Excellent execution underpinned a strong recovery year for UPGS in FY2019, which augurs well for future growth. Headline results confirm the company’s 9 th September trading statement. Detailed sales data reflect the company’s ability to enhance core domestic growth with strong progress in both international and online. In our view, growth should remain positive in FY2020.
UPGS’s sales revenue increased by 40.8% in the year to 31st July 2019 while underlying EBITDA rose by 53.4% to £9.9m and underlying profit before tax by 50.5% to £8.5m, as per the trading statement. Underlying EPS increased by 51.9% to 8.2p, which was very slightly above our expectations. The company proposes a 50.2% higher 4.1p full year dividend. Net debt rose £1.6m to £14.4m – i.e. a very acceptable 1.5x EBITDA.
Furthermore, the company re-confirmed its confidence about further advances in FY2020, helped significantly it appears by UPGS maintaining high levels of service and operational excellence. Arguably, the quality of execution is factored into its customers’ expectations and drive loyalty relative to the company’s competitors. Current trading is in line with expectations and the FY2020 order book is moderately ahead of last year.
These preliminary results include detailed analysis of sales by geographic region, brand product category and strategic pillar (distribution channel). Salient positive moves across the year included the advance of international business from 27% of the total to 39% and the achievement of record sales for both the Beldray and Salter brands, which are now 26% and 17% of group sales respectively. In the second half of FY2019 alone, UK sales revenue increased by 42% while Germany advanced again strongly by 107%.
Excellence in execution is visible in the key areas in which UPGS continues to grow at a rapid pace. The online unit advanced a brisk 63.2% in FY2019 and is now 9.2% of group sales revenue having been only 3.5% in FY2016. Equally, supermarkets rose in importance to 16.3% of total sales from 6.7% in the same period. Discount retailers remain the largest channel at 52.4% having grown by 41.2% last year.
UPGS’s preliminary results lap last year’s announcement that was the start of the company consistently reporting much better newsflow. While we maintain our FY2020 forecasts from our 9th September update, investors should in our view note both the quality of earnings and the clear path to growth. As a result, we continue to argue for a 100p share price, which would imply 9.6x FY2020 EV/EBITDA and an 11.8x P/E ratio.