Sondrel Plc Regulatory News (SND)

4 May 2006 07:02

Sanderson Group PLC04 May 2006 For Immediate Release 4 May 2006 SANDERSON GROUP PLC 2006 Interim Results 'Repositioned to deliver further growth' Sanderson Group plc ('Sanderson' or 'the Group), an established provider ofsoftware and IT services to UK commercial markets focusing on manufacturing andmulti-channel distribution, announces interim results for the six months to 31March 2006. The Group provides software and IT services to businesses withannual turnovers typically between £5million and £250million. Key Points • Turnover of £7.435million (2005: £7.897million) • Adjusted operating profit of £1.233 million* (2005: £1.317million*) • Operating profit of £0.251m (2005: loss of £0.378m) • Profit before tax of £0.283million (2005: £1.024million loss) • Gross margin increased 6% reflecting favourable sales mix; recurring revenues increased to 56% of sales • Net debt at period end was £3.2million; capacity for further strategic acquisitions • Interim Dividend of 1.1p per Ordinary 10p Share (2005: 1.1p) • Adjusted earnings per share - basic* 2.21p (2005: 1.62p#); diluted* 2.11p (2005: 1.56p#) • Unadjusted loss per share, basic and diluted 0.19p (2005 restated: 2.35p) • Megabyte Limited (now trading as Sanderson Retail Systems) acquired in February performing well * Before amortisation, exceptional administrative expenses and LTIP charges # Adjusted for the effect of pre-admission share structure Commenting on the results, Executive Chairman Christopher Winn said: "The acquisitions of Sanderson Retail Systems and PCSL in the last twelve monthshave provided the opportunity to reposition the Group, which now addresses twoprincipal market sectors - Multi-Channel Sales and Manufacturing. Furtheracquisition opportunities are being actively developed." On prospects, Mr Winn added: "The Board is encouraged by the trading performance of the Group in the secondquarter to 31 March 2006, and there is a strong pipeline of sales prospectsentering the second half year, some of which have already been converted intofirm orders. The Board anticipates a satisfactory outcome for the current year." Enquiries: Christopher Winn, Executive Chairman Tel: 02476 555466David O'Byrne, Group Managing Director Tel: 01709 787787 Paul Vann, Winningtons Financial Tel: 0117 920 0092 CHAIRMAN'S STATEMENT Introduction The trading results for the six months to 31 March 2006 show turnover of£7.435 million and operating profit of £251,000. Operating profit beforeamortisation, exceptional items and LTIP charges amounted to £1.233 million. Trading Results The trading results for the six months to 31 March 2006 are summarised below: Six months to Six months to 31 March 2006 31 March 2005 (unaudited) (unaudited) £000 £000Turnover 7,435 7,897 Cost of sales (1,204) (1,774) ----------- -----------Gross profit 6,231 6,123 Administrative expenses (4,998) (4,806) ----------- -----------Adjusted operating profit* 1,233 1,317 Amortisation, LTIP charges & exceptionaladministrative expenses (982) (1,695) ----------- -----------Operating profit / (loss) 251 (378)Profit on disposal of fixed assets 128 -Bank interest payable (69) (119)Non-recurring interest - (504)Other finance costs (27) (23) ----------- -----------Profit / (loss) on ordinary activities beforetaxation 283 (1,024) ----------- ----------- Adjusted earnings per share - basic* 2.21p 1.62p#Adjusted earnings per share - diluted* 2.11p 1.56p# * Before amortisation, exceptional administrative expenses and LTIP charges. # Adjusted to remove the effect of pre-admission share structure. The absence of exceptional, non-recurring costs relating to the period prior tothe Group's admission to AIM in December 2004 has enabled the Group to report aprofit before taxation which compares favourably with the comparative period, inwhich exceptional non-recurring costs were reported. The Group disposed of its surplus property at Huntingdon during the period,generating a profit on disposal of £128,000. Dividends An interim dividend of 1.1 pence per ordinary share is being declared and willbe paid on 14 July 2006 to shareholders on the register at the close of businesson 16 June 2006. Acquisition In February 2006, the Group acquired Megabyte Limited for a maximumconsideration of £2.5 million. The business now trades as Sanderson RetailSystems Limited and the marketing of the Sanderson brand in the retail sector isexpected to generate additional business opportunities. In the five weeks sinceacquisition trading was slightly above expectations and contributed 6% to theGroup's turnover. Sanderson Retail Systems complements the activities ofexisting Sanderson businesses, particularly Sanderson PCSL, Mail Order andWholesale Distribution and a number of cross-selling opportunities are activelybeing developed. Balance Sheet The profile of the balance sheet has changed as a result of the acquisition ofSanderson Retail Systems in February with stock, debtors and deferred incomeincreasing as a direct result. We are confident that, once fully integrated,improved cash generation will be achieved from this business. With net debt of £3.2m, the Group has the capacity to pursue additionalstrategic acquisitions. Business Review Towards the end of the last financial year ended 30 September 2005, the Groupexperienced a slowdown in the level of discretionary spend from some of itsclients, most markedly, in the manufacturing sector. This slowdown in spendingfrom the Group's manufacturing clients has continued into the current year,however after a slow first quarter up to the end of December, overall activitylevels have been good and trading in the second quarter has been slightly aheadof the comparative quarter last year. Whilst the level of turnover is slightly lower (6%) than the comparative periodlast year, gross margin has increased by over 6% to 84%, reflecting a favourableturnover mix with more Sanderson owned IPR and services being provided. The Group has built up a large client base over many years and has adopted arevenue model based upon retaining and developing clients by continuouslyoffering new products and associated technology, together with professionalservices. These provide clients with a good return on investment. Historically,more than 50% of turnover arises from recurring licence, support and maintenancecontracts, with a further 40% of turnover being derived from additional productsand services to existing clients and the balance is derived from new customers. For the period to 31 March 2006, recurring revenues continued to increase andrepresented 56% of Group turnover. Eight new clients were gained in the period,compared with five in the comparative period last year, though the average ordervalue was lower at just over £70,000. Approximately 76% of the Group's turnover was generated from the sale ofsoftware products, with the remaining 24% represented by the provision ofassociated consultancy services. These figures remain unchanged from theprevious period. The Group's software products are designed to meet all the operational needs ofa broad range of businesses and cover functions common to all customers, fromsales and marketing through to finance, human resources, purchasing, production,supply and distribution whilst also addressing specific requirements such asingredient handling and call centre operations. Sanderson owns and develops theIPR to its software products and licences their use. 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. Markets The acquisitions of Sanderson Retail Systems and PCSL in the last twelve monthshave provided the opportunity to reposition the Group, which now addresses twoprincipal market sectors. Multi-Channel Sales incorporates Wholesale Distribution (including cash andcarry), Mail Order and the Retail Sector. The recent acquisitions haveconsiderably strengthened our position in this market sector and this is now thelargest part of the Group. New contracts were won with Thompson & Morgan, FolioSociety, Homeserve and Echo amongst others. Multi-Channel Sales accounted for51% of Group turnover in the period compared with 40% in the comparative periodlast year. Manufacturing covers the provision of solutions to the engineering, plastics,electronics, furniture, automobile parts and print markets, as well asspecialist solutions for the food industry. Though trading was generally slow inthis market sector, a number of new contracts were won during the period.Manufacturing accounted for 49% of Group turnover in the period compared with60% in the comparative period last year. Strategy The Group strategy is to build on its leading market position as a specialistprovider of software and IT services by a combination of organic growth andselective acquisitions to enhance the size, profitability and earnings of theGroup. Staff We would like to thank all our colleagues and staff for their commitment,expertise, and continued dedication in working with our customers and partnersto successfully develop our business. Outlook The Group has been strengthened by the two acquisitions which have been made inthe last year and further acquisition opportunities are being activelydeveloped. The Board is encouraged by the trading performance of the Group inthe second quarter to 31 March 2006, and there is a strong pipeline of salesprospects entering the second half year, some of which have already beenconverted into firm orders. The Board anticipates a satisfactory outcome for the current year. Christopher Winn Chairman 4 May 2006 CONSOLIDATED PROFIT & LOSS ACCOUNT for the six months ended 31 March 2006 Notes Continuing Acquisitions Group Group Group operations 31 March 2006 31 March 2006 31 March 2006 31 March Year ended 2005 30 September 2005 (unaudited) (unaudited) (unaudited) (unaudited) (audited) £000 £000 £000 Restated Restated £000 £000 Turnover 6,952 483 7,435 7,897 15,460 Cost of sales (1,088) (116) (1,204) (1,774) (3,123) -------- -------- -------- -------- --------- Gross profit 5,864 367 6,231 6,123 12,337 Administrativeexpenses (5,691) (289) (5,980) (6,506) (12,156) -------- -------- -------- -------- --------- Operating profit before amortisation,exceptionalitems and LTIP charges 1,155 78 1,233 1,317 2,822LTIP charges 2 (204) - (204) (102) (310)Goodwill amortisation 3 (778) - (778) (577) (1,255)Exceptional administrative expense 4 - - - (1,016) (1,076) -------- -------- -------- -------- --------- Operating profit/(loss) 173 78 251 (378) 181 Profit on disposal offixed assets 128 - - -------- -------- -------- -------- ---------Interest onbank debt 5 (69) (119) (187)Non-recurringinterest 5 - (504) (504) -------- -------- -------- -------- ---------Interest payable (69) (623) (691)Interest receivable - - 28Other finance costs (27) (23) (46) -------- -------- -------- -------- ---------Profit/(loss) onordinary activitiesbefore taxation 283 (1,024) (528) Taxation (360) (14) (73) -------- -------- -------- -------- ---------Loss on ordinaryactivities forthe financial period (77) (1,038) (601) ======== ======== ======== ======== ========= Basic loss per share (pence) 6 (0.19p) (2.35p) (1.42p)Fully dilutedloss per share (pence) 6 (0.19p) (2.35p) (1.42p) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES for the six months ended 31 March 2006 Group Group Group 31 March 2006 31 March Year ended 2005 30 September 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Loss on ordinary activities for thefinancial period (77) (1,038) (601) Actuarial loss recognised in thepension scheme - - (1,052) Deferred tax arising on lossesrecognised in the pension scheme - - 316 -------- -------- --------- - - (736) Total recognised losses for thefinancial period (77) (1,039) (1,337) ======== ========= Prior year adjustment (note 12) (563) --------Total losses recognised since lastannual report (640) ======== CONSOLIDATED BALANCE SHEET as at 31 March 2006 Notes 31 March 31 March 30 September 2006 2006 2005 (unaudited) (unaudited) (audited) Restated Restated £000 £000 £000 Fixed Assets Intangible assets 3 24,933 21,756 22,949Tangible assets 637 879 914 --------- --------- --------- 25,570 22,635 23,863 Current assetsStocks 409 103 103Debtors 7 6,732 3,850 4,188Cash at bank and in hand 413 526 524 --------- --------- --------- 7,554 4,479 4,815 Creditors: amounts fallingdue within one year 8 (10,955) (8,225) (9,008) --------- --------- ---------Net current liabilities (3,401) (3,746) (4,193) --------- --------- --------- Total assets less currentliabilities 22,169 18,889 19,670 Creditors: amounts fallingdue after more than one year 9 (3,374) (1,010) (1,380) --------- --------- --------- Net assets excluding pensionliability 18,795 17,879 18,290 Net pension liability (1,723) (1,005) (1,736) --------- --------- --------- 17,072 16,874 16,554 --------- --------- --------- Capital and reservesShare capital 4,181 4,044 4,081Shares to be issued 495 - -Share premium 14,578 13,970 14,183Profit & loss account 10 (2,182) (1,140) (1,710) --------- --------- --------- 17,072 16,874 16,554 --------- --------- --------- CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 March 2006 Group Group Group 31 March 31 March Year ended 2006 2005 30 September 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Net cash inflow from operatingactivities 669 795 1,907Returns on investments and servicingof finance (109) (119) (301)Taxation (410) - (92)Capital expenditure and financialinvestment 477 (54) (107)Acquisitions (1,637) - (857)Equity dividends paid (575) - (445) -------- -------- ---------Net cash (outflow) / inflow beforefinancing (1,585) 622 105Movement in loans 1,285 (3,675) (3,160)Capital element of hire purchaserepayments (8) - -Issue of ordinary shares - 5,795 5,795Repayment of loan notes - (4,000) (4,000) -------- -------- ---------Decrease in cash and cashequivalents in the period (308) (1,258) (1,260) -------- -------- --------- Reconciliation of net cash inflowfrom operating activities Operating profit / (loss) 251 (378) 181Depreciation and amortisation 857 682 1,398LTIP charges 204 102 310Increase in stocks (39) - -(Increase) / decrease in debtors (1,306) 173 626Increase / (decrease) in creditors 702 216 (608) -------- -------- ---------Net cash inflow from operatingactivities 669 795 1,907 -------- -------- --------- 30 September Cashflow Acquisition Non-cash 31 March 2005 changes 2006 £000 £000 £000 £000 £000Reconciliation ofmovement in net debtCash at bank 524 (111) - - 413Overdraft - (197) - - (197) --------- -------- -------- -------- --------Net cash 524 (308) - - 216 Bank debtdue within oneyear (760) 10 - - (750)due after morethan one year (1,380) (1,295) - 39 (2,636)Capital element of hirepurchase due within one year - - (32) - (32) due after more than one year - 8 (62) - (54) --------- -------- -------- -------- -------- (1,616) (1,585) (94) 39 (3,256) --------- -------- -------- -------- -------- NOTES TO THE ACCOUNTS 1. The interim results for the periods ended 31 March 2006 and 31 March2005 are unaudited and do not constitute statutory accounts within the meaningof s.240 of the Companies Act 1985. They comply with relevant accountingstandards and have been prepared on a consistent basis using the accountingpolicies set out in the 2005 statutory accounts. The comparative figures for thefinancial period ended 30 September 2005 are not the company's statutoryaccounts for that financial year. Those accounts have been reported on by thecompany's auditors and delivered to the registrar of companies. The report ofthe auditors was unqualified and 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 period in respect of the Long Term Incentive Plan. An assumptionhas been made that all awards under the Plan will vest at the end of the threeyear 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 a periodon 5 years. Goodwill arising on the acquisition of Sanderson Retail SystemsLimited in 2006 is being amortised over a period of 10 years. In all cases thedirectors consider the periods to approximate to the useful economic lives ofthe businesses acquired. 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 Group 31 March 31 March Year ended 2006 2005 30 September 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Unsecured loan note interest - 329 329Write-off of facility fees - 175 175 -------- -------- ---------Total non-recurring interest - 504 504Bank loan interest 69 119 187 -------- -------- ---------Total interest payable 69 623 691 -------- -------- --------- The unsecured loan notes were repaid following the Admission of the company'sshares to AIM on 16 December 2004. 6. Actual loss per share is calculated on the basis of the followinginformation: Group Group Group 31 March 31 March Year ended 2006 2005 30 September 2005 (unaudited) (unaudited) (audited) £000 £000 £000Earnings used in basic and dilutedearnings per share calculationLoss for the financial period (77) (1,038) (601) --------- --------- --------- Earnings used in calculatingearnings per share adjusted forgoodwill amortisation, LTIP chargesand exceptional itemsLoss for the financial period (77) (1,038) (601)LTIP charges 204 102 310Goodwill amortisation 778 577 1,255Exceptional items - 1,016 1,076 --------- --------- --------- 905 657 2,040 --------- --------- --------- Weighted average number of shares inissueBasic 41,017,902 44,229,846 42,406,166Dilutive effect of share options 1,786,852 1,727,029 2,155,233 ---------- ---------- ----------Diluted 42,804,754 45,956,875 44,561,399 ---------- ---------- ---------- The basic weighted average number of shares in issue in the six months to 31March 2005 shown above is distorted by the share structure in place prior to theGroup's admission to AIM. The adjusted earnings per share figures quoted in theChairman's statement is therefore based on the number of shares in issue fromthe float date of 16 December 2004 to 31 March 2005. As a result, basic numberof shares in issue used in the calculation for the six months to 31 March 2005is 40,438,482 and the diluted number 42,165,511. 7. Analysis of debtors 31 March 2006 31 March 30 September 2005 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Trade debtors 5,268 3,279 3,152Deferred taxation 400 - 400Accrued income and prepayments 1,064 571 636 -------- -------- --------- 6,732 3,850 4,188 -------- -------- --------- 8. Analysis of creditors due within one year 31 March 31 March 30 September 2006 2005 2005 (unaudited) (unaudited) (audited) Restated Restated £000 £000 £000 Bank loans and overdraft 947 660 760Hire purchase creditor 32 - -Trade creditors 1,333 990 937Corporation tax 397 115 455Other taxes and social security 1,091 752 898Other creditors 1,422 399 750Accruals and deferred income 5,733 5,309 5,208 -------- -------- --------- 10,955 8,225 9,008 -------- -------- --------- 9. Analysis of creditors due after more than one year 31 March 31 March 30 September 2006 2005 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Bank loans 2,636 1,010 1,380Hire purchase creditor 54 - -Deferred income 684 - - -------- -------- --------- 3,374 1,010 1,380 -------- -------- --------- 10. Profit & loss account reserve 31 March 31 March 30 September 2006 2005 2005 (unaudited) (unaudited) (audited) Restated Restated £000 £000 £000 At start of the period - aspreviously reported (1,710) (428) (428)Prior year adjustments (note 12) - 225 225 --------- --------- --------- At start of the period - restated (1,710) (203) (203) Total recognised gains & losses (77) (1,038) (1,337)Dividends paid (575) - (445)LTIP reserve transfer 180 101 275 --------- --------- --------- (2,182) (1,140) (1,710) --------- --------- --------- 11. Acquisition of subsidiary undertaking On 22 February 2006 the Group acquired the entire issued share capital ofSanderson Retail Systems Limited ('SRS'). Prior to the acquisition SRS traded asMegabyte Limited. The consideration paid on acquisition was £1,495,000 of which£1,000,000 was paid in cash and £495,000 in shares. A further £500,000 cash andfurther ordinary shares in Sanderson Group plc may be payable dependent upon theachievement of performance targets by SRS for a period ending not later than30th September 2008. The following table sets out the book values of the identifiable assets andliabilities acquired, and their provisional fair values to the Group. Book value Fair value Provisional adjustments fair value £000 £000 £000 Tangible fixed assets 217 (66) 151Stock 267 267Debtors 1,245 1,245Bank overdraft (332) (332)Trade creditors (180) (180)Other creditors (1,069) (1,069) -------- -------- ---------Net assets 148 (66) 82 -------- -------- --------- Consideration and costsShares issued 495Cash 1,000Costs incurred 105Contingent deferred share consideration 495Contingent deferred cash consideration 500 ---------Consideration and costs 2,595 --------- Goodwill arising 2,513 --------- In addition, on 24 March 2006 the Group acquired the IPR in a software productthat complements the Group's existing product offerings. Consideration of£200,000 cash was paid on acquisition, with a further £50,000 in cash beingpayable in October 2006. The payments are being treated as an intangible assetand amortised over a period of 3 years, which is considered to be the usefullife of the product acquired. 12. Prior year adjustment The following UK accounting standards have been adopted for the first time inpreparing the interim results for the six months ended 31 March 2006: FRS17 Retirement benefits The Group previously reflected the transitional disclosure rules of thestandard, but has now adopted the recognition and measurement requirements forthe first time. FRS21 Events after the balance sheet date The standard requires dividends to be recognised when paid, or approved inGeneral Meeting. As a result, certain dividends previously accrued at periodends have been recognised when paid or approved as applicable. FRS25 Financial instruments: disclosure & presentation Dividends, when recognised, are now reported as a movement in reserves ratherthan on the face of the profit & loss account FRS28 Corresponding amounts No material changes have resulted from the adoption of this standard Adoption has required a restatement of the comparative information, assummarised below. 31 March 31 March 30 September 2006 2005 2005 (unaudited) (unaudited) (audited) Restated Restated £000 £000 £000Balance sheet at period endReduction in provisions forliabilities & charges - 1,208 1,173Increase in net pension liability - (1,005) (1,736)Reduction in creditors - proposeddividends - 485 572 -------- -------- --------- - 688 9 -------- -------- --------- Profit & loss account for the periodIncrease in taxation - - (6)Increase in other finance costs - (23) (46) -------- -------- ---------Increase in loss for the period - (23) (52) -------- -------- --------- The adoption of FRS17 resulted in a lower net liability under FRS17 thanpreviously existed under SSAP24 at 30 September 2004. As a result the net assetsand profit and loss reserve have increased at this date by £225,000. INDEPENDENT REVIEW REPORT TO SANDERSON GROUP PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 31 March 2006 which comprises the consolidated profit andloss account, statement of recognised gains and losses, balance sheet, cash flowstatement and notes to the accounts. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the interim report must be presented and prepared in aform consistent with that which will be adopted in the company's annual accountshaving regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 March 2006. KPMG Audit Plc Chartered Accountants Leeds 4 May 2006 This information is provided by RNS The company news service from the London Stock Exchange