Trading Update

Jun 25, 2025

Earnings release

Summary

FY25 EBITDA is forecast at ~£12.5m, below £14.3m consensus, as U.K. softness and deferred European orders weigh on revenue and margins. The FY26 order book is down 7.5%, prompting a cautious outlook and renewed focus on sales execution.

Ultimate Products. As you all know, they put out a trading update this morning. Today is simply an opportunity for the management to explain a little of the mechanics behind that trading update and to give you, the investors, an opportunity to put forward any questions that you might have. We will start with an opening discussion from Andrew Gossage, and then we'll take Q&A after that. Over to you, Andrew. Thanks, Hannah, and good afternoon, everybody. Thanks for being on the call at such short notice. The trading update this morning splits into two basic parts. The miss that we're forecasting on FY 2025 and the view that we've expressed with regards to guidance with regards to FY 2026. I'll just take those two in order. Why are we forecasting a mix to miss for 2025 and what's happened there? There's been two basic things which have happened from a revenue perspective. We have seen continued tough trading in our markets. GM, general merchandise, continues to be very tough, both particularly in the U.K. where we're more mature, and that has sort of dampened trading in Q4. We've also seen some deferral of European orders, European product launches from Q4 into Q1. On that second point, we have had a lot of product launches in Europe over the latter third of this financial year, but we have seen some of them deferred into Q1, and that's been quantified at about GBP 4 million. We have seen, in terms of mix, overall growth. The story of 2025 really growth in our European business and some decline in our U.K. business. That mix has affected our gross margin. Our European business is typically lower margin relative to our core U.K. business. As a result of that, we are expecting lower revenue than expected and gross margins to be softer than originally expected. We're forecasting around GBP 12.5 million EBITDA versus the GBP 14.3 million, which was the current consensus. I suppose the more significant news really is the sort of pessimistic view we're taking of FY 2026. At this point, we wouldn't draw too many conclusions from the order book. It's still relatively young. At this point, it can be volatile, and it can be affected by timing, for example, orders placed, say, earlier last year than this year. Normally we'd wait until pre-close in August when maybe it had matured a little bit, we could draw perhaps a better informed view from the order book. Given that we were updating anyway, we decided to give this view because the combination of that softer order book together with what continues to be, I think, for general merchandise, a very tough market. Those two together, we felt that we had to update, and we had to give this fairly negative view on FY 2026. Of course, that's what we're dealing with, but really, that's not good enough as far as I'm concerned. No matter how hard markets are, you still have to trade in them, and we have to make sure that we get the best out of whatever markets we operate in. There's still an awful lot of products being traded each day, despite the fact that we know consumers, their sentiments is somewhat muted. We know that consumers are choosing to save more and spend less. We know that food inflation is still there, and that squeezes our half of the shopping basket, which makes things tougher. But all things aside, like I said just before, there's still a lot of product being bought and sold. We still have to take more than our fair share. And it's caused us to go away really and think, "Well, what can we do better here? What improvements can we make?" It's not dissimilar to what we've done previously in the face of escalating costs that all consumer businesses have faced in the last couple of years. We haven't accepted that lying down. We've gone away, and we've automated. And in doing so, we've mitigated those inflationary effects on our overheads, so the overheads are steady level for about three years on the run, despite significant escalation in wage rates. It's the same with this, really. We've gone away and said, "Okay, fine, it's a tough market, but what can we do to do better in it, and what can we do to do better, particularly than our competitors?" We've got, I think, a fantastic brand offer, a fantastic product offer, and we're universally, I think, acknowledged as being the best at what we do operationally. What we need to do is do everything we can to sell that proposition as effectively as possible. What we want to do is up our investments in sales function, up our investments in training and developments, in use of data and technology. Have a look at process and how can that be improved to get the best outcomes possible in what is a difficult market. That is the real key focus of the entire operating board and indeed main board at the moment. It's a tough market, but can we do more to get more out of what is a challenging market? That's where our focus is going to be over the coming months with regards to our sales function. How can we get more out of the current situation? It's really as simple as that. I don't really, Hannah, have much more to say than that. It's quite straightforward. Any questions from your side? Just a few. Let's crack on. What is the net bank debt position range going to be at the end of 2025? End of 2025, the analysts are expecting it to be around GBP 18 million. Relatively similar to what it was at the interims. I would have hoped for that to have come down a little bit more, but that's obviously been affected by these GBP 4 million of deferrals. We're holding that stock at the moment for them, which means that therefore working capital is that GBP 4 million higher than I would have wanted or expected it to be. That should end up being traded out over the course of the summer. I would say in terms of our working capital position, it is still elevated by about GBP 5 million due to the closure of the Red Sea. Obviously, I do hope at some point for the Red Sea to reopen for us to get that back, but I'm not counting on that anytime soon. What is the sold stock balance range going to be at the year-end 2025? Ooh, the sold stock balance level. I was expecting questions on free stock level, because free stock ends up being the risky stock within the business. The free stock level is the one which is relatively stable within the business, and the free stock level has been running at about GBP 10 million-GBP 12 million. If that was rising, that's what would cause me to have issues as a CFO that that was rising above the level I would want it to be. That at the moment is about GBP 9.6 million. Our sold stock level I'd expect to be slightly higher than that, so obviously that's got less risk in relation to it. That's probably going to be in the order of GBP 16 million-GBP 17 million at the year-end, which will obviously include that GBP 4 million extra which I would have expected to have sold. Thank you. Is the 4 million of deferred orders from Q4 in 2025 included in the current order book for 2026, and reflected therefore in the 7.5% fall stated on the trading update? It is, yes. Those 4 million have moved into next year. That was on one large customer. The irony is about it, they did a very big exercise of completely looking at the whole of their order book that they do, and they looked at all customers in relation to that. What's actually ended up happening with this customer is orders have then moved out of 2026 into FY 2027. Miraculously at this point in time, we actually have an order book for FY 2027. About 4 million went from 2025 to 2026, and about 3 million went from 2026 to 2027 at that point. Having about a 1 million net effect on the FY 2026 order book. Really helpful. Can you give more detail on what improving the sales function actually means? Yeah, sure. Look, I don't want anyone to get the false impression that we have a problem with our sales function. This is not about that. This is about, can we do even better? We are focusing on probably four main areas. We need to make sure that we're making as good a use of data and technology as possible. We're pretty adept at that as a business as a whole. Possibly we're a bit less invested in that in the sales area. We need to really double down on training and development. When you're selling a brand, and the business has changed a lot in recent years to be more branded, that requires a certain way that you need to go about that. We need to make sure. Of course, sales is more typically about the soft skills. Train, train, and train again. That is going to be a top priority. Again, probably an area where on reflection, a bit less invested in sales than elsewhere in the business historically. Process and management process. Making sure there is the correct monitoring and oversight of the team on what they are doing and making sure that what the team are working on, it really dovetails into the overall strategic priorities of the business. I do not think there is a huge amount to do human capital-wise. I think we have got good people in there. But there may need to be some additional expertise brought in. We very much aspire from a sales point of view. We have learned this from our two new non-execs, Andrew Milne and JC, who are both from an FMCG background. Andrew is CEO of Nichols, so some people on the call may be holders there, but he is from a sales and marketing background. JC is from an FMCG background with the likes of Procter & Gamble. It has really opened our eyes as who are the best at selling and using data and technology and the training side of selling. We look at the FMCGs and the Cokes of this world, et cetera, and we see them as the example we want to follow. It is that kind of thing. It is a sort of all operating board initiative. It will obviously be led by myself and Simon Showman, but it is about addressing often a lot of small things that get in the way of people's ability to sell and liberate them to do that. People like Craig Holden, David Bloomfield, our trading directors are getting heavily involved in this initiative. It is a very important priority for us. Has sales forecasting been poor? I don't think our forecasting. Once we get those listings, we are able to forecast them pretty accurately. We want to get more listings is the important point. A couple of questions asking, do you think the impact sale has come from Temu and Shein? I don't. Well, to the extent it is, I think it is pretty marginal. Look, I think Temu. Shein, obviously, is more clothing than GM. Temu is really a threat to own label offers. Really people who shop on Temu shop because they are brand agnostic, and they are very happy to buy an unbranded product. We many years ago decided to focus on our brands. The people who buy our products value our brands, so we think they are much less likely to buy from Temu. It may have a marginal impact. So for example, there are some small parts of our business where, say for example, cooling. When it comes to a 6-inch desk fan, people don't really care that much if it is Beldray or not. I suspect it may have a marginal impact and therefore maybe in areas like that we would lose some revenue. That is a very small part of our business. And interestingly, during this recent heat wave, we did see demand on those sort of commodity cooling products at a lower level than would have been previously. But the electrical cooling items, we did see a surge in demands because, when it comes to electrical, more people want the assurance of the brands. Thank you. With debt EBITDA expected to peak at 1.8x, how close is this to your covenants and how often are these tested? Fairly far away from our covenants. The covenants are up there at sort of like 3x and are also based on the full amount of debt that we have. They are only based on part of our debt balances. You cannot take that as being the actual measurement at all because it is only in relation to certain components of our debt. They are measured on a quarterly basis, and we are very comfortable with sort of like where they are. Obviously, I spoke to our bankers yesterday, and they are very well aware of what was coming down the line today. We have a very good relationship with HSBC, and all the models are showing at the moment that we work well within our covenants. Okay. Questions on Europe, essentially. How is it doing? It was supposed to come to the rescue. How are we trading there? If you take a step back, what was the plan? And where is that plan falling down? The plan was in many ways very simple, a stable or preferably growing core U.K. business and a European business where growth was more elevated because we were relatively new entrants to that market, but where the incremental overhead burden was pretty small. So that the gross margin in Europe would convert into EBITDA on a pence on the pound basis, say. Now where we are falling down is we are not delivering that stable U.K. core business. I am very confident that Europe will continue to deliver growth really for the foreseeable. We have some very strong strategic relationships. The point about the GBP 4 million, and you can take a glass half full, half empty view of this. I would have preferred to have that product invoiced in Q4. Not primarily because of the impact on the numbers, although it was a definitely super close second. The more important reason is, the quicker a product launches, the quicker you get your repeats. You get that repeat, it leads to overall a higher level of revenue in aggregate. That is the glass half empty view. The glass half full view is we had a dozen or so launches anyway. They are now repeating. The retailer in question, we are doing product launches with them, several product launches a month have been over the latter part of this year. We will continue to do so into H1. Ultimately, that is going to be a significant driver of growth in Europe. The problem is if we do that, but we see decline in the U.K., then really we are pedaling fast to fill a gap. That is what we have got to address. That is why we want to really double down on our sales efforts and see if there is scope for improvement there. Because if we can make that stable, growth will be even better, of course. On the growth points, there is no reason why there shouldn't be growth. Our brands are still challenger brands in most of the product categories we are in. The only one where we are not really the challenger brand is scales on Salter, where we have 60% U.K. market share. None of this should be a problem, even allowing for the fact that it is a pretty tough market. So if we can stabilize that core U.K., that then allows the confident growth in Europe to convert into gross margin and then down into EBITDA sort of with very little dilution. At the moment, because we are struggling to deliver that stability in the U.K., where really the growth in Europe is to some extent filling a hole there, it is also diluting our gross margin, which is what we have seen in H2. Will further European expansion involve additional sales and marketing expenses in new territories? I think gradually over time, but I think just to return to that point about the incremental cost to serve of our European business, again, assuming a stable U.K. core is pretty modest. Chris and I think it is no more than 2% of revenue. That is because we are leveraging the product developments that we have already invested into the U.K. It is because we are leveraging our operational capability here. The incremental cost is generally just sales efforts, and then I think over time, increasingly some marketing efforts as well. The answer to the question is yes, but it is going to be a modest spend relative to those incremental European revenues. Was the customer who postponed the large order in the U.K. or in Europe? It was in Europe, as I said before. Yeah. Is there room for further cost cutting if sales deteriorate further? Well, I think there's significant opportunity for further management of our costs. I've always got to be quite careful in a forum like this what I say, because the largest elements of our cost base is people. I don't want to cause issues there, but our productivity programs continue apace. Rollout of robotic process automation, RPA, rollout of accelerating use of AI in the business. Then the recent launch of the PIM, the product information management system, has been a bit of a game changer, really, in terms of enhancing productivity throughout the business. So we do see ourselves. This is super important because what we're seeing amongst our competitors, how are they dealing with this? If you take national living wage as a bit of a benchmark, since 2021, it's gone up by the best part of 40%. And we've managed to absorb an awful lot of those increase in salary rates through being more efficient through automation. We see our competition often taking it out of the product, and that is. Well, that's just not sustainable. At some point, the consumer notices, and it damages your brand. So I think we've done something quite special here on that front, and we continue to do so. Okay. I guess what I'm trying to say, it's not just an overhead play. It sounds like an overhead play. But it isn't really. It's about allowing us to be as low a cost. We want to be the lowest cost, highest service supplier to U.K. and European retailers. And that delivers a commercial advantage, not just an overhead benefit. Okay. You talked about competitors. Are you losing market share in the U.K. to other brands? We don't believe so. When we speak to our competitors, they're saying similar things to us. It's a tough market, and that's often magnified then by the sort of reticence of retailers to place orders, because they're not sure what's happening. Uncertainty often sort of leads to inaction, and pushing people over the line to place orders is definitely tougher now than it would typically be. Well, I am a bit concerned about FY 2026. Our order book is down. Like I say, big health warnings, it's early days, there's plenty still to do. But the fact the order book is down, it combines with what everyone's kind of acknowledges a tough market, it does worry me. But we'll give a further view on that when we do pre-close in August when we'll have a bit more data. Okay. Not competitors, but perhaps comparables. ProCook with results today. Marks Electrical recently reported favorable results suggesting that today's profit warning from Ultimate is not connected to the general consumer market. Could you comment? Well, I always find these questions pretty difficult because saying things about other people is. But I think those businesses have gone through their own cycles, haven't they? I think are in a bit of recovery mode, and good on them. We like both those businesses, particularly, well, I think from an operational standpoint, I think Marks Electrical, they fitted my dishwasher last week, they deliver a tremendous service. The guy who founded it, can't remember his name now, who I think is still the CEO, we hold that team in very high regard. So we're pleased to see them back in the office. Mark. Mark of Marks Electrical. Yeah. Is the U.K. softness primarily with discounters or supermarkets? There aren't many people doing well on GM. It's pretty broad spread. I'd say though it's certainly worse with, should we say smaller retailers, maybe retailers that are exclusively GM, maybe don't have a food offer. Food still gets people into the store. That'd be my sort of overall observation on that. When our numbers come out for 2025, we have done comparatively better in the U.K. with supermarkets this year, less with the discounters, and less with the smaller retail. Supermarkets in FY 2025 have certainly held up better in that space by our numbers. Yeah. Thank you. Okay. I have got about three questions all around dividends, capital allocation. One, will you continue with the share buybacks? Two, will you continue with the dividend? What is the thinking around that? And three, excuse me. With your current policy where capital allocation policy linked to EBITDA, does it not make it inevitable that more shares are bought at a higher price and less or none when the share price is lower due to a weak outlook? First of all, our capital allocation policy, if you do not know what it is, first of all, is to invest within the business, for the growth in the business in the long term. It is then to distribute 50% of our post-tax profit. Then to supplement that, as far as to keep net debt to EBITDA at around one times with share buybacks. Obviously, in terms of share buybacks, if we are significantly above the one on a longer-term, medium-term basis, then yes, we would see doing those. That is a constant watching brief. We are not wanting to get net debt be going up and buying our shares. That is only for excess cash to be doing that. That policy is to be buying in the market at what the market share price is at that point in time. Obviously we are a believer in the fair price in the market is the fair price at that point in time. That is a way to, in essence, as a distribution to shareholders, to give shareholders a different route. So, some shareholders prefer dividends, some prefer share buybacks. We do both in relation to that, in line with what our stated policy is. Thanks. Is the guidance you've provided to brokers based on current freight rates, including the recent jump? I'm not sure the recent jump, as it's been referred to. We saw this mini shipping crisis last year, which affected H1 results. We have seen an increase in rates Asia Pacific, but we don't tend to use that route. There's been a mild firming, but I would say it's pretty much within a normalized range. We did see spot rates go down, I think, as low as 1,500, 1,600 and back above 2,000. But our contracted rate is $2,000 anyway in the fourth quarter. That's where the question may be coming from. I could be wrong here, but over the weekend, there was stuff about tanker rates and the rates for tankers increasing, but that's specifically around oil tankers coming out of the Gulf due to the threat of the Persian Gulf ending up being closed as opposed to the shipping that we are working with. But there has been press around those oil tanker prices. Okay, thank you. Do you still expect your online sales to grow? Yes, I do, actually. Online was most adversely affected by the air fryer boom and then it coming off. There have been some changes around Amazon's approach to intake. They have been tightening their inventory. We think that cycle should have come to an end by the time we get to peak. It is always quite a difficult question to answer, this one, without knowing what your October, November, December is going to be. We are not a particularly peaky business. We do more revenue in our first half typically than the second half, but we are not very Christmas peaky. Our online business does tend to be. I am pretty excited about what we are going to do in peak, particularly in the EU. We have been doing a lot of work over the last 12 months to improve our EU offer on the Amazon platform, and we are listed across all the main territories in Europe. More of a focus on Salter and Beldray, and that is moving well, but the real test is peak. I am optimistic, but I will give a more definitive answer once we have seen that peak trading. Yeah, absolutely. A couple of questions, actually, on disposals. One obviously notes that the strength and focus is on Salter and Beldray. Do you need the rest? The other notes that the price you paid for Salter is now two-thirds of your current market value. So, do you have any views on what you are going to, whether you would hold on to everything? Yeah. We call the other brands supporting brands. Plan A is always Salter and Beldray. They are the brands that we invest in from a marketing perspective. They are the ones with the heritage that the consumers love and recognize. I use the word love. We went to the Good Food Show last year, and bloody hell, people really love Salter. It is remarkable. But you do need from time to time a bit of a plan B in terms of channel management reasons. There are times where it would not be appropriate. There is a good commercial opportunity, but it would not be appropriate to use one of those two brands. But we do see Salter and Beldray as very much our main area of focus. Okay. Thank you. When you talk about sales weighted towards lower margin product categories, what kind of categories are we talking about? Are SDAs also still weak? We do have a range within when we talk about product categories. Last year, it is true to say we had a relatively large amount of clearance sales, which are relatively one-off and a relatively high margin. We do not have those same clearance sales in the current year. Then within our main product categories, yes, SDA are at the lower end, housewares, kitchenware in the middle, then Salter scales at the higher end. Yes, you can have a shift between those, and it has been shifted slightly more down towards the SDA level. Also, the customer mix as well, or sales channel mix, has also been slightly more towards the lower end. Then in relation to geographical, it has also been a slight shift towards the lower end. EU versus the U.K., when Europe has been growing, but U.K. has been going down. Almost all three of those areas are weighted towards the lower end, which means that overall, the gross margin mix has been towards the lower end. Which, almost you would like to go, there is one driving reason behind it. In the first half of the year, the driving reason was rates. Really very easy to explain, because you can see what is going on. Second half of the year, it is slightly more complex in terms of those moving parts. But in some way, as Andy explained it earlier, you want that U.K. core to be stable and with the EU, which is slightly lower margin, to be adding the growth to it. That model does not really work if the U.K. is shrinking. Are you seeing any change from Chinese exports being redirected to the EU and U.K. from the U.S.A.? Not really. This was the big news story, wasn't it? There was going to be a load of product arrived that was originally intended for America. It was always a bigger threat in theory than it was in practice. It is not that straightforward to repurpose product for the U.S. market for Europe. To use a very obvious example, the electrical products have a different plug and indeed a different voltage. It was always a bigger threat in theory than in practice. The stock that was left in China when the tariffs went up, basically remained in factory warehouses. Then when the 90-day window was opened, it was all shipped. I have no doubt there will have been some product that made its way to Europe and to U.K. But, we have not seen very much of this. Thank you. What is a good medium-term gross margin target? Target is an interesting word because to be honest with you, it is not necessarily what I am targeting. It is because what you end up with the mix. What we want to do as a business is to grow the top line. Therefore, when I am talking to the analysts and they are setting expectations, you are trying to come to what you are expecting a blended rate to be. Usually, I will be expecting the blended rate to be around 24%, but you can see shifts in that. So obviously this year, slightly lower down at 23, last year slightly higher at 25. I would not say I was necessarily targeting that because if I can see that the growth is coming from an area where I have got a slightly lower gross margin, I would be happy with higher sales, higher gross profit overall, and a slightly lower gross margin as a percentage, if that makes sense. So what we are trying to do is grow top line, grow gross profit, and then the gross margin ends up being a little bit of a ending calculation. But if people are looking about what rate I will be expecting it to be, I will be wanting it to be around 24%. Thank you. Just back to the tariff point, can you leverage perhaps reduced demand from the U.S. to get keener pricing from your Chinese manufacturers? Yeah. There is some good news here, which is very welcome. I think a couple of things. The factories are quieter, so that gives us a stronger negotiating position. I think also America definitely fell into, as far as Chinese manufacturers are concerned, is definitely in unreliable boyfriend territory. Even if it all switched back on tomorrow back to what it was, which I think is unlikely, I think you'd see Chinese manufacturers being quite skeptical about wholeheartedly reinvesting in those relationships again. They are prioritizing the other markets like Europe and U.K. So that's quite helpful. Also, I know there's been some bouncing around in the last few days with things like oil prices with the Iran crisis at the moment. But a lot of input prices have dropped relative to, say, a year ago, so that's quite helpful. The thing that's perhaps a bit unnoticed is there's a bit of a double whammy on the currency from potentially the Chinese renminbi has depreciated against the US dollar. But the US dollar in turn has depreciated against pound and euro. So there's a bit of a double benefit there. So we are seeing better factory gate prices. Then of course, we are seeing a better GBP US dollar rate and indeed a better EUR US dollar rate. Obviously, with that part of our currency, it will take a while to come through because our hedging positions we need to unwind to get the full benefits of that. So it'd be certainly we'll start to see the benefits of that during the course of FY 2026, but more so in Q4 than in Q1, should we say. The benefits of what we'll build as we go through the year. Okay. Just trying to wrap up here. There's quite a few questions around just the rebrand. How have the Beldray rebrand been received? Has the rebrand been part of perhaps the drag if people have seen the rebrand as an opportunity to exit on the basis of their own woes? Or has the rebrand going to be or will it be the opportunity to translate into increased listings and sales? In terms of Beldray rebrand, it's only partly in the market at the moment. But the response to it from retailers has been exceptionally positive. Exceptionally positive. They do see us very much as a credible now competitor, with the other laundry brands that are out there. Because it was a more radical rebrand than Salter. Salter was more conservative because the consumer knew what they wanted from Salter, and we just had to align ourselves with that. Beldray was more of an opportunity to put our stamp on the brand. I think it's absolutely stunning, and that's certainly been the feedback we've had off retailers. But the true test will be once it goes into store and hopefully delivers increased profit density for those retailers and therefore reorders. Super. Okay, well, we're going to have to wrap it up there. But we've had over 50 questions, so apologies if we didn't get into the nitty-gritty of all of them. But I hope that gives you all a really helpful bit of substance on today's trading update. So thank you both, Andrew and Chris, for your time and for our listeners for joining to us, and we'll look forward to further good news in the future. Great. Thank you. Thanks, everyone. Thank you very much.