Latest news with #SandersonDesign
Telegraph
5 days ago
- Business
- Telegraph
Work is under way to turn this firm around – optimists could cash in
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Micro-cap stocks are not for everyone and risk-intolerant investors can look away now, especially if they remember this column's past misadventures in this area with stocks such as Xaar (XAR), the now-renamed Chesterfield Special Cylinders (CSC:AIM), or Pressure Technologies, as was, and the now-delisted Zytronic. But one of our more successful forays here was wallpaper-to-fabrics group Sanderson Design (SDG:AIM), where we more than doubled our money and then took profits north of 200p. A subsequent lengthy slide in the share price catches our eye, not least as it leaves the stock trading very cheaply indeed relative to current net assets, let alone any earnings figure that represents anything like a return to form for the company. Once known as Walker Greenbank, Sanderson Design has a rich heritage and strong brands, which include Zoffany, Harlequin, Sanderson and Morris & Co, but the last three years have been ones to forget for the Chiswick-headquartered company. Weak consumer confidence has dampened sales across its brand, manufacturing and licensing activities, while the company has invested heavily in digital marketing and production. Last year's £16.3m write-down of intangible assets relating to 2016's purchase of Clarke & Clarke took Sanderson into the red on a statutory basis and the dividend was cut. Throw in April's tariff scares, thanks to President Trump's 'Liberation Day' trade agenda, and during spring, the share price hit lows not seen since Covid-19 was doing its worst in early 2020, and before that in 2010. Chair Dianne Thompson and chief executive, Lisa Montague, are working on a cost-cutting programme, driven by an efficiency drive called Future Factory, where digitisation has a key role. Efforts to enhance sales in the US could yet bear fruit, even if the impact of tariffs must still be closely monitored, and the power of the company's brands can be seen in the licensing income they generate through agreements such as those struck with Next and Sainsbury's. In the meantime, Sanderson ended its last financial year in January with £5.8m in cash and no debt. Adjust that figure for a pension surplus and lease liabilities, and net borrowing is limited, so there is no clock ticking away in the background, and this month's trading statement reveals the cash pile is now £7.5m. The lowly valuation attributed to the company further protects the downside. The stock market capitalisation of £36m compares to tangible net assets on the balance sheet as of the January year-end of £57.5m, or just under 80p a share. If momentums return to the business – and it does remain an 'if' – that level is the very least we would expect of the share price. This is also a business that has been capable of making £5m to £8m in net profit in solid years and more than £10m in really good ones, such as 2018. The £36m market valuation looks low against such figures, and any return to those levels would put the shares on a single-digit price-to-earnings multiple. We must be aware of the risks posed by the mixed, if not downright confusing, macroeconomic backdrop, and how it is never as easy as it looks to really crack the US market – even if management believes it can be done. Moreover, any brave buyer of the shares will need a positive catalyst of some kind to persuade others to start thinking their way. The trading update was far from strong, as it flagged a 4pc drop in sales for the first six months of the financial year to January 2026. However, licensing income was strong, brand revenues showed some signs of stabilisation, and the cost cuts were sufficient to prompt management to reiterate their belief that it would improve to a break-even result this time around, after last year's loss. In sum, the Board did not have to disgorge a profit warning. Sometimes all it takes with heavily beaten down stocks is for the rate of decline in sales and profits to slow, especially if management is acting and the balance sheet offers support, as seems to be the case here. Investors then start to think that if a bottom may be in sight, then things will stop getting worse, and that if things stop getting worse, then they may soon get better. Such a thought process, backed up in time by improved profits and cash flow, could just be the catalyst that patient contrarians will seek as they do their research and weigh up the chances of a recovery in Sanderson Design's shares. We now wait to see the first-half results on October 15.
Telegraph
14-03-2025
- Business
- Telegraph
An uncertain economic outlook has upended these firms' share prices
Questor is The Telegraph's stockpicking column, helping you decode the markets and offering insights on where to invest. Accurately forecasting a company's financial performance is never easy, but it is proving to be particularly difficult at the moment. This is largely due to an uncertain near-term economic outlook that has resulted in highly changeable operating conditions for a wide range of firms. Indeed, the timing of interest rate cuts is proving extremely unpredictable given inflation's recent upward trend and the economy's anaemic growth rate. Investors must therefore accept that the share prices of companies from a variety of sectors, particularly those which are reliant on UK consumers, are likely to be more volatile than would normally be the case as stock market participants react to earnings surprises. While this may dissuade some investors from buying shares, in Questor's view, it is unlikely to be of great significance to long-term investors. After all, elevated share price volatility does not equate to a greater risk of permanent capital loss. Of course, a negative earnings surprise still represents a mild disappointment for any investor. For example, Sanderson Design, which is a holding in our Aim portfolio, recently released a full-year trading update that showed its financial performance is set to fall behind the firm's previous expectations. The interior design company stated just over a year ago that it expected profits for the 12 months to January 2025 to be relatively unchanged versus the prior year. However, its forecasts have gradually come under pressure over recent months. Indeed, in its latest trading update for the 2025 financial year, which was released in January, the firm stated that it now anticipates pre-tax profits will fall from £12.2m in 2024 to £4m-£4.8m in 2025. This decline has largely been caused by a weak consumer environment in its key UK market. The company's deteriorating financial prospects have prompted a slump in its share price of around 55pc over the past year. Over the same period, the FTSE Aim All-Share index has declined by 26pc. Clearly, Sanderson Design could continue to experience challenging operating conditions. Rising inflation and an ongoing restrictive monetary policy may cause a further cost-of-living squeeze that reduces demand for its products. However, with the firm expecting to have a net cash position of around £5m at the end of its 2025 financial year, it appears to have a relatively sound balance sheet through which to ride out a tough trading environment. Moreover, its forward price-to-earnings ratio of around 10 suggests its shares offer a margin of safety and that investors have priced in the prospect of further challenges. Therefore, the stock will remain in our Aim portfolio. Although it is at the riskier end of the investment spectrum, it nevertheless continues to offer long-term growth potential due to the likelihood of improved operating conditions as inflation ultimately falls and interest rate cuts continue. Questor says: hold Ticker: SDG Share price at close: 48p Update: Inspecs Another of our Aim portfolio holdings, Inspecs, has also struggled to meet its previous financial guidance. The designer and manufacturer of eyewear released a full-year trading update in January, which stated that revenue for the 12-month period is now expected to be just over £200m. This is down on the firm's original expectations and represents a 1.4pc decline versus the prior year. Encouragingly, the company was able to grow its gross profit margin by 50 basis points to 51.4pc during the year. It is aiming to deliver a further improvement in profit margins during the current financial year, with its performance in the US relatively strong of late. The firm also continues to use only a modest amount of leverage, with its net gearing ratio amounting to around 35pc at the time of its half-year results. With its shares currently trading on a price-to-book ratio of around 0.5, it appears to offer a margin of safety after declining by 80pc since being added to our Aim portfolio in July 2022. This compares with a 22pc fall for the FTSE Aim All-Share index over the same period. Clearly, shares in Inspecs could come under further pressure if its financial performance fails to improve. While it remains a relatively high-risk opportunity, its low valuation means that it retains its place in our portfolio.
