Sanderson cashes in

A transformed balance sheet and a solidly growing order book meant a hefty profit hike at IT solutions group Sanderson (SND) - its products help clients run their businesses more efficiently. Adjust for a much reduced finance charge, after repaying enough debt to leave it with a chunky net cash pile, and the full-year operating profit increased 11 per cent year on year to £1.91m.

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).

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