AI Terminal
UP GLOBAL SOURCING HOLDINGS PLC
Annual Report • Nov 3, 2022
4970_10-k_2022-11-03_5a8860c7-e574-4624-a0cf-09fd3534c2f1.html
Annual Report
Open in ViewerOpens in native device viewer
National Storage Mechanism | Additional information 
RNS Number : 1397F
UP Global Sourcing Holdings PLC
03 November 2022
3 November 2022
UP Global Sourcing Holdings plc
"Ultimate Products" or "the Group"
FULL YEAR RESULTS FOR THE YEAR ENDED 31 JULY 2022
A record financial performance
Ultimate Products, the owner of a number of leading homeware brands including Salter (the UK's oldest houseware brand, est.1760) and Beldray (est.1872), is pleased to announce its audited results for the financial year ended 31 July 2022 ("FY22").
Financial highlights
· Total revenue up 13% to a record £154.2m (FY21: £136.4m)
o International revenue up 22% to £53.1m (FY21: £43.5m)
o Supermarket revenue up 32% to £51.5m (FY21: £38.9m)
o Online revenue up 23% to £25.3m (FY21: £20.6m)
· Adjusted EBITDA* up 41% to £18.8m (FY21: £13.3m)
· Statutory profit before tax up 62% to £15.4m (FY21: £9.5m)
· Adjusted profit before tax* up 42% to £15.8m (FY21: £11.2m)
· Statutory EPS up 54% to 14.3p (FY21: 9.3p)
· Adjusted EPS* up 32% to 14.7p (FY21: 11.1p)
· Full year dividend per share up 42% to 7.12p (FY21: 5.02p)
· Net bank debt/adjusted EBITDA* ratio of 1.3x (FY21: 1.4x)
· Facilities headroom at 31 July 2022 of £17.8m (31 July 2021: £16.2m)
Operational highlights
· Salter acquisition fully integrated, and significantly earnings enhancing
· German kitchen electrical brand Petra relaunched and first retailer orders for FY23 received
· Successful management of the impact of the global shipping crisis and associated supply chain challenges
· Major robotics process automation programme launched in Q4
· Refurbishment of the office and showroom at Manor Mill, the Group's headquarters in Oldham completed
· Installation of 1,150 solar panels on the roof of Manor Mill, expected to produce 40% of the building's energy requirements
· Consumers increasingly investing in energy saving products, such as air fryers, with FY23 sales and order book already up 66% on total air fryers sales in FY22
· Post period end:
o Renewed the Group's Russell Hobbs licencing agreement (for non-electrical kitchen and laundry products) on a rolling four-year basis, rather than the previous fixed-term arrangement
o Planted one millionth tree in partnership with Ecologi
o The Group's inaugural ESG strategy to be published shortly
*Adjusted measures are before share-based payment expense and non-recurring items.
Current trading and outlook
The Board anticipates profit performance for FY23 will be in line with current market expectations. Whilst the current cost of living crisis represents a substantial challenge to all consumer-facing businesses, the Group is well placed to respond to this given its relentless focus on delivering value and growth.
Commenting on the performance, Simon Showman, Chief Executive of Ultimate Products, said:
"In FY22 Ultimate Products has delivered record financial results, seamlessly integrated the Salter brand, and maintained the incredibly high levels of service that our customers have come to expect from us. It has been a year of exceptional financial and operational progress, all of which was achieved against the backdrop of global supply chain disruption and a deteriorating macroeconomic environment.
It is pleasing to see that our energy efficient products, such as air fryers, are performing well and helping consumers save on energy costs. This aligns with our wider purpose of providing beautiful and more sustainable products for every home.
Whilst the current cost of living crisis represents a substantial challenge to all consumer- facing businesses our proven resilience and adaptability, as well as the quality and value of our products, mean that we are well placed to continue delivering future growth."
For more information, please contact:
Ultimate Products +44 (0) 161 627 1400
Simon Showman, CEO
Andrew Gossage, Managing Director
Chris Dent, Finance Director
Shore Capital +44 (0) 20 7408 4090
Mark Percy
Malachy McEntyre
Powerscourt +44 (0) 207 250 1446
Rob Greening
Sam Austrums
Notes to Editors
Ultimate Products is the owner of a number of leading homeware brands including Salter (the UK's oldest houseware brand, established in 1760) and Beldray (a laundry, floor care, heating and cooling brand that was established in 1872). According to its market research, nearly 80% of UK households own at least one of the Group's products.
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. Other brands include Progress (cookware and bakeware), Kleeneze (laundry and floorcare), Petra (small domestic appliances) and Intempo (audio).
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 employs over 370 staff, a significant number of whom have joined via the Group's graduate development scheme, and 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 in Cologne, Germany.
Please note that Ultimate Products is not the owner of Russell Hobbs. The company currently has licence agreements in place granting it an exclusive licence to use the "Russell Hobbs" trademark for cookware and laundry (NB this does not include Russell Hobbs electrical appliances).
For further information, please visit www.upgs.com
BUSINESS REVIEW
Strategy
Our purpose is to provide beautiful and more sustainable products for every home. We do this by designing, sourcing and supplying quality homecare products through our innovative, sustainable and customer-oriented capabilities. The Group's strategy is to develop its portfolio of brands for mass-market, value-led, consumer goods for the home focused on the following revenue channels:
· International retailers;
· Supermarkets;
· Online platforms; and
· Discounters.
This year has seen the Group make excellent progress towards its environmental and social sustainability agenda by ensuring ESG principles are embedded into the foundations of the business through a comprehensive strategy being implemented across the Group, full details of which will be published shortly. This has helped redefine our purpose and enhanced our core values, which will help us tackle the environmental impact that our business makes. Our ambitions include clear targets, the achievement of which will make a distinct difference to our business. These goals are also aligned to our customers' needs, ensuring we can provide them with an even greater service.
We are confident that we are now on our journey to become a more sustainable business, with an improved governance structure and commitment to the Task Force on Climate-Related Financial Disclosures ("TCFD"). It has been a pleasure to see the engagement and passion from our colleagues in this area of the business, where new ideas are continually being presented to the Board for consideration.
Performance
International
International revenue was ahead of last year by 22% (£9.6m) to £53.1m (FY21: £43.5m) with Germany continuing to perform particularly well, up 39% (£5.3m). From a low base, we are also seeing strong growth in Rest of World since we appointed our Australian distributor, with revenue up 177% (£2.0m) to £3.2m (FY21: £1.2m). The prospects for our international business, which is mainly focused on Europe, remain very encouraging. The appointment of a European adviser to assist in opening new major accounts is providing additional strategic focus and know-how to our international efforts.
Supermarkets
Our brands continue to resonate with supermarket customers in both the UK and Europe which led to robust growth in FY22 with revenue up 32% to £51.5m (FY21: £38.9m). The core business, excluding the Salter acquisition, grew by 20% to £46.7m (FY21: £38.9m). The key contributors to growth in this segment continue to be the Salter, Beldray and Russell Hobbs brands. With supermarkets now accounting for 33% of revenue (FY21: 29%), they have overtaken discounters as our largest revenue channel. This performance has been driven by improved consumer awareness and perception of our brands, as well as excellent service execution and aligned ESG values.
Online Platforms
Online grew by 23% (£4.7m) in the year to £25.3m (FY21: £20.6m) with our core online business, excluding the Salter acquisition, remaining broadly level at £20.3m (FY21: £20.6m). Online was adversely affected in H1 22 by the tighter stock availability caused by the disruption to shipping leading to a decline in revenue of 13% (£1.4m). We saw this as a temporary set-back in the rapid and long-standing growth of our online business. Growth returned in H2 22 when availability recovered, which led revenues to increase 20% (£1.8m) on the same period last year.
We expect this strong online momentum to continue into FY23 and are targeting 30% of overall revenue to come from online over the medium term.
While the majority of our online revenues will always come from sales made through platforms, our recently relaunched Salter and Beldray websites provide an additional avenue for growth, which will also facilitate a more direct relationship between our brands and their consumers.
Discounters
Sales to discounters fell by 7% (£3.4m) to £48.1m (FY21: £51.5m) with revenue from the core business (i.e. excluding the Salter acquisition) falling by 8% (£4.1m) to £47.4m (FY21: £51.5m). The performance of this channel was the result of the UK retailers in this category, who remained open during lockdowns, and therefore saw a pandemic related spike in demand, subsequently moderating their ordering as demand normalised. In addition, the account management of certain European discounters, who often prefer to trade face-to-face rather than via video conference, was made more difficult because of the travel restrictions during CY21. Looking through the volatility that has been caused by the pandemic, discount remains, we believe, a growth segment within overall retail and we will continue to target it as one of our key growth channels.
Operating Margins
Gross margin increased to 24.9% (FY21: 22.2%) driven by the benefits of the Salter acquisition with the Salter licence royalty now no longer payable and the addition of the higher margin scales business. Core gross margins remained stable compared to last year which was a significant achievement given substantially increased shipping costs.
The combination of higher revenues, a higher gross margin, and overheads broadly stable relative to revenue led to a 41% (£5.5m) increase in adjusted EBITDA* to £18.8m (FY21: £13.3m) with adjusted EBITDA* margin improving 2.5% to 12.2% (FY21: 9.7%).
OPERATIONAL REVIEW
Integration of the Salter Acquisition
The acquisition of Salter at the end of FY21 was an exciting moment in the history of Ultimate Products. Salter is the UK's oldest housewares brand, dating back to 1760, and has long been the market leader for bathroom and kitchen scales in the UK. Prior to the acquisition, the Group had had agreements in place granting it an exclusive licence to use the Salter trademark for kitchen electrical and cookware since 2011. The acquisition substantially strengthened our brand portfolio with full ownership now enabling us to drive the growth of this brand in a way that we could not have achieved when it was licenced, with international expansion representing a particular opportunity given Salter's substantial British heritage credentials. Integration of the business took place quickly and efficiently with the significantly earning-enhancing acquisition performing in line with our plans.
Supply Chain
During 2021, global shipping capacity was severely constrained because of worldwide port congestion. The drop in capacity caused a substantial increase in the cost of shipping leading to downward pressure on gross margins, albeit we were able to offset this by actions elsewhere. During 2022, there has been an improvement in availability and reliability, which has led to a softening of rates, although these remain substantially higher than historic norms.
The Group has successfully navigated the worst of the shipping and wider supply chain crisis, and, as the situation continues to normalise, we see this providing significant upside to the business in the medium term through the reversing of the downward pressure on margins that it represented and the additional revenue opportunities that have arisen from improved stock availability.
Head Office Investment
In September 2022, we welcomed colleagues back to our head office, Manor Mill, having completed our £2.0m investment to provide a best-in-class working environment and additional capacity for future growth. This investment is an important step in the development of our talent through collaborative working and the interchange of ideas. It is an important part of an overall approach whereby we have created an effective post-pandemic way of working, allowing us to better serve our customers. In addition, we have installed 1,150 roof solar panels, which is a key development for our commitment to Net Zero.
Board Changes
Chris Dent joined the Board on 4 April 2022 as CFO-designate, before taking over as CFO from Graham Screawn when Graham retired from the Board on 1 August 2022. Chris joined the Group from Franchise Brands plc and has extensive public markets experience. We look forward to him playing a key role in Ultimate Products' ambitious plans for the future.
Over the past 12 years, Graham has played an instrumental role in the Group's journey from a privately owned business to a well-established quoted company. We wish him all the very best for his retirement and thank him for the enormous contribution that he has made to the Group's success.
Employee Share Participation
The Group has a history of extending equity participation to the wider colleague base with the objective of increased incentivisation and retention of talent. During the year, share option awards were granted under the PSP Scheme to key managers and under the SAYE Scheme to all qualifying colleagues in the UK who wished to participate. As substantial shareholders, Simon Showman (CEO) and Andrew Gossage (Managing Director) did not participate in the schemes. This allows grants under the PSP Scheme to be made to a wider group of managers including those who are at an earlier stage of their career, thereby helping to secure the Group's future talent pool.
It is intended that the exercise of options will be fully satisfied through ordinary shares held in trust by the EBT. To this end we commenced an EBT share purchase programme with the objective of mitigating the dilutive impact of share option awards and through this improving overall shareholder returns.
Robotics Process Automation
As both a B2C and B2B supplier, our position in the supply chain brings complexity that must be carefully managed to continue to provide the best service to our customers. We see this complexity as an opportunity that represents a significant barrier to entry. We therefore continue to concentrate on developing our systems with a relentless focus on driving productivity through the use of automation. The next step in this journey is the investment in robotics across the entire business to automate hundreds of tasks. Rather than significant extra capital expenditure, the initial investment has taken the form of modest additional headcount increases within our process team. Through this, we expect to see increased productivity and improved accuracy resulting in enhanced operating margins and an even better customer experience.
Petra Brand Update
During 2021, the Group purchased Petra, the German kitchen electrical brand. Founded in Bavaria in 1968, Petra originally specialised in coffee machines before expanding its range into other kitchen electrical products. Market research shows that it remains well known to German consumers, despite the limited brand investment from its previous owner. Since the acquisition, Petra has been refreshed with new branding and a range of kitchen electrical appliances. We are delighted that the brand will be launched with one of Germany's largest hypermarket groups in late 2022, with a substantial initial order received for products including waffle makers, air fryers and multi-meal makers. This exciting development underlines our belief that Petra, with its German heritage and reputation for quality and design, has the potential in time to be a brand of the scale of Salter or Beldray.
Russell Hobbs Licence
Post year end the Group renewed its trademark licence agreement with Spectrum Brands, which grants the Group an exclusive licence to use the "Russell Hobbs" trademark in the United Kingdom, Europe, Australia and New Zealand for non-electrical kitchen and laundry products. The new agreement is on a rolling four-year basis, rather than the previous fixed-term arrangement due to end in March 2023. This significantly reduces the licencing risk for the Group, as the licence will always have four years to run, rather than having a fixed end date.
FINANCIAL REVIEW
| 2022 | 2021 | Change | Change | |||
| £'000 | £'000 | £'000 | % | |||
| Revenue | 154,191 | 136,367 | 17,824 | 13% | ||
| Cost of sales | (115,837) | (106,136) | (9,701) | 9% | ||
| Gross profit | 38,354 | 30,231 | 8,123 | 27% | ||
| Administrative expenses | (19,604) | (16,940) | (2,664) | 16% | ||
| Adjusted EBITDA | 18,750 | 13,291 | 5,459 | 41% | ||
| Depreciation & amortisation | (2,066) | (1,623) | (443) | 27% | ||
| Finance expense | (842) | (518) | (323) | 62% | ||
| Adjusted profit before tax | 15,842 | 11,150 | 4,693 | 42% | ||
| Tax expense | (3,120) | (2,423) | (697) | 29% | ||
| Adjusted profit after tax | 12,722 | 8,727 | 3,995 | 46% | ||
| Share-based payment expense | (403) | (228) | (175) | 77% | ||
| Non-recurring costs | - | (1,414) | 1,414 | -100% | ||
| Tax on adjusting items | 51 | 228 | (177) | -78% | ||
| Statutory profit after tax | 12,370 | 7,313 | 5,057 | 69% | ||
*Adjusted measures are before share-based payment expense and non-recurring items.
Revenue
Overall, Group revenue has increased by 13% to £154.2m in the period (FY21: £136.4m). This has been driven by the inclusion for the full year of the Salter scales business which was acquired during July 2021. In the full year the acquisition added £16.3m (FY21: £0.1m) of revenue to the Group, meaning that underlying revenue grew by 1% from £136.3m to £137.9m.
| Acquisition | Core | 2022 | 2021 | Core change | Total change | |
| £'000 | £'000 | £'000 | £'000 | % | % | |
| Supermarkets | 4,871 | 46,652 | 51,523 | 38,914 | 20% | 32% |
| Discount retailers | 715 | 47,411 | 48,126 | 51,526 | -8% | -7% |
| Online | 5,004 | 20,317 | 25,321 | 20,590 | -1% | 23% |
| Other | 5,757 | 23,463 | 29,221 | 25,336 | -7% | 15% |
| Total Revenue | 16,348 | 137,843 | 154,191 | 136,366 | 1% | 13% |
Overall, the business has seen strong progress with supermarkets, which have now become our largest revenue channel with sales of £51.5m, as we continue to diversify and extend our customer base, especially into European supermarkets. Discounters are down slightly year-on-year, which is partially due to over-stocking by some customers during FY21. Although overall online sales grew by 23% to £25.3m, organically online sales dipped by 1%. This was as a direct result of the shipping crisis which reached its peak during the summer of 2021. As products were more difficult to secure, we prioritised our retail customers, meaning the Group had a sub-optimal level of stock for servicing our online customers, which led to an H122 year-on-year decline of 13%. When the supply chain issues eased and we were able to bring stock levels back to an optimal level, we saw online sales grow 20% year-on-year in H222.
| 2022 £'000 |
2021 £'000 |
Change £'000 |
Change % |
|
| UK | 101,050 | 92,915 | 8,134 | 9% |
| International | 53,141 | 43,451 | 9,690 | 22% |
| Total Revenue | 154,191 | 136,367 | 17,824 | 13% |
In line with our international growth strategy, we have continued to see sales to international customers outpace the growth we have seen domestically within the UK. Growth has been particularly strong in Germany, with sales reaching £19.2m (FY21: £13.8m).
Gross Profit
Gross profit has increased by 27% to £38.4m (FY21: £30.2m), reflecting an increase in gross margin from 22.2% to 24.9%. This increase has been achieved despite a 2.2% headwind in freight costs, as new sales have come from higher gross margin products and channels.
Adjusted EBITDA
Gross profit increased 27%, whereas overheads only increased by 16% to £19.6m (FY21: £16.9m) resulting in a 41% increase in Group EBITDA to a record £18.8m (FY21: £13.3m).
The increase in overheads reflects our investment in building up our teams, with salary costs increasing 9% to £14.6m (FY21: £13.4m). In addition, we have seen costs coming back into the business which dropped significantly in the previous years due to COVID restrictions, such as expenditure on travel and exhibitions.
Adjusted & statutory profit
| 2022 | 2021 | Change | Change | |
| £'000 | £'000 | £'000 | % | |
| Adjusted EBITDA | 18,750 | 13,291 | 5,459 | 41% |
| Depreciation & amortisation | (2,066) | (1,623) | (443) | 27% |
| Finance expense | (842) | (518) | (323) | 62% |
| Adjusted profit before tax | 15,843 | 11,150 | 4,693 | 42% |
| Tax expense | (3,120) | (2,423) | (697) | 29% |
| Adjusted profit after tax | 12,722 | 8,727 | 3,995 | 46% |
| Share-based payment expense | (403) | (228) | (175) | 77% |
| Non-recurring costs | - | (1,414) | 1,414 | -100% |
| Tax on adjusting items | 51 | 228 | (177) | -78% |
| Statutory profit after tax | 12,370 | 7,313 | 5,057 | 69% |
Depreciation and amortisation increased 27% to £2.1m (FY21: £1.6m) as a result of the increase in the depreciation charge following from our £2.0m investment in our head office, which significantly improved working conditions for our people, and helped to ease the transition of our people back to the office post-COVID.
The finance charge has increased 62% to £0.8m (FY21: £0.5m), due to the higher level of net bank debt due to the Salter acquisition, which was financed through £16.7m of debt and £15.0m of new equity. The finance charge also includes interest on capitalised leases as required by IRFS 16.
During 2021 the Group took non-recurring charges of £1.4m, being £0.9m of fees related to the acquisition of Salter, and £0.5m being the repayment of the Government's Coronavirus Job Retention Scheme. There have been no non-recurring charges in the current year.
The tax charge for the period at 21% (2021: 23%) was higher than the statutory rate of 19% due to the higher statutory rate of tax paid on our European foreign branches in Germany and Poland.
As a result, the statutory profit after tax increased by 69% to £12.4m (FY21: £7.3m).
Earnings per share
Although the Group has not issued any new shares within the year, in July 2021 the Group issued 7,142,857 shares at £2.10 to fund the Salter acquisition, meaning that the weighted average number of shares increased from 78,465,192 to 86,353,827, resulting in a 10% effective dilution in the current period.
| FY22 | EPS | FY21 | EPS | |
| £'000 | p | £'000 | p | |
| Adjusted profit after tax / Adjusted EPS | 12,722 | 14.73 | 8,727 | 11.12 |
| Share-based payment expense | (403) | (0.47) | (228) | (0.29) |
| Non-recurring costs | - | - | (1,414) | (1.80) |
| Tax on adjusting items | 51 | 0.06 | 228 | 0.29 |
| Statutory profit after tax / Basic EPS | 12,370 | 14.32 | 7,313 | 9.32 |
As a result, whilst adjusted profit after tax grew by 46% to £12.7m (FY21: £8.7m), adjusted earnings per share increased by 32% to 14.73p (FY21: 11.12p). Basic earnings per share increased by 53% to 14.22p (FY21: 9.32p).
Financing and cash flow
At the year end the Group had a net bank debt/adjusted EBITDA ratio of 1.3x (31 July 2021: 1.4x), which represents net bank debt of £24.3m (31 July 2021: £18.8m). The Group maintains comfortable levels of headroom within its bank facilities, with headroom at 31 July 2022 of £17.8m (31 July 2021: £16.2m). The Group makes use of term loans for longer term funding, such as acquisitions, whereas our invoice discounting and import loan facilities are designed to fund our working capital, and automatically increase in relation to our levels of trading.
| 31 July 2022 | 31 July 2021 | Change | Change | |
| £'000 | £'000 | £'000 | % | |
| Cash | 6,202 | 133 | 6,069 | 4563% |
| Overdraft | (6,020) | - | (6,020) | - |
| Term loan | (8,000) | (10,000) | 2,000 | -20% |
| RCF | (2,217) | (2,983) | 766 | -26% |
| Invoicing discounting | (6,197) | (3,290) | (2,907) | 88% |
| Import loans | (8,179) | (2,759) | (5,420) | 196% |
| Loan fee | 155 | 234 | (79) | -34% |
| Cash | 6,202 | 133 | 6,069 | 4563% |
The Group generated cash from operating activities of £5.8m (FY21: £11.7m), as cash has been used to fund an increase in our working capital balances, especially our stock balances, which were at a sub-optimal level during the shipping crisis last year, and consequently held back sales in the first quarter.
| 31 July 2022 | 31 July 2021 | Change | 2022 | 2021 | ||
| £'000 | £'000 | £'000 | WCD | WCD | ||
| Inventory | 29,162 | 21,674 | 7,488 | 74 | 59 | |
| Debtors | 32,194 | 26,544 | 5,650 | 60 | 57 | |
| Creditors | (29,644) | (29,451) | (193) | 65 | 70 | |
| Total working capital | 31,712 | 18,767 | 12,945 |
Dividend
In line with our established dividend policy of distributing 50% of the Group's adjusted profit after tax, the Board is pleased to propose a final dividend of 4.82 pence per share (FY21: 3.33 pence per share). This takes the total dividend for the year to 7.12 pence per share (FY21: 5.02 pence per share), an increase of 42%.
Subject to shareholder approval at the AGM on 16 December 2022, the final dividend will be paid on 27 January 2023 to shareholders on the register at the close of business on 6 January 2023 (ex dividend date 5 January 2023).
| James McCarthy | Simon Showman |
| Chairman | Chief Executive Officer |
Consolidated Income Statement
For the year ended 31 July 2022
| 2022 | 2021 | |
| £'000 | £'000 | |
| Revenue | 154,191 | 136,367 |
| Cost of sales | (115,837) | (106,136) |
| Gross profit | 38,354 | 30,231 |
| Adjusted earnings before interest, tax, depreciation, amortisation, share-based payments & non‑recurring items ("Underlying EBITDA") | 18,750 | 13,291 |
| Depreciation | (2,044) | (1,607) |
| Amortisation of intangibles | (22) | (16) |
| Share-based payment expense | (403) | (228) |
| Non-recurring items | - | (1,414) |
| Total administrative expenses | (22,073) | (20,205) |
| Operating profit | 16,281 | 10,026 |
| Finance expense | (842) | (518) |
| Profit before tax | 15,439 | 9,508 |
| Tax expense | (3,069) | (2,195) |
| Profit for the year attributable to equity holders of the Company | 12,370 | 7,313 |
| All amounts relate to continuing operations | ||
| Earnings per share | ||
| Basic | 14.3 | 9.3 |
| Diluted | 13.9 | 9.1 |
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2022
| 2022 £'000s |
2021 £'000s |
|
| Profit for the year | 12,700 | 7,313 |
| Items that may subsequently be reclassified to the income statement | ||
| Fair value movements on cash flow hedging instruments | 3,329 | (162) |
| Hedging instruments recycled through the income statement at the end of hedging relationships | 162 | 961 |
| Items that will not subsequently be reclassified to the income statement | ||
| Foreign current translation | 11 | (13) |
| Other comprehensive income | 3,412 | 786 |
| Total comprehensive income for the year attributable to the equity holders of the Company | 15,782 | 8,099 |
Consolidated Statement of Financial Position
At 31 July
| 2022 £'000 |
2021 £'000 |
|||
| Assets | ||||
| Intangible assets | 37,025 | 36,929 | ||
| Property, plant and equipment | 6,369 | 5,719 | ||
| Total non-current assets | 43,394 | 42,648 | ||
| Inventories | 29,162 | 21,674 | ||
| Trade and other receivables | 32,194 | 26,544 | ||
| Derivative financial instruments | 4,142 | 384 | ||
| Current tax asset | - | 62 | ||
| Cash and cash equivalents | 6,202 | 133 | ||
| Total current assets | 71,700 | 48,797 | ||
| Total assets | 115,094 | 91,445 | ||
| Liabilities | ||||
| Trade and other payables | (29,644) | (29,451) | ||
| Derivative financial instruments | - | (220) | ||
| Current tax | (170) | - | ||
| Borrowings | (22,314) | (7,951) | ||
| Lease liabilities | (817) | (771) | ||
| Deferred consideration | (987) | (990) | ||
| Total current liabilities | (53,932) | (39,383) | ||
| Net current assets | 17,768 | 9,414 | ||
| Borrowings | (8,144) | (10,847) | ||
| Deferred tax | (7,585) | (6,147) | ||
| Deferred consideration | - | (983) | ||
| Lease liabilities | (1,940) | (2,030) | ||
| Total non-current liabilities | (17,669) | (20,007) | ||
| Total liabilities | (71,601) | (59,390) | ||
| Net assets | 43,493 | 32,055 | ||
| Equity | ||||
| Share capital | 223 | 223 | ||
| Share premium | 14,334 | 14,334 | ||
| Employee Benefit Trust reserve | (1,571) | (2,152) | ||
| Share-based payment reserve | 1,166 | 1,024 | ||
| Hedging reserve | 3,239 | (162) | ||
| Retained earnings | 26,102 | 18,788 | ||
| Equity attributable to owners of the Group | 43,493 | 32,055 | ||
Consolidated Statement of Changes in Equity
For the year ended 31 July
| Share capital £'000 |
Share premium £'000 |
EBT reserve £'000 |
Share- based payment reserve £'000 |
Hedging reserve £'000 |
Retained earnings £'000 |
Total Equity £'000 |
|
| As at 1 August 2020 | 205 | 2 | (2,155) | 796 | (961) | 15,527 | 13,414 |
| Profit for the year | - | - | - | - | - | 7,313 | 7,313 |
| Foreign currency retranslation | - | - | - | - | - | (13) | (13) |
| Cash flow hedging movement | - | - | - | - | 799 | - | 799 |
| Total comprehensive income for the year | - | - | - | - | 799 | 7,300 | 8,099 |
| Transactions with shareholders: | |||||||
| Ordinary shares issued | 18 | 14,332 | - | - | - | - | 14,350 |
| Dividends paid | - | - | - | - | - | (4,409) | (4,409) |
| Share-based payments | - | - | - | 228 | - | 370 | 598 |
| Purchase/Sale of shares by the EBT | - | - | 3 | - | - | - | 3 |
| As at 31 July 2021 | 223 | 14,334 | (2,152) | 1,024 | (162) | 18,788 | 32,055 |
| Profit for the year | - | - | - | - | - | 12,370 | 12,370 |
| Foreign currency retranslation | - | - | - | - | - | 11 | 11 |
| Cash flow hedging movement | - | - | - | - | 3,401 | - | 3,401 |
| Total comprehensive income for the year | - | - | - | - | 3,401 | 12,381 | 15,782 |
| Transactions with shareholders: | |||||||
| Dividends paid | - | - | - | - | - | (4,830) | (4,830) |
| Share-based payments | - | - | - | 142 | - | (29) | 113 |
| Purchase/Sale of shares by the EBT | - | - | 581 | - | - | (208) | 373 |
| As at 31 July 2022 | 223 | 14,334 | (1,571) | 1,166 | 3,239 | 26,102 | 43,493 |
Consolidated Statement of Cash Flows
For the year ended 31 July
| 2022 £'000 |
2021 £'000 |
||||
| Net cash flow from operating activities | |||||
| Profit for the year | 12,370 | 7,313 | |||
| Adjustments for: | |||||
| Finance costs | 842 | 518 | |||
| Income tax expense | 3,069 | 2,195 | |||
| Depreciation | 2,044 | 1,607 | |||
| Amortisation | 22 | 16 | |||
| Derivative financial instruments | 274 | (678) | |||
| Share-based payments | 403 | 228 | |||
| Income taxes paid | (2,345) | (2,566) | |||
| Working capital adjustments | |||||
| (Increase) in inventories | (7,721) | (368) | |||
| (Increase) in trade and other receivables | (5,649) | (8,091) | |||
| Increase in trade and other payables | 1,221 | 9,031 | |||
| Net cash from operations | 4,530 | 9,205 | |||
| Cash flows used in investing activities | |||||
| Acquisition of subsidiary | (1,960) | (30,578) | |||
| Purchase of intangible assets | - | (111) | |||
| Purchase of property, plant and equipment | (1,843) | (2,260) | |||
| Net cash used in investing activities | (3,803) | (32,949) | |||
| Cash flows used in financing activities | |||||
| Sale of own shares | 373 | 2 | |||
| Proceeds from borrowings | 14,347 | 16,048 | |||
| Repayment of borrowings | (2,766) | (1,144) | |||
| Principal paid on lease obligations | (936) | (713) | |||
| Proceeds from issue of new shares (net of costs) | - | 14,350 | |||
| Debt issue costs paid | - | (245) | |||
| Dividends paid | (4,830) | (4,409) | |||
| Interest paid | (850) | (335) | |||
| Net cash generated by finance activities | 5,338 | 23,554 | |||
| Net increase in cash and cash equivalents | 6,065 | (190) | |||
| Exchange gains on cash and cash equivalents | 4 | (5) | |||
| Cash and cash equivalents brought forward | 133 | 329 | |||
| Cash and cash equivalents carried forward | 6,202 | 133 | |||
Reconciliation of cash flow to the Group net debt position
| Overdraft £'000 | Term Loan £'000 | RCF £'000 |
Invoice discounting £'000s | Import loans £'000s | Loan Fees £'000 |
Total liabilities from financing activities £'000 | Cash £'000 |
Net bank debt £'000 |
||
| At 1 August 2021 | - | - | (225) | - | (3,903) | 136 | (3,992) | 329 | (3,663) | |
| Financing cash flows | - | (10,000) | (2,758) | (3,290) | 1,144 | 245 | (14,659) | - | (14,659) | |
| Other cash flows | - | - | - | - | - | - | - | (196) | (196) | |
| Other changes | - | - | - | - | - | (147) | (147) | - | (147) | |
| At 31 July 2021 | - | (10,000) | (2,983) | (3,290) | (2,759) | 234 | (18,798) | 133 | (18,665) | |
| Financing cash flows | (6,020) | 2,000 | 766 | (2,907) | (5,420) | - | (11,581) | 6,020 | (5,561) | |
| Other cash flows | - | - | - | - | - | - | - | 49 | 49 | |
| Other changes | - | - | - | - | - | (79) | (79) | - | (79) | |
| At 31 July 2022 | (6,020) | (8,000) | (2,217) | (6,197) | (8,179) | 155 | (30,458) | 6,202 | (24,256) | |
NOTES TO THE FINANCIAL STATEMENTS
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 England and Wales. The address of its registered office is UP Global Sourcing Holdings plc, Manor Mill, Victoria Street, Chadderton, Oldham OL9 0DD.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 July 2022 or 2021 but is derived from those accounts. Statutory accounts for UP Global Sourcing Holdings plc for the year ended 31 July 2021 have been delivered to the Registrar of Companies and those for the year ended 31 July 2022 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports. Their reports for the year ended 31 July 2022 and 31 July 2021 did not contain statements under s498 (2) or (3) of the Companies Act 2006.
2. BASIS OF PREPARATION
The consolidated Group Financial Statements have been prepared in accordance with UK adopted international financial reporting standards. The consolidated Group Financial Statements and Company Financial Statements are presented in Sterling and rounded to the nearest thousand unless otherwise indicated. The Financial Statements are prepared on the historical cost basis, except for certain financial instruments and share-based payments that have been measured at fair value. The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and have not presented an income statement or a statement of comprehensive income for the Company alone.
Going Concern Basis
The Directors have adopted the going concern basis in preparing these accounts after assessing the principal risks and having considered the impact of a severe but plausible downside scenario, including a further Covid restrictions, supply chain issues and demand led falls in revenue due to the cost of living crisis. The Directors have considered a number of impacts on sales, profits and cash flows, taking into account experiences learnt from previous business interruptions. The Directors have considered the resilience of the Group in severe but plausible scenarios, taking account of its current position and prospects, the principal risks facing the business, how these are managed and the impact that they would have on the forecast financial position. In assessing whether the Group could withstand such negative impacts, the Board has considered cash flow, impact on debt covenants and headroom against its current borrowing facilities. At the year end the Group had a net bank debt/adjusted EBITDA ratio of 1.3x (31 July 2021: 1.4x), which represents net bank debt of £24.3m (2021: £18.8m). The Group maintains comfortable levels of headroom within its bank facilities, with headroom at 31 July 2022 of £17.8m (31 July 2021: £16.2m). The Group's banking facilities comprise a term loan of £8.5m (FY21: £10.0m), a revolving credit facility of £8.2m (FY21: £8.2m), an import loan facility of £9.0m (FY21: £8.7m), and an invoice discounting facility with a total limit of £23.5m (FY21: £23.5m).
The Group's projections show that the Group will be able to operate within its existing banking facilities and covenants. Therefore, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of these Financial Statements and, as a result, they have applied the going concern principle in preparing its consolidated and Company Financial Statements.
3. REVENUE
| Geographical split by location: | 2022 £'000 |
2021 £'000 |
|
| United Kingdom | 101,050 | 92,916 | |
| Germany | 19,231 | 13,882 | |
| Rest of Europe | 29,700 | 27,720 | |
| Rest of the World | 4,210 | 1,849 | |
| Total | 154,191 | 136,367 | |
| International sales | 53,141 | 43,451 | |
| Percentage of total revenue | 34.5% | 31.9% |
| Analysis of revenue by brand: | 2022 £'000 |
2021 £'000 |
|
| Salter | 48,080 | 28,379 | |
| Beldray | 39,950 | 42,374 | |
| Russell Hobbs (licensed) | 20,165 | 16,840 | |
| Progress | 8,287 | 6,683 | |
| Kleeneze | 2,835 | 2,136 | |
| Premier brands | 119,317 | 96,412 | |
| Other proprietorial brands | 17,032 | 24,357 | |
| Own label and other | 17,842 | 15,599 | |
| Total | 154,191 | 136,367 |
| Analysis of revenue by product: | 2022 £'000 |
2021 £'000 |
|
| Small domestic appliances | 57,032 | 48,715 | |
| Housewares | 54,539 | 35,898 | |
| Laundry | 14,799 | 17,216 | |
| Audio | 5,870 | 6,937 | |
| Heating and cooling | 12,907 | 15,457 | |
| Others | 9,044 | 12,144 | |
| Total | 154,191 | 136,367 |
| Analysis of revenue by sales channel: | 2022 £'000 |
2021 £'000 |
|
| Supermarkets | 51,523 | 38,914 | |
| Discount retailers | 48,126 | 51,526 | |
| Online channels | 25,321 | 20,590 | |
| Multiple-store retailers | 17,312 | 15,578 | |
| Other | 11,909 | 9,757 | |
| Total | 154,191 | 136,367 |
4. FINANCE COSTS
| 2022 £'000 |
2021 £'000 |
||
| Interest on bank loans and overdrafts | 704 | 412 | |
| Interest on lease liabilities | 74 | 82 | |
| Foreign exchange in respect of lease liabilities (net of hedging actions) | (11) | (10) | |
| Other interest payable and similar charges | 75 | 34 | |
| Total finance cost | 842 | 518 |
5. TAXATION
| 2022 £'000 |
2021 £'000 |
||
| Current period - UK corporation tax | 2,390 | 1,591 | |
| Adjustments in respect of prior periods | (281) | (27) | |
| Foreign current tax expense | 467 | 641 | |
| Total current tax | 2,576 | 2,205 | |
| Origination and reversal of temporary differences | 351 | 43 | |
| Adjustments in respect of prior periods | 81 | (37) | |
| Impact of change in tax rate | 61 | (16) | |
| Total deferred tax | 493 | (10) | |
| Total tax charge | 3,069 | 2,195 |
Factors effecting the tax charge
The tax assessed for the current and previous years period is higher than the standard rate of corporation tax in the UK. The tax charge for the year can be reconciled to the profit per the income statement as follows:
| 2022 £'000 |
2021 £'000 |
||
| Profit before tax | 15,439 | 9,508 | |
| Tax charge at 19.0% (2021 - 19.0 %) | 2,933 | 1,807 | |
| Adjustments relating to underlying items: | |||
| Adjustment to tax charge in respect of prior periods | (200) | (9) | |
| Effects of expenses not deductible for tax purposes | (9) | 11 | |
| Impact of overseas tax rates | 231 | 299 | |
| Effect of difference in corporation tax and deferred tax rates | 88 | 2 | |
| Adjustments relating to non-underlying items: | |||
| Adjustment to tax charge in respect of prior periods | - | (55) | |
| Effects of expenses not deductible for tax purposes | 77 | 224 | |
| Differences arising on tax treatment of shares | (178) | (33) | |
| Effect of difference in corporation tax and deferred tax rates | 127 | (51) | |
| Total tax expense | 3,069 | 2,195 |
Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the year. In the 3 March 2021 Budget it was announced that the UK tax rate will increase to 25% from 1 April 2023. Deferred tax balances at the year-end have been measured at 25%.
6. 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. 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 upon the following:
| 2022 £'000 |
2021 £'000 |
||
| Profit for the year | 12,370 | 7,313 | |
| Number | Number | ||
| Weighted average number of shares in issue | 89,312,457 | 82,521,850 | |
| Less shares held by the UPGS EBT | (2,958,630) | (4,056,659) | |
| Weighted average number of shares - basic | 86,353,827 | 78,465,191 | |
| Share options | 2,580,825 | 2,039,490 | |
| Weighted average number of shares - diluted | 88,934,652 | 80,504,681 | |
| Pence | Pence | ||
| Earnings per share - basic | 14.3 | 9.3 | |
| Earnings per share - diluted | 13.9 | 9.1 |
7. DIVIDENDS
| 2022 £'000 |
2021 £'000 |
||
| Interim dividend paid in respect of the previous year | - | 906 | |
| Final dividend paid in respect of the previous year | 2,844 | 2,183 | |
| Interim declared and paid | 1,986 | 1,320 | |
| 4,830 | 4,409 | ||
| Per share | Pence | Pence | |
| Interim dividend paid in respect of the previous year | - | 1.16 | |
| Final dividend paid in respect of the previous year | 3.33 | 2.795 | |
| Interim declared and paid | 2.30 | 1.69 | |
| 5.63 | 5.645 |
The Directors propose a final dividend of 4.82p per share in respect of the year ended 31 July 2022.
8. BANK BORROWINGS
| 2022 £'000 |
2021 £'000 |
|||||
| Overdrafts | 6,020 | - | ||||
| Invoice discounting | 6,197 | 3,290 | ||||
| Import loans | 8,179 | 2,759 | ||||
| Term loan | 2,000 | 2,000 | ||||
| Unamortised debt issue costs | (82) | (98) | ||||
| Current | 22,314 | 7,951 | ||||
| Revolving credit facility | 2,217 | 2,983 | ||||
| Term loan | 6,000 | 8,000 | ||||
| Unamortised debt issue costs | (73) | (136) | ||||
| Non-current | 8,144 | 10,847 | ||||
| Total borrowings | 30,458 | 18,798 | ||||
| Contractual maturities: | ||||||
| In less than one year | 22,396 | 8,049 | ||||
| Between one and two years | 2,000 | 2,000 | ||||
| Between three and four years | 6,217 | 8,983 | ||||
| Less: Unamortised debt issue costs | (155) | (234) | ||||
| Total borrowings | 30,458 | 18,798 | ||||
Current bank borrowings include a gross amount of £6.2m (2021: £3.3m) due under invoice discounting facilities, which are secured by an assignment of and fixed charge over the trade debtors of UP Global Sourcing UK Limited. Furthermore, current bank borrowings include an amount of £8.2m (2021: £2.8m) due under an import loan facility, which is secured by a general letter of pledge providing security over the stock purchases financed under that facility. Bank borrowings are secured in total by a fixed and floating charge over the assets of the Group. Total bank borrowings are net of £155,00 (2021: £234,000) of fees which are being amortised over the length of the relevant facilities. Interest on bank borrowings is payable at a margin ranging between 1.65% and 2.25% above the relevant bank reference rates. As the liabilities are at a floating rate and there has been no change in the creditworthiness of either of the counterparties, the Directors are of the view that the carrying amount approximates to the fair value.
9. FINANCIAL INSTRUMENTS
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
| 2022 £'000 |
2021 £'000 |
|
| Trade receivables- held at amortised cost | 30,643 | 25,372 |
| Derivative financial instruments - assets subject to hedge accounting | 3,899 | 47 |
| Derivative financial instruments - assets not subject to hedge accounting | 243 | 337 |
| Trade and other payables | (28,095) | (27,921) |
| Derivative financial instruments - liabilities subject to hedge accounting | - | (220) |
| Derivative financial instruments - liabilities not subject to hedge accounting | - | - |
| Borrowings | (30,458) | (18,798) |
| Lease liabilities | (2,757) | (2,801) |
| Deferred consideration | (987) | (1,973) |
| Cash and cash equivalents- held at amortised cost | 6,202 | 133 |
Financial Liabilities
The Group held the following financial liabilities, classified as other financial liabilities at amortised cost:
| 2022 £'000 |
2021 £'000 |
|
| Trade payables Borrowings Other payables |
20,662 30,458 7,433 |
19,293 18,798 8,628 |
| Lease liabilities Deferred consideration |
2,757 987 |
2,801 1,973 |
| 62,297 | 51,493 |
Derivative Financial Instruments
The Group held the following derivative financial instruments as financial assets/(liabilities), classified as fair value through profit and loss on initial recognition:
| 2022 £'000 |
2021 £'000 |
|
| Derivative financial instruments - assets Derivative financial instruments - liabilities |
4,142 - |
384 (220) |
| 4,142 | 164 |
The above items comprise the following under the Group's hedging arrangements:
| 2022 £'000 |
2021 £'000 |
|||
| Foreign currency contracts | 3,524 | 97 | ||
| Interest rate swaps | 261 | 47 | ||
| Interest rate caps | 357 | 20 | ||
| 4,142 | 164 |
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 July 2022, the Group was committed to:
| 2022 | 2022 | 2021 | 2021 | |
| Buy | Sell | Buy | Sell | |
| USD$'000 | 57,050 | - | 54,875 | - |
| €'000 | - | 23,200 | - | 23,575 |
| CAD$'000 | - | 60 | - | 140 |
| PLN'000 | - | 5,500 | - | 2,800 |
| CNY'000 | 2,459 | - | 4,399 | - |
At 31 July 2022 & 2021, all the outstanding USD, EUR, PLN and CAD contracts mature within 12 months of the period end. The CNY contracts, which are held to hedge a lease commitment, mature over the length of that lease ending in August 2023. The forward currency contracts are measured at fair value using the relevant exchange rates for GBP:USD, GBP:EUR, GBP:CAD, GBP:PLN and GBP:CNY. The fair value of the contracts at 31 July 2022 is an asset of £3.5m (2021: £97,000).
Forward currency contracts are valued using level 2 inputs. The valuations are calculated using the period end forward 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 upon the changes in the future cash flows, based upon the change in value of the underlying derivative. All of the forward contracts to buy US Dollars and some of those to sell Euros meet the conditions for hedge accounting.
The fair value of forward contracts that are effective in offsetting the exchange rate risk is a liability of £3.4m (2021: £220,000), which has been recognised in other comprehensive income. This will be released to profit or loss at the end of the term of the forward contracts as they expire, being £3.4m within 12 months (2021: £220,000 within 12 months). The cash flows in respect of the forward contracts will occur over the course of the next 12 months
Interest rate swaps and interest rate caps
The Group has entered into interest rate swaps and interest rate caps to protect the exposure to interest rate movements on the various elements of the Group's banking facility. As at 31 July 2022, protection was in place over an aggregate principal of £18.3m (2021: £15.6m). At 31 July 2022, the Group had borrowings of £6.3m (2021: £3.4m) not subject to interest rate protection. All interest rate swaps meet the conditions for hedge accounting.
Interest rate swaps and caps are valued using level 2 inputs. The valuations are based upon the notional value of the swaps and caps, the current available market borrowing rate and the swapped or capped interest rate respectively. The valuations are based upon the current valuation of the present saving or cost of the future cash flow differences, based upon the difference between the respective swapped and capped interest rates contracts and the expected interest rate as per the lending agreement.
The fair value of variable to fixed interest rate swaps that are effective in offsetting the variable interest rate risk on variable rate debt is an asset of £261,000 (2021: £47,000 ), which has been recognised in other comprehensive income and will be released to profit or loss over the term of the swap agreements. The agreements expire between 31 December 2022 and 28 February 2025. The cash flows in respect of the swaps occur monthly over the effective lifetime of the swaps. The fair value of the interest rate caps was an asset of £357,000 (2021: £20,000).
Reconciliation of the financial instruments to the Statement of Financial Position
| Group | 2022 £'000 |
2021 £'000 |
|
| Trade receivables | 30,643 | 25,372 | |
| Prepayments and other receivables not classified as financial instruments | 1,551 | 1,172 | |
| Trade and other receivables | 32,194 | 26,544 |
| Group | 2022 £'000 |
2021 £'000 |
|
| Trade and other payables | 28,095 | 27,921 | |
| Other taxes and social security not classified as financial instruments | 1,549 | 1,530 | |
| Trade and other payables | 29,644 | 29,451 |
The Group's activities expose it to certain financial risks: market risk, credit risk and liquidity risk. The overall risk management programme focuses upon the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out by the Directors, who identify and evaluate financial risks in close cooperation with key members of staff.
a) Market risk: Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign exchange rates.
b) Credit risk: Credit risk is the financial loss to the Group if a customer or counterparty to financial instruments fails to meet its contractual obligation. Credit risk arises from the Group's cash and cash equivalents and receivables balances. Accordingly, the possibility of material loss arising in the event of non-performance by counterparties is considered to be unlikely. Cash at bank is held with banks with high-quality external credit rating.
c) Liquidity risk: Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining sufficient cash. The Directors monitor rolling forecasts of the Group's liquidity and cash and cash equivalents based upon expected cash flow.
Market risk
The Group's interest-bearing liabilities relate to its variable rate banking facilities. The Group has a policy of maintaining a portion of its banking facilities under the protection of interest rate swaps and caps to ensure the certainty of future interest cash flows and offering protection against market-driven interest rate movements. The Group's market risk relating to foreign currency exchange rates is commented on below.
Credit risk
The Group's sales are primarily made with credit terms, exposing the Group to the risk of non-payment by customers. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed regularly by the Board. In addition, the Group maintains a suitable level of credit insurance against its debtor book. Over the course of FY22, on average, over 98% of its trade receivables were insured. Sales to uninsured accounts are monitored closely with weekly forecasts prepared and reviewed with appropriate actions to manage the exposure to credit risk.
Liquidity risk management
The Group is funded by external banking facilities provided by HSBC. Within these facilities, the Group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the Group has sufficient available funds for operations and planned expansions. Cash flow requirements are monitored by short and long-term forecasts, with headroom against facility limits and banking covenants assessed regularly.
Foreign currency risk management
The Group's activities expose it to the financial risks of changes in foreign currency exchange rates. The Group's exposure to foreign currency risk is partially hedged by virtue of invoicing a proportion of its turnover in US Dollars and Euros. When necessary, the Group uses foreign exchange forward contracts to further mitigate this exposure. The following is a note of the financial instruments denominated at each period end in US Dollars:
| 2022 | 2021 | ||||||
| Group | $'000 | $'000 | |||||
| Trade receivables | 11,276 | 15,679 | |||||
| Other receivables | 990 | 729 | |||||
| Net cash, overdrafts and revolving facilities | 7,364 | 34 | |||||
| Import loans | (9,965) | (3,836) | |||||
| Invoice discounting | 75 | (910) | |||||
| Trade payables | (21,310) | (19,984) | |||||
| (11,570) | (8,288) | ||||||
The effect of a 20% strengthening of Sterling at 31 July 2022 on the foreign denominated financial instruments carried at that date would, all variables held constant, have resulted in an increase to total comprehensive income for the period and an increase to net assets of £1.3m (2021: £0.8m). A 20% weakening of the exchange rate, on the same basis, would have resulted in a decrease to total comprehensive income and a decrease to net assets of £1.9m (2021: £1.2m).
The following is a note of the financial instruments denominated at each period end in Euros:
| 2022 | 2021 | |||||
| Group | €'000 | €'000 | ||||
| Trade receivables | 9,345 | 7,948 | ||||
| Net cash, overdrafts and revolving facilities | (125) | (24) | ||||
| Invoice discounting | (5,617) | (3,091) | ||||
| Trade payables | (612) | (235) | ||||
| Lease liabilities | (810) | (283) | ||||
| 2,181 | 4,315 |
The effect of a 20% strengthening of Sterling at 31 July 2022 on the foreign denominated financial instruments carried at that date would, all variables held constant, have resulted in a decrease to total comprehensive income for the period and a decrease to net assets of £262,000 (2021: £497,000). A 20% weakening of the exchange rate, on the same basis, would have resulted in an increase to total comprehensive income and an increase to net assets of £393,000 (2021: £746,000).
The Directors have shown a sensitivity movement of 20% as, due to the current uncertainty given the current economic climate, this is deemed to be the largest potential movement in currency that could occur in the near future. Financial instruments denominated in Canadian Dollars and Polish Zloty are not significant and therefore do not pose a significant foreign exchange exposure.
Capital risk management
The Group is funded by equity and loans. The Group's objective when managing capital is to maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long-term. The capital structure of the Group is managed and adjusted to reflect changes in economic conditions. The Group funds its expenditure on commitments from existing cash and cash equivalent balances, primarily received from existing bank facilities and profits generated. There are no externally imposed capital requirements. Financing decisions are made based upon forecasts of the expected timing and level of capital and operating expenditure required to meet the Group's commitments and development plans.
Fair value estimation
The carrying value less impairment provision of trade receivables and payables are assumed to approximate to their fair values because of the short-term nature of such assets and the effect of discounting liabilities is negligible. The Group is exposed to the risks that arise from its financial instruments. The policies for managing those risks and the methods to measure them are described earlier in this note.
Maturity of financial assets and liabilities
All of the Group's non-derivative financial liabilities and its financial assets at the reporting date are either payable or receivable within one year, except for borrowings.
10. ANNUAL REPORT AND ACCOUNTS
The annual report and accounts for the year ended 31 July 2021 will be posted to shareholders in the week commencing 14 November 2022 and will be available immediately thereafter on the Company's website at https://www.upgs.com/investor-relations/financial-reports/
11. ANNUAL GENERAL MEETING
The Annual General Meeting of UP Global Sourcing Holdings plc will be held on 16 December 2022 at the Company's registered office at Manor Mill, Victoria Street, Chadderton, Oldham, OL9 0DD, notice of which will be sent to shareholders with the annual report and accounts in the week commencing 14 November 2022.
12. PUBLICATION ON WEBSITE
A copy of this announcement and an investor presentation of these results are available on UP's website at https://www.upgs.com/investor-relations/.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
FR UUSWRUNUARAA