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British brands and low-cost model underpin newcomer’s strategy
Thursday 04 May 2017 Author: James Crux

Buy into the positive earnings momentum at Main Market newcomer UP Global Sourcing (UPGS). The consumer products distributor, a specialist in reviving distressed British heritage brands, has a compelling growth strategy which includes an exciting international angle.

Oldham-based ‘Ultimate Products’ is a fast-growing owner, developer and manager of brands focused on six product categories: small domestic appliances, houseware, audio, laundry, luggage and heating/cooling.


Predominantly sourced from China, Ultimate’s wares are easily affordable. Key strengths include its ability to spot consumer trends and get products to the mass market quickly.

Its brands include ironing boards-to-pedal bins specialist Beldray, audio equipment brand Intempo, as well as British heritage kitchenware brands Salter and Russell Hobbs. The latter two are both sold under licence.

Ultimate recently bought Lancastrian heritage cookware brand Progress from the administrators too. These revitalised brands are sold to over 300 blue chip retailers; the largest customer is B&M European Value Retail (BME), while others include Tesco (TSCO), Robert Dyas, WM Morrison Supermarkets (MRW) and Action.

Flying start

Half year results to 31 January 2017 revealed outstanding progress across the business. Total sales grew 62.2% to £68.1m and underlying pre-tax profit powered 77.9% ahead to £8.4m. Ultimate also declared a maiden dividend of 1.62p.

Sterling weakness is impacting gross margins, although management plans to mitigate this through product innovation and value-engineering.

Any drop in retail demand post-Brexit shouldn’t derail Ultimate’s growth, in our opinion, since the company’s success to date has been achieved through increasing market share rather than needing the overall market to grow.

Ultimate Products is targeting further expansion through UK and international discounters.

Sales penetration with UK supermarkets is building and there’s significant potential online. Ultimate’s presence across Amazon’s distribution platforms is growing.

Encouragingly, Ultimate has a huge opportunity to sell into international markets such as the US, India, China and Australia, where there is demand for British heritage brands.

Although the bulk of revenue is still generated from the UK, success with overseas initiatives suggests forecasts could be too conservative.

For the year to July 2017, broker Cenkos Securities forecasts a leap in pre-tax profit to £10.1m (2016: £7.5m), earnings per share              improvement to 9.6p (2016: 7.1p) and a 4.8p dividend.

For the 2018 financial year, these metrics are forecast to grow to £11.8m, 11.5p and 5.7p respectively. (JC)

UP Global Sourcing (UPGS) 178p

Stop loss:  142.4p

Market value: £145m

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