Royal approved textiles group seeks efficiencies after profit warning

Princess Kate at Standfast and Barracks

Sanderson Design Group, which has factories in Lancaster and Loughborough, has been hit by a softening in third-party orders that have hit its manufacturing operations.

In a bleak trading statement to the stock market the company said it faced “a challenging consumer and industry environment” and that expectations of an improved trading environment towards the end of the year have not been realised.

Sales for the year are expected to be approximately £101 million (FY24: £108.6m), a shortfall of less than 5% to its earlier expectations, but the resultant sales mix will have a significant impact on full year profitability.

It added: “Demand for higher-margin repeat orders has recently declined and some customers are delaying planned launches. Although there has been success in new business wins, this is for smaller print runs of new designs which are at lower margins owing to initial set up costs.”

The Group said it is continuing to “accelerate strategic changes and focusing on efficiency and cost savings” to better position the business for the current trading environment and for future growth. 

The business received a much celebrated Royal Warrant in December and the Lancaster factory and print works was visited by Princess Katherine.

The Standfast & Barracks factory in Lancaster, established in 1924, has been in operation for nearly 100 years and produces prints which combine traditional and innovative cutting edge technology.

The Anstey Wallpaper Company also has a rich heritage and integrates a number of wallpaper manufacturing businesses stretching back over 100 years, on one site in Loughborough.

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

Asked what the efficiencies might mean for the manufacturing sites, a company spokesman said they did not have anything to add to the trading statement.

The board now expects underlying pre-tax profits for the year ending 31 January 2025 to be in the region of £4.0 million to £4.8 million.

Lisa Montague, Chief Executive Officer, has bought 32,000 shares and Dianne Thompson, Chairman, has purchased 21,000 in a show of confidence as the share price dropped to 47p from 127p a year ago.

AJ Bell Investment Director Russ Mould said: “Chief executive Lisa Montague has noted a particularly weak finish to the financial year to January 2025 here in the UK, where soft consumer confidence has hit demand for Sanderson’s branded products, which include Zoffany, Harlequin, and Morris & Co. America also ended the year on a softer note, while Sanderson’s manufacturing operations have also failed to meet expectations, as customers back away from repeat orders and reduce run sizes, trends which both hit capacity utilisation rates and overhead recovery, to the clear detriment of profit margins.

“One bright spot remains licensing, where revenues for the year to January 2025 look set to come in broadly flat, and this is a high-margin revenue stream.

“Overall, however, management now expects a 7% drop in full-year sales to £101 million. As a result, underlying pre-tax profit is expected to fall by some 60% to between £4.0 million and £4.8 million, a range which undershoots the prevailing analysts’ consensus of £5.6 million.

“The difficult end to the last financial year also bodes ill for the start of the new one, to January 2026. Analysts had pencilled in a modest 4% improvement in sales to £106 million and pre-tax income of £6.3 million for the coming twelve months but with two profit warnings in the bag a third cannot be ruled out, as trading alerts have a bad habit of coming along like buses – in clumps.

However, in brighter news, Mould points out that Sanderson still expects to end the last financial year with a net cash pile of some £5 million. 

“That does represent a sharp drop from £16.3 million a year ago, thanks to an increase in inventory of unsold stock, substantial capital expenditure and a £2.3 million pension fund contribution, but it could help to underpin the share price at some stage, given that Sanderson’s stock market valuation is down to £33 million after Monday’s slump,” he said.

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