Sanderson Design Share Discussion Threads

[salver2] 17/8/2022 09:12

I agree but a share buyback at these levels would make sense also

[pireric] 17/8/2022 09:11

The £15m net cash is still largely surplus and a chunk should be used for buybacks given the business is trading below NAV, in my view. It's exactly what Buffett would be doing. This deal should generate FCF, rather than consume it over time so a totally separate issue to what they do with their big cash balance even if some initial inventory stocking is needed next year. The business remains highly profitable so the cash either needs to be distributed to shareholders to help close the value gap on offer here, or spent. And I'm not in favour of the company doing M&A, so buybacks and dividends are the only option here.

Eric

[supernumerary] 17/8/2022 09:09

Good deal - much better than wasting cash on share buybacks :¬) I wonder what else they've got lying around in the archives?

[fegger] 17/8/2022 09:00

The interesting point is that Disney needed Sanderson too here. We dont know how many designs and what range Sanderson has in their archive. But Disney could not just do very similar without challenge from Sanderson. And there is likely a vintage authenticity hard to engender today. Good deal for both and could lead to further work together if it went well. For example Disney could take Sanderson designs and incorporate into a range they produce for example.

[elsa7878] 17/8/2022 08:47

The difference being SDG own their own factories (freeholds) and their back catalogue of designs was recently valued at about today's market cap.

[salver2] 17/8/2022 08:46

Yes a pretty anaemic reaction-same with Colefax results-just posted 8 million post tax earnings plus 22 million quid cash holdings -market cap 65 million-that’s about 5.5 times earnings stripping out cash ( almost exactly the same pe as Sanderson)-it’s the outlook I suppose everyone’s worried about-nevertheless both too cheap

[pireric] 17/8/2022 08:42

For some additional context that this is a meaningful drive from Disney



Eric

[elsa7878] 17/8/2022 08:40

It's still significant and the muted reaction shows the state of the market and the spread 5-6%. Too beaucoup.

[pireric] 17/8/2022 08:33

You tend to own the rights to the characters and elements of artwork rather than specific entire designs. As I've guessed above, Disney likely monetise via license fees and sales royalties or some similar structure, the bigger win-win for them being that they get significant brand distribution into a new category. Can Sanderson sell the designs into perpetuity without express consent from Disney? I doubt it. Hence why the collaboration is necessary in the first place.

While Sanderson I suspect make the majority of the revenue pie they carry the design process, offline distribution and manufacturing. Although that is all right in SDGs wheelhouse. Hence why I suspect this may look quite similar to e.g. how Character Group's Peppa pig has historically been structured.

Eric

[cliffpeat] 17/8/2022 08:29

"The Sanderson design archive includes a large number of original Disney wallpapers and fabrics from the 1930s" [LM - CEO]

I suspect that the lawyers are going to have fun determining IP rights on aspects of this deal - I wonder if SDG actually own designs that Disney might buy back?

[pireric] 17/8/2022 08:18

The analogy I would look to is Peppa Pig and Character Group's (CCT) income generation from a deal like that. They have licenses from Entertainment One to create, manufacture and sell for certain regional territories (think mainly the UK), and its very material from a revenue perspective for them as well as being incredibly resilient due to the longevity value attached.

SDG have something similar I suspect for wallpapers and Fabrics for the broad Disney Classics content and on a global scale. Disney probably get certain license fees from SDG per annum and some sales royalties to link to revenue uplift on the range. But this could easily be a very meaningful revenue stream for SDG looking forwards, especially as Disney build out their Disney Home proposition.

Eric

[trt] 17/8/2022 08:14

Disney - generate huge income this is a major step.

[netcurtains] 17/8/2022 07:24

Blimey that sounds like it has the potential to be big.... Especially the Fabric side of the deal (pyjama, aprons, socks, cushions, bed covers etc etc).

[salver2] 15/8/2022 08:42

I’ve added also to my large position and agree with your thoughts - we seem to be the only buyers in town!!

[pireric] 15/8/2022 08:26

Considering the first half profitability should be pretty decent, the market is pricing a very dramatic demand shift here as its now on 7.1x earnings, or only 5.7x excluding the net cash balance.

That is almost certainly too extreme and I suspect enough prospective investors will be willing to backstop this valuation as its incorporating a proper earnings recession (unlike most of the market), so I'm expecting 100p to prove good support moving forwards and volumes to pick up if the stock dips slightly below.

I've been adding last week on that premise. I.e. that its hard to construct much downside from here based on what we know in the market at present. 21% of the market cap in net cash is definitely surplus, and I would agree they should be doing at least a £5-10m buyback to release some surplus cash back to shareholders and to make clear the valuation discrepancy because of the balance sheet strength.

Eric

[salver2] 05/8/2022 15:07

Sanderson should effect a buy back of at least 15 percent of their shares as it trades under assets - Colefax had well over 32 million shares in issue in 1998 when I first bought them and now have less than eight - their final results are due in the next week or two so will make interesting reading

[dan_the_epic] 05/8/2022 13:33

Ginormous employment payrolls in the United States! What recession over there??

[essentialinvestor] 05/8/2022 12:10

CFX highlights the benefit of a CEO with a very large personal holding who
is laser focused on shareholder returns.

[supernumerary] 05/8/2022 10:10

More licensing would transform the company. Falls straight to the bottom line, which I'm sure they're aware of...

[our haven] 05/8/2022 09:28

Excellent points salver2.Looks like yesterday's negative action is over.

[salver2] 05/8/2022 08:47

Take a look at Sandersons closest competitor Colefax-which has 40 million less turnover same market cap and same cash in hand near enough -profits last year 5.42 million-shares up 70 percent this year Sanderson halved-with profit double this -I am a big shareholder in Colefax so very happy ( but doesn’t make sense really apart from most of their product sales ( about 60 percent are in USA)-I think Sanderson shares are an outstanding bargain notwithstanding the much reported headwinds and have been punished unfairly-but the market is an odd place -I also hold shares in a financial company called Just Group which is profitable and trades at about 30 percent of its assets (even stranger!!)

[gswredland] 05/8/2022 08:13

Agreed RC. I'm holding off for the moment.