Value focused home products group UP Global Holdings (UPGS:AIM) reported full-year revenues to 31 July down 6.1% to £115.7 million and pre-tax profits 2.7% lower to £8.2 million reflecting order cancellations and deferrals related to the Covid pandemic.
Today’s headline numbers were already flagged in the 7 September pre-close trading update and with the shares doubling over the last six months it’s not too surprising to see some profit-taking leaving the shares down 8% to 93p.
STRONG MIX EFFECTS
The disruptions caused by the pandemic were offset by a strong showing from the online channels rising almost 50% to £16.7 million and a 40% increase in the supermarket channel to £28.1 million representing 24.3% of overall revenues, up from 14.2% since 2017. The Salter and Beldray brands were the key drivers.
Management expects supermarket sales to overtake the discounters in the next few years and attributed the growth to ‘improved consumer awareness and perception of our brands.’
The firm’s ‘Premier Brands’ grew 8% to £80.9 million and now represent 70% of total revenues while proprietary brands were impacted by weakness in Audio and fell to 54% of total revenues, down from 60.5%.
Online platforms have seen continued momentum in the current financial year with revenues ‘significantly ahead’ of last year. The company has made investments in warehouse automation to increase capacity and meet demand.
As well as a source of growth, online trading contributes a higher margin which pushed up the group's gross margin by 0.9% to 23% and the EBITDA (earnings before interest, taxes, depreciation and amortisation) margin by 0.3% to 9%.
The company highlighted the fact that the overall performance was even better than their ‘best-case scenarios’ etched-out at the start of lockdown with the business remaining profitable in every month.
Strong free cash flow of £14.5 million compared with £3.2 million last year helped to reduce net debt from £14.4 million to £3.8 million while the company has headroom against banking facilities of around £21.3 million compared with £10.1 million last year.
The company acknowledges the challenging market conditions in the UK and Europe with further lockdowns to navigate, but current trading is said to be in line with expectations with the order book ahead of the same time last year.
The established dividend policy of paying out half of adjusted pre-tax profit means the board is recommending a final dividend of 2.795p per share, taking the full-year to 3.955p per share, down 3.2%.
House broker Shore Capital commented, ‘UP is a business of steadily improving quality, that looks increasingly well placed to deliver growth over the medium to long term. We particularly highlight the fast growing online and international sales channel.’