Sondrel Plc Regulatory News (SND)

FOR IMMEDIATE RELEASE 15 May 2012

SANDERSON GROUP PLC

Interim Results for the six months ended 31 March 2012

"Building value in a year of transition"

Sanderson Group plc ("Sanderson" or "the Group"), the software and IT services business specialising in the manufacturing and multi-channel retail markets in the UK and Ireland, announces Interim Results for the six month period ended 31 March 2012.

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

"Whilst UK economic conditions have been challenging, Sanderson has continued to make good progress in what has become a year of transition, following the disposal of Sanderson RBS Limited ("Sanderson RBS"). New products and services have strengthened the Group's competitive market position and a focus on active and expanding market sectors, such as online sales and ecommerce, has provided improved growth and development prospects. The Group continues to generate cash and following the disposal of Sanderson RBS in January for £11.75m cash, debt has been eliminated and the balance sheet greatly strengthened."

Highlights - Financial

§ Revenues from continuing operations of £6.14m (2011: £7.04m).

§ Operating profit from continuing operations of £0.80m (2011: £0.75m).

§ Basic earnings per share of 3.4p (2011: 0.7p).

§ Basic earnings per share from continuing operations of 0.4p (2011: 0.6p).

§ Net cash at period-end of £3.56m (2011: net debt of £7.23m).

§ Increased interim dividend declared of 0.5p per share (2011: 0.3p).

Highlights - Operational

§ Disposal of Sanderson RBS Limited in January realised cash proceeds of £11.75m.

§ Order Book in respect of continuing operations at period-end increased to £1.95m (2011: £1.67m), with much of it scheduled for delivery in second half of current financial year.

§ Gross margins up 3% reflecting delivery of more proprietary software and other 'owned' services.

§ Recurring revenues in respect of continuing operations rose to £3.79m (2011: £3.61m).

§ First order received for new mobile solution applications.

On current trading and prospects, Mr Winn, added:

"Notwithstanding the uncertain economic outlook and continuing challenging market conditions, the Sanderson Board, which still adopts a cautious approach, has a good level of confidence that going into the second half of the financial year the strengthened balance sheet and improved market position of the Group, together with the large order book, will enable the Group to achieve its full year targets."

Enquiries:

Christopher Winn, Chairman Telephone: 0333 123 1400

Adrian Frost, Finance Director

Paul Vann, Winningtons Financial Telephone: 0117 985 8989 or 07768 807631

Mark Taylor/Darren Vickers, Charles Stanley Securities Telephone: 020 7149 6000

(Nominated Advisor)

SANDERSON GROUP PLC

Interim Results for the six months ended 31 March 2012

Chairman's statement

Introduction

In January 2012, the Group sold Sanderson RBS, which specialised in the provision of electronic point of sale systems for major high street retailers to Torex Retail Holdings Limited for a total cash consideration of £11.75m. The income statement for the six month period ending 31 March 2012 ("the period") reports the trading results of the Group's continuing operations. The three and a half months trading contribution from Sanderson RBS Limited has been combined with the profit arising on disposal and reported separately in the income statement as 'profit on discontinued operation'. Comparative figures have been restated accordingly.

Whilst UK economic conditions have been challenging, Sanderson has continued to make good progress in what has become a year of transition, following the disposal of Sanderson RBS. New products and services have strengthened the Group's competitive market position and a focus on active and expanding market sectors, such as online sales and ecommerce, has provided improved growth and development prospects.

The trading results from continuing operations for the period show revenue of £6.14m (2011: £7.04m), gross margin of 84.3% (2011: 81.4%) and operating profit rising to £0.80m (2011: £0.75m). The order book at 31 March 2012 was £1.95m (2011: £1.67m) and represents a 44% improvement during the period (30 September 2011: £1.35m). As has been the pattern in the previous two financial years, we expect the benefits of this larger order book to be reflected in the trading result for the second half year, during which most of the projects are scheduled for implementation and delivery to customers.

The Group has continued to generate cash and following the January business disposal, all bank debt was repaid together with the settlement of the associated interest rate hedging arrangements relating to the bank loan. The net cash balance of £3.56m at 31 March 2012, compares with bank debt of £7.23m at 31 March 2011 and with a peak of £12.5m at 31 March 2008.

Business review

Sanderson provides a wide and comprehensive range of modern software solutions together with associated services to businesses in the manufacturing and multi-channel retail markets. The Group has developed a business model where solutions now primarily comprise Sanderson proprietary owned software, integrated with other market-leading products and importantly, delivered, supported and serviced by expert Sanderson staff. This model has enabled the Group to deliver a reliable and consistent quality service and has ensured the development of long-term relationships with customers. Overall sales were £6.14m (2011: £7.04m) and partially reflecting the emphasis onto the higher margin 'owned' software and services, gross margins improved to 84.3% (2011: 81.4%).

Sanderson continues to focus on supplying new and existing customers with value for money solutions, which often provide the opportunity for customers to achieve cost savings and business efficiencies. Since 2010, the Group has accelerated the introduction of new products and services, which now include Factory and Warehouse Automation, Green IT solutions, as well as, SaaS ('Software as a Service') and Cloud delivery models. The Factory and Warehouse Automation solutions have been very successful, delivering in excess of £2m of new sales since their launch in 2010.

The Group is excited by the growth opportunities presented by the development of mobile applications ("apps"). The explosive growth and adoption by businesses of smartphones and tablet devices is generating substantial demand for access to the Group's solutions via "always-on" mobile devices. We have recently launched an "app" enabling the Group's wholesale and cash and carry customers to access real-time information, greatly assisting their ability to improve customer service and to increase sales. Current developments include furniture manufacturers with retail outlets being able to process real-time customised orders on iPads and an "app" to enable food manufacturers to more cost-effectively comply with food hygiene and safety legislation.

The rapid growth of online, ecommerce and catalogue retail channels is continuing with annual growth rates in excess of 10% in what continues to be a tough retail environment. This growth is expected to continue into the mid-term and will be fuelled by the development and expansion of m-commerce (ecommerce with mobile devices). The optimisation of ecommerce sites offers the Group a further development opportunity in this expanding market.

A cornerstone of the Sanderson business model is the provision of software licencing, support and services on a pre-contracted basis providing good visibility of earnings. In the period to 31 March 2012, these pre-contracted recurring revenues represented 62% (£3.79m) of total revenues.

The Group gained nine new customers in the period (2011: seven new customers) at an average initial contract value of £76k (2011: £102k).

Review of manufacturing

Businesses in the food and drink, engineering, plastics, aerospace, electronics and print manufacturing sectors represent the main areas of specialisation for Sanderson in manufacturing markets. Whilst order intake in general manufacturing and engineering was lower in the period than for the comparative period of 2011, order intake from the food and drink sector showed a 10% increase. Divisional recurring revenues represent 62% of total revenues and cover over 80% of the divisional overheads.

Revenue was £2.95m (2011: £3.01m) and operating profit was £293k (2011: £349k). Three new customers were gained in the period (2011: two new customers), including Tyzack Machine Knives and Bayview Seafoods. The order book of £784k (2011: £825k) is strong and an improved trading result is anticipated for the second half year.

Review of multi-channel retail

Sanderson provides comprehensive IT solutions to businesses operating in the areas of online sales, ecommerce, catalogue sales, wholesale distribution, cash and carry and retail stores. Whilst revenue was lower at £3.20m (2011: £4.03m) reflecting the transition to more 'owned' products and services, the operating profit was much improved at £508k (2011: £403k) reflecting improved gross margins. The Group's wholesale distribution business continued to perform well, but the highlight during the first half year has been the performance of the Sanderson online sales, ecommerce and catalogue business, winning four new customers, including Toni & Guy and Barrington Sports, and increasing sales order intake by over 25% compared with the comparative period of 2011.

The period end order book was strong at £1.27m (2011: £836k) and more than double the order book value of £562k at 30 September 2011.

Strategy

The Group strategy is to build upon and develop our position as a provider of modern software solutions which continue to provide customers with competitive advantage and cost efficiencies. This will enable Sanderson to achieve growth, build value and to improve shareholder returns. Whilst Sanderson will continue to invest across its businesses, particular emphasis and focus will be made in further developing the range and scope of solutions for online sales and ecommerce businesses as well as the development of mobile solutions across all of the Group's target markets. Selective acquisition opportunities will also be made to augment organic growth.

Balance sheet

As a result of the disposal of Sanderson RBS, the Group has a significantly strengthened balance sheet, which the Board feels is important in the current economic climate. Bank debt has been repaid in full and the Group's derivative financial instrument, accompanying the bank loan, has also been settled resulting in a net cash balance of £3.56m being reported at 31 March 2012. Notwithstanding the Group's strategy and the need to invest cash resources to achieve the Group's objectives, Sanderson will endeavour to accrue cash from on-going trading operations to ensure the continued strength of the balance sheet.

Dividend

The Board is committed to improve dividend levels and is pleased to declare an increased interim dividend of 0.5 pence per share (2011: 0.30 pence), to be paid on 17 August 2012, to shareholders on the register at the close of business at 20 July 2012. It is the Board's intention to propose a 0.7 pence (2011: 0.45 pence) final dividend, making a total payment for the financial year of 1.2 pence (2011: 0.75 pence).

Management and staff

The Group employs approximately 150 staff, most of whom have a high level of experience and expertise in the specialist markets which the Group addresses. I would like to thank everyone for their support, hard work, dedication and contribution to the development of the business over the period of recovery and business transition since 2009.

Outlook

Notwithstanding the uncertain economic outlook and continuing challenging market conditions, the Sanderson Board, which still adopts a cautious approach, has a good level of confidence that going into the second half of the financial year the strengthened balance sheet and improved market position of the Group, together with the large order book, will enable the Group to achieve its full year targets.

Christopher Winn

Chairman

15 May 2012

CONSOLIDATED INCOME STATEMENT

Following the disposal of Sanderson RBS Limited in January 2012 (note 4), the Consolidated Income Statement has been restated to separately identify the Group's continuing and discontinued operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six month period to 31 March 2012

For the six month period to 31 March 2011

For the year ended 30 September 2011

CONSOLIDATED STATEMENT OF CASH FLOWS

Following the disposal of Sanderson RBS Limited in January 2012 (note 4), the Consolidated Statement of Cash Flows has been restated to separately identify the Group's continuing and discontinued operations.

NOTES TO THE INTERIM RESULTS

1. Basis of preparation

The Group's interim results for the six month period ended 31 March 2012 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 2012. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS34 '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 14 May 2012.

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 2011, 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.

Revenue, operating profit and profit before tax shown above have been restated to report continuing operations only. The Group disposed of its subsidiary undertaking Sanderson RBS Limited on 20 January 2012 (see note 4). Allocation of centrally incurred costs has been restated to reflect current allocations to continuing operations. The discontinued operation contributed revenue in the period of £3.53m (half year to 31 March 2011; £6.10m, full year to 30 September 2011; £12.36m). The operating result of the discontinued operation for the period, stated after amortisation of acquisition related intangibles and shared based payment charges, was a loss of £0.4m (half year to 31 March 2011; profit of £0.1m, full year to 30 September 2011; profit of £0.4m).

3. Exceptional finance costs

Term debt advanced by the Group's banker, HSBC Bank plc, was repaid in full ahead of schedule in January 2012 following the disposal of subsidiary undertaking Sanderson RBS Limited (see note 4). An early repayment fee, together with unamortised arrangement fees relating to the loan, has been treated as exceptional finance costs in the period.

4. Discontinued operation

The Group disposed of its subsidiary undertaking Sanderson RBS Limited on 20 January 2012.

5. Earnings per share

6. Equity dividends paid

7. 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.