REG - Sanderson Design Grp - Interim Results
11/10/2023 07:15
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RNS Number : 7052P Sanderson Design Group PLC 11 October 2023
11 October 2023
SANDERSON DESIGN GROUP PLC
("Sanderson Design Group", the "Company" or the "Group")
Interim Results for the six months ended 31 July 2023
Strong first-half licensing performance drives profit growth
Full year trading remains in line with Board expectations
Sanderson Design Group PLC (AIM: SDG), the luxury interior design and
furnishings group, announces its unaudited financial results for the six
months ended 31 July 2023.
Financial
highlights
Six months % Change Year ended 31 January
ended 31 July (reported)
2023 2022 2023
(H1 FY24) (H1 FY23) (FY23)
Revenue £56.7m £57.9m (2.1%) £112.0m
Adjusted underlying profit before tax* £6.8m £6.3m 7.9% £12.6m
Adjusted underlying basic EPS* 7.39p 6.90p 7.1% 14.18p
Statutory profit before tax £6.2m £5.5m 12.7% £10.9m
Statutory profit after tax £4.7m £4.2m 11.9% £8.8m
Basic EPS 6.58p 5.89p 11.7% 12.42p
Net cash** £15.9m £15.0m 6.0% £15.4m
Dividend per share 0.75p 0.75p - 3.50p
*excluding share-based incentives, defined benefit pension charge and
non-underlying items as summarised in note 5
** Net cash is defined as cash and cash equivalents less borrowings. For the
purpose of this definition, borrowings do not include lease liabilities
· Revenue of £56.7m (H1 FY23: £57.9m), down 2.1% in reported currency
(down 3.0% in constant currency), reflects strong growth in North America
offset by a challenging market in the UK
· Outstanding performance from licensing with revenue up 81.6% at £6.9m
(H1 FY23: £3.8m) in reported currency
· Brand product sales down 4.5% in reported currency (down 5.8% in
constant currency) at £40.3m (H1 FY23: £42.2m), impacted by trading in the
UK, down 11.8%, which represents approximately half of brand product sales
o Strong performance from the strategic growth opportunity of
North America, with sales up 10.3% in reported currency (up 5.9% in constant
currency)
o Strong sales from the Zoffany and Morris & Co. brands in North
America, up 35% and 16% respectively in reported currency (up 30% and 12% in
constant currency)
· Following a strong comparator period when customers restocked
post-Covid, third party manufacturing returned closer to pre-Covid levels with
sales of £9.5m (H1 FY23: £11.9m; H1 FY20: £9.6m)
· Adjusted underlying profit before tax of £6.8m up 7.9% (H1 FY23:
£6.3m), reflecting the significant contribution from high margin licensing
activities and a continued focus on costs
· Strong balance sheet with net cash of £15.9m at 31 July 2023 (31 July
2022: £15.0m; 31 January 2023: £15.4m)
· Interim dividend of 0.75p per share (H1 FY23: 0.75p)
Operational highlights
· Major licensing agreements signed with NEXT, for Clarke & Clarke
homewares, and with J Sainsbury plc's Habitat brand with Morris & Co. and
Tu brand with Scion for a wide range of products
· Progress in delivery of the Group's US strategy, including relaunching
the New York showroom and the early renewal of the distribution agreement with
Kravet Inc. for Clarke & Clarke for a further five years
· Exciting product launches including Sophie Robinson x Harlequin and
Disney Home x Sanderson with sampling running at a high level
· Investment in manufacturing continuing to drive digital printing,
rising to 76% (H1 FY23: 73%) of total printing at Standfast and 22% (H1 FY23:
19%) of total printing at Anstey in the half year
Dianne Thompson, Sanderson Design Group's Chairman, said:
"We are focused on growth opportunities in the US, where we are currently
under indexed, on driving licensing income internationally and on mitigating
the softness in the UK market through cost saving measures. Our licensing
activities had an outstanding first half and continue to drive the Group's
profit growth in the current year. As we enter the key autumn selling period,
we are encouraged by the high level of sampling from recent product launches,
by our pipeline of licensing opportunities and by the strength of our balance
sheet. The Board's expectations for the full year remain unchanged."
Analyst meeting and webcast
A meeting for analysts and institutional investors will be held at 9.30 a.m.
today, 11 October 2023, at the offices of Buchanan, 107 Cheapside, London EC2V
6DN. For details, please contact Buchanan at SDG@buchanan.uk.com
(mailto:SDG@buchanan.uk.com) .
A live webcast of the meeting will be available via the following link:
https://stream.buchanan.uk.com/broadcast/650086f2f50a141a955e7341
(https://stream.buchanan.uk.com/broadcast/650086f2f50a141a955e7341)
A replay of the webcast will be made available following the meeting at the
Company's investor website, www.sandersondesign.group
(http://www.sandersondesign.group) .
For further information:
Sanderson Design Group PLC c/o Buchanan +44 (0) 20 7466 5000
Lisa Montague, Chief Executive Officer
Mike Woodcock, Chief Financial Officer
Investec Bank plc (Nominated Adviser and Joint Broker) +44 (0) 20 7597 5970
David Anderson / Alex Wright / Ben Farrow
Singer Capital Markets (Joint Broker) +44 (0) 20 7496 3000
Tom Salvesen / Jen Boorer / Alex Emslie
Buchanan +44 (0) 20 7466 5000
Mark Court / Sophie Wills / Toto Berger / Abigail Gilchrist
SDG@buchanan.uk.com (mailto:SDG@buchanan.uk.com)
Notes for editors:
About Sanderson Design Group
Sanderson Design Group PLC is a luxury interior furnishings company that
designs, manufactures and markets wallpapers, fabrics and paints. In addition,
the Company derives licensing income from the use of its designs on a wide
range of products such as bed and bath collections, rugs, blinds and
tableware.
Sanderson Design Group's brands include Zoffany, Sanderson, Morris & Co.,
Harlequin, Clarke & Clarke and Scion.
The Company has a strong UK manufacturing base comprising Anstey wallpaper
factory in Loughborough and Standfast & Barracks, a fabric printing
factory, in Lancaster. Both sites manufacture for the Company and for other
wallpaper and fabric brands.
Sanderson Design Group employs approximately 600 people, and its products are
sold worldwide. It has showrooms in London, New York, Chicago and Amsterdam.
Sanderson Design Group trades on the AIM market of the London Stock Exchange
under the ticker symbol SDG.
For further information please visit: www.sandersondesigngroup.com
(http://www.sandersondesigngroup.com) .
This announcement contains certain forward-looking statements that are based
on management's current expectations or beliefs as well as assumptions about
future events. These are subject to risk factors associated with, amongst
other things, the economic and business circumstances occurring from time to
time in the countries and sectors in which Sanderson Design Group operates. It
is believed that the expectations reflected in these statements are reasonable
but they may be affected by a wide range of variables which could cause actual
results, and Sanderson Design Group's plans and objectives, to differ
materially from those currently anticipated or implied in the forward-looking
statements. Investors should not place undue reliance on any such statements.
Nothing in this announcement should be construed as a profit forecast.
CHIEF EXECUTIVE OFFICER'S STRATEGY AND OPERATIONAL REVIEW
The financial results for the six months ended 31 July 2023 show solid growth
in profitability, further margin improvement and an increasing cash balance
amid challenging market conditions, particularly in the UK, which impacted
overall volumes. The positive profit performance in the half year has been
achieved through a strong performance from licensing, continued growth in
North America, careful cost control and other targeted management actions.
We have managed inflationary pressures in the first half, including pay rises
in line with the Real Living Wage. We remain confident that market softness in
the current half year will be offset by recent product launches and our
licensing pipeline, along with cost savings from the recently completed
rationalisation of our UK support function.
Group sales in the six-month period were down 2.1% in reported currency, down
3.0% in constant currency, at £56.7m (H1 FY23: £57.9m) reflecting in large
part the challenging consumer environment in the UK which represents about
half of brand product sales.
Our licensing segment delivered an outstanding half year with revenue up 81.6%
at £6.9m (H1 FY23: £3.8m), driven by accelerated income of £5.0m (H1 FY23:
£1.9m) from record licensing agreements signed in the first half. New licence
agreements, products from which usually take about a year to progress from
design to launch, are important building blocks for the future in terms of
cash generation and licensing's underlying performance.
Major licensing agreements signed in the first half included NEXT with the
Clarke & Clarke brand for a wide range of homewares. This five-year
agreement, which will see the first product launches in spring next year,
included accelerated income of £3.0m. The Company also signed a multi-year
agreement with J Sainsbury plc, in which the supermarket group's Habitat
homewares brand and Tu clothing brand will develop a wide range of licensed
products in collaboration with the Scion and Morris & Co. brands. These
agreements with NEXT and J Sainsbury highlight our strategic emphasis on
collaborating with larger companies, complemented by high quality niche
opportunities.
The underlying sales performance of licensing reflected good growth from our
core licence revenue along with a larger than expected contribution from
Morris & Co.'s agreement with Ruggable, the US specialist in washable
rugs.
We continue discussions in connection with other licence opportunities and
remain excited by the quality of our pipeline.
Our strategic growth segment of North America, which now represents about a
quarter of brand product sales, showed growth of 10.3% in reported currency,
5.9% in constant currency, at £10.7m (H1 FY23: £9.7m), driven by the Morris
& Co. and Zoffany brands along with a robust performance from Clarke &
Clarke. We remain excited by the opportunity in North America; progress in the
first half included relaunching our New York showroom, developing
relationships with designers and collaborative partners, and renewing our
distribution agreement with Kravet Inc. for Clarke & Clarke for a further
five years, starting in September 2023. Clarke & Clarke sales have grown
by approximately 25% since the initial agreement was signed in June 2019 and
we look forward to the continued success of this relationship.
The difficult consumer environment in the UK led to brand product sales in the
UK being down 11.8% at £19.5m. We are encouraged by recent product launches,
including Sophie Robinson's Harlequin collection and the Disney Home x
Sanderson collaboration. Sampling from both collections has been strong, with
a particularly high level of sampling from the Disney Home collection at the
time of last month's Focus trade show at Chelsea Harbour. However, we remain
focused on cost control and efficiency gains to drive margin improvements. We
recently completed a reorganisation of the UK support function, which is
expected to yield annualised savings of £0.6m and will benefit the second
half of this year and thereafter. This reorganisation aligns the business to
the lower volumes of the current consumer environment and mitigates the
significant inflationary pressures of the recent past.
Trading in our Northern Europe segment largely reflected the issues
experienced in the UK, with brand product sales down 7.3% in reported
currency, down 8.9% in constant currency, at £5.1m. Trading in the Rest of
the World was up 2.0% in reported currency, unchanged in constant currency, at
£5.0m, benefiting from contract sales to the hospitality market in the Middle
East.
The Group's net cash balances have increased during the half year to £15.9m
at 31 July 2023 (31 July 2023: £15.0m, 31 January 2023: £15.4m). The
strength of our balance sheet protects the business during the current
challenging macro-environment and enables us to invest in growth opportunities
and our ZeroBy30 pledge.
The second half last year included a significant investment in inventory,
which has since decreased as planned. Inventory at the half year end was
£26.2m, compared with £27.8m at 31 January 2023, and is expected to decrease
further in the remainder of the financial year.
Live Beautiful
Live Beautiful, which was launched in April 2021, is the Company's
Environmental, Social and Governance strategy and includes two major
commitments: for the Company to be net carbon ZeroBy30 and to be the employer
of choice in the interior design and furnishings industry.
Along with consultants, we are looking at Scope 3 emissions in detail for the
first time. We also expect to complete the previously announced installation
of solar panel on a replacement roof at our Standfast & Barracks factory
over the next 12 months.
OPERATIONAL REVIEW
The table below shows the Group's sales performance in the six months ended 31
July 2023 ('H1 FY24'), compared with H1 FY23.
Six months ended 31 July (£m) Change (%)
2023 2022 Reported Constant currency
Brand product
UK 19.5 22.1 (11.8%) (11.8%)
North America 10.7 9.7 10.3% 5.9%
Northern Europe 5.1 5.5 (7.3%) (8.9%)
Rest of the World 5.0 4.9 2.0% (0.0%)
Total Brand product revenue 40.3 42.2 (4.5%) (5.8%)
Manufacturing*
External 9.5 11.9 (20.2%) -
Internal 7.6 9.7 (21.6%) -
Total Manufacturing revenue 17.1 21.6 (20.8%) -
Licensing*
Total Licensing revenue 6.9 3.8 81.6% -
Intercompany eliminations* (7.6) (9.7) (21.6%) -
TOTAL REVENUE* 56.7 57.9 (2.1%) (3.0%)
*does not report in constant exchange rate
The Brands
The brands segment comprises the sales and licensing activities of Clarke
& Clarke, Harlequin, Morris & Co., Sanderson, Scion and Zoffany. It
also includes licensing income as well as global trading from the brands.
Clarke & Clarke
Clarke & Clarke is the Company's biggest selling brand. Its sales in the
half year were resilient at £11.6m, a decrease of 2% in reported currency, 4%
in constant currency, compared with the first half last year. As mentioned
earlier, the Company recently renewed its successful distribution agreement in
the US with Kravet Inc. for Clarke & Clarke for a further five years.
Clarke & Clarke has recently begun to attract licencing partners and in
February this year NEXT signed a master agreement to produce a very broad
range of Clarke & Clarke homeware, including bedding, towelling,
tableware, furniture and lighting. The launch of the first products from this
agreement, which attracted accelerated income of £3.0m, is expected in spring
2024.
Harlequin
Harlequin is a predominantly UK brand and its sales in the half year were
£7.2m, a decrease of 13% in reported currency, 14% in constant currency,
compared with the first half last year. The brand remains the biggest selling
wallpaper and fabric brand in John Lewis and we are beginning to gain traction
from our strategy to promote the brand, including the colour science
initiative. We are excited by the recent launch of the Sophie Robinson
collection, which has been well received. John Lewis has already been
developing licensed products from the collection including cushions which
launched recently.
Morris & Co.
Morris & Co. has grown rapidly during the past few years to become our
second biggest selling brand in terms of brand product sales, and it also
attracts substantial licensing income. Morris & Co.'s brand product sales
in the first half were broadly unchanged at £9.4m, a decrease of 1% in
reported currency and 2% in constant currency, compared with the first half
last year. The brand continues to perform well in the US, where initiatives
have included a special edit in a collaboration with McGee & Co, a
direct-to-consumer website created by the influential interiors company Studio
McGee. In terms of licensed product in the US, Ruggable's launch of Morris
& Co. rugs has quickly exceeded expectations.
Sanderson
The Sanderson brand was resilient in the first half, with sales of £6.9m, a
decrease of 4% in reported currency, 5% in constant currency, compared with
the first half last year. Its big product launch this year was Arboretum,
which was launched in the spring and has been well received. We are excited by
the potential of the Sanderson brand in the months ahead following the recent
launch of the Disney Home x Sanderson collection of vintage-inspired
wallpapers and fabrics, and also by a collection of trimmings from Salvesen
Graham, the British design duo. Calendar year 2024 promises to be an important
year for the brand, not least with the launch of the much-anticipated
collaboration with London-based Giles Deacon, the couture designer and
illustrator.
Scion
Scion is predominantly a licensing brand, and its licensing revenue makes a
strong contribution to the Group. Its products are also sold from a
direct-to-consumer website, scionliving.com. Sales in the half year were
£0.7m, a decrease of 30% in both reported currency and constant currency,
compared with the first half last year.
Zoffany
Zoffany returned to growth in the first half of the year as a result of our
work to restore the brand to its luxury roots, positioning it for high-end
bespoke projects. Recent collections, including Arcadian Thames, have sold
well, benefiting from the sourcing of niche, luxury fabrics from high end
mills. Zoffany sales in the first half were £4.4m, an increase of 5% in
reported currency, 2% in constant currency, compared with the first half last
year. Zoffany has performed particularly well in the US, where the Company has
been working directly with designers on major residential projects.
Manufacturing
Manufacturing is a core part of our value proposition as an integrated design
company that designs, scales and prints. The world-class capabilities of our
manufacturing operations include the use of multiple printing techniques with
the share of digital printing rising significantly and creating new
opportunities for innovation by combining digital and conventional techniques.
During the half year, third party manufacturing at £9.5m was down 20.2%
compared with the strong comparator last year, when customers restocked post
Covid. In addition, the general consumer slowdown has reduced the requirement
for repeat orders as customers have sufficient stock. Importantly, orders for
new collections have held up well and orderbooks have further improved during
the past few weeks. Going forward, the comparator for manufacturing in the
second half last year is less demanding as it does not include restocking post
Covid.
Digital printing at Anstey, our wallpaper factory, has grown rapidly since the
investment in a new digital printer last year. The percentage of digital
wallpaper printing, compared with traditional techniques, increased to 22% of
the factory's wallpaper printing during the first half (H1 FY23: 19%) and is
currently at about 25%.
Digital printing at Standfast represented 76% of the factory's fabric printing
during the first half (H1 FY23: 73%).
CURRENT TRADING AND OUTLOOK
We are focused on growth opportunities in the US, where we are currently under
indexed, on driving licensing income internationally and on mitigating the
softness in the UK market through cost saving measures. Our licensing
activities had an outstanding first half and continue to drive the Group's
profit growth in the current year. At the start of this month, the second year
of our Morris & Co. womenswear licensing renewal with NEXT was confirmed,
attracting accelerated income of £0.3 million.
As we enter the key autumn selling period, we are encouraged by the high level
of sampling from recent product launches, by our pipeline of licensing
opportunities and by the strength of our balance sheet. Therefore, the Board's
expectations for the full year remain unchanged.
CHIEF FINANCIAL OFFICER'S REVIEW
Key Financial Indicators
We measure and monitor key performance and financial indicators across the
Group. We set out below a summary of the Group's key financial indicators.
Six months ended 31 July
2023 2022
Revenue (£m) 56.7 57.9
Profit before tax (£m) 6.2 5.5
Profit before tax (%) 10.9% 9.5%
Basic earnings per share (pence) 6.58p 5.89p
Adjusted underlying profit before tax* (£m) 6.8 6.3
Adjusted underlying profit before tax* (%) 12.0% 10.9%
Adjusted underlying basic earnings per share* (pence) 7.39p 6.90p
Net cash (£m) 15.9 15.0
Inventory (£m) 26.2 26.7
Capital expenditure (£m) 1.5 1.5
*excluding share-based payment charge, defined benefit pension charge and
non-underlying items as summarised in note 5
Revenue
Group sales in the six-month period of £56.7m (comprising Brand product and
external Manufacturing sales along with licensing revenue) were down 2.1% in
reported currency compared with the same period last year (H1 FY23: £57.9m),
down 3.0% on a constant currency basis.
Six months ended 31 July
2023 2022 Change
Revenue £m £m %
Brands 40.3 42.2 (4.5%)
Licensing 6.9 3.8 81.6%
Total Brands 47.2 46.0 2.6%
Manufacturing - External 9.5 11.9 (20.2%)
Group 56.7 57.9 (2.1%)
Brand product
Brand product revenue in the first half was impacted by the challenging UK
market, which represents approximately 48% of total brand product revenue. The
targeted growth market of the US continued to perform well, with sales up
10.3% in reported currency. The Rest of the World market benefited from an
increasing number of contract sales to the hospitality market in the Middle
East.
Manufacturing
Third-party manufacturing at £9.5 million was down 20.2% compared with the
strong comparator last year (H1 FY23: £11.9m), when customers were restocking
post Covid, and reflects a return to more normalised trading conditions.
Repeat orders were down in the first half this year both from third-party and
Group brands, although orders for new collections have held up well.
Licensing
Licensing performed strongly in the first half with total licensing revenue up
81.6% at £6.9 million (H1 FY23: £3.8m), driven by accelerated income of
£5.0m (H1 FY23: £1.9m) from recently signed licence agreements. Major new
licensing deals were signed with NEXT and Sainsbury's in February and March
2023 respectively and a considerable number of licence renewals were also
agreed, underlining the strength of our licensing relationships. Sangetsu has
recently launched Morris Chronicles in Japan, a collection of Morris & Co.
fabrics, wallpapers and floor coverings, and, this autumn, the Company has
launched the Disney Home x Sanderson collection of vintage-inspired fabrics
and wallpapers.
Gross profit
Gross profit for the period was £38.5m, compared with £38.1m in H1 FY23,
whilst the gross profit margin at 67.9% represents an increase of 210 basis
points over H1 FY23, driven by increased licensing income.
Excluding the impact of licence income, which generates 100% gross profit,
margins remained flat at 63.4%. Manufacturing margins have been negatively
impacted by increased electricity costs, salary inflation and reduced volumes
in H1. However, Brand Product margins have improved year-on-year as the
benefits of our SKU reduction programme start to be realised.
Six months ended 31 July
2023 2022
Product Revenue (£m) 49.8 54.1
Gross profit (£m) 31.6 34.3
% 63.4% 63.4%
Licence Revenue (£m) 6.9 3.8
Gross profit (£m) 6.9 3.8
% 100% 100%
Total Revenue (£m) 56.7 57.9
Gross profit (£m) 38.5 38.1
% 67.9% 65.8%
As previously communicated, our 2-year fixed price gas supply contract expires
in October this year. Given the significant increases in wholesale prices
since October 2021, we estimate this will increase our costs by £0.9m per
annum.
Profit before tax
Profit before tax for the period was £6.2m, up from £5.5m for H1 FY23.
Six months ended 31 July (£m)
2023 2022
Revenue 56.7 57.9
Gross profit 38.5 38.1
Distribution and selling expenses (12.8) (12.7)
Administration expenses (22.1) (22.4)
Other operating income 2.4 2.3
Net finance income 0.2 0.1
Profit before tax 6.2 5.5
Distribution and selling expenses of £12.8m represented 22.6% of revenue in
the period compared with 21.9% in H1 FY23. The increase as a percentage of
revenue can largely be attributed to commission payments as our sales mix has
shifted towards those markets where we employ an agency model.
Conversely, administration expenses fell to £22.1m in the current period from
£22.4m for H1 FY23 despite general inflationary pressure including an average
7% salary increase (as we continue our commitment to be a Real Living Wage
Employer). The Company has recently streamlined its UK support function, which
is expected to yield annualised savings of £0.6 million whilst maintaining a
high level of customer focus. Marketing investment has also been re-focused
following investment in the Chelsea Flower Show in H1 FY23.
Other operating income of £2.4m (H1 FY23: £2.3m) comprises consideration
received from the sale of marketing materials (the cost of which are included
within distribution and selling expenses).
Adjusted underlying profit before tax
Adjusted underlying profit before tax was £6.8m, up from £6.3m in H1 FY23.
Six months ended 31 July (£m)
2023 2022
Profit before tax 6.2 5.5
Amortisation of acquired intangible assets 0.1 0.5
Restructuring and reorganisation costs 0.1 -
Underlying profit before tax 6.4 6.0
Share-based payment charge 0.2 -
Net defined benefit pension charge 0.2 0.3
Adjusted underlying profit before tax 6.8 6.3
Non-underlying items comprise:
- Amortisation of intangible assets: £0.1m (H1 FY23 £0.5m) in respect of the
acquisition of Clarke & Clarke in October 2016.
- Restructuring and re-organisation costs: £0.1m (H1 FY23: nil) relate to the
streamlining of the UK support function
Taxation
Tax for the period is charged on profit before tax based on the forecast
effective tax rate for the full year. The estimated effective tax rate (before
adjusting items) for the period was 23.7% (H1 FY23: 23.4%). The corporation
tax rate increased from 19% to 25% on 6 April 2023 giving a straddle rate of
24% for the full year.
Working capital
(all figures in £m) 31 July 2023 31 July 2022 31 January 2023
Inventories 26.2 26.7 27.8
Trade debtors 11.3 12.6 12.0
Trade creditors (10.0) (9.9) (10.4)
Inventories
Net inventory of £26.2m was lower than both H1 FY23 of £26.7m and year-end
FY23 of £27.8m. Within the Brands segment, the benefit of our SKU reduction
strategy continues to realise benefits with inventory £1.6m lower than at
year-end. Within the manufacturing division, lower sales volumes have meant
that planned reductions in raw material levels are taking longer to take
effect than for finished goods but is expected to start to be realised in H2.
Trade receivables
The Group continues to experience limited bad debts across our customer base.
However, in the current economic environment we maintain a strong focus on our
credit management procedures to improve controls and to mitigate potential
credit risk.
Capital expenditure
Capital expenditure in the period totalled £1.5m (H1 FY23: £1.5m). As
highlighted previously, the level of capital investment required in the coming
years is likely to be above historical levels as we look to boost our digital
printing capacity in both our factories whilst also investing in improved
systems to improve our customer service proposition. Our forward expenditure
programme is closely aligned to our Live Beautiful strategy with capital
maintenance projects only being approved if they can be proven to support us
on our journey to ZeroBy30.
Cash position and banking facilities
Cash at the half year was £15.9m compared with £15.4m at 31 January 2023 and
£15.0m at 31 July 2022.
The Group has banking facilities provided by Barclays Bank plc. The Group has
a £12.5m multi-currency revolving committed credit facility which is due for
renewal in October 2024, further details of which can be found in the Group's
Annual Report and Accounts 2023. The agreement also includes a £5m
uncommitted accordion facility option to further increase available credit
which provides substantial headroom for future growth. Our covenants under the
facility are EBITDA and interest cover measures. The Group is currently
renegotiating the renewal of this facility.
Defined benefit pension
The Group operates two defined benefit pension schemes in the UK both of which
are closed to new members and to future service accrual. In the six months
ended 31 July 2023, the Group made contributions of £1.4m (H1 FY22: £1.2m)
to these schemes. The schemes recorded a deficit of £1.2m at 31 July 2023 (H1
FY22: surplus of £2.6m; 31 January 2023: deficit of £2.4m).
Dividend
A final dividend of 2.75p in respect of the year ended 31 January 2023 was
paid on 11 August 2023 to the shareholders on the Company's register on 14
July 2023.
The Board is announcing a maintained interim dividend of 0.75p for the six
months ended 31 July 2023 (H1FY22: 0.75p), payable on 24 November 2023 to
shareholders on the register on 20 October 2023. The ex-dividend date is 19
October 2023. This dividend reflects the progress made by the business in the
first half and the strength of the Group's balance sheet whilst also
acknowledging the uncertainties in the current macro-economic and consumer
environment.
Unaudited Consolidated Income Statement
For the six months ended 31 July 2023
Note 6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
Revenue 2 56,689 57,922
Cost of sales (18,198) (19,788)
Gross profit 38,491 38,134
Net operating expenses:
Distribution and selling expenses (12,820) (12,652)
Administration expenses (22,079) (22,371)
Other operating income 3 2,363 2,272
Profit from operations 5,955 5,383
Finance income 345 166
Finance costs (148) (83)
Net finance income 197 83
Profit before tax 6,152 5,466
Tax expense 4 (1,453) (1,282)
Profit for the period attributable to owners of the parent 4,699 4,184
Earnings per share - Basic 5 6.58 5.89p
Earnings per share - Diluted 5 6.52 5.83p
Adjusted earnings per share - Basic 5 7.39 6.90p
Adjusted earnings per share - Diluted 5 7.33 6.82p
Unaudited Consolidated Statement of Comprehensive Income
For the six months ended 31 July 2023
6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
Profit for the period 4,699 4,184
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension schemes 121 (856)
Tax (credit)/charge relating to pension schemes (30) 214
Cash flow hedge (61) -
Total items that will not be reclassified to profit or loss 30 (642)
Items that may be reclassified subsequently to profit or loss
Currency translation losses (251) (84)
Other comprehensive expense for the period, net of tax (221) (726)
Total comprehensive income for the period attributable to the owners of the 4,478 3,458
parent
Unaudited Consolidated Balance Sheet
As at 31 July 2023
Note As at As at
31 July 31 January
2023 2023
£000 £000
Non-current assets
Intangible assets 26,299 26,448
Property, plant and equipment 12,814 12,619
Right-of-use assets 3,770 4,577
Minimum guaranteed licensing receivables 6,889 2,637
49,772 46,281
Current assets
Inventories 26,248 27,774
Trade and other receivables 15,718 16,327
Minimum guaranteed licensing receivables 1,488 1,433
Financial derivative instruments 51 112
Cash and cash equivalents 6 15,859 15,401
59,364 61,047
Total assets 109,136 107,328
Current liabilities
Trade and other payables (16,047) (16,286)
Lease liabilities (1,370) (1,701)
Provision for liabilities and charges (420) -
(17,837) (17,987)
Net current assets 41,527 43,060
Non-current liabilities
Lease liabilities (2,495) (3,421)
Deferred income tax liabilities (1,013) (1,121)
Retirement benefit obligation (1,175) (2,446)
Provision for liabilities and charges (717) (1,037)
(5,400) (8,025)
Total liabilities (23,237) (26,012)
Net assets 85,899 81,316
Equity
Share capital 715 715
Share premium account 18,682 18,682
Foreign currency translation reserve (618) (367)
Retained earnings 26,613 21,779
Other reserves 40,507 40,507
Total equity 85,899 81,316
Unaudited Consolidated Cash Flow Statement
For the six months ended 31 July 2023
Note 6 months to 31 July 2023 6 months to 31 July 2022*
£000 £000
Profit from operations 5,955 5,383
Intangible asset amortisation 368 846
Property, plant and equipment depreciation 1,164 1,233
Right-of-use asset depreciation 1,167 1,253
Share-based payment equity charge 181 28
Defined benefit pension charge 164 310
Employer contributions to pension schemes (1,355) (1,182)
Decrease/(increase) in inventories 1,526 (4,097)
Decrease in trade and other receivables 475 960
Increase in minimum guaranteed licensing receivables (4,042) (1,622)
Decrease in trade and other payables (1,829) (4,393)
Increase in provision for liabilities and charges 100 -
Tax paid (418) (133)
Net cash generated from/(used in) operating activities 3,456 (1,414)
Cash flows from investing activities
Finance income received 80 10
Purchase of intangible assets (219) (188)
Purchase of property, plant and equipment (1,404) (1,301)
Net cash used in investing activities (1,543) (1,479)
Cash flows from financing activities
Repayment of lease liabilities (1,281) (1,175)
Net cash used in financing activities (1,281) (1,175)
Net increase/(decrease) in cash and cash equivalents 632 (4,068)
Cash and cash equivalents at the beginning of period 15,401 19,050
Effect of exchange rate fluctuations on cash held (174) 36
Cash and cash equivalents at end of period 6 15,859 15,018
*the prior period comparatives have been restated to provide consistent
presentation with the Annual Report 2023. Depreciation for property, plant and
equipment and depreciation for right-of-use assets are disclosed separately
instead of a combined figure. Minimum guaranteed licensing receivables are
separated from trade and other receivables. Interest paid is split into lease
interest within repayment of lease liabilities and prepayment of facility fee
within trade and other receivables.
Unaudited Consolidated Statement of Changes in Equity
For the six months ended 31 July 2023
Attributable to owners of the parent company
Share capital Share premium account Retained earnings Other reserve* Foreign currency translation Total
reserve
£000 £000 £000 £000
equity
£000
£000
Balance at 1 February 2022 710 18,682 20,610 40,507 (796) 79,713
Profit for the period - - 4,184 - 4,184
Remeasurements of defined benefit pension schemes - (856) - - (856)
Deferred tax relating to pension schemes - - 214 - - 214
Currency translation differences - - - - (84) (84)
Total comprehensive expense - (642) - (84) (726)
Transactions with owners, recognised directly in equity:
Share-based payment equity charge - - 89 - - 89
Related tax movements on share based payment - - (109) - - (109)
Balance at 1 August 2022 710 18,682 24,132 40,507 (880) 83,151
Profit for the period - 4,641 - - 4,641
Other comprehensive income/(expense):
Remeasurements of defined benefit pension schemes - - (6,125) - - (6,125)
Deferred tax relating to pension scheme liability - - 1,531 - - 1,531
Cash flow hedge - - 112 - - 112
Currency translation differences - - - - 513 513
Total comprehensive income/(expense) - 18,682 (4,482) - 513 (3,969)
Transactions with owners, recognised directly in equity:
Dividends - - (2,484) - - (2,484)
Issuance of share capital for share-based payment vesting 5 - (5) - - -
Share-based payment equity charge - - 404 - - 404
Related tax movements on share- based payment - - 3 - - 3
Share-based payment vesting - - (430) - - (430)
Balance at 31 January 2023 715 18,682 21,779 40,507 (367) 81,316
*consists of capital reserve and merger reserve
Unaudited Consolidated Statement of Changes in Equity (cont'd)
For the six months ended 31 July 2023
Attributable to owners of the parent company
Share capital Share premium account Retained earnings Other reserve* Foreign currency translation Total
reserve
£000 £000 £000 £000
equity
£000
£000
Balance at 1 February 2023 715 18,682 21,779 40,507 (367) 81,316
Profit for the period - - 4,699 - - 4,699
Other comprehensive income/(expense):
Remeasurements of defined benefit pension schemes - - 121 - - 121
Deferred tax relating to pension scheme liability - - (30) - - (30)
Cash flow hedge - - (61) - - (61)
Currency translation differences - - - - (251) (251)
Total comprehensive income/(expense) - - 4,729 - (251) 4,478
Transactions with owners, recognised directly in equity:
Share-based payment equity charge - - 181 - - 181
Related tax movements on share-based payment - - (76) - - (76)
Balance at 31 July 2023 715 18,682 26,613 40,507 (618) 85,899
*consists of capital reserve and merger reserve
Notes to the unaudited interim financial statements
1. Basis of preparation of unaudited interim financial statements
The interim financial statements have been prepared in accordance with the
accounting policies that the Group expects to apply in its annual financial
statements for the year ending 31 January 2024.
The accounting policies adopted in the preparation of these interim financial
statements to 31 July 2023 are consistent with the accounting policies applied
by the Group in its Annual Report and Accounts for the year ended, 31 January
2023.
The interim financial statements should be read in conjunction with the annual
financial statements for the year ended 31 January 2023 prepared in accordance
with UK adopted International Accounting Standards. All comparative
information is for the six-month period ended 31 July 2022, except for the
Balance Sheet information which is as at 31 January 2023.
No new standards and interpretations issued and effective for the year have
had any significant impact on the preparation of the financial statements.
The interim financial statements do not represent statutory accounts for the
purposes of section 434 'Requirements in connection with publication of
statutory accounts' of the Companies Act 2006. The financial information for
the year ended 31 January 2023 is based on the statutory accounts for the
financial year ended 31 January 2023, on which the auditors issued an
unqualified opinion and did not contain a statement under section 498 'Duties
of auditor' of the Companies Act 2006 and have been delivered to the Registrar
of Companies. The interim financial statements for the six-month period ended
31 July 2023 have not been audited.
Critical accounting estimates and judgements
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these estimates. In preparing
these interim financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 31 January 2023 - going concern
assessment which is explained in further detail below, retirement benefit
pension obligations and impairment of non-financial assets.
Going concern
A key accounting judgement for these interim financial statements for the six
months ended 31 July 2023 is the adoption of the going concern basis of
preparation.
The Board of Sanderson Design Group PLC has undertaken an assessment of the
ability of the Group and Company to continue in operation and meet its
liabilities as they fall due over the period of its assessment to 31 January
2025. In doing so, the Board considered events throughout the period of their
assessment, including the availability and maturity profile of the Group's
financing facilities and covenant compliance. These interim financial
statements have been prepared on the going concern basis which the directors
consider appropriate for the reasons set out below.
The Group funds its operations through cash generated by the Group and has
access to a £12.5m Revolving Credit Facility ("RCF") which is linked to two
covenants. These covenants are tested quarterly on 30 April, 31 July, 31
October and 31 January each year until the facility matures in October 2024.
The Board expects the facility to be rolled over with broadly similar terms
with no significant changes to the existing covenant levels.
Throughout the period and up to the date of this report the Company has met
all required covenant tests. The total headroom of the Group on 31 July 2023
was £28.4m (31 January 2023: £27.9m), including cash and cash equivalents of
£15.9m (31 January 2023: £15.4m) and the committed facility of £12.5m (31
January 2023: £12.5m). The Group has also access to an uncommitted accordion
facility of £5.0m (31 January 2023: £5.0m) with Barclays Bank plc.
A Management Base Case ('MBC') model has been prepared, together with
alternative stress tested scenarios, given the uncertainty regarding the
impact of economic difficulties (including inflationary pressures and interest
rate rises) and the Ukraine war (including impact of sanctions, duration of
war and inflationary pressures). These scenarios indicate that the Company
retains adequate headroom against its borrowing facilities and bank covenants
for the foreseeable future.
The actual results which will be reported will undoubtedly be different from
the MBC and other scenarios modelled by the Group. If there are significant
negative variations from the MBC, management would act decisively, as they
have done in the recent years, to protect the business, particularly its cash
position. Having considered all the comments above the Directors consider that
the Group has adequate resources to continue trading for the foreseeable
future and will be able to continue operating as a going concern for a period
of at least 12 months from the date of approval of the financial statements.
For this reason, they continue to adopt the going concern basis in preparing
the financial statements.
Principal risks
The Group's activities expose it to a variety of financial risks: market risk
(including foreign exchange risk and interest rate risk), credit risk and
liquidity risk. The interim financial statements do not include all of the
risk management information and disclosures required in the annual report and
accounts; they should be read in conjunction with the Group's Annual Report
and Accounts on 31 January 2023. Information on the principal risks can be
found on page 35 to 39 of the Group's 2023 Annual Report and Accounts on 31
January 2023 which comprise of competition, trading environment, foreign
exchange, supply chain pressure, recruitment and retention of key employees,
reputation risk, environmental risk, health and safety risk, major incident or
disaster and IT. There have been no changes in either the principal risks or
risk management policies since the year end.
Approval of interim financial statements
The Board approved the interim financial statements on 10 October 2023.
2. Segmental analysis
The Group is a designer, manufacturer and distributor of luxury interior
furnishings, fabrics and wallpaper.
The reportable segments of the Group are aggregated as follows:
• Brands - comprising the design, marketing, sales and distribution, and
licensing activities of Morris & Co., Sanderson, Zoffany, Clarke &
Clarke, Harlequin and Scion brands.
• Manufacturing - comprising the wallcovering and printed fabric
manufacturing businesses operated by Anstey and Standfast & Barracks
respectively.
This is consistent with the basis on which the Group presents its operating
results to the Board of Directors, which is the Chief Operating Decision
Maker, for the purposes of IFRS 8. Other Group-wide activities and expenses,
predominantly related to corporate head office costs, defined benefit pension
costs, long-term incentive plan expenses, taxation and eliminations of
inter-segment items, are presented within 'intercompany eliminations and
unallocated'.
The Group has revised its segmental methodology during the period by reviewing
the allocation of shared costs and operating profits among the business
segments and restated the prior year's comparatives to improve usefulness of
the segmentation. The amounts reclassified for the period ended 31 July 2022
are:
1. Central to Manufacturing of £0.7m relating to allocation of costs
such as rental, audit fee, insurance, human resource and IT which are shared
by all business segments but accounted for by a business segment and Brands to
Central of £1.0m relating to central costs such as pension scheme costs and
stock consolidation adjustments accounted for in Brands.
2. Central to Brands of £0.1m in operating profits as the senior
management at the Central and Brands units spend significant amount of time
jointly performing key value driving functions and taking important decisions
that influence the way the Group functions strategically as well as on a
day-to-day basis. Each of these segments also perform some more routine and
less complex functions. These functions take place within the framework set by
the senior leadership in these two business segments.
a) Principal measures of profit and loss - Income Statement segmental
information
6 months to 31 July 2023 Brands Manufacturing Intercompany eliminations and unallocated Total
£000 £000 £000 £000
UK revenue 19,512 6,411 - 25,923
International revenue 20,769 3,047 - 23,816
Licence revenue 6,950 - - 6,950
Revenue - external 47,231 9,458 - 56,689
Revenue - internal - 7,576 (7,576) -
Total revenue 47,231 17,034 (7,576) 56,689
Profit / (Loss) from operations 6,506 (485) (66) 5,955
Net finance income - - 197 197
Profit / (Loss) before tax 6,506 (485) 131 6,152
Tax charge - - (1,453) (1,453)
Profit / (Loss) for the period 6,506 (485) (1,322) 4,699
There is no seasonality to the total revenue and operating profits for the
period.
6 months to 31 July 2022* Brands Manufacturing Total
£000 £000 Intercompany eliminations £000
and unallocated
£000
UK revenue 22,039 7,827 - 29,866
International revenue 20,131 4,090 - 24,221
Licence revenue 3,835 - - 3,835
Revenue - external 46,005 11,917 - 57,922
Revenue - internal - 9,773 (9,773) -
Total revenue 46,005 21,690 (9,773) 57,922
Profit / (Loss) from operations* 4,035 2,503 (1,155) 5,383
Net finance income - - 83 83
Profit / (Loss) before tax 4,035 2,503 (1,072) 5,466
Tax charge - - (1,282) (1,282)
Profit / (Loss) for the period 4,035 2,503 (2,354) 4,184
*the prior period comparatives have been restated to provide consistent
presentation with the current period
b) Additional segmental revenue information
The segmental revenues of the Group are reported to the CODM in more detail.
One of the analyses presented is revenue by export market for Brands.
Brands international revenue by export market 6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
North America 10,687 9,681
Northern Europe 5,083 5,521
Rest of the World 4,999 4,929
20,769 20,131
Revenue of the Brands reportable segment - revenue from operations in all
territories where the sale is sourced from the Brands operations, together
with contract and licence revenue:
Brands revenue analysis 6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
Clarke & Clarke 11,576 11,828
Morris & Co. 9,357 9,462
Harlequin 7,185 8,277
Sanderson 6,887 7,174
Zoffany 4,433 4,247
Scion 697 997
Other brands 146 185
Licensing 6,950 3,835
47,231 46,005
Revenue of the Manufacturing reportable segment - including revenues from
internal sales to the Group's Brands:
Manufacturing revenue analysis 6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
Standfast 8,900 11,265
Anstey 8,134 10,425
17,034 21,690
3. Other operating income
Other operating income comprises consideration received from the sale of
marketing materials and other services of £2,363,000 (H1 FY23: £2,272,000).
4. Tax expense
6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
Current tax:
- UK, current tax (1,029) (759)
- overseas, current tax (45) (61)
- overseas, adjustment in respect of prior year (256) (54)
Corporation tax (1,330) (874)
Deferred tax:
- current period (339) (408)
- adjustments in respect of prior year 216 -
Deferred tax (123) (408)
Total tax expense for the period (1,453) (1,282)
5. Earnings per share
a) Earnings per share
Basic earnings per share ('EPS') is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of shares
outstanding during the period, excluding those held in the Employee Benefit
Trust ('EBT') and those held in treasury, which are treated as cancelled. The
adjusted basic earnings per share is calculated by dividing the adjusted
earnings by the weighted average number of shares.
6 months to 31 July 2023 6 months to 31 July 2022
Earnings Weighted average number of shares Per share amount Earnings Weighted average number of shares Per share amount
£000
(000s)
Pence
£000
(000s)
Pence
Basic earnings per share 4,699 71,468 6.58 4,184 70,983 5.89
Effect of dilutive securities:
Shares under LTIP 592 838
Diluted earnings per share 4,699 72,060 6.52 4,184 71,821 5.83
Adjusted underlying basic and diluted earnings per share:
Add back: share-based payment 183 28
charge
Add back: Net defined benefit pension charge (including National Insurance) 164 310
Non-underlying items 269
(see below)
508
Tax effects of non-underlying items with other add backs (33)
(134)
Adjusted underlying basic earnings per share 5,282 71,468 7.39 4,896 70,983 6.90
Adjusted underlying diluted earnings per share 5,282 72,060 7.33 4,896 71,821 6.82
The Group issued ordinary share capital with voting rights consists of
71,468,206 (H1 FY23: 70,983,505) ordinary shares of which nil (H1 FY23: nil)
ordinary shares are held in treasury and 1 (H1 FY23: 220) ordinary share is
held by the Walker Greenbank PLC EBT. Shares held in treasury or by the EBT
are treated as cancelled when calculating EPS.
b) Adjusted underlying profit before tax
The Group uses an Alternative Performance Measure "adjusted underlying profit
before tax". This is defined as statutory profit before tax adjusted for the
exclusion of share-based incentives, defined benefit pension charge and
non-underlying items. This is recognised by the investment community as an
appropriate measure of performance for the Group and is used by the Board of
Directors as a key performance measure. The table below reconciles statutory
profit before tax to adjusted underlying profit before tax.
Adjusted underlying profit before tax:
6 months to 31 July 2023 6 months to 31 July 2022
£000 £000
Statutory profit before tax 6,152 5,466
Amortisation of acquired intangible assets (a) 138 508
Restructuring and reorganisation costs (b) 131 -
Net non-underlying charge included in 269 508
statutory profit before tax
Underlying profit before tax 6,421 5,974
Share-based payment charge 183 28
Net defined benefit pension charge 164 310
Adjusted underlying profit before tax 6,768 6,312
In calculating the adjusted underlying profit before tax, the Group adjusts
for non-underlying items which are material non-recurring items or items
considered to be non-operational in nature. The nature of these adjustments is
outlined as follows:
(a) Amortisation of acquired intangible assets of £138,000 (H1
FY23: £508,000).
(b) Restructuring and reorganisation costs
These relate to the reorganisation of the Group and comprise of
rationalisation of certain operation and support functions of £131,000 (H1
FY23: nil).
6. Analysis of net funds
1 February 2023 Cash flow Other 31 July 2023
non-cash changes
£000 £000
£000
£000
Cash and cash equivalents 15,401 632 (174) 15,859
Total funds 15,401 632 (174) 15,859
Lease liabilities (5,122) 1,091 166 (3,865)
Total debt (5,122) 1,091 166 (3,865)
Net funds/(debts) 10,279 1,723 (8) 11,994
7. Dividends
A final dividend of 2.75p in respect of the year ended 31 January 2023 was
paid on 11 August 2023 to the shareholders on the Company's register on 14
July 2023.
The Board is announcing a maintained interim dividend of 0.75p for the six
months ended 31 July 2023 (H1 FY22: 0.75p), payable on 24 November 2023 to
shareholders on the register on 20 October 2023. The ex-dividend date is 19
October 2023.
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