Trading Update

Sanderson Design Group PLC (AIM: SDG), the luxury interior design and furnishings group, announces a trading update for the financial year ending 31 January 2025.

The Group's half year results announced on 16 October 2024 stated that the Board's expectations for the full year were reliant on a projected improvement in the trading environment. The Board now expects Group sales for the year to be approximately £101 million (FY24: £108.6m), a shortfall of less than 5% to its earlier expectations, but the resultant sales mix will have a significant impact on full year profitability.

Brand product sales for the year are expected to be down approximately 9% compared with last year (FY24: £78.8m) after a recent worsening of trading conditions. Brand sales of wallpapers and fabrics in our retail channel were 5% up in December 2024, compared with the same month in 2023, whereas sales in the first two weeks of January are down 13% compared with the same time last year, with the downturn in consumer confidence being most significant in the UK, our largest market.

Subdued customer demand, particularly for fabric, is expected to result in a greater than anticipated level of year-end stock provisioning although this inventory is expected to unwind in the coming months. Softness in the contract market at the end of the year, particularly in North America, has also impacted Brand product sales although the pipeline of potential contract orders remains strong.

Licensing has shown good momentum since the half year results and is expected to end the year delivering revenue in the region of £10.1 million to £10.9 million (FY24: £10.9m), with the final outturn dependent on the timing of signature of contracts in work.

In Manufacturing, third-party orders have reflected the challenging consumer and industry environment. Expectations of an improved trading environment towards the end of the year have not been realised, demand for higher-margin repeat orders has recently declined and some customers are delaying planned launches. Although there has been success in new business wins, this is for smaller print runs of new designs which are at lower margins owing to initial set up costs.

As a result of the factors outlined above the Board now expects underlying pre-tax profits for the year ending 31 January 2025 to be in the region of £4.0 million to £4.8 million.

The Group benefits from a robust balance sheet and continues to focus on cash generation. Net cash at 31 January 2025 is expected to be approximately £5 million (H1 FY25: £9.6m; FY24: £16.3m), reflecting the one-off £2.3 million pension contribution in June 2024, one-off capital expenditure items of approximately £3 million and slightly increased inventory levels. Net cash is expected to build in the first half of the new financial year. In addition, the Group has a committed undrawn £10 million revolving credit facility and uncommitted £7.5 million accordion.

The Group is continuing to accelerate strategic changes and focusing on efficiency and cost savings to better position the business for the current trading environment and for future growth. The Group benefits from a strong portfolio of brands, a valuable archive and exciting upcoming product launches. The Board remains confident in the Group's future performance once trading conditions improve.

The Group expects to announce its results for the financial year ending 31 January 2025 in April 2025.