Sanderson Design Group Profit Jumps 47% as North America Offsets UK Slide

Sanderson Design Group (LON: SDG), the luxury wallpaper, fabric and paint design house, reported a 47% rise in adjusted underlying pre-tax profit to £3.3m for the six months to the 31st of July. That measure excludes share-based pay, the pension charge and one-offs, and compares with £2.2m a year earlier.

Revenue rose 6% to £51.4m from £48.3m, and statutory pre-tax profit rose 69% to £2.5m. North America brand sales rose 16% to £13.0m, with the Sanderson brand up 45% there, helped by the Highgrove launch.

Third-party Manufacturing, which prints for other brands, rose 19% to £11.0m. Its gross margin widened to 39.7% from 33.6%, which likely helped profit grow faster than sales.

Licensing revenue rose 13% to £4.9m, including £1.4m from the Blinds2Go renewal. Part of that is minimum guaranteed royalties booked upfront, and the company expects licensing revenue in the full year to be broadly in line with last year.

The UK, about 40% of brand revenue, went the other way. UK brand sales fell 7.8% to £14.0m, and Clarke & Clarke dropped 12.9% to £8.2m. Administrative expenses rose £1.8m to £23.3m.

Chief Executive Officer Lisa Montague addressed the home market in the outlook statement:

Whilst the market in the UK and EU remains challenging amid soft consumer sentiment, we have successfully maintained and defended our market leading position in these regions.

Lisa Montague, Sanderson Design Group

The board expects full-year trading in line with market expectations of £6.5m adjusted underlying pre-tax profit and £102.0m revenue. The first-half profit is therefore already about half the profit figure expected for the year.

The results came out at 7am today, before the market opened. The shares last closed on Friday at 77p.

Net cash, meaning cash less borrowings excluding leases, was £10.4m against £7.8m a year earlier, with a £10.0m Barclays credit facility undrawn. The interim dividend is held at 0.5p, going ex-dividend on the 22nd of October.

After the period end, Sanderson signed a 10-year licence with Dunelm, the owner of the Designers Guild archive, to produce Designers Guild wallpapers, fabrics and paints.