Value-focused consumer products distributor UP Global Sourcing (UPGS), better known as Ultimate Products, is battling back strongly from a difficult year to July 2018, during which underlying pre-tax profit slumped by more than 47% to £5.6m.

The shares, which cratered on profit warnings coughed-up in 2017 and early 2018, rally 13.5% to 65.8p, extending their recent good run, as UP Global Sourcing says the positive momentum reported in a surprise post-Christmas update has continued.

Encouragingly, earnings for the financial year to July will be ‘above the market’s current expectations’, news that triggers another round of upgrades.

For the six months to January 2019, sales shot up 36% to £65.8m at Oldham-headquartered UP Global Sourcing, the company behind affordable homeware brands include ironing boards-to-pedal bins name Beldray, audio equipment brand Intempo and cookware and bakeware brand Progress.

PROGRESS ACROSS FOUR PILLARS

This performance reflects ‘stronger than expected revenue growth’ across each of the company’s four strategic pillars – discounters, UK supermarkets, international customers and online platforms.

Benefiting from a broadening customer base, UP Global Sourcing also boasts an office and showroom in China and supports a growing customer base in Germany via a showroom in Cologne.

The international business is on a growth tear, speaking for 40% of first half sales, up from 20% a year ago.

FULL YEAR EARNINGS BEAT

Thanks to this revenue momentum and ‘notwithstanding the higher overhead costs associated with servicing the increased revenue and the investment in the growth of the international business’, UP Global Sourcing ‘now anticipates that its earnings before interest, taxation, depreciation and amortisation (EBITDA) performance in full year 2019 will be above the market’s current expectations.'

Management continues to assess the implications of a ‘no-deal’ Brexit and the potential impact on volumes and margins if sterling were to devalue. ‘However, in the longer term, the board is confident in the adaptability and resilience of the group’s business model, as evidenced by the strong recovery in trading in the first half of full year 2019 despite a challenging consumer and retail market,’ insists UP Global Sourcing.

THE SHORE CAPITAL VIEW

‘Against a challenging backdrop for the UK consumer, we believe UP has delivered an excellent 6 months of trading, materially outperforming our start of the year expectations,’ insists Shore Capital. The broker is raises its EBITDA forecast by 10% to £8.6m, which takes its pre-tax profit estimate up from £6.5m to £7.2m for a very encouraging recovery from 2018’s £5.6m taxable profits haul.

Shore Capital is now looking for earnings per share (EPS) of 6.9p this year, a very material 11% EPS upgrade on recently raised expectations. And the broker also pencils in a return to progressive dividends with a 3.5p payout forecast, up from last year’s 2.7p (2017: 5.1p).

‘Notwithstanding the potential fall-out from Brexit, we believe UP is well placed to deliver a return to sustained growth underpinned by its extensive brand portfolio and four strategic growth pillars – discounters, UK supermarkets, online platforms and international customers,’ writes Shore Capital.

‘We are also very encouraged to see UP trading so well post the disappointments that the business faced into in full year 2018, resulting in very strong top-line progress and the rebound in profitability, now manifested in two upgrades in our forecasts in full year 2019. Against a backdrop of considerable challenge for many consumer facing businesses in the UK, it is therefore very pleasing to see the group’s progress and upbeat mood.'


Issue Date: 11 Feb 2019