Sanderson Design Group – Finals And Upgrades On Wednesday

On Wednesday of this week the Sanderson Design Group (LON:SDG) will be announcing its results for the year to end January 2023.

The £96.5m capitalised group is a luxury interior furnishings company that designs, manufactures and markets wallpapers, fabrics and paints.

It also 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.

The Denham, Buckinghamshire based group’s brands include Zoffany, Sanderson, Morris & Co., Harlequin, Scion, Clarke & Clarke and Archive by Sanderson Design.

Its products are sold globally.

Employing some 600 people, the group has showrooms in London, New York, Chicago, Amsterdam and Dubai.

Its manufacturing base consists of Anstey wallpaper factory in Loughborough and Standfast & Barracks, a fabric printing factory, in Lancaster.

New Contracts A Plenty In The Last Year

Over the last year the group has pulled off an impressive number of strategic deals.

In February it tied up a contract with Harrods to open The Morris & Co Home Emporium shop-within-a-shop in April 2022.

The same month saw Morris & Co relaunch its innovative paint range, as well as launching a second range of fabrics and wallpapers in collaboration with the influential architect and designer Ben Pentreath.

In early April one of the group’s core licensing agreements was renewed with bedlinens and homewares company Bedeck, for another three years.

Late May saw an arrangement with the Emery Walker Trust for a collection of fabrics, wallpapers, bedding and homewares.

In early June the group’s Harlequin brand signed up designer and TV broadcaster Sophie Robinson, known as The Queen of Colour, for the brands wallpapers and fabrics.

NEXT had been delighted with its 2021 womenswear licensing agreement with Morris & Co and renewed it in late July last year.

September saw an exciting collaboration with Disney in order to create wallpapers and fabrics based on their famous characters.

Later that month the group’s Scion brand launched a new collection with Design In Mind.

Couture designer Giles Deacon collaborated with the group in early October for a range of fabrics, wallpapers and apparel.

Close to Christmas the company declared a new licensing deal with the US-based Ruggable company for rugs, doormats and cushions.

In February this year NEXT signed up another agreement with Clarke & Clarke for homeware products.

Finally at the end of last month a major maiden deal with J Sainsbury for their Habitat homewares and their Tu clothing brands for the group’s Morris & Co and Scion brands.

Sales Per Business And Region

In the year to end January 2022 the group reported at £112.2m turnover.

On a per Business basis the group saw its Brands selling £89.27m, some 79.6% of the total, while Manufacturing made up £22.93m some 20.4%.

On a per Region basis UK sales accounted for 53.8% of the total at £60.35m, North America was £22.20m some 19.8%, Northern Europe recorded £15.89m sales for 14.2%, while the Rest of the World came in at £13.76m, some 12.3% of turnover.

The Equity

There are 71,468,206 shares in issue.

Larger holders include Octopus Investments (13.8%), Ennismore Fund Management (7.49%), BGF Investment Management (5.95%), Close Asset Management (5.16%), Schroder Investment Management (4.96%), FIL Investment Advisors (4.06%), Hargreaves Lansdown Stockbrokers (2.91%), Hargreaves Lansdown Asset Management (2.35%), JP Morgan Asset Management (2.01%) and Allianz Global Investors (1.82%).

Broker’s View – A Buy Looking For 205p

At Singer Capital Markets analyst Matthew McEachran rates the shares as a Buy, aiming for 205p as his Target Price.

For the 2023 year he goes for £112.3m (£112.2m) sales and adjusted pre-tax profits of £12.7m (£12.5m), with earnings of 13.8p (13.0p) and a dividend of 3.69p (3.50p) per share.

His estimates for the year now underway are for £116.1m sales and a slightly lower £12.0m profit, with earnings of 12.7p and a standstill dividend of 3.69p per share.

David Jeary at Progressive Research considers that the group managed to steer a steady course in uncertain times.

His estimates for the last year are also for adjusted pre-tax profits of £12.7m, but worth 14.3p per share in earnings.

For this year he goes for £120.4m sales, £12.5m profits, 14.1p earnings and a 3.5p dividend.

The 2025-year estimates from Jeary are for £125.8m revenues, £12.6m profits, 13.8p earnings and a 3.6p per share dividend.

My View – Hoping For Healthy Upgrades

Next Wednesday could well see the group giving a more positive guidance for the current year to end January 2024 and also for 2025.

On the current analyst estimates the group could be looking to tread water, but it is still increasing its sales, while maintaining its profits – which is impressive enough against such an inflationary retail backdrop.

The group’s shares have moved up from 117p a month ago to 135p now, even so I see them as being capable of rising further, with an attempt at the 171.5p peak achieved at this time last year.

This is a solid classic business, with excellent brand names, trading with top name companies on very much a global basis, and with around £17m cash in the bank.

I believe that its shares are going to improve still further in price, especially if this Wednesday’s corporate comments are optimistic.

I now set a Target Price on the shares at 168p within the next year.