Ultimate Products – has not been a good performer so far this year, however, could the times be on the change, shares now 109p, brokers look for 189p

12.12.2024

Before tomorrow’s AGM, on Friday 13th December, it is very likely that we could well see a more positive Trading Update, which could help to call the turn in this group’s dismal share price action.

The Business

The Oldham-based Ultimate Products (LON:ULTP) is the owner of a number of leading homeware brands including Salter, which is the UK's oldest houseware brand having been established in 1760 and Beldray, the slightly younger laundry, floor care, heating and cooling brand that was established in 1872.

As I reported in my articles earlier this year, according to its market research, nearly 80% of UK households own at least one of this group's products.

Ultimate Products sells to over 300 retailers across 45 countries and specialises in five product categories: Small Domestic Appliances; Housewares; Laundry; Audio; and Heating and Cooling.

Other brands include Progress (cookware and bakeware), Kleeneze (laundry and floorcare), Petra (small domestic appliances) and Intempo (audio).

Its products are sold to a broad cross-section of both large national and international multi-channel retailers as well as smaller national retail chains, incorporating discount retailers, supermarkets, general retailers and online retailers.

Despite the age of its two important brands, the group itself is younger, having been founded in 1997.

It employs over 370 staff, and is headquartered in Oldham, Greater Manchester, where it has design, sales, marketing, buying, quality assurance, support functions and warehouse facilities across two sites.

Manor Mill, the group's head office, includes a spectacular 20,000 sq. ft. showroom that showcases each of its brands.

In addition, the group has an office and showroom in Guangzhou, China and in Paris, France.

Current Trading And Outlook

In late October, when announcing its disappointing 2024 results, the group reported that although weak UK consumer sentiment continued to hold back short-term sales in the UK, it was pleased to see growing momentum internationally, with strong demand for its leading homeware brands being driven by European discounters.

Additionally, it was encouraged by the easing of the current margin headwind to freight rates.

Whilst UK trading had remained challenging, the group believed that gradually improving consumer sentiment and the significant opportunity in Europe will help to drive sales growth in the medium term.

In turn that gives the Board cautious optimism for the year as a whole and hence maintaining its expectations for the current financial year.

CEO Andrew Gossage stated that:

"This continues to be a challenging period for many consumer-facing businesses in the UK, and we are by no means immune from the overall slowdown in spending and weakness in consumer sentiment.

However, our growth strategy of building international sales is yielding positive results.

Our new showroom in Paris is proving to be instrumental in developing our presence throughout the hugely attractive European market, where we see significant opportunity with the discounters that are driving strong European sales growth in the current year.

Against this backdrop, we are pleased to have delivered a resilient FY24 performance while making strong operational progress, including increased productivity through the automation of many of our processes and the rebrand of our two iconic principal brands, Salter and Beldray.

Our proposition to retailers today is clear and compelling.

We offer trusted brands, beautiful products, attractive price points, and outstanding operational capabilities.

Despite current headwinds, we remain cautiously optimistic for FY25 as a whole and as confident as ever in our medium-to-long term prospects."

The Equity

There are some 88.6m shares in issue.

The co-founders, Simon Showman and Barry Franks, both have large positions the group’s equity, Showman 21.07% and Franks 8.29%.

The larger holders include Schroder Investment Management (12.88%), Ennismore Fund Management (7.51%), Slater Investments (3.43%), BlackRock Investment Management (2.79%), JTC Private Banking (2.70%), IG Markets (1.48%), Hargreaves Lansdown Asset Management (1.43%) and Canaccord Genuity Wealth (1.28%).

Analyst Views

At Shore Capital Markets, its analysts Darren Shirley and Clive Black, consider that the outlook for H2 FY25F looks considerably brighter than H1, because it is underpinned by very strong growth in forward orders across the group, and with European Discounters in particular.

They state that UP is a business that has materially strengthened over the past decade, improving the quality of its sales through its branded growth strategy, whilst materially broadening its market opportunity through the development of an online capability and a strengthening relationship with the leading UK Supermarkets.

They also see the potential for sustained and superior growth from a European opportunity that remains very immature and in the early phases.

Their estimates for the current year to end-July 2025 are for sales of £169.0m (£155.0m), with adjusted pre-tax profits lifting to £17.2m (£14.5m), generating earnings of 14.8p (12.1p), while paying a maintained 7.4p per share dividend.

Analyst Nigel Parson at Cavendish Capital Markets has a 185p a share Price Objective out on the company.

For the current year he looks for £172.0m sales, £17.0m profits, 14.6p earnings and a 7.4p dividend.

The 2026 year could see £182.0m turnover, £18.8m profits, earnings of 16.4p and a dividend of 8.2p per share.

They suggest that further success in Europe and growing recognition of the pivot towards brands by investors should drive a re-rating of the group’s shares.

For the 2026 year, they see £178.0m revenues, £18.8m of profits and 16.8p in earnings, enabling an increase in its dividend payment to 8.4p per share.

Current year analyst consensus is for £169.3m (£155.5m) of revenues, with adjusted pre-tax profits rising to £17.5m (£14.5m), lifting earnings per share to 15.0p (12.3p).

The average Price Objective is 189p, the lowest call is 182p, while the highest aim is for 200p.

In My View

This stock owes investors a far better prospect than has been generated over the last year.

It is a good business, with a wide range of products and customers.

There are hopes that the retail sector is due to improve in 2025, despite recent Budget measures.

Let us hope that such better conditions will be reflected in both the balance sheet and the share price of this group.

Ahead of tomorrow’s AGM Update, the £96m-capitalised group’s shares, which have been as high as 185p in the last year, are currently trading at around 109p.