Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sanderson Design Group PLC (LSE:SDG, Financial) successfully launched its first online shop for Morrison Co. in the UK and US, showing promising initial results.
- The company retained a robust balance sheet with a cash balance of GBP 5.8 million and proposed a final dividend of 1 penny per share.
- Licensing revenues reached a record GBP 11 million, with significant contributions from major renewals and new agreements.
- The Sanderson brand saw revenue growth in North America, with sales up 24%, offsetting declines in other regions.
- Strategic initiatives, including digital transformation and cost-saving measures, are expected to improve efficiency and profitability moving forward.
Negative Points
- Revenues declined to GBP 100 million, impacting profitability, with a significant decline in the second half of the year.
- The company reported a loss of GBP 13.9 million, partly due to a GBP 16.3 million goodwill write-off related to the Clark and Clark acquisition.
- Manufacturing volumes were down, leading to losses at both factory sites due to reduced high-margin repeat orders.
- The UK market faced challenging conditions, with domestic sales down 14%, impacting small independent retailers.
- Inflationary pressures increased costs, particularly staff costs, affecting overall profitability.
Q & A Highlights
Q: Could you discuss the future drivers behind gross margin and the impact of omnichannel developments? Also, how flexible is your cost base if consumer confidence doesn't recover?
A: Gross margin has shown steady improvement over the past years, and we expect this trend to continue. The shift to direct sales through omnichannel will significantly enhance margins, though the full impact will be seen in the coming years. Regarding cost flexibility, selling and distribution costs are variable, while administration costs are largely fixed. We have levers to adjust costs, including marketing and restructuring, if necessary. — Lisa Montague, CEO, and Mike Woodcock, CFO
Q: Can you provide more details on the new loyalty scheme and its expected impact? Also, how does the recent USD fluctuation affect the group?
A: The loyalty scheme has shifted from a pattern book model to a more flexible system where customers can choose digital designs or purchase pattern books as needed. This change aims to better align with customer needs. Regarding USD exposure, we are currently long on dollars, with a limited hedging program in place to mitigate currency fluctuations. — Lisa Montague, CEO, and Mike Woodcock, CFO
Q: What volume uplift is needed to bring the factories back to breakeven, and how does the digital strategy fit into this?
A: The recent 15% headcount reduction aligns with current volume plans to move towards breakeven. The digital strategy, including the trade hub re-platforming, aims to enhance customer experience and attract new digital-led customers, potentially increasing volumes. — Lisa Montague, CEO
Q: What are your expectations for licensing in FY26, and how is current trading in the US?
A: Licensing is expected to remain in line with previous years, without significant growth due to the absence of accelerated income. Current trading in the US shows double-digit growth, driven by a re-energized sales team and strong market response. — Lisa Montague, CEO
Q: Given two years of losses in manufacturing, are current cost-cutting measures sufficient to return to profitability? What is the target operating margin?
A: The cost-cutting measures aim to achieve breakeven this year. We will continue to monitor and adjust as needed, with the initial goal of reaching breakeven before determining a long-term profitability target. — Lisa Montague, CEO, and Mike Woodcock, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
