Earlier this month, B&M Bargains, one of the UK’s fastest growing retailers, signed a deal to buy all of the electronic point-of-sale technology for its 230 stores. The agreement marked the latest in a steady flow of similar contracts secured this year by AIM quoted software company Sanderson (LON:SND). For Sanderson’s core client base in retail and manufacturing, the economic downturn has not been kind, but for executive chairman Chris Winn, there are an increasing number of reasons to be cheerful.
Sanderson floated on the Alternative Investment Market in 2004, five years after being taken private in a deal led by private equity firm Alchemy Partners. It returned to the market with a focus on selling enterprise software to manufacturing and retail customers and supplying in-house developed systems that manage anything from quality control to back office, payroll, HR and tills. In recent months Sanderson’s share price has held firm, and indeed taken a turn for the better in recent days. Meanwhile, competitors including Maxima (LON:MXM) and Prologic (LON:PGC) have faired less well.
Two acquisitions in 2007, together worth £15.3 million, added nearly £9 million of revenue and £1.4 million of operating profit in 2008. However, net debt at that time was over £10 million – and it is on that point that investors have been wary of Sanderson in recent years. To its credit, and in spite of the dire state of its markets during the following three years, Sanderson is on course to have reduced the debt figure to its long-term target of £6.5 million by the end of this year. At the half-year, in May, the company’s revenues and adjusted operating profits were broadly flat at £13.1 million and £1.5 million respectively. For Winn, a gradual improvement in manufacturing confidence since the end of the recession and some very bright prospects in retail, mean the outlook is promising – and investors are beginning to warm to that sentiment.
Chris, Sanderson supplies software to manufacturers and retailers – parts of which were hit hard during the recession. What is your sense of how those sectors are performing now?
At the beginning of the recession manufacturing dropped 15% and then went on to have 18 months of constant growth but it is still not back to where…
A good summary. I have held Sanderson for some time, and went to the AGM a couple of years ago (in the midlands so as far as I can remember and I was the only non-board shareholder present). But the answers to my questions were answered openly. It seems a pretty straightforward IT application vendor and apart from the debt issued mentioned, which has been tackled, seemed undervalued.
