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Sanderson

Companies: SND ��
12/12/2006

Investors looking for sustainable income at a reasonable price should look no further than Sanderson, the UK and Ireland-focused software and IT services group guided by Chris Winn.

Final figures to September demonstrated steady, if unspectacular, growth, in spite of flagging levels of discretionary spend from manufacturing clients. On turnover up a modest 4.5% to �16.2m, Winn announced a 7.6% increase in ‘normalised’ operating profits to �3.1m and a pre-tax profit of �1.9m (�562,000).

Encouragingly, the dividend was raised 4% to 2.6p, which means the shares offer investors a very appealing 5.3% yield.

And despite the rather flat top line performance, gross profits rose 10% to �13.5m, giving improved gross margins of 84% (80%), with gains reflecting an increase in the supply of owned IP to clients. Recurring revenues grew from 53% to 55% and 25 new clients were added (17 last time).

Though manufacturing, with the exception of food, proved lacklustre, February acquisition SRS boosted Sanderson's presence in the multi-channel retail market, where competition is forcing companies to drive efficiencies through IT investment. New wins here included Help the Aged and Homeserve and the sector will be a strong area of focus this year.

SRS also made a decent profit contribution and Winn is working on a number of other acquisitions this year. He says lowly geared Sanderson can move swiftly on such deals. Buy/Hold.

James Crux

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