Ultimate Products (UPGS), the owner of homeware brands including Salter and Beldray known until today as UP Global Sourcing, delivered record revenues in FY2023, up 8% to £166.3m, impressively without increasing its prices.
Although sales to retailers slipped 3% to £124.9m, direct online sales climbed 64% to £41.4m, while retail sales returned to growth in the second half after a weak first half in which sales slipped 11%.
Because online sales are higher margin, that saw company’s overall gross margin increase from 24.9% to 25.7%, also helped along by falling freight rates. Administrative expenses did rise 15%, largely down to a higher wage bill as the company made the decision to invest in its people.
That decision “to do the right thing” has resulted in improved productivity, and an in increase in gross profit per employee from £83k in FY18 to £113k in FY23. Overall, pre-tax profit climbed 6% to £16.8m.
Ultimate Products also successfully reintroduced Petra, the German kitchen electrical brand, into the German market, rebranded its core Salter brand acquired at the end of FY21, as well as renewing its Russell Hobbs licensing agreement on a rolling four-year basis.
Although European growth was weaker than the UK, sales growth recovered in the second half, and the opening of a new European showroom in Paris is expected to attract new retail customers on the continent. The company will be closing its Cologne showroom, which has served its purpose of attracting new German retail clients.
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These solid figures from Ultimate Products leave it on track to hit full year expectations for the year to March 2024, with analysts at Equity Development maintaining its forecast for sales to climb 6% to £176.3m and EBITDA to rise to £21.7m, up from £20.2m this year.
At the current price of 120.75p, that leaves the shares trading on a forecast PE ratio of 7.8x and offering a dividend yield of 6.4%, which Equity Development says significantly undervalues the shares – it’s target price is 250p, suggesting more than 100% upside. Its analysts noted strong cash conversion, which underpinned a sharp reduction in bank debt, which fell £9.5m to £14.8m.
It also pointed to the company’s impressive ability to sustain productivity through enhanced productivity, including the increased use of robotics, rather than by implementing inflationary pricing, a strategy which is likely to chime well with increasingly value-conscious consumers.