Sanderson Design Group plc

Good morning, everybody. My name is Lisa Montague, as I think most of you know, and I'm very happy to be here to share with you today, along with my colleague CFO Mike Woodcock, our Samson Design Group year-end results for the fiscal year 26 that closed on the 31st of January. Our chairman, Dame Diane Thompson, is in the room with us, and our other board colleagues are online. I will share with you an overview of the year and then Mike will give you a little more financial detail and hand back to me to talk about the future and how we have continued to accelerate some strategic and transformational initiatives and shapes our strategy to improve results in this year and beyond. Our business at a glance is a leading interior furnishings group that designs and makes world-class fabrics on wallpapers with a strong licensing channel that delivers finished goods with specialist partners in our core market we employ 500 people all committed to leading the industry in the way we work highlights of the year are the results of decisive action that we have taken to improve performance We delivered the cost reductions and improved efficiencies that we set out to do. And in summary, revenues were broadly flat while profitability was greatly improved. We grew back cash balances to £9.8 million, starkly reducing inventory and maintaining a robust balance sheet. The USA sales grew by 10% and the US is on track to be our biggest market soon. manufacturing has been turned around regaining profitability and with strong momentum carrying us into the new year licensing continues to perform strongly with encouraging underlying growth from established partnerships and our DTC acceleration pulled forward the launch of all brand websites into the year positioning us to build audiences for all six consumer brands in the UK and the US Designs have resonated. Highgrove by Sanson Collection was the brand's best ever launch last May, while Huntington's discovery of a new body of archive designs gives Morris & Co's new impetus. Since the year end, we have taken the decision to purchase shares into the EBT to fund future LTIP vestings. The board proposes final dividend of one penny per share to give a total of one and a half pence in the year which is the same as last year so in summary the strategy is working we have delivered the planned improvements and Mike will now share more financial detail behind this performance thank you Lisa morning everybody

So, as always, the first two slides in this section focus on the 10 KPIs we consistently use to track our performance. They provide a high-level view of the result for the year, and then I cover more in each detail later on. FY26 has been a year of stabilisation. As Lisa mentioned, turnover fell by 1% to $99.5 million, but the mix of the revenue and the benefits of the various cost reduction initiatives implemented meant that adjusted underlying profit before tax improved from £4.4 million last year to £5.3 million this. We've also seen a significant improvement in our cash performance and the strengthening of our balance sheet. The absence of any major capital expenditure projects and a £5.7 million reduction in inventory helped increase our net cash position by £4 million to £9.8 million at the year end. So, starting the beta dive with revenue, this table shows our three key revenue streams of brand product sales, licensing, and third-party manufacturing income. Brand product sales were down 2% year-on-year, with growth in North America and other international markets being offset by continued weakness in our home UK territory. Licensing sales were robust against a record-breaking FY25, and third-party manufacturing revenues returned to growth after a difficult prior year. Looking at brand sales by geography, trading conditions in the UK remained subdued, with revenues down 9% compared to the prior year. Income from our top 10 domestic customers was maintained, with the decline largely attributable to small independent retailers. The targeted growth market of North America performed well, with underlying sales up 9% in constant currency. Sales here were impacted in the first half by uncertainty around the US tariff regime, but recovered strongly in H2. were able to pass on the cost of tariffs to customers via surcharge, which contributed around £200,000 in revenue and an additional 1% in growth in the territory. Northern Europe was a mixed picture. The strong growth in Scandinavia, which continues to be a core market for Morrison Co., partially offset by softness in the Netherlands, France, and in particular the Republic of Ireland. Sales in the rest of the world were broadly flat year on year, and included £1 million of revenue from the Middle East, which represented less than 1% of group turnover. Looking at sales by brand, Morris & Co continues to be our only brand where revenues in North America exceeded those of the UK. In constant currency, sales are up 14% in North America and up 9% in Northern Europe, again driven by Scandinavia. As Lisa has mentioned, the brand highlight of the year was the September launch of the Huntingdon collaboration, which should drive sales growth into FY27 and beyond. Clark & Clark is predominantly a UK brand and is therefore exposed to the continuing softness we see in that market. Sales here were down 11%, contributing to a 7% decline in total revenues. In North America, where Clark & Clark is distributed by Kravat, sales were flat in constant currency, but we remain confident in the long-term growth potential of the brand in that market. Sanderson brand has been a strategic focus for the group in the last three years and had a positive year driven by the launch in April of the high growth by Sanderson collection. Sales were up 2% in constant currency, again driven by growth of 12% in North America. Sales of Harlequin in this North American market were up 6% reflecting continued traction from our collaboration with Henry Holland which launched back in September 24. Total brand sales were flat year on year with the overall result like Clark and Clark impacted by the brand's exposure to the UK market. Zoff and his recent launches in the M and Rare Textiles have helped drive sales. In North America high-end residential and hospitality projects helped drive growth of 9% in constant currency and sales there are now almost at the same level as in the UK. So moving on to manufacturing now and as you know our two factories, Standpast and Barracks Textiles and Anstey Wallpaper Company print for both our own brands and for third party customers. The factory restructuring I mentioned earlier, or Lisa mentioned earlier, has reduced costs by £1.5 million compared to the prior year. Increased efficiency has helped the manufacturing segment return to profitability. and we now have a flexible cross-skilled workforce better able to respond to market demand. Our digital first printing strategy has seen digital output of both factories grow to 63% this year. The planned inventory reduction programme and the group level led to the fall in internal turnover but third party sales performed strongly especially in the second half of the year with full year revenues up 5%. Third party order books are benefiting from continued momentum at the start of the new financial year. Our licensing activities leverage our designs and archives and bring wider consumer awareness of our brands across multiple categories of finished goods. Revenues were robust at £10.5 million, slightly lower than the record-breaking £11 million prior year. In accordance with IFRS 15, the Group recognises the value of minimum guaranteed royalties arising under multi-year agreements in full upon signature. This accelerated income, shown in the third column in the table, with $6.1 million in the year compared to $7.3 million in FY25. Agreements signed during the period with significant accelerated income include Ruggable, which has brought in its product range to include the Morris & Co. Huntingdon Designs, and Sangexu in Japan, who have extended their Morris Chronicles Agreement for a further five-year period. The first column in the table shows licensing income excluding the impact of IFRS 15 and represents the cash received by the group from our partners The underlying performance of the year was £9 million, representing a 35.8% increase on the prior year. This next slide analyzes the first column on the previous table, looking at underlying income by brand and by territory. In the UK, the 50% growth in underlying revenues reflects the initial launches of the Habitat 2 agreement, signed in FY25, and the first full year of revenue from the Clark & Clark agreement was next. The growing importance of North America in the group's licensing operation could be seen with a 36% increase versus the prior year and was driven by Morris & Co's agreements with Ruckable and the Williams Sonoma Group. And then looking at the lower table you can see that Morris & Co remains the group's most licensed brand and as mentioned it continues to win new licensees but encouragingly Sanderson saw underlying reviews more than double to become the second largest brand in the licensing portfolio. So we can now look at gross profit. Gross profit percentage grew by 90 basis points to 69.1%. The brand segment recorded a gross profit percentage of 67.9, which is in line with the prior year. The segment benefited from the sales mix shifting towards the higher margin market of North America and the higher margin channel of direct-to-consumer. However, this was offset by an increase in the mix of lower margin contract sales and a higher level of discounting for clearance products due to the high level of fabric inventories across the sector as a whole. The benefit of the restructuring exercise undertaken in our two factories can be seen with the gross profit percentage in this segment increasing by 680 basis points despite the £2.8 million reduction in internal sales I highlighted earlier. Looking into the new financial year, Our current levels of inventory and our utility hedging programme should ensure there will be no material impact on our results should current energy market conditions persist. Our adjusted underlying profit before tax was £5.3 million, up from £4.4 million in FY25. Profit before tax was £3.1 million, a significant improvement versus the prior year, which was impacted by a £16.3 million charge related to the impairment of intangible assets. Selling and distribution costs in this table are shown net of other operating income of £3 million. That comprises consideration received from the sale of patent books. As we mentioned at the half year, our approach to the issuing of these books has changed, resulting in both lower costs and income and a net year-on-year saving of around half a million pounds. Aside from the benefits of patent books, distribution and selling expenses have remained largely flat versus FY25. Savings from the renegotiation of our haulage and our carriage contracts were offset by the impact of additional tariffs in the USA. These tariffs were recovered by applying surcharges to US invoices, which had been recorded as revenue in the accounts. But from the start of the new financial year, we've incorporated these into our standard US price lists. And then administration expenses were broadly flat, with inflationary increases being offset by the savings from restructuring exercises undertaken across all areas of the business. And then moving on to the cash flow and the balance sheet. You can see we ended the year with net funds of 9.8 million up from 5.8 million at the previous year end. Our headroom is further enhanced by a committed but undrawn Barclays facility of 10 million pounds. Inventory reduction was a key area of focus with raw materials in the manufacturing segment and finished goods in the brand segment seeing reductions of 30% and 20% respectively. Net inventory ended the year at 21.5 million down 5.7 million from FY25 and we believe there is still scope for further but more limited reductions in the future as I previously highlighted the way accelerated income licensing income is recognised means there is a time lag before the cash royalties are received minimum guaranteed licensing receivables increased to 17 million pound at year end which meant the 1.4 million of the 10.5 million of revenue from this channel has not immediately been translated into cash However, as noted on the licensing slide, cash receipts from licensing increased from £6.6 million in FY25 to £9.9 million this year. Contributions to pension funds of £1 million this year were significantly lower than last year where we made a one-off injection of £2.3 million to facilitate a buy-in insurance transaction for the smaller of our two legacy defined pension schemes. And capital expenditure again in the prior year was quite high at £4.1 million and that included a new digital printer at Standfast and the fitting out of the Group's new head office at Chiswick. This year no major capital projects were planned and as a result expenditure fell to £700,000 for the full year. So that concludes the financial review of the year. I'll now hand back to Lisa to discuss further our future strategic direction.

Thank you. Thank you very much. Next few minutes I'll now like to summarize where we believe we are in our strategic roadmap and how we're going to push forward with confidence in this strategy. Many of you are familiar with our strategic framework that's been in place now for a few years with four key pillars and four key underpins. We're focused on our interior design community as customers and are on our omnichannel approach to reach them. Heritage brands attract collaborations and lead on our storytelling and licensing appeal. Within products, wallpaper is a growing category and reflects our manufacturing expertise and of course the US will remain our growth market at least until our penetration there has doubled. Our ambition is to decorate spaces that make their owners dream and to achieve this in collaboration with top interior designers around the world, giving them what they want, when and where they need it. This is how the US market works and why we are gaining market share there. Tiny for now, it will grow. As a category, wallpaper is in demand, as I mentioned, and we're clearly recognised as a specialist printing at our UK factory in Loughborough. Wallpaper also sells well online and demand is growing in the US where we can take the lead both with our own house brand and as a supplier to others. North America is where we see rewarding growth and maintain clear ambition as we are indeed under indexed. Culturally we're leaning into developing the teams to behave as a global organisation promoting British design and make with exceptional craft and creativity to an international audience across all platforms however and whenever it suits them to engage this requires agile mindsets and continuous development exciting for me requires also sensitivity across the teams to provide the secure foundation from which to embrace new ways of working digital traction is exciting, having brought forward our plans we will now grow audiences and our direct dialogue glean data and use insights combined this will take us forward celebrating the unique creative propositions of our brands our highly crafted products coupled with the efficiency and ultimately productivity improvements to be leveraged from technology it's all about the balance The benefit of our portfolio of brands, as I think you know, is that we cover a good range of fabrics and wallpaper designs to meet most aesthetic and value preferences. Zoffany is our luxury offer, where we work on bespoke projects at the high end of the market, and we have an exciting collaboration that we announced launching next month to market, that I'm going to show you in a moment. Heritage brands have great traction currently through the recent launches at Sanson and at Morrison Co. and the volume in our business has always been driven by contemporary brands Harlequin and Clark & Clark Looking more closely at the heritage of brands we're delighted to see Morris & Co continue to go from strength to strength revitalised with the newly discovered archive designs in the Huntington collaboration with more to come over the next two years and many years of success ahead of us we're also working on a strong creative campaign directed at new audiences in the US that I can share with you later in the year. Sanderson has been boosted by the high growth collaboration that has strongly outperformed expectations in the first year and we expect that momentum to continue with occasional new designs or colourways dropping to keep the narrative alive. And newly launched this year is also the Sanderson National Trust Collection which has just landed and has offered a great start, following the first collaboration that's been selling well for six years now. This Huntington project has given us a whole new body of work to celebrate, a new chapter of design history in the making. Of the 50 newly discovered designs, 26 have been launched already, with 24 to go this year and next. Lent Lily, that you can just about see there on the cushions and curtains, has fast become an iconic new design in the Morrison Cove portfolio. We believe that this new emphasis will continue for years to come. And Highgrove by Sanderson benefits the King's Foundation and has been a huge success at every level. Sales are the strongest in the first year of any Sanderson collection since 1860. And the halo effect is clear, especially in the US, where Sonson was left known. In fact, around half the sales have been US orders, where our English print mark and decorating style clearly resonates. A select few new designs are being unveiled at this Chelsea Flower Show next month, when the King's Foundation hosts a garden, they have announced, designed by Alan Titmarsh with David Beckham, and we expect a fair amount of attention as we co-sponsor the Highgrove Pavilion across the main avenue. In the fall, a collection of wall designs will join the initiative, completing the full decorating proposition. And moving on to the newest collaboration with Sophony, we announced that Michael Smith's collection goes to market next month, actually on the 26th of May. I've known Michael for a few years since we were in Madrid at the same time. He's widely considered to be America's number one interior designer, which I suppose means the world. Famed for decorating the White House with the Obamas. He's also a huge Softly fan and asked us to help fill a gap in the market for sophisticated outdoor fabrics that might appeal to his clients. Our designers work closely to translate archival designs in six tight color palettes into outdoor fabrics that can also be used indoors to create this capsule. It then took off on a life of its own, was photographed in Cecil Beaton's former home and famous Winter Garden in Wiltshire, with Beaton himself played by Hamish Bowles, who you can see there. He was Anna Winter's global style director. The result is a charming collection that launches to market next month, and Michael is already specifying these articles in his high-end residential project. If Michael Smith couldn't find what he was looking for, we figured nobody could. As we mentioned with Clark & Clark, we believe this brand has huge potential in the US, where it reached $10 million in sell-out this year. With strong new collection launches, catching up from the Lull, which was partly due to tariff caution, and the planned promo trip for Emma Shipley later in the year, there's lots to look forward to this year with Clark & Clark. Harlequin has also recovered and is showing good traction particularly in the US and with hospitality contract sectors that appreciate Harlequin's modern designs and textures. Our new showroom partner in Florida is off to a great start and driving Harlequin growth in the US which all particularly comes with Harlequin from the Sunshine States. We worked hard as you know to bring forward the website development and the whole organisation has transitioned from a purely B2B business to full omnichannel. Digital platforms are driving high margin growth from new customers. Trade customers on our wholesale trade hub that has been greatly improved to include images, inspiration, stories and helpful stock or pricing details has brought 30% more adoption from existing customers. All sites, consumer and trade tell our stories powerful brand stories and help people to make choices. The benefits derived from data and CRM learnings will drive better decisions as we navigate and continue to navigate market changes. I'm thrilled also that we have a new leadership role with Charlotte O'Sullivan joining us in January as Group Digital and Innovations Director to guide our future roadmap in this important area. As I said, we now have six transactional brand sites and a great platform for trade to self-serve. In the full year 27, the year we're in, it's all about finessing and enhancing this proposition, building our user base and frequency of engagement. Charlotte joined us in-house to lend her experience and expertise to our delivery so that we can claim excellence in the future. This year is also about enhancements to the site and embedding the CRM HubSpot that we mentioned we piloted previously. bringing this to life for maximum effect the future opportunity here is undeniably strong we move on to territories there are clearly a few challenges and many uncertainties but we have great product that's in demand excellent teams and now we have the channel to deliver it to our discerning customers our main customer our main customer is the interior design community globally and they're also our best ambassadors as we build our relationships and they trust us as dependable suppliers and creative partners our fan club and industry notoriety grows with the positive effect of endorsement by civil liberated designers some examples here include London's Maddox Creative Studio showing how Morrison Co could be used in quite a different way with wallpaper in a very bold colourful scheme up high as a frieze actually in one of the arts and crafts houses in Chiswick Sophie Robinson colour queen remains the most searched along with Henry Holland on our Harlequin platforms and her very high energy social marketing videos are infectious Michael Smith already mentioned promotes us on many levels in California from his studio showroom and now the new collaboration and Ben meanwhile has decorated for the King, collaborated closely with us on two Morris collections in the past and supported with Kip's May Show Home last year with more in the offering. Again here you can see that the year is just gone. Everything that we set out to achieve has been done. This year it's all about finessing what's working. checking in with our top 10 clients in each region and working with hospitality partners to ensure everybody is getting the designs they need and the best service 24x7 all to build our reputation as a trusted partner supplier and global design authority and in the UK we've also done everything that we promised in FY26 building a much better trade hub the service portal for our customers to interact. Research designs look up details, prices, and stock levels. This is hugely improved from our very functional platform before, but now customers are inspired by our images and ad campaigns, suggested designs they might like, and they can even pay online very 21st century. Hence, take up is positive, which relieves the customer services team to proactively support and problem-solve, adding value where they can. the rollout of last year's pilot with CRM HubSpot I mentioned before will bring together great opportunities to offer even better tailored solutions and service and since we moved to Boise House our dream has been to create a design hub in West London for the exchange of ideas in the design community last month we finally officially launched the Boise Design Club welcoming 30 top designers and a total of 60 guests to our showroom and venue to enjoy a panel talk over cocktails and a delicious dinner at two long tables, as you can see here. The panel discussing archive as the creative engine, very much our topic, was led by Gianluca Longo, former style director of World of Interiors, in conversation with designers Ben Pentris, who you saw earlier, Friend of House, Beata Hyman, and our own Sanderson Design Group Design Director Claire Pallas. We're excited to continue a programme of events that will interest designers and demonstrate our thought leadership and provide hospitality space dedicated to great design and how that makes us feel. We also hosted a dinner for international partners in January inviting distributors from as far away as New Zealand and Kenya markets that rarely get a mention we continue to build our global bonds in residential design and contract with global strategies locally deployed usually with distributors and specialist agents webinars are well received around the world and we believe that we can significantly build our international footprint by nurturing existing and new relationships following our success of this approach in the US and moving on to licensing licensing continues to build strongly with growing international recognition and opportunity to build global partnerships as our brand awareness increases we're working with category specialists and big retail partners approaching the market strategically determining the roadmap for each brand and market to support that brand positioning and our manufacturing teams have achieved an impressive turnaround. The most rewarding aspect is the revitalized environment and the evident pride of the team in having achieved a move back to profitability. We're now beginning to have to hire back to fulfill orders with reasonable lead times. The role of manufacturing in the group is to drive vertical business advantage contributing for overheads and driving efficiency. With the cost basis adjusted and teams working in a more flexible and agile way, productivity is increasing and order book demand building. Continuing with our unique proposition as the only group printing both fabrics and wallpapers, offering top-notch design skills to third-party customers as well as in-house brands, our journey to excellence is well underway. project management and agile ways of working are areas of training across the group the digital first in printing continues with the greatest impact at Anstey where the opportunity is great given new technology solutions that are now available and coming to market we're known for our excellent design our highly skilled craftsmanship and increasingly great customer service with performance improving on every level and good control across all the KPIs. And we are now seven years in to measuring emissions reductions, still going with a further 6.5% reduction this year, having already brought down 40% overall. Samson Design Group is recognised as a champion in the industry, important credentials as a warrant holder As an employer with integrity, this has mostly come from the teams on the ground up, which is especially pleasing. Speaking of our teams, the company wouldn't exist without them. Work Beautiful is a critical pledge within our Live Beautiful framework. Our aim is to celebrate the authenticity of heritage and skilled craft, balance with all the benefits to be reached from technology in terms of efficiency and productivity. We keep to our promise as a real living wage employer even when times are tough and ultimately an engaged workforce will create an inspiring place to work. Looking forward, what do we see? In terms of outlook, We are pleased that the results this year, last year, FY26, and the momentum into this year, FY27, give confidence in the strategy and ability of management to respond to difficult situations. Of course, the Board continues to monitor the external situation and any changes to the geopolitical risk in the currently volatile environment. Sales continue to be encouraging, with the first quarter revenues continuing the momentum we saw in the second half of last year in line with expectations. Our new D2C activity attracts new customers and gives data to drive decisions. Both factories are transformed and with strong momentum driven by demand. Our successful launches last year and this are building sales traction into the future. Licensing continues to perform strongly and importantly underlying sales from existing partners are successful. We have confidence in the strength of our brands, the power of our archive and management's agility giving us the ability to respond to external factors and with the support of our strong balance sheet. In summary, the board has confidence and current trading in the first quarter is in line with expectations. so I thank you for your attention and your support and Michael I'll be pleased to answer any questions that you might have thank you great thank you it's Matthew McEachern from Singers