Russell Hobbs – improved brand visibility for UPGS

UPGS today announced an important step forward in its licensing agreement for the Russell Hobbs brand as it moved from its previous fixed term arrangement to a rolling four-year basis. The move stands to increase certainty around the brand and justify increased investment behind it. Since mid-2021 all other brands in the portfolio have been wholly owned, which augurs well for both predictability and valuation. We reiterate our 250p per share fair value.

The change from fixed term licence arrangements to a rolling four-year basis for Russell Hobbs stands to raise UPGS’s certainty around the brand. The licence with the ultimate brand owner, US listed company Spectrum Brands (NYSE: SPB), will always have a minimum of four years to run, enabling UPGS to invest with greater certainty. The new agreement refers to the UK, Europe, Australia and New Zealand for non-electrical kitchen and laundry products.

We base our 250p fair value assumption on what we feel are deserved ratings of an FY2023 EV/sales ratio of 1.5x and 12x EV/EBITDA, which implies considerable potential upside. Further reassurance comes from the shares being on a miserly PER whilst offering a prospective 7.4% yield.