Sanderson Design Group plc ($SDG)

Good afternoon, and welcome to the Sanderson Design Group plc Results Presentation for the year ended 31st of January 2026. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Lisa Montague, Chief Executive Officer. Good afternoon.

Thank you, and good afternoon, everybody. My name is Lisa, and I'm here to share with you today, along with my colleague, CFO, Mike Michael Woodcock, our results for Sanderson Design Group to our fiscal year end '26, which was on the 31st of January. And thank you for joining us. I will share with you an overview of the year, and then Mike will give you a bit more financial detail and hand back to me to talk about the future and how we have continued to accelerate some of the key strategic and transformational initiatives and shaped our strategy to improve our results in this year and beyond. Our business at a glance, for those of you that don't know us is that we're a leading interior furnishings group that designs and makes world-class fabrics and wallpapers. We also have a strong licensing channel that delivers finished goods with specialist partners in our core markets. We employ 500 people, all of whom are committed to leading the industry in the way we work. I've been here 7 years now and Mike have been with us 4, and we both have luxury goods backgrounds and international backgrounds. To recap this year for the results that we're announcing, we really have highlights of the year, resulting in the decisive actions that we took to improve performance. We delivered cost reductions, and we've improved the efficiencies that we set out to do. In summary, the revenue was broadly flat on the prior year, while profitability was greatly improved. We grew that cash balances to GBP 9.8 million, starkly reduced inventory and maintained a robust balance sheet. U.S. sales grew by 10%, and the U.S. is on track to be our biggest market very soon. Manufacturing has been turned around from a difficult year prior year, regaining profitability and has strong momentum carrying into this new year. Licensing for us has continued to perform strongly with encouraging underlying growth from established partnerships. Our D2C acceleration, we pulled forward the launch of all brand websites into the year that have been planned over a 2-year program. And this has positioned us to build audiences for all of our 6 consumer brands in the U.K. and the U.S. Our designs have resonated well in the market, high growth by Samson Collection with that brand's biggest ever launch since last May in its first year. And we had Huntington discovering a new body of archive designs that gave Morris & Co. new impetus. Since the year-end, we took a decision to purchase shares into the EBT to fund future LTIP vesting. The Board proposes a final dividend of 1p per share to give a total of 1.5p on the full year, which is the same as last year. So in short, the strategy we employed is working. We've delivered the planned improvements, and Mike will now share with you a little more of the financial detail behind this performance. Thanks.

Okay. Thank you, Lisa. Okay. So the first few slides in this section focus on the 10 KPIs we consistently use to track our performance. These provide a high-level view of our results for the year, and then I'll cover each area in more detail later on. So FY '26 has been a year of stabilization. As Lisa mentioned, turnover fell by 1% to GBP 99.5 million, but the mix of the revenue and the benefits of the various cost reduction initiatives we implemented meant that adjusted underlying profit before tax improved from GBP 4.4 million last year to GBP 5.3 million this. We've also seen a significant improvement in our cash performance and the strengthening of our balance sheet. The absence of any major capital expenditure projects and a GBP 5.7 million reduction in inventory has helped increase our net cash position by GBP 4 million to GBP 9.8 million at year-end. So starting a deeper dive with revenue. This table shows our 3 key revenue streams of brand product sales, licensing and third-party manufacturing income. Brand product sales were down 2% year-on-year, with growth in North America and other international markets being offset by continued weakness in our home U.K. territory. Licensing sales were robust against a record-breaking FY '25, and third-party manufacturing revenues returned to growth after a difficult year. Looking now at brand sales by geography. Trading conditions in the U.K. remained subdued with revenues down 9% compared to the prior year. Income from our top 10 domestic customers was maintained with the decline largely attributable to small independent retailers on the U.K. High Street. The targeted growth market of North America performed well with underlying sales up 9% in constant currency. Sales here were impacted in the first half by uncertainty around the U.S. tariff regime, but recovered strongly in H2. We were able to pass the cost of tariffs on to customers via surcharge, and that contributed around GBP 200,000 of revenue or an additional 1% of growth in that territory. Northern Europe was a mixed picture with strong growth in Scandinavia, which continues to be a core market for Morris & Co., partially offset by softness in Netherlands, France and in particular, the Republic of Ireland. And then sales in the rest of the world were broadly flat and included GBP 1 million of revenue from the Middle East, which represents less than 1% of group turnover. So looking now at sales by brand. Morris & Co. continues to be our only brand where revenues in North America exceed those of the U.K. In constant currency, sales were up 14% in North America and up 9% in Northern Europe, driven by Scandinavia. As Lisa mentioned, the brand highlights the September launch of the Huntington collaboration, which should drive sales growth into FY '27 and beyond. Clarke & Clarke is predominantly a U.K. brand and is therefore exposed to continued softness in that market. Sales here were down 11%, contributing to a 7% decline in total revenues. In North America, where Clarke & Clarke is distributed by our friends at Crabit, sales were flat in constant currency, but we remain confident in the long-term growth potential of the brand in that market. The Sanderson brand, which has been a strategic focus for the group in the last 3 years, has had a positive year, driven by the launch in April of the high growth by Sanders on Collection. Overall, brand sales were up 2% in constant currency, driven by growth of 12% in that North American market. Sales of Harwood in the U.S. were up 6%, reflecting continued traction from our collaboration with Henry Holland, which launched back in September 2024. Total brand sales were flat year-on-year with the overall result like Clarke & Clark impacted by the brand's exposure to the U.K. market. And then Zophony, the recent launches in [indiscernible] and Rare Textiles have helped drive sales. In North America, high-end residential and hospitality projects helped drive growth of 9% in constant currency and sales there are now almost at the same level as in the U.K. Two factories, Samar and Barrick Textiles in Lancaster and Wallpaper Company and Lobrookint for both our own brands and for third-party customers. The factory restructuring mentioned earlier has reduced costs by GBP 1.5 million compared to the prior year, increased efficiency and helped the manufacturing segment return to profitability. We now have a flexible cross-skilled workforce better able to respond to market demand. Our digital-first printing strategies and digital output of both factories grew to 63% this year. The planned inventory reduction program at a group level led to a fall in internal turnover, but third-party sales performed strongly, especially in the second half, with full year revenues up 5%. Third-party order books have benefited from continued momentum at the start of the new financial year. On to licensing and our licensing activities leverage our designs and our archives and bring wider consumer awareness of our brands across multiple categories of finished goods. Revenues were robust at GBP 10.5 million, slightly lower than the record-breaking GBP 11 million prior year. In accordance with IFRS 15, the group recognizes the value of minimum guaranteed royalties arising under multiyear agreements in full upon signature. This accelerated income, shown in the third column in the table, was GBP 6.1 million in the year compared to GBP 7.3 million in FY '25. Agreements signed during the year with significant accelerated income included Ruggable, which has broadened its product range to include the Morris & Co. Huntington designs and Sangxu in Japan, who have extended their Morris Chronicles agreement for a further 5-year period. The first column in the table shows licensing income, excluding the impact of IFRS 15 and represents the cash received by the group from our partners. The underlying performance was GBP 9 million, representing a record-breaking 35% increase on the prior year. So this next slide analyzes the first column on the previous table, looking at underlying licensing income by brand and by territory. In the U.K., the 50% growth in underlying revenues reflects the initial launches of the Habitat Chew agreement signed in FY '25 and the first full year of revenue from the Clarke & Clarke agreement with Next. The growing importance in North America in the group's licensing operation can be seen with a 36% increase versus the prior year and was driven by Morris & Co agreements with Ruggable and the Williams-Sonoma Group. And then looking at the lower table, you can see that Morris & Co. remains the group's most licensed brand. And as I mentioned, it continues to win new license partners. However, encouragingly, Sanderson saw underlying revenues more than double to become the second largest brand in the licensing portfolio. So moving down the P&L, we get to gross profit, where we saw our gross profit percentage grow by 90 basis points to 69.1%. The Brands segment recorded a gross profit percentage of 67.9%, which was in line with the prior year. The segment benefited from the sales mix shifting towards the higher-margin market in North America and the higher-margin channel of direct-to-consumer. However, this was offset by an increase in the mix of lower-margin contract sales and a higher level of discounting for clearance products due to the high level of fabric inventories across the sector as a whole. The benefit of the restructuring exercises undertaken in our 2 factories can be seen with the gross profit percentage in the segment increasing by 680 basis points despite the GBP 2.8 million reduction in internal sales. And then looking forward into the new financial year, our current levels of inventory and our utility hedging program should ensure there will be no immediate material impact on our results should current energy market conditions persist. Adjusted underlying profit before tax was GBP 5.3 million, up from GBP 4.4 million in FY '25. Profit before tax was GBP 3.1 million, a significant improvement versus the prior year, which was impacted by a one-off GBP 16.3 million charge related to the impairment of intangible assets. In this table, selling and distribution costs are shown net of other operating income of GBP 3 million. This other operating income represents the consideration received from the sale of patent books that we supply to our wholesale customers. As mentioned at the half year, for those of you that saw the analyst presentation, our approach to issuing these books has changed, resulting in both lower costs and income and a net year-on-year saving of around GBP 0.5 million. Aside from the impact of patent books, distribution and selling expenses have remained largely flat versus the prior year. Savings from the renegotiation of our haulage and carriage contracts were offset by the impact of additional tariff costs in the U.S. As we mentioned earlier, these tariffs were recovered by applying surcharges to U.S. invoices, which have been recorded as revenue in these accounts. But from the start of the new financial year, we've incorporated these surcharges into our standard U.S. price list. Administration expenses were broadly flat with inflationary increases being offset by savings from restructuring exercises undertaken across all areas of the business. And then finally, from a finance point of view, looking at the group's balance sheet and cash position, you can see we ended the year with net funds of GBP 9.8 million, up from GBP 5.8 million at the previous year-end. Our headroom is further enhanced by our committed but undrawn Barclays facility of GBP 10 million. Inventory reduction is a key area of focus with raw materials in the manufacturing segment and finished goods in the Brands segment seeing reductions of 30% and 20%, respectively. Net inventory ended the year at GBP 21.5 million, down GBP 5.7 million from FY '25. And we believe there is still scope for further but more limited reductions in the future. As I previously highlighted, the way accelerated licensing income is recognized means there's a time lag before the cash royalties are received. Minimum guaranteed licensing receivables increased to GBP 17 million at year-end, which meant the GBP 1.4 million of the GBP 10.5 million of revenue from this channel has not immediately been translated into cash. However, as noted on the licensing slide, cash receipts from licensing increased from GBP 6.6 million in FY '25 to GBP 9 million this year. Contributions to pension funds of GBP 1 million was significantly lower than in prior years following the one-off injection of GBP 2.3 million in FY '25 to facilitate the buying insurance transaction for the smaller of our 2 legacy defined benefit schemes. And then finally, capital expenditure in the prior year totaled GBP 4.1 million that year included the new digital printer at Standfast and fitting out the group's new head office at [indiscernible]. This year, FY '26, no major capital projects were planned. And as a result, expenditure fell to just GBP 700,000. So that concludes the financial review of the year. I'll now hand back to Lisa to update now on our future strategic direction. Lisa?

Thank you. Thank you, Mike. Now everyone. In the next few minutes, I'll take you through where we believe we are in our journey and the road map ahead as we see it, as we push forward with confidence in the strategy, always to find new, of course, along the way. Our strategic framework has been in place for a little while now, a few years with 4 key pillars and 4 key underpins. We are focused on interior designers as customers and our omnichannel platforms to reach them. Our heritage brand is the second pillar, attract collaborations, lead on storytelling and licensing appeal. And then within products, you can see our focus on wallpaper as a growing category, and that reflects also our manufacturing expertise. And then the U.S.A. as a geography will remain our growth market until at least our penetration has doubled. Our ambition is to decorate spaces that make their owners dream and to achieve this in collaboration with top designers around the world, giving them what they want when and where they need it. This is how the U.S. market works and why we are gaining market share, tiny for now, albeit it will grow. As a category, wallpaper is in demand. And as I mentioned, we're clearly recognized as a specialist printing at our U.K. factory, [indiscernible] in Lufgra. Wallpaper also sells well online and demand is growing in the U.S. where we can take the lead both with our in-house brands and as a supplier to others. North America is where we see rewarding growth as a market, and we maintain clear ambition as we are definitely under-indexed in that world-leading territory. Culturally, we're leaning in to develop the teams to behave as a global organization, promoting British design inside and outside, and British design and make with exceptional craft and creativity to an international audience across all platforms however and whenever it suits them to engage. This requires agile mindset and continuous development, very exciting for the leadership also requires sensitivity across the teams with a secure foundation from which to embrace new ways of working. Digital traction is exciting. Having brought forward our plans, we will now grow our audiences and our direct dialogue with customers, gain data and insights that we can use for future decision-making. And combined, this will all take us forward, celebrating the unique creative propositions of our brands, our highly crafted products, coupled with the efficiency and ultimately, productivity improvements to be leveraged from technology. It's all about achieving the balance of those things. For anyone less familiar with our brands, we have a good portfolio that covers a range of fabrics and wallpaper designs to meet most aesthetic and value preferences as depicted on this pyramid. Zophony is our luxury offer, where we welcome bespoke projects at the high end, and we have an exciting collaboration launching this month that I'll come back and talk to you about. Heritage brands have traction currently through the recent launches at Samson and with Morris & Co. And the volume in our business has always been driven by contemporary brands, Harlequin and Clarke & Clarke. [indiscernible] heritage brands, we're delighted to see that Morris & Co. continues to grow and go from strength to strength, revitalized with the newly discovered designs in the Huntington collaboration and more to come over the next couple of years. We're also working on a strong creative campaign directed at new audiences in the U.S., and I'll be able to share that later in the year. Sanderson has been boosted by the [indiscernible] collaboration that has strongly outperformed expectation in its first year, and we expect that momentum to continue with occasional new designs or colorways dropping in to keep the narrative alive. Newly launched this year is also the Sanderson National Trust collection that's off to a great start, following the first one of its kind that's been selling well for over 60 years now. Huntington project is a collaboration with the Huntington Museum Library and Botanical Gardens in Pasadena, California, where some 50 designs were newly discovered a couple of years ago now and have been developed by our very talented design team. 26 of these have been launched already, and we have another 24 to go this year and next. There's a design called Lilly that you've been just about seeing the curtains and cushions there, do have a look on the website, that's become -- fast become a new iconic design in the Morris & Co portfolio. And we believe that this new impetus and new IP will give us great success for years to come. High growth by Samson benefits the King's Foundation and has been a huge success on every level. Sales are the strongest in the first year of any Samson collection launched since 1860. The halo effect on the brand is clear, especially in the U.S. where Samson was less well known. In fact, around half of the sales have been U.S. orders, where our English print mark and decorating style clearly resonates. A select few new designs are being unveiled at the Chelsea Flower Show next month, when the King's Foundation host the Garden that they've announced, designed by [indiscernible] with David Beckham, and we expect a fair amount of attention as we cosponsored the high-growth pavilion across the other side of the main avenue. And in the fall, a collection of walls will join the initiative, completing the full decorating proposition. We announced a new collaboration with Michael Smith that goes to market also next month, a lot happening in May. In fact, on the 26th of May, this collection will launch to market. I've known Michael for a few years since we were in the [indiscernible] together at the same time. He's widely considered to be America's #1 interior designer, which I suppose means #1 in the world, same is for decorating the White House with the [indiscernible]. He's also a huge fan and asked us to help to fill a gap that he perceived in the market for sophisticated outdoor fabrics that can also be used indoors. Our designers work closely to translate archival designs into his 6 tight color pallets onto outdoor fabrics to create this capsule and work with our factories and others to do so. It was then photographed and settle Beaton's former home in the famous Winter Garden Wilchire with Beaton himself played by none other than Hamish Bows, who, if you don't know, is Anna Winter's Global style Director. The result of the charming collection that launches to market next month, Michael is already specifying it in his high-end residential projects. And we figured if Michael Smith couldn't find what he was looking for, then nobody could, and that does seem to be the case. Clarke & Clarke has huge potential, particularly in the U.S. where it's growing strongly and reached about $10 million in sellout this year, which you don't see in the numbers because of the way we account the distribution agreement. With strong new collection launches catching up from the lull partly due to the tariff cautions and the planned promo Trip for Ship who we worked with on Clarke & Clarke to transfer her new designs in the market later this year, there's lots to look forward to in this coming year for Clarke & Clarke. Harlequin has recovered also and is showing good traction, particularly in the U.S. and with hospitality contract sectors that appreciate Harlequin's modern designs and textural finishes. Our new showroom partner in Florida is off to a strong start and driving Harlequin growth in the U.S., particularly in the sunshine states. And we worked hard last year to bring forward the website development and the whole organization has transitioned, I would say, from a purely B2B wholesale business to full omnichannel in our approach. Digital platforms are driving high-margin growth from new customers. Trade customers are our wholesale trade hub that has been greatly improved to include images, inspiration, stories and helpful stock or pricing details have brought 30% more adoption from existing customers. And all sites, both consumer and trade, tell our powerful brand stories and help our customers to make choices. The benefits derived from data and CRM learnings will drive better decisions as we continue to navigate market changes. And I'm also thrilled that we have a new leadership role with Charlotte O'Sullivan joining us in January as Group Digital and Innovation Director to guide our future road map. As I said, we now have 6 transitional brand sites and a great platform for the trade to self-serve. In FY '27, the year we're in, it's all about enhancing the proposition, building our user base and the frequency of visits and engagement. Charlotte has joined to lend our experience and expertise to our delivery so that we can claim excellence in the future. This year, we're also embedding our CRM, it's HubSpot, which we had a pilot project on last year. So this will bring maximum impact. The future opportunity is undeniably strong. In our commercial markets, clearly look at the territories, there are many challenges and uncertainties. But we have great product that's in demand and excellent teams and channels to deliver it to our discerning customers. And here they are. Our main customer is the interior design community globally, and they are our best ambassadors. As we build our relationships and they trust us as dependable suppliers and creative partners, our fan club and industry naturally grows with the positive effect of endorsement by celebrated designs. Some examples here include London's [indiscernible] creative, showing how Morris & Co can be used in a different way with wallpaper in a bold colorful scheme up high as a freeze. Sophie Robinson, Color Queen, remains the most searched along with Harlequin on our new in platforms and her high-energy social marketing videos are indeed infectious. Michael Smith, already mentioned, promotes us on many levels in his California studio showroom and now with our new collaboration. And Ben Pantrie, meanwhile, has decorated for the King and has collaborated closely with us on 2 Morris collections and supported our [indiscernible] showroom in New York last year with more opportunities to work together in the offering. Again, in America, what we set out to do last year is done. This is all about connecting what's working, checking in with our top 10 clients in each region and working with hospitality partners to ensure that everyone is getting the designs they need and the best service 24/7 to build our reputation as a trusted partner, supplier and global design authority. In the U.K., we've also done everything that we promised in the FY '26, building a much better trade hub, the service portal for our customers to interact with, as I mentioned, to research designs to look at details, prices and stock levels. It's hugely improved from our very functional platform beforehand. But now customers are inspired by our images and our campaigns, suggested designs they might like and they can even pay online. It's all very 21st century. Hence, take-up is positive, which relieves the customer service team to proactively support and solve where needed. The rollout of last year's pilot with our CRM HubSpot that I mentioned will bring together great opportunities to offer even better tailored solutions and service. And since we moved to Boise House, we've dreamed of creating a design hub in West London, a destination of the exchange of ideas and the design community. And last month, we finally officially launched the Boise Design Hub, welcoming 30 top designers and a total of 60 guests to our showroom for panel talk over cocktails and a delicious dinner at 2 long tables, as you can see here. The panel discussing archive as the creative engine, very pertinent to us with our 75,000 documents in the archive upstairs from the showroom, really with a great representation of arts and craft and lifestyle. We're excited to continue a program of events that will interest designers and demonstrate our thought leadership, provide a hospitality space dedicated to great design and how it makes us feel. We also hosted a dinner earlier in the year in January for our international partners, inviting distributors from as far away as New Zealand and Kenya, markets that rarely get mentioned in these presentations. We continue to build our global bonds in residential design and in contracts with global strategies locally deployed with specialists in each region or country, be they agents or distributed networks. Webinars are very well received in the different time zones, and we believe that we can significantly build our international footprint by nurturing existing and new relationships following the way we've approached our success in the U.S. Moving on to licensing. Licensing continues to build strongly with growing international recognition and the opportunity to build global partnerships as our brand awareness grows. We're working with category specialists and with big retail partners, approaching the market strategically, determining the road map for each brand and for each market to support that brand positioning. Our manufacturing teams have achieved an impressive turnaround as you have seen in the numbers. The most rewarding aspect is the revitalized environment and the evident pride of the teams in achieving the turnaround. We're now beginning to have to hire back to fulfill orders within reasonable lead times, which was the best possible outcome. The goal of manufacturing in the group is to drive vertical business advantage contributing to overheads and drive efficiencies. With the cost base that's adjusted and the teams working in a more flexible and agile way, productivity is increasing and order books demand building. Continuing with our unique proposition as the only group printing both fabrics and wallpapers, offering top-notch design skills to third-party customers and our in-house brands, our journey to excellence is well underway. Project management and agile ways of working are the areas of training across the group. Digital first in printing continues with the greatest impact at [indiscernible], where the opportunity is huge given new technology solutions that are being developed and some already available or coming to market in the near future. We're known for our excellent design, highly skilled craftsmanship and increasingly great customer service with performance improving on every level and good control across the KPIs. And now we're 7 years into measuring emissions reductions and still going with a further 6.5% this year, having already brought down 40% overall. Sanderson Design Group is recognized as a champion in the industry, important credentials as a warrant holder and employer with integrity. And this has mostly come from the teams on the ground up, which is especially pleasing. Through our people strategy, work beautiful is a critical pledge within our Live Beautiful framework. Our aim is to celebrate the authenticity of heritage and skilled craft, balanced with all the benefits to be reaped from technology in terms of efficiency and productivity. We keep our promise as a real living wage employer even when times are tough. And ultimately, an engaged workforce will create an inspiring place to work. Looking forward, in terms of outlook, we're pleased that the results last year and the momentum into this year give confidence in the strategy and the ability of management to respond to difficult situations. We've had a few. Of course, the Board continues to monitor the external situation and any changes to the geopolitical risk in this currently volatile environment. Sales continue to be encouraging with Q1 revenues continuing the momentum we saw in the second half of last year and in line with our expectations. New D2C activity attracts new customers and gives us data to drive better decisions. Both factories are transformed and with strong momentum driven by demand. Successful launches last year and this are building sales traction into the future. Licensing continues to perform strongly and importantly, underlying sales from existing partners are successful. We have confidence in the strength of our brands and the power of our archive and management agility, giving us the ability to respond to external factors and with the support of our strong balance sheet. In summary, the Board has confidence current trading in the first quarter is in line with expectation. Thank you very much for joining us and for your attention. We'd be pleased to answer any questions that you may have.

[Operator Instructions] You can see we've had a number of questions have come through so far, and thank you, Stefan, for submitting those. Perhaps let's start with the first one, probably more for you, Mike. How are the cost savings achieved? I appreciate you've touched on this, but I don't know if there's any more color you could add?

Yes. I mean I think -- I mean, the headline number tends to always revolve around headcount reductions. And we've taken out about GBP 5 million of staff costs over the last 3 years from the business. That equates to about 120 heads. So I think 3 years ago, we had about 633 employees. Today, we're hovering around the 500 mark. Above and beyond that, I think what we've tried to do is encourage a cost-conscious sort of attitude throughout the business. So if you look at the factories, for example, it's not really a cost saving, but they're very much looking at efficiencies in terms of the production process, how to reduce waste material, for example, in terms of wallpaper setup, for example. So we've looked across the P&L. We've looked at sort of the support functions, external advisory costs, et cetera. So we've tried to leave no stone unturned to try to take cost out of the business to offset some of these sales reductions we've been talking about.

Fantastic. Thank you very much indeed. Here we go for the next one. What do you believe will be the key drivers for meaningful ongoing revenue growth? And would you look to make acquisitions to enhance this?

That's yes, we very much see, as you can see, continued growth in U.S. When I said we're under-indexed, I mean that everybody that you might think of or we might recognize as a competitor and identify is bigger than us. We've doubled the business in the last 5 years in the U.S. We have had a subsidiary for some 35 years in the market, and we have 35 employees there and a large network of partnership showrooms and so on. I would see that continuing to grow. I think I mentioned until we've doubled again. And other international markets, although the U.S. is the main big driver of that. Digital also will be a revenue driver and of course, high margin one at that. We'll never undercut our trade partners in terms of pricing. But obviously, we can use promotional opportunities as well along the way with designs that might discontinue occasionally and so on and so forth. So we do see that we're reaching new customers in a new way and not cannibalizing our existing business. Our plan with the omnichannel is to just greatly increase awareness of the brand in the international in all markets to reach also designers and consumers that might not be within reach of a showroom or a store and then to drive that interest back into the network. [indiscernible] didn't ask the acquisition point. We would look at acquisition. I took it off the strategy, I think, like 5 or 6 years ago because it didn't feel the right time. But if there was a compelling opportunity that came about and across our desk that was either going to bring significant synergies or allow us to expand faster in other territories, then we certainly have a good look at it.

Super. And just to really extension to that question, actually, we've got another one in here, and you have just touched on it there, Lisa. But how important is the DTC digital channel strategy in that growth and margin impact, I guess?

We believe it's important. I don't believe we will become a predominantly online retailer in any way, but I think it will be an important platform and channel for us. It gives us a different communication opportunity to reach different customers, as I said, to promote our brands and to work in a truly omnichannel way across all platforms. We can see it in the Morris & Co. numbers. Morris launched last year, had a full year of the Morris & Co. transactional website. That launched only in September in the U.K. and then only March actually in the U.S. and yet 2/3 of those sales in the first year are from the U.S. So that's where we're reaching quite remote areas and new customers.

Perhaps one for you, Mike. What does the overall CapEx look like moving forward, ideally split between growth and maintenance?

Okay. I mean we said that -- I mean, the last 2 years have been one extreme to the other. So 2 years ago, we had a new digital printer invested at Standfast. We had a new head office. We spent over GBP 4 million of CapEx. This year just gone, we've broadly had a minimal level of capital maintenance. I think if you look back over the previous 4 years, we've averaged sort of GBP 3 million to GBP 3.5 million per annum. And I'd expect us to probably return to that level. I think our next big one-off investment would be probably on increasing our digital printing capacity at Anstey. I think we're looking at our strategy around that as to whether or not that would fall into the back end of FY '27 or the early point of FY '28 or maybe split between the 2. Above and beyond that, I think we'd largely focused on capital maintenance. I mean we have 2 factories. We have 2 warehouses. We have a head office. Occasionally, things break our holes appear in rooms, and we need to fix them. So it's difficult to give a sort of definitive view of that, but as I said, I think we'll probably move to sort of GBP 3 million to GBP 3.5 million per annum on an ongoing basis.

That's great. A question from Adrian. The team has clearly done a great job in getting the manufacturing segment back to breakeven. Going forward, what PBT margin are you aiming to achieve in this division over the short to medium term?

Yes. I mean we're back to profitability, and we've got great momentum at the moment. So I think we would all expect sort of best practice margin manufacturing to drop to around 10%, and we should realistically be able to get to that quite reasonably.

And a [indiscernible] David. Given that it appears that you'll need to read labor to capitalize on any meaningful volume growth in manufacturing, what would be a reasonable assumption for contribution margin on such growth?

Good and detailed question. I think it depends to a certain degree on where that additional manufacturing growth comes from. And I say that because digital production obviously requires significantly less labor than some of the conventional techniques that we have. But clearly, we have a significantly fixed cost base within those factories. And I think this year, you've seen the benefit of a little bit of additional volume going through the factory. So it's difficult to say a precise number, but we should see -- and I guess back to Lisa's point, you'd like to see those factories starting to return to 10% operating profit with a decent level of volume going through them.

That's great. Another one from Adrian here. What's required with the Branded segment to reach profitability? Is more cost cutting expected or required?

It's difficult to cut more out of it, to be honest, without -- it's always possible, and if we have to, we will. But we've taken a good chunk of cost out. I think we referred to GBP 5 million over the last 3 years. A lot of that has been around the U.K. cost to serve. It's really about top line growth, and we need to get back to that.

And just combining 2 questions really kind of Royal family related. Can you provide some more background on your work with the Royal family? And obviously, is there any marketing activity surrounding the current Royal visit to the all-important U.S. market?

I'm not sure his majesty took the [indiscernible] wallpaper and fabric collections with him. But he does promote it strongly when anybody is visiting [indiscernible]. We've clearly had a Royal Warrant for over 100 years. So we have decorated for the households for 2 Kings, the Queen and now the parent King. Hydro came around through the King Foundation looking for partnerships and approaching us first probably as [indiscernible] holder, but also through Quest, the Queen Elizabeth Scholarship Trust that promotes craft and making creativity in the U.K. was set up 35 years ago by Queen Elizabeth. And so our name came up and our designers went and sat in the gardens and painted and then placed some of those elements into some traffic Sanderson archival document layout. So it's been an absolute joy work on the high-growth collaboration. As I said, it's been hugely successful. The Kings Foundation has been very pleased with the results so far. We are bringing out a few new designs. For instance, the Kings Road that was launched at the Flower Show last year by David Austin is coming back in sort of in its own design as a trail to be launched this year at the Flower show. And I think activity will be heightened again around the flower show with the Kings Foundation Garden and the high grow stand. It has performed very well in the U.S. But I think whether you like the Royal connection and appreciate it and recognize it in the designs or not, it's a beautiful decorating collection and that the English print mark and decorating style seems to resonate in the U.S. as well as in the U.K. at the high end, and it's certainly elevated.

Great, Lisa. One for you, I think, Mike. Roughly, what are your expected total annual pension costs going forward? Are you still considering a buy-in of the remaining pension scheme? If so, roughly, what would be the cost of that?

Okay. Right. Pension. So just as background, we have 2 legacy defined benefit pension schemes. One I talked about earlier, the smaller of the 2 schemes, we performed an insurance buy-in last year. So there are no ongoing contributions to that scheme. There are still some costs associated with getting to a full buyout associated with that scheme. So that's probably in the region of about GBP 0.5 million that's still to hit the P&L and cash flow as a result of to finally get that scheme off the books. Then in terms of the residual scheme, the larger of the 2, and again, from an accounting point of view, it's showing on the balance sheet as a surplus, but it still probably would require a cash investment of some description in order to persuade an insurance company to take it off. Ongoing contributions to deficit contributions to that scheme has ceased. We're currently spending around GBP 400,000 a year on contributing towards the administration cost of that scheme. So at the moment, that's the agreement we have with the trustees, and we'd expect those to continue up until the point where either the scheme self-funded itself to a buy-in situation, or as a Board, we decided from a capital allocation priority perspective that we were prepared to invest some additional cash in order to facilitate an insurance buyout. So I mean, we continue to look at pricing on a fairly regular basis. But up until now, having discussed capital allocation priorities around capital expenditure, dividends, funding the EBT that Lisa talked about earlier, we've not prioritized that additional investment into the pension scheme.

Question from Tim. You mentioned rehiring and manufacturing. Is this reflecting a different skill set regarding digital printing?

Not really. The -- it's more conventional because the labor intensity on digital is obviously a lot lower. The digital printer that we invested in 3 years ago now is really up and running and contributing well. It's more balancing the demand for conventional and digital and getting that mix right on our demand forecast. So our rehiring is mainly around conventional skills actually at the moment because the digital is very well manned. And what we focused on is that cross-skilling and flexibility to give agility across the factory so that we can adapt to where the demand is. We are looking at how our digital mix, as Mike mentioned, can be calibrated and configured for the future to give us the optimal mix between flexibility and speed. So those are the 2 main considerations.

Perhaps I'll combine the last 2 together into one final question, please. Just talking about who are your biggest customers? How do they differentiate between geography being U.S. and U.K.? And what are the most popular brands that you're seeing in both markets?

Customers -- the market structure is quite different between the U.S. and the U.K. U.K. is very retail driven. And if you're predominantly U.K. audience, you'll recognize that many market towns around the U.K. have 1 or 2 interior designers, usually with the shop front, often making curtains, headboards, cushions and so on and decorating big renovations as well as [indiscernible]. The U.S. offering -- and then you put on [indiscernible], of course, and big retailers and online retailers as well. So our top 10 tend to be big retailers. And then we have in the U.K., probably 3,000 smaller, more independent retailers. And then you have new designers coming into the market who are more likely to be working from a home studio and interacting with us on Instagram. So we have probably 3 big different types of customers. In the U.S., it's completely different. It's all interior designers. There is no retail as such. So all interior designers, some have been small, some have studios that are very well established and some, of course, are less mature. But that's a very different approach to the market because it's about building relationships making the studios aware of our brands really and the attributes of our products and our designs, then they need to use them the first time, become familiar. We need to become a trusted supplier. They need to be assured of our service. So it's sort of a bit of a court ship and becoming to be trusted in the market. And you can see that building. It's not that the market is expanding hugely, but we were, as I said, underrepresented and now taking a little bit more share, not that you measure it to a diff point.

Fantastic. Thank you very much indeed, and thank you for answering all those questions you have from investors. And of course, the company can review all questions submitted them and publish those responses where appropriate to do so. Just before redirecting investors to provide you their feedback, particularly important you, Lisa, I just ask you for a few closing comments, please.

Yes. I'd just like to thank everybody for joining us and for welcoming us to your IMC community for the first time. Very pleased to be here. I'm pleased to be able to share the story with you, and I want to thank everybody for their support and to you also, Paul, for hosting. Thank you.

Fantastic. Thank you very much indeed for updating investors today. Can I please ask investors not to close this session to be automatically redirected to provide your feedback, which will only take a few moments and they'll be greatly valued by the company. On behalf of the management team of Sanderson Design Group plc, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.