News blog
Sanderson
- BY: Andrew Hore |
- POSTED: 05/12/2010 |
Investment in software and improving market conditions helped enterprise software supplier Sanderson to increase its revenues and profit in the year to September 2010.
Revenues rose 8% to £27m, while the underlying profit rose from£1.63m to £1.88m. The gross margin from recurring revenues covers two-thirds of overheads. If incremental revenue from existing customers is added on then all of the overhead costs are covered. This means that the gross profit from new customer revenues should fall through to profit.
There was a small increase in the revenues of the manufacturing sector, particularly food, but most of the growth was from retail customers.
The order book is worth around £3m, which is 58% higher than one year before. Sanderson has just launched a new product that will help customers’ to reduce the number of servers they need to use. A Software-as-a-Service product is due to be launched by the beginning of 2011.
At 28p a share, Sanderson is valued at £12.2m.
House broker Charles Stanley forecasts a profit of £2.5m this year. The shares are trading on six times prospective 2010-11 earnings.
Net debt has been cut from £9.96m to £7.84m but the interest charge remains high due to the company’s situation when it negotiated its present bank facility. Sanderson is confident that it can refinance its borrowings next year that would reduce the interest burden. That could enhance earnings by around £200,000 in a full year.
Charles Stanley believes that net debt will fall to £6.4m by next September. There are still more than £5m of tax losses.
Sanderson is aware that a lot of its shareholders bought the shares for income and it continues to rebuild the dividend. It is 50% higher at 0.6p a share.
Sanderson is interested in bolt-on software acquisitions but it is not keen to issue shares at the current level.
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