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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ultimate Products Plc | LSE:ULTP | London | Ordinary Share | GB00BYX7MG58 | ORDS 0.25P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.50 | -0.29% | 172.00 | 172.00 | 179.50 | 172.50 | 172.00 | 172.50 | 30,366 | 16:27:52 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Household Appliance Stores | 166.32M | 12.59M | 0.1409 | 12.21 | 153.62M |
TIDMUPGS
RNS Number : 4657M
UP Global Sourcing Holdings PLC
30 April 2018
30 April 2018
UP Global Sourcing Holdings plc
"Ultimate Products" or the "Group"
INTERIM RESULTS FOR THE SIX MONTHSED 31 JANUARY 2018
Ultimate Products, the owner, manager, designer and developer of an extensive range of value-focused consumer goods brands, announces its interim results for the six months ended 31 January 2018.
Financial and operational highlights
-- Revenue decreased 28.9% to GBP48.4 million (H1 2017: GBP68.1 million), reflecting: a much tougher trading environment for general merchandise in the UK (against an unusually strong H1 2017 for the Group); and the one-off impact of revenue deferral due to a change in supply arrangements for a major European customer
-- Underlying EBITDA(1) down 49.5% to GBP4.5 million (H1 2017: GBP8.8 million), driven by lower revenues
-- Gross margin remained stable at 22.4% (H1 2017: 22.3%), mainly due to changes in customer mix and the business continuing to adapt to weaker exchange rates
-- Move to the Group's new distribution centre at Heron Mill in Oldham successfully completed in the period
-- Continued progress in Germany, where the Group has opened its new showroom and has already opened a number of major retail accounts with orders taken to date ahead of management's expectations
-- Net debt at 31 January 2018 of GBP6.7 million, down 34.9% (31 January 2017: GBP10.2 million)
-- Interim dividend of 0.83 pence per share, payable on 27 July 2018 to shareholders on the register on 6 July 2018
-- Current trading for FY 2018 in line with management expectations
Commenting on the results, Simon Showman, Chief Executive of Ultimate Products, said:
"This has been a tough six months for both Ultimate Products and the wider general merchandise sector in the UK, as discretionary spend has continued to come under pressure due to low consumer confidence. Our financial performance during the period reflects this market headwind.
While the UK looks set to remain challenging, we are pleased with the early progress that is being made in Germany and are delighted to have opened our new 10,000 sq ft showroom there earlier this month, which will provide a great showcase for our products to our European customer base.
More broadly, we are working hard to ensure that the company is positioned as strongly as possible to navigate its way through the current soft trading environment. We are more focused than ever on the execution of our strategy, and on improving operational efficiencies whilst not compromising in any way on the quality of our products and service. The Group is well invested, retains a strong balance sheet, and maintains comfortable levels of funding headroom within its bank facilities. As a result, we remain confident in our ability to deliver growth in the longer term."
For more information, please contact:
Ultimate Products +44 (0) 161 627 1400
Simon Showman, CEO
Andrew Gossage, Managing Director
Graham Screawn, Finance Director
Shore Capital +44 (0) 20 7408 4090
Mark Percy
Edward Mansfield
Cenkos +44 (0) 20 7397 8900
Harry Hargreaves
Nicholas Wells
Powerscourt +44 (0) 207 250 1446
Rob Greening
Sam Austrums
Notes to Editors
Ultimate Products is an owner, manager, designer and developer of a series of well-known brands focused on the home, selling to over 300 retailers across 38 countries. It has six product categories: Audio; Heating and Cooling; Housewares; Laundry; Luggage; and Small Domestic Appliances. Its brands include Beldray (laundry, floor care, heating and cooling), Intempo (audio), Salter (kitchenware), Constellation (luggage), and Progress (cookware and bakeware).
The Group'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.
Founded in 1997, Ultimate Products is headquartered in Oldham, Greater Manchester, where it has design, sales, marketing, buying, quality assurance, support functions and warehouse facilities across two sites. Manor Mill, the Group's head office, includes a spectacular 20,000 sq ft showroom that showcases each of its brands. In addition, the Group has an office and showroom in Guangzhou, China and a newly established showroom in Cologne, Germany. In total, Ultimate Products now employs over 200 staff.
For further information, please visit www.upgs.com
Note:
1. Calculated after adding back exceptional items and share based payment charges as referred to in Note 10 below.
INTERIM STATEMENT
STRATEGY
The strategy of UP Global Sourcing Holdings plc ("Ultimate Products" or the "Group") is to develop its portfolio of brands focused on mass-market, value-led, consumer goods for the home focused on selling to:
(1) UK and European discounters;
(2) UK supermarkets;
(3) online platforms; and
(4) international retailers.
While the market for general merchandise in the UK is currently challenging, the Board is confident that remaining focused on the above strategy will deliver growth in the longer term.
TRADING
Revenue for the six months ended 31 January 2018 ("H1") was GBP48.4 million, a decrease of GBP19.7 million or 28.9% on the same period last year (H1 2017: GBP68.1 million). As noted previously, H1 2017 was an exceptionally strong period for the Group due to highly positive retailer sentiment (62% of FY 2017 revenue was delivered in H1 2017 as opposed to 53% and 54% in FY 2016 and FY 2015, respectively).
The decline reflects the much tougher trading environment for general merchandise in the UK, with wage inflation running behind general inflation. Discretionary spend has been under pressure and consumer confidence has therefore been lower than it has been for some time. As a consequence non-food sales have declined as consumers have prioritised food purchases. This decline in non-food has been particularly apparent in physical stores, which is our main market, as a result of the growing competition from online.
For retailers, this has also coincided with imported cost price inflation caused by Sterling's weakness since the Brexit referendum, in turn leading to retail price inflation which has also dampened volumes.
The lower volumes available to non-food suppliers, along with retailers' desire to minimise increases in retail prices, has created an even more competitive trading environment than normal.
In addition to the challenging UK conditions, as previously noted, the period also saw a shift in supply arrangements for a major European customer from Free on Board ("FOB") to landed. As landed revenues are recorded as sales later than for FOB, this has led to revenue being deferred which has directly impacted H1 2018.
Despite the challenges set out above, gross margin has remained stable at 22.4% (H1 2017: 22.3%) which is mainly due to changes in customer mix and as the business continues to adapt to weaker exchange rates.
As a result of lower revenues, Underlying EBITDA(1) was GBP4.5 million, a fall of GBP4.3 million or 49.5% on last year (H1 2017: GBP8.8 million).
Note:
1. Calculated after adding back exceptional items and share based payment charges as referred to in Note 10.
BALANCE SHEET
Shareholders' equity was GBP6.8 million at 31 January 2018, up from GBP6.2 million at 31 January 2017. This movement was the net result of an increase in retained earnings of GBP1.4 million net of a movement in the hedging reserve of GBP0.9 million as Sterling strengthened during H1 2018. The main movements in retained earnings from 31 January 2017 to 31 January 2018 were:
(1) total Profit After Tax from 1 February 2017 to 31 January 2018 of GBP3.4 million;
(2) a one-off corporation tax credit of GBP2.1 million received in FY 2017 relating to the Initial Public Offering in March 2017; net of
(3) dividends paid from 1 February 2017 to 31 January 2018 of GBP4.2 million.
Net working capital at 31 January 2018 was GBP12.3 million, down from GBP15.9 million at 31 January 2017 - a reduction of GBP3.6 million or 22.5%. This was entirely driven by the fall in revenue in the period.
Net cash from operations for the period was GBP2.6 million, a reduction of GBP0.4 million or 11.0% (H1 2017: GBP3.0 million) as a result of lower EBITDA, partially offset by lower working capital.
Net debt at 31 January 2018 was GBP6.7 million, down from GBP10.2 million at 31 January 2017, a reduction of GBP3.5 million or 34.9%. The main drivers of this movement were:
(1) net working capital reduction (see above) of GBP3.6 million;
(2) a one-off corporation tax credit (see above) of which GBP1.6 million had benefited cash at 31 January 2018;
(3) total Profit After Tax from 1 February 2017 to 31 January 2018 of GBP3.4 million; net of
(4) dividends paid from 1 February 2017 to 31 January 2018 of GBP4.2 million; and
(5) investment in the new distribution centre at Heron Mill (see below) of GBP0.5 million.
The net debt/underlying EBITDA ratio at 31 January 2018 was 0.9x (31 January 2017: 0.9x) based on underlying EBITDA for the 12 months to 31 January 2018. The Group had headroom within its bank facilities of GBP8.0 million as at 31 January 2018 (31 January 2017: GBP9.7 million).
DISTRIBUTION CENTRE
The move to the Group's new 240,000 sq ft distribution centre at Heron Mill in Oldham was successfully completed in the period. The new facility is more efficient than previous arrangements, and the move has already enabled the Group to keep overall payroll costs in H1 2018 below the prior year despite the effects of the National Living Wage and general wage inflation.
Heron Mill includes a purpose-built single pick area to support Ultimate Products' growing online business, which continues to perform well.
GERMANY
In line with the international focus of its strategy, Ultimate Products opened its new 10,000 sq ft German showroom this month, showcasing our branded product ranges to Europe's largest retail market. The Group has already opened a number of major retail accounts there and orders taken to date are ahead of management's expectations. Given the promising early progress in Germany and the positive consumer data that is emerging from the region, the Board sees significant potential for long-term growth in this market.
DIVID
The Board has declared an interim dividend of 0.83 p per share, payable on 27 July 2018 to shareholders on the register on 6 July 2018.
CURRENT TRADING AND OUTLOOK
Current trading for FY 2018 is in line with management expectations.
The market conditions for general merchandise remain challenging and Ultimate Products, like many others, is faced with a more uncertain environment for consumers, retailers and suppliers. Despite these challenges, the Group is well invested, retains a strong balance sheet and maintains comfortable levels of funding headroom within its bank facilities. We remain more focused than ever on our strategy which the Board continues to believe will deliver growth in the longer term.
Jim McCarthy Simon Showman
Chairman Chief Executive
Consolidated Condensed Income Statement
Unaudited Unaudited 6 months Audited 6 months ended Year ended 31 Jan ended 31 Jan 2017 31 Jul Note 2018 (Restated) 2017 GBP'000 GBP'000 GBP'000 ------------------------------- ------- ------------ ------------ ---------- Revenue 7 48,408 68,086 109,953 Cost of sales (37,543) (52,881) (85,386) ------------------------------- ------- ------------ ------------ ---------- Gross profit 10,865 15,205 24,567 Administration expenses before exceptional items and share based payment charges (6,647) (6,536) (13,444) ------------------------------- ------- ------------ ------------ ---------- Profit from operations before exceptional items and share based payment charges 4,218 8,669 11,123 ------------------------------- ------- ------------ ------------ ---------- Exceptional administration expenses 9 - (1,693) (3,152) Share based payment charges 9 (96) - (80) ------------------------------- ------- ------------ ------------ ---------- Administration expenses (6,743) (8,229) (16,676) ------------------------------- ------- ------------ ------------ ---------- Profit from operations 10 4,122 6,976 7,891 Finance income - 21 - Finance costs (180) (293) (464) ------------------------------- ------- ------------ ------------ ---------- Profit before taxation 11 3,942 6,704 7,427 Income tax 12 (818) (1,398) (1,852) ------------------------------- ------- ------------ ------------ ---------- Profit for the period 3,124 5,306 5,575 =============================== ======= ============ ============ ========== Pence Pence Pence ------------------------------- ------- ------------ ------------ ---------- Earnings per share - basic 13 3.80 7.00 7.20 Earnings per share - diluted 13 3.80 7.00 7.10 =============================== ======= ============ ============ ========== Ex-div date: 5 July 2018 Record date: 6 July 2018
Consolidated Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 ---------------------------------------- ---------- ---------- --------- Profit for the period 3,124 5,306 5,575 Other comprehensive (expense)/income Items that may be subsequently reclassified to income statement: Fair value movements on cash flow hedging instruments Hedging instruments recycled through the income statement at the end of hedging relationships (505) (133) (193) 121 - (441) Foreign currency retranslation (7) 8 1 ---------------------------------------- ---------- ---------- --------- Other comprehensive (expense) for the period (391) (125) (633) ---------------------------------------- ---------- ---------- --------- Total comprehensive income for period attributable to the equity holders of the company 2,733 5,181 4,942 ======================================== ========== ========== =========
Consolidated Condensed Statement of Financial Position
Unaudited Unaudited Audited As at As at As at 31 Jan 2018 31 Jan 2017 31 Jul 2017 GBP'000 GBP'000 GBP'000 Note ---------------------------------------------- ------- -------------- -------------- ------------- Assets Property, plant and equipment 15 1,890 1,382 1,715 Deferred tax 144 164 162 ---------------------------------------------- ------- -------------- -------------- ------------- Total non-current assets 2,034 1,546 1,877 Inventories 11,796 11,835 11,064 Trade and other receivables 16 11,557 20,576 11,745 Current tax 17 - 481 Cash and cash equivalents 122 119 91 ---------------------------------------------- ------- -------------- -------------- ------------- Total current assets 23,492 32,530 23,381 ---------------------------------------------- ------- -------------- -------------- ------------- Total assets 25,526 34,076 25,258 ---------------------------------------------- ------- -------------- -------------- ------------- Liabilities Trade and other payables 17 (11,745) (16,295) (12,516) Current tax (242) (1,248) - Borrowings 18 (4,132) (6,194) (1,518) ---------------------------------------------- ------- -------------- -------------- ------------- Total current liabilities (16,119) (23,737) (14,034) ---------------------------------------------- ------- -------------- -------------- ------------- Net current assets 7,373 8,793 9,347 Borrowings 18 (2,657) (4,163) (4,431) ---------------------------------------------- ------- -------------- -------------- ------------- Total non-current liabilities (2,657) (4,163) (4,431) ---------------------------------------------- ------- -------------- -------------- ------------- Total liabilities (18,776) (27,900) (18,465) ---------------------------------------------- ------- -------------- -------------- ------------- Net assets 6,750 6,176 6,793 ============================================== ======= ============== ============== ============= Equity Share capital 205 184 205 Share premium 2 2 2
Hedging reserve (577) 308 (193) Retained earnings 7,120 5,682 6,779 ---------------------------------------------- ------- -------------- -------------- ------------- Equity attributable to owners of the company 6,750 6,176 6,793 ============================================== ======= ============== ============== =============
Consolidated Condensed Statement of Changes in Equity
Share Share Hedging Retained Total Capital Premium reserve earnings Equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- ---------- ---------- ---------- ----------- ---------- As at 1 August 2017 205 2 (193) 6,779 6,793 Profit for the period - - - 3,124 3,124 Foreign currency translation - - - (7) (7) Cash flow hedging movement - - (384) - (384) --------------------------------- ---------- ---------- ---------- ----------- ---------- Total comprehensive income for the period - - (384) 3,117 2,733 --------------------------------- ---------- ---------- ---------- ----------- ---------- Transactions with shareholders: Dividends payable - - - (2,872) (2,872) Share based payments - - - 96 96 --------------------------------- ---------- ---------- ---------- ----------- ---------- As at 31 January 2018 205 2 (577) 7,120 6,750 ================================= ========== ========== ========== =========== ========== Share Share Hedging Retained Total Capital Premium reserve earnings Equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- --------- ------------ --------- ---------- --------- As at 1 August 2016 184 2 441 567 1,194 Profit for the period - - - 5,306 5,306 Foreign currency translation - - - 8 8 Cash flow hedging movement - - (133) - (133) Total comprehensive income for the period - - (133) 5,314 5,181 --------------------------------- --------- ------------ --------- ---------- --------- Transactions with shareholders: Dividends payable - - - (199) (199) --------------------------------- --------- ------------ --------- ---------- --------- As at 31 January 2017 184 2 308 5,682 6,176 ================================= ========= ============ ========= ========== ========= Share Share Hedging Retained Total Capital Premium reserve earnings Equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- --------- ------------ ---------- ----------- ----------- As at 1 August 2016 184 2 441 567 1,194 Profit for the year - - - 5,575 5,575 Foreign currency translation - - - 1 1 Cash flow hedging movement - - (634) - (634) Total comprehensive income for the year - - (634) 5,576 4,942 --------------------------------- --------- ------------ ---------- ----------- ----------- Transactions with shareholders: Dividends payable - - - (1,530) (1,530) Issue of shares - exercise of share options 21 - - - 21 Share based payments - - - 80 80 Current tax on share schemes - - - 2,086 2,086 As at 31 July 2017 205 2 (193) 6,779 6,793 ================================= ========= ============ ========== =========== ===========
Consolidated Condensed Cash Flow Statement
Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------- ---- ---------- ---------- ---------- Net cash flow from operating activities Profit for the period Adjustments for: 3,124 5,306 5,575 Finance income - (21) - Finance costs 180 293 464 Loss on disposal of non-current assets - 2 (5) Income tax expense 818 1,398 1,852 Depreciation and impairment 237 143 394 Share based payments 96 - 80 Income taxes paid (95) (582) (678) Working capital adjustments (Increase) in inventories (732) (1,290) (519) Decrease/ (increase) in trade and other receivables 200 (4,497) 4,049 (Decrease)/ increase in trade and other payables (1,179) 2,224 (1,790) ------------------------------------------- ---------- ---------- ---------- Net cash from operations 2,649 2,976 9,422 ------------------------------------------- ---------- ---------- ---------- Cash flows used in investing activities Purchase of property, plant and equipment (412) (557) (1,162) Proceeds of disposal of property, plant and equipment - - 28 Net cash used in investing activities (412) (557) (1,134) ------------------------------------------- ---------- ---------- ---------- Cash flows (used in)/ from financing activities Issue of share capital - - 21 Proceeds from borrowings 811 2,137 - Repayment of borrowings - (1,821) (4,085) Debt issue costs paid - - (38) Dividends paid (2,872) (2,449) (3,780) Interest paid (139) (309) (451) Net cash used in finance activities (2,200) (2,442) (8,333) ------------------------------------------- ---------- ---------- ---------- Net increase/ (decrease) in cash and cash equivalents 37 (23) (45) Cash and cash equivalents brought forward 91 136 136 Exchange (losses)/ gains on cash and cash equivalents (6) 6 - ------------------------------------------- Cash and cash equivalents carried forward 122 119 91 =========================================== ========== ========== ========== Notes to the Interim Results 1. General information UP Global Sourcing Holdings plc ('the Company') and its subsidiaries (together 'the Group') is a supplier of branded, value for money household products to global markets. The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is UP Global Sourcing Holdings plc, Manor Mill, Victoria Street, Chadderton, Oldham, OL9 0DD. This consolidated condensed interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 July 2017 were approved by the Board of directors on 6 November 2017 and delivered to the Registrar of Companies. The comparative figures for the financial year ended 31 July 2017 are an extract of the Company's
statutory accounts for that year. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. This consolidated condensed interim financial information is unaudited but has been reviewed by the Company's Auditor. 2. Basis of preparation This consolidated condensed interim financial information for the six months ended 31 January 2018 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. The consolidated condensed interim financial information should be read in conjunction with the audited financial statements for the year ended 31 July 2017, which have been prepared in accordance with IFRSs as adopted by the European Union. As referred to in note 8 of the financial statements for the year ended 31 July 2017, the Directors have taken the decision to reclassify to cost of sales, certain costs that had previously been reported as part of both distribution costs and administrative expenses. The impact on the six months ended 31 January 2017 is the reclassification of GBP1,038,000 from distribution costs and the reclassification of GBP500,000 from administrative expenses. The result has been an increase in cost of sales of GBP1,538,000, with no impact upon previously reported equity. Going concern basis The Group meets its day-to-day working capital requirements through its bank facilities. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group's forecasts and projections, taking account of reasonable sensitivities, show that the Group should be able to operate within available facilities. The Group therefore continues to adopt the going concern basis in preparing its consolidated condensed interim financial statements. 3. Accounting policies The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 July 2017. 4. Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of operating segments. The Directors consider that there are no identifiable business segments that are subject to risks and returns different to the core business. The information reported to the Directors, for the purposes of resource allocation and assessment of performance, is based wholly on the overall activities of the Group. The Group has therefore determined that it has only one reportable segment under IFRS 8. The results and assets for this segment can be determined by reference to the statement of comprehensive income and statement of financial position. 5. Principal risks and uncertainties The Directors consider that the principal risks and uncertainties, which could have a material impact on the Group's performance in the remaining 6 months of the financial year, remain substantially the same as those stated on pages 19-23 of the Group's Annual Report for the year ended 31 July 2017, which is available on the group's website, www.upgs.com. The result of the referendum in favour of the UK leaving the European Union resulted in a weakening of sterling, creating imported cost price inflation and, in turn, retail price inflation, leading to a dampening of consumer demand. We are closely following developments in this area and will adapt our strategy as the impact of the UK exit from the European Union becomes clearer. The Group has an exposure to US Dollars for the purchase of goods and this is partially hedged by virtue of invoicing a proportion of its turnover in US Dollars. In addition, the Group invoices a proportion of its turnover in Euros and Canadian Dollars and where necessary, the Group uses forward currency contracts to further mitigate its foreign currency exposure. 6. Financial instruments The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements should be read in conjunction with the Group's Annual Report for the year ended 31 July 2017, as they do not include all financial risk management information and disclosures contained within the Annual Report. There have been no changes in the risk management policies since the year end. 7. Revenue Geographical split by location: Unaudited Unaudited Audited 6 months ended 6 months Year 31 Jan 2018 ended ended GBP'000 31 Jan 31 Jul 2017 2017 GBP'000 GBP'000 -------------------- ---------------- ---------- --------- United Kingdom 38,810 50,073 79,534 Germany 1,036 712 1,356 Rest of Europe 7,432 15,451 25,929 USA 377 422 806 Rest of the world 753 1,428 2,328 Total 48,408 68,086 109,953 ==================== ================ ========== ========= 8. Seasonality of operations Overall the Group's product range is not significantly seasonal, however, retail demand is higher in the Christmas trading period. As a result, it is anticipated that the operating profits for the second half of the year ending 31 July 2018 will be lower than those for the six months ended 31 January 2018. 9. Exceptional items and share based payment charges Unaudited Unaudited Audited 6 months ended 6 months Year 31 Jan 2018 ended ended GBP'000 31 Jan 31 Jul 2017 2017 GBP'000 GBP'000 -------------------------------- ---------------- ---------- --------- Shareholder bonuses - 1,693 2,003 Initial public offering costs - - 1,149 Share based payment expense 96 - 80 Total 96 1,693 3,232 ================================ ================ ========== ========= Shareholder bonus costs consisted of bonus payments based on certain Group EBITDA performance targets. These costs ceased to accrue after the year ended 31 July 2017. Initial public offering costs related entirely to the Group's IPO in March 2017 and therefore are not considered to relate to the Group's underlying performance. The costs incurred comprised principally legal and advisory fees and listing costs. The share based payment expense relates to the non-cash charge arising on a share option management incentive plan adopted immediately prior to the IPO. The options have been valued using the Monte Carlo option pricing model and are granted with a three-year vesting period and can be exercised
up to seven years following the vesting date. The above items have been shown separately in the Income Statement to better reflect the performance of the underlying business. 10. Operating profit Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 ---------------------------------------------------------------------- ---------- ---------- -------- The profit is stated after charging/(crediting) expenses as follows: Exceptional items and share based payment charges - note 9 Depreciation of owned property, plant and equipment 96 1,693 3,232 Loss on disposal of property, plant and equipment 237 143 394 - 2 (5) ====================================================================== ========== ========== ======== EBITDA represents profit from operations before depreciation and amortisation. Underlying EBITDA represents EBITDA, as defined above, adjusted for the exceptional items and share based payment charges set out in note 9 above. The Directors use EBITDA and underlying EBITDA as key performance indicators of the Group's business. The following table sets forth a reconciliation of EBITDA and Underlying EBITDA to profits from operations for the periods indicated. Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------------------------------- ---------- ---------- -------- Profit from operations 4,122 6,976 7,891 Depreciation 237 143 394 Loss on disposal of property plant and equipment - 2 (5) ------------------------------------------------------------- ---------- ---------- -------- EBITDA 4,359 7,121 8,280 Exceptional items and share based payment charges - note 9 96 1,693 3,232 ------------------------------------------------------------- ---------- ---------- -------- Underlying EBITDA 4,455 8,814 11,512 ============================================================= ========== ========== ======== Underlying EBITDA margin 9.2% 12.9% 10.5% ============================================================= ========== ========== ======== 11. Profit before taxation The Directors also monitor the Group's performance with respect to profit before taxation and underlying profit before taxation. Underlying profit before taxation represents profit before taxation adjusted for the exceptional items and share based payment charges set out in note 9 above. The following table sets forth a reconciliation of profit before taxation and underlying profit before taxation for the periods indicated. Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------------------------------- ---------- ---------- -------- Profit before taxation 3,942 6,704 7,427 Exceptional items and share based payment charges - note 9 96 1,693 3,232 Underlying profit before taxation 4,038 8,397 10,659 ============================================================= ========== ========== ======== 12. Taxation Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 --------------------------------------------------------- ---------- ---------- -------- Total tax expense 818 1,398 1,852 Tax on exceptional items & share based payment charges - 333 401 Tax expense on underlying profit before taxation 818 1,731 2,253 ========================================================= ========== ========== ======== The interim period tax charge is accrued based on the estimated average annual effective income tax rate of 20.8% (six months ended 31 January 2017: 20.9%; year ended 31 July 2017: 24.9%). The tax charge for the year ended 31 July 2017 was higher due to a higher level of expenses not deductible for tax purposes included within the exceptional items and share based payment charges arising in the second half of the year ended 31 July 2017. The effective income tax rates on the underlying profit before taxation was 20.3% (six months ended 31 January 2017: 20.6%; year ended 31 July 2017: 21.1%). The Chancellor announced in his Budget on 16 March 2016 that the main rate of corporation tax will be reduced to 17% from 1 April 2020 and the future current tax charges will reduce accordingly. 13. Earnings per share Basic earnings per share is calculated by dividing the net income for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period, and uses the number of shares as if they had always been subdivided from GBP1 shares to 0.25 p shares. Diluted earnings per share amounts are calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial year, adjusted for the effects of potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group, including performance-based options which the Group considers to have been earned. The calculations of earnings per share are based on the following: Unaudited Unaudited Audited 6 months ended 6 months Year 31 Jan 2018 ended ended GBP'000 31 Jan 31 Jul
2017 2017 GBP'000 GBP'000 -------------------------------------------- ---------------- ----------- ----------- Profit for the period 3,124 5,306 5,575 Number Number Number Weighted average number of shares - basic 82,169,600 73,706,800 77,254,220 Share options - - 946,812 -------------------------------------------- ---------------- ----------- ----------- Weighted average number of shares - diluted 82,169,600 73,706,800 78,201,032 pence pence pence Profit per share - basic 3.8 7.0 7.2 Profit per share - diluted 3.8 7.0 7.1 ============================================ ================ =========== =========== No dilution arises in the 6 months ended 31 January 2018 as the hurdle for the MIP Option Scheme (explained further in note 25 of the financial statements for the year ended 31 July 2017) was not achieved based upon the interim measurement of the criteria as at 31 January 2018. The underlying earnings per share referred to below is based on the underlying profit for the period, which reflects the profit for the period after adding back the exceptional items and share based payment charges set out in note 9 above and the tax effects as set out in note 12 above. Unaudited Unaudited Audited 6 months ended 6 months Year 31 Jan 2018 ended ended GBP'000 31 Jan 31 Jul 2017 2017 GBP'000 GBP'000 -------------------------------------------- ---------------- ----------- ----------- Underlying profit before taxation - note 11 4,038 8,397 10,659 Taxation on underlying profit before taxation - note 12 (818) (1,731) (2,253) -------------------------------------------- ---------------- ----------- ----------- Underlying profit for the period 3,220 6,666 8,406 Number Number Number Weighted average number of shares - basic 82,169,600 73,706,800 77,254,220 pence pence pence Underlying profit per share - basic 3.9 9.0 10.9 ============================================ ================ =========== =========== 14. Dividends Unaudited Unaudited Audited 6 months ended 6 months Year 31 Jan 2018 ended ended GBP'000 31 Jan 31 Jul 2017 2017 GBP'000 GBP'000 ---------------------------- ---------------- ---------- --------- Final dividend paid 2,872 199 199 Interim declared and paid - - 1,331 ---------------------------- ---------------- ---------- --------- 2,872 199 1,530 ============================ ================ ========== ========= Per share - adjusted pence pence pence ---------------------------- ---------------- ---------- --------- Final dividend paid 3.495 0.27 0.27 Interim declared and paid - - 1.62 ---------------------------- ---------------- ---------- --------- 3.495 0.27 1.89 ============================ ================ ========== ========= The adjusted number of shares reflects the subdivision of ordinary share capital from 205,424 GBP1 shares into 82,169,600 0.25 p shares on 28 February 2017. The final dividend declared in respect of the year ended 31 July 2017 was paid in the 6 months ended 31 January 2018. An interim dividend of 0.83 p per share was approved by the Board on 27 April 2018 and will be paid on 27 July 2018 to shareholders on record as at 6 July 2018. 15. Property, plant and equipment Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ------------------------ ------------- ---------- --------- Opening net book value 1,715 970 970 Additions 412 557 1,162 Disposals - (2) (23) Depreciation (237) (143) (394) ------------------------ ------------- ---------- --------- Closing net book value 1,890 1,382 1,715 ======================== ============= ========== ========= Additions to property, plant and equipment during the 6 months to 31 January 2017 and the year ended 31 July 2017 substantially included expenditure relating to the refurbishment of Heron Mill, the Group's new warehousing facility. Such expenditure in the 6 months to 31 January 2018 has reduced and the refurbishment is now substantially complete. 16. Trade and other receivables Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ------------------------------------ ------------- ---------- --------- Trade receivables 10,348 18,994 10,474 Other receivables and prepayments 1,209 1,582 1,271 11,557 20,576 11,745 ==================================== ============= ========== ========= The Directors believe that the carrying value of trade and other receivables represent their fair value. Trade and other receivables are denominated in Sterling, US Dollars, Euros and Canadian Dollars. In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date. 17. Trade and other payables Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ---------------------------------- ------------- ---------- --------- Trade payables 5,640 8,273 5,803 Accruals 5,057 7,533 6,207 Social security and other taxes 1,048 489 506 11,745 16,295 12,516 ================================== ============= ========== =========
Trade payables principally consist of amounts outstanding for trade payables and ongoing costs. They are non-interest bearing and are normally settled on 30 to 60 days terms. The Directors consider that the carrying value of trade and other payables approximates their fair value. Trade and other payables are denominated in both Sterling and US Dollars. UP Global Sourcing Holdings plc has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period. 18. Borrowings Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 Current -------------------------------------------------- ------------- ---------- --------- Bank overdraft and invoice discounting 1,321 4,067 1,016 Import loans 2,841 2,155 534 -------------------------------------------------- ------------- ---------- --------- 4,162 6,222 1,550 Less: Unamortised debt issue cost (30) (28) (32) -------------------------------------------------- ------------- ---------- --------- 4,132 6,194 1,518 ================================================== ============= ========== ========= Non-current Revolving credit facility 2,698 4,227 4,499 -------------------------------------------------- ------------- ---------- --------- 2,698 4,227 4,499 Less: Unamortised debt issue cost (41) (64) (68) -------------------------------------------------- ------------- ---------- --------- 2,657 4,163 4,431 ================================================== ============= ========== ========= Total borrowings 6,789 10,357 5,949 ================================================== ============= ========== ========= The earliest that lenders of the above borrowings require repayment is as follows: In less than one year 4,162 6,222 1,550 Between two and five years 2,698 4,227 4,499 Less: Unamortised debt issue cost (71) (92) (100) -------------------------------------------------- ------------- ---------- --------- 6,789 10,357 5,949 ================================================== ============= ========== ========= The Group is funded by external bank facilities provided by HSBC. The facilities run to July 2020 providing the ongoing funding of the Group and comprise a revolving credit facility of GBP6.2 m, an import loan facility of GBP6.5 m and an invoice discounting facility of GBP17 m. 19. Financial instruments a) Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises are as follows: Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ----------------------------- ------------- ---------- --------- Trade and other receivables 10,376 19,349 10,491 Trade and other payables 10,696 15,806 12,010 Borrowings 6,789 10,357 5,949 Cash and cash equivalents 122 119 91 ============================= ============= ========== ========= b) Financial assets The Group held the following financial assets at amortised cost: Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 --------------------------- ------------- ---------- --------- Cash and cash equivalents 122 119 91 Trade receivables 10,348 18,994 10,474 10,470 19,113 10,565 =========================== ============= ========== ========= c) Financial liabilities The Group held the following financial liabilities, classified as other financial liabilities at amortised cost: Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ----------------- ------------- ---------- --------- Trade payables 5,640 8,273 5,803 Loans 6,789 10,357 5,949 Other payables 5,057 7,533 6,207 17,486 26,163 17,959 ================= ============= ========== ========= d) Financial assets /(liabilities) The Group held the following financial assets/ (liabilities), classified as fair value through profit and loss: Unaudited Unaudited Audited as at as at as at 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ---------------------------- ------------- ---------- --------- Forward currency contracts (589) 309 (200) Interest rate caps 17 40 13 Interest rate swaps 12 6 4 (560) 355 (183) ============================ ============= ========== ========= The following is a reconciliation of the financial instruments to the statement of financial position: Unaudited Unaudited Audited as at as at as at 31 Jan 31 Jan 31 Jul 2018 2017 2017 GBP'000 GBP'000 GBP'000 ---------------------------------------------------------------------------- ---------- ---------- -------- Trade receivables 10,348 18,994 10,474 Forward currency contracts - 309 - Interest rate caps 17 40 13 Interest rate swaps 12 6 4
Prepayments and other receivables not classified as financial instruments 1,180 1,227 1,254 Trade and other receivables (note 16) 11,557 20,576 11,745 ============================================================================ ========== ========== ======== Unaudited Unaudited Audited as at as at as at 31 Jan 2017 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 ------------------------------------------------- ------------- ---------- --------- Trade and other payables held at amortised cost 10,108 15,806 11,810 Forward currency contracts 589 - 200 Social security and other taxes 1,048 489 506 Trade and other payables (note 17) 11,745 16,295 12,516 ================================================= ============= ========== ========= Derivative financial instruments - Forward contracts The Group mitigates the exchange rate risk for certain foreign currency trade debtors and creditors by entering into forward currency contracts. At 31 January 2018, the outstanding contracts all mature within 12 months of the period end (31 January 2017: 7 months; 31 July 2017: 12 months). At 31 January 2018, the Group was committed to buy US$15,750,000, to sell EUR8,950,000 and to sell CA$90,000, paying and receiving respectively a fixed sterling amount (31 January 2017: to buy US$4,000,000, to sell EUR1,700,000 and to sell CA$225,000; 31 July 2017: to buy US$11,650,000, to sell US$3,500,000 to sell EUR7,050,000 and to sell CA$nil). The forward currency contracts are measured at fair value using the relevant exchange rates for GBP:USD, GBP:EUR and GBP:CAD. The fair value of the contracts at 31 January 2018 is a liability of GBP589,000 (31 January 2017: GBP309,000 asset; 31 July 2017: GBP200,000 liability). Forward currency contracts are valued using level 2 inputs. The valuations are calculated using the period end exchange rates for the relevant currencies which are observable quoted values at the period end dates. Valuations are determined using the hypothetical derivative method which values the contracts based on the changes in the future cash flows based on the change in value of the underlying derivative. Derivative financial instruments - Interest rate swaps The Group has entered into an interest rate swap to hedge the exposure to interest rate movements on the Group's revolving credit facility. The swap is based on a principal amount of GBP2,000,000 until 31 July 2018 and exchanges the exposure to a LIBOR interest rate to a fixed rate of 0.39%. The fair value of the swap at 31 January 2018 is an asset of GBP2,000, (31 January 2017: GBPnil, 31 July 2017: GBPnil). In addition, the Group has entered into an interest rate swap to hedge the Group's exposure to interest rate movements on the Group's invoice discounting facility. The swap is based on a principal amount of GBP1,000,000 until 31 December 2019 and exchanges the exposure to Base Rate interest charges to a fixed rate of 0.31%. The fair value of the swap at 31 January 2018 is an asset of GBP10,000 (31 January 2017: GBP6,000 asset, 31 July 2017: GBP4,000 asset). Interest rate swaps are valued using level 2 inputs. The valuations are based on the notional value of the swaps, the current available market borrowing rate and the swapped interest rate. The valuation is based on the current valuation of the present saving or cost of the future cash flow differences, based on the difference between the swapped interest rate and the expected interest rate as per the lending agreement. Derivative financial instruments - Interest rate caps Along with the interest rate swaps referred to above, the Group has entered into interest rate cap agreements to protect the exposure to interest rate movements on the Group's banking facilities. The interest rate caps are measured at fair value, being the market value of the cap at the balance sheet date. The Group has entered into an agreement to cap LIBOR interest rates at 1% until 31 December 2019 on a principal amount of GBP4,000,000. The fair value of the interest rate cap at 31 January 2018 was an asset of GBP8,000 (31 January 2017: GBP20,000 asset, 31 July 2017: GBP6,000 asset). In addition, at 31 January 2018, the Group has entered into further agreements to cap LIBOR interest rates at 2% on a principal amount of GBP4,702,000, reducing to GBP2,842,000 by 31 December 2019. The fair value of the interest rate caps at 31 January 2018 was an asset of GBP9,000, (31 January 2017: GBP20,000 asset, 31 July 2017: GBP7,000 asset). Interest rate caps are valued using level 2 inputs. The valuations are based on the notional value of the caps, the current available market borrowing rate and the capped interest rate. The valuation is based on the current valuation of the present saving or cost of the future cash flow differences, based on the difference between the capped interest rate and the expected interest rate as per the lending agreement. 20. Events occurring after the reporting period Interim dividend As disclosed in note 14, an interim dividend of 0.83 p per share will be paid on 27 July 2018. 21. Related party transactions Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31 Jan 2018 31 Jan 31 Jul GBP'000 2017 2017 GBP'000 GBP'000 Transactions with related companies and businesses Rent paid to Ultimate Apartments pension scheme - 90 163 Rent paid to Heron Mill Limited 120 121 241 Rent paid to Ultimate Apartments Limited - - 3 Rent paid to Berbar Properties Limited 90 - 17 ------------------------------------------------- -------------- ---------- --------- 210 211 424 ================================================= ============== ========== ========= Statement of Directors' Responsibilities The Directors' confirm that these consolidated condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely: * an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and * material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report. The Directors of UP Global Sourcing Holdings plc
are listed on pages 32 to 35 of the Group's Annual Report for the year ended 31 July 2017, which is available on the group's website, www.upgs.com. For and on behalf of the board of directors Andrew Gossage Graham Screawn Managing Director Chief Financial Officer 27 April 2018 27 April 2018
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