Rebuilding a more resilient model
IG Design’s FY22 results reflect both a challenging cost environment and the group’s unwavering service commitment to its customers, with the former unable to be recouped and the latter incurring significant incremental costs. The priority now turns to building a more robust business model.
Rebuilding a more resilient model
G4M delivered FY22 results slightly ahead of guidance in the April post-close trading update, with EBITDA some £0.2m better at £11.2m. FY22 results were down on the exceptional FY21 but show strong progress over FY20, better reflecting the underlying growth trajectory. In light of recent acquisitions, planned enhancements and service additions to its proprietary trading platform, and its prescient investment in inventory ahead of inflationary pressures, G4M’s business model is set fair to deliver further progress over the longer term, despite shorter-term macroeconomic risks.
A tougher gig in FY22; strong growth over FY20
Distil’s FY22 results reflect the exceptional performance delivered in FY21, when sales rose 48% following the distortions caused by the unprecedented response to Covid, lockdowns and retailer fears of supply chain disruption. FY22 has consequently seen declines in both turnover and profitability.
FY22 results reflect challenging comparatives
Sanderson Design Group (SDG) delivered a strong performance in FY22, achieving adjusted underlying profit before tax of £12.5m, an increase of 79% over FY21 and 67% over FY20. This reflected both a return to more normalised trading conditions and the continued delivery of its Live Beautiful strategic framework. Net cash rose by £4m to £19.1m at the year end, with a final declared dividend of 2.75p delivering a full year total of 3.5p. The standout performers were in-house manufacturing (+31%) and the high-margin licensing stream (+40%). Within Brands, the strongest growth rates were achieved by the heritage brands of Morris & Co (+30%) and Sanderson (+24%). We have raised outer year forecasts on the back of the profit outperformance against our expectations achieved in FY22.
A strong profit advance over FY21 and FY20
HeiQ’s FY21 prelims are a testament to the group’s resilience in the face of a very tough backdrop, and to its unshakeable belief in its guiding principles and potential with continued strategic investment, including three acquisitions. Revenue growth was driven by the acquisitions, and while profitability was down compared with the incomparable events that drove FY20, the group delivered profits and retains a strong balance sheet. The model continues to evolve to a focus on IP (Intellectual Property) generation and monetisation, including licensing and partnerships with customers.
A year of resilience and investment
IG Design Group’s post-close trading update for FY22 showed a strong 10% like-for-like group sales increase to $963m, with the International business up 15% and the Americas business up 7%. The group has guided to a full-year adjusted operating margin of 0.5%, ahead of its previous breakeven guidance at this level in its nine-month trading update in January, and a small adjusted loss before tax. The reversal of a deferred tax asset will, however, result in adjusted post-tax loss and EPS being significantly below market expectations. Work has started on restoring the US division’s financial performance, with more detail to follow in the prelims (28 June).
Top-line growth remains robust, with focus fixed on realigning costs and margins
G4M has released its FY22 full-year trading update. Widely reported macroeconomic factors impacting consumer confidence have seen weaker-than-expected sales in February and March. While gross margin has remained strong, this has resulted in lower sales and EBITDA relative to consensus expectations. With overhead cost pressure compounding weaker consumer confidence, especially in H1 FY23E, we believe accordingly that it is prudent to revise outer year forecasts, summarised in the table below and detailed within this note. Strong stock levels will support G4M’s distribution capability, particularly in the new European distribution centres.
Weaker end to year; outlook moderated to reflect broader consumer uncertainty
HeiQ has released a trading update for FY21, along with an announcement that its full-year results will be published on Thursday 28 April. Strong sales growth in the Q4 period to end December 2021 has resulted in a higher-than-expected revenue figure for the year of $57.9m, albeit at a lower-than-expected gross margin of 47%. Around $1m of operating profit from the achieved Lycra milestone payment has been deferred to FY22, with FY21E operating profit expected to be c.$3.4m and net after tax income c.$2.7m.
FY21 trading update and notice of full-year results
Distil delivered a strong final quarter (Q4) for the FY22E financial year to end March 2022, as anticipated in its Q3 trading update. Revenues increased by 32% over last year, with volumes up 38%. Pleasingly, revenues continue to track ahead of the pre-Covid levels of FY20, as they have cumulatively across the year. Strong domestic and export growth in Q4 has been accompanied by higher levels of marketing and new product development (NPD) investment. Subject to markets remaining open, and supported by selective price increases and supply chain efficiencies to counter price inflation, management believes the outlook for FY23E remains positive.
A strong Q4 performance delivered
Sanderson Design Group has announced that Bedeck, one of its core licensees, has renewed its licensing contract with the group for a further three years, commencing on 1 February 2024. The agreement has been signed ahead of the renewal date so that Bedeck can develop and create new products based on recent launches by the group. This follows a flurry of collection launches and relaunches announced in February, which underpin brand heritage and equity, product development and expansion potential. The group will announce its full-year results on 28 April.
Renewal of Bedeck licensing agreement
HeiQ has announced important partnership agreements with two global brand leaders, Hugo Boss and The LYCRA Company, to support the launch and commercialisation of HeiQ AeoniQ, its latest potentially game-changing innovation. HeiQ AeoniQ is a high-performance, climate-positive, recyclable bio-based cellulose yarn. As such, it offers a sustainable and environmentally friendly substitute to the more established, oil-based alternatives of polyester and nylon. This announcement not only underpins HeiQ’s credentials with regard to sustainability and protecting finite global resources but also underlines the group’s ability to monetise its innovative Intellectual Property (IP) creation. Hugo Boss’s $5m equity investment in the HeiQ AeoniQ LLC subsidiary values it at $200m, a sum greater than the current market capitalisation of HeiQ.
HeiQ AeoniQ launch partnerships – crystallising IP-driven value creation
IG Design Group’s trading update for the nine months to 31 December 2021 reports a continuation of contrasting recent trends, with robust demand offset by supply chain delays and operating cost pressures in an inflationary environment. The latter pressures have indeed intensified over the Q3 trading period, such that the group has seen a 460bps year-on-year (yoy) decrease in its cumulative nine-month operating profit margin to 4%. With lower craft sales and continuing cost headwinds expected in Q4, the group is guiding to an FY22E breakeven result at the adjusted operating profit level, with no final dividend to be paid. With the external challenges and uncertainties expected to continue into FY23E, the group believes it is too early to provide firm guidance with regard to FY23E at this stage.