Sanderson Electronics Plc, the Sheffield-based Pick-popper, is one of a small but happy band of computer-related companies that have given their shareholders no cause for concern since they went public on London’s Unlisted Securities Market – and the key to success has little to do with the core activity either: while Sanderson is king of the heap in listed Pick specialists, Sheffield neighbour Electronic Data Processing Plc is performing satisfactorily but had to issue a profit warning a few months back, while UCL Group Plc proved a disaster as a public company and collapsed into the arms of Ferrari Holdings Plc earlier this year. Nor has Sanderson chosen to tread a dull, steady course with no risks – on the contrary, not a few eyebrows were raised when it stepped forward to refinance Anaheim, California-based General Automation Inc, a former minimaker that has looked like a corporate basket case ever since its founder, Larry Goshorn, was deposed in a palace revolution a decade ago. Since then, General Automation has stumbled from near disaster to near disaster, getting unsteadily smaller year by year, seemed to revive when it abandoned all its original businesses to become a player in the Pick market, but after a couple of years of recovery, plunged into losses again. Sanderson now holds 35% of the General with an option to go to 51% and control, and with the combination of judgement and luck that have characterised Sanderson up to now, the company could in retrospect turn out to have bought the holding at the nadir of the US company’s fortunes. At all events, it is able to keep a closer eye on the General’s business than can the California headquarters, because 30% of General Automation’s $41.5m annual turnover comes from the UK, and another 30% from the rest of Europe, which suggests that if things go decidedly sour across the Atlantic, that end of the business could be amputated without unbearable pain. Coupled with the investment in the Australasian distributor of General Automation machines, Sanderson, although consolidating only UKP12m of turnover for the year to September, sits atop a group of associated companies that add another UKP38m or so of turnover; Sanderson and associated companies together emplor 600 people.
Recurring business
An important plus for Sanderson is that one sixth of its business is of a recurring nature – hardware maintenance contracts, software licence fees and support contracts. These accounted for UKP2.3m in the year to September – an increase of 82.7%, which is a significantly faster growth rate than that of the overall business, which increased 54%: such continuing revenue streams are what keep the wolf from the door when times get hard, which is one reason why so many companies are trying to expand in third party maintenance. The company has not finished with its strategy of expansion by acquisition and will continue an appropriate acquisition policy. In the meantime, the company is keeping shareholders warm this winter with a final dividend of 5.4 pence to make 7.5 pence for the year, an increase – in line with the growth in profits – of 70% on the notional 4.4 pence dividend last year.And that comes on top of a very comfortable rise in the share price since the company went public in May 1988 via a placing at 130 pence: the shares were up 10 at 298p in anticipation of the figures.
