RNS Number : 5383U
UP Global Sourcing Holdings PLC
29 March 2023
 

29 March 2023

 

UP Global Sourcing Holdings plc

 

("Ultimate Products", the "Company" or the "Group")

 

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JANUARY 2023

 

FY23 outlook in line with current market expectations*

 

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 interim results for the six months ended 31 January 2023.

 

Financial highlights

·    Total revenue up 2% to £87.6m (H1 2022: £85.7m), achieved with no overall price inflation to keep our products at prices which are affordable to all consumers

Online revenue up 78% to £22.9m (H1 2022: £12.8m), supported by continued normalisation of global supply chains

Sales to retailers down 11% to £64.7m (H1 2022: £72.9m), hampered by caution in forward ordering arising from post-COVID overstocks amongst retailers

·    Gross profit rose 3% to £21.6m (H1 2022: £20.9m), with gross margin increasing to 24.7% (H1 2022: 24.4%), driven by online sales growth

·    Adjusted EBITDA** resilient at £11.2m (H1 2022: £11.2m)

·    Statutory profit before tax down 5% to £9.3m (H1 2022: £9.8m), impacted by higher interest rates and the Group's Head Office investment increasing the depreciation charge

·    Adjusted profit before tax** down 5% to £9.4m (H1 2022: £9.9m)

·    Statutory EPS down 6% to 8.4p (H1 2022: 8.9p), with Adjusted EPS** down 5% to 8.6p (H1 2022: 9.1p)

·    Interim dividend per share up 6% to 2.43p (H1 2022: 2.30p)

·    Improved net bank debt/adjusted EBITDA** ratio of 1.0x (31 July 2022: 1.3x) 

·    Strong cash generation from operating activities of £12.8m (H1 2022: used cash of £5.0m), representing a 114% operating cash conversion

·    Performance for FY23 anticipated to be in line with current market expectations

 

* Consensus market expectations for the financial year ending 31 July 2023 are revenues of £165.3m (actual FY22: £154.2m), adjusted EBITDA of £20.1m (actual FY22: £18.8m) and adjusted EPS of 14.8p (actual FY22: 14.3p)

**Adjusted measures are before share-based payment expense and non-recurring items.

 

Operational highlights

·      Appointment of first dedicated Brand Director

·      Successful relaunch of Petra, the German kitchen electrical brand, into the German market

·      Renewal of the Group's Russell Hobbs licencing agreement on a rolling four-year basis

·      Launch of the Group's inaugural ESG Strategy

·      Investment in robotics yielding positive results, with hundreds of tasks now automated

·      Highly productive attendance at Ambiente, the largest European Trade Fair, in Germany

·      Beginning our journey to diversify our supply chain

 

Current trading and outlook

The Board anticipates full-year performance for FY23 will be in line with current market expectations, with H2 performance benefiting from significant growth in our online channel which is less seasonal. The Group is well placed to respond to the challenges of the current cost of living crisis given its relentless focus on delivering value and growth.

 

Commenting on the results, Simon Showman, Chief Executive of Ultimate Products, said:

"We have delivered a robust performance, with exceptional growth from online, amidst a tough trading environment. Our amazing team has built a resilient and scalable business, based on a strong portfolio of homeware brands with a wide range of products and channels to market.

 

The business has been tested by some of the toughest trading conditions and headwinds seen in recent times, but we are emerging stronger, more focused and more profitable than ever. This resilience puts us in a strong position to accelerate our growth as the macroeconomic uncertainty starts to clear. We therefore remain confident in the future prospects for Ultimate Products."

 

For more information, please contact:

Ultimate Products +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

Malachy McEntyre

 

Powerscourt +44 (0) 207 250 1446

Rob Greening

Sam Austrums

 

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 in Cologne, Germany.

 

Please note that Ultimate Products is not the owner of Russell Hobbs. The company currently 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.upgs.com

 

 

BUSINESS REVIEW

 

We are pleased to present the Interim Report for the six months ended 31 January 2023, a period in which, against an uncertain and highly challenging macro-economic environment, we have continued to invest in our strategic plans.

 

Brand Development

Our purpose is to provide beautiful and more sustainable products for every home, and our vision is to be the Home of Brands. We have, over the past five years, developed our portfolio of consumer goods brands to become true leaders in their respective categories. We are privileged to own Salter, the UK's oldest housewares brand, established in 1760, and Beldray, established in 1872. We have seen the highly successful relaunch of Petra, the German kitchen electrical brand, with sales surpassing £2m during the period. As demonstrated by the recent successes of Beldray, Progress and Kleeneze, 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.

 

In addition, we have 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, which was due to end in March 2023. This change significantly reduces the licencing risk, as the licence will always have four years to run, rather than having a fixed end date. 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 were delighted to appoint Tracy Carroll to the newly created role of Brand Director. Tracy joined from Helen of Troy, an American designer and marketer of consumer brands, where she served as Associate Marketing Director, and was responsible for launching and growing the OXO homeware brand in the UK. This appointment will help us refine and focus the development of our portfolio of brands, and her previous experience is already proving invaluable as we expand our outstanding stable of homeware brands across new geographies and channels.

 

The brand journey that we have been on has seen us pivot from a licence holder to a brand owner, and this gives the business a resilient core from which we can expand and grow. Combined with our renewed focus on marketing, we will now be able to fully realise the sales potential of all of our brands in line with our purpose of providing beautiful and more sustainable products for every home.

 

Customer Diversification

As a business we continue to diversify our customer base to mitigate risk and increase the predictability of our sales. In the current period we have seen the benefits of this strategy in full effect. During a period of significant uncertainty around consumer sentiment, Group revenues increased 2% to £87.6m (H1 2022: £85.7m) achieved with no overall price inflation to keep our products at prices which are accessible to all consumers. Online channels were the main driver of revenue growth, supported by buoyant consumer demand for energy efficient and money saving products. In the first half of the prior year, 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. Pleasingly, the continued normalisation of global supply chains has now enabled us to fully service, and continue to grow, our online channels, which still represent a relatively nascent part of our diverse customer base.

 

Our online growth has more than offset the current comparative weakness we have seen in other areas. Retail customers have been understandably cautious in the size of forward orders, given the current macroeconomic environment and high stock levels carried over from the pandemic. Although sales to retail customers fell by 11% during the period, we see reason to be optimistic in the medium term, with the levels of overstocking that retailers experienced following the COVID-19 pandemic showing signs of subsiding.

 

ESG Strategy Launch

Doing the right thing has always been at the core of everything that we do. As Ultimate Products continues to grow, we are acutely aware that our efforts and ambitions should be underpinned by a clear sense of responsibility and purpose. We have therefore developed a comprehensive ESG strategy which covers everything from our purpose of developing products for the home, educating consumers, investing in our colleagues, and supporting those that need it most within our local communities. This strategy will be at the heart of everything that we do, and ensures that our efforts and ambitions have a clear sense of direction to unite our colleagues and supply partners across the globe. 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, particularly within the environmental pillar, where actions often involve immense scale and complexity. We have always had to manage supply chain intricacy seamlessly and efficiently. We are therefore working to ensure that the necessary infrastructure is in place to support our retail partners in going that 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 inevitably painstaking task of sourcing 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.

 

Robotics Process Automation

While our purpose is to provide beautiful and more sustainable products for every home, a key contributor to our success has been consistently providing the best service to our customers. Whether this is through mitigating supply chain disruption by ensuring that their orders are prioritised, or through helping them achieve their ESG ambitions, we insist on going the extra mile for our retail customers. Owing to the level of complexity involved, our position in the supply chain is not easily replicated, and this represents a significant barrier to entry. We are relentless in developing our systems and, in recent years, have established an intense company focus on driving productivity through automation. During the current year we have embarked on the automation of hundreds of tasks within the business. This 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 an engaged workforce.

 

Performance

 

 

H1 2023

H1 2022

Change

Change

 

£'000

£'000

£'000

Revenue

   87,606

   85,746

   1,860

2%

Cost of sales

  (65,976)

  (64,845)

  (1,131)

2%

Gross profit

   21,630

   20,901

       729

3%

Administrative expenses

  (10,397)

    (9,669)

     (728)

8%

Adjusted EBITDA

   11,233

   11,232

           1

0%

Depreciation & amortisation

    (1,136)

       (957)

     (179)

19%

Finance expense

       (711)

       (361)

     (350)

97%

Adjusted profit before tax

      9,386

      9,914

     (528)

-5%

Tax expense

    (2,007)

    (2,177)

       170

-8%

Adjusted profit after tax

      7,379

      7,737

     (358)

-5%

Share-based payment expense

       (128)

       (144)

         16

-11%

Tax on adjusting items

           29

           27

           2

7%

Statutory profit after tax

      7,280

      7,620

     (340)

-4%

*Adjusted measures are before share-based payment expense and non-recurring items.

 

Revenue

Group revenue has increased by 2% to £87.6m in the period (H1 2022: £85.7m). Due to our ongoing focus on sourcing the best products at the best price for our customers and consumers, prices have followed their long-term trend with no price inflation contributing to our top line growth. Online channels were the main driver of this growth, supported by the continued normalisation of global supply chains. In addition, consumer demand for energy efficient and money saving products has remained buoyant across all channels throughout the period. This has meant that Salter products, alongside our overall small domestic appliance offering (which includes air fryers), have proved especially popular in the period.

 

International

International revenue decreased in the period to £25.0m (H1 2022: £29.0m), as a result of continued overstocking by discounters, and the demand for energy efficient and money saving products being weighted towards the UK. This performance reverses some of the strong growth we have seen, especially in Germany, which remains our largest overseas market. However, the period has seen the successful relaunch of Petra, with sales surpassing £2m in the period. We continue to see the European market as a key area for long-term growth for the business, as was shown by our investment in attending Ambiente, Europe's largest housewares show, where we exhibited our high-quality, branded homeware products to some of Europe's biggest retailers. Our products were very well received, and the event remains an important part of growing brand awareness in the strategically important European market.

 

Supermarkets

Although supermarkets continue to be our largest sales channel, and account for 32% of Group revenue (FY22: 33%), sales from this channel decreased in the period to £28.1m (H1 2022: £31.8m). Our supermarket customers have been more cautious in their forward ordering during the cost-of-living crisis as consumers have allocated a greater proportion of their basket spend on food which has seen significant price inflation, rather than general merchandise. Many supermarkets were also overstocked, a trend that occurred following the COVID-19 pandemic and which is now showing signs of subsiding.

 

Online Platforms

Online sales have grown rapidly in the period. Revenue grew by 78% to £22.9m (H1 2022: £12.8m). As previously noted, our online business was adversely affected in H1 2022 by the tighter stock availability caused by the disruption to shipping, which led to a decline in revenue of 13%. This temporary setback was reversed when availability recovered. Strong online momentum, driven by consumer demand for energy-efficient and money-saving products, has seen our online channel make up 26% of revenue in the period (H1 2022: 15%). This represents a significant step towards our target of 30% of overall revenue coming from online over the medium term. While most of our online revenue will always come from transactions made through third party platforms such as Amazon, our Salter.com and Beldray.com websites contributed a respectable £0.8m of revenue during the period. In addition to providing an additional avenue for growth, our websites help to facilitate a more direct relationship between our brands and their consumers, giving us more direct insights into their behaviour.

 

Discounters

Sales to discounters fell by 16% to £21.1m (H1 2022: £25.1m). The performance of this channel has been driven by general post-COVID overstocking, which caused some discounters to moderate their ordering as they attempted to clear down their stocks. In the UK, the situation has begun to correct, and more normal patterns of order placing have now recommenced. As the cost-of-living crisis continues to affect consumers, we expect that there will be increased opportunities with discounters.

 

Operating Margins

Gross margin increased to 24.7% (H1 2022: 24.4%) as our sales growth was driven by higher-margin online sales. At the end of the period, we began to benefit 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 3% to £21.6m (H1 2022: £20.9m).

 

Administrative expenses rose 8% to £10.4m (H1 2022: £9.7m). Although we have seen relatively low levels of inflationary pressure on our cost of sales, and hence on revenues, we have seen cost pressure in our operating costs. Our wage bill, which makes up 70% of our administrative expenses, rose by 6% in the period, as we increased salaries for our people to help mitigate 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.

 

For the first time in three years, we have also been able to invest in attendance at Ambiente, Europe's largest housewares show, which 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 robust revenues, improved gross margin, and slightly higher overheads has led to a stable adjusted EBITDA at £11.2m (H1 2022: £11.2m).

 

Seasonality

The Group has a seasonality towards H1, with retail demand being higher in the peak Christmas trading period. However, in the current year, this pattern is expected to be less pronounced, with sales growth weighted towards the less seasonal online channels. As a result, it is anticipated that the operating profits for the second half of the year to 31 July 2023 will be only marginally lower than for the six months ended 31 January 2023.

 

Adjusted & statutory profit

Depreciation and amortisation increased 19% to £1.1m (H1 2022: £1.0m) as a result of the increase in the depreciation charge following from our investment in solar panels at our Manor Mill head office during the summer of 2022.

 

The finance charge has increased £0.3m to £0.7m (H1 2022: £0.4m) due to the higher level of interest rates. The Group has benefitted from the hedging instruments it entered into when interest rates were at historically low levels. These instruments cover an aggregate principle of £18.3m, and are a mix of swaps and caps. These instruments have successfully limited the effect of higher interest rates.

 

The tax charge for the period at 21% (H1 2022: 22%) was higher than the statutory rate of 19% due to the higher statutory rate of tax paid on our European foreign branches in Germany and Poland. 

 

As a result, the statutory profit after tax decreased by 4% to £7.3m (H1 2022: £7.6m).

 

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 reduced following the successful vesting of employee share options schemes. This has resulted in the weighted average number of shares increasing 1% to 86,234,633 (31 January 2022: 85,333,766).

 

 

 

 

H1 2023

EPS

H1 2022

EPS

 

£'000

p

£'000

p

Adjusted profit after tax / Adjusted EPS

7,379

8.56

7,737

9.07

Share-based payment expense

(128)

(0.15)

(144)

(0.17)

Tax on adjusting items

29

0.03

27

0.03

Statutory profit after tax / Basic EPS

7,280

8.44

7,620

8.93

 

As a result, whilst adjusted profit after tax decreased by 5% to £7.4m (H1 2022: £7.7m), adjusted earnings per share decreased by 6% to 8.56p (H1 2022: 9.07p).

 

Financing and cash flow

The Group generated cash from operating activities of £12.8m (H1 2022: used cash of £5.0m), being a 114% operating cash conversion. This was significantly stronger than the previous period 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 1.0x (31 July 2022: 1.3x), which represents net bank debt of £19.4m (31 July 2022: £24.3m). The Group maintains comfortable levels of headroom within its bank facilities, with headroom at 31 January 2023 of £22.4m (31 July 2022: £17.8m). 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.

 

 

 

31 January 2023

31 January 2022

           Change

      Change

 

£'000

£'000

£'000

%

Cash

5,004

257

4,747

1847%

RCF/Overdraft

(7,097)

(3,343)

(3,754)

112%

Invoice Discounting

(3,465)

(11,053)

7,588

-69%

Import Loans

(6,970)

(7,128)

158

-2%

Term loan

(7,000)

(9,000)

2,000

-22%

Debt Issue Costs

140

194

(54)

-28%

Net bank debt

(19,388)

(30,073)

10,685

-36%

 

Dividend

In line with our established dividend policy of distributing 50% of the Group's adjusted profit after tax, an interim dividend of 2.43 pence per share (H1 2022: 2.30 pence per share) was approved by the Board on 28 March 2023 and will be paid on 30 June 2023 to shareholders on record as at 2 June 2023 (ex-dividend date being 1 June 2023).

 

Simon Showman 

James McCarthy

Chief Executive Officer

Chairman

 

 

Consolidated Income Statement

 

 

Unaudited

6 months ended

31 January 2023

Unaudited

6 months ended

31 January 2022

Audited

year ended

31 July 2022

 

£'000

£'000

£'000

Revenue

   87,606

   85,746

   154,191

Cost of sales

  (65,976)

  (64,845)

  (115,837)

Gross profit

   21,630

   20,901

     38,354

Adjusted earnings before interest, tax, depreciation, amortisation, share-based payments & nonrecurring items

   11,233

   11,232

     18,750

Depreciation

    (1,125)

       (946)

      (2,044)

Amortisation of intangibles

         (11)

         (11)

           (22)

Share-based payment expense

       (128)

       (144)

         (403)

Total administrative expenses

  (11,661)

  (10,770)

    (22,073)

Operating profit

     9,969

   10,131

     16,281

Finance expense

       (711)

       (361)

         (842)

Profit before tax

     9,258

     9,770

     15,439

Tax expense

    (1,978)

    (2,150)

      (3,069)

Profit for the year attributable to equity holders of the Company

     7,280

     7,620

     12,370

All amounts relate to continuing operations



 

Earnings per share



 

Basic

8.4

          8.9

          14.3

Diluted

           8.3

           8.5

           13.9

 

 

Consolidated Statement of Comprehensive Income

 


Unaudited

6 months ended 31 January 2023

Unaudited

6 months ended

31 January 2022

Audited

year ended

31 July 2022


£'000

£'000

£'000

Profit for the period

7,280

7,620

12,370

 




Items that may subsequently be reclassified to the income statement




Fair value movements on cash flow hedging instruments

(1,645)

1,011

3,239

Hedging instruments recycled through the income statement at the end of hedging relationships

(1,572)

118

162

Items that will not subsequently be reclassified to the income statement




Foreign current translation

-

2

11

Other comprehensive income

(3,217)

1,131

3,412

Total comprehensive income for the period attributable to the equity holders of the Company

4,063

8,751

15,782

 

Consolidated Statement of Financial Position

 

 


Unaudited

As at 31 January 2023

Unaudited 

As at 31 January 2022

Audited

As at 31 July 2022


£'000

£'000

£'000

Assets




Intangible assets

37,014 

                36,918

                37,025

Property, plant and equipment

5,606 

                  5,663

                  6,369

Total non-current assets

42,620 

                42,581

                43,394

 




Inventories

27,290 

                27,093

                29,162

Trade and other receivables

34,323 

                37,753

                32,194

Derivative financial instruments 

913 

                  1,327

                  4,142

Cash and cash equivalents

5,004 

                     257

                  6,202

Total current assets

67,530 

                66,430

                71,700

Total assets

110,150 

              109,011

              115,094

 




Liabilities




Trade and other payables

(31,376) 

               (29,686)

               (29,644)

Derivative financial instruments

(673) 

-  

-

Current tax

(705) 

                    (648)

                    (170)

Borrowings

(12,934) 

               (20,091)

               (22,314)

Lease liabilities

(636) 

                    (849)

                    (817)

Deferred consideration

(494) 

                    (987)

                    (987)

Total current liabilities

(46,818) 

               (52,261)

               (53,932)

Net current assets

20,712 

                14,169

                17,768

 




Borrowings

(11,458) 

               (10,239)

                 (8,144)

Deferred tax

(6,928) 

                 (6,055)

                 (7,585)

Deferred consideration

                    (494)

-

Lease liabilities

(1,717) 

                 (1,758)

                 (1,940)

Total non-current liabilities

(20,103) 

               (18,546)

               (17,669)

Total liabilities

(66,921) 

               (70,807)

               (71,601)

Net assets

43,229 

                38,204

                43,493

 




 Equity




Share capital

223 

                     223

                     223

Share premium

14,334 

                14,334

                14,334

Employee Benefit Trust reserve

(1,815) 

                 (2,072)

                 (1,571)

Share-based payment reserve

1,197 

                  1,099

                  1,166

Hedging reserve

22 

                     967

                  3,239

Retained earnings

29,268 

                23,653

                26,102

Equity attributable to owners of the Group

43,229 

                38,204

                43,493

 

Consolidated Statement of Changes in Equity

For the period ended 31 January

 

 

Share capital

Share premium

Employee Benefit Trust reserve

Share-based payment reserve

Hedging reserve

Retained earnings

Total equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 August 2021

               223

          14,334

          (2,152)

            1,024

             (162)

          18,788

          32,055

Profit for the year

 -

 -

 -

 -

 -

       7,620

      7,620

Foreign currency retranslation

 -

 -

 -

 -

 -

               2

            2

Cash flow hedging movement

 -

 -

 -

 -

     1,129

-

       1,129

Total comprehensive income for the year

 -

 -

 -

 -

        1,129

         7,622

        8,751

Transactions with shareholders:








Dividends paid

 -

 -

 -

 -

 -

   (2,844)

    (2,844)

Share-based payments charge

 -

 -

 -

         144



     144

Deferred tax on share-based payments

-

-

-

-

-

98

98

Purchase/sale of shares by the EBT

 -

 -

80

 (69)

 -

       (11)

           -

As at 31 January 2022

          223

   14,334

   (2,072)

     1,099

          967

      23,653

      38,204

 

 

 

 

 

 

 

 

 

Share capital

Share premium

Employee Benefit Trust reserve

Share-based payment reserve

Hedging reserve

Retained earnings

Total equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 August 2022

               223

          14,334

          (1,571)

            1,166

            3,239

          26,102

          43,493

Profit for the period

 -

 -

 -

 -

 -

7,280

     7,280  

Foreign currency translation

 -

 -

 -

 -

 -

 -

                -  

Cash flow hedging movement

-

-

-

-

(3,217)

-

(3,217)

Total comprehensive income for the period

          -

-

  -

-

(3,217)

   7,280

     4,063

Transactions with shareholders:








Dividends paid

-

-

-

-

-

(4,157)

(4,157)

Share-based payments charge

-

-

-

128

-

-

128

Purchase/sale of shares by the EBT

-

-

(244)

(97)

-

43

(298)

As at 31 January 2023

 223

  14,334

(1,815)

1,197

22

29,268

43,229

 

Consolidated Statement of Cash Flows

For the period ended 31 January

 


Unaudited

31 January 2023

Unaudited 

31 January 2022

Audited

31 July 2022


£'000

£'000

£'000

Net cash flow from operating activities

 



Profit for the year

 7,280

           7,620

   12,370

Adjustments for:

 



Finance costs

711 

              361

        842

Income tax expense

1,978 

           2,150

     3,069

Depreciation

1,125 

              977

     2,044

Amortisation

11 

                11

          22

Derivative financial instruments

(4) 

              118

        274

Share-based payments

128 

              144

        403

Working capital adjustments

 



Decrease/(increase) in inventories

1,872 

         (5,419)

    (7,721)

(Increase) in trade and other receivables

(2,129) 

       (11,208)

    (5,649)

Increase in trade and other payables

1,834 

              201

     1,221

Net cash from operating activities

12,806

(5,045)

6,875

Income taxes paid

(1,446) 

         (1,435)

    (2,345)

Net cash from operations

11,360 

         (6,480)

     4,530

Cash flows used in investing activities

 



Acquisition of subsidiary

(493) 

            (493)

    (1,960)

Purchase of property, plant and equipment

(362) 

            (636)

    (1,843)

Net cash used in investing activities

(855) 

         (1,129)

    (3,803)

Cash flows used in financing activities

 



(Purchase)/sale of own shares

(298) 

        373

Proceeds from borrowings

8,344 

         12,493

   14,347

Repayment of borrowings

(14,426) 

         (1,000)

    (2,766)

Principal paid on lease obligations

(424) 

            (497)

       (936)

Debt issue costs paid

(93) 

                -  

                -  

Dividends paid

(4,157) 

         (2,844)

    (4,830)

Interest paid

(649) 

            (420)

       (850)

Net cash generated by finance activities

(11,703) 

           7,732

     5,338

Net (decrease)/increase in cash and cash equivalents

(1,198) 

              123

     6,065

Exchange gains on cash and cash equivalents

1

            4

Cash and cash equivalents brought forward

6,202 

              133

        133

Cash and cash equivalents carried forward

5,004 

              257

     6,202

 

 

Notes to the Interim Results

 

1.     General Information

This consolidated condensed interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 July 2022 were approved by the Board of Directors on 2 November 2022 and delivered to the Registrar of Companies. The comparative figures for the financial year ended 31 July 2022 are an extract of the Company's statutory accounts for that year. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

 

This consolidated condensed interim financial information is unaudited but has been reviewed by the Company's Auditor.

 

2.     Basis of Preparation

This consolidated condensed interim financial information for the six months ended 31 January 2023 has been prepared in accordance with IAS 34, 'Interim Financial Reporting', in accordance with UK adopted international accounting standards. The consolidated condensed interim financial information should be read in conjunction with the audited financial statements for the year ended 31 July 2022, which have been prepared in accordance with UK adopted IFRSs.

 

Going Concern Basis

The Directors have adopted the going concern basis in preparing this Interim Statement after assessing the resilience of the Group in severe but plausible scenarios, taking account of its current position and prospects, the principal risks facing the business, including those relating to COVID-19 and the conflict in Ukraine, 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. The Group's projections, which cover the period to July 2024, 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 the Interim Statement.

 

Accounting Policies

The accounting policies and method of computations adopted in the preparation of these condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 July 2022.

 

3.     Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board. The Board is responsible for allocating resources and assessing performance of operating segments. The Directors consider that there are no identifiable business segments that are subject to risks and returns different to the core business. The information reported to the Directors, for the purposes of resource allocation and assessment of performance, is based wholly on the overall activities of the Group. The Group has therefore determined that it has only one reportable segment under IFRS 8. The results and assets for this segment can be determined by reference to the statement of comprehensive income and statement of financial position.

 

4.     Principal Risks and Uncertainties

·      Sourcing:  A major loss of continuity in the supply of goods for resale could adversely affect the Group's revenues.  Heavy reliance on China as a source of products. Any deterioration in, or changes to political, economic or social conditions in China could disrupt the supply of goods or result in higher product cost prices.

·      Supply chain management: Inefficient stock management could result in overstocking, which may adversely affect working capital. Conversely, understocking, could limit the Group's ability to maximise revenue opportunities. Although there has been an abatement in the recent shipping and haulage capacity issues, any return in these issues could affect the availability and the costs of shipping.

·      Margin pressure: A tough retail environment, increased shipping and road haulage costs and the impact of weakened Sterling could put pressure on gross margin.

·      Protection of brands: Failure to develop and enhance the product range of our brands could result in loss of our competitive advantage, which could impact on the Group's turnover. Failure to develop or acquire new brands could restrict growth, given the Group's brand-led strategy. Failure to renew or delays in renewing licences for key brands could impact turnover.

·      Climate Change & Environmental: Climate change is a widely acknowledged global emergency, with the need to act faster becoming evident. Managing the greenhouse gas emissions associated with our supply chain is critical to reducing our impact on climate change. The physical and financial impacts of climate change are already being felt and are set to intensify.

·      Legal and regulatory: Failure to comply with legal and regulatory requirements, including environmental and climate change developments, both in the UK and in other countries in which the Group operates, could result in fines or adverse impact on the Group's reputation.

·      Human resources: Failure to attract and retain high-quality individuals, both in the UK and internationally, could impact on the delivery of the Group's strategy.

·      Cyber security: Risk of cyber crime with the potential to cause operational disruption, loss or theft of information, inability to operate effectively, loss of online sales or reputational damage.

5.     Financial Instruments

 

 

 

6.     Revenue

 


6 months ended 31 January 2023

6 months ended

31 January 2022

Year ended

31 July 2022

Geographical split by location:

£'000

£'000

£'000

United Kingdom

62,569

56,718

101,050

Germany

8,825

11,771

19,231

Rest of Europe

15,642

14,866

29,700

Rest of the World

570

2,391

4,210

Total

87,606

85,746

154,191

International sales

25,037

29,028

53,141

Percentage of total revenue

28.58%

33.85%

34.46%






6 months ended 31 January 2023

6 months ended

31 January 2022

Year ended

31 July 2022

Analysis of revenue by brand:

£'000

£'000

£'000

Salter

35,219

26,097

48,080

Beldray

17,174

23,892

39,950

Russell Hobbs (licensed)

10,546

13,371

20,165

Progress

4,005

3,865

8,287

Kleeneze

1,547

1,266

2,835

Premier brands

68,491

68,491

119,317

Other proprietorial brands

10,721

9,154

17,032

Own label and other

8,394

8,101

17,842

Total

87,606

85,746

154,191

   

 

 

 





6 months ended 31 January 2023

6 months ended

31 January 2022

Year ended

31 July 2022

Analysis of revenue by product:

£'000

£'000

£'000

Small domestic appliances

36,695

31,915

57,032

Housewares

26,483

32,365

54,539

Laundry

8,621

8,070

14,799

Audio

7,157

5,569

5,870

Heating and cooling

2,950

2,706

12,907

Others

5,700

5,121

9,044

Total

87,606

85,746

154,191

 

 



 

6 months ended 31 January 2023

6 months ended

31 January 2022

Year ended

31 July 2022

Analysis of revenue by sales channel:

£'000

£'000

£'000

Supermarkets

28,097

31,835

51,523

Online channels

22,904

12,835

25,321

Discount retailers

21,063

25,109

48,126

Multiple-store retailers

10,966

9,220

17,312

Other

4,576

6,747

11,909

Total

87,606

85,746

154,191

 

 

7.     Finance Costs

 

 

6 months ended

31 January 2023

6 months ended

31 January 2022

Year ended

31 July 2022

 

£'000

£'000

£'000

Interest on bank loans and overdrafts

740

332

704

Interest on lease liabilities

35

35

74

Payments received on interest hedging instruments

(137)

-

-

Foreign exchange in respect of lease liabilities

8

(4)

(11)

Other interest payable and similar charges

65

(2)

75

Total finance cost

711

361

842

 

 

8.     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 upon the following:

 


6 months ended

31 January 2023

6 months ended

31 January 2022

Year ended

31 July 2022

Profit for the year

7,280

7,620

12,370



 

Number

Weighted average number of shares in issue

  89,312,457

89,312,457

   89,312,457

Less shares held by the UPGS EBT

(3,077,824)

(3,978,691)

(2,958,630)

Weighted average number of shares - basic

  86,234,633

85,333,766

   86,353,827

Share options

    1,924,065

4,159,769

      2,580,825

Weighted average number of shares - diluted

  88,158,698

89,493,535

   88,934,652


Pence

Pence

Pence

Earnings per share - basic

8.4

8.9

14.3

Earnings per share - diluted

8.3

8.5

13.9

 

 

9.     Dividends

 

 

6 months ended
31 January 2023

6 months ended
31 January 2022

Year ended

31 July 2022


£'000

£'000

£'000

Final dividend paid in respect of the previous year

4,157

2,844

2,844

Interim declared and paid

-

-

1,986

 

4,157

2,844

4,830

 



 

Per share

Pence

Pence

Pence

Final dividend paid in respect of the previous year

4.82

3.33

3.33

Interim declared and paid

-

-

2.30


4.82

3.33

5.63

 

An interim dividend of 2.43p per share was approved by the Board on 28 April 2023 and will be paid on 30 June 2023 to shareholders on record as at 2 June 2023 (ex-dividend date being 1 June 2023).

 

10.   Borrowings

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Current




Bank overdrafts

Invoice discounting

Import loans

Term loan

597

3,465

6,970

2,000

-

11,053

7,128

2,000

6,020

6,197

8,179

2,000

 

Less: Unamortised debt issue cost

13,032

(98)

20,181

(90)

22,396

(82)


12,934

20,091

22,314


 



Non-current

 



Revolving credit facility

Term loan

6,500

5,000

3,343

7,000

2,217

6,000


11,500

10,343

8,217

Less: Unamortised debt issue cost

(42)

(104)

(73)


11,458

10,239

8,144


 



Total borrowings

24,392

30,330

30,458


 



The earliest that lenders of the above borrowings require repayment is as follows:

 



In less than one year

Between one and two years

Between two and five years

Less: Unamortised debt issue cost

13,032

11,500

-

(140)

20,181

2,000

8,343

(194)

22,396

2,000

6,217

(155)


24,392

30,330

30,458

 

The Group is funded by external bank facilities provided by HSBC. The total drawn and undrawn facilities comprise a revolving credit facility of £8.2m (31 January 2022: £8.2m; 31 July 2022 £8.2m), an invoice discounting facility of £23.5m (31 January 2022: £23.5m; 31 July 2022 £23.5m) and a term loan of £7m (31 January 2022: £9m; 31 July 2022: £8m), all running to 2024, along with an import loan facility of £12m (31 January 2022: £8.7m; 31 July 2022: £9m) which is subject to annual review.

 

 

11.   Financial Instruments

 

a)    Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises are as follows:

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Trade receivables - held at amortised cost

32,421

36,656

30,643

Derivative financial instruments - assets

913

1,327

4,142

Trade and other payables

(27,835)

(26,966)

(28,095)

Derivative financial instruments - liabilities

(673)

-

-

Borrowings

(24,392)

(30,330)

(30,458)

Lease liabilities

(2,353)

(2,607)

(2,757)

Deferred consideration

(494)

(1,481)

(987)

Cash and cash equivalents

5,004

257

6,202

 

 

b)     Financial assets

The Group held the following financial assets at amortised cost:

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Cash and cash equivalents

Trade receivables

5,004

32,421

257

36,656

6,202

30,643

 

37,425

36,913

36,845

 

c)     Financial liabilities

The Group held the following financial liabilities, classified as other financial liabilities at amortised cost:

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Trade payables

Borrowings

Lease liabilities

Other payables

Deferred consideration

20,122

24,392

2,353

7,713

494

19,259

30,330

2,607

7,737

1,481

20,662

30,458

2,757

7,433

987

 

55,074

61,414

62,297

 

d)    Derivative financial instruments

The Group held the following derivative financial instruments, classified as fair value through profit and loss on initial recognition:

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Forward currency contracts

Interest rate swaps

Interest rate caps

(605)

323

522

1,024

155

148

3,524

261

357

 

240

1,327

4,142

 

The following is a reconciliation of the financial instruments to the statement of financial position:

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Trade receivables

Prepayments and other receivables not classified as financial instruments

32,421

1,902

36,656

1,097

30,643

1,551

Trade and other receivables

34,323

37,753

32,194

 

 

 

As at
31 January 2023

As at
31 January 2022

As at

31 July 2022

 

£'000

£'000

£'000

Trade and other payables

Other taxes and social security not classified as financial instruments

27,835

3,541

26,996

2,690

28,095

 

1,549

Trade and other payables

31,376

29,686

29,644

 

Derivative financial instruments - 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 January 2023, the Group was committed to:

 


As at 31 January 2023

As at 31 January 2022

As 31 July 2022


Buy

Sell

Buy

Sell

Buy

Sell

USD$'000

59,100

-

57,825

-

57,050

-

EUR€'000

-

23,450

-

19,350

-

23,200

CAD$'000

-

-

-

-

-

60

PLN'000

-

3,300

-

300

-

5,500

CNY'000

1,431

-

3,430

-

2,459

-

 

 

At 31 January 2023, all the outstanding USD, EUR and PLN contracts mature within 12 months of the period end (31 January 2022: 12 months; 31 July 2022: 12 months). The CNY currency contracts, which are held to hedge a lease commitment, mature over the length of that lease ending in August 2023. The forward currency contracts are measured at fair value using the relevant exchange rates for GBP:USD, GBP:EUR, GBP:CNY and GBP:PLN. The fair value of the contracts at 31 January 2023 is a liability of £605,000 (31 January 2022: £1,024,000 asset; 31 July 2022: £3,524,000 asset).

 

Forward currency contracts are valued using level 2 inputs. The valuations are calculated using the period end exchange 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 on the changes in the future cash flows, based on 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 of the financial statements for the year ended 31 July 2022.

 

Derivative financial instruments - 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 January 2023, protection was in place over an aggregate principal of £18,200,000 (31 January 2022: £17,700,000, 31 July 2022: £18,300,000).

 

All of the interest rate swaps meet the conditions for hedge accounting, as set out in the accounting policies contained in the financial statements for the year ended 31 July 2022.

 

Interest rate swaps and caps are valued using level 2 inputs. The valuations are based on 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 on the current valuation of the present saving or cost of the future cash flow differences, based on the difference between the swapped and capped interest rates contracts and the expected interest rate as per the lending agreement.

 

12.     Related party transactions

 

 

 

6 months

ended
31 Jan 2023

6 months

ended

31 Jan 2022

Year

ended

31 Jul 2022

 

£'000

£'000

£'000

Transactions with related companies and businesses:

Lease payments to Heron Mill Limited

 

168

 

240

 

407

Lease payments to Berbar Properties Limited

90

90

180

 

 

13.   Alternative performance measures

 

 The Group uses a number of Alternative Performance Measures (APMs) which are not defined within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and, as such, these measures should be considered alongside the IFRS measures.

 

 

Statement of Directors' Responsibilities

 

The Directors confirm that these consolidated condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, in accordance with UK adopted international accounting standards. The interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

•      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

•      material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

 

 

For and on behalf of the Board of Directors

 

Andrew Gossage

Managing Director

28 March 2023

Chris Dent

Chief Financial Officer

28 March 2023


 


 

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