Tough year for Ultimate Products but orders pipeline recovers

Ultimate Products, the Oldham-based bargain brands group, reported decreased sales and profits in a tough trading year, today.

But it revealed that its order book is currently ahead of this stage last year, and that trading is in line with expectations.

The group said during the year to July 31, revenues fell by 20.4% to £87.6m, which it said was driven by a difficult trading environment and a one-off impact of revenue deferral from a major European customer.

Pre-tax profits of £5.4m represented a 27% fall, compared with the previous year.

On a more positive note, the group said its online revenues showed a 52.3% improvement, to £7m.

Net debt stood at £12.8m, compared with £6m a year ago, and the full year dividend has been cut from 5.115p per share, to 2.72p per share.

The group declared that new landed supply arrangements with a major European retailer further support the its position as one of its key suppliers and “represent an exciting opportunity to grow alongside one of the continent’s fastest expanding retailers”.

Ultimate Products also made good progress in Germany, with a new showroom opened in April 2018, and a number of major retail accounts already open. Orders taken to date are ahead of management’s expectations.

During the last financial year the group also purchased the Accrington-based Kleeneze brand from administration in June 2018, which it is now relaunching with a range of laundry and floorcare products for sale into retail and via online channels.

A newly-refurbished 240,000 sq ft warehouse at Heron Mill in Oldham is already improving operational efficiencies, and provides further capacity for future growth.

Meanwhile, a further 47 graduates have been recruited onto the group’s graduate scheme across 18 different entry-level roles and within nine different key departments.

Simon Showman, chief executive of Ultimate Products, said: “This has been a challenging year for Ultimate Products, and, indeed, for the wider general merchandise sector in the UK.

“Our results reflect a difficult trading environment, but I am proud of the adaptability and resilience that we have shown in navigating our way through it.

“The performance of our online business and the progress that we are making in Germany have been particular highlights,” he said.

He added: “These are areas for which we continue to see substantial potential and on which we are, therefore, focusing an increasing amount of time and investment.

“Current trading is in line with expectations, and we are pleased to report that our order book for FY19 is ahead of this time last year.

“While the UK market looks set to remain challenging for the foreseeable future, we continue to look to the longer-term future with confidence given the viability of our strategy, our experience of managing difficult trading conditions, and our strong balance sheet.”

Stockbroker Shore Capital upgraded its expectations for Ultimate Products’ current year after today’s announcement.

It said: “UPGS has followed an encouraging trading update for the financial year ended 31st July, with results confirming EBITDA in line with our recently raised expectations at £6.5m, albeit a decline of 44% year-on-year.

“Whilst full year 2018 sales are confirmed down 20% year-on-year, we are encouraged that positive momentum is reported in current trading, with the forward order book ahead year-on-year supported by international and online growth and a firmer UK.

“With growing visibility, we upgrade our FY2019F expectations, looking for EBITDA of £7m (previously £6.7m) which leads to underlying earnings per share of 5.5p.

“After a very challenging trading period, we have growing confidence that UPGS has moved from stabilisation back into growth.”