Paul Scott Interviews Andy Gossage, MD Of UP Global Sourcing (UPGS)

3rd Nov '22 by Paul Scott

13 comments 1176 reads

UP Global Sourcing Holdings (LON:UPGS)

I reviewed results for FY 7/2022 here in the SCVR for 3 Nov 2022. It all looked good, so I asked management to do a Q&A session at very short notice, and MD (and 9% shareholder) Andy Gossage kindly rearranged some meetings to fit me in.

I've spoken to him before, just when covid was starting, audio is here from Feb 2020. Back then, his thoughts & experience of supply chains, sourcing from China were really insightful, and of wide read-across. As he predicted at the time, UPGS was able to navigate the massive challenges of the pandemic very well.

Hence today seemed like an ideal time to have another catch up. He didn't disappoint, with an interview full of insights again.
Here is today's audio recording. Even if you're not interested in UPGS shares, I think this interview is essential listening for a broader view of supply chains & the outlook into 2023.

Exclusively for Stockopedia subscribers (please don't copy it anywhere else!) here is a transcript I've typed up for you. Hopefully it should be obvious who is saying what below.

We last spoke in Feb 2020 here just as the pandemic was starting, I remember your insights were fascinating.
Yes it feels like a lifetime ago!
Disclaimers - not advice or recommendation, not charging a fee, and I don’t hold any personally.
Congratulations on strong results for FY 7/2022, in line with expectations.
Brief description of the business please.
We’re a consumer products business, best known for the Salter brand (scales), also cookware, kitchen & electrical. Beldray (150 years old). We sell beautiful products, mass market, with products that are high standard, but aesthetically pleasing, and affordable. HQ in Oldham, plus Cologne office/showroom, and a large sourcing office in China. Kitchen electrical, floorcare, laundry, Kleeneze, Progress (bakeware), and Petra (German coffee maker brand, just relaunched, going well).
Sainsburys, Howdens Joinery, and you, all reported today, saying that trading is going well. So where is this consumer downturn?!
Cost of living crisis is reducing household spending. Trade off between food & non-food. We’ve seen this before - e.g. after Brexit, with smaller baskets, and people prioritise food, with general merchandise suffering. But it is a huge market, and there are always opportunities - e.g. low energy products are now in strong demand. Broad assortment of 3,000 products, so there’s always something…

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rhomboid1

4th Nov '22

Fantastic insights Paul…v many thanks for typing it all out

Colin the Abraham

Excellent. This kind of stuff justifies the Stockopedia subscription fee all by itself!

jonthetourist

Thanks for this Paul. Andy is both likeable and very impressive, I think.

Lampoil1960

Excellent Paul,

Read this whilst listening to the interview.

Thanks for both.

Trident

Brilliant! Thanks to Paul & Andy. I think UPGS has been underestimated, but then I hold so maybe I am biased.

RichardK

Thanks for your efforts Paul. I hold, and find your interview valuable and reassuring.

Richard

WarrantStar

Hi Paul. More great work. Posted at 11.49 pm. Please don't burn yourself out.

I was very surprised to see that they have 3000 products. I guess that some of this is because of different colours of the same underlying item. And different plugs for different markets. And different languages on the packages for different countries. But even so, their product range is very wide. I would have thought that with that width of range there must be quite a few SKUs that are very small sellers and not really worth bothering with.

JamesS

Just want to second the praise below, great work Paul. Look forward to giving it a proper read after work

Threepeat

many thanks for this, Paul.

There is a lot of useful info here especially about freight costs. I have to say when I saw the webinars last year the presenters struck me as straightforward, straight taking guys who knew exactly what they were doing. Results so far proves this. A biggish holding for me. Undervalued

BnB

A good company with strong management that understands its markets well. BUT I’m going to take a contrary view to those who find it undervalued at these levels. Results recently announced are backward-looking and we have not even entered the inevitable recession yet. I would be a seller at these levels - indeed I was when it peaked out near here in August. Selling household goods is going to get a lot tougher next year and the company sells neither essentials nor has any real moat or pricing power, no matter the skills of management. Indeed, even if performance surprises to the upside, I think the flood of downgrades in the sector will drag on the SP. Somewhat oxymoronically therefore, my conclusion is cheap yes, undervalued no.

Paul Scott

Hi WarrantStar,

Yes just to clarify, he did say 3,000 SKUs, but I just simplified it to 3,000 products, as I wasn't sure people would all know what SKUs are, which on reflection was probably a minor mistake.

Regards, Paul.

Fegger

Excellent interview with valuable insights into the company and of wider application

mojomogoz

Thanks Paul

Note that laundry has 'underperformed' recently after being a category that always pushed ahead for them. Perhaps it links more to discounters and their pullback from stocking ( B&M European Value Retail SA (LON:BME) certainly a big carrier of Beldray)...but maybe it links to containers. Their laundry goods have many items that are mix of always low value and sometimes bulky-ish (baskets, mops, etc) and that may have made pricing very unattractive for them?

BNB - you might be right. I don't feel able to call it near term. However, IMO the upside long term growth is very high and I'd argue that they have performed well through all the covid shenanigans and now the doom as their underlying growth trend/potential is actually higher than we've seen and the bad conditions have suppressed it. Here's a link to an old note where I suggest a growth inflection seems to be lurking under the headline nos.

https://www.stockopedia.com/co...

Further counter arguments:

they're really only breaking into Germany now (several years in the making and delayed by covid) and there's a chance of a 'virtuous stocking' cycle like they enjoyed over the pre and post IPO period through the rise of the discounters (B&M opening shops at furious pace and filling them up...so UPGS's little piece of them kept growing)
fast moving/reacting discount sector may have a relatively good time and be in re-stock mode so seeing a bounce back in some UPGS orders
Salter is clearly a brand they can push and grow plus increases breadth of access they have (for example they now supply John Lewis!)
its possible they had been a bit wary of pushing Russell Hobbs before securing stronger terms with them (4yr rolling license),
Progress and Kleeneze are new brands that are showing high development for them (and we've seen them accelerate growth in other brands well as they get traction)
little luxuries are good for hard times (...I know a new kettle isn't the same as lipstick but sort of same vibe re little luxuries).

In my experience, after the post IPO hiccup (where I bought - a sort of stocking indigestion from their customers that mgt didn't foresee) mgt have tended to guide conservatively...and also have more diversified and stable customer base. Therefore, I take their 6% revenue growth forecast as something they feel quite strongly about...and the run up to Xmas/NY is an important time with regard to how their customers are acting etc.

IMO if one believes in UPGS then hold at least - visibility is hard and there is always a chance of sudden stop in orders that feeds through fast to UPGS (but note that will unwind working capital and debt)...but a surprise on H1 trading could see a re-rating up into the double digit pe. I believe that over time a combo of growth and ROCE (good as they growth brands...short term hit as they bought Salter) will see UPGS trend to a teen multiple particularly as becomes bigger

Paul Scott interviews Andy Gossage, MD of UP Global Sourcing (UPGS)

UP Global Sourcing Holdings (LON:UPGS)

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Paul Scott

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