Sanderson Design Share Discussion Threads

[essentialinvestor] 25/4/2024 20:42

£1.12 plus looks doable, but as SDG often moves quickly, in either direction, who knows.

[trt] 25/4/2024 20:12

Worth a top up as previously mentioned and actioned. Chart looking good still to £1.25.

[essentialinvestor] 25/4/2024 13:23

There is significant value here IF they can successfully navigate this.

Needs a decent COO, with coporate restructuring experience.

[essentialinvestor] 25/4/2024 13:18

I've made a case for selling manufacturing and simplying the business over the last 2 years - given current returns, the case for a significant cost restructure, which may include a manufacturing exit, is now compelling.

[barnesian] 25/4/2024 13:10

Dave Yes the 64% is the gross margin for the core business and returns about £64m margin which is about equal to the fixed cost associated with core. So the core is currently roughly breakeven. It needs more revenue which I think will return as we get out of this recession.
If costs can be further reduced without harming revenue, so much the better. I think this is what management is aiming to do. Whether they're looking at Arthur's option of selling their manufacturing assets as well, I don't know. I'd be surprised if it isn't being considered as an option.

[disc0dave46] 25/4/2024 12:54

Isn’t the 64% for core the gross margin so what’s the bottom line margin for core?
For the last 6 years their overall PAT margin has averaged 6%

[arthur_lame_stocks] 25/4/2024 12:50

'So the core business is currently operating around breakeven/marginally profitable.'

The way I see it, you could deliver immediate value by realising the value in the manufacturing assets, selling the freehold property for development etc. I guess these assets account for the vast bulk of the NTAV of £60m.

Then you'd have the huge, historic design archive which is where all the profit is coming from at the moment plus a huge pile of cash to invest in more brands or give back to shareholders.

What management and shareholders have to think about is whether consumers value having historic British brands manufactured in Britain?

I collect antique china and to me the modern Wedgwood just ain't right now it's made in China, but I'm only one consumer.

[barnesian] 25/4/2024 12:32

It's a highly geared business with fixed costs of £69m and a margin of 64% on its core business.

The drop of £8m revenue on its core business last year (£97.7m v £105.5m) cost it £5m in profit and reduced its core business to breakeven.

If core revenue recovers, in time, back to say £105.5m then profit will increase by £5m to nearer £16m.

I think it's an excellent punt at a P/E of around 7.

It also has very valuable IP in high class designs and brands which might be of interest to a luxury conglomerate, particularly at such a low P/E. A bargain.

[essentialinvestor] 25/4/2024 12:10

Dave yes, so say we allow £1.5 million for this - legal (contracts) expenses, coporate licensing account management..etc, even if £2 million is deducted, it still appears to leave 'core' profitability looking a tad threadbare?.

[disc0dave46] 25/4/2024 11:57

Hi EILicensing gross margin is as you say 100%, but as it was pointed out to me some time back on here (sorry can't remember by whom), there will still be some admin and other costs associated with their licensing contracts. Can't determine what these are or the pbt margin for licensing but given underlying pbt is down slightly and licensing income is up significantly I'd say the core business is loss making.

[alter ego] 25/4/2024 11:57

charting guru?

[trt] 25/4/2024 11:34

Graph indicating a rise to £1.25 without resistance.

[essentialinvestor] 24/4/2024 19:07

"..incremental costs to the Group of licensing sales are very low so licensing is reported at a 100% margin, and leverages the strength of our brands' performance over recent years..."

The sbove from today's statement.

So the core business is currently operating around breakeven/marginally profitable.

Am I looking at this correctly.

[essentialinvestor] 24/4/2024 18:53

Given the amount of licensing revenue in recent years, why is their net cash position not increasing at a clip?.

The CFX net cash position nicely increases in a typical financial year, once the money spent on buy backs is accounted for..

Their core business needs a significant cost restructure is what it shouts to me.

[riverman77] 24/4/2024 18:35

Licencing is actually well spread across multiple deals in both UK and the US, with new ones regularly being signed, so this should mitigate the risk of a single deal being cancelled. I see licensing as a growth area, while the core business in the UK has plenty of scope to recover in due course. Far too cheap even on current earnings, but even more so once earnings recover (and even cheaper still once you factor in the net cash position).

[misterd1] 24/4/2024 11:36

The minimum licensing revenue is recognised up front in the P&L as required by the accounting standards.

The cash will then be earned over the periods products are sold - but SDG knows the absolute minimum that it will get - and hence the recognition.

This recognises that the minimum will be received even if no product was sold - that's the deal

[disc0dave46] 24/4/2024 11:35

North America is the only region of growth, Brands only Morris & Co grew but only marginally (0.8%), manufacturing has negative growth. The only growth is licensing which can disappear as it's done in the past when a large contract/s fail to extend / renew.Consensus forecasts are for -10% eps growth FY24. Does look decent value on a PE basis but IMO there's a reason for that!.

[salver2] 24/4/2024 10:36

Pretty much spot on there Disco they need to put their cash to good use as they’re not really growing much -cheap though the shares are -they’re must me a lot of distressed bargains in this sector and if they can’t take the opportunity now they never will -I would say the Morris brand with its licensing power must be worth more than the whole groups market cap which is effectively 54 million plus 16 million cash

[skanjete2] 24/4/2024 10:35

@ Arthur : correct question about licensing, but you also have to take in mind :
- some of their brands exist for over 100 years and seem to be timeless
- Some years ago they communicated that they wanted to make licensing a cornerstone of their businessmodel. They seem to be succeeding with steady growth over the years.

So if they predict it beforehand and deliver, you can hardly argue licensing is a one-off stroke of luck because of whim of fashion.

The renovation/construction sector is in a recession since last year. At the moment we start to see the first signs of some recovery. If we could get to a full recovery in some years and licensing keeps up, we could be in for a nice setup here...

[disc0dave46] 24/4/2024 10:28

Yet another fantasy top up!Results aren't great but it's the same old same old, core business going nowhere and licensing doing okay.Definitely not a growth stock and IMO never has been.

[trt] 24/4/2024 10:12

Grabbed a few more this morning. Dividend yield looking good and this morning's share price dip gets me more of a dividend payout come August.

[arthur_lame_stocks] 24/4/2024 10:11

That still begs the question of whether the company's ability to generate free cashflow makes the shares cheap or not. I reckon they're priced pretty fairly at the moment, I guess you have to take a punt on whether licencing income can keep growing and to what extent the designs are at the whim of fashion.

[arthur_lame_stocks] 24/4/2024 10:06

Thanks pireric, that makes sense to me.

[s34icknote] 24/4/2024 09:55

Better value else where ! Card and sup ?

[pireric] 24/4/2024 09:32

Licensing revenue that was recognised up front but which did not convert to cash in the period, so it's negative as it represents revenue without cash

2 possibilities as I'm not too close to SDG at this stage:

1) Purely timing and the cash flowed in after period-end

2) But given the size of that number, perhaps it's more the case that the cash will come in over the licencing deal life and 'catch-up' with the revenue

Eric