Sanderson

Sanderson, the resilient software and IT services concern with a high proportion of recurring sales, improved profits and pared debt in a positive half to March.

Chaired by respected sector mover and shaker Chris Winn, Sanderson achieved 3% sales growth to a record £13.3m in the half, with adjusted operating profits pushing 30% north to £1.4m. Generating a healthy £1.8m cash, Sanderson was able to strike a balance between reducing net debt to £9m (2009: £9.5m) and upping interim dividends to 0.25p (2009: 0.2p).

These improved financials were driven by new customer wins twinned with cost reductions. Despite sluggish economic conditions, Sanderson has seen improved business momentum since the late summer and reported 50% plus growth in its order book (from the year-end) to £3m.

In its multi-channel retail division, sales increased to £10.2m (2009: £10m), with 11 new customers gained including Hamleys, David Austin Roses and Aquascutum and the average value of new contracts increasing markedly. Over at the manufacturing arm, Sanderson's sales edged up from £3m to £3.1m as new business wins gathered encouraging momentum.

Commenting on the outlook, Winn said 'our competitive position has improved in the marketplace’, highlighting the benefits of new product introductions as well as rising investment in sales and marketing and adding that 'we deliver a pretty good service in terms of reliability’.

For the year to September, broker Charles Stanley sees pre-tax profits growing from £1.4m to £1.9m as turnover burgeons from £24.9m to £25.7m, although upgrades are a possibility given the improving new business pipeline. Based on forecast earnings of 4.13p and a 0.6p dividend, Sanderson shares sell for less than six times earnings, offer an attractive yield of 2.6% and represent an intelligent recovery bet. Buy.