Sondrel Plc Regulatory News (SND)

16 Nov 2005 07:02

Sanderson Group PLC16 November 2005 For immediate release 16 November 2005 Sanderson Group plc Maiden Annual Results for the year ended 30 September 2005 Sanderson Group plc ("Sanderson" or "the Group"), the software and IT servicesbusiness specialising in commercial markets in the UK and Ireland, announcesmaiden annual results for the year ended 30 September 2005. Sanderson providessoftware and IT services to businesses with annual revenues between £5 millionand £250 million. Key Points • Pro forma* turnover at £15.46 million (2004: £15.43 million).• Pre forma* operating profit at £2.80 million (2004: £2.79 million).• Pro forma* profit before tax at £2.70 million (2004: £2.70 million).• Strong cash generation with net cash flow from operating activities at 106% of operating profit before amortisation.• Total net debt reduced from £18.7 million to £1.6 million.• Statutory turnover for the period was £15.46 million and the loss before tax was £482,000.• Proposed Final Dividend of 1.4 pence per ordinary 10p share making a total for the year of 2.5 pence.• First acquisition successfully integrated and performing well.• Over £2 million of orders from new customers, a 17% increase on the previous year. Commenting on the results, Christopher Winn, Chairman, said:"Sanderson continues to generate organic growth in the majority of the marketsit serves, with strong profitability and cash flow underpinning the overallresult. Over the last twelve months, sanderson has been successful in gaining anumber of new clients as well as enhancing the product and service offerings provided to existing clients. Our first acquisition has been successfully integrated and is performing well. "We are pleased to propose a final dividend and we believe that thecontinued development of the business and the solid financial performance provide a strong platform for future growth and enhancement of shareholder value. Our strategy is to develop the Group by delivering organicgrowth with good profitability from the existing business and by making complementary businesses." * Pro forma information shows the results for sanderson as if it had been trading in its current form for the full twelve month period. Enquiries: Christopher Winn, Executive Chairman Tel: 02476 555466David O'Byrne, Managing Director Tel: 01709 787787Adrian Frost, Finance Director Tel: 01709 787787 Sanderson Group plc Paul Vann, Winningtons Financial Tel: 07768 807631 SANDERSON GROUP PLC Maiden Annual Results for the year ended 30 September 2005 CHAIRMAN'S STATEMENT Introduction We are pleased to report our first set of annual results since theadmission of the Company's shares to the Alternative Investment Market ("AIM")on 16 December 2004. Trading Results - Pro forma We have produced pro forma trading results for the year ended 30 September 2005 in order to provide a more meaningful comparison. These resultsshow trading as if the Group had been a public company for the full 12 monthperiod. Comparative pro forma information is provided for the previous financialyear. As indicated in our trading update of 17 October 2005 this financial information shows the Group reporting a slight increase in turnover and operating profit compared with the year to 30 September 2004. Thispro-forma information does not constitute statutory information and has not beenaudited. Pro forma Pro forma year ended year ended 30 Sep 2005 30 Sep 2004 (unaudited) (unaudited) £000 £000Turnover 15,460 15,430 Cost of sales (3,123) (3,021) ------------ ------------Gross profit 12,337 12,409 Administrative expenses (9,535) (9,622) ------------ ------------Adjusted operating profit* 2,802 2,787 Interest payable and similar charges (135) (123) Interest receivable and similar income 28 40 ------------ ------------Adjusted profit before taxation* 2,695 2,704 Tax on profit on ordinary activities (808) (811) ------------ ------------Adjusted profit on ordinary activities after taxation* 1,887 1,893 ------------ ------------ Adjusted earnings per share - basic* 4.66p 4.68p Adjusted earnings per share - diluted* 4.04p 4.06p * Adjusted operating profit, adjusted profit before taxation and adjusted profiton ordinary activities after taxation are stated before accounting for LTIPcharges, amortisation of goodwill of £1,255,000 and exceptional items of £1,076,000 to provide a like for like comparison of the Group's trading performance (see also notes on the proforma results that follow). Trading Results - Statutory The statutory results to 30 September 2005 represent the trading of the Groupfrom 1 October 2004 to 16 December 2004, when the Group was a private equitybacked business and from 16 December 2004 to 30 September 2005 when the businesstraded as a public company. The results of Sanderson PCSL Limited are includedfrom the date of its acquisition on 6 July 2005. The comparative results for 2004 reflect the trading of the Group from its formation on 23 December2003 to 30 September 2004. The results for the year ended 30 September 2005 show turnover of £15.46 millionand operating profit before amortisation, exceptional items, and charges in respect of the Long Term Incentive Plan (LTIP) of £2.82m. Exceptional itemsduring the year of £1.08 million represent the expenses and associatedreorganisation costs incurred in relation to the admission of the Company's shares to AIM on 16 December 2004. The Group's operating profit was £181,000and the loss for the financial year after taxation amounted to £549,000. The effective rate of taxation in the year to 30 September 2005 is less than 30% as a result of the recognition of the Group's deferred tax asset,and the fact that the Group did not pay UK corporation tax until the admissionto AIM in December 2004. The effective rate is expected to increase to 30% in future periods. Balance Sheet The transition from private equity ownership to public listed company has enabled the Group to strengthen its balance sheet. Net assets atthe year end exceeded £16 million, gross bank debt reduced from £5.2 million to£2.1 million and total net debt has reduced from £18.7 million to £1.6 million,leaving the Group with surplus borrowing capacity to pursue further earnings enhancing acquisitions. Cash generation remains strong. Cash generated from operations (excluding AIMadmission costs) exceeded 100% of operating profit before amortisation. This performance is underpinned by the fact that over 50% of recurring revenue relating to the 2005/06 financial year has been invoiced and is recognised asdeferred income prior to the start of the year. Dividends The Board is keen to ensure that shareholders benefit from the tradingperformance of the Group through a progressive dividend policy. Subject toapproval at the Annual General Meeting of Shareholders, a final dividend of 1.4pper ordinary share is proposed and will be paid on 17 February 2006 to shareholders on the register at the close of business on 27 January 2006. Together with the interim dividend of 1.1p per ordinary share this represents adividend of 2.5p for the year. Business Review The Group has built up a large client base over many years and has, during thelast decade, adopted a revenue model based upon retaining and developing clientsby continuously offering new products and associated technology together with professional services. These provide clients with a good return on investment.Historically, more than 50% of turnover arises from recurring licence, support and maintenance contracts, with a further 40% of turnover being derived fromadditional products and services to existing clients. The balance is derivedfrom new customers. For the year to 30 September 2005, recurring revenues continued to grow andrepresented 53% of Group sales. Order intake from new customers, at over£2 million, was 17% ahead of the previous year,. The level ofdiscretionary non recurring spend from existing clients was, however, lower andslowed noticeably in the late summer, most markedly from clients in themanufacturing sector. Software Products The Group's software products are designed to meet all the operational needs ofa broad range of businesses. Products cover functions common to all customers,from sales and marketing through to finance, human resources, purchasing,production, supply and distribution whilst also addressing specialist requirements such as ingredient handling and call centre operations. Sandersonowns and develops the IPR to its software products and licences their use. During the year to 30 September 2005, software sales accounted for 75% of Group turnover, compared with 74% during the previous financial year. Consultancy Services Customers who contract for a new or upgraded system also contract forconsultancy services. These cover the provision of experienced Sandersonpersonnel who assist in the set-up, installation and implementation of thesoftware as well as the provision of general IT advice. Customers also makeannual payments for ongoing technical support and maintenance services. Duringthe year to 30 September 2005, consultancy represented 25% of Group turnover. Markets Sanderson continues to benefit from the modest growth in IT spend in most of itstarget markets which include the following market sectors: Manufacturing This sector includes the engineering, plastics, electronics, furniture, printingand automotive parts industries. Despite winning a number of new contracts during the year, sales in this sectorwere lower than the previous year. This was due to a downturn in discretionaryspend from existing customers during the late summer. Manufacturing accounted for 37% of Group turnover in the year to 30September 2005 and this compares with 40% last year. Food & Process Industries This sector includes customers in the food, cosmetics and pharmaceuticalindustries. Several new contracts were signed during the year and strong demandfor our products has resulted in companies enhancing their existing systems toimprove efficiency and generate improved management information. Food & Process Industries accounted for 19% of Group turnover in the year to 30September 2005 and this compares with 19 per cent last year. Mail Order The mail order market comprises both Business-to-Business andBusiness-to-Consumer operations. Businesses in this market sector oftenexperience rapid growth and are highly dependent on their IT systems. The launchduring the year, of our new Unity product into this sector has stimulated considerable interest and will be a key factor in further developing this part of our business. Mail order accounted for 21% of Group turnover in the year to 30 September 2005,unchanged from last year. Wholesale Distribution This sector includes customers involved in cash and carry, wines, cateringsupplies and frozen food businesses. Increased pressure from the supermarket chains continues to drive IT spend in this sector. Demands for greater efficiency, instant marketing feedback and improved management information will continue to generate revenue growth. A large number of new contract wins in the year demonstrates the strength of our product and service offerings. Wholesale Distribution accounted for 20% of Group turnover in the yearto 30 September 2005, unchanged from last year. PCSL In July 2005 we acquired Progressive Computer Systems Limited ("PCSL"), for amaximum consideration of £1.75million. The business now trades as SandersonPCSL and the marketing of the Sanderson brand, particularly within the retailsector, will generate additional business opportunities. In the three months since acquisition, trading was slightly above expectations and contributed 3% to group turnover. PCSL complements the activities of existing Sanderson businesses, particularly Mail Order, and a number of cross-sellingopportunities are being explored. Business Model The Group has a robust model reflecting the large client base built up over many years. During the year new customers accounted for 12% of turnover compared with 7% for the previous year. Strategy Our strategy is to build upon our leading market position as a specialist provider of software & services by a combination of organic growth and the delivery of high levels of profitability from the existing businesses,as well as pursuing selective acquisitions to enhance the size, profitability and earnings of the Group. We are pleased with the progress of PCSLand we are actively developing a number of other acquisition opportunities. Staff We would like to thank all our colleagues for their commitment, expertise, and continued dedication in working with our customers and partners. Outlook The continued investment in improving our sales and marketing capability hasincreased the level of new client business and we intend to maintain thisprogress. In response to a slowdown in the level of discretionary non recurringspend from some of our clients, we have further enhanced and expanded our product offering and refocused marketing and management effort to increaserevenues from existing clients. The Board has a clear strategy to develop the Group by delivering organic growthwith good profitability from the existing businesses, and by making complementary acquisitions. Christopher WinnChairman 16 November 2005 Consolidated profit and loss account for the year ended 30 September 2005 Continuing Acquisitions Group Group Year ended Year ended Year ended 46 weeks to Note 30.09.2005 30.09.2005 30.09.2005 30.09.2004 £000 £000 £000 £000 Turnover 15,025 435 15,460 11,880Cost of sales (3,121) (2) (3,123) (2,236) ---------- ---------- ---------- ---------Gross profit 11,904 433 12,337 9,644Administrative expenses (11,794) (362) (12,156) (8,325) Operating profit before amortisation,exceptional items and LTIP charges 2,751 71 2,822 2,204LTIP charges 2 (310) - (310) -Goodwill amortisation 3 (1,255) - (1,255) (885)Exceptional items 4 (1,076) - (1,076) - -------- -------- -------- -------- Operating profit 110 71 181 1,319 -------- -------- -------- --------Interest payable on bank debt 5 (187) (493) Non-recurring interest & loan note interest 5 (504) (1,229) -------- --------Interest payable and similar charges 5 (691) (1,722) Interest receivable and similar income 28 75 -------- ---------Loss on ordinary activities before taxation (482) (328) Tax on loss on ordinary activities (67) (100) --------- --------Loss for the financial year (549) (428)Dividends on equity and non-equity shares 6 (1,017) - ---------- ---------Retained loss for the year (1,566) (428) =========== ========= Basic loss per share 7 (1.29p) (0.96p) Diluted loss per share 7 (1.29p) (0.96p) Balance sheets at 30 September 2005 Group Group 2005 2004 £000 £000Fixed assetsIntangible assets 22,949 22,211Tangible assets 914 930 --------------- --------------- 23,863 23,141 --------------- --------------- Current assetsStocks 103 103Debtors 4,188 4,145Cash at bank and in hand 524 1,784 --------------- --------------- 4,815 6,032 Creditors: amounts falling due within one year (9,580) (9,523) --------------- ---------------Net current liabilities (4,765) (3,491) --------------- --------------- Total assets less current liabilities 19,098 19,650 Creditors: amounts falling due after more than (1,380) (18,331)one yearProvisions for liabilities and charges (1,173) (1,247) --------------- ---------------Net assets 16,545 72 =============== =============== Called up share capital 4,081 500Share premium account 14,183 -Profit and loss account (1,719) (428) --------------- ---------------Capital and reserves 16,545 72 =============== =============== Consolidated cash flow statementfor the year ended 30 September 2005 Year ended 46 weeks to 30.09.2005 30.09.2004 £000 £000 Net cash inflow from operating activities 1,907 2,846Returns on investments and servicing of finance (301) (418)Taxation (92) -Capital expenditure and financial investment (107) (146)Equity dividends paid (445) -Acquisitions and disposals (857) 202 ------------ --------- Net cash inflow before financing 105 2,484 FinancingIssue of new shares 5,795 -Inception of bank loans 2,500 -Repayment of loans (5,660) (700)Repayment of loan stock (4,000) - ---------------- ----------------Net cash outflow from financing (1,365) (700) ---------------- ---------------- Movement in cash (1,260) 1,784 ================ ================ Reconciliation of operating profit to net cash inflow from operating activitiesfor the year ended 30 September 2005 Group Group Year ended 46 weeks to 30.09.2005 30.09.2004 £000 £000 Group operating profit 181 1,319Depreciation charges 143 137Goodwill amortisation 1,255 885LTIP charges 310 -(Increase) / decrease in stocks - (8)Decrease / (increase) in debtors 626 669(Decrease) / increase in creditors (534) (121)Decrease in provisions (74) (35) ---------------- ----------------Net cash inflow from operating activities 1,907 2,846 ================ ================ Group operating profit and net cash inflow from operations shown above arestated after the charge for and payment of costs relating to the admission ofthe company's shares on AIM amounting to £1,076,000. An analysis of movements in net debt is presented in note 8. NOTES TO THE ACCOUNTS 1. The financial information set out herein does not constitute the Group'sstatutory accounts for the year ended 30 September 2005 but is derived fromthose financial statements. The statutory accounts will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the registrar of companiesfollowing the Annual General Meeting. The comparative information in respect ofthe period ended on 30 September 2004 has been derived from the auditedstatutory accounts for the period ended on that date, and upon which anunqualified audit opinion was expressed and which did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2. LTIP charges represent the amount chargeable to the profit and lossaccount in the year in respect of the Long Term Incentive Plan, which was putinto place at the time of the Admission. An assumption has been made that allawards under the Plan will vest at the end of the three year performance period. 3. The directors consider each acquisition separately for the purpose ofdetermining the amortisation period of any goodwill that arises. Goodwillrelating to the acquisition of Sonarsend Limited and the Sanderson trade in 2003is being amortised over a period of 20 years. Goodwill arising on theacquisition of Sanderson PCSL Limited in 2005 is being amortised over aperiod of 5 years. In both cases the directors consider the periods toapproximate to the useful economic lives of the businesses acquired. Aspermitted under FRS7 the directors have reviewed the fair value of the assetsacquired on the acquisition of Sonarsend Limited and the Sanderson trade. As aresult an adjustment has been made to the fair value of creditors to reflectadditional liabilities identified during the course of the year. 4. Exceptional items represent the expenses and associated preparationreorganisation costs incurred in relation to the admission of Sanderson Groupplc to AIM on 16 December 2004. 5. Interest comprises: Group Group Year ended 46 weeks to 30.09.2005 30.09.2004 £000 £000 Unsecured loan note discount 329 1,229Write-off of facility fees 175 - ------------ -----------Total non-recurring interest 504 1,229Bank payable interest 187 456Other interest - 37 ------------ -----------Total interest payable 691 1,722 ------------ ----------- The unsecured loan notes were repaid following the Admission. 6. Dividends comprise: Group Group Year ended 46 weeks to 30.09.2005 30.09.2004 £000 £000 Interim dividend of 1.1p per share, paid 24.06.2005 445 -Final dividend proposed of 1.4p per share 572 - ------------ -----------Total dividend for the period 1,017 - ------------ ----------- 7. Actual loss per share is calculated as follows: Year ended 46 weeks to 30.09.2005 30.09.2004 £000 £000 Loss after taxation (549) (428) ------------ ----------- Weighted average number of shares in issueBasic 42,406,166 44,479,495LTIP options 1,433,190 -Other option arrangements 2,734,668 - ------------ -----------Diluted 46,574,024 44,479,495 ------------ ----------- 8. Analysis of net debt At start Cashflow Non-cash of period movement £000 £000 £000 Cash at bank 1,784 (1,260) -Bank loans -due within 1 year (5,170) (3,160) (130) Loan Stock (15,390) 4,000 - -------- ------- ------- (18,776) 5,900 - ========= ======= ======= Interest Debt to At 30 capitalised/ equity September loan stock conversion 2005 accruing discount £000 £000 £000 Cash at bank - - 524 Bank loans -due within 1 year - - (2,140)Loan Stock (329) 11,719 - ------- -------- ------- (329) 11,719 (1,616) ======= ======== ======== Notes to the pro forma (unaudited) results 1. The pro forma results for the year ended 30 September 2005 comprise the actual results of the Sanderson Group for the period, on the basis of current accounting policies, before LTIP charges, goodwill amortisation and exceptional items, which are charged in the statutory results, and on the basis of plc costs having been incurred for the full year, notional interest calculated as ifthe debt level in place post admission to AIm had been in place from 1 October2004 and at an assumed tax rate of 30%. A reconciliation from the statutory operating profit to the pro forma operatingprofit is set out below: £000 Statutory operating profit 181LTIP charges 310Goodwill amortisation 1,255 Exceptional items (note 4) 1,076Additional plc costs (20) ------ 2,802 ====== 2. The pro forma results for the year ended 30 September 2004 comprise the actual results of the Sanderson Group for the period (excluding the PCSL completion acquired during 2005), on the basis of current accounting policiesbefore LTIP charges, goodwill amortisation and exceptional items, which arecharged in the statutory results, and on the basis of notional plc costs, notional interest calculated as if the post admission to AIM debt level of £1.67 million had been in place for the whole period and at an assumed tax rate of 30%. 3. Adjusted earnings per share on a pro forma basis have also been included asthe Directors consider that this figure is helpful for a better understanding ofthe underlying business. It has been assumed that 40,520,900 (basic) and 46,652,592 (diluted) ordinary shares were in issue during both pro forma periods. This information is provided by RNS The company news service from the London Stock Exchange