Monday, 8 December 2008

Sanderson cuts dividend to conserve cash

(By Richard Holway and Anthony Miller) Retail and manufacturing software and services firm Sanderson Group has announced its full year results to 30th Sept 08 with revenues up 52% at £27.6m ands an adjusted PBT of £3m. This was greatly boosted by the acquisition of RBS and were pretty much in line with the lowered expectations signalled in October’s profit warning.

Recurring revenues is now around half of total revenues – a good insulator in these uncertain times. Also Sanderson’s cash generation was good. This resulted in a £1m reduction in net debt to £10.7m and an estimated £8.6m a year hence.

But cash conservation is rightly paramount. So Sanderson is to reduce/halve (but fortunately not cancel as with other firms) the dividend. For the full year that now will amount to 1.4p. But, put that into perspective, it’s still a 7.2% yield!

Chairman Chris Winn reported that current trading is in line with expectations, with five new clients added in the quarter.

You can find a brief history of Sanderson in our June posting here, and many of the reasons we rather like the company still hold. The ‘problem’ at Sanderson is its size - neither its £21m revenue retail business nor its £6m manufacturing business anywhere near scale. Although net debt is down £1m but still stands at £10.6m, which in today’s climate makes further acquisitions most unlikely, especially considering its now sub-£10m market cap.

We still think Sanderson’s future lies in the arms of a potential suitor

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