AUDITED RESULTS FOR THE YEAR ENDED 31 JULY 2023

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 £166.3m (FY22: £154.2m), achieved with no overall price inflation to keep our products at prices which are affordable to consumers:

o Online revenue up 64% to £41.4m (FY22: £25.3m), with strong growth in both the UK and Europe

o Sales to retailers down 3% to £124.9m (FY22: £128.9m), with growth returning in the second half of the year (H2: 8% growth, H1: 11% decrease)

• Gross profit rose 11% to £42.7m (FY22: £38.4m), with gross 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 £83k in FY18 to £113k in FY23

• Adjusted EBITDA* up 8% to £20.2m (FY22: £18.8m)
• Adjusted profit before tax up 6% to £16.8m (FY22: £15.8m)
• Statutory profit before tax up 4% to £16.0m (FY22: £15.4m)
• 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 £24.4m (FY22: £6.8m), 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."

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 £49.6m 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 £1.72 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 £15.2m 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

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 £66.6m 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 £3m 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

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 £166.3m (FY22: £154.2m), 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 £13.8m. We are now using the experience gained in the UK to expand our online capabilities in Europe, where online sales grew 115% to £4.3m, clearly demonstrating the potential for future growth.

Our Product Categories

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

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 £78m. Sales growth in Europe was subdued, with sales increasing 1% to £49.6m. 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 £4.2m in FY22 to £1.1m 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 £20.2m.

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 £83k in FY18 to £113k 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

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

Revenue

Group revenue has increased by 8% to £166.3m in the period (FY22: £154.2m). 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 £41.4m, as the channel benefited from the normalisation of global supply chains, which had held back growth during FY22.

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 £42.7m (FY22: £38.4m).

Other administrative expenses rose 15% to £22.5m (FY22: £19.6m). 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 £83k in FY18 to £113k 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 £20.2m (FY22: £18.8m).

Adjusted & statutory profit

Depreciation and amortisation increased 9% to £2.3m (FY22: £2.1m) 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 £0.3m to £1.1m (FY22: £0.8m) 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 £18.0m 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 £0.4m to £0.8m 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 £0.5m.

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 £12.6m (FY22: £12.4m).

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).

As a result, both adjusted profit and adjusted EPS increase 4% to £13.3m (FY22: £12.7m) and 15.4p (FY22: 14.7p) respectively.

Financing and cash flow

The Group generated strong cash from operating activities of £24.4m (FY22: £6.9m), 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 £14.8m (31 July 2022: £24.3m). 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 £8.0m (FY22: £21.1m)

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

Items that may subsequently be reclassified to the income statement

Items that will not subsequently be reclassified to the income statement

conciliation of cash flow to the Group net debt position

NOTES TO THE FINANCIAL STATEMENTS

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.

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 £14.8m (FY21: £24.3m). The Group maintains comfortable levels of headroom within its bank facilities, with headroom at 31 July 2023 of £16.6m (FY22: £17.8m). The Group's banking facilities comprise a term loan of £6.0m (FY22: £8.0m), a revolving credit facility of £8.2m (FY22: £8.2m), an import loan facility of £9.0m (FY22: £9.0m), and an invoice discounting facility with a total limit of £23.5m (FY22: £23.5m).

REVENUE

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:

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%.

EARNINGS PER SHARE

The Directors propose a final dividend of 4.95p per share in respect of the year ended 31 July 2023.

BANK BORROWINGS

Current bank borrowings include a gross amount of £8.9m (2022: £6.2m) 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 £nil (2022: £2.8m) 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 £73,000 (2022: £155,000) 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.

FINANCIAL INSTRUMENTS

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:

The above items comprise the following under the Group's hedging arrangements:

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 £1.6m (2022: asset of £3.4m), 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 £1.6m within 12 months (2022: £3.4m 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 £18.3m (2022: £18.3m). At 31 July 2023, the Group had borrowings of £nil (2022: £6.3m) 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 £315,000 (2022: £261,000), 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 £484,000 (2022: £357,000).

Reconciliation of the financial instruments to the Statement of Financial Position

• 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.
• 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.
• 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 upon expected cash flow.

Market risk

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

Foreign currency risk management

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 £0.3m (2022: £1.3m). 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 £0.5m (2022: £1.9m).

The following is a note of the financial instruments denominated at each period end in Euros:

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 £0.7m (2022: £0.3m). 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 £1.1 (2022: £0.4m).

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

Fair value estimation

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.

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/

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.

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/.