TIDMSDG

RNS Number : 6156J

Sanderson Design Group PLC

28 April 2022

 
 28 April 2022 
 

SANDERSON DESIGN GROUP PLC

("Sanderson Design Group", the "Company" or the "Group")

Financial Results for the year ended 31 January 2022

A year of strong trading, cash generation and strategic progress

Sanderson Design Group PLC (AIM: SDG), the luxury interior design and furnishings group, announces its audited financial results for the year ended 31 January 2022.

Financial highlights

 
 Year ended 31 January                     2022        2021          Change          2020          Change 
                                                        restated**    2022 cf 2021    restated**    2022 cf 2020 
 Revenue                                   GBP112.2m   GBP93.8m      19.6%           GBP111.5m     0.6% 
                                          ----------  ------------  --------------  ------------  -------------- 
 Adjusted underlying profit before tax*    GBP12.5m    GBP7.0m       78.6%           GBP7.5m       66.7% 
                                          ----------  ------------  --------------  ------------  -------------- 
 Adjusted underlying EPS*                  13.75p      7.89p         74.3%           9.35p         47.1% 
                                          ----------  ------------  --------------  ------------  -------------- 
 Statutory profit before tax               GBP10.4m    GBP4.9m       112.2%          GBP4.5m       131.1% 
                                          ----------  ------------  --------------  ------------  -------------- 
 Statutory profit after tax                GBP7.8m     GBP3.8m       105.3%          GBP3.8m       105.3% 
                                          ----------  ------------  --------------  ------------  -------------- 
 Basic EPS                                 10.93p      5.39p         102.8%          5.41p         102.0% 
                                          ----------  ------------  --------------  ------------  -------------- 
 Net cash***                               GBP19.1m    GBP15.1m      26.5%           GBP1.3m       >1,000% 
                                          ----------  ------------  --------------  ------------  -------------- 
 

*excluding share-based incentives, defined benefit pension charge and non-underlying items as summarised in note 1

** refer to note 12 for details on the prior year restatements

*** Net cash is defined as cash and cash equivalents less borrowings. For the purpose of this definition, borrowings does not include lease liabilities

-- Revenue up 19.6% at GBP112.2m (FY2021: GBP93.8m; FY2020: GBP111.5m), reflecting the receding impact of Covid-19 and the Group's strategy for growth.

-- Third party manufacturing sales up 30.9% from FY2021 and up 8.0% against FY2020, with total sales (including sales to Group brands) up 46.8% from FY21 and up 17.5% against FY2020 contributing substantially to Group profitability.

-- Brand product sales up 17.8% compared with FY2021 and up 0.8% compared with FY2020 in constant currency:

o Morris & Co. brand performing very well in all regions, up 32.4% on FY2021 and up 45.1% on FY2020 in constant currency.

o North America has continued to deliver a very strong performance with all brands.

o Licensing income delivered GBP5.2m (FY2021: GBP3.7m; FY2020: GBP5.5m) including accelerated licensing income of GBP1.4m (FY2021: GBP0.9m; FY2020: GBP2.3m) with strong and exciting collaborations with NEXT, Bedeck and Blinds2Go in the UK, Sangetsu, Nishikawa and Kawashima in Japan and Williams Sonoma in the US.

-- Adjusted underlying profit before tax GBP12.5m (FY2021: GBP7.0m; FY2020: GBP7.5m), reflecting stronger sales and the full-year impact of the operational measures introduced to reduce and control discretionary and fixed costs. Reported profit before tax of GBP10.4m is up 112.2% on the year ended 31 January 2021 (FY2021: GBP4.9m; FY2020: GBP4.5m).

-- Liquidity and headroom of GBP31.6m (FY2021: GBP27.9m; FY2020: GBP13.8m) with a net cash of GBP19.1m (FY2021: GBP15.1m; FY2020: GBP1.3m).

-- Proposed final dividend of 2.75p per share (FY2021: nil; FY2020: nil) to give a total dividend for the year of 3.50p (FY2021: nil; FY2020: 0.52p)

Operational highlights

-- Morris & Co. sales driven in part by its 160(th) anniversary year in 2021 with a compilation of best sellers performing significantly ahead of management expectations and the Simply Morris collection showing encouraging sales since its September 2021 launch.

-- Sanderson's One Sixty compilation collection of re-worked classic designs has exceeded management expectations with the positive impact of the Very Sanderson media campaign, featuring British sports personality Maro Itoje, launched in April 2021.

-- Harlequin's Own The Room TV campaign launched in September 2021 renewed the momentum in the brand.

-- Direct-to-consumer digital incubator projects advanced with the launch our direct-to-consumer website franchise collaboration, Scion Living | Uplifting Design For Your Home , and the online launch of Archive by Sanderson Design, a consumer brand targeting a new customer demographic for the Group.

-- Planet Mark certification for Year 4 of carbon reduction, reflecting our Live Beautiful sustainability pledge.

Dianne Thompson, Sanderson Design Group's Chairman, said:

"I am extremely pleased to be able to report a strong set of results, not only delivering substantial growth against a year impacted by COVID-19, but also against 2020, prior to the pandemic. We delivered an excellent performance from manufacturing, continued strong growth from the Morris & Co. brand, strong licensing income and more than 40% sales growth in the USA, a key target growth market for us.

Trading in the first three months of the current financial year has performed in line with our expectations, with continued demand for manufacturing and strong brand sales, particularly Morris & Co. and Sanderson. Licence income has also performed strongly. As we carefully navigate another potentially challenging year, the Board remains confident in its strategy and the results that are being delivered."

Analyst meeting and webcast

A meeting for analysts and institutional investors will be held at 10am today, 28 April 2022, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. For details, please contact Buchanan at SDG@buchanan.uk.com.

A live webcast of the meeting will be available via the following link:

https://webcasting.buchanan.uk.com/broadcast/62435b9e48e2f937d0543c90

A replay of the webcast will be made available following the meeting at the Company's investor website, www.sandersondesign.group.

For further information:

 
  Sanderson Design Group PLC                c/o Buchanan +44 (0) 20 
                                                          7466 5000 
 Lisa Montague, Chief Executive Officer 
 Mike Woodcock, 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 / Will Brinkley 
 
 Buchanan                                      +44 (0) 20 7466 5000 
 Mark Court / Sophie Wills / Toto 
  Berger 
 

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, Clarke & Clarke and Archive by Sanderson Design.

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 wallpaper and fabric brands.

Sanderson Design Group employs approximately 600 people and its products are sold worldwide. It has showrooms in London, New York, Chicago, 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 2022 was a successful year for the business during which the receding impact of Covid-19 and the Group's strategy for growth resulted in a year of strong trading and cash generation. Trading highlights included an excellent performance from manufacturing, continued strong growth from the Morris & Co. brand, strong licensing income and more than 40% sales growth in the USA in constant currency, a key growth market for the Group.

Our business leveraged consumers' growing interest in pattern, colour and design, which has helped drive our three key revenue streams of manufacturing, brands and licence income.

Our manufacturing operations, which print fabric and wallpaper for our own brands and third parties, deserve special mention after a record year, with sales and profits making a very significant contribution to Group results. Third party manufacturing sales in the year were up 30.9% compared with the year ended 31 January 2021 (up 8.0% on FY2020), reflecting the quality and competitiveness of our printing along with the design strength in our factories' studios. Manufacturing, particularly digital printing, is a significant opportunity for the Group and order books remain strong.

Our heritage brands, Morris & Co. and Sanderson, continued to lead the sales growth in our brands portfolio whilst contemporary Clarke & Clarke, our biggest selling brand, achieved fantastic sales in the USA.

We have continued to advance our Group strategy with the objective of becoming a sustainable, efficient, and growing business. Our sustainability strategy, Live Beautiful, was launched in April 2021 and I am excited by the motivation across the entire Group to achieve our objectives.

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

Financial Results

The results for the year ended 31 January 2022 show a strong recovery from Covid-19, which had a very significant effect on the first half of the previous financial year. Adjusted underlying profit before tax at GBP12.5m is up 78.6% on the year ended 31 January 2021 (FY2021: GBP7.0m; FY2020: GBP7.5m). Reported profit before tax of GBP10.4m is up 112.2% on the year ended 31 January 2021 (FY2021: GBP4.9m; FY2020: GBP4.5m). The Group's balance sheet strengthened considerably throughout the year, resulting in net cash at the year end of GBP19.1m compared with GBP15.1m at 31 January 2021 (FY2020: GBP1.3m).

Dividend

The Directors recommend the payment of a final dividend of 2.75p per share (FY2021: nil; FY2020: nil) which, subject to shareholder approval at the Company's forthcoming Annual General Meeting, will be payable on 12 August 2022 to shareholders on the register at 15 July 2022. This brings the total dividend for the year to 3.50p per share (FY2021: nil; FY2020: 0.52p) if approved at the Company's forthcoming annual general meeting. The Board remains committed to a progressive dividend policy as part of the capital allocation priorities of the Group.

Going Concern

The Directors reviewed a Management Base Case (MBC) model and considered the uncertainties regarding the further impact of Covid-19, supply chain and inflationary pressures and the Russian invasion of Ukraine for the assessment of going concern. The Directors consider that, having reviewed forecasts prepared by the management team which have been stress tested, the Group have adequate resources to continue trading for the foreseeable future. For this reason, they continue to adopt the going concern basis. Further details are included in note 1.

Board and People

The Company's Board continued to evolve during the year. On 1 November 2021, we were delighted to welcome Mike Woodcock, who has a strong track record in consumer and brand-based businesses, as Chief Financial Officer. Mike replaced Michael Williamson, who stepped down as Chief Financial Officer on 31 October 2021. We thank Michael for his contribution to the Company, particularly during the challenging periods of Covid-19 and Brexit.

We were also pleased to appoint two new independent Non-Executive Directors, Juliette Stacey and Patrick Lewis, who joined the Board on 3 November 2021. They bring a wealth of governance, operational management and consumer sector experience to the Board. Vijay Thakrar stepped down as a Non-Executive Director on 27 November 2021 and we thank him for his contribution to the Company.

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 commitment, hard work and adaptability during a year in which Covid-19 continued to impact many aspects of our lives. I am profoundly grateful for the fortitude and resilience of colleagues, which has enabled the Company to emerge strongly from the pandemic.

Outlook

I am extremely pleased to be able to report a strong set of results, not only delivering substantial growth against a year impacted by COVID-19, but also against 2020, prior to the pandemic. We delivered an excellent performance from manufacturing, continued strong growth from the Morris & Co. brand, strong licensing income and more than 40% sales growth in the USA, a key target growth market for us.

Trading in the first three months of the current financial year has performed in line with expectations, with continued demand for manufacturing and strong brand sales, particularly Morris & Co. and Sanderson. Licence income has also performed strongly. The simplification of the Group has continued with the closure of our French subsidiary, with business in France now managed directly from the UK.

We are mindful of the cost, supply chain and geo-political issues that impact consumer confidence, along with specific inflationary pressures in our home market. We are monitoring costs closely and passing on price rises where appropriate. We suspended all trade with Russia on 24 February 2022, a distributor-based region that represented only around 2% of global sales for FY2022.

As we carefully navigate another potentially challenging year, the Board remains confident in its strategy and the results that are being delivered.

Dianne Thompson

Non-executive Chairman

27 April 2022

CHIEF EXECUTIVE OFFICER'S STRATEGY AND OPERATIONAL REVIEW

Introduction

We have delivered strong financial results compared with both FY2021 and FY2020, reflecting an improving trading environment and progress delivered from our strategy for the business. Group sales of GBP112.2m and adjusted underlying profit before tax of GBP12.5m represent significant progress on FY2020, a year unaffected by Covid-19, in which sales were GBP111.5m and adjusted underlying profit before tax were GBP7.5m (FY2021: revenue of GBP93.8m and adjusted underlying profit before tax of GBP7.0m). Reported profit before tax was GBP10.4m (FY2021: GBP4.9m; FY2020: GBP4.5m) showing the same trend as the adjusted measure.

Manufacturing was the star performer of our three key revenue streams of manufacturing, brands, and licensing during the year. Our two manufacturing businesses, Standfast & Barracks and Anstey are the printers of choice in our industry for both UK and international customers. Over the next two to three years, we intend to increase investment at these factories to deliver a step change in technology, capability, and productivity and drive capacity to achieve greater return.

Brand product sales recovered during the year, performing broadly in line with expectations with a particularly strong performance from Morris & Co., up 32.4% on FY2021 in constant currency and up 45.1% on FY2020 in constant currency. Licensing income performed strongly during the year, with income up 43.7% compared with FY2021 in constant currency.

Geographically, North America delivered an excellent performance, recording growth of 42.3% against FY2021 and up 24.1% against FY2020 in constant currency. Our US subsidiary, Sanderson Design Group Inc., had its best year in terms of sales and profits since it was founded in 1998. This performance reflected strategic initiatives, including a greater showroom network and road sales team presence in the North American market.

STRATEGY AND PROGRESS

We set out our growth strategy for the Group in October 2019 and this strategy 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 strategy is to focus on our core products of wallpaper, fabric and paint and to build our finished goods offer with our 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.

Growing key geographies: Our brands have significant international market potential, reflected in their being sold in more than 85 countries worldwide. To maximise return, we are focused on building market share in three key geographies: the UK, Northern Europe and the USA. Our approach is tailored to each individual region.

We have made significant progress during the year and delivered results from pursuing this strategy.

Efficiency

Improving the efficiency of the business by reducing the number of stocked items (SKUs) is an integral part of our strategy. Our focus has been on fewer, stronger collection launches to reduce the number of SKUs. Historically, only a proportion of them sold particularly well whilst others added to costs and inventory.

Launching collections digitally, rather than through pattern books, and monitoring online sample requests has helped us to identify the most popular designs and colourways in new collections. This has saved cost on stock and improved efficiency. The pattern books that we print only to include designs and colourways that are most likely to become best-sellers.

The Group has now reached its target of SKU reduction. The number of collections launched has reduced and each SKU is much more targeted to the market's requirements. As a result, the number of sales per SKU is increasing and a better return on investment is being achieved. The intention is to keep the number of SKUs at approximately 12,000 live options of fabric and wallpaper, with a broadly one-in/one-out SKU merchandising policy.

The simplification of the Group structure has continued with the closure on 31 January 2022 of our French subsidiary, with business in France now managed directly from the UK. The one-off closure cost of GBP1.1m has been included as a non-underlying item. The closure of the French subsidiary, which traded only around break-even at best over the past 25 years, follows the closure in prior year of our Moscow-based subsidiary as its sales were non-material to the Group. The Group now has just two trading subsidiaries, one in the UK and one in the US, and a network of distributors worldwide.

Sustainability

We launched our Live Beautiful sustainability strategy in April 2021 with a broad range of initiatives including two major commitments: for the Group to be net carbon zero by 2030 and to be the employer of choice in the interior design and furnishings industry.

Our employee engagement survey carried out in 2021 gave an overall employee satisfaction rating of 78%, which compares with 58% two years before, in 2019, when the survey was last conducted. We have since raised our target of 70% to 80% for employee satisfaction as we continuously strive for improvement. The survey will next be conducted in 2023.

We were pleased to receive our Year 4 Planet Mark sustainability certification, which measures our carbon footprint. In the year to 31 January 2022, our total carbon footprint was 7,452.9 tonnes, an increase on FY2021's 6,359.3 tonnes reflecting the increase in productivity during the year, but a decrease compared with FY2020's 7,977.8 tonnes despite a sales performance ahead of that year.

Digital and direct-to-consumer initiatives

Through several incubator projects, we are experimenting with digital and direct-to-consumer routes to market to identify the best approach for each brand in our portfolio. During the year, we launched an online shop for the Scion brand through a franchise partnership at scionliving.com; we launched our own direct-to-consumer brand, Archive by Sanderson Design; and we have just opened our first store for Morris & Co. as a directly-operated concession within Harrods, London, with the intention to also move that offer online after the initial period. The insights we gain from these projects, and other initiatives such as selling paint online from our brand websites, will shape our future strategy in this area.

OPERATIONAL REVIEW

The table below shows the Group's sales performance in the year ended 31 January 2022, compared with FY2021 and with FY2020, the most recent pre-pandemic year. The table shows our three key revenue streams of manufacturing, brand product sales, and licensing income. It also gives the four key geographies of our brand product sales: the UK, Northern Europe, North America and Rest of the World.

 
                                    Year ended 31 January                Change (%)                 Change (%) 
                                            (GBPm) 
                                                                        2022 compared            2022 compared with 
                                                                          with 2021 
                                                                                                        2020 
                               2022         2021         2020      Reported     Constant      Reported       Constant 
                                                                                currency                      currency 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 UK Brand product 
  sales                           43.7         38.1         44.9      14.7%         14.7%         (2.7%)         (2.8%) 
 International Brand 
  product sales                   40.4         34.5         39.8      17.1%         21.3%           1.5%           5.0% 
 
    *    North America            16.6         12.5         14.4      32.8%         42.3%          15.3%          24.1% 
 
    *    Northern Europe          13.2         12.5         13.0       5.6%          7.8%           1.5%           2.5% 
 
    *    Rest of the World        10.6          9.5         12.4      11.6%         12.8%        (14.5%)        (13.5%) 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 Total Brand product 
  sales 
  (includes carriage 
  income)                         84.1         72.6         84.7      15.8%         17.8%         (0.7%)           0.8% 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 Licensing income                  5.2          3.7          5.5      40.5%         43.7%         (5.5%)         (2.2%) 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 Total Brand sales 
  including 
  Licensing                       89.3         76.3         90.2      17.0%         19.0%         (1.0%)           0.6% 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 Total Manufacturing 
  sales*                          41.7         28.4         35.6      46.8%             -          17.1%              - 
 Intercompany elimination*      (18.8)       (10.9)       (14.3)      72.5%             -          31.5%              - 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 Total Revenue*                  112.2         93.8        111.5      19.6%             -           0.6%              - 
--------------------------  ----------  -----------  -----------  ---------  ------------  -------------  ------------- 
 

*does not report in constant exchange rate

MANUFACTURING

Our unique, integrated vertical supply chain is an important pillar in our growth strategy and will be the focus of increased investment in the next two to three years.

The two factories, Standfast & Barracks and Anstey Wallpaper Company, print for our own brands and for third parties, positioning them at the centre of our industry. Our third-party sales, in the UK, Europe and the USA, reflect our premium print technologies and world-class excellence in design, manufacturing, customer service and innovation.

Both factories are printing an increasing proportion of their output through digital printing, which will be the focus of investment in the years ahead.

 
                            Year ended 31 January       Change (%)        Change (%) 
                                    (GBPm) 
                                                       2022 compared     2022 compared 
                                                            with              with 
                                                            2021              2020 
                          2022    2021      2020         Reported         Reported 
-----------------------  ------  ------  ----------  ---------------  ---------------- 
 Sales to Group brands     18.8    10.9        14.3       72.5%             31.5% 
                         ------  ------  ----------  ---------------  ---------------- 
 Third party sales         22.9    17.5        21.2       30.9%             8.0% 
                         ------  ------  ----------  ---------------  ---------------- 
 Total Manufacturing 
  sales                    41.7    28.4        35.5       46.8%             17.5% 
                         ------  ------  ----------  ---------------  ---------------- 
 

Standfast & Barracks ('Standfast')

Standfast, our fabric printing factory, is widely regarded, internationally, as the destination for creative, innovative and high-quality fabric printing. 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.

Total sales at Standfast increased significantly in the year to GBP21.3m (FY2021: GBP14.4m; FY2020: GBP17.0m).

Digital printing at Standfast as a proportion of factory output was 69% (FY2021: 61%; FY2020: 52%).

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 combine them.

Total sales at Anstey increased to GBP20.4m (FY2021: GBP14.0m; FY2020: GBP18.5m).

In line with the Group's stated ambition to increase capacity, Anstey has reviewed shift patterns and completed a restructure that opened a total of 20 new roles in the business to ensure capacity for growth, of which 16 have been recruited.

Digital printing at Anstey as a proportion of factory output was 18% (FY2021: 15%; FY2020: 13%).

THE BRANDS

The Brands segment comprises heritage brands Sanderson, Morris & Co, and Zoffany; contemporary brands Harlequin, Scion, Clarke & Clarke and new consumer brand Archive by Sanderson Design. During the year, the relatively small Anthology brand was absorbed into Harlequin as detailed in our interim results announced 13 October 2021. Existing Anthology products will continue to be sold and supported by Harlequin and no new products will be launched.

The Brands segment includes licensing income as well as global trading from the brands, including our overseas sales offices in the USA, Dubai, Netherlands, and Germany.

 
                      Year ended 31 January          Change (%)              Change (%) 
                              (GBPm) 
                                                  2022 compared with      2022 compared with 
                                                         2021                    2020 
 Brands              2022     2021     2020     Reported    Constant    Reported    Constant 
                                                             currency                currency 
-----------------  -------  -------  --------  ----------  ----------  ----------  ---------- 
 Morris & Co.         16.4     12.6      11.4       30.2%       32.4%       43.9%       45.1% 
                   -------  -------  --------  ----------  ----------  ----------  ---------- 
 Sanderson            14.4     11.6      13.1       24.1%       26.2%        9.9%       11.4% 
                   -------  -------  --------  ----------  ----------  ----------  ---------- 
 Zoffany               8.6      7.8       9.6       10.3%       11.6%     (10.4%)      (8.8%) 
                   -------  -------  --------  ----------  ----------  ----------  ---------- 
 Clarke & Clarke      24.6     21.7      25.1       13.4%       14.8%      (2.0%)      (0.5%) 
                   -------  -------  --------  ----------  ----------  ----------  ---------- 
 Harlequin            17.6     16.0      21.3       10.0%       11.9%     (17.4%)     (16.0%) 
                   -------  -------  --------  ----------  ----------  ----------  ---------- 
 Scion                 2.2      2.4       3.2      (8.3%)      (5.9%)     (31.3%)     (29.4%) 
                   -------  -------  --------  ----------  ----------  ----------  ---------- 
 

Morris & Co.

Brand product sales for Morris & Co. in the UK were up 31.6%, in Northern Europe were up 6.6% and in North America were up 89.9% in constant currency compared with FY2021 and up 24.7%, 37.6% and 136.1% respectively compared with FY2020.

The brand's sales were driven in part by Morris & Co.'s 160th anniversary year in 2021, with an anniversary compilation collection of the brand's best sellers performing significantly ahead of our expectations. Marketing around the anniversary is continuing into current financial year, with the brand staging its first-ever show garden at the 2022 Chelsea flower show. Award-winning garden designer Ruth Willmott has created an exciting and highly imaginative show garden on the main avenue based on two of William Morris's best known wallpaper designs, Trellis and Willow Boughs.

The Simply Morris collection, a new design concept for Morris & Co., targeted at sunshine states was launched in 25 September 2021. This modern interpretation of Morris & Co. designs using clear grounds represents a fresh take on maximalism. Initial sales have been very encouraging.

We have recently announced several new Morris & Co. initiatives to drive sales in the current year including the launch of a second capsule of wallpapers and fabrics in collaboration with Ben Pentreath, the influential architect and designer. This new collection, Cornubia, has just been launched to critical acclaim and featured in our Chelsea Harbour showroom during London Design Week last month.

In February 2022, we relaunched Morris & Co. paints, which have been out of production since 2008 though frequently requested by customers. This new range of 40 paints are in colours based on historic William Morris colour recipes and on documents from the Company's extensive Morris & Co. design archive. Initial sales are exclusive to UK independent retailers for six months, after which the product will move to general distribution. Retailers have responded positively with all point-of-sale support material taken up and subsequent feedback from sampling has been very positive.

We are also excited by the recent opening of the Morris & Co. Home Emporium, a new shop-in-shop concept at Harrods' flagship Knightsbridge store in London. In addition to fabric and wallpaper, the concession store will sell the full breadth of Morris & Co. products across furniture, bedlinen, cushions, rugs, paint, tableware, scarfs, and leather goods with a range of limited edition products exclusive to the Emporium.

Sanderson

Brand product sales at Sanderson in the UK were up 23.4%, in Northern Europe were up 17.5% and in North America were up 58.8% in constant currency compared with FY2021 and up 6.0%, 6.6% and 63.8% respectively compared with FY2020.

To celebrate the brand's 160(th) anniversary, in June 2021 Sanderson launched the Sanderson One Sixty compilation collection of re-worked classic designs of fabrics and wallpapers, sales of which have exceeded expectations. The brand also began an exciting collaboration with Maro Itoje, the England rugby star, who, as a modern British icon, features as the new face of the Very Sanderson media campaign.

In line with our strategy of fewer, stronger launches, Sanderson collections have been rationalised to one big launch each year. Following the successful Sanderson One Sixty launch last year, we have just launched Water Garden, which has been very well received. Water Garden also features the panel designed by our sponsored QEST scholar, Rachel Spelling.

Zoffany

Zoffany's brand product sales in the UK were up 12.1%, in Northern Europe were down 8.3% and in North America were up 36.2% in constant currency compared with FY2021 and down 13.8%, down 15.2% and up 25.9% respectively compared with FY2020.

The Kensington Walk collection of wallpapers and fabrics was last year's key launch for the Zoffany brand and was launched in 13 May 2021. Designer Ruth Blanke's addition to the Palladio collection of wallpapers, Avalonis, was launched in February 2022. Ruth won last year's Royal College of Art award to create a new wallpaper for the Palladio wallpaper collection, an award for new designers offered annually by the Company.

Zoffany also launched a Luxury Coordinates range of fabrics and paints to complement the brand's wallpapers. The range includes a new paint finish, True Matt, which has a chalky finish and is environmentally friendly. True Matt, available in 156 colours, has been very well received, winning the Paint Collection category in Livingetc Style Awards 2021.

Clarke & Clarke

Clarke & Clarke's brand product sales in the UK were up 12.6%, in Northern Europe were up 14.5% and in North America were up 32.9% in constant currency compared with FY2021 and up 2.4%, down 2.1% and down 4.6% respectively compared with FY2020.

FY2022 was a fantastic year for the brand in North America, where it is distributed by Kravet Inc. under a very positive relationship.

Clarke & Clarke's collections in the UK with Emma J Shipley and Tess Daly have continued to grow well. The brand's exciting partnership with heritage tableware company Wedgwood resulted in the launch of Wedgwood homewares in March this year, including fabrics and wallpapers for international distribution through both brands' networks.

Increasing the proportion of the brand's wallpaper output, as historically the brand has been almost exclusively fabric focused, has been a key strategic ambition for the brand. Further progress with this important opportunity is expected later this year with an autumn collection launch.

Harlequin

Harlequin's brand product sales in the UK were up 6.5%, in Northern Europe were down 4.2% and in North America were up 33.8% in constant currency compared with FY2021 and down 19.4%, down 20.4% and up 14.9% respectively compared with FY2020.

Through a number of new initiatives, we are seeking to drive renewed impetus behind the Harlequin brand. In September 2021, the Group used TV advertising for the first time to promote the Harlequin brand through a campaign called Own the Room, which seeks to empower consumers to choose the best designs and colours for emotional and physical well-being.

The Own the Room campaign was based on a specially commissioned white paper by Professor Stephen Westland of Leeds university, exploring our emotional and physical responses to colour. This resulted in a colour quiz being developed on the Harlequin website, to help consumers identify their ideal colour and design choices. Harlequin collections are presented as colour stories to suit each of our four profiles: Rewild, Reflect, Retreat and Renew. The quiz, the white paper and further details of the Own the Room campaign can be found at the Harlequin website via this link: https://harlequin.sandersondesigngroup.com/white-paper/

Scion

Scion's brand product sales in the UK were down 0.2%, in Northern Europe were down11% and in North America were down 16% in constant currency compared with FY2021 and down 26%, 28.8% and 25.6% respectively compared with FY2020. The smallest brand in the portfolio, the strategically reduced investment in new designs and the important proportion of licensing, lead to a good level of contribution.

As part of advancing the Group's digital strategy, the Company signed an agreement in November 2020 with a business formed by the leading internet retailer Jane Clayton and Company to launch a direct-to-consumer online shop, Scion Living. The shop, which sells a broad range of Scion's wallpapers, fabrics and licensed products, went live in June 2021 at www.scionliving.com. Sales of direct-to-consumer are not material, but the metrics of visitors to the site, and sales, are beginning to improve and we will provide a further update with the current year's interim results.

Scion is proud to have recently entered a collaboration with Designs in Mind, the social enterprise and mental health charity, whose mission is to support those living with mental health challenges through creativity in art. Scion will work with Designs in Mind on a capsule collection of designs in a range of fun and fresh prints, conceptualised through workshops held at the studio.

Archive by Sanderson Design

Archive by Sanderson Design is a completely new, direct-to-consumer brand launched in September 2021. This maximalist brand, which targets digitally native consumers, who are new customers for the Group, is an important part of our experimentation with new routes to market. The brand leverages the Company's design archive, using heritage designs predominantly from Arts & Crafts period designers.

The brand's first collection comprised a capsule range of wallpapers, fabrics, cushions and lampshades. A made-to-measure service for curtains, blinds and smaller furniture items is provided on the brand's website as part of developing the brand as a lifestyle offering. Bedding is due to launch in May 2022.

Selfridges, the leading luxury lifestyle retailer, was the exclusive retail partner for the launch of the brand, which took place in store in mid-October 2021 with distribution widening to selected retailers after the initial period.

As the brand has only recently launched, its sales in FY2022 were non-material and we remain excited by its potential and the insights to be gained from a direct-to-consumer offering.

LICENSING

Licensing income performed strongly during the year, with profits up 43.7% compared with FY2021 in constant currency. Core categories, including bedding and window coverings, remained robust and some exciting new licensing agreements were signed.

Licensing revenue of GBP5.2m (FY2021: GBP3.7m; FY2020: GBP5.5m) includes GBP1.4m (FY2021: GBP0.8m; FY2020: GBP2.3m) of minimum guaranteed income which is recognised on contract signature for both new agreements and renewals in accordance with IFRS 15.

Our 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. The agreement with Blinds2Go performed very strongly during the year, particularly with the Harlequin and Scion brands. Core licensing income also benefits from many smaller agreements across a wide range of homewares.

Since signing our first licensing agreement with NEXT in March 2020, NEXT has become an increasingly important licensing partner for the Group across the Morris & Co., Sanderson and Scion brands and across a broad range of home and apparel products.

NEXT's Morris & Co. womenswear was successful from launch in April 2021 through the autumn/winter seasons and it continues for two further seasons in the current calendar year. Our most recent licensing deal with NEXT was announced in October 2021, comprising a homewares collaboration with the Morris & Co. brand.

We also signed a number of other exciting new licensing deals during the year. In May 2021, we signed a new exclusive agreement with Sangetsu for Morris & Co. products in Japan and 14 countries in east and southeast Asia. The first products under this agreement are expected to be launched in autumn this year. In August 2021, we signed our first major licensing agreement in the US, again for the Morris & Co brand. This agreement, with kitchenware specialist Williams Sonoma, covers a broad range of tableware, cookware and kitchen accessories, due to launch in August 2022.

A Sanderson collaboration with Paige jeans, the upscale US fashion company, launched in February 2022 as a capsule that sells in luxury retailers internationally and on the Paige.com website.

The Company is progressing a pipeline of further licensing opportunities, leveraging its brands and design archives.

Summary

We are very pleased with the performance of the business during the year and the strength with which we have emerged from Covid. We were able to accelerate some of our strategic initiatives during the year, for example in achieving our five-year SKU reduction in under three years. We now have a much more efficient and agile business with a strong balance sheet. Investment in the near term will focus on our manufacturing operations, where we see significant further opportunities in digital printing. Recent collection launches across our portfolio of brands have been well received and we continue to support the brands with exciting marketing initiatives and licensing agreements, which gives us confidence in the year ahead. Finally, I would like to express my gratitude and heartfelt thanks to all of our colleagues for making the business a success throughout another challenging year.

Lisa Montague

Chief Executive Officer

27 April 2022

CHIEF FINANCIAL OFFICER'S REVIEW

The Chairman's Statement and the Chief Executive Officer's Strategic and Operating Review provide an analysis of the key factors contributing to our financial results for the year ended 31 January 2022. The results show a year of strong trading and cash generation, reflecting the receding impact of Covid-19 on the business and delivery of the Group's strategy for growth.

Revenue

Our reported revenue for the year was GBP112.2m compared with GBP93.8m in FY2021 and GBP111.5m in the pre-Covid year of FY2020.

 
                      Year ended 31 January       Change (%)         Change (%) 
                              (GBPm) 
                                                 2022 compared      2022 compared 
                                                   with 2021          with 2020 
 Revenue             2022      2021     2020       Reported          Reported 
-----------------  --------  -------  -------  ---------------  ----------------- 
 Brands                84.1     72.6     84.7       15.8%             (0.7%) 
                   --------  -------  -------  ---------------  ----------------- 
 Licensing              5.2      3.7      5.5       40.5%             (5.5%) 
                   --------  -------  -------  ---------------  ----------------- 
 Total Brands          89.3     76.3     90.2       17.0%             (1.0%) 
                   --------  -------  -------  ---------------  ----------------- 
 Manufacturing - 
  External             22.9     17.5     21.3       30.9%              7.5% 
                   --------  -------  -------  ---------------  ----------------- 
 Group                112.2     93.8    111.5       19.6%              0.6% 
                   --------  -------  -------  ---------------  ----------------- 
 

Gross Profit

Gross Profit for the full year was GBP73.8m, compared with GBP56.9m in FY2021 and GBP68.2m in FY2020, whilst the Gross Profit Margin at 65.8% represents an increase of 510 basis points over FY2021 (60.7%) and 460 basis points over FY2020 (61.2%).

The Group has adjusted the profit figures for FY2021 and FY2020. See the section later on prior year adjustments for further details.

 
                                         Year ended 31 January 
                                     2022      2021        2020 
                                              restated    restated 
-----------  ---------------------  ------  ----------  ---------- 
 Products           Revenue (GBPm)   107.0        90.1       106.0 
             ---------------------  ------  ----------  ---------- 
               Gross Profit (GBPm)    68.6        53.2        62.9 
 ---------------------------------  ------  ----------  ---------- 
                                 %   64.1%       59.1%       59.3% 
 ---------------------------------  ------  ----------  ---------- 
 
 Licensing          Revenue (GBPm)     5.2         3.7         5.5 
             ---------------------  ------  ----------  ---------- 
               Gross Profit (GBPm)     5.2         3.7         5.5 
 ---------------------------------  ------  ----------  ---------- 
                                 %    100%        100%        100% 
 ---------------------------------  ------  ----------  ---------- 
 
 Total              Revenue (GBPm)   112.2        93.8       111.5 
             ---------------------  ------  ----------  ---------- 
               Gross Profit (GBPm)    73.8        56.9        68.2 
 ---------------------------------  ------  ----------  ---------- 
                                 %   65.8%       60.7%       61.2% 
 ---------------------------------  ------  ----------  ---------- 
 

Excluding the impact of licence income, which generates 100% gross profit, margins improved to 64.1% in FY2022 versus 59.1% in FY2021 and 59.3% in FY2020. This improvement was a result of a change in the sales mix towards higher margin brands within the portfolio and volume driven efficiencies at the Group's two manufacturing sites.

Profit before tax

Profit before tax was GBP10.4m up from GBP4.9m in FY2021 and GBP4.5m in FY2020. This strong profit performance is driven by sales growth, gross margin improvement and a continued focus on cost control.

 
                                        Year ended 31 January (GBPm) 
                                       2022       2021         2020 
                                                 restated    restated 
-----------------------------------  --------  ----------  ----------- 
 Revenue                                112.2        93.8        111.5 
                                     --------  ----------  ----------- 
 Gross Profit                            73.8        56.9         68.2 
                                     --------  ----------  ----------- 
 Distribution and selling expenses     (25.1)      (19.1)       (22.9) 
                                     --------  ----------  ----------- 
 Administration expenses               (42.8)      (36.5)       (45.8) 
                                     --------  ----------  ----------- 
 Net other income                         4.5         3.8          5.4 
                                     --------  ----------  ----------- 
 Finance costs - net                      0.0       (0.2)        (0.4) 
                                     --------  ----------  ----------- 
 Profit before tax                       10.4         4.9          4.5 
                                     --------  ----------  ----------- 
 

Distribution and selling expenses of GBP25.1m represented 22% of revenue in the year compared with 20% in FY2021 and 21% in FY2020. A combination of Covid 19 impacts and Brexit contributed to higher container costs and carrier related capacity issues, particularly in the first half of the financial year.

Administration expenses grew to GBP42.8m in FY2022 from GBP36.5m in FY2021. In the prior year, as a response to Covid-19, the business cut back on discretionary expenditure, with significant reductions in marketing and travel and a hiring freeze across the business. Although many of these activities recommenced in FY22, the benefits of our restructuring and ongoing cost efficiency and control measures are evident in that administration expenses are GBP3.1m below FY2020 of GBP45.8m.

Other operating income of GBP4,342,000 (FY2021: GBP3,822,000; FY2020: GBP5,358,000) comprises consideration received from marketing materials of GBP4,046,000 (FY2021: GBP3,822,000; FY2020: GBP5,358,000) and a research and development expenditure credit ("RDEC") of GBP296,000 (FY2021: nil; FY2020: nil).

Adjusted underlying profit before tax

Adjusted underlying profit before tax was GBP12.5m up from GBP7.0m in FY2021 and GBP7.5m in FY2020.

 
                                                 Year ended 31 January (GBPm) 
                                                2022       2021         2020 
                                                         restated     restated 
                                                 GBPm         GBPm         GBPm 
 Profit before tax                               10.4          4.9          4.5 
 Amortisation of acquired intangible assets       1.0          1.0          1.0 
 Restructuring and reorganisation costs           1.2          0.2          1.0 
 Forgiveness of loan                            (0.4)            -            - 
 Release of a provision for legal case          (0.6)            -            - 
--------------------------------------------  -------  -----------  ----------- 
 Underlying profit before tax                    11.6          6.1          6.5 
 LTIP Accounting Charge                           0.4          0.4          0.4 
 Net defined benefit pension charge               0.5          0.5          0.6 
 Adjusted underlying profit before tax           12.5          7.0          7.5 
--------------------------------------------  -------  -----------  ----------- 
 

Non underlying items comprise:

-- Amortisation of intangible assets: GBP1.0m in respect of the acquisition of Clarke & Clarke in October 2016.

-- Restructuring and reorganisation costs: As part of the Group's policy to rationalise certain operational and support functions, the decision was taken to close our French subsidiary and to manage all French operations from the UK. This resulted in a charge of GBP1.1m to reflect the costs of this reorganisation. Other reorganisations in the UK cost GBP0.1m

-- Forgiveness of loan: On 7 May 2020 the Group entered a loan contract with Wells Fargo for $0.6m (GBP0.4m) under the US Paycheck Protection Programme. On 20 April 2021, our application for forgiveness of the loan in accordance with the US Government Small Business Administration guidance was successful.

-- Release of an accrual for a legal case: GBP0.6m release following the settlement of a legal claim in the USA with a former distributor.

Taxation

Tax for the year is charged on profit before tax based on the forecast effective tax rate for the full year. The estimated effective tax rate (before adjusting items) for the year was 25% (FY2021:18%; FY2020: 15%).

The key driver behind the higher effective tax rate is the impact of the rate at which deferred tax is being recognised (from 19% to 25%) following the announcement in the March 2021 Budget that a Corporation Tax rate of 25% will apply with effect from 1 April 2023.

During the year, the Group successfully applied for GBP0.3m of research and development expenditure credit ('RDEC') in respect of FY2021 and FY2020. This amount is recognised in other operating income.

Earnings Per Share

Basic reported EPS for the year was 10.93p (FY2021 restated: 5.39p; FY2020 restated: 5.41p). 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. The adjusted underlying basic EPS for the year was 13.75p (FY2021 restated: 7.89p; FY2020 restated: 9.35p). The diluted EPS for the year was 10.80p (FY2021 restated: 5.27p; FY2020 restated: 5.37p).

Capital Expenditure

Capital expenditure in the year totalled GBP2.1m (FY2021 GBP1.0m; FY2020 GBP2.4m). Overall capital expenditure was slightly lower than planned due to the later timing of projects. For FY2023 we expect capital expenditure to be around GBP6-7m as we step up our investment in digital printing technology and initiatives to reach our Zeroby30 pledge.

Inventories

Net inventory ended the year at GBP22.7m compared with FY2021 GBP19.6m and FY2020 at GBP27.8m.

This increase on FY2021 reflects a combination of stock re-build following Covid-19 supply chain disruption together with investment to assure strong availability of best sellers as we move into our Spring/Summer FY2022 trading season. The reduction versus FY2020 is evidence of the success of our SKU reduction programme in which we have already achieved our five-year target, set in October 2019, of approximately 12,000 SKUs.

The Group has adjusted the inventory values for FY2021 and FY2020. See the section below on prior year adjustments for further details.

Trade Receivables

Trade receivables increased to GBP13.5m (FY2021: GBP11.7m; FY2020: 13.1m) due to increases in Brands and Manufacturing revenues.

The ageing profile of trade debtors shows that payments from customers are close to terms. The current economic environment still presents a level of expected credit risk and in addition to specific provisioning against individual receivables, a provision has been made of GBP0.5m (FY2021; GBP0.5m; FY2020: GBP0.4m), which is a collective assessment of the risk against non-specific receivables calculated in accordance with IFRS 9. 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.

Cash position and banking facilities

Year-end net cash was GBP19.1m compared to FY2021 of GBP15.1m and FY2020 of GBP1.3m.

In the prior year, owing to Covid-19, the business significantly reduced expenditure and inventory levels and deferred corporation tax payments. Over the course of FY2022 these positions have unwound, and we end the year with what we consider to be a normal level of working capital for the business. This contributed to the fall in operating cash flow from GBP18.2m to GBP12.7m.

All foreign currencies are bought and sold centrally on behalf of the Group. Regular reviews take place of the foreign currency cash flows. The Group does not trade in financial instruments and hedges are only used for highly probable future cash flows and to hedge working capital exposures. No hedging contracts were put in place in the year but the Group will keep this assessment under review in light of levels of trade in foreign currency and volatility.

The Group has banking facilities provided by Barclays Bank plc. The Group has a GBP12.5m multi-currency revolving committed credit facility which is due for renewal in October 2024. The facility remained undrawn during the year. The agreement also includes a GBP5m 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. In May 2020, the Group entered into a loan contract with Wells Fargo for US$565,818 under the US Paycheck Protection Programme scheme. In June 2021, this loan was forgiven and the Group treated the forgiveness as a grant for GBP440,000.

Net defined benefit pension

The Group operates two defined benefit schemes in the UK. These comprise the Walker Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme. These were both closed to new members and to future service accrual from 30 June 2002 and 1 July 2005 respectively.

The triennial valuation of the schemes, based on the position of the schemes on 5 April 2021, is in the process of being completed. Independent pension and actuarial specialists are supporting the Group through the valuation process.

New deficit contribution schedules will be agreed as part of finalising the valuations and the business expects to continue making cash contributions into the schemes to make good any deficits, as well as making contributions towards the ongoing expenses incurred in the running of the schemes. The business also intends to continue actively looking at whether there are appropriate actions which could be taken to help reduce pension scheme risks within our wider business objectives.

Under IAS 19, the net defined benefit pension scheme asset that can be recognised is the lower of the surplus and the asset ceiling i.e. the economic benefits available in the form of refunds or reductions in future contributions or a combination of both, in accordance with IFRIC 14 'IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'. In order to determine whether there are any restrictions on the surplus as outlined in IFRIC 14, the Schemes' Trust Deeds and Rules were reviewed and legal advice was acquired. It is the Group's understanding that based on the conditions at the balance sheet date, it is able to run the Schemes until there are no remaining members; wind up the Schemes at that point; and reclaim any remaining monies. Consequently, the Company is able to recognise in FY2022 the full surplus of GBP2.6m (FY2021:net liability of GBP5.6m; FY2020: net liability of GBP5.7m) calculated in accordance with IAS 19 and IFRIC 14.

Dividend

As a result of the pandemic and in order to protect the Group's liquidity, no dividends were declared or paid during FY2021. For FY2022, an interim dividend of 0.75p per share was paid on 26 November 2021. A final dividend of 2.75p is now proposed taking the full year dividend to 3.50p. This payment will be made on 12 August 2022 to the shareholders on the Company's register on 15 July 2022 if approved at the Company's forthcoming annual general meeting. The Board remains committed to a progressive dividend policy as part of the capital allocation priorities of the Group.

Capital allocation policy

The improvement in the underlying performance of the business in recent years has created a business that is now consistently cash generative.

The level of capital investment required in the coming years is likely to be significantly above historical levels as we look to boost our digital printing capacity in both our factories whilst also investing in improved systems to improve our customer service proposition. Our forward expenditure programme is closely aligned to our Live Beautiful strategy with capital maintenance projects only being approved if they can be proven to support us on our journey to ZeroBy30.

We remain committed to retaining a strong balance sheet and acknowledge that we have two defined benefit pension plans that we are committed to supporting. We continue to look at whether there are appropriate actions which could be taken to help reduce pension scheme risks within our wider business objectives.

Prior year adjustments

The Group has rectified the error in previous years of its cost absorption methodology of the manufacturing units for establishing the profit elimination within inter-group inventories held at the year end. As a result of this error, the value of inventory at 31 January 2021 has reduced by GBP717,000, the cost of sales for the financial year ended 31 January 2021 has increased by GBP80,000 and opening retained earnings and inventory at 1 February 2020 have reduced by GBP637,000 The total impact of these adjustments for the financial year ended 31 January 2022 is a reduction of opening retained earnings of GBP717,000 with equivalent reduction in the value of opening inventories. In addition, the cash flow statement for the year ended 31 January 2021 and 31 January 2020 has been restated to show a reduced profit before tax by GBP80,000 with a compensating adjustment to the movement in inventories. There is no overall change to the reported operating cashflow.

The Group has analysed its minimum guaranteed licensing receivable into its current and non-current assets at 31 January 2022 and restated the 31 January 2021 and 31 January 2020 comparatives. This determination is based on the assessment of the operating cycle of the licensing arrangement after considering the nature of the agreement and the cash and invoicing cycle. This assessment was not carried out in the previous year and there have been no changes in the facts and circumstances and therefore a prior year adjustment has been processed to reflect the split in the previous year.

Going concern

The Directors reviewed a Management Base Case (MBC) model and considered the uncertainties regarding the further impact of Covid-19, supply chain and inflationary pressures and the Russian invasion of Ukraine for the assessment of going concern. The Directors consider that, having reviewed forecasts prepared by the management team which have been stress tested, the Group 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. Further details of the review are disclosed in note 1.

Mike Woodcock

Chief Financial Officer

27 April 2022

CONSOLIDATED INCOME STATEMENT

YEARED 31 JANUARY 2022

 
                                                                (restated) 
                                                          2022        2021 
                                                         Total       Total 
                                                Note    GBP000      GBP000 
----------------------------------------------  ----  --------  ---------- 
Revenue                                                112,200      93,760 
Cost of sales                                         (38,365)    (36,855) 
----------------------------------------------  ----  --------  ---------- 
Gross profit                                            73,835      56,905 
Distribution and selling expenses                     (25,052)    (19,129) 
Administration expenses                               (42,796)    (36,502) 
Other operating income                             4     4,342       3,822 
----------------------------------------------  ----  --------  ---------- 
Profit from operations                             3    10,329       5,096 
----------------------------------------------  ----  --------  ---------- 
Finance income                                             184         139 
Finance costs                                            (154)       (300) 
----------------------------------------------  ----  --------  ---------- 
Net finance income/(costs)                         5        30       (161) 
----------------------------------------------  ----  --------  ---------- 
Profit before tax                                       10,359       4,935 
Tax expense                                        6   (2,600)     (1,109) 
----------------------------------------------  ----  --------  ---------- 
Profit for the year attributable to owners of 
 the parent                                              7,759       3,826 
----------------------------------------------  ----  --------  ---------- 
Earnings per share - Basic                         7    10.93p       5.39p 
----------------------------------------------  ----  --------  ---------- 
Earnings per share - Diluted                       7    10.80p       5.27p 
----------------------------------------------  ----  --------  ---------- 
 
Adjusted earnings per share - Basic*               7    13.75p       7.89p 
----------------------------------------------  ----  --------  ---------- 
Adjusted earnings per share - Diluted*             7    13.59p       7.71p 
----------------------------------------------  ----  --------  ---------- 
 

All of the activities of the Group are continuing operations.

Note 12 explains the effect of the prior year restatements for the year ended 31 January 2021.

A credit of GBP139,000 relating to unwind of discount on minimum guaranteed licensing income was presented as part of interest expense in the prior year. The comparative has been represented to aid comparability.

* these are alternative performance measures

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEARED 31 JANUARY 2022

 
                                                                         (restated) 
                                                                   2022        2021 
                                                          Note   GBP000      GBP000 
-------------------------------------------------------  -----  -------  ---------- 
Profit for the year                                               7,759       3,826 
Other comprehensive income/(expense): 
Items that will not be reclassified to profit 
 or loss 
Remeasurements of defined benefit pension schemes                 6,492     (1,565) 
Deferred tax (charge)/credit relating to pension 
 schemes                                                        (1,233)         297 
--------------------------------------------------------------  -------  ---------- 
Total items that will not be reclassified to 
 profit or loss                                                   5,259     (1,268) 
--------------------------------------------------------------  -------  ---------- 
Items that may be reclassified subsequently to 
 profit or loss 
Currency translation gains/(losses)                                  70       (301) 
--------------------------------------------------------------  -------  ---------- 
Other comprehensive income/(expense) for the 
 year, net of tax                                                 5,329     (1,569) 
--------------------------------------------------------------  -------  ---------- 
 
  Total comprehensive income for the year attributable 
  to the owners of the parent                                    13,088       2,257 
--------------------------------------------------------------  -------  ---------- 
 

Note 12 explains the effect of the prior year restatements for the year ended 31 January 2021.

CONSOLIDATED BALANCE SHEET

as at 31 JANUARY 2022

 
                                                          (restated)  (restated) 
                                                    2022  31/01/2021  01/02/2020 
                                          Note    GBP000      GBP000      GBP000 
----------------------------------------  ----  --------  ----------  ---------- 
Non-current assets 
Intangible assets                                 26,979      28,325      29,815 
Property, plant and equipment                     11,258      12,061      14,101 
Right-of-use assets                                3,923       5,783       8,392 
Retirement benefit surplus                  10     2,577           -           - 
Minimum guaranteed licensing receivable      9     1,619       1,222       1,455 
                                                  46,356      47,391      53,763 
----------------------------------------  ----  --------  ----------  ---------- 
Current assets 
Inventories                                       22,652      19,633      27,819 
Trade and other receivables                  8    16,792      15,885      18,593 
Minimum guaranteed licensing receivable      9       879       1,221         495 
Cash and cash equivalents                         19,050      15,549       3,055 
----------------------------------------  ----  --------  ----------  ---------- 
                                                  59,373      52,288      49,962 
----------------------------------------  ----  --------  ----------  ---------- 
Total assets                                     105,729      99,679     103,725 
----------------------------------------  ----  --------  ----------  ---------- 
Current liabilities 
Trade and other payables                        (20,115)    (20,472)    (22,940) 
Lease liabilities                                (1,983)     (2,676)     (2,810) 
Borrowings                                             -       (412)     (1,719) 
----------------------------------------  ----  --------  ----------  ---------- 
                                                (22,098)    (23,560)    (27,469) 
----------------------------------------  ----  --------  ----------  ---------- 
Net current assets                                37,275      28,728      22,493 
----------------------------------------  ----  --------  ----------  ---------- 
Non-current liabilities 
Lease liabilities                                (1,920)     (3,206)     (5,603) 
Deferred income tax liabilities                  (1,998)       (514)       (802) 
Retirement benefit obligation               10         -     (5,637)     (5,659) 
----------------------------------------  ----  --------  ----------  ---------- 
                                                 (3,918)     (9,357)    (12,064) 
----------------------------------------  ----  --------  ----------  ---------- 
Total liabilities                               (26,016)    (32,917)    (39,533) 
----------------------------------------  ----  --------  ----------  ---------- 
Net assets                                        79,713      66,762      64,192 
----------------------------------------  ----  --------  ----------  ---------- 
Equity 
Share capital                                        710         710         710 
Share premium account                             18,682      18,682      18,682 
Foreign currency translation reserve               (796)       (866)       (565) 
Retained earnings                                 20,610       7,729       4,858 
Other reserves                                    40,507      40,507      40,507 
----------------------------------------  ----  --------  ----------  ---------- 
Total equity                                      79,713      66,762      64,192 
----------------------------------------  ----  --------  ----------  ---------- 
 

A third consolidated balance sheet as at 1 February 2020 has been included above to show the effect of the prior year restatements as detailed in note 12. Minimum guaranteed income is analysed into current and non-current assets as detailed in note 12.

CONSOLIDATED CASH FLOW STATEMENT

YEARED 31 JANUARY 2022

 
                                                                          (restated) 
                                                                    2022        2021 
                                                           Note   GBP000      GBP000 
---------------------------------------------------------  ----  -------  ---------- 
Profit before tax                                                 10,359       4,935 
Defined benefit pension charge                                       487         531 
Net finance (income)/costs                                          (30)         161 
Depreciation and impairment of property, plant and equipment 
 and right-of-use assets                                           5,065       5,697 
Amortisation                                                       1,725       1,735 
Loss on disposal of fixed assets                                       -          72 
Charge for LTIP recognised in equity                                 253         294 
Unrealised foreign exchange gains/(losses) included 
 in operating profit                                                 468        (52) 
Forgiveness of loan into a grant                                   (412)           - 
Defined benefit pension cash contributions                       (2,209)     (2,118) 
---------------------------------------------------------------  -------  ---------- 
Cash generated from operating activities                          15,706      11,255 
Changes in working capital: 
(Increase)/decrease in inventories                               (3,018)       8,186 
(Increase)/decrease in trade and other receivables                 (669)       2,310 
Increase/(decrease) in trade and other payables                      716     (3,529) 
---------------------------------------------------------------  -------  ---------- 
Cash generated from operations                                    12,735      18,222 
---------------------------------------------------------------  -------  ---------- 
Corporation tax paid                                             (3,754)        (23) 
---------------------------------------------------------  ----  -------  ---------- 
Net cash generated from operating activities                       8,981      18,199 
---------------------------------------------------------  ----  -------  ---------- 
Cash flows from investing activities 
Interest received                                                      5           1 
Purchase of intangible assets                                      (379)       (245) 
Purchase of property, plant and equipment                        (1,750)       (830) 
Proceeds from disposal of property, plant and 
 equipment                                                             -          75 
---------------------------------------------------------  ----  -------  ---------- 
Net cash used in investing activities                            (2,124)       (999) 
---------------------------------------------------------  ----  -------  ---------- 
Cash flows from financing activities 
Payment of lease liabilities                                     (2,686)     (2,958) 
Interest paid                                                       (76)       (279) 
Proceeds from borrowings                                               -         412 
Dividends paid to Company's shareholders                           (532)           - 
---------------------------------------------------------  ----  -------  ---------- 
Net cash used in financing activities                            (3,294)     (2,825) 
---------------------------------------------------------  ----  -------  ---------- 
Net increase in cash and cash equivalents                          3,563      14,375 
Cash and cash equivalents at beginning of year                    15,549       1,336 
Effect of exchange rate fluctuations on cash 
 held                                                               (62)       (162) 
---------------------------------------------------------  ----  -------  ---------- 
Cash and cash equivalents at end of year                     11   19,050      15,549 
---------------------------------------------------------  ----  -------  ---------- 
 

Note 12 explains the effect of the prior year restatements for the year ended 31 January 2021.

Interest paid was presented as part of net cash generated from operations in the prior year. The comparative has been represented to aid comparability.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

as at 31 JANUARY 2022

 
                                                            Attributable to owners of the parent 
                                        ---------------------------------------------------------------------------- 
                                                                                 Other reserves 
                                                                        -------------------------------- 
                                                                                                 Foreign 
                                                     Share  (restated)                          currency  (restated) 
                                           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 
 as previously stated                        710    18,682       5,495    43,457   (2,950)         (565)      64,829 
Prior period restatement 
 (note 12)                                     -         -       (637)         -         -             -       (637) 
--------------------------------------  --------  --------  ----------  --------  --------  ------------  ---------- 
Balance at 1 February 2020 
 as restated                                 710    18,682       4,858    43,457   (2,950)         (565)      64,192 
Profit for the year                            -         -       3,826         -         -             -       3,826 
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/(expense)           -         -       2,558         -         -         (301)       2,257 
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       7,729    43,457   (2,950)         (866)      66,762 
--------------------------------------  --------  --------  ----------  --------  --------  ------------  ---------- 
 
 
                                                            Attributable to owners of the parent 
                                        ---------------------------------------------------------------------------- 
                                                                                 Other reserves 
                                                                        -------------------------------- 
                                                                                                 Foreign 
                                                     Share  (restated)                          currency  (restated) 
                                           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 2021 
 as previously stated                        710    18,682       8,446    43,457   (2,950)         (866)      67,479 
Prior period restatement 
 (note 12)                                     -         -       (717)         -         -             -       (717) 
Balance at 1 February 2021 
 as restated                                 710    18,682       7,729    43,457   (2,950)         (866)      66,762 
Profit for the year                            -         -       7,759         -         -             -       7,759 
Other comprehensive income/(expense): 
Remeasurements of defined 
 benefit pension schemes                       -         -       6,492         -         -             -       6,492 
Deferred tax charge relating 
 to pension scheme asset                       -         -     (1,233)         -         -             -     (1,233) 
Currency translation differences               -         -           -         -         -            70          70 
--------------------------------------  --------  --------  ----------  --------  --------  ------------  ---------- 
Total comprehensive income                     -         -      13,018         -         -            70      13,088 
Transactions with owners, 
 recognised directly in equity: 
Dividends                                      -         -       (532)         -         -             -       (532) 
Long-term incentive plan 
 charge                                        -         -         253         -         -             -         253 
Related tax movements on 
 long-term incentive plan                      -         -         142         -         -             -         142 
--------------------------------------  --------  --------  ----------  --------  --------  ------------  ---------- 
Balance at 31 January 2022                   710    18,682      20,610    43,457   (2,950)         (796)      79,713 
--------------------------------------  --------  --------  ----------  --------  --------  ------------  ---------- 
 

Note 12 explains the effect of the prior year restatements as at 31 January 2021 and 31 January 2020.

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

1. Accounting policies and general information

General information

Sanderson Design Group PLC ('the Company') and its subsidiaries (together 'the Group') is a luxury interior furnishing group whose brands include Morris & Co., Sanderson, Zoffany, Clarke & Clarke, Harlequin, Scion and Archive by Sanderson Design. The Company is a public limited company which is listed on the Alternative Investment Market of the London Stock Exchange and is registered, domiciled and incorporated in the UK. The Company registration number is 61880 and the address of its registered office is Chalfont House, Oxford Road, Denham, UB9 4DX.

The consolidated financial information and announcement of Sanderson Design Group plc for the year ended 31 January 2022 were authorised for issue by the Board of Directors on 27 April 2022.

Basis of preparation

The financial information contained within this final results announcement for the year ended 31 January 2022 and the year ended 31 January 2021 is derived from but does not comprise statutory financial statements within the meaning of section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 January 2021 have been filed with the Registrar of Companies and those for the year ended 31 January 2022 will be filed following the Company's annual general meeting.

The auditors' report on the statutory accounts for the year ended 31 January 2022 and the year ended 31 January 2021 is unqualified, does not draw attention to any matters by way of emphasis, and does not contain any statement under section 498 of the Companies Act 2006.

The statutory consolidated financial statements, from which the financial information in this announcement has been extracted have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The accounting policies applied are consistent with those set out in the Sanderson Design Group plc Annual report and Accounts for the year ended 31 January 2021.

Going concern

In the context of the continuing Covid-19 outbreak and the impact of the invasion of Ukraine by Russia, 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 from date of signing of the report to 31 January 2024, including the availability and maturity profile of the Group's financing facilities and covenant compliance. This financial information has 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 at 30 April, 31 July, 31 October and 31 January each year until the debt matures in October 2024. 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 2022 was GBP31.6m (2021: GBP30.5m), including cash and cash equivalents of GBP19.1m and the committed facility of GBP12.5m. The Group has also access to an uncommitted accordion facility of GBP5.0m with Barclays. The Group had ended a temporary overdraft facility of GBP2.5m with Barclays during the financial year.

In assessing going concern management has taken account of the uncertainties caused by Covid-19and the war in Ukraine, 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, further waves of the virus, disruption to supply chain and inflationary pressures) and the Russian invasion of Ukraine (including impact of sanctions, duration of war and inflationary pressures). We suspended all trade with Russia on 24 February 2022, a distributor-based region that represented only around 2% of global sales for FY2022. These forecasts 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 and the possible escalation of the Ukraine war to other Eastern European countries. 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 considered all of the comments above the Directors consider that the Group and the Company have adequate resources to continue trading for the foreseeable future and will be able to continue operating as a going concern for a period of at least 12 months from the date of approval of the financial information. For this reason, they continue to adopt the going concern basis in preparing the financial information.

2. Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning future events. The resulting accounting estimates will seldom precisely equal the related actual results. The Group applies its best endeavours in setting accounting estimates, and uses historical experience and other factors, including input from experienced and specialist management. Estimates and assumptions are periodically re-evaluated and the resulting accounting balances updated as new information, including actual outcomes, become apparent.

The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Retirement benefit obligations

The Group recognises its obligations to employee retirement benefits. The quantification of these obligations is subject to significant estimates and assumptions regarding life expectancy, discount and inflation rates, wage and salary changes, the rate of increase in pension payments, and the market values of equities, bonds and other pension assets. In making these assumptions the Group takes advice from a qualified actuary about which assumptions reflect the nature of the Group's obligations to employee retirement benefits. The assumptions are regularly reviewed to ensure their appropriateness.

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

2. Critical accounting estimates and judgements (cont'd)

b) Retirement benefit obligations (cont'd)

Under IAS 19, the net defined benefit pension scheme asset that can be recognised is the lower of the surplus and the asset ceiling i.e. the economic benefits available in the form of refunds or reductions in future contributions or a combination of both, in accordance with IFRIC 14 'IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'. In order to determine whether there are any restrictions on the surplus as outlined in IFRIC 14, the Schemes' Trust Deeds and Rules were reviewed and legal advice was acquired. It is the Group's understanding that, based on facts and circumstances at the balance sheet date, it is able, without condition or restriction placed on it by the trustees, to run the Schemes until there are no more remaining members; wind up the Schemes at that point; and reclaim any remaining monies. Consequently, the Group is able to recognise the full surplus calculated in accordance with IAS 19 and IFRIC 14.

The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

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 Morris & Co., Sanderson, Zoffany, Clarke & Clarke, Harlequin, Scion and Archive by Sanderson Design brands operated from the UK, the US, France, Netherlands 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 'Intercompany elimination and unallocated'.

a) Principal measures of profit and loss - Income Statement segmental information

 
                                                            Intercompany 
                                                             elimination 
                                 Brands  Manufacturing   and unallocated    Total 
Year ended 31 January 2022       GBP000         GBP000            GBP000   GBP000 
------------------------------  -------  -------------  ----------------  ------- 
UK revenue                       43,682         14,173                 -   57,855 
International revenue            40,425          8,761                 -   49,186 
Licence revenue                   5,159              -                 -    5,159 
------------------------------  -------  -------------  ----------------  ------- 
Revenue - external               89,266         22,934                 -  112,200 
Revenue - internal                    -         18,807          (18,807)        - 
------------------------------  -------  -------------  ----------------  ------- 
Total revenue                    89,266         41,741          (18,807)  112,200 
------------------------------  -------  -------------  ----------------  ------- 
Profit/(loss) from operations     5,479          6,602           (1,752)   10,329 
Net finance income                    -              -                30       30 
------------------------------  -------  -------------  ----------------  ------- 
Profit/(loss) before tax          5,479          6,602           (1,722)   10,359 
Tax expense                           -              -           (2,600)  (2,600) 
------------------------------  -------  -------------  ----------------  ------- 
Profit/(loss) for the year        5,479          6,602           (4,322)    7,759 
------------------------------  -------  -------------  ----------------  ------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

3. Segmental analysis (cont'd)

a) Principal measures of profit and loss - Income Statement segmental information (cont'd)

 
                                                                    Intercompany 
                                                                     elimination 
                                         Brands  Manufacturing   and unallocated    Total 
Year ended 31 January 2021 (restated)    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             4,987          1,664           (1,555)    5,096 
Net finance costs                             -              -             (161)    (161) 
--------------------------------------  -------  -------------  ----------------  ------- 
Profit/(loss) before tax                  4,987          1,664           (1,716)    4,935 
Tax expense                                   -              -           (1,109)  (1,109) 
--------------------------------------  -------  -------------  ----------------  ------- 
Profit/(loss) for the year                4,987          1,664           (2,825)    3,826 
--------------------------------------  -------  -------------  ----------------  ------- 
 

The segmental Income Statement disclosures are measured in accordance with the Group's accounting policies as set out in note 1. The Group has revised its segmental methodology during the year by reviewing the allocation of central costs to the Brands unit and restated the prior year's comparatives to improve usefulness of the segmentation. The amount reclassified from central costs to Brands for the year ended 31 January 2021 is GBP2.4m relating to majority of the Company's administrative cost, LTIP expenses and IT costs. The reason this is considered to be more appropriate is the senior management of the Company spend significant amount of time on developing Brands' strategies and managing its day-to-day operations daily and IT costs are mainly incurred by Brands. Note 12 explains the effect of the prior year restatements as at 31 January 2021 and 31 January 2020.

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 'Intercompany elimination 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.

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.

 
                                                    2022     2021 
Brands international revenue by export market:    GBP000   GBP000 
-----------------------------------------------  -------  ------- 
North America                                     16,644   12,521 
Northern Europe                                   13,189   12,480 
Rest of the World                                 10,592    9,548 
-----------------------------------------------  -------  ------- 
                                                  40,425   34,549 
-----------------------------------------------  -------  ------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

3. Segmental analysis (cont'd)

b) Additional segmental revenue information (cont'd)

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:

 
                                                  2022     2021 
Brand revenue analysis*:                        GBP000   GBP000 
---------------------------------------------  -------  ------- 
Harlequin                                       17,623   16,043 
Scion                                            2,210    2,391 
Sanderson                                       14,421   11,606 
Morris & Co.                                    16,444   12,619 
Zoffany                                          8,564    7,827 
Clarke & Clarke                                 24,554   21,704 
Archive by Sanderson Design and other brands       291      436 
Licensing                                        5,159    3,684 
---------------------------------------------  -------  ------- 
                                                89,266   76,310 
---------------------------------------------  -------  ------- 
 

*The Brands reportable segments for the year ended 31 January 2022 have been redefined to provide additional focus on each Brand.

Revenue of the Manufacturing reportable segment - including revenues from internal sales to the Group's Brands:

 
                                     2022     2021 
Manufacturing revenue analysis:    GBP000   GBP000 
--------------------------------  -------  ------- 
Standfast                          21,310   14,410 
Anstey                             20,431   13,951 
--------------------------------  -------  ------- 
                                   41,741   28,361 
--------------------------------  -------  ------- 
 

4. Other operating income

Other operating income of GBP4,342,000 (2021: GBP3,822,000) comprises consideration received from marketing materials of GBP4,046,000 (2021: GBP3,822,000) and a research and development expenditure credit (RDEC) of GBP296,000 (2021: nil).

5. Net finance income/(costs)

 
                                                        2022     2021 
                                                      GBP000   GBP000 
---------------------------------------------------  -------  ------- 
Finance income: 
Interest received on bank deposits                         5        1 
Unwind of discount on minimum guaranteed licensing 
 income                                                  179      138 
---------------------------------------------------  -------  ------- 
Total finance income                                     184      139 
---------------------------------------------------  -------  ------- 
Finance cots: 
Interest payable on bank borrowings                     (22)     (97) 
Amortisation of issue costs of bank loans                  -     (21) 
Lease interest                                         (132)    (182) 
---------------------------------------------------  -------  ------- 
Total finance costs                                    (154)    (300) 
---------------------------------------------------  -------  ------- 
Net finance income/(costs)                                30    (161) 
---------------------------------------------------  -------  ------- 
 

Unwind of discount on minimum guaranteed licensing income was presented as part of interest expense in the prior year. The comparative has been represented to aid comparability.

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

6. Tax expense

 
                                                            2022     2021 
                                                          GBP000   GBP000 
-------------------------------------------------------  -------  ------- 
Current tax: 
 
  *    UK current tax                                      1,973    1,018 
 
  *    UK adjustments in respect of prior years              224       39 
 
  *    overseas, current tax                                 117       24 
 
  *    overseas, adjustments in respect of prior years     (107)        - 
Corporation tax                                            2,207    1,081 
-------------------------------------------------------  -------  ------- 
Deferred tax: 
 
  *    current year                                          157        7 
 
  *    adjustments in respect of prior years                  57       21 
 
  *    effect of changes in corporation tax rates            179        - 
-------------------------------------------------------  -------  ------- 
Deferred tax                                                 393       28 
-------------------------------------------------------  -------  ------- 
Total tax charge for the year                              2,600    1,109 
-------------------------------------------------------  -------  ------- 
 
 
                                                           2022     2021 
Reconciliation of total tax charge for the year          GBP000   GBP000 
------------------------------------------------------  -------  ------- 
Profit on ordinary activities before tax                 10,359    4,935 
------------------------------------------------------  -------  ------- 
Tax on profit on ordinary activities at 19.00% (2021: 
 19.00%)                                                  1,968      938 
Fixed asset differences                                      42     (27) 
Non-deductible expenditure                                  173       63 
Income not subject to tax                                   (2)      (2) 
Share based payment                                          40        1 
Group income                                                  -     (11) 
Adjustments in respect of prior years                       117       39 
Adjustments in respect of prior years - deferred tax         57       21 
Overseas tax suffered                                         2     (33) 
Movement in deferred tax not recognised                   (170)      141 
Current tax - other                                           -       47 
Effect of changes in corporation tax rates                  373     (68) 
------------------------------------------------------  -------  ------- 
Total tax charge for year                                 2,600    1,109 
------------------------------------------------------  -------  ------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

7. Earnings per share

(a) 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, 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.

 
                                                     2022                        2021 (restated) 
                                        -------------------------------  ------------------------------- 
                                                    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                   7,759      70,983      10.93     3,826      70,980       5.39 
Effect of dilutive securities: 
Shares under LTIP*                                       850                            1,652 
--------------------------------------  --------  ----------  ---------  --------  ----------  --------- 
Diluted earnings per share                 7,759      71,833      10.80     3,826      72,632       5.27 
--------------------------------------  --------  ----------  ---------  --------  ----------  --------- 
Adjusted underlying basic and diluted 
 earnings per share: 
Add back LTIP accounting charge              406                              345 
Add back net defined benefit pension 
 charge                                      487                              531 
Non-underlying items (see below)           1,207                            1,187 
Tax effect of non-underlying items 
 and other add backs                        (96)                            (287) 
--------------------------------------  --------  ----------  ---------  --------  ----------  --------- 
Adjusted underlying basic earnings 
 per share                                 9,763      70,983      13.75     5,602      70,980       7.89 
--------------------------------------  --------  ----------  ---------  --------  ----------  --------- 
Adjusted underlying diluted earnings 
 per share                                 9,763      71,833      13.59     5,602      72,632       7.71 
--------------------------------------  --------  ----------  ---------  --------  ----------  --------- 
 

*In calculating the diluted earnings per share, shares under LTIP arrangements have been included to the extent that performance conditions had been satisfied at the balance sheet date. Awards of shares that are contingent on future performance conditions have been excluded. When preparing the calculation for the current year it was noted that the prior year dilutive shares were subject to performance conditions that had not been satisfied at the previous year end and therefore there should not have been a dilutive impact of the outstanding LTIP shares. The prior year reported results have not been restated as the impact is not material

Sanderson Design Group PLC's issued ordinary share capital with voting rights consists of 70,983,505 (2021: 70,983,505) ordinary shares of which nil (2021: nil) ordinary shares are held in treasury and 220 (2021: 50,000) 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 at 31 January 2022 was GBP370 (2021: GBP56,000). The total number of shares held in the EBT at the year end represented less than 0.1% (2020: 0.1%) 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 in note 7(b) below Note 12 explains the effect of the prior year restatement as at 31 January 2021 and 31 January 2020.

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

7. Earnings per share (cont'd)

7 . (b) 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.

Adjusted underlying profit before tax

 
                                                                    restated 
                                                              2022      2021 
                                                            GBP000    GBP000 
---------------------------------------------------------  -------  -------- 
Statutory profit before tax                                 10,359     4,935 
---------------------------------------------------------  -------  -------- 
Restructuring and reorganisation costs (a)                   1,190       171 
---------------------------------------------------------  -------  -------- 
Amortisation of acquired intangible assets (b)               1,016     1,016 
---------------------------------------------------------  -------  -------- 
Forgiveness of loan under the US Paycheck Protection 
 Programme (c)                                               (440)         - 
---------------------------------------------------------  -------  -------- 
Release of an accrual for a legal case (d)                   (559)         - 
---------------------------------------------------------  -------  -------- 
Total non-underlying charge included in statutory profit 
 before tax                                                  1,207     1,187 
---------------------------------------------------------  -------  -------- 
Underlying profit before tax                                11,566     6,122 
LTIP accounting charge                                         406       345 
Net defined benefit pension charge                             487       531 
Adjusted underlying profit before tax                       12,459     6,998 
---------------------------------------------------------  -------  -------- 
 

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 closure of Sanderson Design Group Brands SARL in France of GBP1,100,000 and other reorganisation costs of GBP90,000 (2021: GBP171,000). See further details in the Chief Financial Officer's Review.

(b) Amortisation of acquired intangible assets GBP1,016,000 (2021: GBP1,016,000).

(c) In May 2020, the Group entered into a loan contract with Wells Fargo for US$565,818 under the US Paycheck Protection Programme scheme. In June 2021, this loan was forgiven and the Group treated the forgiveness as a grant for GBP440,000.

(d) Release of an accrual of GBP559,000 for a legal case in the US that had concluded during the financial year.

Note 12 explains the effect of the prior year restatements as at 31 January 2021 and 31 January 2020.

8. Trade and other receivables

 
                                                                2022     2021 
Current                                                       GBP000   GBP000 
----------------------------------------------------  --------------  ------- 
Trade receivables                                             14,262   12,632 
Less: provision for impairment of trade receivables            (775)    (903) 
----------------------------------------------------  --------------  ------- 
Net trade receivables                                         13,487   11,729 
Corporation tax debtor                                           339        - 
Other taxes and social security                                  842    1,346 
Other receivables                                                307      849 
Prepayments                                                    1,817    1,961 
----------------------------------------------------  --------------  ------- 
                                                              16,792   15,885 
----------------------------------------------------  --------------  ------- 
 
 

There is no material difference between the carrying amount and the fair value of the trade and other receivables. The only financial asset that is subject to IFRS 9's expected credit loss model is trade receivables for sales of inventory.

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

9. Minimum guaranteed licensing receivable

The Group has analysed the minimum guaranteed licensing receivable into its current and non-current components and made a prior year adjustment to reflect similar analysis in the comparatives. This determination is based on the assessment of the operating cycle of the licensing arrangement , taking into consideration the nature of the agreement and the cash and invoicing cycle. This assessment was not carried out in the previous year and as such all amounts receivable were shown as current in error. A prior period adjustment has been processed to reflect the split in the previous year (see note 12).

The following table analyses the Group's minimum guaranteed licensing receivable into relevant maturity groupings based on the remaining period to contractual maturity at the Balance Sheet date.

 
                     Current  Non-current 
                   Less than         Over 
                      1 year       1 year    Total 
                      GBP000       GBP000   GBP000 
----------------  ----------  -----------  ------- 
31 January 2022          879        1,619    2,498 
31 January 2021        1,221        1,222    2,443 
1 February 2020          495        1,455    1,950 
----------------  ----------  -----------  ------- 
 
 

10. 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 2022 are expected to be GBP2,391,000.

 
                                                                2022      2021 
                                                              GBP000    GBP000 
----------------------------------------------------------  --------  -------- 
Present value of funded obligations                         (74,124)  (84,926) 
Fair value of scheme assets                                   76,701    79,289 
----------------------------------------------------------  --------  -------- 
Surplus/(deficit) in funded scheme (net asset/(liability) 
 in Balance Sheet)                                             2,577   (5,637) 
----------------------------------------------------------  --------  -------- 
 

Reconciliation of opening and closing balances of the present value of the defined benefit obligation

 
                                                              2022     2021 
                                                            GBP000   GBP000 
---------------------------------------------------------  -------  ------- 
Benefit obligation at beginning of year                     84,926   83,767 
Interest cost                                                1,122    1,395 
Remeasurement (gains)/losses - changes in financial 
 assumptions                                               (6,086)    5,266 
Remeasurement gains - changes in demographic assumptions      (51)  (1,347) 
Remeasurement gains - experience                           (1,797)    (719) 
Benefits paid                                              (3,646)  (3,436) 
Settlements                                                  (344)        - 
---------------------------------------------------------  -------  ------- 
Benefit obligation at end of year                           74,124   84,926 
---------------------------------------------------------  -------  ------- 
 

Reconciliation of opening and closing balances of the fair value of plan assets

 
                                                        2022     2021 
                                                      GBP000   GBP000 
---------------------------------------------------  -------  ------- 
Fair value of plan assets at beginning of year        79,289   78,108 
Interest income on scheme assets                       1,055    1,313 
(Loss)/return on assets, excluding interest income   (1,442)    1,635 
Contributions by employers                             2,209    2,118 
Benefits paid                                        (3,646)  (3,436) 
Scheme administrative cost                             (420)    (449) 
Settlements                                            (344)        - 
---------------------------------------------------  -------  ------- 
Fair value of scheme assets at end of year            76,701   79,289 
---------------------------------------------------  -------  ------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (CONT'D)

11. Analysis of net funds/(debt)

 
                                                       Other 
                            1 February              non-cash  31 January 
                                  2021  Cash flow    changes        2022 
                                GBP000     GBP000     GBP000      GBP000 
Cash and cash equivalents       15,549      3,562       (61)      19,050 
Total funds                     15,549      3,562       (61)      19,050 
--------------------------  ----------  ---------  ---------  ---------- 
 
Short term loan                  (412)          -        412           - 
Finance lease liabilities      (5,882)      2,685      (706)     (3,903) 
--------------------------  ----------  ---------  ---------  ---------- 
Total debts                    (6,294)      2,685      (294)     (3,903) 
--------------------------  ----------  ---------  ---------  ---------- 
 
 
Net funds/(debts)   9,255  6,247  (355)  15,147 
------------------  -----  -----  -----  ------ 
 

Other non-cash changes are exchange gains/(losses) from the retranslation of bank balances held in non-sterling bank accounts and new additions to right of use assets.

12. Explanation of prior year adjustments for the years ended 31 January 2021 and 31 January 2020

The Group has rectified the error in previous years of its cost absorption methodology of the manufacturing units for establishing the profit elimination within inter-group inventories held at the year end. As a result of this error, the value of inventory at 31 January 2021 has reduced by GBP717,000, the cost of sales for the financial year ended 31 January 2021 has increased by GBP80,000 and opening retained earnings and inventory at 1 February 2020 have reduced by GBP637,000

The total impact of these adjustments for the financial year ended 31 January 2022 is a reduction of opening retained earnings of GBP717,000 with equivalent reduction in the value of opening inventories. In addition, the cash flow statement for the year ended 31 January 2021 has been restated to show a reduced profit before tax by GBP80,000 with a compensating adjustment to the moment in inventories. There is no overall change to the reported operating cashflow.

The Group has analysed the minimum guaranteed licensing receivable into its current and non-current components and made a prior year adjustment to reflect similar analysis in the comparatives. This determination is based on the assessment of the operating cycle of the licensing arrangement , taking into consideration the nature of the agreement and he cash and invoicing cycle. This assessment was not carried out in the previous year and as such all amounts receivable were shown as current in error. A prior period adjustment has been processed to reflect the split in the previous year. This restatement has no effect on the result, equity or retained earnings brought forward in the prior year.

The following table analyses the Group's minimum guaranteed licensing receivable into relevant maturity groupings based on the remaining period to contractual maturity at the Balance Sheet date. The impact is to increase non-current assets and reduce net current assets by GBP1,222,000 as at 31 January 2021 and by GBP1,455,000 as at 31 January 2020.

 
                     Current  Non-current 
                   Less than         Over 
                      1 year       1 year    Total 
                      GBP000       GBP000   GBP000 
----------------  ----------  -----------  ------- 
31 January 2021        1,221        1,222    2,443 
31 January 2020          495        1,455    1,950 
----------------  ----------  -----------  ------- 
 

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END

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April 28, 2022 02:02 ET (06:02 GMT)

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