FY13 results show that steady-state Sanderson continues to progress its growth plan despite on-going changes within its target markets that are altering the flow and mix of the business.
There is continued growth within multi-channel retail (£7.23m revenue in 2013 vs. £7.17m) but there is diversity within the unit too, with ecommerce growing strongly while mail order fulfilment is declining. The company prepared for the shift with investment in the ecommerce business (see here), which pegged the unit’s operating profit at 6%. The new customer count for the year was down to 5 (vs. 9), which could be a worrying sign but some of the contracts are larger, including a £250,000 deal signed at the start of the year. Although ecommerce sales are going well there is more work to be done to really push this part of the business forward.
General manufacturing had a tougher year than FY12 but within this unit food and drink processing fared well and is now 49% of the manufacturing business revenue stream (vs. 44%). The number of new customers was up yoy ( 9 vs. 6) which is all to the good.
As a result of these shifts and variances, total revenue for the year to September 30 2013, was up a modest 3% to £13.8m but the operating margin jumped from 83.6% to 87.6% due to more sales of Sanderson’s own IP with its higher margins, with the operating profit coming in at £2.2m (vs. 2.04m).
The multi-channel retail business has emerged as the bigger part of the business which means H2 now contributes a larger proportion of annual operating profit. The growing number of food and drink sector customers also drives heightened business activity in H2, again pushing profits into this period. This could make H114 comparatives look challenged and puts a lot of pressure on the H2 period but high levels of pre-contracted and recurring revenues, which are the cornerstone of Sanderson’s forward visibility, are still at reassuring levels.