Online drives first half growth

Online channels were the main driver of growth for UPGS in the first half of FY2023 with a 2% sales revenue gain - areas of product strength included energy efficient and money saving items, which were cited as being buoyant across all distribution channels. At the same time key indicators of financial strength also improved. The trading backdrop also showed signs of improvement in the first half. Commenting on outlook, the company anticipates that the market’s current expectations for FY2023 will be met. UPGS continues to highlight the positive impact that the company’s automation programme is having on the business. 

Despite recent share price strength, we still believe that the current valuation fails to fairly reflect UPGS’s three salient growth drivers - brands, online & supermarkets distribution and international. With external headwinds easing, a second half acceleration is in prospect, plus a robust financial position, the near-term outlook appears positive. We reiterate our 250p fair value per share (based on an FY2023 EV/sales ratio of 1.5x and 12x EV/EBITDA).