Sanderson Design Group plc (SDG) Earnings Call Transcript & Summary

Good morning, everybody. Hello, and thank you for joining us as we share our final results for the financial year ended 31st of January 2024. My name is Lisa Montague. As you know, I'm CEO of Sanderson Design Group and joined today by Michael Woodcock, our Chief Financial Officer of the group. In the room with us is our Chairman, Dame Thompson and Senior Independent Director, Chris Rogers; and our other Board colleagues are joining remotely. Our agenda is that I will cover the highlights of last year, and then I'll invite Mike to take us through the financial detail. After which, he will hand back to me to share with you our strategic progress and the current outlook. So share an overview of the group at a glance. We design and market core products of wallpapers and furnishing fabrics. We print wallpapers and textiles in our 2 U.K. factories, both for our group brands and for other market leaders globally. We also license our designs on to finished goods with specialists in their fields. Design is at the heart of everything that we do, as our name suggests, and our vision is to lead the industry by being intrepid imaginative and always respectful, caring for our people and our planet. Striving to be a net 0 business which is celebrated as a great employer to our 600 strong team. Our 6 high-end consumer brands are principally sold into the trade with the U.K. as our main market, while we adopt a global mindset and a keen focus on growing the North American market. To cover some of this year's highlights, we delivered revenues of GBP 108.6 million and an adjusted profit before tax of GBP 12.2 million, just 3% below last year. Licensing was the success of the year, delivering a record GBP 10.9 million of revenues, including accelerated income from important new agreements. Momentum continues. And this year, we've already booked around GBP 2 million worth of accelerated income in the first quarter. Our brands launched strong collaborations last year, including with TV makeover Star Sophie Robinson, collaborating with Harlequin and bringing her saves energy and enthusiasm for color to capture the imagination of our customers. And Ferry Dust was also sprinkled on Sanderson through the Disney Magical tie-up for Disney Home as part of the 100-year celebrations. Both got off to a strong start with record sampling numbers and sales are now coming through, slightly ahead of expectations. North America, our focused growth market increased by over 8% in constant value. and continues to perform well into this year. We've maintained good cash reserves of GBP 16.3 million, almost GBP 1 million ahead of last year. And we're pleased to offer a final dividend of 2.75p per share, taking the full year dividend to 35p is a demonstration of Board confidence in the strength of this group. All in all, in what continues to be a challenging trading environment, we made good strategic progress by remaining alert, agile and confident. So thank you for your attention. And please now welcome Mike to share a little more detail behind the numbers. Thank you.

Thank you, Lisa. So as usual, I'll start by focusing on the 10 KPIs we used to track our performance. This provides a high-level view of our results for the year. I'll then cover each area in more detail on subsequent slides. This first slide shows that despite a GBP 3.4 million decline in headline revenues, the impressive performance of the licensing segment saw a profit before tax fall by only $500,000 and adjusted underlying profit down by GBP 400,000. The second schedule highlights a return to cash generation with GBP 3.6 million of free cash flow, driven by a GBP 1.1 million reduction in our inventory position despite the difficult trading environment. We end the year with GBP 16.3 million of cash, up $900,000 compared to January 2023. The following slides will now look at the financial results in more detail, starting with a review of revenue by segment. So just a quick reminder of how we report group revenues. Our business model has 3 pillars: brands, licensing, and manufacturing. The brands and licensing segments comprise our 6 consumer brands, whilst our 2 manufacturing businesses print for both third-party customers and our own brands. In total, sales of GBP 108.6 million were down just over 3% on the previous year, with growth in licensing income, partially offsetting declines in brand product sales, and in particular, third-party manufacturing revenues. At a more detailed level, looking firstly at brand product sales by geography, the difficult consumer environment in the U.K. saw brand product sales declined by 11%. Performance in our larger customers has held up well, but it's been the smaller independent retailers on the U.K. High Street, where we've seen the biggest downturn. Our strategic growth market of North America, which now represents over 1/4 of brand product sales showed growth of 9.2% in constant currency, driven by the Morris & Co, and Zhan brands. Progress in the year included relaunching our New York showroom, developing relationships with designers and collaborative partners and accelerating the renewal of our distribution agreement with Cravat Ink, for Carton Clark for a further 5 years. Trading in our Northern European region reflects some other challenges to those experienced in the U.K., particularly in Scandinavia, and Ireland, although Germany, and Netherlands were more resilient. Trading in the rest of the world was down 6.8%, with strength in the Contracts business, partially offsetting softness in domestic channels. Looking now at revenue on a brand-by-brand basis. Clarke & Clarke, our biggest selling brand, reported sales of GBP 22.4 million in reported currency, down 5% versus the prior year. In the U.S., sales finished the year strongly after the renewal of the distribution agreement with Cravat and the launch of an important collaboration with Breegan Jane, the California-based interior designer and lifestyle commentator. For the Morris & Co. brand, sales during the year of GBP 19.1 million were broadly unchanged compared with FY '23. By region, sales were up strongly in North America with an increase of 24% in constant currency, the result of a number of initiatives, including a special edit with a direct-to-consumer website Studio. Harlequin U.K.-focused brand and consequently has been more impacted by the downturn in our home market. The well-received Sofie Robinson collection was launched in the autumn last year, and Harlequin remains the biggest selling wallpaper and fabric brand in John Lewis, our biggest U.K. customer. Sales at GBP 13.6 million was slightly down on the prior year. The Disney Home X Sanderson Capsule collection of fabrics and wallpapers based on original Sanderson and more papers in the 1930s launched in Autumn 2023 and has performed well. During the years off in his brand product sales were GBP 8.2 million in reported currency, down from GBP 8.8 million in the prior year. In the U.S., the brand was up 12%, where a specific focus was held on collaborating directly with designers on major residential projects. Moving on now to manufacturing, which is a core part of our value proposition as an integrated design company to design, scale and print, the world-class capabilities of our manufacturing operations include the use of multiple printing techniques with the share of digital printing rising significantly. External manufacturing revenues have returned to pre-pandemic levels, although this does represent a 14% reduction versus the prior year, a period when customers, particularly in half well, we're still heavily restocking post COVID. Noticeably, the general consumer slowdown has reduced repeat orders from third-party customers. Importantly, though, orders for new collections continue to hold up well, and for the first time, digital production accounted for more than 50% of total manufacturing revenues. In the new fiscal year, we've continued to focus on the efficiency of our factories. At Anstey given the growing proportion of less labor-intensive digital production, we've completed a consultation exercise, which included a reduction of approximately 20% of head count. This exercise will lead to annualized cost savings of GBP 1.1 million at an exceptional cost in the current fiscal year of GBP 0.5 million. Our licensing activities, leverage our designs and our archives and bring wider consumer awareness through our brands across multiple categories of finished goods, meaning licensing has the potential to stimulate sales of our core products of fabric, all paper and paints. Licensing had a record year with sales up 68% at GBP 10.9 million, including GBP 6.5 million of accelerated income, recognition of which is a requirement of IFRS 15. This represents total minimum guaranteed sales associated with newly signed contracts with a discount rate applied to them. Major licensing agreement signed in the year included NEXT with the Clarke Clark brand for a wide range of homewares. This 5-year agreement included accelerated income of GBP 3 million. Also, a major multiyear agreement was signed with J. Sainsbury in which the Supermarkets group's Habitat Homeware brand and Tu Clothing brand will develop a wide range of licensed products in collaboration with the Morris & Co. and Scion brands. This next slide analyzes our total licensing revenue by brand and by region. You'll see in the top table, the income in the U.K. was boosted by the previously mentioned agreements with NEXT for Clarke & Clarke and Sainsbury's for Morris & Co. and in particular, scion. The table also shows the significant growth of U.S. licensing revenues, which have been driven by a combination of new deals, renewed agreements and strong underlying performance. The Morris & Co. with the U.S. retailer, Williams-Sonoma, was extended by a further year until August 2026, with new product categories added. Close to the year-end, the brand signed its third major licensing deal in the U.S.A. with Envouge, a New York designer, and distributor of fashionable products at the home. Underlying income in the U.S. was driven by Morris & Co.'s agreement with Ruggable, the washable rug company, which provided a larger-than-expected contribution. The agreement was also expanded to include European countries, including the U.K., Ireland, Germany, France, and Austria. As I mentioned, IFRS 15 requires us to recognize accelerated income when a partner commits to a minimum guaranteed level of revenue. This creates a time lag between the revenue being recognized in the P&L and the cash receipt. What you can see on this slide is how this lag has evolved over the last 4 years and also that the licensing segment still contributed to GBP 6.2 million of cash to the group in FY '24. Looking forward, given the agreements we already have in place, we'd expect this cash contribution to grow to around GBP 8 million in 2025. Gross profit margin at 67.9% grew by 160 basis points year-on-year. Excluding the impact of licensing income, which is reported as generating 100% gross profit, margins remained broadly flat at 64.2%. Within the Brands division, gross margin improved by 1%. Now that our SKU reduction program is complete and sales per SKU are growing, we are starting to realize volume-related sourcing efficiencies and have been able to reduce the level of promotional activity required to sell clear slow selling collections. Conversely, our manufacturing division has been impacted by reduced volumes of both internal and external orders. Given the high fixed cost base of both of our factories and utility price increases, gross margins fell by nearly 4% despite the number of cost-saving measures being implemented. As previously mentioned, post year-end, we've continued to focus on cost control with the restructuring of our Anstey Wallpaper facility. With challenging consumer environment in the U.K. and other markets, adjusted underlying profit before tax was GBP 12.2 million, down from GBP 12.6 million in the prior year. Distribution and selling expenses increased by GBP 300,000 year-on-year, although this is entirely due to an increase in the cost of patent books, offset by income from the sale of these books, which is included in other operating income. Inflationary pressures impacted all areas of administration expenses. However, we continue to implement cost efficiency measures, which limited this increase to 1% compared to the prior year. Administration expenses remained GBP 2 million below pre-COVID FY 2020 levels. And then finally, I'll move on to talk about the group's strong balance sheet and cash position, which in the current consumer market provides significant protection in the event of any further deterioration in trading conditions. We ended the year with net cash of GBP 16.3 million compared to GBP 15.4 million at the previous year-end. Despite cost increases driven by the continued impact of salary, utility, and raw material inflation, net inventories fell by GBP 1.1 million. Now that our SKU reduction strategy is complete, we've been able to reduce our investment in finished goods symmetry while also increasing the availability of our best-selling ranges. However, produced production volumes in our factories have meant the raw materials and work in progress levels remain above their optimum level, and this will be an area of focus for us in FY '25. As I previously highlighted, the way licensing revenues are recognized, means there's a time lag before the cash flows from the agreements are received. Licensing receivables increased by GBP 4.7 million year-on-year. Capital expenditure in the year totaled GBP 3.3 million. We continue to focus on investment on digital printing technology across both of our factories and in projects that reduce our environmental impact and support our Live Beautiful sustainability strategy. Significant investments in the year included a new more efficient team at Standfast & Barracks and the commissioning of our new dose digital wallpaper printer at Anstey. So now I'll hand back to Lisa, who will talk about our strategy for FY '25 and beyond. Thank you.

Thank you, Mike. Now let's check in on where we are in our journey. As a reminder our strategic framework is well established, and we regularly review and reset priorities within it. Within our pillars of brands, products, customers, and geographies. We have highlighted in the current main areas of focus. The pillars rule underpinned with people, financial health and care for our planet. And also for context, our brand pyramid demonstrates our coverage of the luxury sector of the home interior furnishings market with our 6 consumer-facing brands. So reviewing our strategic priorities, we do believe that strategic progress to date positions us well to grow market share of our brands and products in core markets as conditions improve. We have the U.S. lens on everything that we do, being certain that the greatest growth opportunity currently is in North America and getting it right there has a positive global impact. Sanderson, as an important heritage brand, has been polished off with a new logo, advertising campaign, Disney collaboration, and now this spring, the stylish new collaboration with London Designer and Illustrator Charles Deacon. Receiving raptures applause. Licensing, as I mentioned, was the star of the year and gathers momentum that will continue to deliver well into the future. Both factories are constantly challenging themselves and being challenged to be at the forefront of British manufacturing and to be design-led and market-oriented. And we support the business with continued careful investment in new technology where it drives market competitiveness through enhanced productivity and creative innovation. We assess each project for its environmental impact as we go. In terms of progress against our strategic plan in this 5-year view that we set out, we're clearly focused on international growth and the delivery of the American market momentum is the lead indicator of success. We've appointed an international sales director this year to accelerate delivery of the opportunities identified, the former General Manager of Clarke & Clarke, who knows the market as well. Sanderson is our brand focus. And as I mentioned, the Giles collaboration has caught the attention of the industry, launched with the world of Interiors in February, taking over London Sine week in March, and now off to the U.S. where today, Charles and [ Claire Wallace ], our Design Director are in conversation on the stage at Houston Design Week. My favorite subject of SKU reduction, which is still there at the top of the chart, we're now stable. We've reduced from 20,000 to 10,000 SKUs over the last few years, and we're holding that discipline. Brand product margin is starting to come through and the benefits will only grow with volume. This year, too, we halo British manufacturing of 100 years of textiles printing at Standfast. With activities each month kicking off with an exhibition in the museum of Lancaster that opened last week. Next week, a trade fair in Italy and in June at home again with local dignities and across the group. Digital investment is reemphasized slightly ahead of plan actually. We are progressing the digital trade hub investments to better serve our customers. And as recently announced, we're launching later this year a dedicated Morris & Co website. This will be our own website, showcasing the full offer of Morris & Co. Co products in one space. We will report the store sales, while sites to be operated by an agent that's a specialist retailer, digital expert and trusted partner. And looking even further ahead to next year, we like planning forward, we are thrilled to have announced a rare partnership with a California-based Huntington library, Art Gallery and Botanical Gardens. To bring to market some treasures from their archive that are very special unfinished works of William Morris and his collaborators. It's a true privilege and I'm so excited and honored by the trust placed in us to deliver this unique opportunity. Briefly going to talk through progress by territory this time rather than by brand as the regions are performing really quite differently. North America, first, our ambition is to grow double digit year-on-year in the United States, and we're on track so far to achieve our goals, having put in place all the measures we identified with our U.S. team of 36 employees and a network of third-party agents and road programs having increased significantly our presence in network in the past few years. Our brands are now well known and in demand in the design community, decorating show homes, hosting region events, supporting e-commerce partners, and collaborating with influential industry leaders. We started our U.S. licensing program a couple of years ago with Williams Sonoma and extended last year with Ruggable, both focusing on the Morris & Co. brand. And Clarke and Clarke, as we know, is distributed by market leader, Kravet, their extensive network has recently hosted Breegan & Jane, who you've heard about is the California-based HDTV star, who's also a dream to work with. Thanks to her passion and her love of personal appearances. And for the first time, I'm going to mention France, Germany, and Japan. We're focused on being relevant in each of these markets and have engaged local PR agencies to better support our teams. These represent 3 very different opportunities for us. France for us is a turnaround story, having moved to an agent model and are now rebuilding the network. Germany is developing well with our team on the ground there, flourishing now that we've put in place the support that they really needed. In Japan, famously loves good design, appreciates Morris & Co. daily. And with both imported core product and strong specialist partners who make to a very high standard locally, Japan feels buoyant again after a few sluggish years economically, and we're confident in presenting our standards on progress there for renewed recognition of the aesthetic design integrity and craft skill dating back to 1860. And our biggest market is the U.K. where our mission is to hold our leading market position. We're working closely with our customers to deliver whatever they need to win in a tough market. Our bigger customers, the likes of John Lewis partnership and Brewers are performing well with our brands as we partner closely to inspire consumers with special edits and events. Our smaller customers need different support, making it easier to use the trade hub, offering shop-in-shop setups, window schemes, and access to digital assets to inspire their customers and drive footfall. We're aware of the need to adapt our approach as the market transitions, while also challenging ourselves on the cost to serve, phasing into market headwinds with resilience and keeping a keen eye as always, on opportunities. And reasons to be cheerful, thanks to our marketing activity. It's been very effective thus far. We're ahead already in the first part of the year on most metrics, which is a great indicator of the general confidence in our brands and engagement with our brands. and with what we're doing. Our Instagram followers on Morris & Co. Co alone have reached over 250,000 fans. Our editorial reach is running ahead in Q1 with more than GBP 5 million worth of advertising equivalent value already generated. The trade hub is performing well and growing, so the re-platforming will enhance the customer experience. And we've built a strong in-house team now across marketing and communications, and I'm thrilled to see the progress being made. Mentioned Sanderson in particular. So there's a little zoom here on how we're reenergizing this 160-year-old design icon. We've dusted off the logo, taking it back to a 1930s archived version of that graphic, which I hope you like as much as we do. The advertising campaign has been throughout this presentation is created by Damian Fox, celebrates new collections as well as classics. And with his crafty wallpaper dresses as masterpieces being celebrated globally in the press with a great response. Sanderson also the [ Royal Warrant ] Holding brand that sponsors Quest, the Queen Elizabeth Scholarship Trust and our commitment to excellence in design, and to making in the U.K. And last but by no means least, our charming partnership with Disney, and the team there continues to attract attention from their partners. And to bring new opportunities, not all of which we're allowed to mention, but include a gorgeous H&M Home collection to launch this fall and more to come. So quite exciting. We've talked about licensing and licensing is now firmly established as a third core pillar of the business, significantly amplifying our brand's awareness on finished goods to new audiences for the benefit of all of our customers. Licensing is now integrated across the business as a key activity to nurture and develop with the strengthened team in the licensing itself and the leadership team focused across the whole group. Our design expertise is the unique advantage that we bring as we scale and adapt our brand assets to leverage the team's creative skills and deliver exceptional results in collaboration with our partners. We've nurtured long-standing partnerships with category specialists, renewing, and extending relationships with [indiscernible] for bedding, blinds to go for curtains, and blinds. And most recently, yesterday, in fact, adding a further 5 years to our existing arrangement with rug specialist, the Royal Warrant Holdings Dutch carpet maker [indiscernible]. At the same time, we've developed new partnerships with category specialists, specifically in our target U.S. market, Ruggable, Washable Rugs and [ Ondo ] bedding in the U.S. Our renewal rate is strong and it's testament to long-standing and flourishing partnerships. We have a total of 61 partnerships with 76 agreements as some of our partners work across more than one brand with us. We signed 14 new partners in the year, which is 7% more than the prior year. And 8 category partners were renewed all 8, while 2 collaborations with small contributions expired. And I wanted to show you here the profile of our partners and how we see the foundations of the business, with solid and long-term partnerships with our 48 partners that are category specialists and you've seen recently renewed. Collaborations are established as usually shorter term, more fashion or apparel partnerships such as page jeans or the hot trainers. New for us are the big retail groups of the type that we signed last year, just going to market now, such as the next with Clarke & Clarke and Habitat with silo. These big groups with significant distribution networks, introduce our brands to large new audiences, increasing brand awareness, and we expect will drive sales back to our core products and customers. not proven yet, but please take a look at the powerful advertising by Habitat with Sion that is strongly present in social media, in print publications and outdoor campaigns. We expect the brand halo effect to shine. And the power of the finished goods partnerships gives us 4x more brand presence in the market, simply measured without valuing the marketing impact that I just mentioned on the last slide. Here, we see that our GBP 77 million trade revenues equate at retail value with sales that have been made to nearly 4x that value, close to GBP 300 million is a conservative estimate. With licensing increasing by 22% in underlying sales value, the brand value in the market was propped up despite the drop in trade revenues. And future opportunities at retail sales value growth look positive in this year and next year as we start to see significant partners land product in the market this month, which could lift the presence of Scion, in particular and Clarke & Clarke significantly. So moving on now to operations, the ambition for our 2 U.K. factories for our logistics operations is to be the best design-led interiors resource by offering a full design service that utilizes our technical expertise and our full range of print techniques and processes for competitive advantage. Anstey has undergone a structural review as you've heard, and we're working on building in agility and flexibility as we pivot to set at the forefront of British manufacturing, and we're delighted to share our sixth year certificate of Planet Mark that demonstrates continued reduction in emissions, having achieved a whopping 40% reduction in CO2 emissions in total over the past 5 years. We're constantly seeking other ways to support our planet and to reduce our impact. And now moving on as well as to how we can positively impact biodiversity working with the Raw Warrant Holders Association of their nature recovery group alongside Wildlife Trust and Natural England. Our Rewilding and allotments at the La feria site are a great example of how our community is working together for positive impact and things that people can really see to make a difference And our people enjoy our of beautiful pledge. This year, we're launching our Work Beautiful initiative to deliver on our promise to build a company where talent prospers creativity flourishes and individuals come to grow and to celebrate their career successes. We are also building a listening culture and a global mindset of inclusion and belonging. We aim to be the employer of choice in our industry, attracting the best minds and talent, investing in skills and development, enabling our people, and our business to thrive. We work long organization alongside organizations to foster design, craft and making skills from schools through to scholarships. We're super proud to be a real living wage employer and to support our team in difficult times. And we're on the move. We're taking Sanderson Home to the wallpaper factory that was designed by Charles Boise in 1902 for [indiscernible]. It's a great privilege to make this original wallpaper factory home again to our thunders and teams of around 80 people moving in their next month, hopefully, to create creative hub of showroom studios and commercial offices, housing our precious design archives here too. And in terms of outlook, the positive momentum that we're seeing in our licensing activities has continued into the current year with 2 major renewals, as I've mentioned. Trading conditions overall are expected to remain challenging. The Board remains focused on growth drivers, including North America, and licensing and remains confident in the business' agility, and our ability to navigate any further market uncertainties, supported by the company's strong cash position, the Board's expectations for this full year revenue and profit are unchanged. Thank you for your kind attention today, for your support. And if you'd like to ask us any questions, Mike and I will be delighted to take them. Thank you .

I was wondering if you could talk a little bit about the opportunity in B2B and how attractive or how more attractive the economics are within B2B and whether you think it could pave the way for more of your brands. I'm obviously referring to the Morris & Co. B2B shop online. And yes, really how you see the future about developing and evolving.

Small point. I think you mean B2C.

Sorry. Yes, B2C.

That's fine. Opportunities everywhere. Yes. We've talked about B2C before. We had our 2 incubated projects you might remember previously. So what that showed us was that the Morris & Co. offer coming together really reinforced everything that we do and position that brand really well, was very well received to show our core products as well as finished goods alongside each other to create a whole offer for the consumer. We did believe at the time, it would work online, but we didn't have the resource available all the skills in-house a couple of years ago to do that. And of course, you might remember we had GBP 2 million of utility inflation, GBP 2 million of salary increases, and another GBP 2 million at the time to build that platform didn't seem the right thing to be doing as a priority. So what we've chosen to do is whilst we're building in-house know-how is to work with a partner on that. So we started with Sion Living. A couple of years ago, that's worked really well. Morris & Co, obviously, is a much larger brand. And we really want to be driving that at the forefront ourselves. So rather than taking that as a franchise opportunity, which we did really with Soini terms of the agreement. This is much more direct on an agency model. So our partner will operate. We will be reporting sales. We'll be controlling the positioning, the marketing and so on and so forth of the brand. So it will feel very much driven by Morris & Co and operated in the background where we have less capability by a real digital expert. So I think there's good opportunity. The main opportunity for us is to really make sure that, that brand is well understood. -- we can share the history. We can tell our stories. We can talk about what differentiates Morris & Co in terms of the history, the archive that we hold, social, and lifestyle archive, and also talk about the stories of new collections coming out, these new collaborations like I mentioned with Cantina that make us really unique. We don't have plans for the other brands as it stands currently, but we'll see how this develops.

Okay. And then on licensing, you talked about the GBP 8 million of cash for next year. How should we think about the mix of variable versus accelerated income next year?

Do you want to do that?

Yes. I mean look, I think we had a record year in terms of accelerated income this year. And obviously, the big 2 in there were the next and the Sainsbury's deals, which obviously start to generate underlying income as we go into the new financial year. So I think we'd probably expect there aren't those deals out there every day. So I suspect in terms of the mix for FY '25, we'd expect to see slightly lower accelerated income and a slightly higher level of underlying performance from the licensing coming through.

Can I ask a little bit more about manufacturing. You've obviously done the headcount cuts at once. You talked about work in progress, raw materials still being above optimal. Could you maybe add a little bit of color around what you're planning to do to sort of bring that more efficiently in the current year on top of what you've already been doing?

Yes. I mean I think from an inventory point of view, it's the point to make here is, I guess, it's good quality raw material. So it's basic stand past. It's wallpaper substrate for Anstey. And the honest answer is I think we stocked up expecting a slightly higher level of repeat business coming through those factories in the year than we actually saw. So it's just about us being slightly long on stock, and we'll just reduce our purchasing this year to take account of the current level of orders. And we'd look, I think we've sort of natural sort of flow-through of that product to be in a better position come this time next year.

So may I add, David, that it was the Anstey situation is really about also making sure we've got flexibility and agility built in. So whilst we preserve that full range of print processes that we can also be flexible and agile across the site.

Toby Torrington from Equity Development. 3 unrelated questions, I think, just to test you. First of all, have you put through any selling price increases this February? I noticed that you did last year? Should I do the one at a time or..

Yes, we can do that. The usual annual increase goes through every February, and it returned to a more normalized level this year of.

Okay. That's great. Secondly, on another manufacturing question, some investment in digital again at Anstey. There's a difference a natural difference, I think, between digital percentages at [ SMB ] and Anstey. How far do you think you can take entity from the 18% currently?

We're already over 20%. So yes, it was '19, it dropped back to '18 when we put in the new machine because, of course, we had to close the digital area for a while to install the new machine. We're back up at about 23%, I think, this so far this year. But I'd be surprised because it's a very different Standfast & Barracks print close to 80% digital now and 20% conventional. We'd be very surprised if it went more than 50-50 at Anstey because paper is different and people like to see the ink, the print mark, which is quite different on textile.

As a follow-on supplementary on that one for Mike CapEx expectations for the coming year.

I mean I think we've said in the past, we'd expect our underlying level of CapEx to be around GBP 5 million per annum. It would have been that last year, I think there were a couple of delayed projects. So the head office move that the Lisa talked about, we would have expected to be building out or fitting out our part of that office last year. There were some delays with the landlords contractor, so that got delayed. And then also, we've had a project we've talked about before, I think, to put solar panels on the roof at Standfast and again, that project got delayed into this financial year. So I think we said before, we'd expect about GBP 5 million to be the run rate. And I'd expect that for FY '25 as well.

Okay. And the last question, a more general question, I guess, difficult to answer. But have there been any sort of significant channel changes in your primary markets, either in the U.K. or internationally?

Not really. We've obviously seen over the last 5 years is the advent of e-commerce and direct sellers. And that, I suppose, globally has increased a little more. Now if you look at the U.S., that's the part of our business that probably wasn't there 5, 10 years ago, likes of Wayfair, Perigold, Obviously, we work very closely with Wallpaper Direct. Not really otherwise. I mean what we're seeing slightly is a polarization, I'd say, of where we're seeing people suffer more is in the smaller retailer on the U.K. high street. And that's not just our sector, that's general. So we're working very closely with everybody, but we're seeing our bigger customers winning through with innovation and creative ideas and more natural ability probably to generate footfall and our interior design is also working well with projects the middle that's struggling. And so that's more difficult to generate footfall.

A couple of questions for me, really follow-ups actually. Could we just go back to Anstey and the restructuring that you've done there, the GBP 1.1 million annualized savings. We've had a few questions just asking beyond what will how much of that is wages and payroll and how much is operational changes, shift patterns and the like. Could you give a little bit more flavor around the actual transformation of process and shift and stuff, that would be quite helpful. or even just a rough gauge.

I mean, ultimately, it's all people related, yes. So I think it's as we said, we've taken about 20% of the workforce out there. What we've also done, I think, is look to align shift patterns, shift premiums, the benefits that we're offering across the factory. And as Lisa says, it's about flexibility and trying to have people cross-trained across the various production lines that we have there, so we can react to demand more effectively and more efficiently. And so is the 1.1 dependent on certain assumptions around volume and activity.

That's assuming current volumes.

Just in terms of raw material and input costs, is could you give us a flavor as to what's happening now? I mean you'll presumably be starting to at some point this year will be starting to turn the gas back up on buying your raw materials, how are the prices in the market currently?

I mean raw material prices, I'd say, have stabilized now. So we're not seeing as we go into the new financial year, any significant levels of increases. There's the odd 1 or 2 things coming through. But I think we're through that sort of that peak period in terms of raw materials. As I said, I mean, again, I think we'd expect to be reducing the level over the course of this year, where actually will be a slight benefit to us of selling product that we bought at last year's prices. So we're not seeing huge amounts of inflationary pressure coming through. I mean the only more than one sort of lag of costs that's still coming through is the gas. And obviously, our gas came off contract last October, so we benefited up until that point of sort of a gas contract arranged pre the Russian innovation of Ukraine and pre the increasing global gas prices. So there's some of that to come through, although as we've talked about, we've looked to make the factors as efficient as possible. As Lisa said, we've reduced our CO2 emissions by 40%. So that's helped in terms of the overall utility bill that we're facing.

And without dropping service levels, we're keeping a very tight control on inventory.

And then last one, just in relation to your price rise in February was 6%. You've presumably got some good insight into what the rest of the market is doing. Are they roughly settling down at those sorts of levels? Or are you running ahead or behind what you're seeing from other brands?

No, we tend to be in line and yes.

We have a question on line from the webcast. It is from Gavin Laidlaw from StopWatch U.K. What is the current factory utilization.

I mean I think we've talked about this before. I think and we've obviously restructured Anstey to reflect the current level of demand that we're seeing through that factory. We've always said that in the medium term, we could double the output of the factories, given the material or the sort of the equipment that we have, the lines that we have, the additional working hours. So I think we'd say we're optimized for the current levels. But long term, we can easily flex up as required if demand were there.

Great. There are currently no further questions on the webcast. So I'll hand back to you, Lisa.

Thank you. Well, if there are no further questions, I'd just like to thank you all for your continued support and for joining us and following our story. Thank you.