Interim Results For the six months ended 31 March 2016 Christopher Winn - Chairman | I an Newcombe - Chief Executive | Adrian Frost - Finance Director
Contents • Interim results for the six months to 31 March 2016 (slides 3-10) • Business review (slides 11-23) • Sanderson background and investors (slides 24-31) Sanderson Group plc is a software and IT services business specialising in digital technology and enterprise software for businesses operating in the retail, manufacturing, wholesale distribution and logistics sectors 2 Interim results for the six months ended 31 March 2016
Half year to 31 March 2016 Revenue Gross Margin Order Intake Operating Profit Adj eps Interim Dividend Now 8% 22% 7% 5% 11% 86.2% • Continued organic growth • High gross margin reflecting Sanderson Intellectual Property (IP) • Orders from new customers excellent, resulting in large order book • A strong second half in prospect Profit figures are stated before charges for amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related & restructuring costs. 3 Interim results for the six months ended 31 March 2016
Half year to 31 March 2016 Consolidated Income Statement 2016 2015 £000 £000 Revenue 9,860 9,090 • Investment in human capital Gross profit 8,501 7,702 (generates IP & recurring Gross margin 86.2% 84.7% revenue) Technical costs (4,176) (3,885) • Sales & marketing costs (1,271) (1,037) Profit now larger than pre EPoS Admin & establishment costs (1,580) (1,406) disposal in 2012 Operating profit 1,474 1,374 Amortisation & share-based payments (300) (281) Acquisition & restructuring costs – (87) Net finance costs (145) (101) Pre-tax profit 1,029 905 Taxation (91) (71) Retained profit 938 834 Adjusted eps 2.3p 2.2p Operating profit figures are stated before charges for amortisation of acquisition-related intangibles, share-based payment charges and acquisition-related & restructuring costs. Diluted adjusted eps 2.2p 2.2p 4 Interim results for the six months ended 31 March 2016
Cashflow analysis Summary cashflow statement H1 2016 H1 2015 £000 £000 Cash from operations 1,633 749 Acquisition consideration 0 (948) Deferred consideration (1,538) (845) Dividends (657) (544) Pension scheme funding (180) (300) Development expenditure (403) (286) Other (76) (31) Movement in cash (1,221) (2,205) Closing cash balance 3,386 3,954 Cash per share (pence) 6.18 7.25 5 Interim results for the six months ended 31 March 2016
A strong balance sheet Consolidated Balance Sheet 2016 2015 • £000 £000 Good cash generation Intangible assets 30,502 30,573 • Tangible assets 528 359 Strong cash-backed balance Current assets excluding cash 5,824 5,384 sheet Current and deferred taxation 292 262 Cash 3,386 3,954 Trade and other payables (3,871) (3,431) Deferred consideration (361) (1,466) Deferred income (4,827) (4,853) Pension obligations (4,539) (4,600) 26,934 26,182 Cash 4 Share capital and premium 14,528 14,470 Other reserves (88) 54 3 Retained earnings 12,494 11,658 26,934 26,182 £m 2 1 0 Cash represents c. 6.2p per share 6 Interim results for the six months ended 31 March 2016
Balance sheet analysis Intangible Analysis - Goodwill Product IP Customer Acquisition Related Totals List (Book value, £000) Sanderson 20,951 0 0 20,951 Elucid 722 0 0 722 TSM 40 31 26 97 Priam 310 107 115 532 One iota 2,608 1,283 741 4,632 Proteus 1,085 530 150 1,765 Evogenic 188 158 40 386 At 31/03/2016 25,904 2,109 1,072 29,085 6 months 12 months 12 months to Mar to Sep to Sep 2016 2015 2014 R&D Spend £000 £000 £000 Total investment 1,457 2,644 2,341 Expensed (1,054) (1,820) (1,661) Capitalised 403 824 680 Amortisation 270 499 243 7 Interim results for the six months ended 31 March 2016
Sanderson IPR 8 Interim results for the six months ended 31 March 2016
Typical revenue breakdown 41% 5% 9 Interim results for the six months ended 31 March 2016
Good position going into the second half Revenue cover Order book value at period end 3500 Order Book To Do 3000 YTD £3.2m Recurring £10.4m £9.9m £5m 2500 Gap 2000 £2.2m £000 1500 1000 500 0 Panmure Gordon & Co Research (£m) May 2016 Year to September 2016E 2017E Sales 20.3 21.4 PBT normalised 3.4 3.7 Dividend per share (p) 2.3 2.5 10 Interim results for the six months ended 31 March 2016
Focus on growth in core markets Enterprise Digital Retail Manufacturing Wholesale Distribution & Logistics Double digit growth for online Food & Drink: Wholesale: Foodservice improved 60% of food manufacturers planning ‘On the go’ products, convenience and care Mobile sales exceed 50% for 1 st time IMRG increased capex Food Manufacture home market boosting sales FWD Parcel deliveries break 1bn barrier Double digit growth for wholesalers Royal Mail 86% expecting revenue growth BDO adopting technology e.g. online sales & 1 in 4 shoppers intend to make contactless Consumer expenditure +13% 2015-20 IGD click & collect IGD payment in next year Mastercard Beacons to drive coupons, 80% on mobiles Driven by changing habits & tastes Logistics: Employs 1 in 12 ONS by 2020 Jupiter General Manufacturing: Driven by ecommerce 79% shoppers think retailers need to do UK industry in recession for 3 rd time in 8 75% expect increased capex in IT to drive more to attract shoppers BBC years ONS/BBC efficiency & productivity UK Logistics Just 29% of major retail bosses confident Some sectors showing growth - machinery, Confidence Index about next 6 months (60% 3 years) PWC fabrication, plastics, automotive ONS 11 Interim results for the six months ended 31 March 2016
Digital retail • 60+ customers • Comprehensive solutions for ecommerce, mobile commerce, retail • Cloud-based store solutions • Continued strong demand for mobile solutions • Connected retail joining online & in-store 1500 H1 2016 H1 2015 1000 2014 £000 £000 500 2015 Revenue 2,945 2,803 2016 0 Order Operating profit 328 487 Book Gross margin 83%, recurring gross margin £780k Order Book covers 39% of overheads 2 months of new revenue Optimum 2 months 12 Interim results for the six months ended 31 March 2016
Digital retail • Benefiting from retailer focus on digital technology & innovation to survive & drive growth • Digital store integrating on & off-line sales & improving the customer experience • Continued investment in sales, marketing & development • Increased annual investment of over £0.5 million 13 Interim results for the six months ended 31 March 2016
Case study: Size? • Retail chain offering designer branded training shoes, casual sportswear & accessories • Stores across the UK and in Europe • Wanted to embrace innovation & omni-channel retail technology as part of their fixtures & fittings • Fully connected digital retail experience – Flagship Carnaby Street Store – Video walls – highly engaging, entertaining, ‘wow factor’ – Promotions, product launches, touchscreen kiosks for purchasing • Increased footfall & ultimately sales 14 Interim results for the six months ended 31 March 2016
Case study: JoJo Maman Bebe • UK-based, maternity wear & baby clothing retailer – Founded 1993 as online brand by Laura Tenison MBE • Customer since 2010 – Then £20m business with 27 shops & 300 employees – Now £44m+, 70+ stores, over 700 employees • Sanderson multi-channel system supported growth – Back office, EPoS in stores, web, wholesale in UK & US – Single view of customer, managing stock & sales across operation – Numerous projects, most recently supporting retail expansion online in US 15 Interim results for the six months ended 31 March 2016
Enterprise: Manufacturing • 200+ customers • Modern, functionally rich solutions match customer needs & deliver excellent return on investment • Strong recurring revenue: 58% • Good reputation for quality products & service • Large customer base & long-term relationships 1500 H1 2016 H1 2015 1000 2014 £000 £000 500 2015 Revenue 3,252 3,135 2016 0 Order Operating profit 514 365 Book Gross margin 89%, recurring gross margin £1.16m Order Book covers 79% of overheads 5 months of new revenue Optimum 3 months 16 Interim results for the six months ended 31 March 2016
Enterprise: Manufacturing • Food & drink business performing very strongly • Demand for solutions to manage traceability of products, new product development and regulatory compliance • 4 new food & drink customers this year, value £1.12m (last year 3, value £216k) 17 Interim results for the six months ended 31 March 2016
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