Unbound starts sale process as Hotter owner bows to inevitable

In a nutshell, it means a re-focus on the core Hotter brand, range rationalisation and more products bought in as finished goods, as well as it kicking off a formal sale process.

Unbound's share price dropped in double-digits following the news and it now has a market capitalisation of only a little over £2 million. That's down over 90% in a year.

The company has been cutting costs all year and has seen two potential takeover or funding deals fall through in 2023 as well. 

On Friday, it said its operating review has seen the board concluding that “in the short term the greatest opportunity for resilient and profitable growth comes from the simplification of the group's business with a focus on development of the core Hotter brand within the UK market”.

So after a period in which it has been ambitiously focused on growth through selling multiple brands, it’s essentially going back to its original business that’s all about the comfort shoe brand targeting the 55+ demographic.

However, that doesn’t mean a relocation of its earlier model. It said that while “remaining anchored to its brand DNA of comfort, the group is further evolving the product portfolio to offer more choice. New styles, materials and constructions will be sourced as an increased mix of finished products, and our manufacturing operations will be rebalanced accordingly”.

It said this will offer greater consumer choice but also less duplication within its product range and an overall reduction in SKUs within the business. The proportion of product purchased as 'finished goods' will “continue to increase progressively”. The board “considers that the development of the product portfolio arising from this will significantly improve product appeal and will in due course drive revenue and improve margins”.

It has temporarily ceased its loss-making direct-to-consumer sales in the US and EU (other than Ireland). This contributed to around 11% of group revenue in FY23. And it will “continue to investigate opportunities to service and grow the group's US consumer base profitably in the future”.

And it added that while it “remains confident in the opportunity of the Unbound Partnership Platform, it has temporarily paused further development activity to allow focus on the more rapidly incremental growth opportunities available from the core Hotter business in the short term”.

As for the formal sale process, it’s clearly been driven by weak cash flow. The company said that although Q1 revenues were lower than previously anticipated, profitability for the opening quarter was “broadly in line with” its expectations as a result of the impact of the cost reduction programme. But the trading position in H2 “has left the company with cash constraints”. The business “continues to seek additional funding to provide the working capital necessary to complete the group's restructuring and ensure its long-term profitability, stability and resilience”.

Its ongoing debt service requirements mean that any underperformance against trading expectations “would result in a worsening of the group's cash position”. It expects to be able to make a scheduled bank repayment on 31 July, however, a temporary working capital shortfall could happen in September and October due to the planned build-up of inventory ahead of the launch of AW24.

It believes any shortfall could be addressed but also that any measures it might need to take “could damage the longer term growth prospects of the group”.

It remains in regular dialogue with its core banking partners who remain supportive and has now appointed Interpath Advisory to act as joint financial adviser alongside Singer Capital Markets Advisory, its current financial adviser, nominated adviser and broker “to manage the strategic review and formal sale process”.