For Immediate Release                                                                                               28 November 2011

SANDERSON GROUP PLC

Preliminary Results for the year ended 30 September 2011

Improving performance as trading momentum continues

Sanderson Group plc ("Sanderson" or "the Group"), the software and IT services business specialising in the multi-channel retail and manufacturing markets in the UK and Ireland, announces Preliminary Results for the financial year ended 30 September 2011.

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

"Sanderson has continued to trade well with a good level of momentum across its multi-channel retail and manufacturing businesses.  Whilst the Group's trading has continued to be impacted by the slow pace of recovery in the UK economy and more challenging trading conditions on the high street, the new products and services introduced over the last two years have driven the improvement in the Group's trading performance."

Highlights - Financial

§  Revenues of £26.42m (2010: £26.99m).

§  Operating profit of £2.09m (2010: £1.69m).

§  *Adjusted operating profit increased to £3.30m (2010: £3.09m).

§  Profit attributable to shareholders of £0.80m (2010: £0.27m).

§  Basic earnings per share of 1.9p (2010: 0.6p).

§  **Adjusted basic earnings per share of 5.5p (2010: 3.9p).

§  Cash generated from operations increased to £3.43m (2010: £3.37m).

§  Net debt at period-end further reduced to £6.72m (2010: £7.84m).

§  Proposed final dividend of 0.45p per share (2010: 0.35p) making a total dividend for the year of 0.75p per share (2010: 0.60p).

§  New and improved banking facilities successfully negotiated with HSBC in August.

*Before amortisation of acquisition-related intangibles and charge in respect of share-based payments.
** Before amortisation of acquisition-related intangibles, charge in respect of share-based payments and exceptional finance costs

Highlights - Operational

§  Further improvement in gross margins to 71.7% (2010: 69.0%).

§  Recurring revenues from annual software licences, support and managed service contracts rose to £13.70m (2010: £13.66m) representing 52% of total revenues (2010: 51%).

§  Total of 26 new customers gained across all product areas including Brown Thomas, B&M Retail, Twinings, Lewis's Home Retail and Gardners.

§  Innovation on new products and services - Retail Concept Suite following Green IT, Software as a Service and Cloud delivery models.

On current trading and prospects, Mr. Winn, added:

"The Group has made good progress since 2009 notwithstanding challenging conditions in its core markets.  The Sanderson business model, with strong cash flows and high levels of recurring revenue provides both good resilience in these challenging markets, as well as a solid foundation for future growth.  The Board remains cautious in its outlook and sensitive to conditions in the general economy, but the strong order book and improved competitive market position provide a reasonable level of confidence moving into the financial year ending 30 September 2012."

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, Charles Stanley Securities

(Nominated Advisor)                                                                  Telephone: 020 7149 6000

SANDERSON GROUP PLC

Preliminary Results for the year ended 30 September 2011

CHAIRMAN'S STATEMENT

Introduction

Sanderson has continued to trade well with a good level of momentum across its multi-channel retail and manufacturing businesses.  Whilst the Group's trading has continued to be impacted by the slow pace of recovery in the UK economy and more challenging trading conditions on the high street, the new products and services introduced over the last two years have driven the improvement in the Group's trading performance.

In August, the Group announced the refinancing of its term debt and working capital facilities with HSBC Bank plc having replaced the Royal Bank of Scotland ('RBS') as the Group's banker.  This was achieved ahead of schedule, provides the Group with an improved banking arrangement and achieves significant cost savings in the future when compared to the RBS facility.

Results

The Group has focused on selling and supplying higher margin solutions based upon its own software and services and this has resulted in an improved gross margin of 71.7% (2010: 69.0%).  The higher gross profit of £18.95 million (2010: £18.63 million) has more than offset the effect of a slight decline in revenues from £26.99 million in 2010 to £26.42 million in 2011.

Recurring revenues from annual software licences, support and managed service contracts increased to £13.70 million, representing 52% of total revenue (2010: £13.66 million, 51% of revenue). Operating profit, before the amortisation of acquisition-related intangibles and the charge in respect of share-based payments, increased by 7% to £3.30 million (2010: £3.09 million).  Profit attributable to shareholders increased to £0.80 million (2010: £0.27 million) and as a result basic earnings per share increased to 1.9p (2010: 0.6p).  Adjusted basic earnings per share, stated before the amortisation of acquisition-related intangibles, the charge in respect of share-based payments and exceptional finance costs increased to 5.5p (2010: 3.9p).

Cash generated from operations in the twelve months to 30 September 2011 improved to £3.43 million (2010: £3.37 million).  The Group remains strongly cash generative and net debt has fallen to £6.72 million at 30 September 2011 (2010: £7.84 million) from a peak of £12.46 million at 31 March 2008.  The Board anticipates further significant reductions in the levels of net debt in future periods.

Dividend

The Board is pleased with the continued improvement in the trading performance reported for the financial year and whilst continuing to focus on further reducing debt levels, it is seeking to return to a progressive dividend policy. Subject to approval at the Annual General Meeting of shareholders, expected to be held on 15 March 2012, a final dividend of 0.45p per ordinary share is proposed, making a total of 0.75p for the year, which represents a 25% increase compared with the total dividend of 0.60p paid in 2010.  The final dividend will be paid on 30 March 2012 to shareholders on the register at the close of business on 9 March 2012.

Business Review

Sanderson provides a wide range of software solutions to the multi-channel retail and manufacturing markets. These solutions comprise primarily the Group's own software often integrated with other market-leading products, which are installed, supported and serviced by Sanderson staff.  The efficient provision of cost effective solutions with an emphasis on quality, consistency and reliability, continues to ensure both a very high retention of customers, as well as acting as an excellent reference base for new customers.

The Group has continued to invest in its sales and marketing capability and has accelerated investment in the development of new products and services.  There has been increased focus on the account management and support provided to existing customers whilst more aggressively competing for and gaining new customers.  The new product and service suites of Business Assurance and Factory Automation introduced in the previous year have continued to gain traction in their respective markets.  The introduction of solutions based on the latest technologies in the areas of internet retailing and ecommerce have provided further business impetus.  The product portfolios were additionally enhanced by the launch of a number of energy saving products, collectively branded 'Green IT'.

Sanderson continues to focus on supplying customers with value for money solutions, frequently providing a compelling return on investment.  Enhancements to existing systems are targeted at providing customers with tangible benefits such as cost savings and business efficiencies.  The latest versions of the Group's software products incorporate features which address both regulatory and legislative compliance whether for the Payment Card Industry in retail or food standards and traceability in food manufacturing, as well as utilising latest technologies which enable increased Factory and Warehouse Automation.

Order intake has been resilient, despite some slowdown in activity in the high street retail sector towards the end of the financial year.   At 30 September 2011, the order book stood at £2.92 million (excluding support) compared to £3.03 million at 30 September 2010 and £1.92 million at 30 September 2009. 

Review of multi-channel retail

The Group provides end-to-end, comprehensive IT solutions to businesses operating in the areas of online sales, ecommerce, catalogue sales, wholesale distribution and high street retail outlets.  Revenues derived from multi-channel retail operations were £20.28 million compared with £21.17 million in 2010.  Reflecting a higher proportion of our own software and services, gross margins increased from 64.9% in 2010, to 68.4% in 2011.  

The multi-channel business, encompassing all operations of the division with the exception of high street retail, performed very strongly during the year.  The wholesale distribution and cash and carry market was particularly active during our fifteenth year of operating in this sector.  Activity levels in the online sales and ecommerce sector remain strong.

In terms of the high street retail business, the Group has invested in the Milton Keynes office from where managed services and support services are provided to our high street retail customers.  A new Retail Concept Suite has been developed which showcases and demonstrates latest store technologies aimed at assisting retailers to maximise customer spend.

Activity levels from the larger existing retail customers have continued to be strong, especially in the areas of fraud prevention and PCI ('Payment Card Industry') compliance.  The Group has also developed a new hospitality and catering module within its suite of retail software, which utilises the latest tablet PCs and wireless technology to enable customers to achieve savings and efficiencies in catering management.  Salford Royal NHS Foundation Trust has achieved significant savings and the Bradford Teaching Hospitals NHS Trust, Whipps Cross University Hospital NHS Trust and The Adelaide and Meath Hospital, Dublin, have now adopted the Sanderson system.

A total of 22 new customers were gained during the year (2010: 24) even though, being symptomatic of the well-reported high street slowdown, a number of large orders which were expected to be placed before the end of the financial year were deferred.  New customers included Brown Thomas, B&M Retail, Country Homes & Gardens, Twinings and Lewis's Home Retail.   In addition, large projects were awarded by a number of existing customers, including Wilkinson, The Original Factory Shop, Fenwick and Lakeland.

Review of manufacturing

The Group's manufacturing business covers the provision of modern, comprehensive IT solutions to manufacturing companies which operate primarily in the engineering, plastics, aerospace, electronics, print and food manufacturing sectors.  Revenues grew by 5% to £6.15 million (2010: £5.83 million) and the most marked recovery in activity was in the area of general manufacturing, especially printing and aerospace.

Four new customers were gained including Gardners, Albury Chickens and Dairy Best Victoria, compared with the same number in the previous year ended 30 September 2010.  Recurring revenues continue to be strong, accounting for 58% of total revenue (2010: 61%).  The gross margin from the recurring revenues stream covers 78% of divisional overheads (2010: 83%).

UK manufacturing has been a challenging sector to operate within, but the Sanderson business has a good management team and has continued to show resilience, achieving growth over the last two years.  The latest version of the Unity software, together with recent product and service initiatives have been well received by customers and the current order book is strong.

Strategy

The Group's strategy is to be the supplier of choice in its target markets by offering modern, functionally rich products, backed by a high quality service, thereby delivering cost effective solutions to customers and providing long-term growth in earnings and enhanced value to our investors.

Management and staff

The Group Operating Board and senior management team have continued to be instrumental in delivering an improved and improving business performance.  In total, the Group employs approximately 250 staff, who have a high level of experience in the specialist markets which the Group addresses.  The commitment of staff to the development of the Sanderson business is crucial and we would like to thank all of our staff for their support, commitment and contribution to the Group's progress.

Outlook

The Group has gained customers in all of its new product areas and the Warehouse and Factory Automation products have already accounted for nearly one million pounds' worth of additional new business since launch in 2010.  Going forward, we believe that the Group's Green IT, SaaS and Cloud solutions will drive further growth.

The Group has made good progress since 2009 notwithstanding challenging conditions in its core markets.  The Sanderson business model, with strong cash flows and high levels of recurring revenue provides both good resilience in these challenging markets, as well as a solid foundation for future growth.  The Board remains cautious in its outlook and sensitive to conditions in the general economy, but the strong order book and improved competitive market position provide a reasonable level of confidence moving into the financial year ending 30 September 2012.

Christopher Winn
Chairman

28 November 2011

Consolidated income statement

for the year ended 30 September 2011

Consolidated statement of comprehensive income

for the year ended 30 September 2011

Consolidated statement of financial position

at 30 September 2011

Consolidated statement of changes in equity

For the year ended 30 September 2011

Consolidated statement of cash flows

for the year ended 30 September 2011

Notes

1.     Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ('IFRS').  The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.  The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.

2.     Segmental reporting
The Group is managed as two separate divisions, providing IT solutions and associated services to the manufacturing and multi-channel retail sectors.  Substantially all revenue is generated within the UK.  The information provided to the chief operating decision maker is analysed between the divisions as follows:

* of acquisition related intangibles

2.      Segmental reporting (continued)

The Group's assets are held in the United Kingdom. No one customer accounts for more than 10% of the sales of either division. Included within other unallocated assets and liabilities are bank overdrafts totalling £0.522m (2010: £1.408m) in respect of certain shared operations.  Bank balances in respect of shared operations cannot be allocated between operating divisions.

3.     Finance income

4.     Finance expenses

In addition to the amounts disclosed above, the Group incurred an exceptional finance expense in 2011 amounting to£379,000 (2010: £nil). The expense represents costs incurred in the early repayment of the previous banking facility advanced by the Royal Bank of Scotland, together with the write off of the unamortised portion of arrangement fees in respect of this facility.

5.     Taxation

5.     Taxation (continued)

Reconciliation of effective tax rate

The current consolidated tax credit for the period is lower (2010: charge greater) than the average standard rate of corporation tax in the UK during the period of 27%.  The differences are explained below.

6.     Dividends

7.     Earnings per share

Basic and diluted earnings per share are calculated by dividing the result after tax for the year by the weighted average number of ordinary shares at the end of the year and the diluted weighted average number of ordinary shares at the end of the year respectively.  In order to better demonstrate the performance of the Group, an adjusted earnings per share calculation has been presented below which adds back items typically adjusted for by users of the accounts.  The calculations for earnings and the number of shares relevant to all of the measures of earnings per share described in the foregoing are set out below.

The calculation of the basic and diluted earnings per share is based on the following data:

8.     Annual Report & Accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The Consolidated Income Statement, Consolidated Statement of Financial Position, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows, together with associated notes, have been extracted from the Group's 2011 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under section 498(2) or (3) of the Companies Act 2006.

The accounts for the year ended 30 September 2011 will be laid before the Company at the Annual General Meeting, expected to be held at the Company's registered office on 15 March 2012. A copy of this preliminary statement will be available to download on the Group's website www.sanderson.com. Copies of the Annual Report and Accounts will be posted to shareholders in due course at which time the Annual Report and Accounts will be made available to download on the Group's website www.sanderson.com in accordance with AIM Rule 26, and will be delivered to the Registrar of Companies in due course.