Ultimate Products Plc (ULTP) Earnings Call Transcript

Good afternoon, everybody, and many thanks for joining us this afternoon for Ultimate Products' Full Year '26 Results Investor Presentation. Just while we are waiting for everybody to join the call and before we get to the reason that you're all here for, I'm going to run through some of the housekeeping. So just to let you know that this webinar is being recorded and will be available on our website in due course. You can also find our analyst research at our website. There will be a question-and-answer session at the end of this presentation. And for those of you that don't know how to do that, at the bottom of your screen, there is a Q&A button. So if you post your questions in there, we will endeavor to get through as many as we can. Right at the end of the presentation and the Q&A session, if you could just hang on, a survey will pop up on your screen, and we would appreciate if you could complete that as management really do appreciate some feedback. So, as I said, now to the exciting part, I am very happy to welcome Simon Harrison, Ultimate Products' new Chief Exec, for his first public investor presentation. But I will now formally pass you over to Chris Dent, CFO; and Simon Harrison, CEO, to run through the presentation.

Brilliant. Thanks very much. Good afternoon. And yes, welcome to our full year presentation for the year ending 31st of July 2026. For those of you who don't know me, I'm Chris Dent, CFO of the business. So we are in an unusual situation today. Simon started with us yesterday in terms of actually being the CEO, having been with us 7 weeks beforehand as CEO-designate whilst he took over from Andy. So today's presentation is not going to contain vast amounts of surprises. It's going to be quite a look back to what we did last year. So no big strategic changes at the moment. So before I run through the deck, I will hand over to Simon to introduce himself to you all.

Thanks, Chris, and good afternoon, everybody. Thanks for making time for Chris and I today. It's great to be able to speak to you directly so soon into the new role. It's been a real privilege to take over the role from Andy Gossage who, together with Simon Showman, have built the business that we have today. And it's been great to have a full and professional handover from Andy over the last couple of months. We've had a chance to meet many colleagues, some customers, and really start to get under the skin of the business with Andy. So it's been a great start for me. Prior to joining Ultimate Products, I've spent around 30 years working in FMCG. I had 20 years at Coca-Cola Enterprises, where I worked across all functions really, sales, marketing, supply chain, and before becoming the Vice President for Commercial Development in the U.K. And then after Coca-Cola, I joined Princes Group, the international food and beverage plc, for 5 years, where I was the CEO, and I led the business through change in ownership and also a successful IPO. For most of my career, I've really been focused on the consumer and the customer, helping teams build brands and also build long-term strategic relationships with customers. And that commercial growth opportunity is what really attracted me to Ultimate Products. We have some fantastic brands like Salter and Beldray with what I believe is great potential. We have a great culture in the business, particularly entrepreneurial and fast-moving culture. And we have some real world-class technology and automation underpinning the business, and some great partnerships with our customers across the U.K. and Europe. But I also saw in UP an opportunity for further growth. I'm sure, like me, you spent time shopping in supermarkets or discount stores or online, and you probably see the same that I do, which is that our categories are underdeveloped in many of those retail outlets or online sites. I think we need some more inspiration to drag shoppers into the general merchandise aisles, probably some more focus on the correct range in store and online, and generally inject a bit of fun and excitement into the aisles where our products are sold. And it's that real commercial growth opportunity that's excited me most about taking on this role. Right now, very early days, as Chris said, day 2 officially. And my priorities are to spend as much time as I can with our colleagues and our customers. I want to really try and understand how the changes that are already underway in the business are bedding in and get a clear understanding of where we can focus and improve our execution. And once I have an opportunity to do that properly, I'll be in a much better position to set out my own priorities for the business. But for today, it's really great to be here with you. I'm looking forward to hearing more about some of the areas that you're interested in as Chris takes you through the presentation. So with that, I'll hand back to Chris.

Brilliant. Thank you very much. So it has been a big year of change for us. But we have stayed true to 3 things. We stay true to our purpose, our values, and also we stay true to our culture. So our purpose is beautiful product for every home, which is what is going to continue to be our guiding star in the future. Our culture is a culture of continuous improvement. It's that desire to be better today than we were yesterday and be better tomorrow than we are today. And it's that culture of continuous improvement which has driven many of the changes that have happened during the current year. So I'll go through a couple of those. So if we just move on to Slide 4, that will be a fantastic start on the changes. So our desire is to be the Home of Brands. And it's our brands since IPO 10 years ago that have driven our long-term growth. So you can see how sales of our proprietary brands have gone from GBP 51 million back in FY '17, up to GBP 128 million in the current financial year, which is up 5% from last year, which is really pleasing, still ever so slightly below the peak that we reached during FY '23 during the air fryer boom. Although our brands are key to our long-term success and for shareholder equity value, they've not always been given the commercial primacy that they ought to have been done. That can be seen particularly in FY '24, when we're coming off the back of the air fryer boom. We used clearance sales as a tactical way to close the gap that we saw from coming off the air fryer boom. Now third-party clearance can be great because it's relatively high margin; however, it does have significant issues to it. It's volatile, one-off by its very nature. It's nonpredictable, and also it ends up being cannibalistic to our own revenues. It can cause confusion to both our consumers and our retail customers, but it can also cause confusion within the business amongst our sales team about what it is we really stand for. Therefore, during the year, we took the tough decision to close down our clearance division. That was a really tough decision for us to make for a business. One, as a CFO, I like it because it's relatively high margin, but also it was the historic core of the business that Simon Showman started 29 years ago. But we have to accept that, that is part of our history and the future of what will drive our business forward is going to be our brand, and that's why we have to give them primacy within our business. The second major change that we made was in relation to how our overall commercial function works. So previously, we had siloed departments working alongside each other who didn't always communicate very well and may have had overlapping and conflicting priorities. Therefore, we created something this year, which we call the commercial triangle, which is to drive the commercial performance within the business. So we have brands who are there to identify consumer needs, audiences, trends and propositions. We have buying who are there to develop relevant differentiated product ranges. And then we have the sales department who are there to translate that proposition into retailer-specific opportunities. And I'm really pleased to see the way that these 3 departments are now working together to drive our commercial performance in the future. So Katie, our Chief Product Officer, is now in charge of the way that we develop products going forward. Product development is actually the biggest investment that we make as part of UP, and it's really important that we get that right. We need to stay consistently ahead of trends and bring innovation into the business. But that innovation needs to absolutely be driven by the data and what the consumer wants. In the past, we've perhaps been guilty of bringing too many different products to market. They're really beautiful products, but without really thinking about who the end consumer is. Now all of our new product development needs to have that clear reason to exist and be driven by the data. Now I'm not saying that they should all be made by the CFO and be done in the way that I would see the data, because that does not allow for the creativity of the product team. If it was down to me, we'd have never ended up with some of these beautiful pink products that we have over here. I mean, that's not strictly true. You may have ended up with sort of like some of them. And the data told us that when we were developing that, black is the most popular choice. If it was up to a CFO, we would only have a range of black products. But what the team did is they felt that there was a space for pink products within our range, and they went and looked at the data. And what they found was that although pink never comes at the top of the list of choices when it's all ranked, what they realize is the people who like pink are very passionate about it and are underserved. And once we have that data, we knew that there was a space within our product portfolio for a range of pink products, which have now been selling incredibly well. I may have signed off the pink. I certainly would have signed off leopard skin, which was another thing which we did this year, which is now actually selling very well with our German consumers through Penny Markt. So under Tracy, we've seen significant rebrands of the business. So the bulk of that rebrand is now complete. So we've done Salter and Beldray, Progress. We've also done Russell Hobbs as well under their [indiscernible] brand guidelines. So now the task of brands and marketing is to support the rest of the commercial triangle. It is to be there to provide the ideas and the inspiration for Katie and also to provide the data and the backing for Duncan to go away and sell. In the current year, we have moved on in some ways. We have had our first TV advert for Beldray. So I was delighted to see that on television. As a Lancastrian, I was slightly disappointed that I had to go to Yorkshire to go and view the advert at my sister-in-law's house, but never mind. We've seen considerable success with that. So in terms of a sales driver, we saw sales of our All-in-One Beldray floor cleaner go up by a fairly impressive 605% and sales overall on the beldray.com website up by 64%. In and of themselves, they are fantastic figures. How that translates into extra gross margin would mean that the investment is not quite sort of like cover the cost of the overall advert. Because when you're going in to see advertising, it's not about the immediate sales that you're gaining. It's about the halo effect. It's about the building of the brand year-on-year. So although not about sort of like to see it plastered all over ITV every single evening, TV advertising is going to be an important part of our brand armory going forward. So moving on to the next slide. It's actually in our sales team that we have seen the biggest transformation in the current year. Looking back almost 18 months ago, in May '25, we realized that our sales team has fallen behind the rest of the business, that they didn't necessarily have the right skills that we needed to drive the business forward. The sales team, it's true today have been led by Simon Showman for many years, and Simon, in many ways, was the rainmaker of that sales function. And knowing that Simon was going to leave the business, we needed to ensure that we had a sales function beneath that, that would enable Simon to move on from the business. So when we started on that, we knew the sales team that we wanted. We felt that perhaps with a couple of tweaks over here, a couple of tweaks over there, and with some training, we would be able to lift the team that we were -- we had at that point in time. Sadly, what we need to do is a rather larger transformation of this area than we originally expected. And you'll see that the cost of that, that GBP 800,000 of redundancy and recruitment costs, really shows the scale of the transformation that we have done here. In fact, from the team that we had back in May '25, there are 2 sort of like remaining people there. However, we now do have the team who have the requisite skills that we need to drive branded sales on a year-by-year basis going forward. They are a relatively green team at the moment. They still have quite a lot to learn about our products, about our industry, and about our customers. The transformation is almost complete. We probably have a couple more people that we need to bring into the team. But I'm very pleased now with the team that we have got, and we have a base to start building our sales back up in the future. So one final thing in relation to the sales team, which does also come on to this slide as well. So I'm delighted to announce to you all here today, which is a brand new, hot off the press that we launched our CRM system yesterday. So one of the reasons that we have sort of like fallen behind is that, for a business which prides itself on its operational excellence and its use of technology, we didn't have a CRM to support our sales team, which is fairly woeful of us as a business. But we have now corrected that. The CRM system was launched yesterday. The CRM is part of our overall ERP project. So our ERP project is the core system that we use in our business. That's a GBP 2 million overall investment that we're making within the business. So the CRM is actually the second part of it. The initial part was the introduction of our PIM during the year, so our product information management system. So that has all the information about the 2,500 products that we sell. So moving that out from the core system means we have significantly derisked the ERP implementation when it comes about. This all makes us sound as if we love doing major IT projects. We do not like doing them. In many respects, these system changes have been forced upon us by the previous supplier end-of-lifing our system, which means that we're having to do these major upgrades at the moment. What we prefer to do is marginal gains. And we continue to be working on those marginal gains over the last year to drive our productivity forward. That's enabled us to decrease headcount over the course of the year. But it also means that we now have a fantastic operational base, which gives us a huge amount of operational leverage as we grow our sales line, meaning that we do not have to significantly expand our teams going forward. So we've seen that increase in our operational capabilities. So the 2 areas where we've been doing those productivity gains are in relation to robotic process automation. The biggest one that we've done during the year has been to help our sales team in terms of ordering samples. So we send out a large amount of samples to customers each week. That used to be a very manual process by which forms were filled in, products were delivered to salespeople's desk, and the salespeople have to arrange for DHL carrier to come along and pick it up and arrange with the customer to get it. We've now automated the entirety of that process, which is saving the sales team 19.5 hours a week, which is 19.5 hours which they can now spend in terms of selling to customers instead. Then the other thing that we're doing is lots in relation to AI as an awful lot of people around the world are doing at the moment. So the biggest investment that we've made in AI this year has been in relation to translating our instruction manuals, which, given we sell internationally, some of our manuals need to be translated into over 20 languages. What we have done is we're now doing all of that through AI and getting AI to check its own homework to ensure that those translations have been done correctly. And that's saving us about GBP 84,000 a year in terms of translation services. So moving on to the final sort of like big change, which has occurred in the year, on Slide 8. So obviously, the biggest change is in relation to the senior management. So we are delighted to welcome Simon Harrison as our new CEO. His CV and the experience that he has will enable this business to grow its branded proposition into the future. Obviously, we are very sad to be losing Andrew Gossage and Simon Showman. They are the founders of this business. They took it from nothing to a business of GBP 150 million turnover over the past 29 years. I know that some people may have been slightly puzzled over the timing of this with Andy only being sort of like CEO for just over 2 years. Now for us internally, this made sense because there were a number of things which Andy knew he had to sort out within the business to allow him and Simon to step back. When you've had a business which has been growing under their founders, quite often, there's a lot of things underneath, which do need to be sorted. Andy made that his task over the past 2 years to sort those things out to provide a strong base for us to grow forward from. And that includes, for instance, the changes we made in the commercial team and the changes that we have made in the sales team. I want to thank them from the bottom of my heart personally for everything which they have done within the business. And I'm delighted that they are both going to continue to stay on as NEDs, Andy with a 6-month hiatus at the moment, but I'm so glad that they're staying on to give us the benefit of all the expertise that they have and knowledge about the business. So moving on to the duller part of the agenda. So moving on to the financial statements. So if we look at revenue, obviously, revenue down 3% in the year. So the majority of that is due to the decision to close the clearance business. That has also impacted gross margin. So gross margin down from 23.2% to 22.6% because clearance is at a relatively high margin level. Admin expenses are remarkably flat and have remained flat for the past 4 years, which is down to the productivity gains that we've been making through operational efficiencies through our RPA program. This year, that included that GBP 800,000 of reorg cost in relation to the sales team transformation, which left adjusted EBITDA down 20% at just over GBP 10 million. The next slide shows revenue broken down into lots of detail. Those of you who followed our business for a while will know that we give you a lot of data around sales. We try and break it down into all the relevant categories. This table to me explains the business best, seeing overall the third-party clearance and white label down 60% and our overall branded sales up 2%. That sales growth of 2% is weighted towards international, where we continue to see strong growth with European discounters, where you can see they're up sort of like 64%. Where has been most disappointing for us as a business is a 7% decline in the U.K. Because we do have good visibility of our order book with our major customers, that was what we were seeing back in May last year as us being down in that core U.K. market. And that's what spurred us to be making the changes to the commercial function and the major transformation to the sales team. And it's that, that we want to bring back, first of all, to being stable and then bring that back to growth, because although we are working in a very tough market, we believe that we should be able to gain market share there, whereas the minus 7% does feel like we're going backwards in relation to that. So that's summarized on the next slide into a bridge where we can see sales down from GBP 150 million to GBP 145 million, third-party clearance and white label down, international branded up, and our U.K. branded down. In terms of how that translates to profit bridge, you can see there that the biggest part of the decline in profitability is due to revenue being down, but also gross margin down due to sales mix. And then you can see how operating expenses are relatively flat. So excluding the reorganizational costs, flat operating expenditure, obviously, we've got the benefit of seeing headcount reduce, but that's offset by pay increases and increases in other overheads. So down at the bottom end of the income statement on the next slide, we can see relatively flat depreciation and amortization, also a relatively flat finance expense where slightly higher rates have offset the lower average net debt. That's leaving adjusted profit before tax down 28% to GBP 6.3 million. We do have the one-off costs in the year. So the ERP implementation, which is overall a GBP 2 million investment that the business is making, so GBP 0.7 million of cost in relation to that and then GBP 0.3 million of cost in relation to the move to AIM. So overall, adjusted EPS down 26%. We are continuing to follow our capital allocation policy. So for those of you that don't know that, it's our intention to maintain net debt at around 1x EBITDA. And also to continue to invest in the business and return around 50% of post-tax profits to shareholders through dividends. So following that 50% payout, the dividend for the full year is 2.7p, which means that the final dividend is 1.8p. Moving on to a quick look at the balance sheet on Page 16. You can see net bank debt and working capital work pretty much in opposite directions to each other. So we have net debt within the business to fund our significant working capital requirements. So as a wholesaler bringing stock in, we do have that working capital requirement running usually somewhere between GBP 20 million and GBP 30 million. And you can see with the working capital coming down in the current year, our net bank debt has dropped. When I'm looking at our working capital to net bank debt, I tend to, myself from a health perspective, look at our working capital to net debt cover, which was very healthy 2.9x at year-end. Final slide is just showing how the net debt came down in the year. So you can see a big positive, the EBITDA and also the money coming back from our working capital due to lower trading. So moving on to the final slide. So current trading does remain in line with market expectations. It is tough out there with subdued consumer demand and geopolitical uncertainty. So we're currently looking at trading being relatively flat for FY '27. However, we do believe that the changes that we're making, the ongoing investment that we're making to our operational capabilities, particularly around that commercial function, are providing us with a strong base for future growth opportunities. So that's the end of the run-through of the slide deck. So Rachel, if we can open it up to questions, that would be fantastic.

Many thanks, Chris. And also thank you, Simon, for the introduction. Okay. If we just go to questions. We've got quite a few, so I will endeavor to get through as many as I can in the time that we have. So if we can start with commercial restructuring and the sales force, which lead indicators do you track to show the commercial restructuring is working before it shows up in revenue? Are there any early indications that the restructured sales force is working?

So obviously, we do have an order book. And so we do sort of have some visibility before it sort of like shows up in revenue because the order book sort of runs 12 to 18 months in advance. In the areas where we need to be returning to growth, specifically in the U.K. branded, that's where I'm starting to sort of like see the green shoots coming through because that's our commercial priority at the moment, is to ensure that, that U.K. core is getting back to growth. And over the past 2 years, it's been going down, but now we can start seeing that flattening out, which is what we need to then start driving growth there in the future.

Great. Thank you. And more specifically, looking at the restructured sales force, what coaching and training methods have been implemented to ensure that all members of the sales force are selling Salter and Beldray at best practice and across all retail channels?

So we do have a relatively new team. We are providing them all with training. So pretty much most Fridays is now training day for the sales team. So there are a variety -- there is internal training, which we're doing to be getting them up to speed in relation to our products and processes. So that would quite often be led by our buying teams, getting them up to speed on the key sort of like Salter and Beldray products, so they know what they are selling. However, we are also getting quite a lot of external training as well, which is more specifically about getting the sale over the line, dealing with difficult conversations, pricing negotiations. So giving them all those basic skills, which they need. But we do have a different salesperson now within the business. So they are now more aligned with our branded proposition rather than kind of like coming from a background of selling more of clearance or white label, the people that we're bringing into the business do have those skills because that's what we're looking for when we are hiring new people.

Could I just add as well, just to supplement what Chris has said around some of the numeric indicators, that the sales force operates in a different way? There's also just -- having spent some time with the guys over the last month or so, we're certainly starting to talk now more about not just sell-in, but sell-through. And that's a very important mindset shift. I think the business for many years has been very good at selling products in to customers. Selling it through the customers is a skill set that we're really, really keen to develop. So what does that mean? Well, it means making sure that we have good advice on ranging, merchandising, price promo architecture, and also just developing plans with the customer to activate from the shelf back, either the physical shelf or the digital shelf. So I'm starting to see already some indications there of that -- of changing mindset on the back of the training and coaching and some good conversations starting with customers about those sell-out or sell-through plans, which I think has been quite nice to see the early stage of those being developed.

Great. Thank you, both. If I can move on to international growth. So branded sales to European discounters grew 64%. Is that growth coming from new customers and countries, or from deeper ranges with existing customers? And how much runway is left?

So at the moment, that's coming from deepening relationships with existing customers. So increasing our product ranges that we are selling to them, increasing amounts rather than new customers. So there is a huge amount of runway there in Europe. There are many customers who we do not sell to, there are many retailers across the entirety of Europe and our market share is still very low. So in the medium term, there continues to be a huge amount of opportunity there. However, in the short term, we need to ensure that our U.K. base is solid first, and that's our key priority this year rather than winning new customers in Europe.

Okay. Thank you. And leading on from that, perhaps, Salter is your largest brand, but it's less well-known internationally. How do you see its role in Europe compared with Petra and George Wilkinson?

Simon, do you?

Yes. I mean, I think, firstly, just a couple of comments on Salter. I have to say I see huge potential for the brand. If you trace its heritage back to 1760 and the association, particularly with scales, precision, and quality engineering, all of those cues lend themselves really well to extending the brand into the various categories in which we operate. So Salter, I see as a very, very strong brand, supplemented also with our other lead brand, Beldray, which, again, a long heritage, but also still extremely relevant to today's consumer and consumer needs. I think, for me, early days yet. I need to get to know the brands much better than I do today. But focusing on really landing the brand at scale in the U.K. is my priority. We have a number of other brands that we use at the moment across our European customer base. It's not to say that Salter hasn't got international potential. I really believe it has. But our first priority is to really scale the brand in the U.K., and continue to innovate and develop that would be my initial thoughts.

Thank you. And while we're on brands, we've got a couple of questions about how do Russell Hobbs and Kleeneze fit the Home of Brands portfolio over the long term?

So Russell Hobbs for us, we have a strong relationship with Spectrum Brands who are based just down the road from us here. Russell Hobbs is a very well-known brand in Europe. And therefore, for us, it can help us as a door opener. So we do sell a lot of sort of like Russell Hobbs cookware to the big German supermarkets, which gives us an in to be selling our other brands to them, which, as we've acknowledged, Salter is not as well known in Europe. So for us, that does give us a strong platform for entering into those markets. Kleeneze is there as a secondary brand for when Beldray doesn't work for channel management. So we would prefer to be growing Beldray, but if for whatever reason it doesn't work, it's always important to have that secondary brand there. And sometimes you may use it as a more entry level if that sort of like works, but it's not one -- ever going to be one of our primary brands.

Okay. Moving on from that. Would you consider exploiting your brand building and rejuvenated selling expertise by acquiring a brand of similar scale to either Salter or Beldray?

I don't think so at this precise moment in time because we believe that Salter and Beldray can still do an awful lot more. And therefore, at the moment, the job is to get the growth out of them and to get them up to their maximum potential rather than going out and acquiring other brands, because quite often what you end up doing is you buy another brand, and that slightly confuses everybody about what they should be concentrating on. And those 2 brands cover a large amount of product categories in which we want to work. So let's get the most out of those, first of all.

Okay. And sticking with Salter and Beldray, salter.com grew 50%, beldray.com grew 29%. How large do you think your own websites can become? And how does the margin compare with the third-party marketplace?

So I believe that both of them can become much, much bigger. How big is an interesting question. But I believe that we should be able to do as much with them as we are currently doing with our largest marketplace. There is no reason why salter.com shouldn't be the main place where people go and buy our iconic scales brands -- our scales products, for instance. We can be generating the hits to there, especially now the playing field is being leveled a little bit by AI coming in. So now people aren't necessarily going on to one of their favorite marketplaces as the first place where they are going. What they're doing is they're asking AI to go and find it. And the AI won't necessarily be going to the previously favorite marketplaces. Where it will go to is where AI is best pointing it to. So if we make our websites as relevant as possible to AI, which -- for instance, we now have shadow websites purely to be read by AI to ensure that our sites are as searchable and as findable as possible by AI. And over the next kind of like couple of years, we're going to see those traditional search methodologies go down as AI increases, and that gives us a real opportunity for our own websites to grow. In terms...