Ultimate Products - AUDITED RESULTS FOR THE YEAR ENDED 31 JULY 2024
29/10/2024 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20241029:nRSc9418Ja&default-theme=true
RNS Number : 9418J Ultimate Products PLC 29 October 2024
29 October 2024
Ultimate Products plc
("Ultimate Products", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 JULY 2024
A resilient performance supported by wide-ranging operational progress
Cautious optimism for FY25
Ultimate Products, the owner of a number of leading homeware brands including
Salter (the UK's oldest houseware brand, est.1760) and Beldray (est.1872),
announces its audited results for the financial year ended 31 July 2024
("FY24", or "Year"), that are in line with market expectations.
Financial highlights
· Total revenue down 6.5% to £155.5m (FY23: £166.3m)
o As previously flagged, the decline was due to Supermarket ordering being
held back by overstocking, weakened consumer demand for general merchandise,
and strong prior year comparatives (which were bolstered by the exceptionally
strong demand for energy efficient air fryers in FY23)
o International sales increased 7% to £54.3m (FY23: £50.7m), driven by
increase in sales to European Discounters
· Gross profit down by 5% to £40.5m (FY23: £42.7m), with gross margin
remaining steady at 26.0% (FY23: 25.7%), with the freight rate rises seen over
the summer not impacting our financial results in FY24
· Adjusted EBITDA* down 11% to £18.0m (FY23: £20.2m)
· Adjusted profit before tax* down 14% to £14.4m (FY23: £16.8m)
· Statutory profit before tax down 10% to £14.3m (FY23: £16.0m)
· Statutory EPS down 17% to 12.2p (FY23: 14.6p), with Adjusted EPS*
down 20% to 12.3p (FY23: 15.4p) reflecting a higher tax rate of 26.4% (FY23:
21.3%)
· Full year dividend per share maintained at 7.38p per share (FY23:
7.38p per share)
· Net bank debt/adjusted EBITDA* ratio of 0.6x (FY23: 0.7x)
· Continued strong cash generation from operating activities of £18.5m
(FY23: £24.4m), representing a 103% operating cash conversion (FY23: 120%)
Operational highlights
· Continued to drive productivity through focus on continuous
improvement, including the automation of hundreds of tasks across the business
o Continued increase in gross profit per employee, up 4.4% to £118k (FY23:
£113k), reflecting the success of efficiency initiatives such as robotic
automation, AI and process change
· Opening of the Group's new European showroom in Paris, ideally located
for hosting both existing and prospective customers across the region, helping
to grow sales in France by 78% to £12.0m
· Completion of the rebranding of the iconic Salter label, elevating its
already strong identity and consumer recognition
· Initiation of the rebranding of Beldray, to develop a bold new look
and reaffirm a fully refreshed brand strategy that puts the consumer at the
forefront of every decision
· Appointment of Andrew Gossage as Chief Executive Officer taking over
from the Group's founder, Simon Showman, who remains on the Board as Chief
Commercial Officer
· Appointment of Christine Adshead as Non-Executive Chair, followed by
the appointments post year-end of Andrew Milne and José Carlos
González-Hurtado as new Non-executive Directors, bolstering the credentials
of the Board
· Approval of new Capital Allocation Framework to maintain net bank
debt / adjusted EBITDA at c.1.0x, continue to return around 50% of post-tax
profits to shareholders through dividends, and to supplement this with share
buybacks
Current trading and outlook
Although weak UK consumer sentiment continues to hold back short-term sales in
the UK, we are pleased to see growing momentum internationally, with strong
demand for our leading homeware brands being driven by European discounters.
In addition, we are encouraged by the easing of the current margin headwind to
freight rates. Therefore, whilst UK trading remains challenging, we believe
that gradually improving consumer sentiment and the significant opportunity in
Europe will drive sales growth in the medium term, giving the Board cautious
optimism for the year as a whole and hence maintaining its expectations for
the current financial year.
Commenting on the results, Andrew Gossage, Chief Executive of Ultimate
Products, said:
"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."
*Adjusted measures are before share-based payment expenses and non-recurring
items
**Financial summary, including consensus market expectations are set out below
FY23 (Actual) FY24 (Actual) FY24 (Consensus) FY25 (Consensus)
Revenue £166.3m £155.5m £155.5m £169.3m
Adjusted EBITDA £20.2m £18.0m £18.0m £20.6m
Adjusted PBT £16.8m £14.5m £14.5m £17.5m
Adjusted EPS 15.4p 12.3p 12.3p 15.0p
For more information, please contact:
Ultimate Products +44 (0) 161 627 1400
Andrew Gossage, CEO
Chris Dent, CFO
Shore Capital +44 (0) 20 7408 4090
Malachy McEntyre (Corporate Broking)
Isobel Jones (Corporate Broking)
Mark Percy (Corporate Advisory)
David Coaten (Corporate Advisory)
Harry Davies-Ball (Corporate Advisory)
Cavendish Capital Markets Limited + 44 (0)20 7220 0500
Carl Holmes (Corporate Finance)
Matt Goode (Corporate Finance)
Abigail Kelly (Corporate Finance)
Charlie Combe (ECM)
Sodali & Co +44 (0) 207 250 1446
Rob Greening
Sam Austrums
Oliver Banks
Notes to Editors
Ultimate Products is the owner of a number of leading homeware brands
including Salter (the UK's oldest houseware brand, established in 1760) and
Beldray (a laundry, floor care, heating and cooling brand that was established
in 1872). According to its market research, nearly 80% of UK households own at
least one of the Group's products.
Ultimate Products sells to over 300 retailers across 38 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).
The Group's 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.
Founded in 1997, Ultimate Products employs over 370 staff, a significant
number of whom have joined via the Group's graduate development scheme, 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.
Please note that Ultimate Products is not the owner of Russell Hobbs. The
company currently has licence agreements in place granting it an exclusive
licence to use the "Russell Hobbs" trademark for cookware and laundry (NB this
does not include Russell Hobbs electrical appliances).
For further information, please visit www.upplc.com (http://www.upplc.com) .
BUSINESS REVIEW
Purpose & Strategy
FY24 was a challenging period for many consumer businesses. Despite an
uncertain and difficult macroeconomic backdrop, we have continued to invest in
our strategic plans and make good progress toward our long-term priorities.
With Christine Adshead being appointed as Chair, and Andrew Gossage moving to
CEO, it is an opportune moment to revisit those strategic plans and priorities
and reflect on what has driven growth for the Company over the past 10 years.
Firstly, our purpose is to provide beautiful and more sustainable products for
every home. As part of this, we have always focused on delivering outstanding
products that appeal to households across our key markets. In addition, we
ensure these products are attractively priced, not only for consumers but also
for our retail partners, who can earn an equivalent 'own label' margin.
For a time, this emphasis on product and price was our sole focus. Ten years
ago, however, Ultimate Products moved from a sourcing model, which centred
exclusively on product and price, to a branded model. Under this new approach,
it is our brands, alongside product and price, that became a key driver of
sales. This change of model enabled us to simplify and elevate our business to
become the Home of Brands.
Looking back to FY14, our business had revenues of £49.3m, EBITDA of £1.5m,
and an EBITDA margin of just 3%. At that point, our owned brands made up just
20% of our business, with the remaining 80% being comprised of clearance stock
and licensed brands. This largely non-branded approach impacted our ability to
generate repeat orders, with Group revenues weighted towards one-off sales of
clearance stock. Our penetration with supermarkets and online platforms, the
behemoths of general merchandising, was also low, with just 10% of our sales
coming through these channels. To address this, over the past ten years we
have concentrated on growing branded product sales across four strategic
pillars: Supermarkets, Discounters, Online and International.
During that time, total Group sales have increased by over £100m (a
cumulative average growth rate or "CAGR" of 12%). Sales to UK supermarkets
have increased by a CAGR of 18.8% from £4.9m to £27m, while Online sales
have increased by a CAGR of 41% from £1m to £28.6m. This growth has been
achieved by expanding our brands in our key chosen product areas.
80% of our revenue now comes from the brands we own, and 60% comes from our
two principal brands, Salter (our scales and kitchen brand) and Beldray (our
laundry and floorcare brand). Between them, these two British heritage brands
have over 400 years of history and incredible consumer recognition.
Having successfully built-up the performance and recognition of our leading
homeware brands, we are now evolving our business again, to sell not just
based on brand, product and price and, but also on capability. We have
tremendous brands, a passion for product and highly attractive price points,
all of which have helped our business to grow. However, this has all been
underpinned by our formidable and highly advanced operational capability,
refined over several decades of international trading. This impressive
operational capability, which allows us to go the extra mile for our retail
customers, is built around our culture of continuous improvement, which has
enabled us to increase our EBITDA margins from 3% to 12% while simultaneously
growing sales.
We now want to align ourselves with our retailers' individual strategies and
be a key strategic partner to them, which is particularly important during a
period of heightened political and economic uncertainty.
This evolution to selling on capability, brand, product and price, is
reflected in the development of our Board of Directors. During the year, Simon
Showman transitioned from his role as Chief Executive Officer to Chief
Commercial Officer. As the founder of the business, Simon has built a host of
strong relationships with our retail partners in the UK and Europe and, in his
new role, he will oversee the Group's commercial functions including sales,
buying and product development. As we build long-term relationships
internationally, it is important that we do so at a strategic level, and
Simon's wealth of experience and knowledge will be highly valuable in this
regard, helping us drive further growth in the UK and across Europe.
Our ability to evolve our business is as a result of the energy and ability of
our people. We take pride in being a talent led business that offers
continuous improvement to its colleagues through a multitude of opportunities
across all areas of the organisation. Our graduate scheme aims to bring the
best and brightest talent into the business and provide them with an
industry-leading training programme, which is collegial and intellectually
stimulating. Our workforce is unafraid to challenge the status quo, and the
way in which things are done. This mindset is encouraged, as it allows us to
nurture a culture of continuous improvement. It is our people that give us
confidence that our strategy is right for driving the business over the next
ten years using an ability to sell on capability, brand, product and price.
Performance
During FY24, because of the difficult trading environment, Group revenues and
profits fell short of our expectations. Despite this, we have continued to
focus our efforts on our long-term strategic priorities to ensure that the
business has solid foundations for future growth.
Some of the challenges faced during FY24 have originated in the changes to
consumer demand that occurred as a result of the COVID-19 pandemic and
associated lockdowns. Namely, during FY22 it became clear that many retailers
were overstocked because of the rapid changes in aggregate demand that
occurred during the pandemic.
In FY23, the widespread overstocking issues were mitigated by sales of our
energy efficient products, particularly during the peak of the cost-of-living
crisis in the Winter of 2023. This phenomenon was typified by our sales of air
fryers, which performed exceptionally strongly during this period - reaching
£26m of sales - but was unlikely to be repeated in successive years. In FY24,
air fryer sales returned to a more normalised £15m, but remain at a
significantly higher level than their pre-FY23 average. For example, H1 2022
sales were just £2.3m. As such, we are pleased to see that air fryers and
other energy efficient products are now firmly embedded in everyday consumer
behaviour, rather than being a passing fad.
In the current year, we began to see the gradual resumption of normal forward
ordering patterns from our retailer customers as overstocking issues subsided.
This normalisation began with our discounter customers in the UK, before
gradually extending to other retail customers. The only exception to this
trend was among German supermarket customers, which explains why Group sales
to this channel fell £6.4m (37%).
While we therefore believe that the vast majority of our retailers entered the
current calendar year with normalised stocks levels, the well-documented
decline in general consumer sentiment, particularly in Spring 2024, led to a
reduction in the Group's near-term sales from landed stocks (call off, regular
stock and online sales), which typically achieve a higher gross margin. This
broad slowdown has been widely reported, with all commentators puzzled by the
subdued consumer demand despite growing levels of disposable income and the
return of real wage growth in the UK economy. Overall, these factors resulted
in revenue being down 6.5% for the full year.
Our Product Categories
FY24 FY23 FY24 FY23
£000 £000 Change % % %
Small Domestic Appliances 58,119 66,813 (8,694) -13% 37% 40%
Housewares 40,603 48,008 (7,405) -15% 26% 29%
Laundry 18,630 18,163 467 3% 12% 11%
Audio 15,160 15,545 (386) -2% 10% 9%
Heating & Cooling 3,028 6,214 (3,186) -51% 2% 4%
Clearance 14,619 3,959 10,661 269% 9% 2%
Others 5,338 7,612 (2,275) -30% 3% 5%
Total 155,497 166,315 (10,818) -6.5% 100% 100%
Our passion is product, and by sourcing appealing branded products at prices
that resonate with both our customers and underlying consumers, we have
successfully grown our top line over the past ten years. We maintain a
diversified product portfolio across numerous different brands and categories,
which ensures that we are not overly reliant on any one product type or
consumer trend, though we do concentrate our product development around key
product areas.
Each year we develop and bring to market around 600 new products. This refresh
of our product base brings exciting new products to consumers, but also allows
for the reset of margins where cost structures have changed. Product
development is an investment in the future; therefore, we need to ensure that
we maximise the return on that investment. One of the benefits of
concentrating growth in international and online sales is the extension of
product life cycles, as current product lines can be sold to new consumers
through different channels. This means that we can tighten our product
development process to bring to market a refined number of higher-quality and
more innovative products, complemented by a better-branded and more focused
marketing strategy.
During the current year we have seen a reduction of sales in our key product
categories. As Small Domestic Appliances (SDA) includes air fryers, this
category was down by 13% (£8.7m). Historically, our most popular products
among German supermarkets have been Russell Hobbs branded cookware. The
overstocking issues at these supermarkets impacted demand for such products,
which led to the 15% (£7.4m) fall in overall Houseware sales. A separate
effect of the overstocking issues can be seen in the growth of our small
Clearance division, which saw sales increase 269% (£10.6m). As mentioned
above, the Clearance division used to be core to the Ultimate Products
business. Although in recent years it has been surpassed by our branded
offering, it continues to enjoy longstanding partnerships with big brands,
helping them manage their end of line and overstocking while still protecting
their brands and core distribution.
As retailers and wholesalers have dealt with their overstock issues, there
have been greater opportunities to purchase and resell high quality clearance
packages. As these issues resolve, the opportunities for this division will
recede, but it will continue to operate as a complementary operational hedge
that increases the underlying resilience of the Group.
Our Brands
FY24 FY23 FY24 FY23
£000 £000 Change % % %
Salter 56,354 66,599 (10,245) -15% 36% 40%
Beldray 34,184 35,031 (847) -2% 22% 21%
Russell Hobbs (licensed) 12,059 16,458 (4,399) -27% 8% 10%
Progress 5,871 7,425 (1,554) -21% 4% 4%
Kleeneze 3,188 3,194 (6) 0% 2% 2%
Petra 2,576 3,378 (802) -24% 2% 2%
Premier Brands 114,232 132,085 (17,853) -14% 73% 79%
Other proprietorial brands 14,709 16,036 (1,327) -8% 9% 10%
Own label and other 26,556 18,194 8,362 46% 17% 11%
Total 155,497 166,315 (10,818) -6.5% 100% 100%
80% of our revenue now comes from the brands we own, and around 60% comes from
our two principal brands, Salter (our scales and kitchen brand) and Beldray
(our laundry and floorcare brand). Between them, these two British heritage
brands have over 400 years of history and incredible consumer recognition.
Over the past year we have refined the development of our portfolio of brands
in a more strategic manner. This includes focusing our brand product
development on core categories, employing a more brand-led approach to design,
and concentrating our efforts on building brand equity, which we use to drive
sales volumes.
During the year we completed a rebrand of Salter and have since begun the
rebrand of Beldray. With Salter, the rebrand concentrated on protecting the
substantial brand equity that has been built up since 1760, when the brand was
established. The rebrand gave us an opportunity to recognise the importance of
consistency across Salter's various touch points, achievable by setting clear
and consistent brand guidelines. Through a simplified style guide, and the
streamlining of internal processes, we have retained Salter's highly regarded
brand identity and used this simplification to strengthen its existing brand
equity. With Beldray, consumer perceptions of the brand were less fixed, which
has allowed us to be braver and more creative in its rebrand. Beldray is
stepping into the limelight with bold colours, a tongue-in-cheek marketing
plan and products to make those daily chores quicker… easier… and far less
hassle. Both rebrands will lay solid foundations for growing these two brands
with consumers, both in the UK and internationally, and in a far more
consistent and strategically focused manner, thereby helping to drive topline
growth.
Sales at Salter fell 15% (£10.2m) as a result of the reduction in demand for
air fryers. Russell Hobbs branded cookware was the most popular product sold
into German supermarkets, whose overstocking issues led to a 27% (£4.4m) fall
in sales of the Russell Hobbs brand. The level of 'Own label and other' sales
increased by 46% (£8.4m) due to the level of clearance sales that were made
during the period.
Our Channels
FY24 FY23 FY24 FY23
£000 £000 Change % % %
Supermarkets 45,409 49,116 (3,707) -8% 29% 30%
Discount retailers 44,994 44,593 401 1% 29% 27%
Online channels 33,974 41,449 (7,475) -18% 22% 25%
Multiple-store retailers 19,891 22,178 (2,287) -10% 13% 13%
Other 11,229 8,979 2,251 25% 7% 5%
Total 155,497 166,315 (10,818) -6.5% 100% 100%
Our three main channels to market are discounters, supermarkets and online.
While we have always had a strong presence as a supplier to discounters, over
the past ten years we have grown our supermarket (CAGR: 24%) and online
channels (CAGR:41%) using our branded products and operational capabilities.
Discounters cleared through their overstocks during FY23, and returned to
normal patterns of ordering during FY24, as can be seen from the £44.9m of
sales made to discounters in FY24, representing a 1% increase on the prior
year. On the other hand, supermarkets (especially those serving European
markets) have been slightly behind in terms of clearing their overstocks. Our
sales to German supermarkets fell 37% (£6.4m) in the period, as a number of
German supermarkets reduced their forward orders. UK supermarket sales
returned to growth in the period. While in H1 sales to this channel fell by 5%
(£0.7m) as a result of a fall in demand for air fryers, we were pleased to
see H2 sales grow by 21% (£3.4m) as more normalised trading resumed. This
resulted in FY24 UK supermarket sales increasing 8% to £34.7m.
It is in our online channels where the air fryer comparatives are most
pronounced, with sales being down 59% (£4.4m). It is also in our online sales
channels where the slowdown in consumer spending has been most visible, with
other (non-air fryer) online sales being down 23% in the second half of the
year.
Territory
FY24 FY23 FY24 FY23
£000 £000 Change % % %
UK 101,152 115,580 (14,427) -12% 65% 69%
Europe 52,990 49,645 3,344 7% 34% 30%
Rest of World 1,355 1,090 265 24% 1% 1%
Total 155,497 166,315 (10,818) -6.5% 100% 100%
The other key pillar to our growth strategy is international sales, accounting
for over one third of FY24 revenues (up from under 5% in 2014). Over the past
ten years we have been successful using our proven 'land-and-expand' approach
to build strategic relationships with European retailers, and we believe there
continues to be a significant growth opportunity available to us in the
sizeable European market (population c.477m). Our European penetration is much
lower than in the UK (population: c.67m), where we currently sell c.£1.46 of
product per capita. The financial effects of reproducing that level of
penetration in Europe would be transformational for our business.
Our land-and-expand strategy was successfully used to grow sales with German
supermarkets. Ten years ago, we had £nil sales to the largest German
supermarkets. During FY22 and FY23 these sales reached c.£25m. Although sales
fell in the current year, these German supermarkets continue to be key
strategic retail customers for the Group.
To capitalise on the potential that Europe offers, in September 2023 we
relocated our European showroom to Paris, which has opened opportunities with
both French and pan-European retailers. Among the top ten retailers across
Europe (combined annual revenues: £600bn), we currently sell to five (based
in the UK and Germany). Of the remaining five, four are French supermarkets,
which we are now focusing on as part of our land-and-expand strategy. The
initial results have been encouraging, with sales in France growing by 78%
(£5.3m) year-on-year.
Despite the headwind from German supermarket overstocking, international sales
were up by 7% to £54.3m. International sales, excluding German supermarkets,
were up 30% (£10.0m), driven by new customers in France following the opening
of our European showroom in Paris and through growth with international
discounters.
Culture of continuous improvement
Building strategic relationships with our retail partners is a key priority
for the Group. Our appealing price point is what initially makes our products
attractive, allowing them to earn a margin that is equivalent to own label.
However, what drives repeat orders is our unrivalled execution, which builds
trust and respect. As well as selling on product and price, our consistency
and quality of service also enables us to sell on capability.
Our position in the supply chain makes our business complex; we work with over
500 factories and retailers and deliver over 3,000 types of product to our end
consumers. While this means our business model cannot be simple, we
consistently and seamlessly navigate the intricacies of both our model and
global supply chains to strive to provide an unbeatable level of service for
our retail partners. We believe it is our unrivalled execution that makes us a
strategic partner to many of the UK and Europe's leading retailers.
While we cannot make our business simple, we can strive to make our business
simpler. This enables us to become more focused on the areas where we excel,
and which have proven long-term growth potential. This mindset can be
summarised as 'do less, do it better'. At the most rudimentary level, doing
less may mean challenging ourselves as to whether individual tasks are
necessary, but it encapsulates a laser-focused approach to all that we do. 'Do
it better' can encompass a range of solutions, such as process change, robotic
automation and AI. Over the past year, we have automated hundreds of
low-skill, low-reward tasks, ultimately increasing the ability of our
workforce to focus on higher value activities. By solving issues with
automation, we are able to increase productivity and improve accuracy. This
results in a better customer experience, helping to drive sales, with the
savings being reinvested in price, quality and marketing spend. This focus on
productivity and improving our operational efficiency and capability has seen
an increase in gross profit per colleague of 4% to £118k (FY23: £113k).
Shipping
During the year we have once again seen supply chain disruption. While the
disruption in the current year, caused by political tensions related to the
Red Sea, is less severe than the crisis in FY22 when rates peaked at $18,000,
it led to an increase in shipping costs due to longer shipping route, with
spot rates reaching a peak of $9,000 during the Summer, before falling in the
Autumn to around $4,500. Increases in shipping costs, which typically
represent 5-10% of our cost of goods sold, potentially impacts our gross
margin. However, we are continually taking commercial actions to mitigate the
rate increases and historically we have proved highly adept at navigating
times of price volatility.
Financial Review
FY24 FY23 Change Change
£'000 £'000 £'000 %
Revenue 155,497 166,315 (10,818) -6.9%
Cost of sales (115,043) (123,568) 8,525 -6.9%
Gross profit 40,454 42,747 (2,293) -5.4%
Administrative expenses (22,432) (22,534) 102 -0.5%
Adjusted EBITDA 18,022 20,213 (2,191) -11%
Depreciation & amortisation (2,191) (2,260) 69 -3%
Finance expense (1,381) (1,132) (249) 22%
Adjusted profit before tax 14,450 16,821 (2,371) -14%
Tax expense (3,820) (3,560) (260) 7%
Adjusted profit after tax 10,630 13,261 (2,631) -20%
Share-based payment expense (137) (837) 700 -84%
Tax on adjusting items 34 162 (128) -79%
Statutory profit after tax 10,527 12,586 (2,059) -16%
*Adjusted measures are before share-based payment expense and non-recurring
items.
During the period, 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.
Operating margins
Gross margin remained stable at 26.0% (FY23: 25.7%), as we continued to
benefit from low freight rates during the year. Shipping rates began to rise
again during the Spring of the current financial year and will impact our
gross margin in the first half of FY25. The stable gross margin in FY24 means
that gross profit fell by just 5% to £40.5m (FY23: £42.7m).
Administrative expenses remained steady at £22.4m (FY23: £22.5m). During the
year we have continued our focus on continuous improvement to drive
productivity. As a result, our wage bill, which makes up 70% of our other
administrative expenses, fell 3% to £15.8m (FY23: £16.2m), as our full-time
equivalent (FTE) headcount fell 5% to 368. We continue to invest in the
long-term growth of the business, increasing our spend on marketing by £0.1m
to £1.2m, and through the successful opening of our Paris showroom, which had
a one-off cost of around £0.1m.
Despite improved gross margins and reduced overheads, achieved as the business
continues to invest in productivity, the 6% fall in revenue has caused EBITDA
to fall back to £18.0m (FY23: £20.2m), with a resultant drop in EBITDA
margin from 12.2% to 11.6%. Looking forward, the efficiency gains that we have
embedded through our continued investment in productivity will help to drive
profitability as we return to topline growth.
Adjusted & statutory profit
Depreciation and amortisation decreased marginally by 3% to £2.2m (FY23:
£2.3m). The finance charge has increased by 22% to £1.4m (FY23: £1.1m) as
several highly beneficial hedging instruments came to an end during the
period, meaning that more of the Group's debt is subject to current floating
rates, which has offset the result of lower average net debt across the
period. Around £0.2m of the charge relates to fixed debt-related costs and
imputed interest charges on capitalised lease liabilities.
As a result, adjusted profit before tax decreased 14% to £14.5m (FY23:
£16.8m). The tax charge for the period increased by 20% as we saw the impact
of a full period of the increased UK corporation tax rate from 19% to 25%. The
tax charge for the period at 26.4% (FY23: 21.3%) was higher than the blended
statutory rate of 21% due to the higher statutory rate of tax paid on our
European foreign branches in Germany and Poland. The impact of the change in
tax rates led to a 20% decrease in adjusted profit to £10.6m (FY23: £13.3m)
and a 16% decrease in statutory profit after tax to £10.5m (FY23: £12.6m).
Earnings per share
Despite the reduction in our issued share capital of 683,885 shares to
88,628,572 (FY23: 89,312,457), which resulted from our share buy-back
programme, the number of shares held in in our Employee Benefit Trust has
reduced following the successful vesting of employee share options schemes.
This has resulted in the weighted average number of shares increasing 0.3% to
86,556,581 (FY23: 86,310,315).
FY24 EPS FY23 EPS
£'000 p £'000 p
Adjusted profit after tax / Adjusted EPS 10,630 12.3 13,261 15.4
Share-based payment expense (137) (0.2) (837) (1.0)
Tax on adjusting items 34 0.0 162 0.2
Statutory profit after tax / Basic EPS 10,527 12.2 12,586 14.6
As a result, both adjusted profit after tax and adjusted earnings per share
decreased by 20%.
Financing and cash flow
The Group generated cash from operating activities of £18.5m (FY23: £24.4m),
representing a 103% operating cash conversion (FY23: 121%). This meant that at
the period end the Group had a net bank debt/adjusted EBITDA ratio of 0.6x
(FY23: 0.7x), which represents net bank debt of £10.4m (FY23: £14.8m). The
Group makes use of term loans for longer term funding, such as acquisitions,
whereas our invoice discounting and import loan facilities are designed to
fund our working capital, and automatically increase in relation to our levels
of trading. During the year the Group fully repaid the acquisition debt
related to the transformational acquisition of Salter in FY21. We continue to
hold £37m of debt facilities for the purpose of funding working capital.
Change Change
FY24 FY23
£'000 £'000 £'000 %
Cash 4,733 5,086
RCF/Overdraft (4,791) (5,004)
Invoice Discounting (8,765) (8,950)
Import Loans (1,668) -
Term loan - (6,000)
Debt Issue Costs 73 73
Net bank debt (10,418) (14,795) 4,377 -30%
Capital Allocation Policy
It is the Board's intention to maintain the net bank debt/adjusted EBITDA
ratio at around 1.0x, with the debt being used to fund the Group's working
capital. The Board believes that this level of leverage is an efficient use of
the Group's balance sheet and allows for further returns of capital to
shareholders. It is the Board's intention to continue to invest in the
business for growth, whilst returning around 50% of post-tax profits to
shareholders through dividends, and to supplement this with share buy-backs,
which commenced during the course of the year, pursuant to a policy of
maintaining net bank debt at a 1.0x adjusted EBITDA ratio.
In line with our established policy of distributing around 50% of the Group's
adjusted profit after tax, the Board is pleased to propose a final dividend of
3.93p per share (FY23: 4.95p per share). In addition, the Board is also
proposing to distribute a further 1.0p per share to maintain the total
dividend for the year at 7.38p per share (FY23: 7.38p per share), reflecting
the Board's confidence in the future prospects of the Group, and the year-end
leverage being below the 1.0x adjusted EBITDA ratio required by our Capital
Allocation Policy. Subject to shareholder approval at the AGM on 13 December
2024, the final dividend will be paid on 31 January 2025 to shareholders on
the register at the close of business on 3 January 2025 (ex-dividend date 2
January 2025).
Consolidated Income Statement
For the year ended 31 July 2024
2024 2023
£'000
£'000
Revenue 155,497 166,315
Cost of sales (115,043) (123,568)
Gross profit 40,454 42,747
Adjusted earnings before interest, tax, depreciation, amortisation, 18,022 20,213
share-based payments & non‑recurring items ('Adjusted EBITDA')
Depreciation and loss on disposal of fixed assets (2,169) (2,238)
Amortisation of intangibles (22) (22)
Share-based payment expense (137) (837)
Total administrative expenses (24,760) (25,631)
Operating profit 15,694 17,116
Finance expense (1,381) (1,132)
Profit before tax 14,313 15,984
Tax expense (3,786) (3,398)
Profit for the year attributable to equity holders of the Company 10,527 12,586
All amounts relate to continuing operations
Earnings per share
Basic 12.2 14.6
Diluted 12.0 14.3
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2024
2024 2023
£'000s
£'000s
Profit for the year 10,527 12,586
Items that may subsequently be reclassified to the income statement
Fair value movements on cash flow hedging instruments (1,108) (1,329)
Hedging instruments recycled through the income statement at the end of 1,605 (3,445)
hedging relationships
Deferred tax relating to cashflow hedges (123) 875
Items that will not subsequently be reclassified to the income statement
Foreign currency translation - (2)
Other comprehensive (loss)/income 374 (3,901)
Total comprehensive income for the year attributable to the equity holders of 10,901 8,685
the Company
Consolidated Statement of Financial Position
At 31 July 2024
2024 2023
£'000
£'000
Assets
Intangible assets 36,981 37,003
Property, plant and equipment 7,574 8,443
Total non-current assets 44,555 45,446
Inventories 36,578 28,071
Trade and other receivables 29,710 29,890
Derivative financial instruments 667 1,233
Cash and cash equivalents 4,733 5,086
Total current assets 71,688 64,280
Total assets 116,243 109,726
Liabilities
Trade and other payables (39,084) (30,005)
Derivative financial instruments (996) (1,806)
Current tax (105) -
Borrowings (15,151) (15,891)
Lease liabilities (811) (836)
Total current liabilities (56,147) (48,538)
Net current assets 15,541 15,742
Borrowings - (3,990)
Deferred tax (6,898) (6,797)
Lease liabilities (3,436) (4,262)
Total non-current liabilities (10,334) (15,049)
Total liabilities (66,481) (63,587)
Net assets 49,762 46,139
Equity
Share capital 221 223
Share premium 14,334 14,334
Capital redemption reserve 2 -
Employee benefit trust reserve (1,946) (1,989)
Share-based payment reserve 1,431 1,817
Hedging reserve (286) (660)
Retained earnings 36,006 32,414
Equity attributable to owners of the Group 49,762 46,139
Consolidated Statement of Changes in Equity
For the year ended 31 July
Share capital Capital redemption reserve Share premium EBT reserve Share-based payment reserve £'000 Hedging reserve Retained earnings Total
£'000
£'000
£'000
£'000
£'000
Equity
£'000
£'000
As at 31 August 2022 223 - 14,334 (1,571) 1,166 3,239 26,102 43,493
Profit for the year - - - - - - 12,586 12,586
Foreign currency retranslation - - - - - - (2) (2)
Cash flow hedging movement - - - - - (4,774) - (4,774)
Deferred tax movement - - - - - 875 - 875
Total comprehensive income for the year - - - - - (3,899) 12,584 8,685
Transactions with shareholders:
Dividends payable - - - - - - (6,255) (6,255)
Share-based payments charge - - - - 837 - - 837
Deferred tax on share-based payments - - - - - - (88) (88)
Transfer of reserve on exercise/ cancellation of share award - - - - (186) - 186 -
Transfer of shares by the EBT to employees on exercise of share award - - - 297 - - (115) 182
Purchase of own shares by the EBT - - - (715) - - - (715)
As at 31 July 2023 223 - 14,334 (1,989) 1,817 (660) 32,414 46,139
Profit for the year - - - - - - 10,527 10,527
Foreign currency retranslation - - - - - - -
Cash flow hedging movement - - - - - 497 497
Deferred tax movement - - - - - (123) (123)
Total comprehensive income for the year - - - - - 374 10,527 10,901
Transactions with shareholders:
Dividends payable - - - - - - (6,411) (6,411)
Share-based payments charge - - - - 137 - - 137
Deferred tax on share-based payments - - - - - - 140 140
Transfer of reserve on exercise/ cancellation of share award - - - - (523) - 523 -
Transfer of shares by the EBT to employees on exercise of share award - - - 692 - - (187) 505
Purchase of own shares by the EBT - - - (649) - - - (649)
Purchase of own shares for cancellation (2) 2 - - - - (1,000) (1,000)
As at 31 July 2024 221 2 14,334 (1,946) 1,431 (286) 36,006 49,762
Consolidated Statement of Cash Flows
For the year ended 31 July
2024 2023
£'000
£'000
Net cash flow from operating activities
Profit for the year 10,527 12,586
Adjustments for:
Finance costs 1,382 1,132
Income tax expense 3,786 3,399
Depreciation 2,165 2,218
Amortisation 22 22
Loss on disposal of non-current assets 4 20
Derivative financial instruments 190 (199)
Share-based payments 137 837
Working capital adjustments
(Increase)/Decrease in inventories (8,507) 1,090
Decrease/(Increase) in trade and other receivables (207) 2,691
Increase in trade and other payables 9,048 559
Net cash from operations 18,546 24,355
Income taxes paid (3,176) (3,957)
Cash generated from operations 15,370 20,398
Cash flows used in investing activities
Acquisition of subsidiary- deferred consideration - (987)
Purchase of property, plant and equipment (1,300) (999)
Net cash used in investing activities (1,300) (1,986)
Cash flows used in financing activities
Sale of own shares (144) (532)
Purchase of shares for cancellation (1,000) -
Proceeds from borrowings 6,341 2,753
Repayment of borrowings (11,071) (13,412)
Principal paid on lease obligations (838) (840)
Debt issue costs paid (137) (94)
Dividends paid (6,411) (6,255)
Interest paid (1,186) (1,147)
Net cash used in finance activities (14,446) (19,527)
Net decrease in cash and cash equivalents (376) (1,115)
Exchange gains/(losses) on cash and cash equivalents 23 (1)
Cash and cash equivalents brought forward 5,086 6,202
Cash and cash equivalents carried forward 4,733 5,086
Reconciliation of cash flow to the Group net debt position
Group Overdraft Term Loan RCF Invoice discounting Import loans Loan Fees Leases Total liabilities from financing activities Cash Net
£'000
£'000
£'000
£'000s
£'000s
£'000
£'000
£'000
£'000
debt
£'000
At 1 August 2022 (6,020) (8,000) (2,217) (6,197) (8,179) 155 (2,757) (33,215) 6,202 (27,013)
Financing cash flows 1,016 2,000 2,217 (2,753) 8,179 94 840 11,593 - 11,593
Other cash flows - - - - - - - - (1,115) (1,115)
Other changes - - - - - (176) (3,181) (3,357) (1) (3,358)
At 31 July 2023 (5,004) (6,000) - (8,950) - 73 (5,098) (24,979) 5,086 (19,893)
Financing cash flows 213 6,000 - 185 (1,668) 137 838 5,705 - 5,705
Other cash flows - - - - - - - - (376) (376)
Other changes - - - - - (137) 13 (124) 23 (101)
At 31 July 2024 (4,791) - - (8,765) (1,668) 73 (4,247) (19,398) 4,733 (14,665)
Notes to the financial statements
1. General information
Ultimate Products plc (`the Company') and its subsidiaries (together `the
Group') is a supplier of branded, value-for-money household products to global
markets. The Company is a public limited company, which is listed on the
London Stock Exchange and incorporated and domiciled in England and Wales. The
address of its registered office is Ultimate Products plc, Manor Mill,
Victoria Street, Chadderton, Oldham OL9 0DD.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 July 2024 or 2023 but is derived
from those accounts. Statutory accounts for Ultimate Products plc for the
year ended 31 July 2023 have been delivered to the Registrar of Companies and
those for the year ended 31 July 2024 will be delivered following the
Company's annual general meeting. The auditors have reported on those
accounts; their reports were unqualified and did not include references to any
matters to which the auditors drew attention by way of emphasis without
qualifying their reports. Their reports for the year ended 31 July 2024 and
31 July 2023 did not contain statements under s498 (2) or (3) of the Companies
Act 2006.
2. Basis of preparation
The consolidated Group Financial Statements have been prepared in accordance
with UK adopted international financial reporting standards. The Consolidated
Financial Statements and Company Financial Statements are presented in
Sterling and rounded to the nearest thousand unless otherwise indicated. The
Financial Statements are prepared on the historical cost basis, except for
certain financial instruments and share-based payments that have been measured
at fair value. The Directors have taken advantage of the exemption available
under Section 408 of the Companies Act 2006 and have not presented an income
statement or a statement of comprehensive income for the Company alone.
Going Concern
The Directors have adopted the going concern basis in preparing these accounts
after assessing the principal risks and having considered the impact of severe
but plausible downside scenarios, including pandemic type restrictions, supply
chain issues and demand led falls in revenue due to inflation and rises in
interest rates. The Directors have considered a number of impacts on sales,
profits and cash flows, taking into account experiences learnt from previous
business interruptions. The Directors have considered the resilience of the
Group in severe but plausible scenarios, taking account of its current
position and prospects, the principal risks facing the business, how these are
managed and the impact that they would have on the forecast financial
position. In assessing whether the Group could withstand such negative
impacts, the Board has considered cash flow, impact on debt covenants and
headroom against its current borrowing facilities. At the year end the Group
had a net bank debt/adjusted EBITDA ratio of 0.6x (FY23: 0.7x), which
represents net bank debt of £10.4m (FY23: £14.8m). The Group maintains
comfortable levels of headroom within its bank facilities, with headroom at 31
July 2024 of £16.4m (FY23: £16.6m). The Group's banking facilities comprise
a revolving credit facility of £8.2m (FY23: £8.2m) (expired 1 October 2024),
an import loan facility of £12.0m (FY23: £9.0m), and an invoice discounting
facility with a total limit of £23.5m (FY23: £23.5m).
The Group's projections show that the Group will be able to operate within its
existing banking facilities and covenants. Therefore, the Directors have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of approval of
these Financial Statements and, as a result, they have applied the going
concern principle in preparing its consolidated and Company Financial
Statements.
3. Revenue
Geographical split by location: 2024 2023
£'000
£'000
United Kingdom 101,152 115,580
Germany 11,142 15,198
Rest of Europe 41,848 34,447
Rest of the World 1,355 1,090
Total 155,497 166,315
International sales 54,345 50,735
Percentage of total revenue 35% 31%
Analysis of revenue by brand: 2024 2023
£'000
£'000
Salter 56,354 66,599
Beldray 34,184 35,031
Russell Hobbs (licensed) 12,059 16,458
Progress 5,871 7,425
Petra 2,576 3,194
Kleeneze 3,188 3,378
Premier brands 114,232 132,085
Other proprietorial brands 14,709 16,036
Own label and other 26,556 18,194
Total 155,497 166,315
Analysis of revenue by product: 2024 2023
£'000
£'000
Small domestic appliances 58,119 66,813
Housewares 40,603 48,008
Laundry 18,630 18,163
Audio 15,160 15,545
Heating and cooling 3,028 6,214
Others 19,957 11,572
Total 155,497 166,315
Analysis of revenue by sales channel: 2024 2023
£'000
£'000
Supermarkets 45,409 49,116
Discount retailers 44,994 44,593
Online channels 33,974 41,449
Multiple-store retailers 19,891 22,178
Other 11,229 8,979
Total 155,497 166,315
4. Finance costs
2024 2023
£'000
£'000
Interest on bank loans and overdrafts 1,138 1,114
Interest on lease liabilities 242 134
Foreign exchange in respect of lease liabilities (net of hedging actions) 13 (81)
Other interest payable and similar charges (12) (35)
Total finance cost 1,381 1,132
5. Taxation
2024 2023
£'000
£'000
Current period - UK corporation tax 3,031 3,040
Adjustments in respect of prior periods 243 (72)
Foreign current tax expense 394 431
Total current tax 3,668 3,399
Origination and reversal of temporary differences 226 5
Adjustments in respect of prior periods (108) (6)
Impact of change in tax rate - -
Total deferred tax 118 (1)
Total tax charge 3,786 3,398
Factors effecting the tax charge
The tax assessed for the current and previous period is higher than the
standard rate of corporation tax in the UK. The tax charge for the year can be
reconciled to the profit per the income statement as follows:
2024 2023
£'000
£'000
Profit before tax 14,313 15,984
Tax charge at 25% (2023: 20.5%) 3,578 3,277
Adjustments relating to underlying items:
Adjustment to tax charge in respect of prior periods 135 (78)
Effects of expenses not deductible for tax purposes 53 119
Impact of overseas tax rates 20 56
Effect of difference in corporation tax and deferred tax rates - 15
Adjustments relating to non-underlying items:
Effects of expenses not deductible for tax purposes 34 171
Differences arising on tax treatment of shares (34) (162)
Effect of difference in corporation tax and deferred tax rates - -
Total tax expense 3,786 3,398
Corporation tax is calculated at 25% (2023: 20.5%) of the estimated assessable
profit for the year, being the average effective tax rate in the year.
Deferred tax balances at the year-end have been measured at 25%.
6. Earnings per share
Basic earnings per share is calculated by dividing the net income for the
period attributable to ordinary equity holders by the weighted average number
of ordinary shares outstanding during the period. Diluted earnings per share
amounts are calculated by dividing the profit attributable to owners of the
parent by the weighted average number of ordinary shares in issue during the
financial year, adjusted for the effects of potentially dilutive options. The
dilutive effect is calculated on the full exercise of all potentially dilutive
ordinary share options granted by the Group, including performance-based
options which the Group considers to have been earned.
The calculations of earnings per share are based upon the following:
2024 2023
£'000
£'000
Profit for the year 10,527 12,586
Number Number
Weighted average number of shares in issue 89,213,704 89,312,457
Less shares held by the UPGS EBT (2,557,123) (3,002,142)
Weighted average number of shares - basic 86,555,581 86,310,315
Share options 974,498 1,576,409
Weighted average number of shares - diluted 87,531,079 87,886,723
Pence Pence
Earnings per share - basic 12.2 14.6
Earnings per share - diluted 12.0 14.3
7. Dividends
2024 2023
£'000
£'000
Final dividend paid in respect of the previous year 4,289 4,157
Interim declared and paid 2,122 2,098
6,411 6,255
Per share Pence Pence
Final dividend paid in respect of the previous year 4.95 4.82
Interim declared and paid 2.45 2.43
7.40 7.25
The Directors propose a final dividend of 4.93p per share in respect of the
year ended 31 July 2024.
8. Bank borrowings
Group 2024 2023
£'000
£'000
Overdrafts 4,791 5,004
Invoice discounting 8,765 8,950
Import loans 1,668 -
Term loan - 2,000
Unamortised debt issue costs (73) (63)
Current 15,151 15,891
Revolving credit facility - -
Term loan - 4,000
Unamortised debt issue costs - (10)
Non-current - 3,990
Total bank borrowings 15,151 19,881
Cash (4,733) (5,086)
Net bank borrowings 10,418 14,795
Contractual undiscounted maturities: 2024 2023
£'000
£'000
In less than one year 15,151 15,954
Between one and two years - 2,000
Between three and four years - 2,000
Less: Unamortised debt issue costs (73) (73)
Total borrowings 15,151 19,881
Current bank borrowings include a gross amount of £8.8m (2023: £9.0m) due
under invoice discounting facilities, which are secured by an assignment of
and fixed charge over the trade debtors of Ultimate Products UK Limited.
Furthermore, current bank borrowings include an amount of £1.7m (2023: £nil)
due under an import loan facility, which is secured by a general letter of
pledge providing security over the stock purchases financed under that
facility. Bank borrowings are secured in total by a fixed and floating charge
over the assets of the Group. Total bank borrowings are net of £73,000 (2023:
£73,000) of fees which are being amortised over the length of the relevant
facilities. Interest on bank borrowings is payable at a margin ranging between
1.65% and 2.25% above the relevant bank reference rates. As the liabilities
are at a floating rate and there has been no change in the creditworthiness
of either of the counterparties, the Directors are of the view that the
carrying amount approximates to the fair value.
9. Financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
Group 2024 2023
£'000
£'000
Trade receivables - held at amortised cost 28,507 28,175
Derivative financial instruments - carried at FVTOCI 576 900
Derivative financial instruments - carried at FVTPL 91 333
Trade and other payables (36,091) (27,995)
Derivative financial instruments -carried at FVTOCI (966) (1,783)
Derivative financial instruments - carried at FVTPL (30) (23)
Borrowings - held at amortised cost (15,151) (19,881)
Lease liabilities - held at amortised cost (4,247) (5,098)
Cash and cash equivalents - held at amortised cost 4,733 5,086
Financial Assets
The Group held the following financial assets at amortised cost:
Group 2024 2023
£'000
£'000
Cash and cash equivalents - held at amortised cost 4,733 5,086
Trade receivables - held at amortised cost 28,507 28,175
33,240 33,261
Financial Liabilities
The Group held the following financial liabilities, classified as other
financial liabilities at amortised cost:
Group 2024 2023
£'000
£'000
Trade payables 30,363 19,024
Borrowings 15,151 19,881
Other payables 5,728 8,971
Lease liabilities 4,247 5,098
55,489 52,974
Derivative Financial Instruments
The Group held the following derivative financial instruments as financial
assets/(liabilities), classified as fair value through profit and loss on
initial recognition:
Group 2024 2023
£'000
£'000
Derivative financial instruments - assets 667 1,233
Derivative financial instruments - liabilities (996) (1,806)
(329) (573)
The above items comprise the following under the Group's hedging arrangements:
Group 2024 2023
£'000
£'000
Foreign currency contracts (544) (1,372)
Interest rate swaps 111 315
Interest rate caps 104 484
(329) (573)
Forward contracts
The Group mitigates the exchange rate risk for certain foreign currency trade
debtors and creditors by entering into forward currency contracts. At 31 July
2024, the Group was committed to:
2024 2023
Buy Sell Buy Sell
USD$'000 59,000 - 54,300 -
€'000 - 34,000 - 23,200
CAD$'000 - - - 60
PLN'000 - - - 5,500
CNY'000 4,483 - 6,340 -
At 31 July 2024 & 2023, all the outstanding USD, EUR, PLN and CAD
contracts mature within 12 months of the period end. The CNY contracts, which
are held as a partial hedge on a lease commitment, mature by August 2026. The
forward currency contracts are measured at fair value using the relevant
exchange rates for GBP:USD, GBP:EUR, GBP:CAD, GBP:PLN and GBP:CNY.
Forward currency contracts are valued using level 2 inputs. The valuations are
calculated using the period end forward rates for the relevant currencies,
which are observable quoted values at the period end dates. Valuations are
determined using the hypothetical derivative method, which values the
contracts based upon the changes in the future cash flows, based upon the
change in value of the underlying derivative.
All of the forward contracts to buy US Dollars and some of those to sell Euros
meet the conditions for hedge accounting. The fair value of forward contracts
that are effective in offsetting the exchange rate risk is a liability of
£564,000 (2023: liability of £1,603,000), which has been recognised in other
comprehensive income. This will be released to profit or loss at the end of
the term of the forward contracts as they expire, being £564,000 within 12
months (2023: £1,603,000 within 12 months). The cash flows in respect of the
forward contracts will occur over the course of the next 12 months.
Interest rate swaps and interest rate caps
The Group has entered into interest rate swaps and interest rate caps to
protect the exposure to interest rate movements on the various elements of
the Group's banking facility. As at 31 July 2024, protection was in place
over an aggregate principal of £8.9m (2023: £18.3m). At 31 July 2024, the
Group had net bank borrowings of £1.5m (2023: £nil) not subject to interest
rate protection. All interest rate swaps meet the conditions for hedge
accounting.
Interest rate swaps and caps are valued using level 2 inputs. The valuations
are based upon the notional value of the swaps and caps, the current available
market borrowing rate and the swapped or capped interest rate respectively.
The valuations are based upon the current valuation of the present saving or
cost of the future cash flow differences, based upon the difference between
the respective swapped and capped interest rates contracts and the expected
interest rate as per the lending agreement.
The fair value of variable to fixed interest rate swaps that are effective in
offsetting the variable interest rate risk on variable rate debt is an asset
of £111,000 (2023: £315,000), which has been recognised in other
comprehensive income and will be released to profit or loss over the term of
the swap agreements. The agreements expire on 28 February 2025. The cash flows
in respect of the swaps occur monthly over the effective lifetime of the
swaps.
The fair value of the interest rate caps that are effective in offsetting the
variable interest rate risk on variable rate debt is an asset of £64,000
(2023: £408,000), which has been recognised in other comprehensive income and
will be released to profit or loss over the term of the cap agreements. The
agreements expire between 31 December 2024 and 2 August 2027. The cash flows
in respect of the swaps occur monthly over the effective lifetime of the
swaps.
Reconciliation of the financial instruments to the Statement of
Financial Position
Group 2024 2023
£'000
£'000
Trade receivables 28,507 28,175
Prepayments and other receivables not classified as financial instruments 1,203 1,328
Current tax asset not classified as a financial instrument - 387
Trade and other receivables 29,710 29,890
Group 2024 2023
£'000
£'000
Trade and other payables 36,091 27,995
Other taxes and social security not classified as financial instruments 2,993 2,010
Trade and other payables 39,084 30,005
The Group's activities expose it to certain financial risks: market risk,
credit risk and liquidity risk. The overall risk management programme focuses
upon the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group's financial performance. Risk management is
carried out by the Directors, who identify and evaluate financial risks in
close cooperation with key members of staff.
a) Market risk: Market risk is the risk of loss that may arise from
changes in market factors such as interest rates and foreign exchange rates.
b) Credit risk: Credit risk is the financial loss to the Group if a
customer or counterparty to financial instruments fails to meet its
contractual obligation. Credit risk arises from the Group's cash and cash
equivalents and receivables balances. Accordingly, the possibility of material
loss arising in the event of non-performance by counterparties is considered
to be unlikely. Cash at bank is held with banks with high-quality external
credit rating.
c) Liquidity risk: Liquidity risk is the risk that the Group will
not be able to meet its financial obligations as they fall due. This risk
relates to the Group's prudent liquidity risk management and implies
maintaining sufficient cash. The Directors monitor rolling forecasts of the
Group's liquidity and cash and cash equivalents based upon expected cash flow.
Market risk
The Group's interest-bearing liabilities relate to its variable rate banking
facilities. The Group has a policy of maintaining a portion of its banking
facilities under the protection of interest rate swaps and caps to ensure the
certainty of future interest cash flows and offering protection against
market-driven interest rate movements. The Group's market risk relating to
foreign currency exchange rates is commented on below.
Credit risk
The Group's sales are primarily made with credit terms, exposing the Group to
the risk of non-payment by customers. The Group has implemented policies that
require appropriate credit checks on potential customers before sales are
made. The amount of exposure to any individual counterparty is subject to a
limit, which is reassessed regularly by the Board. In addition, the Group
maintains a suitable level of credit insurance against its debtor book. Over
the course of FY24, on average, over 99% of its trade receivables were
insured. Sales to uninsured accounts are monitored closely with weekly
forecasts prepared and reviewed with appropriate actions to manage the
exposure to credit risk.
Liquidity risk management
The Group is funded by external banking facilities provided by HSBC. Within
these facilities, the Group actively maintains a mixture of long-term and
short-term debt finance that is designed to ensure the Group has sufficient
available funds for operations and planned expansions. Cash flow requirements
are monitored by short and long-term forecasts, with headroom against facility
limits and banking covenants assessed regularly.
Foreign currency risk management
The Group's activities expose it to the financial risks of changes in foreign
currency exchange rates. The Group's exposure to foreign currency risk is
partially hedged by virtue of invoicing a proportion of its turnover in US
Dollars and Euros. When necessary, the Group uses foreign exchange forward
contracts to further mitigate this exposure. The following is a note of the
financial instruments denominated at each period end in US Dollars:
Group 2024 2023
$'000
$'000
Trade receivables 9,184 11,342
Other receivables 85 369
Net cash and overdrafts 5,404 2,640
Import loans (2,142) -
Invoice discounting 2,177 1
Trade payables (33,425) (17,324)
(18,717) (2,972)
The effect of a 20% strengthening of Sterling at 31 July 2024 on the foreign
denominated financial instruments carried at that date would, all variables
held constant, have resulted in an increase to total comprehensive income for
the period and an increase to net assets of £1.8m (2023: £0.3m). A 20%
weakening of the exchange rate, on the same basis, would have resulted in a
decrease to total comprehensive income and a decrease to net assets of £2.7m
(2023: £0.5m).
The following is a note of the financial instruments denominated at each
period end in Euros:
Group 2024 2023
€'000
€'000
Trade receivables 12,566 11,369
Other receivables 22 -
Net cash and overdrafts (927) 3,266
Invoice discounting (9,104) (6,573)
Trade payables (1,383) (1,217)
Lease liabilities (368) (638)
806 6,207
The effect of a 20% strengthening of Sterling at 31 July 2024 on the foreign
denominated financial instruments carried at that date would, all variables
held constant, have resulted in a decrease to total comprehensive income for
the period and a decrease to net assets of £0.1m (2023: £0.7m). A 20%
weakening of the exchange rate, on the same basis, would have resulted in an
increase to total comprehensive income and an increase to net assets of £0.1m
(2023: £1.1m).
The Directors have shown a sensitivity movement of 20% as, due to the current
uncertainty given the current economic climate, this is deemed to be the
largest potential movement in currency that could occur in the near future.
Financial instruments denominated in Canadian Dollars and Polish Zloty are not
significant and therefore do not pose a significant foreign exchange exposure.
Capital risk management
The Group is funded by equity and loans. The Group's objective when managing
capital is to maintain adequate financial flexibility to preserve its ability
to meet financial obligations, both current and long-term. The capital
structure of the Group is managed and adjusted to reflect changes in economic
conditions. The Group funds its expenditure on commitments from existing cash
and cash equivalent balances, primarily received from existing bank facilities
and profits generated. There are no externally imposed capital requirements.
Financing decisions are made based upon forecasts of the expected timing and
level of capital and operating expenditure required to meet the Group's
commitments and development plans.
Fair value estimation
The carrying value less impairment provision of trade receivables and payables
are assumed to approximate to their fair values because of the short-term
nature of such assets and the effect of discounting liabilities is negligible.
The Group is exposed to the risks that arise from its financial instruments.
The policies for managing those risks and the methods to measure them are
described earlier in this note.
Maturity of financial assets and liabilities
All of the Group's non-derivative financial liabilities and its financial
assets at the reporting date are either payable or receivable within one year,
except for borrowings.
Interest rate risk management
Interest rate risk is the risk of increased costs arising from movements in
interest rates impacting the Group's liabilities. Interest on financial
instruments is classified as fixed rate if interest resets on the instruments
are less frequent than once every 12 months. Interest on financial instruments
is classified as variable rate if interest resets on the instruments occur
every 12 months or more frequently.
All of the Group's bank borrowings are variable rate. The Group is exposed to
cash flow interest rate risk on its bank overdrafts, Revolving Credit
Facility, invoice discounting and import loans to the extent that they are
used. The Group has interest rate swaps and interest rate caps to mitigate the
exposure of interest rate movements as described above. The Group's
interest-bearing financial assets and liabilities at the balance sheet date
were as follows:
As at 31 July 2024 As at 31 July 2023
Fixed Variable Total Fixed Variable Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents
- 4,733 4,733 - 5,086 5,086
Bank borrowings - (15,224) (15,224) - (19,954) (19,954)
- (10,491) (10,491) - (14,868) (14,868)
The Group considers that a 100 basis points movement in interest rates is a
reasonable measure of volatility. The effect on profit before tax of a 100
basis points increase in interest rates on the variable rate balances as at 31
July 2024 would be a reduction of £65,000 (31 July 2023: £110,000
reduction). The effect on profit before tax of a 100 basis points decrease in
interest rates on the variable rate balances as at 31 July 2024 would be an
increase of £101,000 (31 July 2023: £110,000 increase).
10. Share capital & reserves
Allotted, called up and fully paid 2024 2023 2024 2023
£'000
£'000
No. of shares
No. of shares
At 1 August 223 223 89,312,457 89,312,457
Share buy-backs (2) - (683,885) -
At 31 July 221 223 88,628,572 89,312,457
Following approval at the General Meeting on 2 May 2024, the Company commenced
a share buy-back programme, purchasing 683,885 Ordinary Shares of 0.25p each
for a total cost of £1m, including costs of £10,000. The average price paid
for these repurchased shares was £1.45 per share. The repurchased shares were
cancelled during the year.
11. Annual Report and Accounts
The annual report and accounts for the year ended 31 July 2024 will be posted
to shareholders in the week commencing 11 November 2024 and will be available
immediately thereafter on the Company's website at
https://www.upplc.com/investor-relations/financial-reports/
12. Annual General Meeting
The Annual General Meeting of Ultimate Products Plc will be held on 13
December 2024 at the Company's registered office at Manor Mill, Victoria
Street, Chadderton, Oldham, OL9 0DD, notice of which will be sent to
shareholders with the annual report and accounts in the week commencing 11
November 2024.
13. Publication on website
A copy of this announcement and an investor presentation of these results are
available on the Company's website
at https://www.upplc.com/investor-relations/
(https://www.upplc.com/investor-relations/) .
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFFTIILTFIS
Recent news on Ultimate Products
See all newsUltimate Products - Director/PDMR Shareholding
Ultimate Products - Director/PDMR Shareholding
Brief: Ultimate Products' Board Expects Q3 Flat Trading Trends To Continue For Rest Of Year
Ultimate Products - Q3 2026 Trading Update
Brief: Ultimate Products Appoints Simon Harrison As CEO, Effective October 26