Taking a look at Ultimate Products before its Finals tomorrow and sets a 175p Target Price for the shares, now 142p.

Ultimate Products (LON:ULTP) – Finals Due Tomorrow Will Show Fall Back, But Recovery Is Now Underway

Tomorrow morning this consumer homeware products wholesaler, will be reporting its Final Results for the year to end July.

It was reported in Q3 that trading had been impacted by a slowdown in near-term sales from landed stocks (call off, regular stock and online sales), typically at higher gross margin, reflecting the broader slowdown seen in retail sales to consumers. 

The results will show both a sales and a profits drop – however that does not bother me too much, simply because I believe that the group is now pushing forward again, certainly enough to see a recovery to previous levels, if not even being exceeded in the current year.

The Business

Ultimate Products has been bringing branded kitchen and laundry products to the market since 1997.

It designs, develops and distributes innovative products across its key brands, including household names Salter (the UK's oldest houseware brand, est.1760) and Beldray (est.1872).

The group’s offices span two continents, with its headquarters in Oldham, a sourcing office and showroom in China, as well as a showroom in Paris for serving Continental Europe.

Its key owned brands in Europe include Salter, Beldray, Progress, Kleeneze, Petra and Intempo within its portfolio.

ULTP also markets Russell Hobbs non-electrical products under licence, which is now on a four-year rolling basis.

Over the years it has built strong working relationships with some 300 retailers in 38 countries, manufacturing and distributing exciting products for its valued retail partners.

It was reported that the group sells £1.72 of product per capita in the UK and furthermore, that around 80% of British households own at least one of the group’s products.

While the group’s products are already present in most UK households, the group is now pushing more strongly into Europe, with the belief that they will be just as attractive to retail partners and consumers in France, as well as the wider European market more generally.

Management Comments

In early May CEO Andrew Gossage stated that:

"It is disappointing that Spring has seen continued poor demand from consumers, which has adversely affected sales in the current quarter.

Our assumption is that these challenging conditions will persist in the short-term and so impact our FY24 outcome.

In contrast, the order book for FY25, at this early stage, is significantly ahead of FY24 as retailers continue to increase their forward orders as the overstocking issues brought about by the pandemic subside and consumer confidence builds as we see a return to real wage growth.

As such, we remain confident in the Group's medium-term prospects."

Broker’s Views

Analyst Mark Photiades, at Canaccord Genuity Capital Markets, rates the group’s shares as a Buy, with a Price Objective of 182p.

His estimates for the year to end-July, are for £155.5m (£166.3m) sales, adjusted pre-tax profits of £14.4m (£16.9m), with earnings falling to 11.9p (15.1p) and a lower dividend of 5.9p (7.4p) per share.

However, for the current year to end-July 2025, he sees a jump back in sales to £171.1m, with £17.8m profits, 14.9p per share in earnings and a 7.5p dividend.

For 2026 he sees £181.3m revenues, £19.7m profits, 17.0p earnings and a double covered 8.6p per share dividend.

At Cavendish Capital Markets, analysts Nigel Parson and Michael Clifton, have very similar estimates for the last year and for the 2025 and 2026 years.

They have a 185p Price Objective on the group’s shares, taking the view that tomorrow’s FY24 results announcement will be a share price performance catalyst.

My View

In late April this year, this group’s shares hit a 185.50p 2024 High, they previously peaked way back in June 2021 at 238p – both levels which may take a little time to be regained.

However, I do like this business, and I am bullish about the possibilities of its corporate recovery this year and next.

Certainly sufficient enough to see the 2024 price peak being penetrated, possibly within the next six months or so.

The shares are currently trading at around the 142p level, with the whole group only capitalised at about £120m.

I now set a new Target Price for the group’s shares at 175p.

(Profile 13.07.20 @ 74.8p set a Target Price of 100p*)

(Profile 28.10.24 @ 142p set a Target Price of 175p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)