Ultimate Products confident despite fall in first-half revenue

13th Feb 2024 15:27

(Sharecast News) - Homeware company Ultimate Products said in an update on Tuesday that its unaudited revenues in the first half experienced a slight decline of 4% to £84m year-on-year.

The London-listed firm, which owns brands including Salter and Beldray, said factors contributing to the decrease included challenges in supermarket ordering due to overstocking, tough comparisons with the exceptionally high demand for energy-efficient air fryers in the first half of the 2023 financial year, and some revenue deferral due to recent disruptions in global supply chains.

Despite the challenges, Ultimate Products said it was committed to enhancing productivity through continuous improvement initiatives, including the automation of a number of tasks across the business.

Lower freight rates during the period also contributed to improved operating margins.

Looking ahead to the second half of the 2024 financial year, the group said it expected a stabilisation in shipping schedules, with peak air fryer sales moving out of prior-year comparatives.

Additionally, issues related to supermarket overstocking were gradually subsiding, and more retail customers were reporting normalised stock positions, indicating an improving order trend for 2024.

At the end of the half-year, the group's net bank debt-to-adjusted EBITDA ratio stood at 0.4x, down from 0.7x in July.

That ratio remained below 1.0x throughout the seasonal peak trading period, with net debt reaching a seasonal peak of £17.1m in December, compared to £30.5m in the first half of the 2023 financial year.

In terms of capital allocation, Ultimate Products said it had largely repaid the debt incurred from the acquisition of Salter during 2021.

As a result, the board had approved a new capital allocation policy, aiming to maintain the net bank debt-to-adjusted EBITDA ratio at around 1.0x.

The level of leverage was seen as efficient for the group's balance sheet, allowing for further returns of capital to shareholders.

Ultimate Products said it intended to invest in business growth while returning around 50% of post-tax profits to shareholders through dividends, and supplementing that with share buybacks.

"Amidst a tough but improving consumer backdrop, we are pleased to have delivered a resilient performance," said chief executive officer Andrew Gossage.

"The overstocking issues that have held back ordering at many of our retail partners, especially European supermarkets, continue to subside."

Gossage said that as the underlying demand for the firm's products and brands remained robust, customers that had paused their ordering were now open to buy again.

"As a result, we remain confident in our prospects, as demonstrated by our new capital allocation policy."

At 1534 GMT, shares in Ultimate Products were up 2.38% at 150.49p.

Reporting by Josh White for Sharecast.com.