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  • Writer's pictureMark Watson-Mitchell

Ultimate Products – surely 80% of the UK households cannot be wrong

Apart from being major retail names, tell me what do the following companies have in common?

Tesco, Asda, Aldi, Sainsburys, Morrisons, B&M, Co-op, B&Q, The Range, Express Gifts, Action SystemeU, Iceland, Boots, Dunnes, The Works, Continente Modelo, Primark, Robert Dyas, Factory Shop, Amazon, Avon, The Range, Homestore and More, JTF, Argos, House of Fraser, The Works, Dunelm, Superdrug, Poundland, AS Watson, Blokker, Gifi, Debenhams, Poundworld, Matalan, JD Williams, Ryman, Shop Direct, Costco, Groupon and Catch of the Day.

Yes, it really is quite a list of retail store groups – and what they have in common is that they are customers of Ultimate Products (LON:ULTP).

So, What Does The Company Do

Headquartered in Oldham, where it has design, sales, marketing, buying, quality assurance, support functions and warehouse facilities across two sites, the company also has an office and showroom in Guangzhou, China and in Paris, France.

According to its market research, nearly 80% of UK households own at least one of the group's products.

The group, which owns a wide range of well-recognised brand names, sells to over 300 retailers across 38 countries on four continents.

It specialises in five product categories: Small Domestic Appliances; Housewares; Laundry; Audio; and Heating and Cooling.

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.

Apart from Salter, the UK’s oldest homeware brand, and Beldray, the laundry, floor care, heating and cooling brand, its other brands include Progress (cookware and bakeware), Kleeneze (laundry and floorcare), Petra (small domestic appliances) and Intempo (audio).

It also has a licence agreement with Russell Hobbs for cookware and laundry (but not electrical).

Sales Per Region & Business

In the year to end July 2023 the group turned over £166.31m, of which 69.5% were UK sales, 9.1% into Germany, 20.7% to the Rest of Europe, and the Rest of the World taking the balance 0.7%.

Splitting down the sales per business – small domestic appliances represented 40.2%, housewares 28.9%, laundry 10.9%, audio 9.3%, heating and cooling 3.7%, while other categories accounted for 7.0% of the group turnover.

Good shareholders list

With 89,312,457 shares issued, it is quite impressive that two of the largest holders are CEO Andrew Gossage, with 9.016% of the equity and Chief Commercial Officer and Founder Simon Showman who holds 20.75%, while the UP Global Sourcing Employee Benefit Trust owns 2.67%.

Institutions in the equity include Schroder Investment Management (15.21%), Ennismore Fund Management (7.76%), Slater Investments (3.56%), JTC Private Banking (2.66%), Hargreaves Lansdown Asset Management (1.65%), Canaccord Genuity Wealth (1.54%) and Chelverton Asset Management (1.42%).

Management Comments

In the Trading Update for the half-year to end January, which saw some difficult trading, CEO Andrew Gossage stated that:

"Amidst a tough but improving consumer backdrop, we are pleased to have delivered a resilient performance.

The overstocking issues that have held back ordering at many of our retail partners, especially European supermarkets, continue to subside.

As the underlying demand for our products and brands remains robust, customers who had paused their ordering are once more open to buy.

As a result, we remain confident in our prospects.”

He noted that the group anticipates a full-year profit performance, to end July 2024, to be in line with current market expectations, which are for an adjusted EBITDA of £21.6m and adjusted earnings of 15.6p per share.

Brokers Views

At Canaccord Genuity Capital Markets, Mark Photiades has the group’s shares as a Buy, with the view that they will get up to 200p.

His estimate is for current year sales of £167.0m, with £18.6m adjusted pre-tax profits, earnings of 15.4p and paying a dividend of 7.7p per share.

For the coming year he sees £180.3p sales, £20.5m profits, 17.0p earnings and 8.5p of dividend.

Shore Capital analysts Darren Shirley and Clive Black, who suggest that a share buyback is on the horizon, have £18.4m profits, 15.6p earnings and 7.8p dividend for the year to end July.

For the next year they estimate £19.6m profits, 16.6p earnings and 8.3p of dividend.

Nigel Parson and Michael Clifton at Cavendish Capital Markets look for 210p for the shares, while for this year they go for £18.7m profits, 16.1p earnings and a dividend of 8.1p per share.

For 2025 they have £20.5m profits, 17.2p of earnings and paying 8.6p in dividend.

My View – 180p plus within six months

I believe that the market has undervalued the shares of this cash-generative group.

It has been making a strong effort to de-leverage over the last couple of years, from £24.3m debt at end July 2022, falling to £14.8m in 2023 and which could well be halved this year to just around £7.4m debt.

By end July 2025 there are estimates that the £128m valued group should be into cash of around a short £1m.

Obviously, the last year has shown some hiccups along the way, with destocking and shortages being prevalent, but this group is showing some good resilience.

Its shares, which are currently around 145p, fell to a one-year low of 113p last October, then touched 170p just before Christmas.

They could react positively to the accompanying Statement with its Interim Results that are due to be published next Tuesday morning.

In my view the share could easily put on 25% in price between now and the end of this coming Summer, taking them up above the 180p level – and, even then, would still be looking cheap.


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