Sondrel Plc Regulatory News (SND)

26 Apr 2005 07:02

Sanderson Group PLC26 April 2005 FOR IMMEDIATE RELEASE 26 APRIL 2005 SANDERSON GROUP PLC Maiden Interim Results and Board Appointment 'Sanderson continues to deliver growth' Sanderson Group plc ('Sanderson' or 'the Group), the software and IT servicesbusiness specialising in commercial markets in the UK and Ireland, announcesinterim results for the period ended 31 March 2005. The Group provides softwareand IT services to businesses with annual turnovers typically between £5millionand £250million. Key Points • Pro forma* turnover up 7% to £7.897million (2004:£7.395million) • Pro forma* adjusted operating profit up 11% to £1.291 million (2004: £1.166million) • Pro forma* adjusted profit before tax up 11% to £1.236million (2004: £1.111million) • Cash Generation was strong with net cash flow from operating activities since flotation at 96% of operating profit • Statutory turnover for the period was £7.897million and loss before tax was £1.001million. • Maiden Interim Dividend of 1.1 pence per Ordinary 10p Share Commenting on the results, Christopher Winn, Chairman, said:"The Group continues to achieve above average organic growth in its markets,with strong profitability and cash flow underpinning the overall result. Overthe last six months, the Group has been successful in gaining a number of newclients as well as increasing the range of products and services which areprovided to existing clients. We are pleased to be able to announce a maiden interim dividend and we believethat the continued development of the business and the solid financialperformance to date, provide a strong platform for future growth and enhancementof shareholder value". * Pro forma information shows the results for the Group as if it had beentrading in its current form for the full six month period. Board Appointment • New Finance Director, Adrian Frost, appointed with effect from 3 May 2005 Enquiries: Christopher Winn, Executive Chairman Tel: 02476 555466David O'Byrne, Managing Director Tel: 01709 787787Sanderson Group plc Paul Vann/Victoria Stephens - Binns & Co PR Limited Tel: 020 7153 1482 CHAIRMAN'S STATEMENT Introduction We are pleased to report our first set of interim results since the admission ofthe Company's shares to the AIM market on 16 December 2004. Trading Results - Statutory The statutory results to 31 March 2005 (Page 5), represent the trading of theGroup from 1 October 2004 to 16 December 2004, when the Group was a privateequity backed business and then from 16 December 2004 to 31 March 2005 when thebusiness became a public company. The comparative results for 2003-2004 reflectthe trading of the Group from its formation on 23 December 2003 up until 31March 2004. The results for the 26 weeks to 31 March 2005 show turnover of £7.897million andoperating profit, before amortisation, exceptional items, and LTIP charges of£1.317million. Exceptional items in the period of £1.016million represent theexpenses and associated reorganisation costs incurred in relation to theadmission of Sanderson Group plc to AIM on 16 December 2004. Trading Results - Pro forma We have produced pro forma trading results for the six month period in order toprovide a more meaningful comparison of trading. The pro forma results showtrading as if the Group had been a public company for the full six month period.Comparative pro forma information is provided for the first six months of theprevious financial year. The pro forma financial information shows the Groupreporting an increase of 7% in turnover and 11% in operating profit comparedwith the six month period to 31 March 2004. Pro forma six Pro forma six months months ended 31 ended 31 March 2005 March 2004 (unaudited) (unaudited) £000 £000Turnover 7,897 7,395 Cost of sales (1,744) (1,466) ----------- -----------Gross profit 6,123 5,929 Administrative expenses (4,832) (4,763) ----------- -----------Adjusted operating profit* 1,291 1,166 Interest payable (55) (55) ----------- -----------Adjusted profit on ordinary activities before 1,236 1,111taxation* Taxation (370) (333) ----------- -----------Adjusted profit on ordinary activities after 866 778taxation* ----------- ----------- Adjusted earnings per share - basic 2.14p 1.92pAdjusted earnings per share - diluted 1.92p 1.72p * Before amortisation, exceptional items and LTIP charges. (Also see Notes 1,2, and 3) Balance Sheet The balance sheet at 31 March 2005 shows net assets of £16.2million. Operatingcash flows since Admission equated to 96% of operating profit, an encouragingfigure in what is a low quarter for annual licence collections. Bank debt at 31March 2005, net of cash balances, amounted to £1.1million. This compares to anet bank debt position of £2.0million when the Company's shares were admitted tothe AIM market on 16 December 2004. This strong balance sheet and low level of gearing leaves us well positioned topursue complementary and earnings enhancing acquisitions. Dividends The Board is keen to ensure that shareholders benefit from the tradingperformance of the Group with a progressive dividend policy. An interimdividend of 1.1 pence per ordinary share is being declared and this dividendwill be paid on 24 June 2005 to shareholders on the register at the close ofbusiness on 6 May 2005. Business Review The Group has built up a large client base over the last 22 years and has, overthe last decade, adopted a revenue model based upon retaining and developingclients by continuously offering new products (with associated technology) andservices which provide clients with a good return on investment (ROI).Historically, more than 50% of turnover arises from recurring licence, supportand maintenance contracts, with a further 40% of turnover being derived fromadditional products and services to existing clients. The balance of turnoveris derived from new customers. 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 specific requirementssuch as ingredient handling and call centre operations. Sanderson owns anddevelops the IPR to its software products and licences their use. During the six month period to 31 March 2005, software sales accounted for 76%of Group turnover, compared with 74% during the financial year ended 30September 2004. 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 six months to 31 March 2005, consultancy accounted for 24% of Groupturnover. The turnover split by activity is illustrated below: Markets Sanderson continues to benefit from the modest growth in IT spend within itstarget markets and independent research continues to forecast growth inexpenditure on enterprise applications of approximately 5% per annum for thenext three years. Sanderson targets the following market sectors: Manufacturing This sector includes the engineering, plastics, electronics, furniture, printingand automotive parts industries. A number of new contracts were won during the period including Butler & Tanner,Michelmersh Brick Holdings, and Promethean Technologies Group. Manufacturing accounted for 40% of Group turnover in the six month period to 31March 2005 and this compares with 38% in the same period last year. Food & Process Industries This sector includes customers in the food, cosmetics and pharmaceuticalindustries. New contracts were gained with Food Partners, Memory Lane Cakes,and Edward Billington. Food & Process Industries accounted for 20% of Group turnover in the six monthperiod to 31 March 2005, unchanged from the same period last year. Mail Order The mail order market comprises both Business-to-Business andBusiness-to-Consumer operations. New contracts were gained with Grattan, M&MSports, and Machine Mart. Mail order accounted for 22% of Group turnover in the six month period to 31March 2005 and this compared with 19% for the same period last year. Wholesale Distribution This sector includes customers involved in cash and carry, wines, cateringsupplies and frozen food businesses. New contracts were gained with FirstChoice, Management Wholesale and The Soft Drinks Company. Wholesale Distribution accounted for 18% of Group turnover in the six monthperiod to 31 March 2005, and this compares with 23% for the same period lastyear. Business Model The Group has a robust model reflecting the large client base which it has builtup over the last 22 years. During the period new customers accounted for 14% ofturnover compared with 5% for the same period last year: Strategy Our strategy is to continue to build on our leading market position as aspecialist provider of software and IT services by a combination of continuingorganic growth as well as pursuing selective acquisitions to enhance the size,profitability and earnings of the Group. A small number of acquisitionopportunities are currently being developed and progressed. Board Changes We are pleased to announce the appointment of Mr Adrian David Frost, aged 37, asFinance Director of Sanderson Group plc, with effect from 3 May 2005. DeborahWood is leaving the Group to spend more time with her young family and we wouldlike to thank her for her contribution as Finance Director of Sanderson Limited,the Group's main subsidiary, and latterly, as Group Finance Director. Adrian joined Sanderson in October 2000 and played a key role in both theformation of the Group as well as the Sanderson flotation in December 2004.Adrian is currently Finance Director of Talgentra Holdings Limited and itssubsidiaries, as well as being a director of Sanderson Support Limited. Pastdirectorships have included Sonarsend plc and its subsidiaries. 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 investment in improved sales and marketing capabilities is reflected in theincreased amount of new business and the strengthening sales prospect pipeline.The progress made in enhancing and expanding our product range will also help togenerate further sales, both from existing customers as well as competing to winnew customers. In addition, we continue to seek suitable acquisitions in orderto accelerate earnings growth and to enhance the value of the Group. We continue to develop our business model and are encouraged by the progress todate. The Board anticipates a satisfactory outcome for the full year. Christopher Winn Chairman 26 April 2005 CONSOLIDATED PROFIT & LOSS ACCOUNT for the period ended 31 March 2005 Notes 26 weeks to 14 weeks to 46 weeks to 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Turnover 7,897 3,845 11,880 Cost of sales (1,774) (681) (2,236) -------- -------- -------- Gross profit 6,123 3,164 9,644 Administration expenses (6,506) (2,709) (8,325) -------- -------- -------- Operating profit before 1,317 763 2,204amortisation, exceptionalitems and LTIP chargesLTIP charges 2 (102) - -Goodwill amortisation 3 (577) (308) (885)Exceptional items 4 (1,016) - - Operating (loss)/profit (378) 455 1,319 Interest on bank debt 5 (119) (92) (493)Non-recurring interest 5 (504) (416) (1,229)Interest payable (623) (508) (1,722)Interest receivable - - 75 -------- -------- -------- Loss on ordinary activities before taxation (1,001) (53) (328)Taxation (15) - (100) -------- -------- -------- Loss on ordinary activities (1,016) (53) (428)after taxation Dividends 6 (485) - - -------- -------- -------- Retained loss for the (1,501) (53) (428)financial period ======== ======== ======== Basic loss per share (pence) 7 (2.3p) (0.1p) (1.0p) Fully diluted loss per share 7 (2.3p) (0.1p) (1.0p)(pence) CONSOLIDATED BALANCE SHEET as at 31 March 2005 Notes 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Fixed assets Intangible assets 3 21,756 22,788 22,211Tangible assets 879 952 930 --------- -------- --------- 22,635 23,740 23,141 Current assetsStocks 103 103 103Debtors 8 3,850 3,053 4,145Cash at bank and in hand 526 1,516 1,784 --------- -------- --------- 4,479 4,672 6,032 Creditors: amounts falling 9 (8,710) (7,222) (9,523)due within one year --------- -------- ---------Net current liabilities (4,231) (2,550) (3,491) --------- -------- --------- Total assets less current 18,404 21,190 19,650liabilities Creditors: amounts falling 10 (1,010) (19,461) (18,331)due after more than oneyearProvisions for liabilities (1,208) (1,282) (1,247)and charges --------- -------- --------- Net assets 16,186 447 72 --------- -------- --------- Capital and reserves 16,186 447 72 --------- -------- --------- CONSOLIDATED CASH FLOW STATEMENT for the period ended 31 March 2005 26 weeks to 14 weeks to 46 weeks to 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Net cash inflow from operating 795 1,483 2,846activities Returns on investments and servicing (119) (92) (418)of financeTaxation - - -Capital expenditure (54) (77) (146)Acquisitions - 202 202 -------- -------- --------Net cash inflow before financing 622 1,516 2,484 Movement in loans (3,675) - (700)Issue of ordinary shares 5,795 - -Repayment of loan notes (4,000) - - -------- -------- --------(Decrease)/increase in cash and cash (1,258) 1,516 1,784equivalents in the period -------- -------- -------- Reconciliation of net cash inflowfrom operating activities Operating (loss)/profit (378) 456 1,319 Depreciation and amortisation 682 354 1,022LTIP charges 102 - -Increase in stocks - (8) (8)Decrease in debtors 173 2,156 669Increase in creditors 216 (1,475) (156) -------- -------- --------Net cash inflow from operating activities 795 1,483 2,846 -------- -------- -------- Reconciliation of movement innet debt 30.09.04 Cashflow Non-cash 31.03.05 changes £000 £000 £000 £000 Cash at bank 1,784 (1,258) - 526 Debt due within one year (1,000) 340 - (660)Debt due after more than one year (19,560) 7,335 11,215 (1,010) --------- --------- -------- --------- (18,776) 6,417 11,215 (1,144) --------- --------- --------- --------- NOTES TO THE ACCOUNTS 1. The interim results for the periods ended 31 March 2005 and 31 March2004 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 2004 statutory accounts. The comparative figures forthe financial period ended 30 September 2004 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, 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 goodwill arose on the acquisition of Sanderson Group plc fromSonarsend plc, the previous parent company, on 23 December 2003. A number ofprovisional fair value adjustments have been made in arising at this number.These will be reassessed as at 30 September 2005. Goodwill is being written-offover twenty years. 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: Period to Period to Period to 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Unsecured loan note interest 329 416 1,229Write-off of facility fees 175 - - --------- --------- ---------Total non-recurring interest 504 416 1229Bank loan interest 119 92 493 --------- --------- ---------Total interest payable 623 508 1,722 --------- --------- --------- The unsecured loan notes were repaid following the Admission. 6. Dividends for the period ended 31 March 2005 total £485,000 andrepresent a proposed interim dividend of 1.1 pence per ordinary share. It isproposed that the interim dividend will be payable on 24 June 2005 to allshareholders on the register at the close of business on 6 May 2005. 7. Actual loss per share is calculated as follows: Period to Period to Period to 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Loss after taxation (1,016) (53) (428) --------- --------- --------- Weighted average number of shares inissueBasic 44,229,846 36,940,299 44,479,495Dilutive LTIP 990,045 - -Other dilutive option arrangements 1,751,728 - - ----------- ---------- ----------Diluted 46,971,619 36,940,299 44,479,495 ----------- ---------- ---------- 8. Analysis of debtors 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Trade debtors 3,279 2,491 3,695Accrued income and prepayments 571 562 450 --------- --------- --------- 3,850 3,053 4,145 --------- --------- --------- 9. Analysis of creditors due within one year 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Bank loans 660 700 1,000Trade creditors 990 485 484Corporation tax 115 - 100Other taxes and social security 752 598 686Other creditors 399 652 1,229Proposed dividend 485 - -Accruals and deferred income 5,309 4,787 6,024 --------- --------- --------- 8,710 7,222 9,523 --------- --------- --------- 10. Analysis of creditors due after more than one year 31.03.05 31.03.04 30.09.04 (unaudited) (unaudited) (audited) £000 £000 £000 Bank loans 1,010 5,300 4,170Unsecured loan notes - 14,161 14,161 --------- --------- --------- 1,010 19,461 18,331 --------- --------- --------- NOTES ON THE PRO FORMA (UNAUDITED) RESULTS 1. The pro forma results for the six months ended 31 March 2005 comprisethe actual results of the Sanderson Group for the period, on the basis ofcurrent accounting policies, before LTIP charges, goodwill amortisation andexceptional items, which are charged in the statutory results, and on the basisof plc costs having been incurred for the full six months, notional interestcalculated as if the current debt level of £1.67million had been in place forthe whole period and at an assumed tax rate of 30%. 2. The pro forma results for the six months ended 31 March 2004 comprisethe actual results of the Sanderson Group for the period, on the basis ofcurrent accounting policies before LTIP charges, goodwill amortisation andexceptional items, which are charged in the statutory results, and on the basisof notional plc costs, notional interest calculated as if the current debt levelof £1.67million had been in place for the whole period and at an assumed taxrate of 30%. 3. Adjusted earnings per share on a pro forma basis have also been includedas the Directors consider that this figure is helpful for a better understandingof the underlying business. It has been assumed that 40,438,482 (basic) and45,210,222 (diluted) ordinary shares were in issue during both pro formaperiods. INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO SANDERSON GROUP PLC Introduction We have been engaged by the Company to review the financial information set outbelow and we have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. The 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 theCompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company for our review work, orfor the conclusions we have reached. Director's responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4: Review of the interim financial information issued by the AuditingPractices Board for use in the United Kingdom. A review consists principally ofmaking enquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon assessingwhether the accounting policies and presentation have been consistently appliedunless otherwise disclosed. A review is substantially less in scope than anaudit performed in accordance with Auditing Standards and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion 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 twenty-sixweeks ended 31st March 2005. KPMG Audit Plc Chartered Accountants Leeds 26 April 2005 This information is provided by RNS The company news service from the London Stock Exchange