FDM Group plc

FDM Group plc

Sanderson Design Group (SDG) has announced another major licensing agreement with NEXT, further underpinning the group’s burgeoning commercial relationship with the UK’s leading clothing and homewares retailer. The agreement represents a first significant licensing agreement for SDG’s largest brand by revenue, Clarke & Clarke, and will encompass a wide range of homeware categories, from bedding and towelling to furniture and lighting. Covering a five-year licence term, SDG will recognise accelerated licensing income of £2.6m in the current FY24 financial year.

Substantial new licensing agreement with NEXT

Sanderson Design Group (SDG) has delivered its full-year trading update to 31 January 2023. Group revenue held steady at £112.0m, with continued strength in performance from the Morris & Co brand, high-margin licensing and North America, offset by the group’s withdrawal from Russia and a small decline in manufacturing revenue against a tough comparator. In conjunction with robust cost control measures and judicious price increases, underlying profits are thus expected to be in line with Board expectations.

Steering a steady course in uncertain times

G4M delivered a solid performance over its peak Q3 trading period, with financial performance in line with Board expectations. Group sales rose 5% over last year, with Europe performing particularly strongly (+11%). In the UK, sales were flat, with Royal Mail strikes and their knock-on impacts compounding the effects of weaker consumer sentiment. Lower marketing spend and labour efficiencies offset a temporarily softer gross margin, with G4M reiterating that FY23E EBITDA and net debt reduction are in line with consensus market expectations. Our forecasts therefore remain unchanged.

Steady progress over peak trading period

A number of primarily one-off factors has resulted in a 48% decrease in revenue to £411k in Distil’s peak Q3 trading period (to end December). The principal reasons behind this were: the continuing effects of the one-off reduction in UK market stock cover arising from the change in business model and removal of the UK distributor; a softer-than-expected UK spirits market; and systems issues within a major customer, resulting in sub-optimal replenishment. Distil has indicated that FY23 revenue will be significantly below market expectations. The expected full-year EBITDA loss of £0.6m is, however, unchanged from previous market guidance.

One-off factors adversely impact Q3 trading

IG Design Group has delivered a strong set of interim results, as guided in October’s trading update, with adjusted PBT up 35% to $27.4m on a reported basis (+42% on a constant currency basis). This was driven by accelerated ordering of seasonal goods by retailer customers keen to de-risk their supply chains, alongside catch-up pricing and product engineering, which has delivered some gross margin recovery. While cautious on the outlook given continuing economic uncertainties, the Board has upgraded FY23E guidance to a small adjusted profit before tax (PBT).

A strong H1, with progress on many fronts

G4M’s interim results reflected the previously disclosed headline performance featured in last month’s AGM trading update. The improved H2 trading momentum highlighted in the AGM statement has pleasingly continued into November, with the company reiterating confidence that the full-year FY23E outturn will be in line with consensus market expectations. Future platform developments will focus not only on enhancements to customer service and experience, but also on evolution of the platform to support multiple channels and verticals between suppliers and customers.

Interim results in-line, with clear focus on future platform evolution

G4M reported H1 sales growth of 2% to 30 September, despite the trading challenges laid out in its September AGM trading update. The star of the show was Europe and Rest of the World, which delivered a sales uplift of 10%, reflecting the benefits of the additional Irish and Spanish hubs opened last year. The improved period-end trading momentum has continued into early October. Together with a return to a more normalised seasonal trading pattern, a number of website upgrades to be implemented in H2 and further productivity enhancement measures, the FY23E outlook remains in line with market consensus expectations following the September update.

Improved September momentum continuing into H2 – unchanged forecasts

IG Design Group has reported strong trading across both divisions for the H1 period ended 30 September. The primary driver is that the group’s retailer customers have brought forward their seasonal ordering to pre-empt a repeat of the supply chain challenges and disruptions that occurred in the run-up to Christmas 2021. The result of this reweighting towards H1 will be a significant improvement over last year’s difficult H1 period. As such, and mindful of the ongoing challenges of a difficult economic backdrop, there is no change to the Board’s expectations for FY23E’s full-year trading outturn. Our FY23E forecast is thus unchanged at this stage.

A strong first half, but no change to full-year guidance

Distil’s interim results to 30 September 2022 reflect the financial consequences of the strategic change to its business model, with the group assuming direct control of servicing its major UK customers and employing a third-party distributor for the rest of its business (primarily hospitality, wholesale and export). The reversal to a £602k adjusted operating loss should be seen in this light. To that point, we are making no changes to the reinitiated forecasts published after the Q1 trading update on 13 July. Net cash reserves stood at £0.95m as at 30 September (vs £1.56m at 31 March).

Interim results reflect business model shift

Sanderson Design Group (SDG) delivered an impressive 12.5% increase in adjusted underlying profit before tax to £6.3m for H1 FY23 from the previously disclosed 0.7% increase in group revenue. Strong performances from the higher-margin activities of the North American market, licensing and the Morris & Co brand were the keys drivers of a significant gross margin expansion, also supported by prices increases. A good start to H2 underpins the group’s anticipation to meet the Board’s expectations for the year, while simultaneously expressing caution in light of the various headwinds buffeting businesses globally. We are prudently reining back our forecasts to reflect that caution, while expecting the group to mitigate cost pressures and further benefit from its brand pricing power.

Resilient interim results in uncertain times

Against a backdrop of continuing global economic and market challenges, HeiQ has delivered a robust performance in H1. Management remains cautiously optimistic on meeting FY22E expectations. The company has made good progress on its four key technology platforms, including further product launches with strong revenue potential. The focus of the business model continues to shift towards commercialisation of its key technology platforms and IP (Intellectual Property) generation and monetisation, including licensing and partnerships with customers.