Sanderson Design : Interim Results 2021

For immediate release

13 October 2021

SANDERSON DESIGN GROUP PLC

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

Interim Results for the six months ended 31 July 2021

Strong recovery continues with key financial metrics ahead of the previous two half years

Reinstatement of interim dividend. Full year trading in line with expectations

Sanderson Design Group PLC (AIM: SDG), the luxury interior design and furnishings group, announces its financial results for the six months ended 31 July 2021.

Financial highlights

Six months ended 31 July	2021	2020	2019
Revenue	£57.5m	£38.8m	£55.9m
Adjusted underlying profit before tax*	£6.0m	£0.4m	£4.9m
Adjusted underlying EPS*	6.53p	0.54p	5.54p
Statutory profit/(loss) before tax	£4.9m	(£0.9m)	£3.5m
Statutory profit/(loss) after tax	£3.8m	(£0.8m)	£2.6m
Basic EPS	5.31p	(1.10p)	3.68p
Net cash excluding 'Leases'	£15.4m	£4.5m	£0.9m
Net cash/(debt) including 'Leases'	£10.5m	(£2.6m)	(£7.7m)
Interim dividend per share	0.75p	n/a	0.52p

*excluding share-based incentives, defined benefit pension charge and non-underlying items - see note 8(b) of the financial statements

• Revenue up 48.2% at £57.5m (2020: £38.8m), reflecting continued demand for home interior products, the sustained trend towards decorative styles and the strength of our UK manufacturing.
• Brand product sales up 42.3% compared with the same period in 2020 in constant currency and up
  5.4% compared with the same period in 2019 in constant currency: o North America has delivered a very strong performance.
  o Brand product sales in Northern Europe were up 21.1% in constant currency against 2020 and up 7.8% against 2019.
  o Licensing income delivered £2.0m (2020: £1.3m) including accelerated licensing income of £0.5m (2020: £0.3m).
• Manufacturing sales up 100.0% from the same period in 2020 when the manufacturing sites were affected by Covid-19 closures and up 22.8% against the same period in 2019 reflecting the buoyant order books from both UK and export customers.
• Adjusted underlying profit before tax £6.0m (2020: £0.4m) on the back of stronger sales and the positive effect of the operational measures introduced to reduce and control discretionary and fixed costs. This also includes the forgiveness of the US Paycheck Protection Payment scheme of £0.4m.

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• Cash inflow from operating activities of £4.6m (2020: £5.1m) supporting increased liquidity and
  headroom of £27.9m (2020: £17.0m) with a net cash position of £15.4m (2020: £4.5m) as at 31 July 2021.
• Interim dividend of 0.75p per share (2020: nil; 2019: 0.52p).

Operational highlights

• Sanderson 160th anniversary collection was well received along 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.
• Morris & Co. demonstrating strong appeal with the apparel collaboration with NEXT performing very strongly since launch in May 2021 and its first major US licensing agreement with Williams Sonoma, America's market leader in high quality kitchenware.
• Direct-to-consumerdigital strategy advanced with the launch of scionliving.com, our direct-to- consumer website franchise collaboration, 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 3, reflecting our Live Beautiful sustainability commitment.

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

"The first six months of our financial year have continued the strong recovery of the business, with particularly impressive performances from North America, manufacturing and the Morris & Co. brand. This positive trading and the strength of our balance sheet mean we are delighted to return to the dividend list with an interim payment.

"As we enter the second half of the financial year, we are mindful of the cost, supply chain and other issues affecting the UK and international business environment. We are focused on mitigating the potential impact of those issues on our business.

"Since the half year, manufacturing sales and licensing income remained robust and offset a slight softening in brand sales. Our key Autumn selling weeks in October and November have just started and we remain confident of meeting the Board's expectations for the full year."

Webcast and Analyst Q&A call

A pre-recorded presentation of the half year results, by Lisa Montague, Chief Executive Officer, and Michael Williamson, Chief Financial Officer, will be available from 7.05am today, 13 October 2021, at the following link: https://webcasting.buchanan.uk.com/broadcast/614b5fa43ae1ca74490b23b9

The pre-recorded presentation will also be available at the Company's investor website, https://sandersondesign.group/investors/

A Q&A call for analysts and institutional investors will be held at 11.00 a.m. today via video conferencing. For dial-in details, please contact Buchanan at [e-mail].

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For further information:
Sanderson Design Group PLC	c/o Buchanan +44	(0)	20 7466 5000
Lisa Montague, Chief Executive Officer
Michael Williamson, Chief Financial Officer
Caroline Geary, Company Secretary
Investec Bank PLC (Nominated Adviser and Broker)	+44	(0)	20 7597 5970
David Anderson / Alex Wright / Ben Farrow
Buchanan	+44	(0)	20 7466 5000
Mark Court / Sophie Wills / Toto Berger
[e-mail]

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 renowned interiors brands.

Sanderson Design Group employs approximately 610 people and its products are sold worldwide. It has showrooms in London, New York, Chicago, Paris, Amsterdam and Dubai.

Sanderson Design Group trades on the AIM market of the London Stock Exchange under the ticker symbol SDG.

For further information please visit: www.sandersondesigngroup.com

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CHIEF EXECUTIVE OFFICER'S STRATEGY, OPERATIONAL AND FINANCIAL REVIEW

INTRODUCTION

The six months to 31 July 2021 were a period of strong trading, continuing the momentum reported in the second half of the previous financial year. It was also a period of considerable strategic and operational development, particularly in respect of our digital initiatives and sustainability strategy.

Comparing the first half of this year with the six months ended 31 July 2020, a period materially affected by Covid-19, shows that the Group is significantly ahead on all the key metrics of revenue, revenue growth, profit, EBITDA and net cash. This comparative performance is particularly striking given that Covid-19 restrictions continued to have an impact at the beginning of the current financial year.

The Group is benefiting from the sustained demand for home interior products and the renewed focus on the home, which has characterised the Covid-19 pandemic. Our manufacturing operations are performing very strongly, reflecting the high quality of our offering along with our post-Brexit competitiveness for both UK and overseas customers.

Our income from licensing has also performed strongly. In the half year, core licensing income, which excludes the recognition of fixed minimum guaranteed licensing income under IFRS 15 and income from apparel contracts, was £1.2m (2020: £1.0m; 2019: £0.9m), driven by online retail. Licensing income from apparel was £0.3m (2020: £nil; 2019: £0.3m) with the Morris & Co apparel collaboration at NEXT performing particularly strongly since launch in May 2021. Accelerated licensing income under IFRS 15 was £0.5m (2020: £0.3m; 2019: £2.0m).

Significant strategic and commercial progress has also been made in the year-to-date. Our digital strategy advanced with the launch of scionliving.com, our direct-to-consumer website franchise collaboration, and more recently by the direct online launch of Archive by Sanderson Design, a consumer brand targeting a new customer demographic for the Group.

We have signed a number of new licensing deals in the year to date, including an exclusive agreement with Japan's Sangetsu Corporation for Morris & Co. products in 14 countries in east and southeast Asia. The first products under this agreement are expected to be launched in autumn 2023. 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. NEXT is an increasingly important licensing partner for the Group, with the most recent agreement being a homewares collaboration with the Morris & Co. brand signed earlier this month.

Initiatives to achieve our strategic ambition to increase brand awareness have included working with Maro Itoje, the England rugby star, on a media campaign for the Sanderson brand and using TV advertising to launch Harlequin's Own the Room campaign.

In light of Covid-19, health and safety remains the top priority throughout the business, particularly in our manufacturing, warehousing and showroom operations. Progressively, the Group's desk-based staff are returning to our offices and finding a balance between office and remote working that best serves our people and protects productivity. Covid-19 continues to create some uncertainties for the near-term outlook, which we plan to mitigate through maintaining a robust balance sheet and strong liquidity.

It is particularly noteworthy that the Group's net cash balances were £15.4 million at the half year end, excluding leases. Inventory management remains focused on efficiency while ensuring that strong-

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selling lines are always in stock. The Board will continue to review further capital requirements across the business as we come out of the pandemic to invest in a strong platform to support future growth and efficiency.

As previously reported, in June 2021 we received US$565,818 in forgiveness for a loan under the Paycheck Protection Payment scheme in the US. We have had no staff on furlough from 1 April 2021 and, during April 2021, we returned all CJRS monies received in the current financial year, totalling £100,000.

The Audit Committee report in this year's Annual Report & Accounts noted the intention to hold a competitive tender process to appoint a new external auditor to succeed PricewaterhouseCoopers, which has audited the Company for many years. This tender process is well advanced and an announcement will be made in due course.

Sustainability

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

As previously announced, our employee engagement survey carried out earlier this year gave an overall employee satisfaction rating of 78%, which compares with 58% two years ago 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.

We were pleased to receive our Year 3 Planet Mark sustainability certification, which measures our carbon footprint. In the year to 31 January 2021, our total carbon footprint was 6,359.3 tonnes (2020: 7,977.8 tonnes; 2019: 9,246.9 tonnes) of carbon dioxide equivalent.

Dividend

The strong performance in the first half of the financial year and the strength of our balance sheet has enabled the Board to restore the Company to the dividend list with an interim dividend payment of 0.75p for the six months ended 31 July 2021 (2020: nil; 2019: 0.52p).

People

As announced in May this year, Vijay Thakrar, Non-Executive Director, will step down from the Board on 27 November 2021 on completion of his current three-year term. We are very grateful to Vijay for his valuable contribution to the Board and wish him well for the future. The recruitment process for further strengthening the Board is proceeding well and it is expected that a further announcement will be made shortly.

Earlier this month, we were delighted to welcome Mike Woodcock to the Company as Group Financial Officer. Mike, an executive with a strong track record in consumer and brand-based businesses, will become Chief Financial Officer, and join the Board, on 1 November 2021 as announced on 29 September 2021. Michael Williamson, the Company's current Chief Financial Officer, will step down from the Company on 31 October 2021 to pursue new career opportunities. We extend our sincere thanks to Michael for leading the Group's finances through the challenging periods of Covid and Brexit and wish him every success in the future.

Sanderson Design Group is a people business. We would like to thank all employees for their tremendous energy and commitment during the year to date.

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