Feeling good about FY2019

UPGS develops new, innovative concepts and brings professional, sought-after products to the mass market. Their offices span two continents, with headquarters in the UK, offices and a showroom in Guangzhou and a showroom in Germany.

After an unquestionably challenging year, UPGS delivered FY2018 preliminary earnings results in line with consensus as underlying EPS was 5.4p. Sales revenue of £88m and £6.5m adjusted EBITDA reconfirmed an earlier announcement.  UPGS’s international business continued to gain ground as a portion of sales due to a strong H2.  Moreover, FY2019 appears to have started well and we raise our EBITDA estimate from £6.9m to £7.1m, largely due to better than expected sales revenue: the future feels good.  

Overall, there were few surprises in UPGS’s FY2018 results. Revenue and EBITDA were pre-released in a 10th September trading statement, which reported that FY2019 orders were ahead of last year and that online rose 52% to be 7.9% of sales revenue.  Importantly, international regained ground in the second half of FY2018 and comprised 36.9% of sales compared with 19.8% in the first half and 27.4% in the year as a whole.  International sales grew 16.4% in the 6 months.  German business doubled in FY2018.

UPGS reconfirmed that FY2019 started well and we infer good reason for ongoing optimism.  A well-positioned brand portfolio and good growth prospects in both online and international prompt us to raise our FY2019 sales forecast from £95.4m to £97.0m, EBITDA from £6.9m to £7.1m and EPS from 5.5p to 5.6p.  Dividend policy is for a 2x cover, while debt headroom and projected cash conversion underpin future dividends.

The longer-term investment case for UPGS remains intact.  The company is committed to driving its brands’ revenue growth through its four strategic pillars: discount retailers, raised supermarket penetration, online and international. We retain our future expectations of sustainable 5% organic sales revenue growth.