Sanderson Design : ANNUAL REPORT

Live Beautiful

Sanderson Design Group

Annual Report & Accounts 2024

Sanderson Design GroupAnnual Report & Accounts 2024	Sanderson Design GroupAnnual Report & Accounts 2024

We are a luxury interior furnishings group united in a single purpose

To bring the beautiful into people's homes and lives.

Strategic Report	Governance
03	At a Glance	49	Board of Directors
04	Highlights	50	Group Leadership Team
06	Chairman's Statement	51	Corporate Governance
08	Chief Executive Officer's	54	Nomination Committee
	Strategy and Operating		Report
	Review	55	Directors' Remuneration
12	Our Business Model		Report
13	Quintessentially British	59	Audit Committee Report
	- Our Brands	61	Report of the Directors
20	Licensing
63	Statement of Directors'
21	Chief Financial		Responsibilities
	Officer's Review

1. Key Performance Indicators
2. Stakeholder Engagement

1. Section 172 Statement
2. Live Beautiful

33 Greenhouse Gas Emission and Energy Consumption Reporting

35 Climate-related Financial Disclosure Regulations

43 Principal Risks

Financial Statements

65 Independent Auditors' Report to the Members of Sanderson Design Group PLC

70 Consolidated Income Statement

1. Consolidated Statement of Comprehensive Income
2. Consolidated Balance Sheet
3. Consolidated Cash Flow Statement
4. Consolidated Statement of Changes in Equity
5. Notes to the Consolidated Financial Statements

1. Company Balance Sheet
2. Company Statement of Changes in Equity

99 Notes to the Company Financial Statements

1. Glossary
2. Five-YearRecord

107 Shareholder Information

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Strategic Report

1. At a Glance
2. Highlights

1. Chairman's Statement

1. Chief Executive Officer's Strategy and Operating Review

1. Our Business Model
2. Quintessentially British - Our Brands

1. Licensing
2. Chief Financial Officer's Review

1. Key Performance Indicators
2. Stakeholder Engagement

1. Section 172 Statement
2. Live Beautiful

1. Greenhouse Gas Emission and Energy Consumption Reporting

1. Climate-relatedFinancial Disclosure Regulations

1. Principal Risks

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At a Glance

We are Sanderson Design Group PLC, an international luxury interior furnishings company that designs, manufactures, and markets wallpapers and fabrics together with strong licensing partnerships that produce a wide range of ancillary interior products. Design is at the heart of everything we do.

Our Vision

To lead the interiors industry in transforming the way we design, manufacture and distribute, enriching people's lives, helping them to live beautiful.

Our Purpose & Values

As custodians of over 160 years of design experience, our purpose is to Bring the Beautiful into People's Homes and Lives. We do this by being:

Intrepid: We're brave, we're bold, we take the lead, and inspire others around us.

Imaginative: We take a creative and innovative approach to everything we do.

Respectful: We consider customers, colleagues, the planet, and the people who live on it.

Starting the

Journey to

Sustainability.

0/30	#1
ZeroBy30	The employer of choice
We are committed	We are committed to
to being net carbon	being a great and happy
ZeroBy30.*	place to work.

Product Overview

The Group is home to a collective of six quintessentially British luxury interior brands targeted at consumers: Sanderson, Morris & Co., Zoffany, Harlequin, Clarke & Clarke and Scion as well as two manufacturing brands which produce fabric and wallpaper for the industry.

We operate in the upper sector of the market, producing high value products. Our UK domestic market is strongly penetrated, and our USA subsidiary is a key focus for the business.

Locations

We employ 610 people globally across our brands and manufacturing businesses, with the majority based in the UK.

• Refer to Greenhouse Gas Emission and Energy Consumption Reporting section for definition of ZeroBy30.

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Highlights

Sanderson Design Group PLC (AIM: SDG), the luxury interior furnishings group, is pleased to announce its financial results for the 12-month period ended 31 January 2024.

Revenue

£108.6m

2023: £112.0m (-3.0%)

Adjusted underlying EPS*

13.74p

2023: 14.18p (-3.1%)

Cash**

£16.3m

2023: £15.4m (+5.8%)

Adjusted underlying profit before tax*

£12.2m

2023: £12.6m (-3.2%)

Statutory profit before tax

£10.4m

2023: £10.9m (-5.4%)

Basic EPS

11.46p

2023: 12.42p (-7.7%)

• Excluding share-based incentives, defined benefit pension charge and non-underlying items as summarised in note 12.
• Cash is defined as cash and cash equivalents less borrowings. For the purpose of this definition, borrowings does not include lease liabilities.

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Highlights continued

Financial highlights

• Revenue marginally down 3.0% at £108.6m (FY2023: £112.0m), in what has been a challenging consumer environment
• A record year for licensing, with sales up 67.7% at £10.9m (FY2023: £6.5m)
• North America, our strategic growth market, performed strongly in the year, with brand product sales up 8.2% in reported currency, and up 9.2% in constant currency
• Total manufacturing sales fell 10.3% to £35.0m (FY2023: £39.0m)
• Operating cost efficiencies and contribution from licensing offset volume decline to deliver broadly similar profit before tax for the year. Adjusted underlying profit before tax of £12.2m (FY2023: £12.6m). Reported profit before tax of £10.4m, down £0.5m (FY2023: £10.9m)
• Liquidity and headroom of £26.3m
  (FY2023: £27.9m) with cash position of £16.3m
  (FY2023: £15.4m) and banking facilities of
  £10.0m (FY2023: £12.5m)
• Proposed final dividend of 2.75p per share (FY2023: 2.75p) to give a total dividend for the year of 3.50p (FY2023: 3.50p)

Operational highlights

• A significant number of new multi-year licensing agreements with a wide range of businesses including major retailers such as NEXT and Sainsbury's
• We announced a direct-to-consumer Morris & Co. online shop that will showcase the strength of the Morris & Co. full portfolio of core products and finished goods to the UK, USA and EU.
  This adds to the Morris & Co.'s US licensing agreements with Ruggable, the washable rug company, and the US retailer Williams Sonoma, for tableware and cookware
• Strong product launches from our brands, including a collaboration for Sanderson with designer and illustrator Giles Deacon, and the Disney Home x Sanderson capsule collection launched in autumn 2023 and was well received
• The Group's head office will relocate later in the year to the Sanderson brand's historic home in Chiswick, west London at Voysey House

Sustainability highlights

• Planet Mark certification for Year 6 of carbon reduction, reflecting our Live Beautiful sustainability pledge
• CO2 emissions reduced by 10.4% in FY2024 on location basis, ahead of our plan to reach ZeroBy30
• Energy consumption all from renewables, validated by Planet Mark
• Product packaging focus at our warehouses, with 15% reduction in plastic and 12% for cardboard and fabric bags moved from plastic to 100% recycled/100% recyclable
• Climate-relatedFinancial Disclosure Regulations 2022 will be reported in this year's annual report for the first time
• We are proud to be a Real Living Wage employer

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Chairman's Statement

Record licensing sales reflect the unique intellectual property in the Group's brands and the strategic focus on licensing as a growth driver.

Dianne Thompson

Non-executive Chairman

During the year ended 31 January 2024, our licensing activities within our brands business became firmly established as the third strategic pillar for the Group, complementing our brand sales and manufacturing operations. For the first time in the Group's history, licensing contributed more than £10m of sales, at £10.9m for the year ended 31 January 2024 (FY2023: £6.5m). These record sales reflect the unique intellectual property in the Group's brands and design archives along with the Board's strategic focus on licensing as a growth driver.

During the year, we signed a significant number of new licensing agreements with a wide range of businesses including major companies such as NEXT and Sainsbury's. The visibility of licensing income continues to strengthen, given recent and upcoming product launches, contract renewals and extensions, and a strong pipeline of opportunities. The incremental costs to the Group of licensing sales are very low so licensing is reported at a 100% margin, and leverages the strength of our brands' performance over recent years.

The excellent performance from licensing during the year mitigated the challenging consumer environments in the UK and other markets but North America, the Group's second largest market after the UK, performed strongly and will continue to be the Group's most important geographic region for driving growth. The strategy for the UK and other geographic regions is to control costs and drive efficiency whilst ensuring that the Group is positioned to take advantage of any upturn in consumer confidence.

During the year, we have continued to advance our Live Beautiful sustainability strategy, which has two major commitments: for the Company to be net carbon zero by 2030 and to be the employer of choice in the interior design and furnishings industry. We were pleased to receive our Planet Mark Year 6 certification earlier this year, marking the sixth financial year that the sustainability of our business has been measured by Planet Mark, the sustainability certification organisation. In the year to 31 January 2024, our total carbon footprint was 5,707 tonnes, a decrease on FY2023's 6,368 tonnes reflecting continued progress in our journey to net zero.

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Chairman's Statement continued

The strategy for the UK and other geographic regions is to control costs and drive efficiency whilst ensuring that the Group is positioned to take advantage of any upturn in consumer confidence.

This year's annual report marks the first time that the Group has been required to include a report under the Climate-related Financial Disclosure Regulations 2022. We welcome this opportunity to provide further clarity for investors and wider stakeholders on how the Group is managing climate-related risks and opportunities.

Further details of the Group's strategic and operational progress are included in the Chief Executive Officer's Strategy and Operating Review.

Financial results

The results for the year ended 31 January 2024 reflect strong growth in licensing income offset by the challenging consumer environment in the UK and Europe. Adjusted underlying profit before tax at £12.2m was down 3.2% on the previous year (FY2023: £12.6m). Reported profit before tax of £10.4m was down 5.4% for the year ended 31 January 2024 (FY2023: £10.9m). The Group's Balance Sheet remains strong with cash at the year end of £16.3m compared with £15.4m at 31 January 2023 and £15.9m at 31 July 2023.

Dividend

The Directors recommend a final dividend of 2.75p (FY2023: 2.75p) taking the full year dividend to 3.50p (FY2023: 3.50p). Payment of the final dividend, if approved at the Company's forthcoming Annual General Meeting, will be made on 9 August 2024 to shareholders on the Company's register at 12 July 2024, with an ex-dividend date of 11 July 2024. The Board remains committed to a progressive dividend policy as part of the capital allocation priorities of the Group.

People

On behalf of the Board, I would like to thank all of our colleagues for their commitment, energy and creativity during another year of challenges and opportunities for the business.

Outlook

The positive momentum in our licensing activities has continued into the current year with two major renewals, with window coverings company Blinds 2go and rugmaker Brink & Campman, which together represent accelerated income of approximately £2.0m.

Trading conditions overall are expected to remain challenging in the year. The Board remains focused on its strategic growth drivers, including North America and licensing, and remains confident in the business's agility to navigate further market uncertainties, supported by the Company's strong cash position. The Board's expectations for the current year's performance are unchanged.

Dianne Thompson

Non-executive Chairman

23 April 2024

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Chief Executive Officer's Strategy and Operating Review

Significant strategic and operational progress was made during the year.

Lisa Montague

Chief Executive Officer

Introduction

The results for the year ended 31 January 2024 show the strength of our business model, which has provided the Group with the ability to face into a generally challenging consumer environment. Our business model has three pillars - brands, licensing and manufacturing - bringing resilience to the Group in that the impact of subdued consumer confidence on brand product sales has been substantially mitigated by licensing, which is now firmly established as a key part of the business.

It was a record year for licensing, with sales up almost 68% at £10.9m (FY2023: £6.5m), representing approximately 10% of Group sales. As licensing is reported at 100% margin, as a result of leveraging the strength of our brand's performance over recent years, the contribution to Group profits is substantial.

The strategic growth market of North America performed strongly in the year, with brand product sales up 8.2% in reported currency, and up 9.2% in constant currency. Total Group sales for the year were 3.0% below the prior year at £108.6m (FY2023: £112.0m) in reported currency, down 3.0% in constant currency.

As part of our continued focus on cost control, we successfully managed inflationary pressures during the year including pay rises in line with the Real Living Wage. We are proud to be a Real Living Wage employer and we have honoured this year's increase for FY2025. We again finished the year with a strong balance sheet, with cash at 31 January 2024 of £16.3m, which protects the business in current markets and enables us to invest for growth.

We have entered the current financial year with strong momentum in licensing and with strong product launches from our brands, including a collaboration for Sanderson with designer and illustrator Giles Deacon. The Sanderson brand is a key focus for the current year with a number of initiatives underway to maximise the success of the brand, starting with Giles Deacon's collection, which has been well received.

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