TIDMSDG
RNS Number : 9151Y
Sanderson Design Group PLC
18 May 2021
18 May 2021
SANDERSON DESIGN GROUP PLC
("Sanderson Design Group", the "Company" or the "Group")
Financial Results for the year ended 31 January 2021
Sanderson Design Group PLC (AIM: SDG), the luxury interior
design and furnishings group, announces its financial results for
the year ended 31 January 2021.
Financial highlights
Year ended 31 January 2021 2020 Change
Revenue GBP93.8m GBP111.5m (15.9)%
--------- ---------- --------
Adjusted underlying profit
before tax* GBP7.1m GBP7.4m (3.7)%
--------- ---------- --------
Adjusted underlying EPS* 8.00p 9.26p (13.6)%
--------- ---------- --------
Statutory profit before tax GBP5.0m GBP4.4m 14.6%
--------- ---------- --------
Statutory profit after tax GBP3.9m GBP3.7m 4.9%
--------- ---------- --------
Net cash excluding 'Leases' GBP15.1m GBP1.3m > 1000%
--------- ---------- --------
Net cash/(debt) including GBP9.3m GBP(7.1)m n.m.
'Leases'
--------- ---------- --------
*excluding share-based incentives, defined benefit pension
charge and non-underlying items
-- Revenue of GBP93.8m (2020: GBP111.5m), reflecting the
difficult global marketplace in the first half year caused by the
effects of lockdowns worldwide. Trading in the second half
recovered to pre-pandemic levels resulting in the previously
announced upwards revision to Board expectations for the financial
year.
-- Brand sales down 15.4% during the year but just 1.1% down in
the second half compared with H2 2020:
o Morris & Co. sales continue to exceed expectations,
particularly in Northern Europe.
o Brand product sales in Northern Europe were down just 5.0% in
constant currency, 4.3% in reportable currency, with Scandinavia's
performance proving resilient.
o Core licensing income** was up 3.3% despite the pandemic.
-- Manufacturing sales down 20.2% reflecting first half-year
factory closures, partly offset by strong demand from UK and export
markets with third-party sales of GBP11.0m in the second half (H2
2020: GBP11.7m).
-- Adjusted underlying profit before tax GBP7.1m (2020:
GBP7.4m), including net GBP2.7m Coronavirus Job Retention Scheme
('CJRS'), with stronger sales in the second half-year, coupled with
the effect of the measures to reduce discretionary and fixed
costs.
-- Strong cash inflow from operating activities of GBP18.2m
(2020: GBP9.6m) leading to increased liquidity and headroom of
GBP30.5m at 31 January 2021 (2020: GBP13.8m) with net cash position
of GBP15.1m (2020: GBP1.3m).
** core licensing income excludes the recognition of fixed
minimum guaranteed licensing income under IFRS 15
Operational highlights
-- Board and leadership team completed in February 2020. The new
team successfully took the business through the pandemic and
continues to execute the strategy.
-- Efficiency and cost-saving initiatives, including
restructuring in August 2020 with the reduction of 68 positions,
delivered GBP3m of annualised cost savings.
-- Investment to elevate the brands and increase online presence through new brand websites and collaborations.
-- Change of name to Sanderson Design Group PLC*** in December
2020, and simplification of the corporate and business
structures.
-- Launch of Scion online shop expected in early June 2021
following agreement with leading internet retailer Jane Clayton and
Company in November 2020.
-- Clarke & Clarke's partnership with Kravet in North America performing ahead of expectations.
-- Launch of Live Beautiful sustainability strategy in April
2021 with ESG targets and the second annual Planet Mark
certification.
*** formerly known as Walker Greenbank PLC
Dianne Thompson, Sanderson Design Group's Chairman, said:
"First, I would like to put on record my gratitude to all of the
Group's employees for their commitment and adaptability throughout
the pandemic. It has been a difficult time for everyone but
colleagues' support for each other, for customers and suppliers has
been exemplary, for which I thank them deeply.
"Whilst Covid-19 affected our operational activity during the
year, it accelerated the strategic development of the Group. It
concentrated our focus on improving the underlying efficiency,
agility and productivity of the business. It also sharpened our
focus on digital strategy and sustainability.
"Current sales trends in February, March and April 2021 were
slightly ahead of our expectations reflecting increased demand for
home interiors. The Group has a strong balance sheet with net cash
at 31 January 2021 of GBP15.1 million, which positions the business
strongly in the event of further disruption. Overall, we remain
cautiously optimistic in our outlook for the year ahead."
Analyst conference call
A conference call for analysts and institutional investors will
be held at 10.00 a.m. today, 18 May 2021. For dial-in details,
please contact Buchanan at SDG@buchanan.uk.com .
For further information:
Sanderson Design Group PLC c/o Buchanan +44 (0) 20
7466 5000
Lisa Montague, Chief Executive Officer
Michael Williamson, Chief Financial
Officer
Caroline Geary, Company Secretary
Investec Bank PLC (Nominated Adviser
and Broker) +44 (0) 20 7597 5970
David Anderson / Alex Wright / Ben
Farrow
Buchanan +44 (0) 20 7466 5000
Mark Court / Sophie Wills / Toto
Berger / Charlotte Slater
SDG@buchanan.uk.com
Notes for editors:
About Sanderson Design Group
Sanderson Design Group PLC is a luxury interior furnishings
company that designs, manufactures and markets wallpapers, fabrics
and paints. In addition, the Company derives licensing income from
the use of its designs on a wide range of products such as bed and
bath collections, rugs, blinds and tableware.
Sanderson Design Group's brands include Zoffany, Sanderson,
Morris & Co., Harlequin, Scion, Anthology and Clarke &
Clarke.
The Company has a strong UK manufacturing base comprising Anstey
wallpaper factory in Loughborough and Standfast & Barracks, a
fabric printing factory, in Lancaster. Both sites manufacture for
the Company and for other renowned interiors brands.
Sanderson Design Group employs approximately 600 people and its
products are sold worldwide. It has showrooms in London, New York,
Chicago, Paris, Amsterdam and Dubai.
Sanderson Design Group trades on the AIM market of the London
Stock Exchange under the ticker symbol SDG.
For further information please visit:
www.sandersondesigngroup.com
CHAIRMAN'S STATEMENT
The financial year ended 31 January 2021 was a challenging year
during which Covid-19 was the dominant theme for individuals,
businesses and society.
First, I would like to put on record my gratitude to all the
Group's employees for their commitment and adaptability throughout
the pandemic. It has been a difficult time for everyone but
colleagues' support for each other, for customers and suppliers has
been exemplary, for which I thank them deeply. The over-riding
priority for the Company throughout the pandemic has been the
health, safety and wellbeing of all at the Company, and it will
continue to be so.
Whilst Covid-19 affected our operational activity during the
year, it accelerated the strategic development of the Group. It
concentrated our focus on improving the underlying efficiency,
agility and productivity of the business. It also sharpened our
focus on digital strategy and sustainability.
To prepare the business for the future, we changed the Company's
name in December 2020 from Walker Greenbank PLC to Sanderson Design
Group PLC. The name change, which has been well received, is part
of the simplification of the corporate structure of the Group and
gives us a much better online presence. The new name, which
leverages the international recognition of the Sanderson brand,
better represents our brand and manufacturing assets and highlights
design as being at the centre of what we do.
Whilst the name has changed, our heritage continues, and we
remain a business that was first incorporated on 3 May 1899; the
custodian of brands dating back to 1860. We have a responsibility
to protect and preserve the past, in terms of the heritage of our
business, brands and manufacturing, and, as importantly, to ensure
the longevity of this heritage for future generations.
Sustainability is, therefore, imperative for our business and
will underpin our growth. During the year we developed our
sustainability strategy, Live Beautiful, which was launched on 16
April 2021 this year with the ambitious but achievable objective of
becoming net carbon zero by 2030. Sustainability is high on the
Board's agenda and I am passionate about Sanderson Design Group
leading the industry on this important issue.
Our strategy for the Group's growth remains unchanged and is
focused on five key areas:
-- Driving the individual brands
-- Focusing on core products of wallpaper, fabric and paint
-- Partnering with core customers
-- Investing in people
-- Growing key geographies - UK, Northern Europe and US
Whilst inevitably Covid-19 has had an impact on the delivery of
this strategy, considerable progress was made during the year.
Further details are provided in the Chief Executive Officer's
Strategy and Operational Review.
Financial Results
Our results for the year ended 31 January 2021 reflect the
impact of Covid-19 on the business. This impact was mitigated by
careful cost control, the UK Government's Coronavirus Job Retention
Scheme ("CJRS") and other measures. The first half of the year saw
the greatest impact from lockdown measures, including temporary
factory closures, whereas trading in the key autumn selling period
in the second half was better than anticipated. Our balance sheet
strengthened considerably throughout the year, protecting the
business against uncertainties and reflecting the money saved
through delaying product launches and capital expenditure and
through a restructuring programme which is expected to deliver
annualised cost savings of GBP3 million.
Dividend
The Board recognises the importance of dividend income to
shareholders and is committed to recommencing dividend payments as
soon as conditions allow. Whilst our financial position improved
during the financial year, there remains significant uncertainty in
the external trading environment as the result of the ongoing
pandemic. We do not, therefore, believe it would be prudent to
declare a final dividend for the financial year 2021. The Board
will continue to review the dividend policy during the coming
months and an update will be provided at the time of the
announcement of the Company's interim results later in 2021 with
the objective of the Company returning to dividend payments at the
earliest opportunity.
People
The success of any business is built on its people. On behalf of
the Board, I would like to thank all of our colleagues for their
continued hard work and dedication during the year, particularly in
light of the exceptionally challenging circumstances that have
characterised the pandemic.
Dianne Thompson
Non-executive Chairman
17 May 2021
CHIEF EXECUTIVE OFFICER'S STRATEGY AND OPERATIONAL REVIEW
Covid-19
Our 2021 financial year started well. The new leadership team
was in place and we were focused on delivering the growth strategy
for the business that we had formulated and announced during the
previous year. Almost immediately we were affected by Covid-19,
which brought the temporary closure of our factories in March 2020
along with lockdowns and severe disruption across our target
markets. Against this challenging backdrop, I am pleased to report
that we made significant progress across the business during the
year.
Most importantly, we acted quickly to protect the health and
safety of our employees. We also took significant operational and
financial measures to protect the liquidity of the Group.
Trading was impacted by the three national lockdowns in the UK,
starting on 23 March, 4 November and 28 December 2020, and by
lockdowns in our export markets. During the first UK lockdown our
manufacturing facilities were closed. With the phased reopening of
our factories and the relaxation of lockdown measures worldwide,
trading improved from a low in April 2020 and gained momentum
towards the half year end and continued strongly in the key autumn
selling period.
Our manufacturing facilities operated at full capacity in the
second half of the financial year, during which trading overall was
more in line with prior years.
We are grateful for the support we received from the UK
Government's CJRS, particularly during the critical weeks of the
first lockdown. In April 2020, a total of 510 employees in the UK
were furloughed, which reduced to just 133 at the half-year end and
reduced further to 15 by 31st January 2021. During the financial
year, we received a total of GBP3.1 million from the CJRS. From 1
April 2021, we have no staff furloughed. We returned GBP0.4 million
to the UK Government in February 2021 relating to 68 employees made
redundant in a restructuring exercise completed in August last
year. We have also returned all CJRS monies (totalling GBP0.1
million) received in the current financial year in April 2021.
On 7 May 2020, the Group entered a loan contract with Wells
Fargo for US$565,818 under the US Paycheck Protection Payment
scheme. No repayments have been made in relation to this loan. On
20 April 2021, the Group applied for forgiveness of the loan in
accordance with the US Government Small Business Administration
guidance. Whilst we expect the loan to be forgiven, in the event
that forgiveness is not granted it is the Group's intention to
repay the loan before 31 January 2022.
Internal communications have been very important throughout
Covid-19. I have communicated regularly with all colleagues, which
has made us more cohesive as a business, and used video
conferencing to create a forum for discussion. This enhanced
internal communication will continue going forwards.
Strategy and progress
It is a credit to everyone at the Company that we have been able
to deliver underlying pre-tax profits of GBP7.1 million (2020:
GBP7.4 million) on sales of GBP93.8 million (2020: GBP111.5
million). I would like to send my thanks to all colleagues for this
achievement, which reflects everyone's hard work and
persistence.
We set out our growth strategy for the Group in October 2019 and
it remains unchanged. The key elements are summarised below:
Driving the brands: The Group has a strong and broad portfolio
of powerful brands, each with clear market positioning. Our
intention is to focus precisely on the individuality of each brand,
giving each its own market, channel, product and communications
strategy; thereby strengthening their appeal to drive demand in
their respective marketplaces.
Focusing on core products: The Group has two strong
manufacturing arms that benefit the brands' business. Our short-
and medium-term strategy is to focus on our core products of
wallpaper, fabric and paint and to build our finished-goods offer
with our licensing partners.
Partnering with core customers: The strategic focus on the
individuality of each brand, and our tailored service, will help
cement relationships with key customers, while enhanced
communication will drive demand for both heritage and contemporary
brands from consumers, through our interior design partners, retail
channels and hospitality partners. We will continue to deepen our
relationships with existing licensing partners and seek new
opportunities.
Investing in people: People, and creativity, are at the heart of
our business. In our industry, Sanderson Design Group is a favoured
destination for emerging new designers, and we will benefit from
doing even more to bring in new creative and other talent, nurture
it and create a high-performance culture. The commitment,
flexibility and agility demonstrated during the pandemic has
already achieved a step change towards a more responsive
organisation with a strong, aligned team.
Growing key geographies: Our brands have significant
international market potential, reflected in their being sold in
more than 85 countries worldwide. To ensure focus, we are
concentrating our efforts on building market share in three key
geographies: the UK, Northern Europe and the US. Our approach is
tailored to each individual region.
We have made significant progress during the year in pursuing
this strategy despite the pandemic.
Efficiency
Historically, the Company has launched around 55 new collections
each year. We planned to reduce this to 37 collections in the 2021
financial year but, owing to Covid-19, we launched just 33
collections.
An important strategic objective to improve the efficiency of
the business is to significantly reduce the number of colourways
and other options within the collections so there are fewer,
stronger launches. This will give a corresponding reduction in the
number of new stocked options (SKUs) of fabric and
wallcoverings.
New SKUs launched in financial year 2021 reduced from 2,311 in
financial year 2020 to 1,293. It is expected that the number of
SKUs launched will reduce further in the current financial year to
about 1,000 and to remain around this level each year going
forward.
One of our first responses to the pandemic was to suspend the
launch of new collections as our factories were closed and our
markets severely disrupted. This had the effect of avoiding a very
significant amount of spend on pattern books, launches and
inventory, therefore strengthening our cash position.
In December 2020 we renamed the Company from Walker Greenbank
PLC to Sanderson Design Group PLC, to create a better platform from
which to elevate the Company's brands and other assets. Walker
Greenbank's corporate structure had become over-complicated, with
multiple holding companies and sub-brands. Walker Greenbank itself
was a holding company with little resonance in the industry.
The Group undertook a restructuring exercise in August 2020
resulting in a cost saving of GBP1.2 million in the year ended 31
January 2021, and is expected to deliver total annualised savings
of GBP3.0 million going forwards. The Group is now leaner, more
agile and better prepared for the future.
Whilst Covid-19 impacted our planned launches, it propelled
innovation in the niche launches that we did proceed with. It
enabled us to accelerate some of our ideas to improve efficiency in
the launch process, particularly around the use of digital
communications to mitigate the cost of traditional printed pattern
books.
In future, all product pre-launches will be digital. This is
because the customer feedback from the initial sampling can be used
to inform the launch marketing, pattern book content and
inventory.
The launch of Scion's online shop, initially announced in
November 2020, is now planned for early June 2021. The shop,
dedicated solely to Scion, will sell the brand's products direct to
consumers under a franchise agreement with Design Online Limited
("Design Online"), a company formed by the leading internet
retailer Jane Clayton and Company. The online shop, to be called
Scion Living, will serve customers in the UK and Europe before
potentially expanding internationally. The shop's product range is
expected to include all Scion fabrics and wallcoverings along with
bespoke furnishings and an extensive range of licensed
products.
The communication of the Company and its brand assets has been
simplified with the name change to Sanderson Design Group, which
was implemented ahead of the relaunch of our brand, trade and
corporate websites. The new websites represent a major improvement
to the online presence of our brands. They are more engaging for
consumers, which in turn will help drive sales for our trade
customers. The trade site itself has better functionality to
accommodate the increase in online transactions by trade
customers.
Sustainability
We also unveiled our Company's purpose statement during the
year: "To Bring the Beautiful into People's Homes and Lives." This
purpose statement has been developed alongside our Live Beautiful
sustainability strategy and other ESG initiatives, which have
progressed significantly during the year.
During the year, we received Planet Mark sustainability
certification for measuring and reporting our carbon footprint. In
the year to 31 January 2020, our total carbon footprint was 7,977.8
tonnes (2019: 9,246.9 tonnes) of carbon dioxide equivalent.
On 16 April 2021, we announced ambitious plans to become net
carbon zero by 2030, which we believe is achievable through our
Live Beautiful strategy of transforming the way we design,
manufacture and distribute our products. Further details are
available at this link:
https://www.sandersondesign.group/media/1477/live_beautiful_sustainability_strategy.pdf
. In addition to the net carbon zero target, we have another major
sustainability pledge focused on ensuring the job satisfaction and
fulfilment of our people, with our ultimate aim to be the employer
of choice in our industry. We have developed a roadmap for
continuous improvement towards our sustainability goals and I am
excited by the level of interest from everyone at the Company that
this initiative has prompted.
Operational Review
Trading during the year reflected the effects of the pandemic
with the first half being particularly affected followed by a
strong recovery in the second half.
-- The Brands
Total Brands comprise Sanderson, Morris & Co., Harlequin,
Zoffany, Scion, Anthology and Clarke & Clarke. The Brands
segment includes the licensing income derived from the brands as
well as global trading from our brands, including our overseas
subsidiaries in the US, France, Russia and Germany.
Year ended 31 January Change (%)
(GBPm)
2021 2020 Reported Constant
currency
----------- ----------- ----------- -----------
Total Brand sales 76.3 90.2 (15.4) (15.6)
----------- ----------- ----------- -----------
Comprising:
----------- ----------- ----------- -----------
Licensing 3.7 5.5 (33.0) (33.2)
----------- ----------- ----------- -----------
UK Brand product sales 38.1 44.9 (15.3) (15.3)
----------- ----------- ----------- -----------
International Brand
product sales 34.5 39.8 (13.1) (13.5)
----------- ----------- ----------- -----------
* North America 12.5 14.4 (13.0) (13.3)
----------- ----------- ----------- -----------
* Northern Europe 12.5 13.0 (4.3) (5.0)
----------- ----------- ----------- -----------
* Rest of the World 9.5 12.4 (22.5) (22.8)
----------- ----------- ----------- -----------
The table above shows the impact of the pandemic on brand sales,
which primarily affected the first half of the financial year.
Total Brand sales were down 15.4% in reportable currency at GBP76.3
million.
Brand product sales in Northern Europe were down just 4.3% in
reportable currency, reflecting the continued strength of the
Morris & Co. brand in Scandinavia.
The performance of the individual brands is discussed below. To
improve transparency, this report marks the last time that the
Harlequin, Scion and Anthology brands and the Sanderson and Morris
& Co brands will be grouped together. In future, the trading
performance of each brand will be set out separately to enable
investors to gain a better insight into the performance of each
brand.
Harlequin incorporating Scion and Anthology
Worldwide sales of Harlequin, Scion and Anthology were GBP18.4
million in reportable currency, a decrease of 27.3% on the previous
year (2020: GBP25.3 million).
Sales in the UK were down 24.2%, sales in North America were
down 14.0% in constant currency and sales in Northern Europe were
down 18.7% in constant currency.
Harlequin's children's collection, the Book of Little Treasures,
was launched in July 2020 and was our first digital launch. We
collaborated with Mumsnet, the internet forum for parents, on the
launch, which was well received. This launch highlighted the
benefits of a digital launch, particularly in terms of the feedback
from the sampling process in which we can see which of the designs
and colourways are the most popular and therefore the ones we
should focus on. The collection was reduced from 76 SKUs to just 40
and sales are performing as forecast with strong uptake from John
Lewis in particular for the Little Home offer.
Scion is an upbeat brand conveying fresh ideas for modern
living. In addition to wallpaper and fabric, Scion is a valuable
brand for licensing, where the contemporary and graphic nature of
the designs have stretched very successfully to a wide range of
products, ranging from bedding and bathroom products to window
furnishings, gifting, tableware and stationery. In March 2020,
Scion announced a homewares collection with the major retailer NEXT
plc, underscoring the strength of the brand's licensing potential.
This collection launched in the summer of 2020 and has performed
well.
Anthology, aimed at the Contract market with its creative
finishes, subtle textures and sophisticated complexity remained
popular with interior designers and hotel groups worldwide.
Arthur Sanderson & Sons incorporating the Morris & Co.
brand
Worldwide sales of these two brands were GBP24.2 million (2020:
GBP24.1 million) in reportable currency, almost unchanged compared
with the same period last year, despite the pandemic, reflecting
the trend for more decorative finishes and the renewed appeal of
Arts & Crafts design.
Sales in the UK were down 9.5%, sales in North America were up
13.4% in constant currency and sales in Northern Europe increased
by 11.1% in constant currency.
As one of the oldest surviving English soft furnishing brands,
Sanderson, a Royal Warrant holder, is famous today for a signature
style that is informed by heritage and designed for modern
living.
In January 2020, we announced Sanderson's collaboration with the
National Trust to create a unique collection of fabrics to
celebrate the Trust's 125(th) anniversary. The collaboration was
announced prior to Covid-19 and was well received when previewed at
Chelsea Harbour in March 2020. We were unable to print the pattern
books, which were due to be printed in April 2020, owing to the
temporary closure of the printer during the first UK lockdown. We
already had inventory and launch photography, and there was demand
in the market, so we gained our first experience of using digital
communication to replace a traditional launch. This led also to our
first webinars, which were hosted by designers and brand managers
and were greatly appreciated by our distributors, particularly in
export markets, who were struggling to access new collections.
Sanderson's 160(th) anniversary was officially last year but we
delayed the launch of an anniversary collection until April 2021. A
limited preview of 12 styles was launched exclusively with John
Lewis in December 2020 with strong results. Wallpaper Direct, the
online wallpaper business, launched an exclusive collection of 50
SKUs in honour of the anniversary and reported strong demand from
its March 2021 launch. The wider collection launch during London
Design Week in May 2021 will be supported by the first significant
media campaign for many years, featuring England rugby star Maro
Itoje as the new face of the Sanderson brand. The media campaign
will look back to the Very Sanderson campaigns of the 1970s, which
featured British celebrities of the day such as Petula Clark, Diana
Rigg and Robert Carrier.
The Morris & Co. brand enjoyed a very strong sales
performance, up 9.0% during the year, reflecting sustained consumer
interest in the Arts & Crafts movement, particularly in
Scandinavia and the United States.
An exciting collaboration with the highly regarded designer Ben
Pentreath, who created the Queen Square edit from our archive using
a new and vibrant colour palette, was our next experience of a
digital launch. The sampling from the pre-launch showed that 25% of
sampling was on one wallpaper, a green and turquoise colourway. We
focused attention on the colourway for our inventory and marketing
material, receiving a huge amount of positive media coverage on
launch. Sales of the collection have exceeded expectations and a
follow up is planned.
Digital communication has been an important part of marketing
all the brands with the number of Instagram followers being a key
metric. Morris & Co. achieved the milestone of 100,000
Instagram followers in December 2020 and that has since increased
to 121,000 Instagram followers in May 2021. Morris & Co. had
65,000 Instagram followers at 31 January 2020.
This year marks the 160(th) anniversary of the Morris & Co
print works. We intend to mark the anniversary by launching a
compilation collection of his most signature designs this year. We
have several other exciting launches planned in a calendar of
anniversary events throughout the year.
Zoffany
Zoffany, positioned at the upper end of the premium market, is a
fusion of luxury and art and is the lead brand for the Group in
North America. Total worldwide sales fell 18.0% to GBP7.8 million
in reportable currency (2020: GBP9.5 million). Sales in the UK
decreased by 22.8%, sales in North America were down 7.5% in
constant currency and sales in Northern Europe were down 9.7% in
constant currency.
Zoffany's Palladio collection, an exciting, screen-printed
wallpaper collection that draws on the original Palladio wallpapers
launched in the 1950s, was launched in September 2020. The
collection includes Precarious Pangolins by the influential
designer and conservationist Sam Wilde. The design adds a
contemporary dimension to the collection and continues the
tradition established in the 1950s of talented new designers
creating Palladio wallpapers.
We ran the Zoffany Visual Arts Award championing new design
talents. The winner was announced in April 2021 and will receive
funds towards the second-year studies.
Clarke & Clarke
Clarke & Clarke is positioned at the more affordable end of
our premium target markets. Total sales were down 14.2% at GBP21.7
million compared with the same period last year (2020: GBP25.3
million). Sales in the UK decreased by 4.5%, sales in North America
were down 33.0% in constant currency and sales in Northern Europe
were down 13.3% in constant currency. The reported sales decline in
North America was due to the changing contract and operating in
financial year 2020 from a commission agency to a new
distributor.
Clarke & Clarke is distributed in North America by Kravet
Inc, whose sales have been ahead of expectations. Kravet is pleased
with the first full year's performance, which has exceeded all
other third- party brands they distribute, and further growth is
anticipated.
Clarke & Clarke's Wilderie and Animalia collections by
designer Emma J Shipley continued their strong growth during the
year across fabric, wallpaper and homewares. The Emma J Shipley
momentum was reinforced by a new launch into US retailer
Anthropologie and an exclusive bedding launch in John Lewis. Tess
Daly homewares was launched at the beginning of March 2020, shortly
before the first UK lockdown. Sales were impacted but bounced back
in the second half of the financial year. NEXT is the main partner
for the collection and new bedding design launches are planned this
financial year and next year.
Clarke & Clarke secured an exciting, exclusive licence
agreement with the heritage brand Wedgwood with the product
launching in Spring 2022. Under the agreement, Clarke & Clarke
will launch up to five bedding designs with coordinated accessories
alongside a stunning collection of fabrics and wallpapers.
-- Licensing
Licensing income is a dynamic and high margin revenue stream for
the Company with further potential for growth.
Core licensing income, excluding the recognition of fixed
minimum guaranteed licensing income under IFRS 15, was up 3.3% in
reportable currency and in constant currency, by GBP0.1 million,
reflecting a strong performance from our core bedding, blinds and
Japanese licensees.
As a result of the impact of the pandemic on our licensees
during the financial year, reported licensing income was down 33.0%
in reportable currency, down 33.2% in constant currency, to
GBP3.7million (2020: GBP5.5 million), including a GBP400,000
recognition of a minimum guarantee under IFRS 15 from NEXT plc in
connection with a licensing agreement signed in November 2020 with
the Sanderson and Morris & Co brands. This exciting agreement
is for an extensive range of clothing, homeware and accessories.
With the Morris & Co brand, NEXT is producing apparel,
including womenswear, men's shirts and childrenswear for Summer 21,
some of which are already available instore. With the Sanderson and
Sanderson Home brands, NEXT is producing a range of homeware, which
is expected to be launched later this year.
Core licensing income includes bedding with Bedeck,
window-coverings with Blinds2Go and a number of important strategic
partners across the homewares sector in Japan, including bedding
with Nishikawa, textiles with Kawashima and wallcoverings with
Sangetsu.
-- Manufacturing
Covid-19 had a major impact on our manufacturing operations,
Standfast & Barracks and Anstey, which were both closed at the
start of the first UK lockdown before being progressively reopened
in May 2020. The factories performed strongly during the second
half of the year.
Our unique integrated vertical supply chain is an important
pillar in our strategy. The benefits of owning our production
capabilities have been underlined by the pandemic in that it
enabled the Group's Brands to secure supply. Our manufacturing has
also proven to be an important strategic and competitive asset
under current Brexit arrangements as supply from Europe and
elsewhere is subject to duties and tariffs.
Total manufacturing sales in the first half decreased 38.5% to
GBP10.5 million compared with the corresponding period, with total
third-party sales down 32.5%. In the full year, total manufacturing
sales decreased by just 20.2% to GBP28.4 million (2020: GBP35.5
million) and total third-party sales were down just 17.9%.
Both factories have continued to attract export orders as a
result of their range of digital and conventional printing
capabilities.
Standfast & Barracks ('Standfast')
Standfast, our fabric printing factory, is widely regarded,
internationally, as the destination for creative, innovative and
high-quality fabric printing. Standfast, in common with Anstey,
attracts international orders from countries including the USA.
Standfast continues to exploit its extensive archive and original
artwork, with a talented design studio that reinterprets antique,
heritage and classic design into prints relevant for today.
Standfast saw a decrease in sales during the year of 15.5% to
GBP14.4 million (2020: GBP17.1 million). Third-party sales in the
UK decreased by 15.2%; third-party export sales declined by 2.8%;
whilst sales to our own Group brands decreased by 24.2%. Digital
printing at Standfast increased to GBP8.8 million accounting for
62% of factory output during the year (2020: 49%).
In April 2020, Standfast was awarded the prestigious Queen's
Award for Enterprise 2020 in the International Trade category,
recognising the factory's impressive overseas sales growth in the
preceding three years.
Anstey Wallpaper Company ('Anstey')
Anstey, our wallpaper printing and paint-tinting business, is an
unrivalled factory in its range of wallpaper printing techniques on
one site. We continue to invest in new technology to extend the
potential of the factory and to build on its unique capabilities.
Third-party customers reference the unique ability of Anstey to
work consistently across the range of techniques and to blend
them.
Sales at Anstey decreased 24.5% to GBP14.0 million (2020:
GBP18.5 million). Third-party sales in the UK were down 27.5%;
third-party export sales were down 20.4%; and internal wallcovering
sales to our own Group brands decreased by 22.7%. Digital printing
at Anstey as a proportion of factory output was 15% (2020:
12%).
Export sales to the USA and Europe reflect Anstey's premium
print technologies, world-class excellence in manufacturing,
customer service, quality and innovation.
Current trading and outlook
The most significant impact of the Covid-19 pandemic on
performance was during the total initial lockdown and over the
first six months of financial year 2021. Over the second six
months, despite further lockdowns, our sales recovered to levels in
line with prior periods and enabled us to previously announce the
upwards revision to our expectations for the financial year.
Current sales trends in February, March and April 2021 are
slightly ahead of our expectations reflecting increased demand for
home interiors. The Group has a strong balance sheet with net cash
at 31 January 2021 of GBP15.1 million, which positions the business
strongly in the event of further disruption. Overall, we remain
cautiously optimistic in our outlook for the year ahead.
Lisa Montague
Chief Executive Officer
17 May 2021
CHIEF FINANCIAL OFFICER'S REVIEW
The Chairman's Statement and Chief Executive's Strategic and
Operating Review provide an analysis of the key factors impacting
the results including the effects of Covid-19. Our business was
severely disrupted in the financial year by the effects of lock
downs both in the UK and in overseas markets.
Revenue Performance
Our reported revenue for the year was GBP93.8 million (2020:
GBP111.5 million), a reduction of GBP17.7 million or 15.9% on prior
year.
Year ended 31 January
(GBPm)
2021 2020 Change (%)
Total Revenue 93.8 111.5 (15.9)
Comprising:
Brand product revenue 72.6 84.7 (15.4)
Manufacturing external
revenue 17.5 21.3 (17.9)
Licensing 3.7 5.5 (33.0)
Underlying Profit Performance
Despite the effects of the pandemic on our revenues we have
achieved an adjusted underlying profit before tax of GBP7.1 million
(2020: GBP7.4 million). We can report an increase in margin for
adjusted underlying profit before tax to 7.5% (2020: 6.6%). The
profit performance has benefitted from actions to grow revenue in
the second half, reduce the cost base, increase efficiencies and
access government support such as the CJRS.
Our business was severely disrupted in the first half by the
effects of lock downs. In the second half year, despite further
lock downs, we experienced trading more in line with prior years
with a strong performance in our peak selling months of October and
November 2020. Our manufacturing and distribution facilities have
remained open since the first lock-down and have operated at full
capacity. The Group believes that this demand reflects a widely
reported trend in the home improvement and furnishings sector, with
consumers having directed discretionary spending on their homes
during the Covid-19 pandemic.
Year ended 31 January
(GBPm)
2021 2020
H1 H2 H1 H2
Revenue 38.8 55.0 55.9 55.6
Adjusted underlying
PBT 0.4 6.7 4.9 2.5
The table above demonstrates the extreme effect of the initial
lock down, when we had to close facilities and furlough a
significant number of employees. During the financial year ended 31
January 2021, we received a total of GBP3.1 million from the CJRS.
We repaid GBP0.4 million in February 2021 for the 68 employees made
redundant in August 2020.
Income statement
The Group's income statement is summarised below.
Year ended 31 January
2021 2020
Revenue (GBPm) 93.8 111.5
Gross profit (GBPm) 57.0 68.1
Gross profit (%) 60.8% 61.1%
Net operating expenses (GBPm) 51.8 63.3
Profit from operations (GBPm) 5.2 4.8
Gross profit margin has held up at 60.8% (2020: 61.1%), despite
the disruptive effects of Covid-19 and Brexit, and the enforced
manufacturing operation closure for three months in the first half
of the year. Distribution and selling costs, administration costs
and net other income are included in net operating expenses.
Distribution and selling costs have been reduced by GBP3.8 million
to GBP19.1 million (2020: GBP22.9 million) on the back of lower
volume of transactions and reduced samples in the first half of the
financial year. Administration costs have decreased by GBP9.3
million to GBP36.5 million (2020: GBP45.8 million) through
efficiency and cost-saving initiatives, which have included staff
cost savings, reduced travel and control of consultancy, legal and
professional and marketing expenditures. Net other income which
represents consideration from the sale of marketing materials and
additional services has reduced by GBP1.5 million to GBP3.8 million
(2020: GBP5.3million), as a result of the closure of non-essential
retail for long periods during the financial year.
The reported revenue and operating profit by reporting segments
is set out below.
Eliminations
and
Brands Manufacturing unallocated Total
Year ended 31 January 2021 GBPm GBPm GBPm GBPm
Total revenue 76.3 28.4 (10.9) 93.8
Profit from operations 7.5 1.7 (4.0) 5.2
Year ended 31 January 2020
Total revenue 90.2 35.6 (14.3) 111.5
Profit from operations 8.2 2.2 (5.6) 4.8
Underlying profit before tax
Statutory profit before tax of GBP5.0 million (2020: GBP4.4
million) includes non-underlying charges of GBP1.2 million (2020:
GBP2.0 million) as set out below.
Year ended 31 January (GBPm)
2021 2020
--------------------------------------------- ------ ------
Statutory profit before tax 5.0 4.4
--------------------------------------------- ------ ------
Add back:
Amortisation of acquired intangible
assets 1.0 1.0
Restructuring and reorganisation costs 0.2 1.1
Anstey net other income - (0.1)
Total non-underlying charge included
in profit before tax 1.2 2.0
--------------------------------------------- ------ ------
Underlying profit before tax 6.2 6.4
Add back:
LTIP accounting charge 0.3 0.4
Net defined benefit pension charge 0.6 0.6
Adjusted underlying profit before tax
excluding LTIP and defined benefit pension
charge 7.1 7.4
--------------------------------------------- ------ ------
Acquisition-related costs incurred were in respect of the
acquisition of Clarke & Clarke, which completed on 31 October
2016. This comprises the amortisation of intangible assets of
GBP1.0 million (2020: GBP1.0 million).
Restructuring and reorganisation costs of GBP0.2 million (2020:
GBP1.1 million) reflect the rationalisation of certain operational
and support functions during the year. These costs mainly comprise
employee severance costs associated with the restructuring and
reorganisation processes.
Net finance costs reduced to GBP0.2 million (2020: GBP0.4
million), as the Group paid down its bank debt during the year.
Taxation
Tax expense for the year is GBP1.1 million (2020: GBP0.7
million).
Earnings per share
Basic reported EPS for the year was 5.50p (2020: 5.24p). The
Group also reports an adjusted underlying EPS which adjusts for the
impact of the LTIP accounting charge, net defined benefit pension
charge and other non-underlying items, as these items can fluctuate
due to external factors outside of the control of the Group. The
adjusted underlying basic EPS for the year was 8.00p (2020:
9.26p).
Key Financial Indicators
We measure and monitor key performance and financial indicators
across the Group. We set out below a summary of the Group's key
financial indicators.
Year ended 31 January
2021 2020
Revenue (GBPm) 93.8 111.5
Revenue Growth (%) (15.9%) (1.6%)
Adjusted underlying profit
before tax (GBPm) 7.1 7.4
Adjusted underlying profit
before tax (%) 7.5% 6.6%
Adjusted earnings per share
(pence) 8.00p 9.26p
Net cash position (GBPm) 15.1 1.3
Net cash flow (GBPm) 14.4 0.9
Inventory (GBPm) 20.4 28.5
Capital expenditure (GBPm) 1.0 2.4
Reported EBITDA (GBPm) 12.6 12.1
Liquidity and Cash Flow
We have actively conserved cash and controlled costs to mitigate
the effects of Covid-19. The Group cut its operating costs,
marketing and discretionary expenditure, capital expenditure
programs and dividends, due to uncertainty in the health, economic
and political environment. As a result, despite significant
Covid-19 disruption, the Group has increased liquidity and headroom
to GBP30.5 million at 31 January 2021 (2020: GBP13.8 million), with
a year end net cash position of GBP15.1 million (2020: GBP1.3
million) and repaid its UK bank debt (2020: GBP1.7 million).
T he Group generated strong cash inflow from operating
activities during the year of GBP18.2 million (2020: GBP9.6 million
).
Working capital has improved significantly through the reduction
in inventory and receivables in the year, as tighter working
capital management controls were implemented and the strategy of
reducing SKUs and scale of new collection launches were applied.
The tight control of inventory continues with new operating
replenishment rules and bi-weekly commercial review meetings.
Key working capital balances and their movements year on year
are set out below:
Year ended 31 January (GBPm)
2021 2020
Inventory 20.4 28.5
Trade debtors 11.7 13.1
Trade creditors (8.8) (14.3)
Capital expenditure was GBP1.0 million (2020: GBP2.4 million ),
with tight cash controls applied in response to Covid-19. The Group
made additional payments to the pension schemes of GBP2.1 million
(2020: GBP1.9 million ) to reduce the deficit, as part of the
ongoing planned reduction. Tax paid during the year was GBP23,000
(2020: GBP0.8 million ). Tax payments have been made shortly after
31 January 2021 of GBP1.3m.
Banking Facilities
The Group has banking facilities provided by Barclays Bank PLC.
In October 2019, the Group renewed its GBP12.5 million
multi-currency revolving committed credit facility with Barclays
Bank PLC for a further five-year period. The agreement also
includes a GBP5 million uncommitted accordion facility option to
further increase available credit which provides substantial
headroom for future growth. Our covenants under the facility are
EBITDA and interest cover measures.
Following the outbreak of Covid-19, the Group obtained a
temporary overdraft facility of GBP2.5 million to April 2021, to
complement the headroom in our existing GBP12.5m revolving credit
facility. Agreement was reached with Barclays Bank PLC during June
2020 to waive the interest cover covenant condition for the
quarterly tests arising through to July 2021 and to waive the
leverage covenant condition for the quarterly tests through to
April 2021. A liquidity covenant was introduced, requiring that
available headroom within the GBP12.5 million facility remains
above GBP5 million through to July 2021. All covenants were
complied with during the year and up to the date of this report.
All of the Group's bank facilities remain secured by first fixed
and floating charges over the Group's assets.
Net defined benefit pension
The Group operates two defined benefit schemes in the UK for its
employees. These comprise the Walker Greenbank Pension Plan and the
Abaris Holdings Limited Pension Scheme, which are both closed to
new members and to future service accrual from 30 June 2002 and 1
July 2005 respectively.
Pension deficit
We reported a valuation under IAS 19 at 31 January 2021 of
GBP5.6 million (2020: GBP5.7 million), despite the economic
uncertainties and low interest rates for bonds. The valuation
improvement from the interim results was principally due a recovery
in equities and stock markets.
The triennial valuation of the defined benefit schemes is due to
be carried out based upon the schemes' position on 5 April 2021.
The Group has appointed independent pension and actuarial
specialists to support the company through the valuation
process.
The movements in the pension valuation for IAS 19 purposes is
set out below:
Year ended 31 January (GBPm)
2021 2020
Deficit at beginning of the year (5.7) (9.7)
Scheme expenses (0.4) (0.4)
Interest cost (1.4) (1.9)
Expected return on plan assets 1.3 1.6
Contributions 2.1 1.9
Return on scheme assets 1.6 11.6
Experience adjustments on benefit obligation 0.7 (0.4)
Actuarial loss from the change in financial
assumptions (5.3) (9.0)
Actuarial gain from the change in demographic
assumptions 1.3 0.5
------ ------
Gross deficit at the end of the year (5.6) (5.7)
------ ------
In 2019, the Company agreed a recovery plan to pay contributions
to eliminate the funding shortfall by October 2026.
Dividends
As a result of the pandemic during the year and in order to
protect the Group's liquidity, no dividends were declared or paid
during the financial year. The Board will continue to review the
dividend policy during the coming months and an update will be
provided at the time of the announcement of the Company's interim
results later in 2021.
Foreign currency risk
All foreign currencies are bought and sold centrally on behalf
of the Group. Regular reviews take place of the foreign currency
cash flows, unmatched exposures are covered using forward contracts
and working capital exposures are hedged using currency swaps, as
appropriate. The Group does not trade in financial instruments and
hedges are used for highly probable future cash flows and to hedge
working capital exposures.
Credit risk
The Group does not generally seek credit insurance as this is
not a commercial solution to reducing credit risk. The Board
reviews the internal credit limits of all major customers and
reviews the credit risk regularly. The ageing profile of trade
debtors shows that payments from customers are close to terms. The
current economic environment still presents a level of risk and in
addition to specific provisioning against individual receivables, a
provision has been made of GBP0.5 million (2020: GBP0.4 million),
which is a collective assessment of the risk against non-specific
receivables. The Group has experienced limited bad debts and in the
last 12 months and has enhanced its credit management procedures to
improve controls and mitigate potential credit risk.
Going concern
The Directors consider that, having considered forecasts
prepared by the management team which have been stress tested, the
Group and Company have adequate resources to continue trading for
the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
I would like to thank my finance colleagues across the Group for
their efforts particularly since the start of lock-down from 23
March 2020. In these difficult circumstances, the teams have been
working remotely and their dedication and professionalism has
enabled the Group to deliver the improved results as presented
today.
Michael Williamson
Chief Financial Officer
17 May 2021
Consolidated Income Statement
Year ended 31 January 2021
2021 2020
Total Total
Note GBP000 GBP000
-------------------------- ----- ---------
Revenue 3 93,760 111,453
Cost of sales (36,775) (43,324)
-------------------------- ----- --------- ---------
Gross profit 56,985 68,129
-------------------------- ----- --------- ---------
Net operating expenses:
Distribution and selling
expenses (19,129) (22,921)
Administration expenses (36,502) (45,788)
Net other income 4 3,822 5,358
-------------------------- ----- --------- ---------
Profit from operations 5,176 4,778
-------------------------- ----- --------- ---------
Finance income 1 3
Finance costs (162) (403)
-------------------------- ----- --------- ---------
Finance costs - net 5 (161) (400)
-------------------------- ----- --------- ---------
Profit before tax 5,015 4,378
Tax expense 6 (1,109) (655)
-------------------------- ----- --------- ---------
Profit for the year
attributable to owners
of the parent 3,906 3,723
-------------------------- ----- --------- ---------
Earnings per share
- Basic 8 5.50p 5.24p
-------------------------- ----- --------- ---------
Earnings per share
- Diluted 8 5.38p 5.20p
-------------------------- ----- --------- ---------
Adjusted earnings
per share - Basic 8 8.00p 9.26p
-------------------------- ----- --------- ---------
Adjusted earnings
per share - Diluted 8 7.82p 9.19p
-------------------------- ----- --------- ---------
All of the activities of the Group are continuing
operations.
Consolidated Statement of Comprehensive Income
Year ended 31 January 2021
2021 2020
Note GBP000 GBP000
--------------------------------------------------- ----- -------- --------
Profit for the year 3,906 3,723
--------------------------------------------------- ----- -------- --------
Other comprehensive income / (expense):
Items that will not be reclassified to profit
or loss
Remeasurements of defined benefit pension
schemes 12 (1,565) 2,727
Corporation tax credits recognised in equity - -
Increase / (Reduction) of deferred tax asset
relating to pension scheme liability 297 (558)
--------------------------------------------------- ----- -------- --------
Total items that will not be reclassified
to profit or loss (1,268) 2,169
--------------------------------------------------- ----- -------- --------
Items that may be reclassified subsequently
to profit or loss
Currency translation (losses) / gains (301) (156)
Total items that may be reclassified subsequently
to profit or loss (301) (156)
--------------------------------------------------- ----- -------- --------
Other comprehensive income / (expense) for
the year, net of tax (1,569) 2,013
--------------------------------------------------- ----- -------- --------
Total comprehensive income for the year
attributable to the owners of the parent 2,337 5,736
--------------------------------------------------- ----- -------- --------
Consolidated Balance Sheet
At 31 January 2021
2021 2020
Note GBP000 GBP000
-------------------------------------- ----- --------- ---------
Non-current assets
Intangible assets 28,325 29,815
Property, plant and equipment 12,061 14,101
Right-of-use assets 5,783 8,392
46,169 52,308
-------------------------------------- ----- --------- ---------
Current assets
Inventories 20,350 28,456
Trade and other receivables 9 18,328 20,543
Cash and cash equivalents 10 15,549 3,055
-------------------------------------- ----- --------- ---------
54,227 52,054
-------------------------------------- ----- --------- ---------
Total assets 100,396 104,362
-------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables (20,472) (22,940)
Lease liabilities (2,676) (2,810)
Borrowings 10 (412) (1,719)
(23,560) (27,469)
-------------------------------------- ----- --------- ---------
Net current assets 30,667 24,585
-------------------------------------- ----- --------- ---------
Non-current liabilities
Lease liabilities (3,206) (5,603)
Deferred income tax liabilities 7 (514) (802)
Retirement benefit obligation 12 (5,637) (5,659)
(9,357) (12,064)
-------------------------------------- ----- --------- ---------
Total liabilities (32,917) (40,019)
-------------------------------------- ----- --------- ---------
Net assets 67,479 64,829
-------------------------------------- ----- --------- ---------
Equity
Share capital 710 710
Share premium account 18,682 18,682
Foreign currency translation reserve (866) (565)
Retained earnings 8,446 5,495
Other reserves 40,507 40,507
-------------------------------------- ----- --------- ---------
Total equity 67,479 64,829
-------------------------------------- ----- --------- ---------
Consolidated Cash Flow Statement
Year ended 31 January 2021
2021 2020
Note GBP000 GBP000
---------------------------------------------- ----- -------- --------
Cash flows from operating activities
Cash generated from operations 11 18,222 9,588
Interest paid (279) (564)
Corporation tax paid (23) (798)
---------------------------------------------- ----- -------- --------
Net cash generated from operating activities 17,920 8,226
---------------------------------------------- ----- -------- --------
Cash flows from investing activities
Interest received 1 17
Purchase of intangible assets (245) (736)
Purchase of property, plant and equipment (830) (1,752)
Proceeds from disposal of property, plant
and equipment 75 77
Net cash used in investing activities (999) (2,394)
---------------------------------------------- ----- -------- --------
Cash flows from financing activities
Payment of lease liabilities (2,958) (2,735)
Proceeds from borrowings 412 -
Dividends paid to Company's shareholders - (2,179)
---------------------------------------------- ----- -------- --------
Net cash used in from financing activities (2,546) (4,914)
---------------------------------------------- ----- -------- --------
Net increase in cash and cash equivalents 14,375 918
Cash and cash equivalents and bank overdraft
at beginning of year 1,336 434
Effect of exchange rate fluctuations on
cash held (162) (16)
Cash and cash equivalents and bank overdraft
at end of year 10 15,549 1,336
---------------------------------------------- ----- -------- --------
Consolidated Statement of Changes in Equity
Year ended 31 January 2021
Attributable to owners of the parent
----------------------------------------------------------------------------------------
Other reserves
------------------------------------------
Foreign
Share currency
Share premium Retained Capital Merger translation Total
capital account earnings reserve reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- --------- ---------- ---------------- --------- ------------- --------
Balance at 1 February
2019 710 18,682 1,392 43,457 (2,950) (409) 60,882
Profit for the
year - - 3,723 - - - 3,723
Other comprehensive
income/(expense):
Remeasurements
of defined benefit
pension schemes - - 2,727 - - - 2,727
Deferred tax relating
to pension scheme
liability - - (558) - - - (558)
Currency translation
differences - - - - - (156) (156)
Total comprehensive
income - - 5,892 - - (156) 5,736
Transactions with
owners, recognised
directly in equity:
Dividends - - (2,179) - - - (2,179)
Long-term incentive
plan charge - - 390 - - - 390
Balance at 31
January 2020 710 18,682 5,495 43,457 (2,950) (565) 64,829
----------------------- --------- --------- ---------- ---------------- --------- ------------- --------
Consolidated Statement of Changes in Equity continued
Year ended 31 January 2021
Attributable to owners of the parent
----------------------------------------------------------------------------------
Other reserves
------------------------------------
Foreign
Share currency
Share premium Retained Capital Merger translation Total
capital account earnings reserve reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Balance at 1 February
2020 710 18,682 5,495 43,457 (2,950) (565) 64,829
Profit for the
year - - 3,906 - - - 3,906
Other comprehensive
income/(expense):
Remeasurements
of defined benefit
pension schemes - - (1,565) - - - (1,565)
Deferred tax relating
to pension scheme
liability - - 297 - - - 297
Currency translation
differences - - - - - (301) (301)
Total comprehensive
income - - 2,638 - - (301) 2,337
Transactions with
owners, recognised
directly in equity:
Dividends - - - - - - -
Long-term incentive
plan charge - - 294 - - - 294
Related tax movements
on long-term incentive
plan - - 19 - - - 19
Balance at 31 January
2021 710 18,682 8,446 43,457 (2,950) (866) 67,479
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Notes to the Consolidated Financial Statements
1. Accounting policies and general information
Basis of preparation
The consolidated financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 ('IFRS') and the
applicable legal requirements of the Companies Act 2006. The
consolidated financial statements have been prepared under the
historical cost convention, except for those assets and liabilities
measured at fair value, as described in the accounting policies.
The accounting policies set out below have been consistently
applied to all periods presented unless otherwise indicated.
The Group meets its day-to-day working capital requirements
through its banking facilities. The Group's forecasts and
projections, taking account of reasonably possible changes in
trading performance, show that the Group will be able to operate
within the level of its current facilities.
A key accounting judgement for the year ended 31 January 2021 is
the adoption of the going concern basis of preparation. This is
described further in note 2. The Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Therefore, the
Group continues to adopt the going concern basis in preparing its
consolidated financial statements.
2. Critical accounting estimates and judgements
A key accounting judgement for the year ended 31 January 2021 is
the adoption of the going concern basis of preparation.
In the context of the current Covid-19 outbreak, the Board of
Sanderson Design Group PLC has undertaken an assessment of the
ability of the Group and Company to continue in operation and meet
its liabilities as they fall due over the period of its assessment.
In doing so, the Board considered events throughout the period of
their assessment, including the availability and maturity profile
of the Group's financing facilities and covenant compliance. These
financial statements have been prepared on the going concern basis
which the directors consider appropriate for the reasons set out
below.
The Group funds its operations through cash generated by the
Group and has access to a GBP12.5m Revolving Credit Facility
("RCF") which is linked to two covenants. These covenants are
tested quarterly on 30 April, 31 July, 31 October and 31 January
each year until the debt matures in October 2024. The Group also
agreed a temporary overdraft facility with Barclays at the start of
the pandemic of GBP2.5m, to April 2021, giving total facilities of
GBP15m until April 2021 and GBP12.5m thereafter. In addition, there
is an uncommitted accordion facility of GBP5m. In June 2020, the
Directors successfully negotiated a waiver of the Group's interest
cover covenants to July 2021 and leverage covenant to April 2021
and replaced them with a liquidity covenant that requires the Group
to maintain GBP5m headroom against the facilities between 1
November 2020 and 31 July 2021. Throughout the financial year and
up to the date of this report, the Company has met all required
covenant tests and maintained headroom of well over GBP5m.
The total headroom of the Group at 31 January 2021 was GBP30.5m
(2020: GBP13.8m), including cash and cash equivalents of GBP15.5m,
the committed facility of GBP12.5m and the temporary overdraft
facility of GBP2.5m.
In assessing going concern, management has taken account of the
uncertainties caused by Covid 19. A Management Base Case (MBC)
model has been prepared, together with alternative stress tested
scenarios, given the uncertainty regarding the impact of Covid 19
(including variants and further waves of the virus). These indicate
that the Company retains adequate headroom against its borrowing
facilities and bank covenants for the foreseeable future.
There remain significant uncertainties concerning the future
effects of Covid 19 in terms of variants, further restrictions and
lockdowns. The actual results which will be reported will be
undoubtedly different from the MBC and other scenarios modelled by
the Company. In the event that there are significant negative
variations from the MBC, management would act decisively, as they
have done in the last year, to protect the business particularly
its cash position. Having taken into account all of the comments
above the Directors consider that the Group and the Company have
adequate resources to continue trading for the foreseeable future.
For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
3. Segmental analysis
The Group is a designer, manufacturer and distributor of luxury
interior furnishings, fabrics and wallpaper. The reportable
segments of the Group are aggregated as follows:
-- Brands - comprising the design, marketing, sales and
distribution, and licensing activities of Sanderson, Morris &
Co., Harlequin, Zoffany, Anthology, Scion and Clarke & Clarke
brands operated from the UK and its foreign subsidiaries in the US,
France, Russia and Germany.
-- Manufacturing - comprising the wallcovering and printed
fabric manufacturing businesses operated by Anstey and Standfast
respectively.
This is the basis on which the Group presents its operating
results to the Board of Directors, which is considered to be the
CODM for the purposes of IFRS 8. Other Group-wide activities and
expenses, predominantly related to corporate head office costs,
defined benefit pension costs, long-term incentive plan expenses,
taxation and eliminations of inter-segment items, are presented
within 'Eliminations and unallocated'.
a) Principal measures of profit and loss - Income Statement segmental information
Year ended 31 January 2021
Eliminations
and
Brands Manufacturing unallocated Total
GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------------- ------------- --------
UK revenue 38,077 11,339 - 49,416
International revenue 34,549 6,111 - 40,660
Licence revenue 3,684 - - 3,684
--------------------------------- -------- -------------- ------------- --------
Revenue - external 76,310 17,450 - 93,760
Revenue - internal - 10,911 (10,911) -
--------------------------------- -------- -------------- ------------- --------
Total revenue 76,310 28,361 (10,911) 93,760
--------------------------------- -------- -------------- ------------- --------
Profit / (loss) from operations 7,494 1,664 (3,981) 5,176
Net finance costs - - (161) (161)
Profit / (loss) before tax 7,494 1,664 (4,142) 5,015
Tax charge - - (1,109) (1,109)
--------------------------------- -------- -------------- ------------- --------
Profit / (loss) for the year 7,494 1,664 (5,252) 3,906
--------------------------------- -------- -------------- ------------- --------
Year ended 31 January 2020
Eliminations
and
Brands Manufacturing unallocated Total
GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------------- ------------- --------
UK revenue 44,945 14,443 - 59,388
International revenue 39,754 6,809 - 46,563
Licence revenue 5,502 - - 5,502
--------------------------------- -------- -------------- ------------- --------
Revenue - external 90,201 21,252 - 111,453
Revenue - internal - 14,291 (14,291) -
--------------------------------- -------- -------------- ------------- --------
Total revenue 90,201 35,543 (14,291) 111,453
--------------------------------- -------- -------------- ------------- --------
Profit / (loss) from operations 8,161 2,235 (5,618) 4,778
Net finance costs - - (400) (400)
Profit / (loss) before tax 8,161 2,235 (6,018) 4,378
Tax charge - - (655) (655)
--------------------------------- -------- -------------- ------------- --------
Profit / (loss) for the year 8,161 2,235 (6,673) 3,723
--------------------------------- -------- -------------- ------------- --------
3. Segmental analysis continued
a) Principal measures of profit and loss - Income Statement segmental information continued
The segmental Income Statement disclosures are measured in
accordance with the Group's accounting policies.
Inter-segment revenue earned by Manufacturing from sales to
Brands is determined on normal commercial trading terms as if
Brands were any other third-party customer.
All defined benefit pension costs, and LTIP expenses, are
recognised for internal reporting to the CODM as part of Group-wide
activities and are included within 'Eliminations and unallocated'
above. Other costs, such as Group insurance, rent and auditors'
remuneration which are incurred on a Group-wide basis are recharged
by the head office to segments on a reasonable and consistent basis
for all periods presented and are included within segment results
above.
Tax charges have not been allocated to a segment.
b) Additional segmental revenue information
The segmental revenues of the Group are reported to the CODM in
more detail. One of the analysis presented is revenue by export
market for Brands.
2021 2020
Brands international revenue by export market: GBP000 GBP000
------------------------------------------------ -------- --------
North America 12,521 14,393
Northern Europe 12,480 13,039
Rest of the World 9,548 12,322
34,549 39,754
------------------------------------------------ -------- --------
Revenue of the Brands reportable segment - revenue from
operations in all territories where the sale is sourced from the
Brands operations, together with contract and licence revenue:
2021 2020
Brand revenue analysis: GBP000 GBP000
---------------------------------------------- -------- --------
Harlequin, incorporating Anthology and Scion 18,439 25,311
Sanderson, incorporating Morris & Co. 24,220 24,081
Zoffany 7,827 9,548
Clarke & Clarke, incorporating Studio G 21,704 25,333
Other brands 436 426
Licensing 3,684 5,502
---------------------------------------------- -------- --------
76,310 90,201
---------------------------------------------- -------- --------
Revenue of the Manufacturing reportable segment - including
revenues from internal sales to the Group's Brands:
2021 2020
Manufacturing revenue analysis: GBP000 GBP000
--------------------------------- -------- --------
Standfast 14,410 17,061
Anstey 13,951 18,482
--------------------------------- -------- --------
28,361 35,543
--------------------------------- -------- --------
4. Net other income
Net other income comprises consideration received from the sale
of marketing materials and additional services of GBP3,822,000
(2020: GBP5,268,000), and business interruption reimbursements to
cover loss of profits of GBPnil (2020: GBP54,000). In addition,
there was non-underlying net other income of GBPnil (2020:
GBP144,000).
5. Finance costs
2021 2020
GBP000 GBP000
---------------------------------------------------- -------- --------
Interest income:
Interest received on bank deposits 1 3
Interest expense:
Interest payable on bank borrowings (97) (255)
Amortisation of issue costs of bank loans (21) (50)
Unwind of discount on accelerated licensing income 138 147
Lease interest (182) (245)
Total finance costs (162) (403)
---------------------------------------------------- -------- --------
Net finance costs excluding non-underlying items (161) (400)
---------------------------------------------------- -------- --------
6. Tax expense
2021 2020
GBP000 GBP000
----------------------------------------------- -------- --------
Current tax:
- UK current tax 1,018 744
- UK adjustments in respect of prior years 39 557
- overseas, current tax 24 40
----------------------------------------------- -------- --------
Corporation tax 1,081 1,341
----------------------------------------------- -------- --------
Deferred tax:
- current year 7 (26)
- adjustments in respect of prior years 21 (660)
- effect of changes in corporation tax rates - -
----------------------------------------------- -------- --------
Deferred tax 28 (686)
----------------------------------------------- -------- --------
Total tax charge for the year 1,109 655
----------------------------------------------- -------- --------
7. Deferred income tax
A net deferred tax liability of GBP514,000 (2020: GBP802,000) is
recognised in respect of future deductions for LTIP payments and
other temporary differences.
2021 2020
GBP000 GBP000
---------------------------------------------------- -------- --------
Taxable temporary differences on property, plant
and equipment (647) (677)
Taxable temporary differences on intangible assets (1,060) (1,121)
Taxable temporary differences on share based 83 -
payments
Other temporary differences 39 14
(1,585) (1,784)
Retirement benefit obligations 1,071 982
(514) (802)
---------------------------------------------------- -------- --------
8. Earnings per share
Basic earnings per share ('EPS') is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of shares outstanding during the year, excluding
those held in the Employee Benefit Trust ('EBT') and those held in
treasury (note 24), which are treated as cancelled. The adjusted
basic earnings per share is calculated by dividing the adjusted
earnings by the weighted average number of shares.
2021 2020
--------- ----------- --------- -----------
Weighted Weighted
average average
number Per share number Per share
Earnings of shares amount Earnings of shares amount
GBP000 (000s) Pence GBP000 (000s) Pence
-------------------------------- --------- ----------- ---------- ------------- ----------- ----------
Basic earnings per share 3,906 70,980 5.50 3,723 70,984 5.24
Effect of dilutive securities:
Shares under LTIP 1,652 545
-------------------------------- --------- ----------- ---------- ------------- ----------- ----------
Diluted earnings per
share 3,906 72,632 5.38 3,723 71,529 5.20
-------------------------------- --------- ----------- ---------- ------------- ----------- ----------
Adjusted underlying basic
and diluted earnings
per share:
Add back LTIP accounting
charge 345 395
Add back net defined
benefit pension charge 531 593
Non-underlying items
(see below) 1,187 1,985
Tax effect of non-underlying
items
and other add backs (287) (126)
-------------------------------- --------- ----------- ---------- ------------- ----------- ----------
Adjusted underlying basic
earnings per share 5,682 70,980 8.00 6,570 70,984 9.26
-------------------------------- --------- ----------- ---------- ------------- ----------- ----------
Adjusted underlying diluted
earnings per share 5,682 72,632 7.82 6,570 71,529 9.19
-------------------------------- --------- ----------- ---------- ------------- ----------- ----------
Sanderson Design Group PLC's issued ordinary share capital with
voting rights consists of 70,983,505 (2020: 70,983,505) ordinary
shares of which no (2020: nil) ordinary shares are held in treasury
and 50,000 (2020: nil) ordinary shares are held by the Walter
Greenbank PLC EBT. Shares held in treasury or by the EBT are
treated as cancelled when calculating EPS.
The market value of shares held by the EBT on 31 January 2021
was GBP56,000 (2020: GBPnil). The total number of shares held in
the EBT at the year end represented 0.1% (2020: 0%) of the issued
shares.
In calculating the adjusted earnings the Group adjusts for
non-underlying items which are material non-recurring items or
items considered to be non-operational in nature. The nature of
these adjustments is outlined below.
Adjusted underlying profit before tax
The Group uses an Alternative Performance Measure "adjusted
underlying profit before tax". This is defined as statutory profit
before tax adjusted for the exclusion of share-based incentives,
defined benefit pension charge and non-underlying items. This is
recognised by the investment community as an appropriate measure of
performance for the Group and is used by the Board of Directors as
a key performance measure. The table below reconciles statutory
profit before tax to adjusted underlying profit before tax.
8. Earnings per share continued
Adjusted underlying profit before tax continued
2021 2020
GBP000 GBP000
---------------------------------------- -------- --------
Statutory profit before tax 5,015 4,378
---------------------------------------- -------- --------
Amortisation of acquired intangible
assets 1,016 1,016
---------------------------------------- -------- --------
Restructuring and reorganisation costs 171 1,059
---------------------------------------- -------- --------
Anstey net other income - (90)
Total non-underlying charge included
in statutory profit before tax 1,187 1,985
---------------------------------------- -------- --------
Underlying profit before tax 6,202 6,363
LTIP accounting charge 345 395
Net defined benefit pension charge 531 593
Adjusted underlying profit before tax 7,078 7,351
---------------------------------------- -------- --------
In calculating the adjusted underlying profit before tax the
Group adjusts for non-underlying items which are material
non-recurring items or items considered to be non-operational in
nature. The nature of these adjustments is outlined as follows:
a) Restructuring and reorganisation costs
These relate to the reorganisation of the Group and comprise of
the rationalisation of certain operational and support functions.
The costs mainly comprise employee severance and professional fees
associated with the reorganisation process of GBP171,000 (2020:
GBP702,000); compensation for loss of office and associated costs
to the former Chief Financial Officer of GBPnil (2020: GBP330,000)
as well as a further GBPnil (2020: GBP27,000) in respect of
property termination and asset impairment costs associated with the
Clarke & Clarke Haslingden site exit.
b) Anstey fire-related net other income
This comprises GBPnil (2020: GBP144,000) of proceeds arising
from reimbursement of repair costs in respect of plant and
equipment and related costs following a minor fire, less repair
costs GBPnil (2020: GBP54,000).
c) Amortisation of acquired intangible assets GBP1,016,000
(2020: GBP1,016,000).
9. Trade and other receivables
2021 2020
Current GBP000 GBP000
----------------------------------------------------- -------- --------
Trade receivables 12,632 14,171
Less: provision for impairment of trade receivables (903) (1,025)
Net trade receivables 11,729 13,146
Other taxes and social security 1,346 1,071
Accrued Accelerated Licensing Income 2,442 1,954
Other receivables 268 381
Marketing materials 581 1,184
Prepayments 1,962 2,807
----------------------------------------------------- -------- --------
18,328 20,543
----------------------------------------------------- -------- --------
There is no material difference between the carrying amount and
the fair value of the trade and other receivables. The only
impaired assets are within trade receivables, accrued accelerated
licensing income and marketing materials. The only financial asset
that is subject to IFRS 9's expected credit loss model is trade
receivables for sales of inventory.
10. Analysis of net funds
1 February Other non-cash 31 January
2020 Cash flow changes 2021
GBP000 GBP000 GBP000 GBP000
--------------------------- ----------- ---------- --------------- -----------
Cash and cash equivalents 3,055 12,656 (162) 15,549
Bank overdraft (1,719) 1,818 (99) -
--------------------------- ----------- ---------- --------------- -----------
Cash and cash equivalents
and bank overdraft 1,336 14,474 (261) 15,549
--------------------------- ----------- ---------- --------------- -----------
Short term loan - (412) - (412)
Finance lease liabilities (8,413) 2,958 (427) (5,882)
Net (debt) / funds (7,077) 17,020 (688) 9,255
--------------------------- ----------- ---------- --------------- -----------
Other non-cash changes are exchange gains/(losses) from the
retranslation of bank balances held in non-sterling bank accounts
and new additions to the right of use assets. The non-cash change
to the bank overdraft reflects the prepaid 5 year facility fee.
The Group took a loan under the US Paycheck Protection Payment
scheme on 7 May 2020, under a scheme for businesses affected by the
US lockdown. No repayments have been made in relation to this loan
and it has been treated as repayable within 1 year (Sterling
equivalent at 31 January 2021 GBP412,000).
11. Cash generated from operations
2021 2020
GBP000 GBP000
------------------------------------------------------ -------- --------
Profit before tax 5,015 4,378
Defined benefit pension charge 531 593
Net finance costs 161 400
Depreciation and impairment of property, plant
and equipment and right-of-use assets 5,697 5,643
Amortisation 1,735 1,734
Loss / (gain) on disposal of fixed assets 72 (51)
Insurance reimbursements - (144)
Charge for LTIP recognised in equity 294 390
Unrealised foreign exchange losses included in
operating profit (52) (112)
Defined benefit pension cash contributions (2,118) (1,870)
------------------------------------------------------ -------- --------
Cash generated from operating activities
pre insurance proceeds 11,335 11,003
Insurance proceeds relating to operating activities - 144
------------------------------------------------------ -------- --------
Cash generated from operating activities
post insurance proceeds 11,335 11,147
Changes in working capital:
Decrease / (increase) in inventories 8,106 (436)
Decrease / (increase) in trade and other receivables 2,310 (1,957)
(Decrease) / increase in trade and other payables (3,529) 834
Cash generated from operations 18,222 9,588
------------------------------------------------------ -------- --------
12. Retirement benefit obligation
Defined benefit schemes
Sanderson Design Group PLC operates two defined benefit schemes
in the UK which both offer pensions in retirement and death
benefits to members: the Walker Greenbank Pension Plan and the
Abaris Holdings Limited Pension Scheme. Pension benefits are
related to the members' final salary at retirement and their length
of service. The schemes are closed to new members and to future
accrual of benefits, although deferred members still in-service
have a salary link to their benefits. This disclosure excludes any
defined contribution assets and liabilities.
The Group's contributions to the schemes for the year beginning
1 February 2021 are expected to be GBP2,278,000.
2021 2020
GBP000 GBP000
------------------------------------------------------- -------- --------
Deficit at beginning of year (5,659) (9,663)
Scheme expenses (449) (370)
Interest cost (1,395) (1,870)
Expected return on plan assets 1,313 1,647
Contributions 2,118 1,870
Return on scheme assets 1,635 11,561
Actuarial loss from changes in financial assumptions (5,266) (8,996)
Experience adjustment on benefit obligation 719 (359)
Actuarial gain from change in demographic assumptions 1,347 521
------------------------------------------------------- -------- --------
Gross deficit at the end of the year (5,637) (5,659)
------------------------------------------------------- -------- --------
Remeasurements of the net defined benefit liability/(asset) to
be shown in the Statement of Comprehensive Income
2021 2020
GBP000 GBP000
------------------------------------------------- -------- --------
Net remeasurement - financial 5,266 (8,996)
Net remeasurement - demographic (1,347) 521
Net remeasurement - experience (719) (359)
Return on assets, excluding interest income (1,635) 11,561
Total remeasurements of the net defined benefit
liability 1,565 2,727
------------------------------------------------- -------- --------
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END
FR GPURUAUPGPUM
(END) Dow Jones Newswires
May 18, 2021 02:00 ET (06:00 GMT)
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