Sanderson Design Group plc

Good morning ladies and gentlemen welcome to the Sanderson Design Group plc interim results investor presentation. Throughout today's recorded meeting attendees will be in listen only mode. Questions are encouraged they can be submitted at any time using the Q&A tab situated on the right hand corner of the screen. Before we begin we'd like to submit the following poll and I'm sure the company will be most grateful for your participation. I now like to hand over to CEO Lisa Monskew. Lisa good morning.

Good morning and thank you for joining us for Sanderson Design Group's interim results presentation. This morning we're pleased to have announced an excellent set of results showing that our strategy is delivering with double digit growth in both North America and manufacturing and strong performance in our licensing and direct to consumer channels. We've seen continued momentum into the second half and we remain on track to meet full year expectations. Before we present the results I want to briefly address the general meeting that has been requisitioned by one of our shareholders. This proposes to remove our chair with immediate effect and to appoint a named non-executive director to the board. This morning we've published a detailed circular setting out the board's firm position and recommendation to vote against these resolutions. I'd encourage all shareholders to read that document in full Mike and I will explain throughout this morning our presentation our strategy is delivering measurable results supported by a strong independent board and the proposed resolutions would only serve to cause significant disruption to that progress and to our ability to continue to build shareholder value every vote counts so please whatever the size of your holding make sure that your voice is heard details of how to vote are set out in the Circulus this morning however our focus is on the interim results and on updating you with the progress that we are making across the business so with that let me turn to the results the cover of our presentation and throughout it shows our stunning new Morris & Co campaign honouring William Morris as the original design rebel This is particularly aimed at the US and international audiences who may be less familiar with the life and works of Morris and his reputation as the father of design. So now, as promised, I will be delighted to cover the highlights and to pass over to Mike to share more financial detail. Then I will come back to share some strategic initiatives that will take us forward. For anyone less familiar with the group, we are an international house of luxury interior brands designing and manufacturing in the UK and around the world we employ 500 people around the country with factories in Lancaster and Loughborough a logistics centre in Milton Keynes showroom and head offices in London and around 50 staff abroad notably 35 on our North American team you have known us for our six consumer brands now seven we're delighted to have won the opportunity to give designers guild a future recently signing a 10-year licensing agreement to design make and distribute worldwide we looked at this previously and we believe that the brand is very strong the creative vision clear and that it appeals to a different customer with a whole home decorating vision that we can also transmit well online with visualization tools Financial constraints burden the business but the brand can be quickly re-energised and we believe deliver top line growth with positive contribution from the start as soon as we've made the initial investment in opening stock. Our heritage brands and the rich archive that we hold also drive licensing opportunities that build awareness by applying our design onto finished goods such as bedding or rugs or cushions in specialist retailers or in large retail chains design is in the centre of our name and at the heart of everything we do I'm delighted to share our good progress in the first half of this year as you will have seen from the trading update on the 7th August group revenues grew 6% to 51.4 million pounds Our focus market and the biggest luxury market in the world North America grew a stunning 19% with momentum now that suggests our growth rate has accelerated above competitor trends in the US market Manufacturing turnaround is evident thanks to all the measures taken now growing 19% with strong US demand and healthy margins projected to continue online activity to engage with designers and customers alike has delivered high margin sales reaching new customers through this channel driven by MorrisonCo that launched first and with six dedicated brand sites now transactional in the UK and the US and you could expect a designers guild site to follow cash increased to 10 million and £400,000 up from £9.8 million at the end of the year. That's after £1.3 million invested in share purchases into the Employment Benefits Trust. Adjusted profit for tax in the first half has increased to £3.3 million from this time last year to £2.2 million and on these results the Board proposes an interim dividend in line with last year 0.5 pence per share. I'd now like to hand over to Mike Woodcock to present to you the detail behind the numbers. Thank you Mike.

Thank you Lisa. So the first two slides I'll talk to you focus on the 10 KPIs we consistently use to track our performance. These provide a high level view of our financial results and then we cover each in more detail later on. The first half of FY27 has been a period of solid improvement. Revenue improved by 6% versus half 1 FY26 with EBITDA growing 12% and the Justice underlying profit before tax increasing by 47%. Statutory profit before tax improved by 69% year on year and inventory levels have continued to fall following a £5.7 million reduction in FY26. we ended half one with cash reserves of 10.4 million after funding the EBT with the 1.3 million pounds lease that was just mentioned so starting with detailed revenue this slide shows our three key revenue streams of brand product sales licensing and third-party manufacturing income brand product sales were up two percent year-on-year with growth in North America offsetting continued weakness in our home territory licensing grew by 13 percent boosted by £3.6 million of accelerated income and a 5% increase in underlying revenues. And third-party manufacturing revenues maintained the momentum seen in H2FY26, growing 19% to £11 million, with this segment also benefiting from strong sales to North American customers. The UK and to a lesser degree Northern Europe remain challenging amid soft consumer sentiment though we have successfully maintained and defended our market leading position in these regions. Our unique vertically integrated model gives us a competitive advantage to control more elements of the supply chain and we are well positioned to capitalise on opportunities in a consolidating market as demonstrated by our recent enlightening agreement for designers Guildbrad. As the world's largest interiors market, North America remains a clear strategic priority for the group and an important driver of high margin growth. In half one, US brand product sales demonstrated clear forward momentum, increasing 19% in constant currency to £13 million. Our expanded distribution network and ability to launch collections that resonate with the US market is now translating into real demand from buyers and designers, with North America now the group's most profitable, highest margin and fastest growing territory. As noted at year end, the Middle East only represents around 1% of group turnover, so we are not significantly exposed to that market. However, despite the geopolitical situation in the region, sales actually grew by 6% in half Morrison Co. continues to see increased sales on a like-for-like basis, buoyed by the Huntington Collection, which brought previously unproduced archived designs to the market for the first time, and contributed to a 14% increase in the brand's North American sales. At Clark & Clark, which trades at the more value-conscious end of the market, performance has been more muted. U.S. sales have been constrained by a delayed launch by a U.S. partner, and continued softness in the U.K. markets. As we've entered the second half, trading has started to improve and we remain optimistic for the brand's potential going forward. Across the brands, High Growth by Sanderson has been the standout success since it launched in May 2025, being the highest-grossing collection ever in its first year. This has supported the growth of the Sanderson brand globally and has been particularly well received in North America, with High Growth achieving the highest proportion of US sales of any new collection. Revenue from Harlequin has stabilized after a number of years of decline and recent collection launches have recalibrated the brand meaning it's well set for future growth. Zoffany's collaboration with Michael S. Smith is another example of a designer-led collaboration with a range of high-end indoor outdoor products. Michael S. Smith is one of the top interior designers in the US and the partnership gives Zoffany creditability and a profile he could not achieve through conventional marketing. Additionally, it demonstrates the importance of cultivating strong relationships with leading designers in the US market. The group operates a unique, vertically integrated model in the luxury interiors market. Through our two factories, Anstey and Stamplast and Barracks, we are the only designer that controls its own manufacturing across both fabrics and wallpapers, printing for both our own brands and third party customers. We focus on delivering excellence across design, manufacturing, customer service and innovation. The restructuring programmes completed last year across both sites have transformed our manufacturing operations and we now have a more agile workforce and an increased adoption of digital printing techniques. Third party manufacturing revenue grew by 19% to £11 million on strong demand from US brands and buyers. Internal manufacturing recovered strongly, up 18% to £6.2 million despite us reducing group inventories by a further £800,000 in the first half of the year. Our workforce across both Anstey and Stamphaston Barracks has shown real drive over the course of the first half and we thank the teams for their continued flexibility and dedication. The momentum in this segment of the group is set to continue with a positive order book moving into half two. We continue to invest in both factories with digital printing now accounting for 64% of revenues. Total planned investment for the year will be second half weighted as we continue to upgrade our digital printing capabilities. Technological advances allow for enhanced speed and flexibility and optimised productivity and efficiency across both the sites. Licensing revenue was up 13% at £4.9 million. Underlying revenue shown in the first column in the table which excludes the impact of the IFRS 15 accounting standard grew 5% to £4.1 million contributing strongly to the group's cash generation Accelerated income is a requirement of IFRS 15 and represents the total minimum guaranteed sales associated with newly signed contracts In half one we recognise £3.6 million of revenue reflecting the signing of new licences, renewals and extensions including those with Blinds2Go and William Sonoma Looking at the pipeline of renewals and new partnerships in half 2 we expect full year licensing revenue to be broadly in line with the full year FY26. This next slide analyses the first column on the previous table looking at underlying licensing income by brand and by territory. In the UK the 11% growth in underlying revenues reflects the continued strong performance of all our partners including the Habitat 2 agreement signed in FY25 and encouraging results from our long-term and newly extended Blinds2Go partnership. North American revenues continue to be driven by Morrison & Co's agreements with Ruggable and the Williams Sonoma Group and in the lower table you can see that Morrison & Co remains the group's most licensed brand. Looking ahead we're confident in the licensing opportunities created by our recent design launches including the Morrison & Co Huntingdon collaboration Sanderson Highgrove and the new Voicy House collection. Signing further licensing agreements remains an important focus. Beyond the direct revenue generated by leveraging the group's brands and design archives, it raises the profile of our designs more broadly and reinforces demand across the wider business. Gross profit continues its upward trajectory, and the £35.5 million was up £2.5 million compared to HY and FY26, with improved performance across all segments. Our overall gross profit percentage increased by 90 basis points to 69.2%. Within the brand segment, the increase was driven by the strong performance of both the higher margin North American market and the higher margin direct to consumer channel. However, the key driver behind the group's overall improvement within the manufacturing segment were a combination of sales growth, restructuring and various other efficiency projects across both factories saw gross profit increased by 590 basis points to 39.7%. Adjusted profit before tax increased 47% to £3.3 million, demonstrating a sustained improvement in group profitability and was driven by a combination of the strong North American growth, the continued manufacturing turnaround and increased licensing revenue. The result also reflects management's prior actions to reduce that cost base, and we remain committed to a prudent approach to cost control. Net distribution and selling expenses have remained broadly flat, with increases in carriage costs arising from fuel prices and tariffs being offset by various efficiency programmes. Administration expenses increased by £1.7 million compared to half one FY26. due to investments in the group's IT and DTC infrastructure, the timing of certain marketing expenditure and inflationary increases. This chart highlights that net cash increased from £9.8 million on 31 January to £10.4 million at the half year. On top of our cash reserves, headroom is further enhanced by a committed but undrawn Barclays facility of £10 million EBITDA of £4.6 million was 12% higher than the corresponding period last year and contributed significantly to the cash build in the period. A highlight of FY26 was a £5.7 million reduction in inventory levels across the group and it's pleasing to report a further £800,000 reduction in H1 FY27. Capital expenditure in half one totaled £1 million but as I noted earlier we expect this to increase in the second half as we continue to invest in our factories. We also funded the purchase by our EBT of 2.2 million shares at a cost of £1.3 million to satisfy the future vesting of share schemes. With these cash reserves of £10.4 million and a strong balance sheet we are well positioned to capitalise on opportunities in a consolidating market as demonstrated by our recent strategic licensing agreement to the Designers Guild brand. So that concludes the financial review of the first half of the year and I'll now hand back to Lisa to update further on our future strategic direction. Lisa.