Broadening the scope for growth

UPGS’s success in online and supermarkets, combined with the ability of key brands to resonate with its end-customers’ desire for quality affordable homebased products, shows that the company is well positioned for further growth as the Covid19 pandemic eases. Moreover, the potential for more M&A and new geographies implies substantial headroom for future expansion. We upgrade our profit forecasts and fair value in this report.

UPGS’s FY2021 half-year report, released today, re-confirms the £75.4m (+11.4%) sales number which was released in its end-period trading statement on 8^th February 2021 and the favourable net bank debt position of only £1.5m. Profits in the six months to end-January 2021 increased at a significantly faster pace than sales. Underlying EBITDA increased 20.8% to £8.8m and underlying pre-tax profits rose 24.4% to £7.7m. Interim dividends will be 45.7% higher at 1.69p.

UPGS’s valuation appears undemanding in the light of the management’s ability to make it prosper during prolonged periods of Covid-19 related lockdown, the shift in distribution channels, Germany as a core region, and potential for further M&A. Our assessment of fair value rises to 200p / share, which would equate to an 18.0x prospective 2022 P/E ratio that better reflects track record and prospects.