profit is stated before amortization of acquisition-related intangibles, share-based payment charges and acquisition-related costs

 On current trading and prospects, Mr Winn, added:

"Whilst the Group will continue to invest across all of its businesses, particular emphasis will be placed on further developing the range of solutions for mobile and ecommerce businesses, as well as for the food and drink processing sector. Selective acquisition opportunities will continue to be considered. However, in the current year, management intends to focus on delivering 'on target' results and on making the 2013 acquisitions of Priam and One iota, successful additions to the Group.

The economic environment, whilst showing clear signs of improvement, is still characterised by historically low levels of investment in capital products and with sales cycles still being protracted, the Board intends to maintain 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 continue to make significant progress during the current financial year ending 30 September 2014."

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

Interim Results for the six months to 31 March 2014

chairman's statement

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 its interim results for the six month period to 31 March 2014 ('the period').

Results

The Group has made continued progress with revenues improving to £7.94 million (2013: £6.37 million) and operating profit rising by over 20% to £1.21 million (2013: £0.99 million). Gross margin continues to be strong at 87%, an improvement of more than five percentage points over the last four years (2013: 88%, 2012: 84%, 2011: 81%), reflecting an emphasis on the supply and delivery of 'owned' proprietary software and services. The Group's order book at the period end stood at £2.47 million (2013: £1.58 million).

Balance sheet

The Sanderson Board remains committed to pursuing a growth strategy based upon a conservative financing policy, backed by a strong balance sheet. On 28 October 2013, the Group successfully completed a placing of 6,363,636 new ordinary shares, issued at 55 pence per share, raising £3.50 million before costs. The Group continues to convert substantially all of its profit into cash and at 31 March 2014 had a net cash balance of £5.07 million (2013: £4.50 million) which represents approximately 10 pence per ordinary share.

Dividend

The Board remains committed to maintaining a progressive dividend policy and is pleased to declare an increase of over 20% in the level of the interim dividend to 0.80 pence per share (2013: 0.65 pence, 2012: 0.50 pence, 2011: 0.30 pence). The dividend will be paid on 15 August 2014 to shareholders on the register at the close of business on 18 July 2014.

Acquisition of One iota

One iota Limited ('One iota'), a leading provider of cloud-based multi-channel solutions, became part of the Group in October 2013. One iota represents an exciting business opportunity with good growth prospects in an expanding market sector. There is considerable scope for further cross-selling of products and services, driven by strong growth of mobile commerce and the Group plans to build synergies during the second half year.

Business review

There does appear to be a general improvement in business confidence within the UK and the Group's recent experience has been that the outlook for many small and medium sized businesses ('SMEs'), the Group's primary target market, has now moved to being 'cautiously optimistic'. At the core of the Group's well-developed business model is a commitment to long-term customer relationships which results in a high proportion of sales arising from pre-contracted recurring revenues. The Sanderson software is licensed to customers on a 'right to use' basis and is supplemented by support, implementation and project management services provided by Group staff. Both the licence and ongoing support services are pre-contracted and in the period, these recurring revenues grew to £4.41 million (2013: £3.96 million) representing 56% of total revenues.

The Group's solutions offer customers 'value for money' systems providing tangible business benefits. These solutions typically enable customers to increase sales and revenues whilst also achieving timely additional efficiencies by making and maintaining cost savings. The Group has continued to invest in both product and service development, as well as in sales and marketing with particular emphasis being focused on the Group businesses specialising in the UK food and drink processing sector ('food and drink') and those focusing on the areas of mobile enabled online sales, ecommerce and catalogue sectors ('mobile and ecommerce'). Sales order intake doubled in the Sanderson food and drink business compared with last year and similarly, orders for mobile and ecommerce grew strongly and accounted for over a third of the Group's total order intake during the period.

Overall, the Group achieved a very good sales order intake in the period, very much reflecting the investment in the sales and marketing capability and capacity which has been made during the two previous years. Order intake was £4.27 million compared with £2.19 million last year, with twelve new customers being gained at an average value of £143,000 (2013: three at an average value of £61,000).

Review of multi-channel retail

Sanderson provides comprehensive IT solutions to businesses operating in the areas of online sales, ecommerce and catalogue sales, wholesale distribution, cash and carry businesses and retail stores. Mobile enablement and deployment is a key business driver in this sector. One iota has made a good start to being part of Sanderson and has helped to expand the Group sales into the areas of mobile enabled online sales and ecommerce. A number of 'joint' opportunities are being developed which offer customers a single solution covering mobile enablement of enterprise solutions for online sales, ecommerce and high street retailers.

There are increased levels of business activity in the wholesale distribution, cash and carry, online sales, ecommerce and catalogue markets, whilst the Group business which addresses the traditional mail order market has continued to decline. The wholesale distribution and cash and carry business has developed a new version of software, launched at the Wholesale Customer Forum in April. Already, the new software has generated a high level of customer interest.

Seven new customers were gained during the period, including WCF Home Shopping, Astley Clarke and Cloggs. This compares with two in the comparative period of 2013. Six of the new customers operate in the mobile and ecommerce sectors - three of whom are online retailers of footwear. The Group has also gained a number of large orders from existing customers including Joe Browns, Badger Office Supplies, Turner Price, Clipper Logistics Group and Healthspan.

Divisional revenue was £4.71 million (2013: £3.40 million) and operating profit was up by over a third to £848,000 (2013: £649,000). Divisional operating profit has grown steadily from the £403,000 profit achieved in the first six months to 31 March 2011. These are the first results incorporating a contribution from One iota, which achieved £788,000 of revenue and £154,000 of operating profit. The period end order book was strong at £1.19 million (2013: £822,000) and with good sales prospects, the multi-channel retail business is well-positioned to accelerate its growth and to achieve its higher trading targets for the current financial year ending 30 September 2014.

Review of manufacturing

Businesses in the engineering, plastics, aerospace, electronics, print and food and drink processing sectors represent the main areas of specialisation for Sanderson in manufacturing markets. The Sanderson business focused on the non-food and drink manufacturing markets traded below expectations but with a now reduced cost base and a post-period end improvement in sales orders, the prospects for the second half year are much improved.

Over the past three years, the Group has invested an additional £600,000 in accelerated product development and in its sales and marketing capability for its food and drink business. Traceability of products and ingredients through the food manufacturing and supply chain is a strong feature of the Sanderson food and drink solution - a key requirement for businesses operating in this industry.

Five new customers were gained during the period, including a large bottling and drinks company, Prima Foods UK, Rathfinny Estate and Accommodation Furniture. This compares with one new customer in the comparative period of 2013. Large projects with existing customers included Food Partners, Freddy Hirsch and Proctor Paper & Board.

A strong trading performance by food and drink drove overall divisional growth and offset a slower trading performance from the general manufacturing business. Revenue for the period was £3.23 million (2013: £2.97 million) and operating profit was £367,000 (2013: £339,000). Recurring revenues represent over 61% of total divisional revenues and cover over three-quarters of divisional overheads. The order book of £1.28 million (2013: £761,000) is very strong and together with a good short-term sales prospect list, should ensure another improved trading result for the second half year.

Management and staff

Sanderson now employs 193 staff with 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, dedication and contribution to the ongoing development of the Group.

Strategy

The Board's strategy is to achieve sustained growth by further building and developing the Group's businesses operating within the multi-channel retail and manufacturing markets. Whilst the Group will continue to invest across all of its businesses, particular emphasis will be placed on further developing the range of solutions for mobile and ecommerce businesses, as well as for the food and drink processing sector. Mobile solutions are being developed across all of the Group's target markets.

In order to augment organic growth, selective acquisition opportunities will continue to be considered. However, in the current year, management intends to focus on delivering 'on target' results and on making the 2013 acquisitions of Priam and One iota, successful additions to the Group.

Outlook

The Board remains focused on the continued development of Sanderson. The economic environment, whilst showing clear signs of improvement, is still characterised by historically low levels of investment in capital products and with sales cycles still being protracted, the Board intends to maintain 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 continue to make significant progress during the current financial year ending 30 September 2014.

Christopher Winn

Chairman

9 June 2014

 CONSOLIDATED INCOME STATEMENT

Earnings per share

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months to 31 March 2014

For the six months to 31 March 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

For the year ended 30 September 2013

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE INTERIM RESULTS

1. Basis of preparation

The Group's interim results for the six month period ended 31 March 2014 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 2014. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 '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 6 June 2014.

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 2013, 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.

* Adjustments to operating profit in respect of amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related costs.

3. Acquisition

On 7 October 2013 the Group acquired the entire issued ordinary share capital of One iota Limited 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. Details of deferred consideration payable are set out below.

The business provides cloud-based, multi-channel solutions via new mobile, tablet and in-store devices. The solutions provided by One iota are complementary to the Group's existing ecommerce solutions and will leave Sanderson well placed to offer a combined, market-leading solution to SME retailers. Extending the Group's capabilities in this active and growing market was a major reason for the Group completing the acquisition. Following completion of the transaction, the Group controls 100% of the voting rights of One iota.

In the period from acquisition to 31 March 2014 the business contributed revenue of £788,000 and an operating profit of £154,000 before amortisation of acquisition-related intangibles and acquisition-related costs. Had One iota been owned from 1 October 2013 the results of the Group set out in the Income Statement would not have been materially different from those shown.

It is estimated that the acquisition had the following effect on the Group's assets and liabilities at the acquisition date:

Deferred consideration of £0.30m 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%.

Goodwill arising on the acquisition is not tax deductible.

4. Earnings per share

5. Equity dividends paid

6. Interim report

The Group's interim report will be sent to the Company's shareholders. This report will also be available from the Company's registered office and on the Company's website www.sanderson.com.