Sanderson Design Group – quality brand portfolio, growing US push and strong cash will help to strengthen second half year
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,
AIM movers: Eneraqua energy growth and coal production recommences at Edenville Energy
Energy and water efficiency equipment provider Eneraqua Technologies (LON: ETP) grew its interims from a combination of organic growth and a contribution from recent acquisition Welltherm, which provides drilling services for heat pump installation. Revenues were 92% higher at £24.2m, while underlying pre-tax profit was £3m. Full year expectations are covered by contracted orders as are nearly three-quarters of next year’s forecast revenues. There are plans to move into the consumer market, but that will not make a meaningful contribution until next year – although there will be £500,000 of marketing costs. A full year pre-tax profit of £10.6m is forecast, while the 2023-24 figure has been upgraded by 4% to £12.2m. The share price is 13.9% ahead at 262p, which is just below the November flotation price of 277p.
Edenville Energy (LON: EDL) says production has restarted at the Rukwa coal project at an initial rate of 4,000 tonnes per month of washed coal. This rate of production should increase. Pricing discussions are exceeding the previously published range of $35-$50/tonne. The share price has jumped 36.4% to 15p.
Falcon Oil & Gas (LON: FOG) has a binding letter of intent with new joint venture partner Tamboran (B1), which amends the previous terms of the joint operating agreement for the Betaloo sub-basin exploration permits in Australia. Tamboran (B1) is a joint venture between Sheffield Holdings and Tamboran Resources. Falcon will earn an additional carry of future well costs of up to A$6.75m – its share of A$30m. Drilling of the first two stage 3 wells will start soon and Falcon will benefit from the carry under the existing agreement with Origin Energy. The share price is 3.62% ahead at 7.15p.
Oil and gas producer Echo Energy (LON: ECHO) says that production reached 392,253 barrels of oil equivalent in the first nine months of 2022 with third quarter production higher than in the previous quarter. Three power generation units are operational at the Santa Cruz Sur assets in Argentina, while work on maintenance of compressors and upgrading the Eagle workover rig continue. The share price is 6% higher at 0.265p.
Ukraine-based oil and gas producer Enwell Energy (LON: ENW) shares fell 14.3% to 23.3p following quarterly operating figures. Production slumped compared with one year earlier with gas production more than halved. Aggregate production was 2,588 barrels of oil equivalent per day, down from 5,126 in the third quarter of 2021. Production at the VAS field was suspended, but it has resumed in October.
There is profit taking at drug developer Evgen (LON: EVG) which yesterday announced that it is partnering with Swiss biotech Stalicia for the potential use of SFX-01 for the treatment of autism spectrum disorder and other CNS disorders. The share price fell 10.6% to 6.35p, having started the week at 2.85p. The deal could generate up to $160.5m in milestone payments and double-digit royalties. The upfront payment is $500,000 with a further $500,000 once a volunteer study is completed in the first half of 2023.
Property lending platform operator Lendinvest (LON: LINV) continues to decline even though chief executive Rod Lockhart bought 27,111 shares at 67.5p each. The share price fell 8.82% to 62p, having started the week at 97.5p. Platform assets under management are one-third higher at £2.4bn, but finnCap has downgraded its full year forecast. Interest rate volatility is hampering margins. The July 2021 placing price was 186p.
Scirocco Energy (LON: SCIR) is using cash generated from the deal to sell Rumuva to repay part of the balance on the Prolific facility. An initial payment of $200,000 is being made. The remaining balance will be repaid in five instalments of $49,000 a month up to March 2023. If these payments are made there will be no additional share issue. The share price is 7.89% lower at 0.175p.
FTSE 100 rattled by Bank of England action
The FTSE 100 once more gave up ground on Tuesday after the latest steps by the Bank of England to support the UK bond market and avoid what it called a ‘fire sale’ of UK bonds.
“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” the Bank of England said in a statement.
The FTSE 100 was down 1% at 6,890 at the time of writing, while the UK 10-Year Bond yield fell to 4.41%.
The Bank of England action was reportedly a result of pressure by pension funds to include index-linked bonds to the bank’s bond purchases.
Index-linked bonds are widely held by pension funds, and having suffered huge losses this year, some pension funds are experiencing complexities meeting their liabilities.
“The fact the Bank of England has widened its support measures for the market by including index-linked gilts in its programme of government bond purchases will only serve to worry investors even more,” says Russ Mould, investment director at AJ Bell.
“So far, its support measures haven’t kept a lid on gilt yields as they have continued to creep up in recent sessions, thereby increasing the cost of borrowing for the government. And today’s news only triggers a very small retreat in yields.
“The Bank of England hopes to avoid a crisis in the market by being a willing buyer of bonds from pension funds who are under pressure. These pension funds will welcome today’s move, but whether the broader market shares the same enthusiasm remains to be seen.”
Early signs were that the market did not share the bank’s enthusiasm.
Shares in asset managers, insurance companies and wealth managers were down substantially on Tuesday following the latest round of action by the Bank of England.
Aviva was the FTSE 100’s top faller down 3.9% as St James’s Place, Phoenix Group and Hargreaves Lansdown all gave up more than 2%. Legal & General shares shed 3.2% and are now off 37% so far in 2022.
Innovative Eyewear growth plans build momentum with key hires
Innovative Eyewear (NASDAQ:LUCY) have announced two key executives hires as part of their expansion plans to target the $28.3 billion total addressable eye wear market with their smart eyewear technology.
Following the announcement of a strategic licensing agreement with global lifestyle brand Nautica last week, Innovative Eyewear are bolstering their sales and marketing department with the two appointments named today.
Innovative Eyewear have appointed Jan Cory as VP of Global Optical Sales and Marketing and Ekene Ofodile will join as Vice President, Sales and Marketing.
Both have extensive experience in complimentary fields such as wearables and optics.
Ekene Ofodile spent 15 years at New Balance Athletics as Head of International Sales Operations before driving wearables sales as Director of Strategic Account Sales at Honeywell International’s Safety & Productivity Services Retail division.
“I believe Harrison Gross & the Innovative Eyewear team are disrupting the eyewear industry with smart frame technology. I am thrilled to be joining the Company at this pivotal moment and look forward to contributing to its very bright future” said Mr. Ofodile.
Jan Cory was recognised by Vision Monday as one of the Most Influential Women in Optical in 2015 and brings years of experience in the optical industry having been through the acquisition of Bausch + Lomb by Luxottica, and spending 12 subsequent years at Luxottica.
“We are excited and honored to add both Ekene and Jan to our management team,” said Harrison Gross, CEO of Innovative Eyewear, Inc.
“Their combined eyewear industry knowledge and track record of developing significant sales should help us rapidly scale our smart eyewear business in both retail optical and non-optical channels worldwide.”
Tekcapital, the AIM-listed investment company who owns approximately 71% of Innovative Eyewear, saw its shares gain 2.5% in London trade on Tuesday.
Marks Electrical continues to outperform market
Online electricals retailer Marks Electrical (LON: MRK) is still gaining market share with a 15% increase in sales during the first half of the financial year. That rate of growth accelerated in the last couple of months of the period.
Sales are growing in the domestic appliances and consumer electronics markets thanks to its positive reputation for service due to its own fleet of delivery vehicles and recycling offer. More installations are being taken in-house to improve overall service.
The total market has declined during the six-month period, but Marks Electrical has maintained profitable growth. The company has been pushing energy efficient products. It is also further expanding the range of products it offers by moving into IT products.
Marks Electrical is in a stronger cash position than previously anticipated with stockturn improving. There are no borrowings. Cash was £7.7m at the end of September 2022 and should continue to build up year-on-year. It is expected to improve from £3.87m to £8.5m over the 12 months to March 2023. This enables Marks Electrical to take advantage of opportunities to buy stock at attractive prices.
Marks Electrical cannot totally buck the current economic conditions and Equity Development has trimmed its full year sales forecast by 5% to £89m, which is still more than 10% ahead of the previous year. The level of discounting by rivals could hamper growth, but Marks Electrical has shown that it has the ability to cope with tough market conditions.
Gross margins could dip slightly from last year’s level of 19.8%. Advertising and marketing are likely to remain 5% of sales, but other operating expenses will further reduce operating margins. Pre-tax profit is expected to fall from £6.44m to £5.67m this year, before recovering sharply next year as margins potentially recover.
The share price is 4.5% ahead at 58.5p, which is trading on less than 14 times prospective 2022-23 earnings. That could fall to ten next year if forecasts are achieved.
Argo Blockchain shares crash after September operational update
Argo Blockchain shares crashed to fresh lows on Tuesday after the bitcoin miner issued an operational update for September.
The Argo Blockchain share price fell over 25% to 16.5p in early trade on Tuesday, the lowest level since December 2020. Argo Blockchain shares are now down 83% in 2022 and trade at just a fraction of their all-time high around 330p.
Argo’s fall from grace is inextricably linked to waning interest in cryptocurrencies with the most popular coins losing a large proportion of their value this year.
However, today’s decline follows an operational update that showed Argo mined less Bitcoins in September than the prior month, and said they were curtailing their operations due to high energy prices.
Argo mined 215 Bitcoin or Bitcoin Equivalents in September, down from 235 in August. It is difficult to see a favourable scenario for increased mining activity in the near-term with high energy prices set to persist.
Mining revenue diminished significantly falling to $4.27 million in September from $5.23 million in August. Although revenue fell, Argo saw their mining margin increase to 25% from 20%.
Argo recently announced a scramble to raise capital by selling mining machines and issuing equity.
“As another month of high energy prices and uncertain market conditions ended, Argo continues to execute on its plans to grow operations at Helios,” said Peter Wall, Chief Executive Officer at Argo Blockchain.
“We are nearing completion of the installation of our new Bitmain S19J Pro machines, which will increase our total hashrate capacity to 2.9 EH/s by the end of the month. This will represent a 81% increase in total hashrate capacity since Q1 2022. I continue to be proud of our team for its efforts to deliver long-term growth in the interest of our shareholders.”
AIM movers: Evgen drug deal and no oil at Serenity for Europa and i3 Energy
Drug developer Evgen (LON: EVG) is partnering with Swiss biotech Stalicia for the potential use of SFX-01 for the treatment of autism spectrum disorder and other CNS disorders. The share price jumped 63.2% to 4.65p. This deal could generate up to $160.5m in milestone payments and double-digit royalties, although that is a long way away. The upfront payment is $500,000 with a further $500,000 once a volunteer study is completed in the first half of 2023. If the FDA approves an investigational new drug admission that will spark a $5m payment – possibly next year. Including what is already in the bank, cash should last until the end of 2024.
Identity management software provider Intercede Group (LON: IGP) says trading is in line with expectations and is acquiring password security management software company Authlogics for an initial £2.5m, plus up to £3m depending on growth in annualised recurring revenues. This broadens the scope of the Intercede business. Net cash will still be £7.9m. The share price rose by 38.2% to 52.5p.
Shares in PipeHawk (LON: PIP) increased 18.5% to 16p after winning a contract to provide a manufacturing assembly system for a rotor component in an aerospace e-motor. The value is £1.6m over 12 months.
Helium One Global (LON: HE1) has completed an engineering audit on the preferred drill rig for phase II drilling at Rukwa in Tanzania. The rig will be imported from Kenya and drilling could start by February. That sparked a 9% rise to 6.65p.
Frasers Group (LON: FRAS) has acceptances totalling 48.6% for its 2p a share bid for MySale Group (LON: MYSL) – once settlement is completed. The share price improved by 9.76% to 2.25p.
Subsea rental equipment supplier Ashtead Technology (LON: AT.) says higher utilisation and pricing means that 2022 results will be much better than expected. The share price rose 7.83% to 268.5p. Ashtead Technology floated last November at 162p a share.
Subsea cable protection services provider Tekmar Group (LON: TGP) is exploring approaches from interested parties as part of its strategic review. The maturity date of a £3m CBILs loan has been extended to the end of October 2023. The share price edged up 6.1% to 8.75p.
Europa Oil & Gas (LON: EOG) is the worst performer on the day with a 37.5% decline to 1.375p because the Serenity SA02 well in the North Sea was not oil bearing. The gross well cost is forecast to be £10.4m with £4.8m paid by Europa Oil & Gas and £5.6m by i3 Energy (LON: I3E). WH Ireland has reduced its estimate for i3 Energy from 66p a share to 49.35p a share. The i3 Energy share price fell 12.1% to 24.125p.
Acoustic materials supplier Autins Group (LON: AUTG) says second half sales were similar to those in the first half, but the fourth quarter was weak because of production disruption at a major customer. Higher costs have put pressure on gross margins. Autins hopes to reduce its loss in the short-term through operational efficiencies. Net debt was £2.4m at the end of September 2022. The share price declined 35.7% to 9p.
Property lending platform operator Lendinvest (LON: LINV) says platform assets under management are one-third higher at £2.4bn, but finnCap has downgraded its full year forecast. Interest rate volatility is hampering margins. Earnings have been downgraded from 12.6p a share to 8.9p a share. Volatile The dividend forecast is maintained at 4.6p a share. The share price slumped 27.7% to 70.5p. The July 2021 placing price was 186p.
Investment publisher Bonhill (LON: BONH) has commenced a strategic review that could lead to the sale of the company or separate businesses. Trading remains difficult and shareholder Rockwood Strategic (LON: RKW) is providing a £800,000 loan facility. Restructuring should reduce costs by £700,000 in 2023. In 2018, InvestmentNews was bought for £21.3m and in 2019 Bonhill acquired Last Word for £8m in cash and shares. The shares are 26.1% lower at 4.25p, which values Bonhill at £4.2m.
Upgrade for pawnbroker Ramsdens
Pawnbroker Ramsdens (LON: RFX) says trading in the year to September 2022 was ahead of expectations and this has led to an upgrade to 2022-23 forecasts. Economic uncertainty and reduced competition from other short-term credit providers means there is a positive backdrop propelling growth for Ramsdens.
The pawnbroking loan book has increased from £6.1m to £8.6m, while the retail jewellery sales were 43% ahead. Higher jewellery stocks mean that net cash is expected to be £9.3m, which is lower than previously forecast. Foreign exchange volumes are four-fifths of pre-Covid levels. Gold buying did well, and the high gold price will continue to benefit this part of the business.
Liberum expects a 2021-22 pre-tax profit of £7.5m, up from £7m previously, and an improvement to £8.5m this year even though wages and energy costs are rising.
Profit contributions from each division have been upgraded, except for foreign exchange where expectations have been trimmed because of concerns about the economic uncertainty’s effect on foreign holidays. Average transaction values are higher than previously.
Ramsdens has 157 stores, but the number of openings has been lower than targeted. That shows that management will only open at the right sites and not try to meet targets for the sake of it.
The share price rose 5.1% to 207.5p, which puts the shares on just over ten times prospective 2022-23 earnings. Dividends should grow steadily. The forecast yield is 4.5%. Liberum has a target share price of 240p.
FTSE 100 stumbles on prospect of US rate hikes, end of BoE intervention
An appalling close to US markets on Friday spilled over to the European open on Monday with most major European indices starting the week off in the red.
A slightly better than expected Non-Farm Payroll figure on Friday almost guaranteed the Federal Reserve would kick on with a 75bps point hike at their next meeting, and were a long way off pivoting to a slower pace of rate hikes.
The NASDAQ closed down nearly 4% on Friday and saw the FTSE 100 open well below 7,000 while the DAX fell back towards 12,000.
However, after touching lows of 6,922 in early trade on Monday, the FTSE 100 recovered some losses to trade at 6,971 at the time of writing.
Stronger dollar and UK uncertainty
The dollar gained on the back of the robust jobs data sent GBP/USD back below 1.1100 for the first time in over a week.
The pound had enjoyed a relief rally but looked set to resume declines with pressure on the UK government mounting and no remedy to sterling’s woes in sight.
Investors will also be concerned the doubling of Bank of England bond purchases failed to support the pound or FTSE 100 on Monday.
“Also leaving investors on edge is the news that the Bank of England has doubled the amount of government bonds it is prepared to buy each day under a support initiative. While this programme is designed to provide calm to the markets following concerns about pension funds dumping gilts on the market, the fact it has doubled the previous limit of £5 billion also acts as a reminder that we’re living in unsettled times,” said Russ Mould, investment director at AJ Bell.
There was a slight reprieve for the pound after Kwasi Kwartneg said the government would bring forward the release of their economic projections to 31st October.
The pound typically has an inverse relationship with the FTSE 100 and investors will be looking to see if this holds and provides support for the index this week.
However, the FTSE 100’s largest overseas earners were weaker on Monday with AstraZeneca down 1.7%, Diageo 3% and BP off 1.5%. Shell was down 0.6% after announcing refining margins are declining last week.
DS Smith
Some of the changes the global economy underwent due to the pandemic are here to stay. One of these is the shift towards online shopping and DS Smith’s packaging business is a major beneficiary.
In a world where retailers are issuing profit warnings, the seller of the spades in the gold rush is proving to be a winner.
DS Smith shares were 11% higher at the time of writing after announcing operating profit would exceed prior guidance.