Sanderson Design Group PLC  

Sanderson Design Group PLC (LSE: SDG) is an FTSE AIM All-Share index listed luxury interior design and furnishing Company engaged in the designing and manufacturing of wallpaper and fabrics. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 43.00

• Decline in Group Sales and Profitability: Group sales for FY25 are expected to be approximately GBP 101 million, down from GBP 108.6 mn in FY24, representing a YoY decline of ~7%. The resulting sales mix deterioration is projected to significantly reduce profitability, with underlying pre-tax profit now expected in the range of GBP 4.0mn to GBP 4.8mn.
• Weaker Brand Product and Manufacturing Performance: Brand product sales are forecast to be down ~9% YoY FY25 (FY24: GBP 78.8mn), pressured by a 13% drop in early January 2025 UK retail sales, following already subdued fabric demand.
• Decline in Licensing Income: Licensing revenue fell 40% YoY to GBP 4.1mn in H1 FY25 (H1 FY24: GBP 6.9mn), due to a high base effect from two significant deals last year and ongoing timing-related variability, negatively impacting profitability leverage from high-margin segments.
• Drop in Statutory Earnings Metrics: Statutory profit before tax declined 76% to 1.5mn in H1 FY25 (H1 FY24: 6.2mn), while basic EPS fell by 78% to 1.46p (H1 FY24: 6.58p), reflecting lower top-line performance and margin contraction.
• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

SDG is likely to trade at a discount given the decline in Group sales and profitability, underperformance in brand product and manufacturing segments—particularly in the UK—alongside a sharp 40% YoY drop in licensing revenue to GBP 4.1mn (H1 FY24: GBP 6.9mn), a 40% erosion in net cash to GBP 9.6mn (H1 FY24: GBP 15.9mn), and lingering uncertainty around inflationary pressures. For conducting the valuation, the following peers have been considered: Northern Bear PLC (LSE: NTBR), Focusrite PLC (LSE: TUNE), etc.

Given its current trading levels, recent decline and downward price trend, along with ongoing tariff escalations, geopolitical tensions, stagnant inflation, elevated interest rates, relative valuation, and associated risks, it appears prudent to exit the stock at this stage. Hence, a ‘Sell’ recommendation is given on the stock at the Closing Market Price of GBX 43.00 as of 24 April 2025.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 24 April 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.