UK’s largest shoe manufacturer with a strong focus on comfort and service


Investment valuations

As reported at March
Valuations 19.2 5.8 33.0

Coinciding with the implementation of its new operating model, in October 2020 Hotter launched its “freesole”, “cushion +” and “stability +” product ranges which incorporate differentiating technology to meet customers’ needs beyond the core brand promise of uncompromising comfort and fit. Hotter’s product has continued to develop in 2021 with further focus on differentiating technology in the spring/summer range launched in late February. 

The optimisation of its operating model improves Hotter’s situation and gives it the opportunity for growth as a digital direct to consumer business serving its existing UK and US markets, supported by a small, strategic UK retail estate. This leaves it free of the significant constraints imposed previously by its large retail network and the consequential impact on product range, margin erosion across channels and working capital inefficiency.

Performance since the October operating model and product strategy launch has been highly encouraging despite the impact of Covid-19 on Hotter’s remaining retail estate. In the seven months from October UK online sales have grown 30% on the prior period whilst sales from digital partnerships have grown 44%. Online sales in the UK and US contributed 68% of total sales over this period, up from 54% in the prior year on an LFL basis. The growth in online sales reflects a shift from retail sales (retained stores only) with the offline direct to consumer business unchanged at 22% of total sales.

Over the same seven-month period the impact and resilience of Hotter’s new operating model is demonstrated by EBITDA being 8% ahead of the proforma for continuing operations for the year to January 2020, which (as illustrated in the table below) indicated full year proforma EBITDA of £5.4 million. This growth is despite the retained retail estate and retail wholesale partners being closed for 21 out of the 30 weeks in the seven-month period. Over this period the retained retail estate had negative EBITDA of £0.3 million.

Whilst Hotter is relatively early in the demonstration of sustained growth and profitability in its new model, the resilience and performance to date give us grounds for confidence in its development as an increasingly profitable digital business serving its target demographic of over-55-year-olds in the UK, the US and beyond. The increase in its valuation as at March 2021 reflects early demonstration of the EBITDA improvement under Hotter’s new operating model.

The table below, replicated and updated from our September 2020 annual results, shows EBITDA for the year ended January 2020 as reported, and also on a pro forma basis under the new operating model on an LFL sales basis. It also shows the pro forma impact of a range of sales growth rates through its direct channels – now contributing over 85% of sales in a “normal” period, with early growth in the seven months to April of 10%.

  Year to January
 20 as reported
Year to January
20 continuing
Direct Channel Growth
10.0% 15.0% 20.0%
Sales (£million) 85.5 60.5 64.6 66.7 68.8
EBITDA (£million) 4.3 5.4 7.3 8.3 9.2

There remains uncertainty over the degree to which Covid-19 disruption will have an ongoing impact on Hotter’s remaining retail operations. We now estimate that a 10% reduction in retail demand from 2019 levels across a full year would reduce EBITDA contribution by approximately £0.2 million. This estimation of the impact of retail trade at reduced levels during market recovery from Covid-19 has reduced since our December full year report as a result of the demonstration of rigorous cost management within the Company.  

With the significant improvements made to Hotter’s customer offering, we have confidence in the management team’s ability to drive future sales and profit growth, as a direct to consumer business. 

In April 2021, Electra led the sale of the Sentinel business to the Utrecht based global industrial products group Aalberts N.V. The net proceeds received by Electra of £22.2 million represented a return of over 13 times the £1.7 million invested in taking control for a nominal sum in 2019 and subsequently supporting the business turnaround.

Note: portfolio company data other than at period ends is unaudited and based on management information subjected to internal verification



Ian Watson


Based on multiple earnings



January 2014