Value-focused consumer products distributor UP Global Sourcing (UPGS) earns another round of upgrades as first half results confirm further strong profits recovery.

This encouraging news sees investors drive the the share price 9.2% higher to 77.5p. That means the stock has nearly doubled so far this year, having ended 2018 at 40.4p.

Forecast-beating half-time results help restore investors’ confidence in the growth story, previous damaging profit warnings beginning to fade from their collective memory, whilst demonstrating the virtues of UP Global Sourcing’s value-orientated branded and diversified business model.

The impressive numbers prompt house broker Shore Capital to upgrade its full year 2019 forecasts for the third time since the start of the calendar year, whilst carrying forward its upgrades into financial years 2020 and 2021 to boot.

READ MORE ABOUT UP GLOBAL SOURCING HERE

Established in 1997 and better known as Ultimate Products, Oldham-headquartered UP Global Sourcing is the company behind affordable homeware brands including laundry, floor care and heating and cooling brand Beldray, the original patent holder for the adjustable-height ironing board, as well as kitchenware name Salter, audio brand Intempo and cookware and bakeware brand Progress.

UP Global Sourcing has a ‘spectacular’ 20,000 square foot showroom at its head office at Manor Mill (a Grade 2 listed former cotton mill) and also operates from an office and showroom in Guangzhou, China and a new European showroom in Cologne, Germany.

Supplying more than 300 retailers across 36 countries, Tesco (TSCO), Primark, B&Q, Action, Amazon and Costco to name but a few, UP Global Sourcing sells over one million frying pans, one million mugs and one million speakers each year.

BROAD-BASED GROWTH

Results for the six months ended 31 January 2019 reveal broad-based growth across four strategic pillars, underpinning a 36% surge in total sales to £65.8m.

Sales to UK and European discounters were up 34.6% with a return to growth with UK discounters now expected in the second half, UK supermarkets revenue was 32.1% ahead, online sales shot up 85.2%, albeit a growth rate that is expected to moderate in the second half, while international retailers revenue rose 173% with Germany the biggest contributor.

A stronger gross margin than expected is the major positive surprise considering cut-throat competition and price deflation for general merchandise wares, helping underlying pre-tax profit power 47.3% higher to £5.9m. UP Global Sourcing also declares a near-40% hike in the half-time dividend to 1.16p.

CEO Simon Showman sounds confident, being ‘delighted with the strong recovery in trading that the business has delivered in the first half of the year. These results should be taken as a clear sign of the adaptability and resilience of our business model, especially when viewed against the ongoing difficult trading conditions within the UK general merchandise market.’

Showman adds: ‘Looking ahead, market conditions in the UK are likely to remain challenging for the foreseeable future. However, current trading is comfortably in line with expectations and we remain confident that a relentless focus on our tried and tested strategy will continue to deliver sustainable growth.’

THE ANALYSTS’ VIEW

Shore Capital writes: ‘Very strong first half of 2019 results from Ultimate Products in part demonstrate a period of recovery against a challenged comparative. However, we believe our third upgrade in calendar year 2019 also reflects strong underlying progress, with broad based 20.8% (underlying) revenue growth coming alongside a welcome diversification of sales across its four strategic pillars. With trading “comfortably in line” with expectations, we once again upgrade our full year 2019 financial expectations, by 4% to pre-tax profit of £7.53m, earnings per share of 7.2p also a 4% upgrade.’

The brokerage describes UP Global Sourcing’s international opportunity as ‘substantial, and an increasingly important component of the investment case, offering growth whilst diversifying the group’s retail customer base.’

Equity Development explains UP global Sourcing’s strategy ‘remains to develop its portfolio of mass-market consumer goods in its four strategically targeted distribution channels. Importantly, the company delivers not only a value-led proposition but one that maintains a “feel-good” factor. Its offering is not reliant solely on “cheapness”. The “tried and tested” focus on these four channels - UK and European discounters, UK supermarkets, online platforms and International retailers - appears to underpin the company’s confidence in its growth outlook.’

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Issue Date: 29 Apr 2019