Placing and Admission to the Alternative Investment Market Nominated Adviser and Broker Arden Partners Limited THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or as to what action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent adviser who is authorised for the purposes of the Financial Services and Markets Act 2000 and who specialises in advising on the acquisition of shares and other securities. This document, which is an admission document required by the AIM Rules, does not constitute a prospectus pursuant to the POS Regulations but has been drawn up in accordance with the requirements of the POS Regulations as required by the AIM Rules. A copy of this document has been delivered to the London Stock Exchange as an admission document in respect of the Ordinary Shares. Application has been made for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and dealings will commence in the Ordinary Shares on 16 December 2004. AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the official list of the United Kingdom Listing Authority. A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. London Stock Exchange plc has not itself examined or approved the contents of this document. Sanderson Group plc (Incorporated and registered in England and Wales with registered no. 4968444 ) Placing of 27,721,000 Ordinary Shares at 50p per share and Admission to trading on AIM Nominated Adviser and Broker Arden Partners Limited Share Capital on Admission Authorised Issued and Fully Paid Amount Number Amount Number £5,350,000 53,500,000 Ordinary Shares of 10p each £4,043,848 40,438,482 All of the Ordinary Shares will upon Admission, rank pari passu in all respects and will rank in full for all dividends and other distributions declared, paid or made in respect of the Ordinary Shares after Admission. Arden Partners, which is regulated by the Financial Services Authority, is acting as nominated adviser and as broker exclusively for the Company in connection with the Placing, Employee Offer and Admission. Arden Partners is not acting for any other person and will not be responsible to any other person for providing the protections afforded to clients of Arden Partners, or for advising any other person in connection with the Placing or Employee Offer. The responsibilities of Arden Partners, as nominated adviser, are owed solely to the London Stock Exchange. The Directors of Sanderson, whose names appear on page 3 of this document, accept responsibility for the information contained in this document. To the best of the knowledge of the Directors the information contained in this document is in accordance with the facts and this document makes no omission likely to affect the import of such information. Your attention is drawn to Part 4 of this document, which sets out certain risk factors relating to any investment in Ordinary Shares. All statements regarding the Group’s business, financial position and prospects should be viewed in light of the risk factors set out in Part 4 of this document. The distribution of this document outside the UK may be restricted by law and therefore persons outside the UK into whose possession this document comes should inform themselves about and observe any restrictions as to the Placing, the Employee Offer, the Ordinary Shares or the distribution of this document. The Ordinary Shares have not been, nor will be, registered in the United States under the United States Securities Act of 1933, as amended, or under the securities laws of Canada, Australia or Japan and they may not be offered or sold directly or indirectly within the United States, Canada, Australia, or Japan or to, or for the account or benefit of, US persons or any national, citizen or resident of the United States, Canada, Australia or Japan. This document does not constitute an offer to sell or issue or the solicitation of an offer to buy or subscribe for Ordinary Shares in any jurisdiction in which such offer or solicitation is unlawful. CONTENTS Page DIRECTORS, SECRETARY AND ADVISERS 3 PLACING STATISTICS 4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS 4 PART 1 INFORMATION ON THE GROUP 5 PART 2 FINANCIAL INFORMATION ON THE GROUP 14 PART 3 PRO FORMA FINANCIAL INFORMATION 33 PART 4 RISK FACTORS 34 PART 5 ADDITIONAL INFORMATION 36 DEFINITIONS 63 2 DIRECTORS, SECRETARY AND ADVISERS Directors Christopher Winn (Executive Chairman) David Andrew O’Byrne (Managing Director) Deborah Mary Wood (Finance Director) David James Gutteridge (Non-Executive Director) John Clement MacKenzie Paterson (Non-Executive Director) Philip Edward Kelly (Non-Executive Director) Company Secretary Deborah Mary Wood Registered and Head Office Sanderson House Manor Road Coventry CV1 2GF Nominated Adviser and Broker Arden Partners Limited Arden House 17 Highfield Road Edgbaston Birmingham B15 3DU Solicitors to the Company DLA LLP Fountain Precinct Balm Green Sheffield S1 1RZ Auditors and Reporting Accountants KPMG LLP 1 The Embankment Neville Street Leeds LS1 4DW Solicitors to the Placing Pinsent Masons 3 Colmore Circus Birmingham B4 6BH Principal Bankers Barclays Bank PLC 3rd Floor 54 Lombard Street London EC3P 3AH Registrar Neville Registrars Limited Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA 3 PLACING STATISTICS Number of Sale Shares being placed on behalf of Selling Shareholders 16,000,000 Total number of New Ordinary Shares being placed on behalf of the Company 11,721,000 Total number of Ordinary Shares being placed 27,721,000 Issue Price 50p Number of Ordinary Shares in issue immediately following Admission 40,438,482 Percentage of the Enlarged Share Capital being placed 68.6 per cent. Market capitalisation at the Issue Price £20.2 million Gross proceeds of the Placing and Employee Offer receivable by the Company £6.0 million Estimated proceeds, after expenses, of the Placing and Employee Offer receivable by the Company £5.1 million EXPECTED TIMETABLE OF PRINCIPAL EVENTS Admission and commencement of dealings 16 December 2004 Delivery of Ordinary Shares into CREST accounts 16 December 2004 Despatch of definitive share certificates (where applicable) by 5 January 2005 Each of the times and dates above is subject to change. 4 PART 1 INFORMATION ON THE GROUP Overview Sanderson is a well established and profitable software and IT services business specialising in commercial markets in the UK and Ireland. The Group provides software and IT services to enterprises with turnovers between £5m and £250m. This is a substantial market and the Directors believe that Sanderson maintains a strong market position due to the quality of its products and services and its successful track record. Sanderson is well positioned to take advantage of the growth in IT spend within its target markets which independent research indicates is being stimulated by demand for improved productivity. This research forecasts growth in expenditure on enterprise applications of approximately 5 per cent. per annum for the next three years. The Group has a strong revenue model, with more than 50 per cent. of turnover arising from recurring licence, support and maintenance contracts. A further 40 per cent. of turnover is derived from the existing customer base, with the balance represented by revenue from new customers. The Directors believe that the Group’s industry knowledge, proven revenue model, track record and acquisition experience provide a good position from which to acquire complementary businesses to strengthen its position as a leading supplier of software and IT services in its chosen markets. The Sanderson business was founded in 1983 and grew organically and by acquisition to over £119m turnover. In December 2003 the Former Sanderson Group was demerged into three separate, independent entities, with the Company retaining the Sanderson name and brand. The Directors believe that the Sanderson name is widely recognised as an established provider of software and IT services. The Business The Group provides software products and consultancy services. Software products The Group’s packaged software products are designed to meet all the operational needs of a broad range of businesses. Products cover functions common to all customers from sales and marketing through finance, human resources, purchasing, production, supply and distribution whilst also addressing specific requirements such as ingredient handling and call centre operations. As a result of the comprehensive design of its products and the typical size of its customers, the Group is usually the principal business software supplier to its customers. Where required, the Group also supplies technology products to support its software. Sanderson continuously works with its customers to develop products and services to meet either their specific requirements or to reflect functional or technological advances. Wherever possible Sanderson seeks to ensure that these developments can be introduced within existing platforms and environments, thereby safeguarding customers’ existing IT investment. This is a key benefit for both new and existing customers and helps to maintain customer loyalty. Sanderson has many customers who have used the Group’s software products for over ten years. All development is carried out in the UK by Sanderson employees. In the year ended 30 September 2004, Sanderson spent approximately £1.5 million on product development, and customers contributed to this through annual license fees and funding of specific projects. The Group’s strategic product is UNITY, a software suite released in 2003.