Provider of software and IT services to the multi-channel retail and manufacturing markets in UK & Ireland, Sanderson, has released results for the six months to 31st March confirming the guidance given in its April trading update (see Sanderson’s outlook gives confidence for FY). During a period in which both its key vertical businesses continued to operate against the backdrop of a “slow pace of recovery in the UK economy”, Sanderson kept the business on an even keel with revenues (at £13.1 million, compared to £13.3 million) and operating profit (at £0.7 million, compared to £0.8 million) largely unchanged. Gross margins improved by 3.5% as Sanderson delivered more of its proprietary software and other owned services for customers.
Importantly, the Group continued to be cash generative (cash generated from operations was £1.7 million compared to £1.8 million in H110). As a result, net debt reduced yet again. Since it peaked at £12.5 million in March 2008, the net debt has reduced by over 40% (and the Board “anticipates further significant reductions in future periods”).
The outlook from Sanderson is pretty positive, particularly for H2. The order book at the period end was up from £3.1 million to £3.3 million, and the Group expects to deliver much of the work in the second half of the year. It looks like the Manufacturing division has had a particularly good period for winning business, with its order book standing 88% higher (at £860K) than at the end of March last year. Though of course, that indicates that the multi-channel retail business order book has gone backwards; although it won the same number of customers (11) as in H110, the average order size has gone down from £156K to £111K.
Longer-term, the increasing level of recurring revenues (54% of the total compared to 51% in 2010), partly as a result of its new SaaS solutions, means the Group will be increasingly resilient to economic pressures.