Sanderson Design Group H1 FY26: Profit steady, cash up, and US momentum building
Sanderson Design Group has kept profits on an even keel in a tougher market. For the six months to 31 July 2025, revenue dipped 4% to £48.3m, but adjusted underlying profit before tax held at £2.2m and statutory profit before tax was £1.5m, unchanged year-on-year. The Board says full-year expectations remain intact.
The headline story: cost discipline and licensing growth offset weaker UK and European demand, while the US continues to quietly pull ahead. Cash generation improved as inventories came down, and the interim dividend is maintained.
| Key metric | H1 FY26 | H1 FY25 |
|---|---|---|
| Revenue | £48.3m | £50.5m |
| Adjusted underlying PBT | £2.2m | £2.2m |
| Statutory PBT | £1.5m | £1.5m |
| Adjusted basic EPS | 2.22p | 2.21p |
| Basic EPS | 1.41p | 1.46p |
| Net cash | £7.8m | £9.6m |
| Interim dividend | 0.50p | 0.50p |
Revenue mix: US growth and licensing offset a softer UK and Europe
Total brand sales fell 7% to £34.7m, but the regional picture matters. North America grew 4% at constant currency to £11.2m, while the UK was down 9% to £15.1m. Northern Europe and Rest of World were also lower, both down 9% at constant currency.
- United Kingdom: £15.1m, down 9%
- North America: £11.2m, up 4% at constant currency
- Northern Europe: £4.3m, down 9% at constant currency
- Rest of World: £4.1m, down 9% at constant currency
By brand, Clarke & Clarke bore the brunt, down 11% to £9.4m, largely on UK softness. Morris & Co. (£8.8m) and Sanderson (£6.8m) were modestly lower overall, but both did better in North America. Harlequin (£6.0m) is re-energised in the US, up 13% at constant currency there. Scion is primarily a licensing brand, and its brand product sales halved to £0.3m.
Licensing shines: up 6% reported, 22% underlying
Licensing revenue rose to £4.4m, up 6%. Under the IFRS 15 accounting standard, some contract income is recognised upfront as “accelerated” revenue; stripping that out, underlying licensing revenue grew 22% to £3.9m. That is high-quality income, often with attractive margins and cash generation.
- Underlying licensing revenue: £3.9m (H1 FY25: £3.2m), up 22%
- Accelerated income recognised: £2.4m (H1 FY25: £2.7m)
- Notable deals: The Tile Shop renewal (Morris & Co.) in the US; Portmeirion’s Royal Worcester extension for Sanderson; first agreements signed using the Morris & Co. x The Huntington designs
The pipeline is progressing and management expects full-year licensing broadly in line with last year.
Margins and costs: factory fixes coming through, overheads trimmed
Group gross margin slipped 60 basis points to 68.3%, mainly due to mix in the Brands segment. Brands gross margin fell 90 basis points to 67.4% and stock provisions nudged up. On the flip side, manufacturing gross margin improved sharply to 33.8% (up 410 basis points) as restructuring benefits kicked in.
Costs are under control. Distribution and selling expenses fell to £11.9m from £14.5m and admin costs to £21.6m from £22.4m. A change to the pattern book model reduced “Other operating income”, but still delivered a net £0.7m saving versus last year.
- Annualised cost savings completed this year: ~£2.5m (central overhead £1m; manufacturing £1.5m)
- Total cost reductions over three years: ~£4.8m
- Manufacturing expected to reach break-even or slightly better for the year
Cash, inventory and balance sheet: cleaner and stronger
Net cash improved to £7.8m at 31 July 2025 from £5.8m at the year end, helped by a planned reduction in inventory and tighter working capital. Operating cash flow swung to an inflow of £3.7m from an outflow of £3.3m in H1 FY25.
- Inventory: £24.7m, down from £27.2m at 31 January 2025
- Capital expenditure: £0.3m (no major projects planned this year)
- Minimum guaranteed licensing receivables: £3.9m due within one year; £11.5m due after one year
- Banking: £10.0m revolving credit facility to 31 January 2029, plus a £7.5m accordion; covenants met
One to note for US trade: from 29 August 2025, the US removed the $800 de minimis for commercial shipments. Sanderson is adding an invoice surcharge to recover new tariffs and admin costs while the situation evolves.
Digital and brand execution: omnichannel engine revving
The digital build-out is gaining traction. The Morris & Co. direct-to-consumer site launched in North America in March 2025 and is trading above expectations. The revamped Trade Hub for trade customers went live in late August with improved tools and sampling. A Harlequin DTC site launched on 1 October 2025, with a Sanderson DTC site due in the coming weeks.
On product, the Highgrove by Sanderson collection launched in May 2025 and is seeing unprecedented sample requests for the brand. Morris & Co. x The Huntington launched in September, bringing 26 previously unfinished designs to market with exclusive IP rights held by the Group – a rich seam for future collections and licensing.
Outlook: guidance intact, early H2 trend encouraging
The Board reports brand sales in the first nine weeks of H2 up 5% at constant currency versus the same period last year, with growth in North America, the UK and Rest of World. Despite macro unpredictability, guidance is unchanged: on track to meet full-year expectations. The interim dividend is maintained at 0.50p per share, payable on 28 November 2025 to holders on 24 October 2025 (ex-dividend 23 October 2025).
My take: steady execution in a choppy market
This is a disciplined performance in a tricky consumer backdrop. Costs are down, cash is up, and the US is doing the heavy lifting. Licensing is doing exactly what it should – growing underlying income at high margin – and the manufacturing turnaround is visible in the gross margin step-up.
Positives
- Profit protected despite a 4% revenue dip
- Underlying licensing revenue up 22% and a healthy deal flow
- Operating cash flow recovery and lower inventory
- US momentum and DTC progress across Morris & Co. and Harlequin
- Manufacturing margins improving after restructuring
Watch-outs
- UK and Europe remain soft; consumer sentiment is the swing factor
- Gross margin pressure in Brands from mix and provisions
- IFRS 15 accelerates licensing revenue – timing can be lumpy and receivables are rising by design
- US tariff changes add friction, albeit being recovered via surcharges
Catalysts to watch: continued US brand growth, uptake of new DTC sites, the commercial traction of the Highgrove and Huntington collections, and evidence that manufacturing can hit break-even for the full year. If the H2 sales trend holds and costs stay tight, Sanderson has a credible route to deliver on guidance.
Quick reference: divisional and brand detail
| Segment | H1 FY26 | YoY change |
|---|---|---|
| Brands revenue | £34.7m | -7% reported, -5% constant currency |
| Licensing revenue | £4.4m | +6% |
| Manufacturing (external) | £9.2m | Flat |
| Gross margin | 68.3% | -60 bps |
| Brand | H1 FY26 revenue | YoY change (reported) |
|---|---|---|
| Clarke & Clarke | £9.4m | -11% |
| Morris & Co. | £8.8m | -4% |
| Sanderson | £6.8m | -3% |
| Harlequin | £6.0m | -3% |
| Zoffany | £3.3m | -6% |
| Scion | £0.3m | -50% |
Bottom line: trading is on track, with the US and licensing doing the heavy lifting, and cost actions cushioning the cycle. If early H2 momentum sticks, Sanderson Design Group looks set to deliver the year as planned.
