A quality brand portfolio, growing US push and strong cash, alongside cost reductions and increased efficiency will help to strengthen second half year for Sanderson Design Group.
It seems that this group has always been at the centre of English interior decoration.
Dating back to 1860, it was originally an importer of French wallpapers, since then it has significantly expanded its portfolio of businesses to include a range of iconic design brands of note.
Today the Sanderson Design Group (LON:SDG) defines itself as an international luxury interior furnishings company that designs, manufactures and markets wallpapers and fabrics together with a wide range of ancillary interior products.
The group’s single purpose is very bold – ‘To bring the Beautiful into People’s Homes and Lives’ and it certainly does that.
Its list of leading brands includes Archive, Clarke & Clarke, Harlequin, Morris & Co, Sanderson, Scion and Zoffany.
The latest interim results showing strength in its diversity
In the first half year to end July the group showed some resilience with a 0.7% lift in sales to £57.9m (£57.5m) while its adjusted pre-tax profits were a very healthy 12.5% better at £6.3m (£5.6m), raising its earnings12.9% to 6.90p (6.11p) but cautiously paying a maintained dividend of 0.75p per share.
A big advance was made by the revenue from licensing, up 90.0% at £3.8m, while the recent push into the North American market has performed well, helping to balance out slight falls in sales in the UK, Europe and the Rest of The World.
At the period end the group had net cash of £15.0m, which was £4.1m lower than at the end of January this year, due mainly to a strategic investment in its core lines.
Chairman Dianne Thompson commented that:
“Thanks to the Group’s strong and rich portfolio of valuable brands, and the creative design talent and agility of our teams, we have managed to navigate the trading challenges of the first half, taking opportunities where possible to support the strategic progress of the Group.”
Comparison with its full year results
In its year to the end of January 2022, the business had benefited from consumers’ growing interest in pattern, colour and design, which helped to drive its three key revenue streams of manufacturing, brands and licence income.
For that year the group reported revenue up 19.6% to £112.2m and its adjusted underlying profit before tax was a very impressive 78.6% better at £12.5m.
Recent Deals – expanding its design spread
This year has seen the group declare a number of new agreements with Harrods, Ben Pentreath, Bedeck, Williams Sonoma, Emery Walker, Sophie Robinson, NEXT, Designs in Mind, Japanese partnerships and the latest last week with Giles Deacon, the British fashion designer.
The Group’s Larger Holders
With some 70.99m shares in issue, the company’s largest investor is Octopus Investments (13.74%), while other names include Close Asset (9.57%), Ennismore (7.67%), BGF Investments (5.99%), Hargreaves Lansdown (5.10%), Schroder Investments (4.99%), Interactive Investor (4.97%) and Charles Stanley (4.78%).
Analyst Opinion – well positioned to weather the challenges
David Jeary at Progressive Equity Research estimates that the current year to end January 2023 will see the group generate sales of £115.0m and profits of £12.7m, taking earnings up to 14.3p (13.6p) and paying a maintained 3.5p per share dividend.
Looking into the next year he has estimated £120.4m of revenues, £10.4m profits, 14.1p earnings and a 3.5p dividend per share.
Conclusion – shares are destined to rise
The current price of this group’s shares is too low, especially considering its global spread, its strong balance sheet and the diversity of its market leading design brands.
At the current price of 99p the shares are trading at 6.9 times price current year earnings and that is very attractive.
After the interims and ahead of the next Trading Update in January next year, it would be reasonable to hope for an upward lift in price to around 125p,