Last checked at 1 Dec 2015 07:00
FOR IMMEDIATE RELEASE 1 December 2015
SANDERSON GROUP PLC
Preliminary Results for the year ended 30 September 2015
"Good trading momentum maintained with One iota revenues up 70%;
Strong order book; proposed final dividend up 20%"
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 2015.
Commenting on the results, Chairman, Christopher Winn, said:
"The trading results for the year ended 30 September 2015 are in line with market expectations and show Group revenue growing to £19.18 million (2014: £16.41 million) and adjusted operating profit* growing to £3.30 million (2014: £2.84 million), an increase of 16%.
"Overall, gross margin has been maintained at 85% (2014: 85%), reflecting a continuing emphasis on the supply of Sanderson proprietary software and services. The Group's order book remains strong and at the year-end stood at a robust £2.35 million (2014: £2.41 million).
"The Group's cash generative business model has enabled Sanderson to invest in excess of £3 million during the year to further develop the Group's operations, including £1.91 million of consideration and deferred consideration payments in respect of acquired businesses. Following this investment, at 30 September 2015, Sanderson reported a cash balance of £4.61 million (2014: £6.16 million)."
Highlights - Financial
§ Revenue increased to £19.18 million (2014: £16.41 million).
§ Pre-contracted recurring revenues of £9.77 million (2014: £8.76 million), representing approximately 51% of total revenue; gross margin from recurring revenues covered 67% of total Group overhead (2014: 71%).
§ Operating profit* increased 16% to £3.30 million (2014: £2.84 million).
§ Profit before tax of £2.03 million (2014: £1.92 million).
§ Basic earnings per share of 3.4 pence (2014: 3.1 pence).
§ Adjusted** earnings per share of 5.1 pence (2014: 4.6 pence)
§ Net cash at year-end of £4.61 million (2014: £6.16 million) after acquisition related cash consideration payments of £1.91 million.
§ Proposed final dividend up 20% to 1.2 pence per share (2014: 1.0 pence; 2013: 0.85 pence), making total for year of 2.1 pence (2014: 1.8 pence; 2013: 1.5 pence).
Highlights - Operational
§ Strong trading momentum in Multi-Channel retail complemented by significant growth in digital retail businesses with One iota revenues up 70%.
§ Introduction of new Unity Express ERP product targeting newer manufacturing businesses gaining good traction with three new client wins.
§ Appointments of Ian Newcombe as Group CEO and David Gutteridge as non-Executive Director in June 2015.
§ New Three Year Plan adopted; future reporting of divisional performance to change to Digital Retail and Enterprise Software
* Operating profit is stated before amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related and restructuring costs.
** Adjusted for amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related and restructuring costs
On current trading and prospects, Ian Newcombe, Group Chief Executive, added:
"Sanderson has maintained a strong balance sheet, a robust business model built upon long-term relationships with customers generating strong recurring revenues and is well-positioned in its target markets. Together, these factors provide the Board with a good level of confidence that, at this early stage of the new financial year, the Group will make further progress and deliver trading results which are, at least, in line with market expectations for the year ending 30 September 2016."
Enquiries:
Christopher Winn, Chairman Telephone: 0333 123 1400
Ian Newcombe, Group Chief Executive
Adrian Frost, Finance Director
Paul Vann, Walbrook PR Limited Telephone: 0117 985 8989
or 07768 807631
Mark Taylor, Panmure Gordon (UK) Limited Telephone: 020 7866 2500
(Nominated Advisor)
SANDERSON GROUP PLC
Preliminary Results for the year ended 30 September 2015
Chairman's statement
Sanderson Group plc, 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 2015.
Financial results
The trading results for the year ended 30 September 2015 are in line with market expectations and show Group revenue growing to £19.18 million (2014: £16.41 million) and adjusted operating profit (stated before the amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related and restructuring costs) growing to £3.30 million (2014: £2.84 million), an increase of 16%.
Overall, gross margin has been maintained at 85% (2014: 85%), reflecting a continuing emphasis on the supply of Sanderson proprietary software and services. The Group's order book remains strong and at the year-end stood at a robust £2.35 million (2014: £2.41 million).
The Group's cash generative business model has enabled Sanderson to invest in excess of £3 million during the year to further develop the Group's operations, including £1.91 million of consideration and deferred consideration payments in respect of acquired businesses. Following this investment, at 30 September 2015, Sanderson reported a cash balance of £4.61 million (2014: £6.16 million).
Dividend
This strong cash generation has enabled the Board to maintain a 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 2016, the Board is proposing a final dividend of 1.2 pence per ordinary share, making a total of 2.1 pence for the year. This represents a 17% increase compared with the total dividend of 1.80 pence in 2014. The final dividend, if approved, will be paid on 18 March 2016 to shareholders on the register at the close of business on 4 March 2016.
Strategy
The strategy of the Board is to achieve sustained growth by further building and developing the Sanderson businesses operating within the multi-channel retail and manufacturing target markets. The digital retail opportunity, in particular, provides exposure to a market sector which is experiencing rapid growth. 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 our fast growing digital retail businesses, for the food and drink processing sector and for entry level systems in the manufacturing division. Mobile solutions continue to be developed across all of the Group's target markets.
To augment organic growth, selective acquisition opportunities will continue to be considered.
Management and staff
Ian Newcombe, who has made a major contribution to the formulation of the Group's strategy and who has personally driven the development of the multi-channel business, was appointed as Group Chief Executive on 9 June 2015. The Sanderson executive plc team comprises Ian Newcombe as Group Chief Executive, Adrian Frost as Group Finance Director and myself, as Executive Chairman.
The Group Board was also further strengthened by the appointment of David Gutteridge, as a non-executive director. David has considerable business experience including with Financial Objects plc, Cyan Holdings plc and previously with Sanderson Group plc as a non-executive director between IPO in 2004 and 2012. David was Chairman of Tinglobal Limited until May 2014, when he led a successful trade sale to Singapore listed, Declout Plc.
Sanderson now employs 235 staff with a high level of experience and specialist expertise in the market sectors which the Group addresses. On behalf of the Board, I would again like to thank everyone for their hard work, support, dedication and contribution to the ongoing development of the Group.
Christopher Winn
Chairman
SANDERSON GROUP PLC
Preliminary Results for the year ended 30 September 2015
Group Chief Executive's business review
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 delivered a consistent and reliable quality of service which has ensured the development of long-term relationships with customers.
The Group's solutions are developed and marketed to provide customers with 'value for money' IT systems which offer tangible business benefits and a timely return on investment. The primary target market for Sanderson comprises generally small and medium sized businesses. Sanderson solutions typically enable customers to increase sales and revenue whilst also achieving additional efficiencies by making and maintaining cost-savings, often within twelve months of implementation.
The Group has continued to invest in both the development of software products and services, as well as in sales and marketing. Particular emphasis has been placed on the Group businesses specialising in the development of mobile commerce solutions and food and drink processing solutions. The mobile commerce products, together with in-store technology developments, are collectively referred to as digital retail solutions which enable retailers to capitalise on the huge growth in the widespread adoption of smartphones and tablets and to exploit mobile as a sales channel. Full integration with existing business systems minimises duplication of data handling and significantly improves the return on investment achieved by customers adopting this technology.
At the core of the Group's well-developed business model is Sanderson software with on-premise and cloud-based licences, together with Sanderson services, 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 2015, pre-contracted revenues were £9.77 million representing 51% of total revenues (2014: £8.76 million). The gross margin from recurring revenues covered 67% of total Group overheads in the year (2014: 71%).
Reflecting prior and continuing investment in the Group's sales and marketing capacity and capability, Sanderson achieved an improved intake of sales orders in the year of £10.03 million (2014: £8.71 million), with 21 new customers being gained (2014: 17).
Acquisition
On 5 December 2014, the Group acquired a supplier of specialist warehouse management solutions, Proteus Software Limited, for an initial cash consideration of £1.40 million. Up to a further £0.50 million is payable in March 2016, based upon the trading performance of Proteus in the twelve months following acquisition. Proteus solutions, which complement the Group's own products, services and customers are used by businesses operating in the areas of third party logistics, warehouse management and supply chain distribution. The Proteus business has been positioned within the Group's multi-channel business and its results are reported within this division.
Review of multi-channel retail
Sanderson provides comprehensive IT solutions to businesses operating in the ecommerce, mobile commerce, retail, distribution, wholesale and logistics sectors of the UK. Mobile enablement and deployment continues to be a key business driver in this sector with increasing levels of business activity. Well-positioned in this active sector, One iota Limited has grown revenue by in excess of 70% during the year. The wholesale distribution and cash and carry market has been a slower area of business during the year but prospects for the coming year have improved, driven by the latest enhanced version of software. Proteus has made a steady start as part of Sanderson and contributed £1.88 million of revenue and £58,000 of profit. The addition of Proteus has helped to further expand the Group's presence in the areas of warehousing, logistics and supply chain. A number of internal 'joint' sales opportunities are being developed.
The deployment and use of mobile technologies is continuing to grow with market demand accelerating. In the coming year, management expects to focus further efforts on delivering growth across the Group's businesses but especially from the newly emerging digital retail market, where the Group's One iota business has a growing presence.
Ten new customers were gained during the year, including Anzac Wines & Spirits, Dunsters Farm, Superdry and Matthew Algie (2014: ten new customers). The multi-channel retail division has continued to gain a number of large orders from existing customers who generally invest in and deploy the latest technologies to attract new customers and to maximise sales.
Divisional revenue rose by 31% to £12.71 million (2014: £9.68 million) and operating profit rose by 39% to £2.62 million (2014: £1.89 million). The year-end order book continued to be strong at £1.45 million (2014: £1.48 million) and with good sales prospects, the multi-channel retail business is well-positioned to achieve its increased trading targets for the current financial year ending 30 September 2016.
Review of manufacturing
Businesses in the food and drink processing sectors and engineering, plastics, aerospace, electronics, print ('general manufacturing'), represent the main areas of specialisation for Sanderson in manufacturing markets. The overall divisional trading performance was lower than expected and this contrasted with the strong trading performance of the prior year.
Sanderson continues to invest in product development and in its sales and marketing capability with a focus on the 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 the food and drink industry. The Group business which focuses on customers operating in this food and drink market sector experienced some delay in the receipt of expected sales orders and delivered a lower level of profitability as a result. However, one large order with a value in excess of £400,000 was gained just after the year-end and the outlook for the current year to 30 September 2016, is much improved.
The Sanderson business which addresses the general manufacturing market improved its trading performance and this improvement is expected to continue into the current year. The introduction of the new Unity Express 'ERP' ('Enterprise Resource Planning') product aimed at new and emerging manufacturing businesses has proved successful and three new customers were gained in the year, albeit at an average contract value of in the region of £35,000, compared with the average value experienced by the remainder of the Group of nearer £75,000 across the 21 new customer contracts signed in the year. It is expected that Unity Express will augment the Unity solution, which is targeted at larger businesses.
Eleven new customers were gained during the year, including Simtom Food Products, Summit Chairs, St Marcus Fine Foods, Wine Bottling Solutions, Purdie Dished Ends and NutriFresh. This compares with seven new customers in the prior year. Large projects with existing customers included Food Partners, Cook Trading and Freddy Hirsch.
Revenue for the year was £6.48 million (2014: £6.74 million) and operating profit was £680,000 (2014: £952,000). Recurring revenue represents over 58% of total divisional revenue and covers over three-quarters of divisional overheads. A good start to the current year, together with a strong sales prospect list, should ensure that the manufacturing division achieves a much improved trading result for the full year ending 30 September 2016.
Outlook
The Board has adopted a three-year strategy and has an internal business plan which seeks to further develop the Group both organically as well as by way of selective acquisitions, thereby increasing profitability, dividends and shareholder value. The Board believes that the Group's digital retail business will enhance the Group's ability to develop and expand. Revenues derived from the digital retail market have grown from £4.53 million in the year ended 30 September 2014 to £5.87 million in the year ended 30 September 2015. Reflecting the growing importance of the Group's digital retail business, going forward, the Group intends to report its breakdown of divisional results in terms of a Digital Retail business division and an Enterprise software division,which consist of a manufacturing business and a warehouse and logistics business. The Board will continue to invest in its ERP software businesses, in order to ensure that product offerings continue to both attract new customers as well as to maximise and encourage additional investment in system enhancements from existing customers. The combination of more rapid growth available via a Digital Retail division and the steadier growth from the Enterprise Software business is expected to enable the Group to meet its strategic targets over the next three years and beyond.
Sanderson has maintained a strong balance sheet, a robust business model built upon long-term relationships with customers generating strong recurring revenues and is well-positioned in its target markets. Together, these factors provide the Board with a good level of confidence that, at this early stage of the new financial year, the Group will make further progress and deliver trading results which are, at least, in line with market expectations for the year ending 30 September 2016.
Ian NewcombeGroup Chief Executive
Consolidated income statement
for the year ended 30 September 2015
|
|
2015 |
2014 |
| Note | £000 | £000 |
|
|
|
|
Revenue | 2 | 19,182 | 16,411 |
Cost of sales |
| (2,964) | (2,483) |
Gross profit |
| 16,218 | 13,928 |
|
|
|
|
Technical and development costs |
| (7,858) | (6,322) |
Administrative and establishment expenses |
| (3,774) | (3,731) |
Sales and marketing costs |
| (2,165) | (1,827) |
Results from operating activities |
| 2,421 | 2,048 |
|
|
|
|
Results from operating activities before adjustments in respect of the following: |
| 3,303 | 2,839 |
Amortisation of acquisition-related intangibles |
| (483) | (387) |
Acquisition-related and restructuring costs |
| (310) | (303) |
Share-based payment charges |
| (89) | (101) |
Results from operating activities
|
| 2,421 | 2,048 |
Finance income | 3 | 47 | 28 |
Finance expenses | 4 | (185) | (160) |
Acquisition-related finance expense | 4 | (252) | - |
Profit before taxation |
| 2,031 | 1,916 |
Taxation | 5 | (164) | (318) |
Profit for the year |
| 1,867 | 1,598 |
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 | 3.4p | 3.1p |
Diluted earnings per share | 7 | 3.3p | 2.9p |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of comprehensive income
for the year ended 30 September 2015
|
|
|
|
|
| 2015 | 2014 |
|
| £000 | £000 |
|
|
|
|
|
|
|
|
Profit for the year |
| 1,867 | 1,598 |
|
|
|
|
Other comprehensive income |
|
|
|
Items that will not subsequently be reclassified to profit or loss |
|
|
|
Re-measurement of net defined benefit liability |
| (90) | (834) |
Deferred taxation effect of defined benefit pension plan items |
| 18 | 183 |
|
| (72) | (651) |
|
|
|
|
Items that will subsequently be reclassified to profit or loss |
|
|
|
Change in fair value of available for sale financial asset |
| (31) | 17 |
Foreign exchange translation differences |
| (78) | 23 |
|
|
|
|
Total comprehensive income attributable to equity holders of the parent |
| 1,686 | 987 |
Consolidated statement of financial position
at 30 September 2015
|
|
| 2015 | 2014 |
Non-current assets |
|
| £000 | £000 |
Property, plant and equipment |
|
| 469 | 294 |
Intangible assets |
|
| 30,627 | 28,514 |
Deferred tax assets |
|
| 1,319 | 1,145 |
|
|
| 32,415 | 29,953 |
Current assets |
|
|
|
|
Inventories |
|
| 83 | 4 |
Trade and other receivables |
|
| 5,472 | 4,706 |
Other short-term financial assets |
|
| 190 | 222 |
Cash and cash equivalents |
|
| 4,607 | 6,159 |
|
|
| 10,352 | 11,091 |
Current liabilities |
|
|
|
|
Trade and other payables |
|
| (3,909) | (3,355) |
Deferred consideration |
|
| (1,594) | (815) |
Income tax payable |
|
| - | (47) |
Deferred income |
|
| (4,830) | (4,412) |
|
|
| (10,333) | (8,629) |
|
|
|
|
|
Net current assets |
|
| 19 | 2,462 |
Total assets less current liabilities |
|
| 32,434 | 32,415 |
Non-current liabilities |
|
|
|
|
Pension obligations |
|
| (4,627) | (4,804) |
Deferred consideration |
|
| (244) | (1,213) |
Deferred tax liabilities |
|
| (936) | (581) |
|
|
| (5,807) | (6,598) |
Net assets |
|
| 26,627 | 25,817 |
Equity attributable to equity holders of the parent company |
|
|
|
|
Share capital |
|
| 5,460 | 5,406 |
Share premium |
|
| 9,023 | 8,809 |
Available for sale reserve |
|
| 60 | 91 |
Foreign exchange reserve |
|
| (87) | (9) |
Retained earnings |
|
| 12,171 | 11,520 |
Total equity |
|
| 26,627 | 25,817 |
Consolidated statement of changes in equity
for the year ended 30 September 2015
| Share capital | Share premium | Available for sale reserve | Foreign exchange reserve | Retained earnings | Total equity |
| £000 | £000 | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
At 1 October 2014 | 5,406 | 8,809 | 91 | (9) | 11,520 | 25,817 |
Exercise of share options | 54 | 214 | - | - | (150) | 118 |
Settlement of share options | - | - | - | - | (48) | (48) |
Dividend paid | - | - | - | - | (1,035) | (1,035) |
Share-based payment charge | - | - | - | - | 89 | 89 |
Transactions with owners | 54 | 214 | - | - | (1,144) | (876) |
|
|
|
|
|
|
|
Profit for the year | - | - | - | - | 1,867 | 1,867 |
Other comprehensive income: |
|
|
|
|
|
|
Remeasurement of net defined benefit liability | - | - | - | - | (90) | (90) |
Deferred tax on above | - | - | - | - | 18 | 18 |
Foreign exchange translation differences | - | - | - | (78) | - | (78) |
Change in fair value of available for sale financial asset | - | - | (31) | - | - | (31) |
Total comprehensive income | - | - | (31) | (78) | 1,795 | 1,686 |
At 30 September 2015 | 5,460 | 9,023 | 60 | (87) | 12,171 | 26,627 |
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 |
| ||||||
Consolidated statement of cash flows
for the year ended 30 September 2015 |
|
|
|
|
|
|
|
|
| 2015 | 2014 |
Cash flows from operating activities |
| £000 | £000 |
Profit for the year after taxation |
| 1,867 | 1,598 |
Adjustments for: |
|
|
|
Amortisation of intangible assets |
| 982 | 630 |
Depreciation |
| 156 | 135 |
Share-based payment charge |
| 89 | 101 |
Net finance expense |
| 390 | 132 |
Income tax charge |
| 164 | 318 |
Operating cash flow before changes in working capital |
| 3,648 | 2,914 |
Movement in trade and other receivables |
| (105) | (1,076) |
Movement in inventories |
| (37) | (4) |
Movement in trade and other payables |
| (629) | 856 |
Cash generated from operations |
| 2,877 | 2,690 |
Payments to defined benefit pension scheme |
| (450) | (360) |
Income tax paid |
| (5) | - |
Interest paid |
| - | (2) |
Net cash flow from operating activities |
| 2,422 | 2,328 |
Cash flow from investing activities |
|
|
|
Purchase of property, plant and equipment |
| (296) | (113) |
Acquisition of subsidiary undertakings, net of cash acquired |
| (1,041) | (2,046) |
Payment of deferred consideration in respect of subsidiary undertakings |
| (895) | (100) |
Dividend received |
| 12 | 15 |
Bank interest received |
| 35 | 13 |
Development expenditure capitalised |
| (824) | (680) |
Net cash flow from investing activities |
| (3,009) | (2,911) |
Cash flow from financing activities |
|
|
|
Issue of shares, net of costs |
| 118 | 3,953 |
Settlement of share options |
| (48) | - |
Equity dividends paid |
| (1,035) | (873) |
Net cash flow from financing activities |
| (965) | 3,080 |
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
| (1,552) | 2,497 |
Cash and cash equivalents at beginning of year |
| 6,159 | 3,662 |
Cash and cash equivalents at the end of the year |
| 4,607 | 6,159 |
|
Notes
1. Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ('IFRS'). The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange. The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.
2. Segmental reporting
The Group is managed as two separate divisions, providing IT solutions and associated services to the manufacturing and multi-channel retail sectors. Substantially all revenue is generated within the UK. The information provided to the CODM is analysed between the divisions as follows:
| Multi-Channel | Manufacturing | Total |
| ||||
| 2015£000 | 2014 £000 | 2015£000 | 2014 £000 | 2015£000 | 2014 £000 | ||
|
|
|
|
|
|
| ||
Revenue - external customers | 12,704 | 9,675 | 6,478 | 6,736 | 19,182 | 16,411 | ||
Cost of sales | (1,670) | (1,293) | (1,294) | (1,190) | (2,964) | (2,483) | ||
Gross profit | 11,034 | 8,382 | 5,184 | 5,546 | 16,218 | 13,928 | ||
Depreciation + | (104) | (62) | (52) | (73) | (156) | (135) | ||
Operating profit before adjustments | 2,623 | 1,887 | 680 | 952 | 3,303 | 2,839 | ||
Amortisation* | (422) | (334) | (61) | (53) | (483) | (387) | ||
Acquisition-related and restructuring costs | (201) | (303) | (109) | - | (310) | (303) | ||
Share-based payment charges | (81) | (79) | (8) | (22) | (89) | (101) | ||
Result from operating activities | 1,919 | 1,171 | 502 | 877 | 2,421 | 2,048 | ||
Net finance expense |
|
|
|
| (390) | (132) | ||
Taxation |
|
|
|
| (164) | (318) | ||
Profit attributable to equity holders |
|
|
|
| 1,867 | 1,598 | ||
*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
|
| ||||||||||
| 2015£000 | 2014 £000 | 2015£000 | 2014 £000 | 2015£000 | 2014 £000 | |||||
Property, plant and equipment | 319 | 184 | 150 | 110 | 469 | 294 | |||||
Intangible assets | 18,597 | 16,916 | 12,030 | 11,598 | 30,627 | 28,514 | |||||
Deferred tax assets | 227 | 8 | 1,092 | 1,137 | 1,319 | 1,145 | |||||
Inventory | 83 | 4 | - | - | 83 | 4 | |||||
Cash and cash equivalents | 1,560 | 2,972 | 1,451 | 2,111 | 3,011 | 5,083 | |||||
Trade and other receivables | 3,987 | 2,815 | 1,485 | 1,891 | 5,472 | 4,706 | |||||
Total assets | 24,773 | 22,899 | 16,208 | 16,847 | 40,981 | 39,746 | |||||
|
|
|
|
|
|
| |||||
Trade and other payables | (2,378) | (1,787) | (1,531) | (1,568) | (3,909) | (3,355) | |||||
Deferred income | (2,665) | (2,231) | (2,165) | (2,181) | (4,830) | (4,412) | |||||
Income tax | - | (47) | - | - | - | (47) | |||||
Deferred taxation | (863) | (554) | (73) | (27) | (936) | (581) | |||||
Deferred consideration | (1,575) | (2,028) | (263) | - | (1,838) | (2,028) | |||||
Pension obligations | - | - | (4,627) | (4,804) | (4,627) | (4,804) | |||||
Total liabilities | (7,481) | (6,647) | (8,659) | (8,580) | (16,140) | (15,227) | |||||
Allocated net assets | 17,292 | 16,252 | 7,549 | 8,267 | 24,841 | 24,519 | |||||
Other unallocated assets and liabilities |
|
|
|
| 1,786 | 1,298 | |||||
Net assets |
|
|
|
| 26,627 | 25,817 | |||||
Included within other unallocated assets and liabilities are cash balances totalling £1.60 million (2014: £0.70 million) and an investment held for resale. Amounts in respect of shared operations cannot be allocated between operating divisions.
3. Finance income
| 2015£000 | 2014£000 |
|
|
|
Bank interest received | 35 | 13 |
Dividend received | 12 | 15 |
| 47 | 28 |
4. Finance expenses
| 2015£000 | 2014£000 |
|
|
|
Other interest | - | 4 |
Net interest on defined benefit pension scheme deficit | 185 | 156 |
| 185 | 160 |
The Company is required by International Accounting Standards to calculate the fair value of deferred consideration by discounting expected future cash payments using the Company's cost of capital. The discount is then charged to the income statement over the period of deferral. As a result of certain deferred consideration payments in respect of One iota Limited being paid earlier than previously forecast, an accelerated charge of £252,000 (2014: £nil) has arisen. This charge, which is a non-cash item, has been separately reported as an acquisition-related finance expense.
5. Taxation
Current tax expense | 2015£000 | 2014£000 |
UK corporation tax for the current year | - | - |
Overseas corporation tax for the current year | - | (6) |
Relating to prior periods | 26 | - |
Total current tax | 26 | (6) |
Deferred tax |
|
|
Deferred tax for the current year | 216 | 315 |
Relating to prior periods | (78) | 9 |
Total deferred tax | 138 | 324 |
Taxation charged to the income statement | 164 | 318 |
5. Taxation (continued)
Reconciliation of effective tax rate
The current consolidated tax charge for the period is lower (2014: lower) than the average standard rate of corporation tax in the UK during the period of 20.5%. The differences are explained below.
| 2015 | 2014 |
| £000 | £000 |
|
|
|
Profit before taxation - continuing operations | 2,031 | 1,916 |
Tax using the average UK Corporation tax rate of 20.5% (2014: 22%) | 416 | 422 |
Effects of: |
|
|
Expenses not deductible for tax purposes | 74 | 62 |
Utilisation and recognition of losses | (262) | 149 |
Tax relief arising on option exercise | - | (272) |
Over provision in previous years | (52) | 9 |
Change in tax rate | (12) | (52) |
Total tax in income statement | 164 | 318 |
6. Dividends
|
| 2015£000 | 2014 £000 |
|
|
|
|
Interim dividend of 0.9 per share (2014: 0.80p) | 491 | 432 | |
Final dividend relating to previous financial year of 1.00p per share (2014: 0.85p) | 544 | 441 | |
Total dividend for the financial year | 1,035 | 873 | |
A final dividend of 1.20 pence per ordinary share in respect of the financial year ended 30 September 2015 will be proposed at the Annual General Meeting of the Company, expected to be held on 3 March 2016. If approved by shareholders, the total final dividend payment will amount to £655,206. The directors will receive a proportion of this dividend by virtue of their shareholdings in the Company, details of which are disclosed in the Directors' Report.
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: | 2015 | 2014 |
| £000 | £000 |
|
|
|
Result for the year | 1,867 | 1,598 |
Amortisation of acquisition-related intangibles | 483 | 387 |
Share-based payment charges | 89 | 101 |
Acquisition- related and restructuring costs | 310 | 303 |
Adjusted profit for the year | 2,749 | 2,389 |
Number of shares: | 2015 | 2014 |
| No. | No. |
|
|
|
In issue at the start of the year | 54,063,808 | 43,800,946 |
Effect of shares issued in the year | 347,143 | 8,057,990 |
Weighted average number of shares at year end | 54,410,951 | 51,858,936 |
Effect of share options | 1,446,115 | 2,328,723 |
Weighted average number of shares (diluted) | 55,857,066 | 54,187,659 |
Earnings per share: | 2015(pence) | 2014(pence) |
Total attributable to equity holders of the parent undertaking: |
|
|
Basic | 3.4 | 3.1 |
Diluted | 3.3 | 2.9 |
Earnings per share, adjusted, from continuing operations: |
|
|
Basic | 5.1 | 4.6 |
Diluted | 4.9 | 4.4 |
8. Acquisitions
On 5 December 2014 the Group acquired control of Proteus Software Limited by purchasing the entire issued ordinary share capital (and thereby 100% of the voting rights) for a maximum aggregate consideration of £1.90 million. Cash consideration of £1.40 million was paid at completion and deferred consideration of up to £500,000 will be payable subject to Proteus achieving certain performance targets in the year to 5 December 2015. Based on current forecasts, management expect to pay £191,000 in January 2016 and this amount had been included in the calculation of consideration shown below.
The business provides warehouse management solutions to businesses operating in the areas of third party logistics, warehouse management and supply chain distribution. The business complements the Group's existing operations in these areas, a major reason for the Group completing the acquisition.
For the year ended 30 September 2014 Proteus had unaudited revenue of £1.98m (2013: £1.91m) and a loss before taxation of £3,000 (2013: profit before tax of £11,000). At 30 September 2014 Proteus's net assets were £586,000. In the period from 6 December 2014 to 30 September 2015 the subsidiary contributed £1.88 million to consolidated revenue and £58,000 to consolidated profit before taxation (stated after charging amortisation of acquired intangibles).
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 | 34 | - | 34 |
Intellectual property | 395 | 214 | 609 |
Other intangible assets | - | 173 | 173 |
Stock | 42 | - | 42 |
Trade and other receivables | 692 | (36) | 656 |
Cash and cash equivalents | 452 | - | 452 |
Income tax receivable | - | 42 | 42 |
Deferred income | (692) | - | (692) |
Trade and other payables | (361) | (420) | (781) |
Deferred taxation | - | (29) | (29) |
Net identifiable assets and liabilities | 562 | (56) | 506 |
Goodwill on acquisition |
|
| 1,085 |
|
|
| 1,591 |
|
|
|
|
Cash consideration paid at completion |
| 1,400 | |
Deferred contingent cash consideration |
|
| 191 |
Net consideration payable |
|
| 1,591 |
The deferred consideration payable has not been discounted as the likely amount payable and date of payment mean that the effect of any discount will be immaterial.
8. Acquisitions (continued)
On 8 June 2015 the Group acquired control of Evogenic Limited by purchasing the entire issued ordinary share capital (and thereby 100% of the voting rights) for a maximum aggregate consideration of £445,000. Cash consideration of £110,000 was paid at completion. Unconditional deferred consideration of £60,000 will be paid in five equal instalments at six monthly intervals commencing in December 2015. Further deferred consideration of up to £275,000 will be payable subject to the Evogenic trading activity achieving certain performance targets in the three years to June 2018. Based on current forecasts, management expect to pay £238,000 over the three year period.
The business has developed an ERP solution to meet the unique demands of SME manufacturers and distributors. The solution complements the Group's existing operations in these areas, a major reason for the Group completing the acquisition. For the year ended 30 June 2014 Evogenic had unaudited revenue of £84,000 (2013: £117,000) and a profit before taxation of £5,000 (2013: £14,000). At 30 June 2014 Evogenic's net assets were £16,000. In the period from 8 June 2015 to 30 September 2015 the Evogenic business contributed £30,000 to consolidated revenue and £5,000 to consolidated profit before taxation (stated after charging amortisation of acquired intangibles).
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 | 1 | - | 1 |
Intangible assets | - | 216 | 216 |
Trade and other receivables | 4 | - | 4 |
Cash and cash equivalents | 17 | - | 17 |
Trade and other payables | (3) | (20) | (23) |
Deferred taxation | - | (32) | (32) |
Net identifiable assets and liabilities | 19 | 164 | 183 |
Goodwill on acquisition |
|
| 188 |
|
|
| 371 |
|
|
|
|
Cash consideration paid at completion |
| 110 | |
Deferred, unconditional cash consideration |
| 52 | |
Deferred contingent cash consideration |
|
| 209 |
Net consideration payable |
|
| 371 |
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.
8. Acquisitions (continued)
The fair value adjustments relate to the recognition of intangible assets in accordance with IFRS 3: Business Combinations, adjustments to trade receivables to provide for amounts written off post completion, the recognition of income tax and deferred tax assets and liabilities and the accrual of costs incurred prior to completion but payable after completion. 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.
Costs relating to the acquisitions of £184,000 (2014: £125,000) 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 2015 statutory financial statements upon which the auditor's 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 2015 will be laid before the Company at the Annual General Meeting, expected to be held at the Company's registered office on 3 March 2016. 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.