Ultimate Prod Share Price (ULTP)

Management of Ultimate Products conducted a live Investor Presentation following Interim Results (for the period to 31 Jan 2024).

Andrew Gossage (CEO) & Chris Dent (CFO) ran viewers through the financial and operational highlights of the period, which included stable profits (EBITDA) and a marked reduction in bank debt. The company also discussed trading in line with market expectations, its intention to buy back up to 10% of its shares, and the ongoing productivity drive through focus on continuous improvement, including the automation of hundreds of tasks across the business. The team also answered investor questions in a wide-ranging Q&A session.

The full video has been dividend into chapters as below:

0:00:03 Beginning

0:00:35 Introduction to Ultimate Products

0:03:00 Highlights of the period (Financial & Operational)

0:05:35 Strategy

0:17:01 Financial review

0:28:00 Summary & Outlook

0:31:42 Questions & Answers

Link to full video: https://www.equitydevelopment.co.uk/research/ultimate-products-investor-presentation-interim-results-april-2024

Stable profits (EBITDA) and a marked reduction in bank debt were key features of Ultimate Products’ (‘UP’) interim results, released today. The company also announced its intention to buy back up to 10% of its shares. FY2024 full year results are expected to match current market expectations.

With revenue expansion likely to resume in H2 2024, and continue into FY2025, we argue that UP is more than capable of generating sales growth and free cash flow simultaneously.

Underlying 6% sales growth, a robust portfolio of six Premier Brands, the ability consistently to convert profits into cash and the prospect of a buyback programme support our view that UP’s shares merit a valuation significantly in excess of current levels. With a keen eye on relative valuation, we base our unchanged 250p fair value on 1.3x EV/sales, 10.3x EV/EBITDA and 14.7x P/E ratio. At this share price the dividend yield would still be 3.4% - i.e. in line with peers.

New research report here: https://www.equitydevelopment.co.uk/research/balancing-sales-growth-with-cash-flow-generation-interim-results

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), will be conducting a live investor presentation following the release of their Interim Results for the period to 31st January 2024.

The event will take place at 9.45am on Friday 12th April.

The online presentation will be hosting by Andrew Gossage (CEO) & Chris Dent (CFO) and is open to all existing & potential shareholders. Questions can be submitted during the presentation and will be addressed at the end.

Link to register: https://www.equitydevelopment.co.uk/news-and-events/ultimateproducts-investor-presentation-12april2024

Whoops! Meant 4% buyback obviously

Link to new research report: https://www.equitydevelopment.co.uk/research/cash-generation-drives-shareholder-value

Ultimate Products’ (UP) sales fell by 4% in the first six months of FY2024, with the likelihood of a broadly flat full year. But the company’s FY2024 profit expectations - and our own EBITDA forecasts - remain unchanged as improved gross margins should offset lower sales.

UP’s first half sales setback was caused by 3 important temporary effects. First, the company lapped an unusually strong period a year earlier when demand for air fryers was at a peak. Second, supermarket overstocking has taken longer to dissipate than might be expected. Third, UP was negatively affected by disruptions to global supply chains related to conflict in the Red Sea. In contrast, the gross margin outlook is significantly more positive as the uplift to gross margins achieved in the second half of FY2023 appears likely to be retained in FY2024. We increase our gross margin expectations in FY2024 from 25.5% to 26.6%.

Some idea of buyback potential is available from today’s trading update. The company targets long-term net debt/EBITDA at 1.0x. If our expectations for end-FY2024 net debt of £8.0m are met and £21.6m EBITDA are met, the implied headroom for share buy-backs would be of the order of £13m to £14m – equivalent to around 10% of the company’s current market cap.

With positive news on the scope for buybacks in our view offsetting lower than expected sales revenue in FY2024 we maintain fair value of 250p for the shares.