Sanderson looks to reduce debt as profits dip

SANDERSON GROUP, the Sheffield-based IT company, said today a strong performance from its manufacturing business had helped it boost turnover by 50%.

Announcing its preliminary results for the year ended September 30, the software and IT service specialist said turnover had risen by 50% to £27.55m while adjusted operating profit had grown by 17% to £4.07m.

The group said that pre-tax profits had dropped to £0.9m compared to £1.94m in 2007. 

Sanderson said the drop was due to an increased amortisation charge in respect of acquisition related net finance expenses to fund the previous year’s acquisitions.

However the group said that despite the profits fall the contribution during the year from the acquired businesses “more than” covered the associated costs.

The group serves mid-sized companies in sectors such as manufacturing, food and process, mail order and wholesale distribution.

Sanderson generates approximately 50% of revenue from annual software licences and support. The group said that it was continuing to benefit from this recurring revenue and was seeking further opportunities to generate cash.

Overall the group said that cash generated from operations was up 66% to £4.86m and it has reduced its bet debt over the period to £1.04m

Net debt has been reduced to £10.66m compared to £11.70m – with £500,000 of deferred consideration having been paid during the year.

Chairman Christopher Winn said: “These results reflect a full year contribution from the multi-channel retail businesses acquired in the previous financial year, together with a strong trading performance from the manufacturing business.”

Mr Winn said that the group had undergone a review of its operating structure which will result in a” considerable reduction in the rate of tax paid by the group for at least the next three years”.

He added that the new operating structure, together with the continued strong cash generation delivered by the business, should enable the group to considerably reduce its debt levels.

Going forward Mr Winn said that the group had a resilient business model which would see it through the current economic downturn.

He said that the group’s trading performance in the first quarter of the new financial year is currently in line with both management’s expectations.

He added: “Sanderson is experiencing continued growth in sales of online trading solutions and the existing customer base should provide opportunities to significantly increase cross-selling of its products and services.

“Notwithstanding the current challenging economic climate and market conditions in the retail sector, trading in the current financial year is in line with management’s expectations and five new customers have been acquired in the first quarter.”

The group proposed a final dividend per share of 0.2p making the total dividend for the year 1.4p