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Ultimate Products plc, owner of renowned homeware brands such as Salter and Beldray, reported a mixed performance in the first half of FY2024, with a slight decrease in revenue to £84.2 million, down 4% year-over-year, amidst challenging market conditions. However, gross profit improved by 3% to £22.4 million, benefiting from a sales mix shift and reduced global shipping rates, leading to a gross margin increase to 26.6%. Adjusted EBITDA remained stable at £11.3 million, with a slight increase in statutory profit before tax to £9.5 million. Despite these positives, statutory EPS saw a 3% decrease, reflecting the impact of the higher UK corporate tax rate. The interim dividend per share saw a modest increase to 2.45p.

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Ultimate Products has demonstrated resilience in a tough market environment, managing costs effectively and capitalising on a more favorable sales mix. The decrease in revenue is attributed to overstocking issues in supermarkets and modest revenue deferrals due to global supply chain disruptions. However, the company has shown robust gross profit margins and stable adjusted EBITDA, thanks to efficient cost management and a strategic sales mix. Notably, cash generation from operating activities increased significantly, showcasing strong operational efficiency.

Risk Factors

Key risks include ongoing global supply chain disruptions, fluctuating demand for household products, and the impact of economic uncertainties on consumer spending. Moreover, the company’s reliance on the UK and European markets exposes it to regional economic risks and potential Brexit-related trade barriers.

Management remains optimistic, highlighting the company’s adaptability and focus on operational efficiencies. The rebranding initiatives and strategic focus on expanding European market presence, as evidenced by the opening of a new showroom in Paris, are expected to drive future growth. The transition in leadership, with Andrew Gossage stepping in as CEO, is poised to further the company’s strategic initiatives.

Outlook

Expectations for FY24 remain in line with market predictions, anticipating revenues of £166.7 million and adjusted EBITDA of £21.5 million. Factors influencing future performance include the easing of overstocking issues, market expansion efforts in Europe, and the continuous improvement of operational efficiencies. The company’s focus on a diversified product portfolio and brand strength, particularly in the Salter and Beldray brands, are critical for long-term growth.

Considering Ultimate Products’ stable financial performance, strategic market expansions, and efficient cost management, I would Hold shares personally, if I am an investor. Investors should closely monitor the company’s progress in expanding its European footprint and the impact of economic uncertainties on consumer demand.

While revenue declined slightly, improved gross profit margins and stable EBITDA highlight the company’s strong underlying financial health. The outlook remains cautiously optimistic, with management focused on long-term growth strategies.