TIDMUPGS
RNS Number : 7649R
UP Global Sourcing Holdings PLC
31 October 2023
31 October 2023
Ultimate Products plc
(previously, UP Global Sourcing Holdings plc)
("Ultimate Products", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEARED 31 JULY 2023
Record revenue and profits
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), announces its audited results for the
financial year ended 31 July 2023 ("FY23", or "Year"), that are in
line with market expectations.
Financial highlights
-- Total revenue up 8% to a record GBP166.3m (FY22: GBP154.2m),
achieved with no overall price inflation to keep our products at
prices which are affordable to consumers:
o Online revenue up 64% to GBP41.4m (FY22: GBP25.3m), with
strong growth in both the UK and Europe
o Sales to retailers down 3% to GBP124.9m (FY22: GBP128.9m),
with growth returning in the second half of the year (H2: 8%
growth, H1: 11% decrease)
-- Gross profit rose 11% to GBP42.7m (FY22: GBP38.4m), with g
ross margin increasing to 25.7% (FY22: 24.9%), driven by online
sales growth and the fall in global shipping rates:
o Our relentless focus on productivity improvements since FY18
has driven gross profit per employee from GBP83k in FY18 to GBP113k
in FY23
-- Adjusted EBITDA* up 8% to GBP20.2m (FY22: GBP18.8m)
-- Adjusted profit before tax up 6% to GBP16.8m (FY22: GBP15.8m)
-- Statutory profit before tax up 4% to GBP16.0m (FY22: GBP15.4m)
-- Statutory EPS up 2% to 14.6p (FY22: 14.3p), with Adjusted EPS* up 4% to 15.4p (FY22: 14.7p)
-- Full year dividend per share up 4% to 7.38p (FY22: 7.12p)
-- Improved net bank debt/adjusted EBITDA* ratio of 0.7x (FY22:
1.3x), driven by improvements in working capital management and the
phasing of trading during the second half of FY23
-- Strong cash generation from operating activities of GBP24.4m
(FY22: GBP6.8m), representing a 121% operating cash conversion
(FY22: 37%)
*Adjusted measures are before share-based payment expense and
non-recurring items.
Operational highlights
-- Successful relaunch of Petra, the German kitchen electrical brand, into the German market
-- Renewal of the Group's Russell Hobbs licensing agreement on a rolling four-year basis
-- Launch of the Group's inaugural ESG Strategy
-- Continued investment in AI and robotics yielding positive
results, and supporting operating margin:
o Robotics programme now saving over 1,000 hours of employee
time every week, allowing our talent to focus on higher value
tasks
-- Post period end:
o Opening of the Group's new European showroom in Paris
o Rebrand of the iconic Salter label
o Renaming of the Group from UP Global Sourcing Holdings plc to
Ultimate Products plc, to better reflect the Group's purpose and
core activities
Current trading and outlook
The Board anticipates that full-year performance for FY24 will
be in line with current market expectations. Net debt is continuing
to reduce as the Group de-levers following the transformational
Salter acquisition at the end of FY21. In the current environment
of higher interest rates, the Group's low net bank debt/adjusted
EBITDA ratio, combined with its interest rate hedges, provides both
a competitive advantage and growing optionality in the use of free
cash flow.
Commenting on the results, Simon Showman, Chief Executive of
Ultimate Products, said:
"I am delighted to report a record financial performance for
Ultimate Products in FY23. This is a fantastic achievement for our
business, particularly given the tough macroeconomic backdrop. Our
homeware brands and products are used by households on a daily
basis, and we have worked extremely hard to make sure that we
maintain affordable prices for all consumers. We are hugely proud
that we have achieved this despite persistent cost inflation.
Our online business was a standout performer in FY23,
particularly in the UK. I am confident that the experience we have
gained in optimising this part of our business will be hugely
valuable as we continue scaling our European ecommerce business,
where sales are already growing strongly. In addition, we are
confident that our recently opened Paris showroom will help us
attract new retail customers in the French market, as well as
across the wider European continent."
For more information, please contact:
Ultimate Product s +44 (0) 161 627 1400
Simon Showman, CEO
Andrew Gossage, Managing Director
Chris Dent, Chief Financial Officer
Shore Capital +44 (0) 207 408 4090
Mark Percy
David Coaten
Iain Sexton
Malachy McEntyre
Isobel Jones
Cavendish Capital Markets Limited + 44 (0)20 7220 0500
Carl Holmes
Matt Goode
Abigail Kelly
Charlotte Sutcliffe
Powerscourt +44 (0) 207 250 1446
Rob Greening
Sam Austrums
Oliver Banks
Notes to Editors
Ultimate Products is the owner of a number of leading homeware
brands including Salter (the UK's oldest houseware brand,
established in 1760) and Beldray (a laundry, floor care, heating
and cooling brand that was established in 1872). According to its
market research, nearly 80% of UK households own at least one of
the Group's products.
Ultimate Products sells to over 300 retailers across more than
40 countries, and specialises in five product categories: Small
Domestic Appliances; Housewares; Laundry; Audio; and Heating and
Cooling. Other brands include Progress (cookware and bakeware),
Kleeneze (laundry and floorcare), Petra (small domestic appliances)
and Intempo (audio).
The Group's products are sold to a broad cross-section of both
large national and international multi-channel retailers as well as
smaller national retail chains, incorporating discount retailers,
supermarkets, general retailers and online retailers.
Founded in 1997, Ultimate Products employs over 370 staff, a
significant number of whom have joined via the Group's graduate
development scheme, and is headquartered in Oldham, Greater
Manchester, where it has design, sales, marketing, buying, quality
assurance, support functions and warehouse facilities across two
sites. Manor Mill, the Group's head office, includes a spectacular
20,000 sq ft showroom that showcases each of its brands. In
addition, the Group has an office and showroom in Guangzhou, China
and Paris, France.
Please note that Ultimate Products is not the owner of Russell
Hobbs. The Company has licence agreements in place granting it an
exclusive licence to use the "Russell Hobbs" trademark for cookware
(NB this does not include Russell Hobbs electrical appliances).
For further information, please visit www.upplc.com
BUSINESS REVIEW
Purpose & Strategy
Our core purpose is to provide beautiful and more sustainable
products for every home. This purpose runs deep within our business
and, over the past two years of surging inflation, has become even
more relevant to our valued retail customers and consumers. The
significance lies in those two overlooked words at the end of our
purpose: 'every home'.
Our ambition is to provide desirable and affordable products to
every household across the UK and Europe. In the current economic
climate, where consumers are feeling the impact from cost of living
price increases, we are extremely proud to have kept our prices
flat year-on-year. Although our products are not as essential as
food or energy, they are the products that consumers and their
families use on a daily basis - the kettles and toasters that make
breakfast possible; the scales and kitchen accessories that help
bake a cake for the family; the air fryer used to cook dinner for
the kids. Our products continue to be wanted and needed by millions
of households, and this is why they are found in [80%]/[so many] of
homes across the UK.
Our focus on providing beautiful and more sustainable products
at a price that is appealing to both our retail customers and
consumers has helped us maintain our position as a leading branded
homeware supplier during times of household budgetary constraint.
Our retail partners can earn an equivalent 'own label' margin
whilst, at the same time, being able to take advantage of our world
class sourcing and logistical capabilities. Meanwhile, our
consumers can purchase, at affordable prices, beautiful products
which they are proud both to use and to have on display in their
homes.
Whilst we are proud to keep our prices low, we retain the
ability to increase selling prices. The mechanism by which this is
achieved is through constant innovation and bringing new products
to market. Each year we aim to introduce around 600 new products,
which is approximately 20% of the total amount of products we sell.
These new products enable a resetting of price, which allows us to
maintain healthy, but fair gross margin levels.
While our products are already highly prevalent across UK
households, we also have strong European ambitions. In FY23, we
generated sales of GBP49.6m in Europe, up 1% from the previous
year. However, as sales in the UK grew faster, our overall
percentage of sales from Europe fell slightly from 32% in FY22 to
30% in FY23. We continue to believe that our products are as
attractive to our retail partners and consumers in Europe as they
are in the UK, and view the continent as a key growth driver for
the business. We currently sell GBP1.72 of product per capita in
the UK (population: c.67 million). If we can repeat just a fraction
of that level of penetration in Europe (population: c.477 million),
the financial effects would be transformational for our business.
To capitalise on this huge potential, we took the decision during
the year to relocate our European showroom to Paris, which we
expect will open up opportunities with both French and pan-European
retailers.
Our Cologne showroom enabled us to showcase the quality of our
products to German retailers in their home territory, and was
therefore very important in helping us to achieve traction and
growth in that market. As such, we have been able to win a number
of large German retailers as customers across Europe, with German
sales of GBP15.2m making up 30% of our sales into Europe. We
regularly meet our German retail partners at their premises and at
events, such as Ambiente, the largest consumer goods fair in
Europe, so there is now less need for them to travel to our
showroom. Therefore, as we look to increase our penetration with
other large non-German retail customers, we took the decision to
move our European showroom to a 16,500 sq. ft. space at the Homexpo
Paris showroom complex, where the anchor tenant is JJA, one of
France's largest home furnishing suppliers. The site, which is
located near Charles de Gaulle airport, is not only convenient for
hosting French retail partners, but also existing and potential
customers from across Europe. To facilitate this international
expansion plan, we have been delighted to welcome our new sales
team in Paris, who complement our other sales teams in Germany and
Poland.
While our outlook is increasingly international, the heart of
Ultimate Products will always be Oldham, which we have been proud
to call home since our inception. Our commitment to Oldham, from
where we continue to recruit the majority of our talent, was
reaffirmed during the year with the renewal of our lease at Heron
Mill, our 240,000 sq. ft. warehousing facility.
Our Brands
FY23 FY22 FY23 FY22
GBP000 GBP000 Change % % %
------------- ------------------ ----------- ------------ ------- -------
Salter 66,599 48,080 18,519 38.5% 40.0% 31.2%
Beldray 35,031 39,950 (4,919) -12.3% 21.1% 25.9%
Russell Hobbs (licensed) 16,458 20,165 (3,707) -18.4% 9.9% 13.1%
Progress 7,425 8,287 (862) -10.4% 4.5% 5.4%
Petra 3,194 - 3,194 - 1.9% 0.0%
Kleeneze 3,378 2,835 543 19.2% 2.0% 1.8%
------------- ------------------ ----------- ------------ ------- -------
Premier Brands 132,085 119,317 12,768 10.7% 77.5% 77.4%
Other proprietorial
brands 16,036 17,032 - 996 -5.8% 11.6% 11.0%
Own label and other 18,194 17,842 352 2.0% 10.9% 11.6%
Total 166,315 154,191 12,124 7.9% 100.0% 100.0%
============= ================== =========== ============ ======= =======
In line with our desire to be the 'Home of Brands', we have
developed our portfolio of proprietary consumer goods brands to
become true leaders in their respective categories. Our brand
journey over the last five years has seen us pivot from a licence
holder to a brand owner, giving the business a resilient core from
which we can expand and grow. 89% of our revenues are now derived
from brands which we either own (79%) or have on long-term licence
(10%), which is up from 60% in 2018.
As a key part of this journey, we were delighted to welcome
Tracy Carroll to the newly created role of Brand Director in
December 2022. Tracy is enabling us to refine and focus the
development of our portfolio of brands. Her first major project is
the ongoing rebrand of our key Salter brand, which was successfully
previewed at the Exclusively Homeware event in June 2023. We are
delighted by the performance of Salter in the current year with its
GBP66.6m of sales, representing a significant 39% step-up in the
scale of what is the UK's oldest houseware brand.
In addition, we renewed our trademark licence agreement with
Spectrum Brands, which grants us an exclusive licence to use the
"Russell Hobbs" trademark in the United Kingdom, Europe, Australia
and New Zealand for non-electrical kitchen and laundry products.
The new agreement is on a rolling four-year basis, rather than the
previous fixed-term arrangement. This change reduces the licencing
risk, as the licence will always have four years to run. It also
allows us to better focus on the long-term growth of the Russell
Hobbs brand, which will increase the benefits of the partnership
for both Spectrum Brands and Ultimate Products.
Finally, we have seen the highly successful relaunch of Petra,
the German kitchen electrical brand, with sales surpassing GBP3m
during the period. We have a tried and tested approach to
reinvigorating and growing our heritage brands, of which Petra is
just the latest, and most international, example.
Our Strategic Pillars
FY23 FY22 FY23 FY22
Strategic Pillar: GBP000 GBP000 Change % % %
------------- ------------ --------- ------- ------- -------
Supermarkets 49,116 51,523 (2,407) -4.7% 29.5% 33.4%
Discount retailers 44,593 48,126 (3,533) -7.3% 26.8% 31.2%
Online channels 41,449 25,321 16,128 63.7% 24.9% 16.4%
Multiple-store retailers 22,178 17,312 4,866 28.1% 13.3% 11.2%
Other 8,979 11,909 (2,930) -24.6% 5.4% 7.7%
Total 166,315 154,191 12,124 7.9% 100.0% 100.0%
============= ============ ========= ======= ======= =======
As a business we continue to diversify our customer base to
mitigate risk and increase the predictability of our revenue. This
year, we have seen the benefits of this strategy in full effect.
During a period of significant uncertainty around consumer
sentiment, Group revenues increased 8% to GBP166.3m (FY22:
GBP154.2m), a performance that was achieved with no overall price
inflation, in order to keep our products at prices which are
accessible to all consumers.
Online channels were the main driver of revenue growth, and more
than offset the temporary weakness we have seen in other areas. In
the first half of the year, retail customers were understandably
cautious in the size of forward orders, given the macroeconomic
environment and high stock levels carried over from the pandemic.
As a result, sales to retailers fell 11% in H1 FY23 against the
corresponding period in FY22. The second half of FY23 saw an easing
in the level of overstocking and sales returned to growth,
increasing 8% against the corresponding period in H2 FY22. Although
overstocking and uncertainty regarding the consumer environment
continue to hold back retail ordering, confidence is steadily
returning.
The exceptional 64% growth in FY23 online sales reverses the
pattern seen in FY22, when, amidst a period of significant supply
constraints, we made the strategic decision to prioritise orders
made by our retail partners, meaning that sales through our online
channels were necessarily constrained. Our online sales are mainly
conducted through third-party websites such as Amazon and eBay, as
well as through our own sites, Salter.com and Beldray.com. They
have primarily been focused in the UK (FY23: 89% of online sales;
FY22: 92%), where an optimised approach to third party platforms
helped to grow sales by GBP13.8m. We are now using the experience
gained in the UK to expand our online capabilities in Europe, where
online sales grew 115% to GBP4.3m, clearly demonstrating the
potential for future growth.
Our Product Categories
FY23 FY22 FY23 FY22
GBP000 GBP000 Change % % %
------------- ------------- ----------- ------- ------- -------
Small Domestic Appliances 66,813 57,032 9,781 17.2% 40.2% 37.0%
Housewares 48,008 54,539 (6,531) -12.0% 28.9% 35.4%
Laundry 18,163 14,799 3,364 22.7% 10.9% 9.6%
Audio 15,545 12,907 2,638 20.4% 9.3% 8.4%
Heating & Cooling 6,214 5,870 344 5.9% 3.7% 3.8%
Others 11,572 9,044 2,528 28.0% 7.0% 5.9%
Total 166,315 154,191 12,124 7.9% 100.0% 100.0%
============= ============= =========== ======= ======= =======
Our Small Domestic Appliances (SDA) category has grown strongly
in the year, supported by buoyant consumer demand for energy
efficient and money saving products. Part of this growth was in air
fryers, where continued strong sales following the pre-Christmas
boom appear to indicate that this product line has found a
permanent place on kitchen counters. As always, it is newness in
product that maintains Ultimate Products' strong market position,
and we have been delighted to take our first orders for the Salter
combined air fryer-microwave, which will open up the air fryer
market to new consumers.
Housewares have been hardest hit by retailer overstocking, with
cookware in particular having seen a COVID-19 spike in sales,
followed by a subsequent fall.
Our Geographies
FY23 FY22 FY23 FY22
GBP000 GBP000 Change % % %
------------- ------------- --------- ----- ------- -------
UK 115,580 101,050 14,530 14% 69.5% 65.5%
Europe 49,645 48,931 714 1% 29.8% 31.7%
Rest of World 1,090 4,210 (3,120) -74% 0.7% 2.7%
Total 166,315 154,191 12,124 7.9% 100.0% 100.0%
============= ============= ========= ===== ======= =======
As noted, growth in the current year has primarily been in the
UK, where online sales were up 60%, and sales to retail customers
were flat at GBP78m. Sales growth in Europe was subdued, with sales
increasing 1% to GBP49.6m. Within this, we saw healthy growth in
our online sales, which offset weakness in sales to European
retailers who have not reduced overstocking as quickly as UK
retailers. This performance reverses some of the strong growth we
have seen, especially in Germany, which remains our largest
overseas market. We continue to see the European market as a key
area for long-term growth, demonstrated by our investment in a new
European showroom in Paris. Our showroom in Cologne was very
successful in helping to build strong relationships with retail
buyers at German discounters and supermarkets. These relationships
are now sustained through attending events such as Ambiente,
Europe's largest housewares show, and visiting the premises of our
retail partners. Our relocation to Paris aims to replicate the
success we have had in Germany with both French retailers and other
European retailers for whom our new showroom, located near Charles
de Gaulle airport, is easier to visit than Cologne.
Revenues in the Rest of World ("ROW") declined from GBP4.2m in
FY22 to GBP1.1m in FY23, as post-Covid overstocking impacted a key
Australian customer. ROW remains a nascent part of the business,
with a limited number of customers, which can inevitably lead to
fluctuations in year-on-year revenue performance.
Investment in Productivity
Despite seeing a dramatic increase in the inflationary
environment, we are proud that we kept our products at affordable
prices for every consumer, a decision that helped support our sales
growth of 8%. Although we kept our prices consistent, as a business
we are not immune to cost inflation. To hire and retain the best
talent we need to ensure that our wages continue to be competitive
and attractive. Despite these cost pressures, we have been able to
maintain our adjusted EBITDA margin at 12.2% and increase adjusted
EBITDA by 8% to a record GBP20.2m.
We achieved this through the strength of our operating model,
which is constantly being finetuned to optimise productivity, and
this approach is directly linked to our ability to consistently
provide the best service to our customers. We have therefore been
relentless in developing the systems that underpin our business
and, in recent years, have established a company culture that is
intensely focused on driving productivity through automation. This
focus has driven gross profit per employee from GBP83k in FY18 to
GBP113k in FY23.
During the year, we embarked on the automation of hundreds of
tasks across the business, which is saving over 1,000 hours of
employee time every week. Our approach to automation is best
characterised as a bottom-up approach by which our teams will come
to us with problems, which our process development team will then
solve. This demand-driven approach has allowed us to concentrate
our efforts on the tasks that cause the most friction within our
business. Solving them with automation increases productivity and
improves accuracy, resulting in enhanced operating margins, an even
better customer experience, and a more engaged workforce.
ESG Strategy Launch
Doing the right thing has always been at the core of everything
that we do. As we continue to grow, we are acutely aware that our
efforts and ambitions should be underpinned by a clear sense of
responsibility and purpose. This ambition is reflected in our
comprehensive ESG strategy which is at the heart of all company
activity and ensures that our efforts and ambitions have a clear
sense of direction to unite our colleagues and supply partners. We
are cognisant of the impact that our business has on the world in
which we operate, and we know that, to ensure long-term success, we
must play our part in becoming a more sustainable business.
We also recognise that our retail partners need our help to
achieve their own ESG ambitions where actions often involve immense
scale and complexity. To facilitate this, we are working to ensure
that the necessary infrastructure is in place to support our retail
partners in going the extra mile, while continuing to provide them
with an outstanding service. Being an ESG front runner is not only
the right thing to do but will also enhance our competitive and
commercial position.
Finally, we also recognise that an integral part of our
long-term sustainability is the diversification of our supply
chain. Over the next phase of our business development, we will
look to diversify our supply lines away from their relatively
narrow geographical concentration in China. As part of this
journey, we have appointed a member of our Operating Board to head
up the complex task of identifying new factories around the world
which can meet the high standards of both the Group and its
customers, but also support our key purpose of providing beautiful
and more sustainable products for every home.
Financial Review
FY23 FY22 Change
GBP'000 GBP'000 GBP'000 %
----------------- ------------------- ------------------ -----
Revenue 166,315 154,191 12,124 8%
Cost of sales (123,568) (115,836) (7,732) 7%
----------------- ------------------- ------------------ -----
Gross profit 42,747 38,355 4,392 11%
Other administrative expenses (22,534) (19,605) (2,929) 15%
Adjusted EBITDA 20,213 18,750 1,463 8%
----------------- ------------------- ------------------ -----
Depreciation & amortisation (2,260) (2,066) (194) 9%
Finance expense (1,132) (842) (290) 34%
Adjusted profit before tax 16,821 15,842 979 6%
----------------- ------------------- ------------------ -----
Tax expense (3,560) (3,120) (440) 14%
Adjusted profit after tax 13,261 12,722 539 4%
----------------- ------------------- ------------------ -----
Share-based payment expense (837) (403) (434) 108%
Tax on adjusting items 162 51 111 218%
Statutory profit after tax 12,586 12,370 216 2%
----------------- ------------------- ------------------ -----
*Adjusted measures are before share-based payment expense and
non-recurring items.
Revenue
Group revenue has increased by 8% to GBP166.3m in the period
(FY22: GBP154.2m). Due to our ongoing focus on supplying the best
products at the best price for our retail customers and consumers,
prices have followed their long- term trend with no price inflation
contributing to our top line growth. Our online business saw
exceptional growth of 64% to sales of GBP41.4m, as the channel
benefited from the normalisation of global supply chains, which had
held back growth during FY22.
FY23 FY22 FY23 FY22
By Strategic Pillar: GBP000 GBP000 Change % % %
------------- ------------ --------- ------- ------- -------
Supermarkets 49,116 51,523 (2,407) -4.7% 29.5% 33.4%
Discount retailers 44,593 48,126 (3,533) -7.3% 26.8% 31.2%
Online channels 41,449 25,321 16,128 63.7% 24.9% 16.4%
Multiple-store retailers 22,178 17,312 4,866 28.1% 13.3% 11.2%
Other 8,979 11,909 (2,930) -24.6% 5.4% 7.7%
Total 166,315 154,191 12,124 7.9% 100.0% 100.0%
============= ============ ========= ======= ======= =======
This strength in our online business helped to mitigate the
weakness which we saw in the first half of the year from retailers,
when significant levels of overstocking led to a reduction in sales
of 11% in H1. It is pleasing that, as the year progressed, the
overstocks eased, leading to retail sales growing by 8%
year-on-year in H2, resulting in FY23 sales to retailers falling
just 3%. Although having eased in H2, overstocks continue to be a
headwind, especially in Europe. This, tied with macroeconomic
uncertainty, has led some retailers to change their buying patterns
away from large infrequent forward orders to smaller but more
frequent orders from current stock.
During a period of higher inflation, which has squeezed customer
spending power, it is no surprise that sales growth was weighted
towards energy efficient and money saving products. Consequently,
Salter products, alongside our overall small domestic appliance
offering (which includes air fryers), have proved especially
popular in the period.
Operating Margins
Gross margin increased to 25.7% (FY22: 24.9%) as our sales
growth was driven by higher-margin online sales. In the second half
of the year, we also benefited from the fall in freight rates,
which has helped to mitigate the weakness that we have seen in the
value of Sterling. The increase in gross margin means that gross
profit rose 11% to GBP42.7m (FY22: GBP38.4m).
Other administrative expenses rose 15% to GBP22.5m (FY22:
GBP19.6m). Although we have seen relatively low levels of
inflationary pressure on our cost of sales, we have seen pressure
in our operating costs. Our wage bill, which makes up 77% of our
other administrative expenses, rose by 13% in the period, as we
increased salaries for our people to ensure that employee
remuneration remains attractive enough to recruit and retain
talent, a measure that both drives productivity within the business
and mitigates the effects of the cost-of-living crisis. This is
consistent with our intention to always do the right thing and to
invest in our people. We are proud to continue to invest in our
people, and they in turn have helped us to increase productivity,
with gross profit per employee increasing from GBP83k in FY18 to
GBP113k in FY23. It is these productivity gains that have allowed
us to maintain operating margins, whilst at the same time
appropriately rewarding our people.
We were able to invest in attendance at Ambiente, Europe's
largest housewares show, which we had been unable to take part in
during the Covid-19 pandemic. Attending Ambiente enabled us to
exhibit our range of quality branded houseware products to new
customers, consumers and suppliers, as we continue to grow brand
awareness in the strategically important European market.
The combination of 8% revenue growth, improved gross margin, and
inflation-impacted overheads has led to a stable operating margins
at 12.2%, with adjusted EBITDA increasing 8% to GBP20.2m (FY22:
GBP18.8m).
Adjusted & statutory profit
Depreciation and amortisation increased 9% to GBP2.3m (FY22:
GBP2.1m) as a result of the increase in the depreciation charge
following our investment in solar panels at our Manor Mill head
office during the summer of 2022.
The finance charge has increased GBP0.3m to GBP1.1m (FY22:
GBP0.8m) due to the higher level of interest rates. The Group has
benefited from the hedging instruments it entered into when
interest rates were at historically low levels. These instruments
cover an aggregate principle of GBP18.0m and are a mix of swaps and
caps. These instruments, as well as careful management of net debt,
have successfully limited the effect of higher interest rates.
The share-based payment expense increased by GBP0.4m to GBP0.8m
as a result of the modification of the MIP scheme which was
approved at the FY22 AGM and resulted in a one-off charge of
GBP0.5m.
The tax charge for the period at 21.3% (FY22: 20%) was higher
than the blended statutory rate of 21% due to the higher statutory
rate of tax paid on our European foreign branches in Germany and
Poland, with the overall rate increasing due to the increase in UK
corporation tax from 19% to 25%.
As a result, the statutory profit after tax increased by 2% to
GBP12.6m (FY22: GBP12.4m).
Earnings per share
Although we have not issued any new shares within the year, the
number of shares held in our Employee Benefit Trust has changed
over the year, resulting in the weighted average number of shares
decreasing 0.1% to 86,310,315 (31 July 2022: 86,353,827).
31 July EPS 31 July EPS
2023 2022
GBP'000 p GBP'000 p
-------------------------- -------------------- ----------------------- ------------------- ----------------------
Adjusted profit after tax 13,261 15.4 12,721 14.7
-------------------------- -------------------- ----------------------- ------------------- ----------------------
Share based payment (837) (1.0) (403) (0.5)
Tax on adjusting items 162 0.2 51 0.1
Statutory profit 12,586 14.6 12,369 14.3
-------------------------- -------------------- ----------------------- ------------------- ----------------------
As a result, both adjusted profit and adjusted EPS increase 4%
to GBP13.3m (FY22: GBP12.7m) and 15.4p (FY22: 14.7p)
respectively.
Financing and cash flow
The Group generated strong cash from operating activities of
GBP24.4m (FY22: GBP6.9m), being a 121% operating cash conversion
(FY22: 37%). This was significantly stronger than the previous year
when the Group needed to invest in working capital due to the
supply chain crisis during CY 2021. This meant that at the period
end the Group had a net bank debt/adjusted EBITDA ratio of 0.7x (31
July 2022: 1.3x), which represents net bank debt of GBP14.8m (31
July 2022: GBP24.3m). The Group makes use of term loans for longer
term funding, such as acquisitions, whereas our invoice discounting
and import loan facilities are designed to fund our working
capital, and automatically increase in relation to our levels of
trading. With the Group's trading being seasonally weighted towards
pre-Christmas consumer spending, working capital reaches a peak in
the Autumn, and a low in the Spring. In the current year the low
point for net debt was GBP8.0m (FY22: GBP21.1m)
31-Jul-23 31-Jul-22 Change Change
GBP'000 GBP'000 GBP'000 %
----------------------- ---------------------- -------------------- ---------------------- ------------
Cash 5,086 6,202 (1,116)
Overdraft (5,004) (6,020) 1,016
Term loan (6,000) (8,000) 2,000
RCF - (2,217) 2,217
Invoicing discounting (8,950) (6,197) (2,753)
Import loans - (8,179) 8,179
Loan fee 73 155 (82)
---------------------- -------------------- ---------------------- ------------
Net bank debt (14,795) (24,256) 9,461 -39%
----------------------- ---------------------- -------------------- ---------------------- ------------
Dividend
In line with our established dividend policy of distributing 50%
of the Group's adjusted profit after tax, the Board is pleased to
propose a final dividend of 4.95p per share (FY22: 4.82p per
share). This takes the total dividend for the year to 7.38p per
share (FY22: 7.12p per share), an increase of 4%. Subject to
shareholder approval at the AGM on 15 December 2023, the final
dividend will be paid on 26 January 2024 to shareholders on the
register at the close of business on 29 December 2023 (ex-dividend
date 28 December 2023).
Name Change
For many years the Group has traded under the name Ultimate
Products, while the Company name UP Global Sourcing Holdings plc
failed to truly reflect who we are. We spoke earlier of two easily
overlooked words in our purpose - 'every home' - and now emphasise
the two words that are most fundamental to who we are: 'Ultimate
Products'. Our purpose is to provide beautiful and more sustainable
products to every home, and we are delighted to announce that, to
better align with this purpose, the Company has been renamed
Ultimate Products plc with immediate effect.
The new name will be reflected by the London Stock Exchange and
the Company's London Stock Exchange market ticker will change to
'ULTP' at 8.00 a.m. (BST) today. The Company's ISIN (GB00BYX7MG58)
and SEDOL (BYX7MG5) will remain unchanged.
In order to reflect the Company's new name, the Company's
website address has been changed to www.upplc.com .
Shareholder documents of title will be unaffected by the change
of name and existing share certificates should be retained and
remain valid. Any new share certificates issued will bear the new
name, Ultimate Products plc.
Summary
FY23 has been a challenging year for the many retailers and
consumers that we are proud to support; nonetheless, the Group has
responded by remaining true to its core purpose, and this has led
to a record financial performance. While this success is rooted in
the resilient business model we have developed, it also depends on
the huge daily efforts of our colleagues. They have once again met
the challenges of the year with tenacity, creativity, and above
all, passion. On behalf of all stakeholders, we thank them for all
of the hard work they have undertaken over the past year.
We look to the future with optimism and excitement, knowing that
we have a team of colleagues who will truly bring to life our UK
and international strategy of developing our portfolio of beautiful
and more sustainable brands.
Consolidated Income Statement
For the year ended 31 July 2023
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------------------- -------------- -------------------
Revenue 166,315 154,191
Cost of sales (123,568) (115,837)
--------------------------------------------------------------------------------- -------------- -------------------
Gross profit 42,747 38,354
-------------- -------------------
Adjusted earnings before interest, tax, depreciation, amortisation, share-based
payments &
non -- recurring items ("Underlying EBITDA") 20,213 18,750
Depreciation (2,238) (2,044)
Amortisation of intangibles (22) (22)
Share-based payment expense (837) (403)
Non-recurring items - -
-------------- -------------------
Total administrative expenses (25,631) (22,073)
--------------------------------------------------------------------------------- -------------- -------------------
Operating profit 17,116 16,281
Finance expense (1,132) (842)
--------------------------------------------------------------------------------- -------------- -------------------
Profit before tax 15,984 15,439
Tax expense (3,398) (3,069)
--------------------------------------------------------------------------------- -------------- -------------------
Profit for the year attributable to equity holders of the Company 12,586 12,370
--------------------------------------------------------------------------------- -------------- -------------------
All amounts relate to continuing operations
Earnings per share
Basic 14.6 14.3
Diluted 14.3 13.9
--------------------------------------------------------------------------------- -------------- -------------------
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2023
2023 2022
GBP'000s GBP'000s
------------------------------------------------------- ---------- ----------
Profit for the year 12,586 12,700
Items that may subsequently be reclassified to
the income statement
Fair value movements on cash flow hedging instruments (1,329) 3,329
Hedging instruments recycled through the income
statement at the end of hedging relationships (3,445) 162
Deferred tax relating to cashflow hedges 875 -
Items that will not subsequently be reclassified
to the income statement
Foreign current translation (2) 11
------------------------------------------------------- ---------- ----------
Other comprehensive income (3,901) 3,412
------------------------------------------------------- ---------- ----------
Total comprehensive income for the year attributable
to the equity holders of the Company 8,685 15,782
------------------------------------------------------- ---------- ----------
Consolidated Statement of Financial Position
At 31 July
2023 2022
GBP'000 GBP'000
-------------------------------------------- ---------- ------------
Assets
Intangible assets 37,003 37,025
Property, plant and equipment 8,443 6,369
Total non-current assets 45,446 43,394
-------------------------------------------- ---------- ----------
Inventories 28,071 29,162
Trade and other receivables 29,890 32,194
Derivative financial instruments 1,233 4,142
Cash and cash equivalents 5,086 6,202
-------------------------------------------- ---------- ----------
Total current assets 64,280 71,700
-------------------------------------------- ---------- ----------
Total assets 109,726 115,094
-------------------------------------------- ---------- ----------
Liabilities
Trade and other payables (30,005) (29,644)
Derivative financial instruments (1,806) -
Current tax - (170)
Borrowings (15,891) (22,314)
Lease liabilities (836) (817)
Deferred consideration - (987)
-------------------------------------------- ---------- ----------
Total current liabilities (48,548) (53,932)
-------------------------------------------- ---------- ----------
Net current assets 15,742 17,768
-------------------------------------------- ---------- ----------
Borrowings (3,990) (8,144)
Deferred tax (6,797) (7,585)
Lease liabilities (4,262) (1,940)
-------------------------------------------- ---------- ----------
Total non-current liabilities (15,049) (17,669)
-------------------------------------------- ---------- ----------
T otal liabilities (63,587) (71,601)
-------------------------------------------- ---------- ----------
Net assets 46,139 43,493
============================================ ========== ==========
Equity
Share capital 223 223
Share premium 14,334 14,334
Employee Benefit Trust reserve (1,989) (1,571)
Share-based payment reserve 1,817 1,166
Hedging reserve (660) 3,239
Retained earnings 32,414 26,102
-------------------------------------------- ---------- ----------
Equity attributable to owners of the Group 46,139 43,493
============================================ ========== ==========
Consolidated Statement of Changes in Equity
For the year ended 31 July
Share-
based payment
Share capital Share EBT reserve Hedging Retained Total
GBP'000 premium reserve GBP'000 reserve earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------------- ---------- ---------- -------------- --------------- --------------- ----------
As at 1 August
2021 223 14,334 (2,152) 1,024 (162) 18,788 32,055
Profit for the
year - - - - - 12,370 12,370
Foreign
currency
retranslation - - - - - 11 11
Cash flow
hedging
movement - - - - 3,401 - 3,401
--------------- --------------- ---------- ---------- -------------- --------------- --------------- ----------
Total
comprehensive
income for
the year - - - - 3,401 12,381 15,782
--------------- --------------- ---------- ---------- -------------- --------------- --------------- ----------
Transactions
with
shareholders:
Dividends paid - - - - - (4,830) (4,830)
Share-based
payments - - - 142 - (29) 113
Purchase/ Sale
of shares by
the EBT - - 581 - - (208) 373
--------------- --------------- ---------- ---------- -------------- --------------- --------------- ----------
As at 31 July
2022 223 14,334 (1,571) 1,166 3,239 26,102 43,493
=============== =============== ========== ========== ============== =============== =============== ==========
Profit for the
year - - - - - 12,586 12,586
Foreign
currency
retranslation - - - - - (2) (2)
Cash flow
hedging
movement - - - - (4,774) - (4,774)
Deferred tax
movement 875 - 875
--------------- --------------- ---------- ---------- -------------- --------------- --------------- ----------
Total
comprehensive
income for
the year - - - - (3,899) 12,584 8,685
--------------- --------------- ---------- ---------- -------------- --------------- --------------- ----------
Transactions
with
shareholders:
Dividends
payable - - - - - (6,255) (6,255)
Share-based
payments
charge - - - 837 - - 837
Deferred tax
on
share-based
payments - - - - - (88) (88)
Transfer of
reserve on
exercise/
cancellation
of share
award - - - (186) - 186 -
Transfer of
shares by the
EBT to
employees on
exercise of
share award - - 297 - - (115) 182
Purchase of
own shares by
the EBT - - (715) - - - (715)
As at 31 July
2023 223 14,334 (1,989) 1,817 (660) 32,414 46,139
=============== =============== ========== ========== ============== =============== =============== ==========
Consolidated Statement of Cash Flows
For the year ended 31 July
2023 2022
GBP'000 GBP'000
------------------------------------- --------- ---------
Net cash flow from operating
activities
Profit for the year 12,586 12,370
Adjustments for:
Finance costs 1,132 842
Income tax expense 3,399 3,069
Depreciation 2,218 2,044
Amortisation 22 22
Loss on disposal of non-current
assets 20 -
Derivative financial instruments (199) 274
Share-based payments 837 403
Working capital adjustments
(Increase) in inventories 1,090 (7,721)
(Increase) in trade and other
receivables 2,691 (5,649)
Increase in trade and other
payables 559 1,221
Net cash from operations 24,355 6,875
--------------------------------------- --------- ---------
Income taxes paid (3,957) (2,345)
--------------------------------------- --------- ---------
Cash generated from operations 20,399 4,530
--------------------------------------- --------- ---------
Cash flows used in investing
activities
Acquisition of subsidiary-
deferred consideration (987) (1,960)
Purchase of property, plant
and equipment (999) (1,843)
Net cash used in investing
activities (1,986) (3,803)
--------------------------------------- --------- ---------
Cash flows used in financing
activities
Sale of own shares (532) 373
Proceeds from borrowings 3,767 14,347
Repayment of borrowings (14,426) (2,766)
Principal paid on lease obligations (840) (936)
Debt issue costs paid (94) (4,830)
Dividends paid (6,255) (4,830)
Interest paid (1,147) (850)
--------------------------------------- --------- ---------
Net cash generated by finance
activities (19,527) 5,338
--------------------------------------- --------- ---------
Net increase in cash and
cash equivalents (1,115) 6,065
Exchange gains on cash and cash
equivalents (1) 4
Cash and cash equivalents brought
forward 6,202 133
Cash and cash equivalents carried
forward 5,086 6,202
====================================== ========= =========
conciliation of cash flow to the Group net debt position
Total
liabilities
from
Term Invoice Import Loan financing
Overdraft Loan RCF discounting loans Fees Leases activities Cash Net debt
GBP'000 GBP'000 GBP'000 GBP'000s GBP'000s GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- -------- ------- ------------ --------- -------- -------- ----------- -------- --------
At 1
August
2022 - (10,000) (2,983) (3,290) (2,759) 234 - (18,798) 133 (18,665)
---------- --------- -------- ------- ------------ --------- -------- -------- ----------- -------- --------
Financing
cash
flows (6,020) 2,000 766 (2,907) (5,420) - - (11,581) 6,020 (5,561)
Other cash
flows - - - - - - - - 45 45
Other
changes - - - - - (79) - (79) 4 (75)
---------- --------- -------- ------- ------------ --------- -------- -------- ----------- -------- --------
At 31 July
2022 (6,020) (8,000) (2,217) (6,197) (8,179) 155 (2,757) (33,215) 6,202 (27,013)
---------- --------- -------- ------- ------------ --------- -------- -------- ----------- -------- --------
Financing
cash
flows 1,016 2,000 2,217 (2,753) 8,179 94 840 11,593 - 11,593
Other cash
flows - - - - - - - - (1,115) (1,115)
Other
changes - - - - - (176) (3,181) (3,357) (1) (3,358)
---------- --------- -------- ------- ------------ --------- -------- -------- ----------- -------- --------
At 31 July
2023 (5,004) (6,000) - (8,950) - 73 (5,098) (24,979) 5,086 (19,893)
---------- --------- -------- ------- ------------ --------- -------- -------- ----------- -------- --------
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Ultimate Products plc ('the Company') and its subsidiaries
(together 'the Group') is a supplier of branded, value for-money
household products to global markets. The Company is a public
limited company, which is listed on the London Stock Exchange and
incorporated and domiciled in England and Wales. The address of its
registered office is Ultimate Products plc, Manor Mill, Victoria
Street, Chadderton, Oldham OL9 0DD.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 July 2023 or
2022 but is derived from those accounts. Statutory accounts for
Ultimate Products plc for the year ended 31 July 2022 have been
delivered to the Registrar of Companies and those for the year
ended 31 July 2023 will be delivered following the Company's annual
general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not include references to
any matters to which the auditors drew attention by way of emphasis
without qualifying their reports. Their reports for the year ended
31 July 2023 and 31 July 2022 did not contain statements under s498
(2) or (3) of the Companies Act 2006.
2. BASIS OF PREPARATION
The consolidated Group Financial Statements have been prepared
in accordance with UK adopted international financial reporting
standards. The consolidated Group Financial Statements and Company
Financial Statements are presented in Sterling and rounded to the
nearest thousand unless otherwise indicated. The Financial
Statements are prepared on the historical cost basis, except for
certain financial instruments and share-based payments that have
been measured at fair value. The Directors have taken advantage of
the exemption available under Section 408 of the Companies Act 2006
and have not presented an income statement or a statement of
comprehensive income for the Company alone.
Going Concern Basis
The Directors have adopted the going concern basis in preparing
these accounts after assessing the principal risks and having
considered the impact of severe but plausible downside scenarios,
including pandemic type restrictions, supply chain issues and
demand led falls in revenue due to inflation and rises in interest
rates. The Directors have considered a number of impacts on sales,
profits and cash flows, taking into account experiences learnt from
previous business interruptions. The Directors have considered the
resilience of the Group in severe but plausible scenarios, taking
account of its current position and prospects, the principal risks
facing the business, how these are managed and the impact that they
would have on the forecast financial position. In assessing whether
the Group could withstand such negative impacts, the Board has
considered cash flow, impact on debt covenants and headroom against
its current borrowing facilities. At the year end the Group had a
net bank debt/adjusted EBITDA ratio of 0.7x (FY22: 1.3x), which
represents net bank debt of GBP14.8m (FY21: GBP24.3m). The Group
maintains comfortable levels of headroom within its bank
facilities, with headroom at 31 July 2023 of GBP16.6m (FY22:
GBP17.8m). The Group's banking facilities comprise a term loan of
GBP6.0m (FY22: GBP8.0m), a revolving credit facility of GBP8.2m
(FY22: GBP8.2m), an import loan facility of GBP9.0m (FY22:
GBP9.0m), and an invoice discounting facility with a total limit of
GBP23.5m (FY22: GBP23.5m).
The Group's projections show that the Group will be able to
operate within its existing banking facilities and covenants.
Therefore, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for at least 12 months from the date of approval of these Financial
Statements and, as a result, they have applied the going concern
principle in preparing its consolidated and Company Financial
Statements.
3. REVENUE
2023 2022
Geographical split by location: GBP'000 GBP'000
----------------------------------- --------- ---------
United Kingdom 115,580 101,050
Germany 15,198 19,231
Rest of Europe 34,447 29,700
Rest of the World 1,090 4,210
------------------------------------ --------- ---------
Total 166,315 154,191
==================================== ========= =========
International sales 50,735 53,141
==================================== ========= =========
Percentage of total revenue 31% 35%
==================================== ========= =========
2023 2022
Analysis of revenue by brand : GBP'000 GBP'000
---------------------------------- --------- ---------
Salter 66,599 48,080
Beldray 35,031 39,950
Russell Hobbs (licensed) 16,458 20,165
Progress 7,425 8,287
Petra 3,194 -
Kleeneze 3,378 2,835
----------------------------------- --------- ---------
Premier brands 132,085 119,317
Other proprietorial brands 16,036 17,032
Own label and other 18,194 17,842
----------------------------------- --------- ---------
Total 166,315 154,191
=================================== ========= =========
2023 2022
Analysis of revenue by product: GBP'000 GBP'000
------------------------------------ --------- ---------
Small domestic appliances 66,813 57,032
Housewares 48,008 54,539
Laundry 18,163 14,799
Audio 15,545 12.907
Heating and cooling 6,214 5,870
Others 11,572 9,044
Total 166,315 154,191
===================================== ========= =========
2023 2022
Analysis of revenue by sales channel : GBP'000 GBP'000
------------------------------------------ --------- ---------
Supermarkets 49,116 51,523
Discount retailers 44,593 48,126
Online channels 41,449 25,321
Multiple-store retailers 22,178 17,312
Other 8,979 11,909
Total 166,315 154,191
=========================================== ========= =========
4. FINANCE COSTS
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------------- --------- ---------
Interest on bank loans and overdrafts 1,114 704
Interest on lease liabilities 134 74
Foreign exchange in respect of lease liabilities (net of hedging actions) (81) (11)
Other interest payable and similar charges (35) 75
---------------------------------------------------------------------------- --------- ---------
Total finance cost 1,132 842
============================================================================ ========= =========
5. TAXATION
2023 2022
GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Current period - UK corporation tax 3,040 2,390
Adjustments in respect of prior periods (72) (281)
Foreign current tax expense 431 467
---------------------------------------------------- --------- ---------
Total current tax 3,399 2,576
==================================================== ========= =========
Origination and reversal of temporary differences 5 351
Adjustments in respect of prior periods (6) 81
Impact of change in tax rate - 61
---------------------------------------------------- --------- ---------
Total deferred tax (1) 493
==================================================== ========= =========
Total tax charge 3,398 3,069
==================================================== ========= =========
Factors effecting the tax charge
The tax assessed for the current and previous years period is
higher than the standard rate of corporation tax in the UK. The tax
charge for the year can be reconciled to the profit per the income
statement as follows:
2023 2022
GBP'000 GBP'000
---------------------------------------------------------------- --------- ---------
Profit before tax 15,984 15,439
Tax charge at 20.5% (2022: 19%) 3,277 2,933
Adjustments relating to underlying items:
Adjustment to tax charge in respect of prior periods (78) (200)
Effects of expenses not deductible for tax purposes 119 (9)
Impact of overseas tax rates 56 231
Effect of difference in corporation tax and deferred tax rates 15 88
Adjustments relating to non-underlying items:
Effects of expenses not deductible for tax purposes 171 77
Differences arising on tax treatment of shares (162) (178)
Effect of difference in corporation tax and deferred tax rates - 127
Total tax expense 3,398 3,069
================================================================ ========= =========
Corporation tax is calculated at 19% (2022: 19%) of the
estimated assessable profit for the year. In the 3 March 2022
Budget it was announced that the UK tax rate will increase to 25%
from 1 April 2023. Deferred tax balances at the year-end have been
measured at 25%.
6. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net
income for the period attributable to ordinary equity holders by
the weighted average number of ordinary shares outstanding during
the period. Diluted earnings per share amounts are calculated by
dividing the profit attributable to owners of the parent by the
weighted average number of ordinary shares in issue during the
financial year, adjusted for the effects of potentially dilutive
options. The dilutive effect is calculated on the full exercise of
all potentially dilutive ordinary share options granted by the
Group, including performance-based options which the Group
considers to have been earned. The calculations of earnings per
share are based up on the following:
2023 2022
GBP'000 GBP'000
--------------------------------------------- ------------ ------------
Profit for the year 12,586 12,370
---------------------------------------------- ------------ ------------
Number Number
--------------------------------------------- ------------ ------------
Weighted average number of shares in issue 89,312,457 89,312,457
Less shares held by the UPGS EBT (3,002,142) (2,958,630)
---------------------------------------------- ------------ ------------
Weighted average number of shares - basic 86,310,315 86,353,827
Share options 1,576,409 2,580,825
---------------------------------------------- ------------ ------------
Weighted average number of shares - diluted 87,886,723 88,934,652
---------------------------------------------- ------------ ------------
Pence Pence
--------------------------------------------- ------------ ------------
Earnings per share - basic 14.6 14.3
============================================== ============ ============
Earnings per share - diluted 14.3 13.9
============================================== ============ ============
7. DIVIDS
2023 2022
GBP'000 GBP'000
----------------------------------------------------- --------- ---------
Final dividend paid in respect of the previous year 4,157 2,844
Interim declared and paid 2,099 1,986
------------------------------------------------------ --------- ---------
6,255 4,830
===================================================== ========= =========
Per share Pence Pence
----------------------------------------------------- --------- ---------
Final dividend paid in respect of the previous year 4.820 3.33
Interim declared and paid 2.430 2.30
------------------------------------------------------ --------- ---------
7.25 5.63
===================================================== ========= =========
The Directors propose a final dividend of 4.95p per share in
respect of the year ended 31 July 2023.
8. BANK BORROWINGS
2023 2022
GBP'000 GBP'000
-------------------------------- ---------- ---------
Overdrafts 5,004 6,020
Invoice discounting 8,950 6,197
Import loans - 8,179
Term loan 2,000 2,000
Unamortised debt issue costs (63) (82)
Current 15,891 22,314
-------------------------------- ---------- ---------
Revolving credit facility - 2,217
Term loan 4,000 6,000
Unamortised debt issue costs (10) (73)
-------------------------------- ---------- ---------
Non-current 3,990 8,144
-------------------------------- ---------- ---------
Total borrowings 19,881 30,458
-------------------------------- ---------- ---------
Cash (5,086) (6,202)
-------------------------------- ---------- ---------
Net bank borrowings 14,795 24,256
================================ ========== =========
Contractual maturities:
In less than one year 15,954 22,396
Between one and two years 2,000 2,000
Between three and four
years 2,000 6,217
Less: Unamortised debt
issue costs (73) (155)
-------------------------------- --------- ---------
Total borrowings 19,881 30,458
================================ ========= =========
Current bank borrowings include a gross amount of GBP8.9m (2022:
GBP6.2m) due under invoice discounting facilities, which are
secured by an assignment of and fixed charge over the trade debtors
of Ultimate Products UK Limited. Furthermore, current bank
borrowings include an amount of GBPnil (2022: GBP2.8m) due under an
import loan facility, which is secured by a general letter of
pledge providing security over the stock purchases financed under
that facility. Bank borrowings are secured in total by a fixed and
floating charge over the assets of the Group. Total bank borrowings
are net of GBP73,000 (2022: GBP155,000) of fees which are being
amortised over the length of the relevant facilities. Interest on
bank borrowings is payable at a margin ranging between 1.65% and
2.25% above the relevant bank reference rates. As the liabilities
are at a floating rate and there has been no change in the
creditworthiness of either of the counterparties, the Directors are
of the view that the carrying amount approximates to the fair
value.
9. FINANCIAL INSTRUMENTS
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
2023 2022
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Trade receivables - held at amortised cost 28,175 30,643
Derivative financial instruments - carried
at FVTOCI 900 3,899
Derivative financial instruments - carried
at FVTPL 333 243
Trade and other payables (27,995) (28,095)
Derivative financial instruments -carried
at FVTOCI (1,783) -
Derivative financial instruments - carried
at FVTPL (23) -
Borrowings - held at amortised cost (19,881) (30,458)
Lease liabilities - held at amortised cost (5,098) (2,757)
Deferred consideration - held at amortised
cost - (987)
Cash and cash equivalents - held at amortised
cost 5,086 6,202
----------------------------------------------- --------- ---------
Financial Liabilities
The Group held the following financial liabilities, classified
as other financial liabilities at amortised cost:
2023 2022
GBP'000 GBP'000
------------------------- --------- ---------
Trade payables 1 9,024 20,662
Borrowings 19,881 30,458
Other payables 8,971 7,433
Lease liabilities 5,098 2,757
Deferred consideration - 987
------------------------- --------- ---------
52,974 62,297
========================= ========= =========
Derivative Financial Instruments
The Group held the following derivative financial instruments as
financial assets/(liabilities), classified as fair value through
profit and loss on initial recognition:
2023 2022
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Derivative financial instruments - assets 1,233 4 ,142
Derivative financial instruments - liabilities (1,806) -
(573) 4,142
================================================= ========= =========
The above items comprise the following under the Group's hedging
arrangements:
2023 2022
GBP'000 GBP'000
---------------------------- --------- ---------
Foreign currency contracts (1,372) 3,524
Interest rate swaps 315 261
Interest rate caps 484 357
------------------------------ --------- ---------
(573) 4,142
============================ ========= =========
Forward contracts
The Group mitigates the exchange rate risk for certain foreign
currency trade debtors and creditors by entering into forward
currency contracts. At 31 July 2023, the Group was committed
to:
2023 2023 2022 2022
Buy Sell Buy Sell
---------- -------- -------- -------- --------
USD$'000 54,300 - 57,050 -
EUR'000 - 24,700 - 23,200
CAD$'000 - - - 60
PLN'000 - 4,600 - 5,500
CNY'000 6,340 - 2,459 -
---------- -------- -------- -------- --------
At 31 July 2023 & 2022, all the outstanding USD, EUR, PLN
and CAD contracts mature within 12 months of the period end. The
CNY contracts, which are held as a partial hedge on a lease
commitment, mature until August 2026. The forward currency
contracts are measured at fair value using the relevant exchange
rates for GBP:USD, GBP:EUR, GBP:CAD, GBP:PLN and GBP:CNY.
Forward currency contracts are valued using level 2 inputs. The
valuations are calculated using the period end forward rates for
the relevant currencies, which are observable quoted values at the
period end dates. Valuations are determined using the hypothetical
derivative method, which values the contracts based upon the
changes in the future cash flows, based upon the change in value of
the underlying derivative.
All of the forward contracts to buy US Dollars and some of those
to sell Euros meet the conditions for hedge accounting, as set out
in the accounting policies in note 3. The fair value of forward
contracts that are effective in offsetting the exchange rate risk
is a liability of GBP1.6m (2022: asset of GBP3.4m), which has been
recognised in other comprehensive income. This will be released to
profit or loss at the end of the term of the forward contracts as
they expire, being GBP1.6m within 12 months (2022: GBP3.4m within
12 months). The cash flows in respect of the forward contracts will
occur over the course of the next 12 months.
Interest rate swaps and interest rate caps
The Group has entered into interest rate swaps and interest rate
caps to protect the exposure to interest rate movements on the
various elements of the Group's banking facility. As at 31 July
2023, protection was in place over an aggregate principal of
GBP18.3m (2022: GBP18.3m). At 31 July 2023, the Group had
borrowings of GBPnil (2022: GBP6.3m) not subject to interest rate
protection. All interest rate swaps meet the conditions for hedge
accounting, as set out in the accounting policies in note 3.
Interest rate swaps and caps are valued using level 2 inputs.
The valuations are based upon the notional value of the swaps and
caps, the current available market borrowing rate and the swapped
or capped interest rate respectively. The valuations are based upon
the current valuation of the present saving or cost of the future
cash flow differences, based upon the difference between the
respective swapped and capped interest rates contracts and the
expected interest rate as per the lending agreement.
The fair value of variable to fixed interest rate swaps that are
effective in offsetting the variable interest rate risk on variable
rate debt is an asset of GBP315,000 (2022: GBP261,000), which has
been recognised in other comprehensive income and will be released
to profit or loss over the term of the swap agreements. The
agreements expire between 2 January 2024 and 28 February 2025. The
cash flows in respect of the swaps occur monthly over the effective
lifetime of the swaps. The fair value of the interest rate caps was
an asset of GBP484,000 (2022: GBP357,000).
Reconciliation of the financial instruments to the S tatement of
F inancial P osition
2023 2022
Group GBP'000 GBP'000
--------------------------------------------------------------------------- --------- ---------
Trade receivables 28,175 30,643
Prepayments and other receivables not classified as financial instruments 1,328 1,551
Trade and other receivables 29,503 32,194
============================================================================ ========= =========
2023 2022
Group GBP'000 GBP'000
------------------------------------------------------------------------- --------- ---------
Trade and other payables 27,995 28,095
Other taxes and social security not classified as financial instruments 2,010 1,549
Trade and other payables 30,005 29,644
========================================================================== ========= =========
The Group's activities expose it to certain financial risks:
market risk, credit risk and liquidity risk. The overall risk
management programme focuses up on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group's financial performance. Risk management is carried
out by the Directors, who identify and evaluate financial risks in
close cooperation with key members of staff.
a) Market risk: Market risk is the risk of loss that may arise
from changes in market factors such as interest rates and foreign
exchange rates.
b) Credit risk: Credit risk is the financial loss to the Group
if a customer or counterparty to financial instruments fails to
meet its contractual obligation. Credit risk arises from the
Group's cash and cash equivalents and receivables balances.
Accordingly, the possibility of material loss arising in the event
of non-performance by counterparties is considered to be unlikely.
Cash at bank is held with banks with high - quality external credit
rating.
c) Liquidity risk: Liquidity risk is the risk that the Group
will not be able to meet its financial obligations as they fall
due. This risk relates to the Group's prudent liquidity risk
management and implies maintaining sufficient cash. The Directors
monitor rolling forecasts of the Group's liquidity and cash and
cash equivalents based up on expected cash flow.
Market risk
The Group's interest-bearing liabilities relate to its variable
rate banking facilities. The Group has a policy of maintaining a
portion of its banking facilities under the protection of interest
rate swaps and caps to ensure the certainty of future interest cash
flows and offering protection against market-driven interest rate
movements. The Group's market risk relating to foreign currency
exchange rates is commented on below.
Credit risk
The Group's sales are primarily made with credit terms, exposing
the Group to the risk of non-payment by customers. The Group has
implemented policies that require appropriate credit checks on
potential customers before sales are made. The amount of exposure
to any individual counterparty is subject to a limit, which is
reassessed regularly by the Board. In addition, the Group maintains
a suitable level of credit insurance against its debtor book. Over
the course of FY23, on average, over 98% of its trade receivables
were insured. Sales to uninsured accounts are monitored closely
with weekly forecasts prepared and reviewed with appropriate
actions to manage the exposure to credit risk.
Liquidity risk management
The Group is funded by external banking facilities provided by
HSBC. Within these facilities, the Group actively maintains a
mixture of long-term and short-term debt finance that is designed
to ensure the Group has sufficient available funds for operations
and planned expansions. Cash flow requirements are monitored by
short and long-term forecasts, with headroom against facility
limits and banking covenants assessed regularly.
Foreign currency risk management
The Group's activities expose it to the financial risks of
changes in foreign currency exchange rates. The Group's exposure to
foreign currency risk is partially hedged by virtue of invoicing a
proportion of its turnover in US Dollars and Euros. When necessary,
the Group uses foreign exchange forward contracts to further
mitigate this exposure. The following is a note of the financial
instruments denominated at each period end in US Dollars:
2023 2022
Group $'000 $'000
------------------------------------- --------- ---------
Trade receivables 11,342 11,276
Other receivables 369 990
Net cash, overdrafts and
revolving facilities 2,640 7,364
Import loans - (9,965)
Invoice discounting 1 75
Trade payables (17,324) (21,310)
---------------------------
(2,973) (11,570)
=========================== === === ========= =========
The effect of a 20% strengthening of Sterling at 31 July 2023 on
the foreign denominated financial instruments carried at that date
would, all variables held constant, have resulted in an increase to
total comprehensive income for the period and an increase to net
assets of GBP0.3m (2022: GBP1.3m). A 20% weakening of the exchange
rate, on the same basis, would have resulted in a decrease to total
comprehensive income and a decrease to net assets of GBP0.5m (2022:
GBP1.9m).
The following is a note of the financial instruments denominated
at each period end in Euros:
2023 2022
Group EUR'000 EUR'000
------------------------------ -------- --------
Trade receivables 11,369 9,345
Net cash, overdrafts and
revolving facilities 3,266 (125)
Invoice discounting (6,573) (5,617)
Trade payables (1,217) (612)
Lease liabilities (638) (810)
6,207 2,181
=========================== ======== ========
The effect of a 20% strengthening of Sterling at 31 July 2023 on
the foreign denominated financial instruments carried at that date
would, all variables held constant, have resulted in a decrease to
total comprehensive income for the period and a decrease to net
assets of GBP0.7m (2022: GBP0.3m). A 20% weakening of the exchange
rate, on the same basis, would have resulted in an increase to
total comprehensive income and an increase to net assets of GBP1.1
(2022: GBP0.4m).
The Directors have shown a sensitivity movement of 20% as, due
to the current uncertainty given the current economic climate, this
is deemed to be the largest potential movement in currency that
could occur in the near future. Financial instruments denominated
in Canadian Dollars and Polish Zloty are not significant and
therefore do not pose a significant foreign exchange exposure.
Capital risk management
The Group is funded by equity and loans. The Group's objective
when managing capital is to maintain adequate financial flexibility
to preserve its ability to meet financial obligations, both current
and long-term. The capital structure of the Group is managed and
adjusted to reflect changes in economic conditions. The Group funds
its expenditure on commitments from existing cash and cash
equivalent balances, primarily received from existing bank
facilities and profits generated . There are no externally imposed
capital requirements. Financing decisions are made based up on
forecasts of the expected timing and level of capital and operating
expenditure required to meet the Group's commitments and
development plans.
Fair value estimation
The carrying value less impairment provision of trade
receivables and payables are assumed to approximate to their fair
values because of the short-term nature of such assets and the
effect of discounting liabilities is negligible. The Group is
exposed to the risks that arise from its financial instruments. The
policies for managing those risks and the methods to measure them
are described earlier in this note.
Maturity of financial assets and liabilities
All of the Group's non-derivative financial liabilities and its
financial assets at the reporting date are either payable or
receivable within one year, except for borrowings.
10. ANNUAL REPORT AND ACCOUNTS
The annual report and accounts for the year ended 31 July 2023
will be posted to shareholders in the week commencing 13 November
2023 and will be available immediately thereafter on the Company's
website at
https://www.upplc.com/investor-relations/financial-reports/
11. ANNUAL GENERAL MEETING
The Annual General Meeting of UP Global Sourcing Holdings plc
will be held on 15 December 2023 at the Company's registered office
at Manor Mill, Victoria Street, Chadderton, Oldham, OL9 0DD, notice
of which will be sent to shareholders with the annual report and
accounts in the week commencing 13 November 2023.
12. PUBLICATION ON WEBSITE
A copy of this announcement and an investor presentation of
these results are available on UP's website at
https://www.upplc.com/investor-relations/ .
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END
FR DBLFXXBLLFBZ
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October 31, 2023 03:00 ET (07:00 GMT)
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