Shares in UP Global Sourcing (UPGS) gained 12.1% to 70.5p on Monday on the news annual earnings should beat market expectations following a better-than-expected last six weeks.
Shore Capital upgraded its revenue and profit estimates for the value-focused consumer goods group, whose online business has proved a broad beneficiary of lockdown, during which its discounter and supermarket customer base has remained open.
Better known as Ultimate Products, the Oldham-headquartered company owns, designs and develops affordable consumer goods brands focused on the home and sells to over 300 retailers across 38 countries.
Its brands include Beldray, the leading laundry, floor care, heating and cooling name, audio brand Intempo, as well as laundry name Kleeneze and cookware and bakeware brand Progress.
EARNINGS BEAT
In today’s unscheduled trading update, UP Global Sourcing said it now anticipates that underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) for the year to July 2020 will be ‘above the market’s current expectations’.
This prompted Shore Capital to upgrade its EBITDA estimate by £2.2m to £7.8m. That translates into pre-tax profits of £5.7m, an upgrade from £3.4m, although down from the £8.4m of taxable profits generated last year, which is no surprise given the prevailing pandemic-induced headwinds the company is facing.
PROGRESSING AT PACE
The broker raised this year’s revenue forecast by 13% to £104m while also stressing that its expectations for June and July remain cautious and the full year forecast has upside potential.
Encouragingly, UP Global Sourcing announced that the invoicing and delivery of its order book has ‘progressed at a steady pace’ since first half results were posted at the end of April, in spite of the challenges posed by COVID-19.
Over the last six weeks, sales have averaged about £1.8m per week versus Shore Capital’s conservatively pitched forecast of £430,000 per week.
As of last Friday, total invoiced revenue for the full year was £97.2m, lower than last year’s £102.5m, and there was an order book for the remainder of the year of £10.6m.
THE ANALYSTS’ TAKE
‘Net bank debt as of 5 June is modest at £2.6m, and we see Ultimate Products as being well placed to come through the current crisis in robust health and well placed to return to growth over the medium to long term,’ commented Shore Capital.
Analysts at Equity Development said the UP Global Sourcing investment case ‘has not only remained intact, but once again proven itself resilient and flexible. Despite lockdown, demand for the company’s “feel good” brands, which include Beldray, Russell Hobbs’ non-electrical products and Salter (excluding scales), was robust in the first five months of the calendar year.’
Moreover, Equity Development insisted management should be ‘commended for simultaneously continuing to source product out of China, whilst sustaining end-market distribution and ensuring safe working practices for all employees.’