UPGS released an unscheduled trading statement this morning which confirms better than expected numbers for FY2020 sales revenue, profitability, and net debt. A more encouraging outcome than previously envisaged when the company reported its interim results on 30th April.
A commitment to being sufficiently flexible to ensure employee safety while still satisfying customer demand is clearly working well. Accordingly, we make positive adjustments to our own forecasts.
UPGS expects sales revenue to be above the level previously envisaged. Total invoiced revenue at close of business on the 5 th June 2020 was £97.2m and there was a further £10.6m of orders for the remainder of the current fiscal year. As a result, we raise our own forecast for the year from £93m to £105m which allows scope for £3m in the event of any slippage in the order book. Revenue continues to benefit from the strength of online and robust sales at those outlets which have stayed open during lockdown, including the supermarkets.
Higher sales revenue should translate into higher underlying profits. In particular, there is no reason to believe that gross margins should have deteriorated materially. With overheads being broadly similar to what we expected prior to the sales upgrade, we add around £2m to our forecast for underlying EBITDA. Investors should note that underlying EBITDA excludes any benefits from the UK Government’s Coronavirus Job Retention Scheme.
Financially, UPGS remains in healthy shape. The latest net debt figure stood at a relatively modest £2.6m. A summary of the company’s headroom facilities was included in our 30th April report “UPGS - Benefits of Underlying Strengths.” Looking ahead, UPGS’s investment case has not only remained intact, but once again proven itself resilient and flexible. Despite lockdown, demand for the company’s “feel good” brands, which include Beldray, Russell Hobbs’ non-electrical products, and Salter (excluding scales), was robust in the first five months of the calendar year.
Moreover, the company’s management should be commended for simultaneously continuing to source product out of China, whilst sustaining end-market distribution and ensuring safe working practices for all employees. The Heron Mill warehouse facility in Oldham, Greater Manchester is functioning efficiently.