Leading homewares group UP Global Sourcing (LON:UPGS) put on a good trading performance in its first half-year to end January 2023. Demand remained buoyant for its energy efficient and money saving products.

Encouragingly, the level of general retailer overstocking experienced during 2022 which, along with the challenging macroeconomic environment, caused retailer customers to be cautious in the size of their forward orders, is now reducing in the UK and more normal patterns of order placing have recommenced.

The 2% increase in the period to £87.6m sales was also driven by the group’s online channels.

Ultimate Products sells to over 300 retailers across 38 countries and specialises in five product categories: Small Domestic Appliances; Housewares; Laundry; Audio; and Heating and Cooling. 

Its brands include Salter, Beldray, Progress, Kleeneze, Petra and Intempo, while it also has the cookware licence for Russell Hobbs.

The £136m capitalised company’s products are sold to a broad cross-section of both large national and international multi-channel retailers as well as smaller national retail chains, incorporating discount retailers, supermarkets, general retailers and online retailers.

Group CEO Simon Showman stated that:

“Amidst a tough economic climate, we are delighted that our products, especially those that are energy efficient and money saving, continue to resonate strongly with consumers. Global supply chain disruption has now eased, which has improved stock availability and supported the growing demand from our online customers. 

Looking ahead, we expect that the current softness in global shipping pricing, as well as the partial recovery in Sterling, will provide additional relief against the ongoing inflationary backdrop.

We are increasingly excited by the positive impact that our robotics process automation programme is having on our business. Our bottom-up, demand-led approach to automation enables us to concentrate efforts on the items that can most improve productivity, and this will ultimately enhance operating margins and drive an even better customer experience.”

Analysts Opinions – 250p ‘fair value’ per share

Clive Black and Darren Shirley, sector analysts at Shore Capital, have estimates for the current year to end July for £169.1m (£154.2m) sales, with adjusted pre-tax profits of £17.0m (£15.8m), worth 14.6p (14.3p) in earnings and a dividend per share of 7.3p (7.1p).

For the coming year they go for £179.2m revenues, £18.4m profits. 15.5p earnings and a 7.8p per share dividend.

Over at Equity Development Chris Wickham and Hannah Crowe are looking for £163.4m sales for this year and £173.3m next year and give a ‘fair value’ rating of 250p on the shares.

They are looking for £16.9m profits, 15.1p earnings and a 7.5p dividend for 2023, then for £173.2m sales, £18.5m profits, 15.6p earnings and a 7.8p dividend for the 2024 trading year.

Conclusion – 200p soon

The continued resilience of group sales was actually quite impressive and displays the wide spread of customers taking its products.

The group’s shares eased 8% to 153p on the news, but have performed very well since we featured the group in late October last year, when its shares were defined as ‘looking too cheap’ at just 95p.

I see the shares now basing before a rise to 200p gets underway.

Yet another profits upgrade has been guided by the global promotional products Altitude Group (LON:ALT)for the year to end March 2023.

The company continues to deliver on its strategy and has been experiencing continued robust trading via expansion of its Services and Merchanting programmes. As a result of the strong trading and underlying performance noted in November which has continued into 2023 the group’s board anticipates that FY23 trading will be materially ahead of current market expectations.

CEO Nichole Stella stated that:

“Following a number of positive market updates earlier in the year, we are delighted with this continued progress and are expecting to achieve record year-end results. In addition to our improved trading so far this year, we have invested in growing market share and have a reassuringly strong pipeline of opportunities. We look forward to updating the market further in the forthcoming months and to the next financial year with great enthusiasm.”

The Sheffield-based Altitude Group (LON:ALT) owns and develops the technology solutions and services in North America and the UK.

The £23.7m capitalised company offers patented technology platform to its network with a built-in supply chain, as well as combines an e-commerce trading platform with a cloud-based CRM and order management system for business intelligence requirements; e-commerce website solutions with in-built patented online designer and pre-loaded product databases; patented online design solutions; and virtual sample services that allow personalized design on a product with imprint technique. 

It also provides various services, such as supplier relations, negotiated group discounts, events and exhibitions, catalogues, artwork services, and marketing programmes. 

In addition, the company provides various design tools, applications, and web site pop-up stores for promotional product distributors and suppliers. 

Analyst Opinion – 52p share valuation

Analysts Andy Hanson and Carl Smith at NOMAD and Broker Zeus Capital upgraded their current year estimates.

They are estimating end March 2023 sales of £17.3m (£11.9m), adjusted pre-tax profits of £0.8m (£0.1m), lifting earnings to 1.3p (0.5p) per share.

For the coming year they see £24.4m sales, £1.1m profits and 1.5p per share in earnings.

They have a discounted cash flow valuation of 52p on the group’s share.

Conclusion – good upside

Building up a good market showing, with regular profit upgrades is very positive.

The group’s shares responded to the good news, leaping 20% to 40p. 

When they ease back after initial euphoria the shares will offer good upside to patient investors.

The FTSE 100 carved out minor gains on Monday as markets awaited a raft of economic data this week. Global markets are bracing for the next update of inflation data from the United States and United Kingdom, as well as Eurozone GDP.

The FTSE 100 was 0.3% at 7,910 at the time of writing on Tuesday. S&P 500 futures were pointing to a fractionally higher open in the United States.

The inflation readings from the US and UK will have major implications for the respective central bank’s next moves on interest rates and promise to be market moving events.

“The FTSE 100 defied weak markets in Asia overnight and selling on Wall Street on Friday to trade higher on Monday morning as investors await key US and UK inflation data later this week,” said AJ Bell investment director Russ Mould.

“Back above the 7,900 mark and within striking distance of its recent all-time highs the index continues to build on its gains of recent months, but the confidence that remains is about as fragile as a fine china cup.”

CPI Inflation

The Bank of England recently predicted UK inflation would fall to 4% by the end of the year – a scenario which would permit longed-for easier monetary policy. Markets have began pricing in a slowing of hikes this year – if there are signs to the contrary, one would expect a period of market volatility.

Economists estimate UK CPI will fall to 10.2% from 10.5% previously when the data is reported by the ONS on Wednesday.

Before then, we will receive US CPI tomorrow which is expected to fall to 6.2% – dramatically lower than the 9.1% peak recorded last year.

UK Housebuilders

Deutsche Bank analysts have cut five UK housebuilders as they feel the recent strong rally in sector has sufficiently priced in improvement in the UK housing market outlook. Persimmon was cut to a sell and fell 2.7% in Monday’s trade.

Barratt Developments and Taylor Wimpey were cut to a hold and fell 1.6% and 2.4% respectively.

The engineering sector caught investors attention on Monday with Weir Group rising 2.6% with Spirax-Sarco and BAE Systems also among the top risers.

Deutsche Bank have downgraded a swathe of UK housebuilders as it suggests a lot of the positive news around the UK property market is priced into shares.

Enjoying mildly improving sentiment around the UK property market, London-listed housebuilders have staged a remarkable rally from last year’s lows.

However, analysts at Deutsche Bank now feel most of the good news is priced into the sector and have downgraded Barratt Developments, Redrow, Taylor Wimpey, Crest Nicholson Holdings and Persimmon.

All were cut to a hold from buy, apart from Persimmon which was cut to a sell.

Persimmon shares were down 2.8% at the time of writing on Monday.

Housebuilding shares fell heavily during the early stages of 2022 before bargain hunters stepped in to pick up the beaten down stocks on hopes the UK economic doomsday scenario would fail to transpire.

Barrett’s recently reported results for 2022 and said forward sales were dramatically lower than at the same point last year.

DX Group shares were falling on Monday after the logistics group responded to a Sunday Times article alluding to a corporate espionage case involving rival Tuffnell Parcel Express.

This morning, DX Group confirmed they had received a claim 10th February and would ‘defend its position robustly. It is alleged DX Group staff attempted to obtain commercially sensitive information from delivery drivers.

DX Group shares were down 7.5% at the time of writing.

DX Group Corporate Governance

The media reports over the weekend and claim from Tuffnells comes after DX Group conducted internal investigations last year and made sweeping changes to their management structure and took disciplinary action against employees.

“Industrial espionage has rarely sounded more prosaic although the consequences for delivery and logistics firm DX, if the claims from Sheffield-based rival Tuffnells are proven at the High Court, could be anything but,” said AJ Bell investment director Russ Mould.

“According to newspaper reports DX employees, formerly of Tuffnells, conspired to obtain customer service receipts from the latter. The £50 payments offered to ‘Pat’ the delivery driver in exchange for the confidential corporate information make it sound like an off-the-wall episode in the life of Greendale’s favourite postie.”

“DX has put out the expected robust defence and the company has already conducted a corporate governance investigation into the matter which resulted in a shake-up of its senior management and a long suspension for the shares.”

“The company desperately needs to move on from the scandal and continue to capitalise on the progress it made during the pandemic when there was a sizeable increase in demand for parcel deliveries. Previously the company had a chequered history as a listed firm, littered with profit warnings and dividend cuts, so it is important to clean up this mess as soon as it can.”   

The company is set to release interim results 27th February.