A transformed balance sheet and a solidly growing order book meant a hefty profit hike at IT solutions group
That cash reflects the £11.75m in proceeds from the sale of its Sanderson RBS unit in January and chairman Christopher Winn says the funds will be used for product development and, perhaps, acquisitions. "We also want to see the [dividend] yield go beyond 3 per cent in the next two to three years," explains Mr Winn.
Operationally, meanwhile, a focus on higher-margin proprietary software helped Sanderson to boost its gross margin from 82.3 per cent to 83.6 per cent. Moreover, the order book grew 40 per cent to £1.89m and more profitable recurring revenue now generates 57 per cent of group sales - up from 55 per cent a year earlier. "Nearly all operating profit is converted into cash and we expect to generate between £2m and £2.1m in profits next year," says finance director, Adrian Frost.
Brokerlink expects pre-tax profit of £2.1m for 2013, giving EPS of 4.1p (from £1.5m and 3p for 2012).
|SANDERSON GROUP (SND)|
|ORD PRICE:||46p||MARKET VALUE:||£20m|
|TOUCH:||45-47p||12-MONTH HIGH:||49.5p||LOW: 25p|
|DIVIDEND YIELD:||1.6%||PE RATIO:||15|
|NET ASSET VALUE:||46p*||NET CASH:||£4.1m|
The shares trade in line with net assets and, strip out the 9p a share of cash, and they are rated on nine times expected earnings. With brokers expecting decent earnings growth, that's too cheap and we reiterate Simon Thompson's October buy recommendation at 40p. Buy.
Last IC view: Buy, 40p, 15 Oct 2012