- Challenging UK conditions persist
- Full-year guidance downgraded
- Stronger second half expected
Ultimate Products’ (ULTP) shares plunged 16% to 85p after the homeware brands owner downgraded full-year profit guidance following a tough first half impacted by ‘challenging’ conditions in its domestic market.
The Oldham-headquartered company pinned the warning on weak UK consumer demand for general merchandise during the half ended 31 January 2025, during which the company had to absorb an extra £2 million in shipping costs due to elevated summer freight rates.
However, the share price damage was cushioned to an extent by news of improved trading in the second quarter, with Ultimate Products also calling out ‘cautiously encouraging momentum’ heading into the second half.
WEAK DEMAND WEIGHS
The owner of Salter, the UK’s oldest houseware brand established back in 1760, and laundry-to-floor care brand Beldray, Ultimate Products reported a 5.7% drop in first half sales to £79.4 million.
UK market conditions remained subdued amid weaker consumer demand for general merchandise and like-for-like sales were impacted by tough prior year air fryer comparatives, although international sales rose 12% to £29.1 million amid good growth in Europe.
GUIDANCE DOWNGRADE
Since the start of January, Ultimate Products has seen a slowdown in the pace of new orders from ‘some’ retail customers and expects revenues for the year to July will be ‘broadly flat’ on last year’s 155.5 million as a result.
Due to weaker-than-expected sales and rising costs, adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) for the first half is expected to be ‘in the region’ of £7 million’ and for the full year, is now expected to be in the £14 million to £16 million range, well below the £20.6 million consensus was calling for.
However, Ultimate Products anticipates a return to top line growth in the second half and assured investors that freight rates have settled at more normal levels.
WHAT DID THE CEO SAY?
CEO Andrew Gossage said that looking ahead, Ultimate Products is ‘cautiously encouraged by both the improved shipping rate environment and by the healthy order book that we have in place for the rest of the year, led by our international business. We therefore anticipate a stronger performance in H2. While upcoming cost pressures and the ongoing challenges faced by some of our retail customers inevitably create some near-term uncertainty, we remain confident in our medium-term strategy, particularly given the growing appeal of our brands to shoppers across mainland Europe.’
BROKER VIEWS
‘Ultimate Products is a high-quality firm but prior anticipated aspirations have fallen victim to cost and market conditions,’ conceded Shore Capital as the house broker slashed its full-year 2025 pre-tax profit estimate by 36% to £11 million.
‘The group’s shares will reflect these moving parts, but we do concur with management that it should be confident about its medium-term strategy as Ultimate Products, in truth, remains a high-quality consumer goods play.’
Canaccord Genuity said: ‘The challenging UK consumer backdrop has been well-documented, as evidenced by a number of the retail sector trading updates over recent weeks and the sharp fall in consumer confidence; however, we continue to believe that Ultimate Products is well positioned to benefit from an improved consumer environment in the UK as and when underlying macro conditions improve. The long-term growth opportunity for Ultimate Products and its well-regarded stable of brands in mainland Europe remains undiminished.’
