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Writer's pictureMark Watson-Mitchell

Ultimate Products – Looking Forward For Current Year Higher Sales And Profits, With Shares Looking Cheap

Ahead of its final results being announced on Tuesday 29th October, this morning Ultimate Products (LON:ULTP) has issued its Pre-Close Trading Update for the year to end July.


The group, which sells to over 300 retailers across 38 countries, specialises in five product categories: Small Domestic Appliances; Housewares; Laundry; Audio; and Heating and Cooling.


Its brands include Salter (housewares), Beldray (laundry and floor care),  Progress (cookware and bakeware), Kleeneze (laundry and floorcare), Petra (small domestic appliances) and Intempo (audio).


Under licence it also has the Russel Hobbs brand name for its cookware and laundry products.


The Update


Unaudited group revenues decreased 6.5% to £155.5m (FY23: £166.3m) with supermarket ordering held back by overstocking, weakened consumer demand for general merchandise, and strong prior year comparatives having been bolstered by the exceptionally strong demand for energy efficient air fryers in H1 2023.


In line with market expectations, unaudited adjusted EBITDA decreased by 11% to £18.0m (FY23: £20.2m) and unaudited adjusted PBT* decreased by 14% to £14.4m (FY23: £16.8m).


At the year end, the group had a net bank debt of £10.4m (FY23: £14.8m), which represents a net bank debt / adjusted EBITDA ratio of 0.6x (FY23: 0.7x), well within the group's capital allocation policy of 1.0x.


Trading at the start of the current financial year is in line with market expectations.


The significant increase in shipping rates, arising from disruption in the Red Sea, has seen some recent stabilisation and is leading supply chains to adapt to a new normal.


While this process takes place, the group's commercial teams are working hard, as they did in the previous shipping crisis, to mitigate the short-term impact on gross margin.


Management Comment


CEO Andrew Gossage stated that:


"Our FY24 performance was not without its challenges but I am pleased to report that many of the temporary headwinds are now easing, as reflected in a healthy FY25 order book.


As we look ahead to FY25 with cautious optimism, we are confident in the proven resilience of our business model and the ongoing demand for our fantastic range of leading homeware brands."


Analyst Views


Chris Wickham and Hannah Crowe at Equity Development consider that the group’s share rating looks too low, sticking with their 200p estimated ‘Fair Value’ for the shares.


They estimate that the year to end July 2025 will see revenues rise to £172.0m (est £155.5m), with adjusted EBITDA of £20.6m (est £18.0m), lifting earnings to 14.5p (est 12.3p) and paying a dividend of 7.2p (est 6.1p) per share.


Sector analysts Clive Black and Darren Shirley at Shore Capital are pleased to note the management’s warm words for the current year prospects.


They are looking for 2025 to show £17.5m pre-tax profits, worth 15.3p in earnings and a 7.4p current year dividend per share.


At Canaccord Genuity Capital Markets analyst Mark Photiades has an unchanged Buy rating on the shares looking for 182p in due course.


His estimates are for £171.1m sales, £17.8m adjusted pre-tax profits generating 14.9p in earnings and paying a 7.5p dividend per share.


In My View


The shares are down nearly 3% on the news, trading at 136p and valuing the group at only £117m.


On the analyst estimates they trade on a very low valuation of just 9.1 times current year earnings and way below valuation levels.


In late April this year they were up to 185.50p, a level at which to aim for repetition.



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