UP Global Sourcing Holdings – looking for a 33% uplift in 2020

At times like these, when we are witnessing companies left, right and centre citing poor sales and knackered finances, UP Global Sourcing is a breath of fresh air. 

I do like to see announcements from companies that upwardly amend previous trading statements.

That is just what has happened with UP Global Sourcing Holdings (LON:UPGS) – twice in fact in the last six weeks.

The group, which trades as Ultimate Products, is the owner, manager, designer and developer of an extensive range of value-focused consumer goods brands.

The Oldham based group’s products are sold to a broad cross-section of both large national and international multi-channel retailers as well as smaller national retail chains, incorporating discount retailers, supermarkets, general retailers and online retailers.

The head office in Greater Manchester, includes a spectacular 20,000 sq. ft. showroom that showcases each of its brands. In addition, it has an office and showroom in Guangzhou, China and in Cologne, Germany.

The company sells to over 300 retailers across 38 countries. It has six major product categories: Audio; Heating and Cooling; Housewares; Laundry; Luggage; and Small Domestic Appliances.

Its brands include Beldray (laundry, floor care, heating and cooling), Intempo (audio), Salter (kitchenware), Kleeneze (laundry), and Progress (cookware and bakeware).

Directors have a big stake in the business

There are some 82.2m shares in issue, of which three of the group’s directors control over 41% of the equity, while the employee benefit trust holds another 4.9%.

Other large holders include Schroder Investment (17.40%), Ennismore Fund (7.97%), Hargreaves Lansdown Stockbrokers (1.95%), Chelverton Asset (1.83%), Henderson Global (1.80%), and Hargreaves Lansdown Asset Management (1.48%).

Cautious downward forecast

The group reported its interim results at the end of April, when the resourcing supplier stated that it had enjoyed a resilient first six months, but was cautious about its outlook, because of Covid19.

Second half demand was estimated to be lower than previously expected making it difficult to give any forecasts.

At that time Chief Executive Simon Showman stated that, “The business is well capitalised with a strong balance sheet and good access to funding, and we believe that there may be attractive growth opportunities for Ultimate Products as we emerge from this crisis. As a result, despite the short-term uncertainty we remain confident in the long-term prospects of the business.”

Research estimates for the full year to end-July 2020 were then altered downwards to £93m in revenue and £3.6m in adjusted pre-tax profits, worth 3.5p per share in earnings.

Upward statement

Less than six weeks later, on 8 June, the company issued a trading update declaring that the group had progressed at a steady rate the invoicing and delivery of its order book and as a result it anticipated that its figures would exceed current market expectations.

Researchers then lifted up their views to some £105m in revenues, with profits being upped to £5.8m, worth 5.6p in earnings.

Second upward statement

So, when the company issued another trading update a week ago, on 6 July, the market was pleased to see the statement.

It seems that, like so many other operators in the online retailing sector, UPGS had seen a strong performance having been made in the intervening period since the last update, leading to the invoicing and delivery of the group’s order book having progressed at a good pace.

Analysts changed their views

The researchers upped their figures again.

Now revenues for the year to end-July will be above £111m, with adjusted underlying pre-tax profits in excess of £7.4m, which would kick earnings up to 7.1p per share.

At times like these, when we are witnessing companies left, right and centre citing poor sales and knackered finances, it is very pleasing to see such statements as those from UPGS.

The shares closed at the end of last week at 74.8p, which puts them out on just one 10 times price earnings for the year ending in two weeks.

And that is far too low a rating, as far as I am concerned.

I now set a target price of 100p for the shares, which seems likely to be an easy objective.