REG - Supreme PLC - Final Results
05/07/2022 07:00
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RNS Number : 2850R Supreme PLC 05 July 2022
5 July 2022
Supreme plc
("Supreme," the "Company" or the "Group")
Audited Final Results for the Year Ended 31 March 2022
- Strong organic and acquisitive progress across FY22
- Sales slowdown within Lighting category will supress Revenue and
EBITDA performance in FY23
Supreme (AIM:SUP), a leading manufacturer, supplier and brand owner of
fast-moving consumer products, announces its audited final results for the
year ended 31 March 2022 ("FY22").
Financial highlights
FY22 FY21 %
£ (millions) £ (millions) change
Revenue 130.8 122.3 +7%
Gross profit 38.5 33.0 +17%
Gross profit % 29.4% 27.0% +2.4%
Adjusted EBITDA(1) 21.1 19.3 +9%
Profit before tax 16.3 13.0 +25%
Adjusted profit before tax(2) 17.4 16.4 +6%
EPS 11.8p 8.9p +33%
Adjusted EPS(3) 12.8p 12.0p +7%
Net debt 4.0 7.6 +47%
Adjusted net debt(4) 1.9 6.1 +69%
· Revenue growth of 7%, underpinned by new customer momentum and
earnings enhancing acquisitions. Most notably:
- Vaping revenue growth of £4.1 million (10%)
- Sports Nutrition & Wellness revenue growth of £9.0 million
(132%).
· Further gains in gross margin, growing to 29.4% (FY21: 27.0%)
driven by an increased propensity for manufacturing across the Group and a
focus on higher margin business.
· The Balance Sheet remains strong with net assets of £32.3
million (FY21: £18.8 million) and net debt of £4.0 million at the end of
FY22 (FY21: £7.6 million), alongside a new £25 million RCF facility with
HSBC in March 2022 for acquisitions.
Operational highlights
· Strong organic growth supported by new contract momentum and the
expansion of the UK sales footprint
- Launched two vitamins brands; Millions & Millions and Sealions
- Secured additional vaping contracts with Sainsbury's, Morrisons and
in convenience retail via Core Communications
- Supreme now services over 3,300 retail and public sector customers,
in addition to over 70,000 active unique online accounts.
· Delivered and integrated two earnings-enhancing acquisitions in
the period
- Acquired Vendek Limited, one of Ireland's leading distributors
of batteries and lighting products, providing a cost-effective shelter from
export challenges generated by Brexit, whilst creating an additional hub from
which to expand Supreme's European footprint alongside facilitating access to
some of Ireland's largest retailers and distributors
- Acquired the stock and brands of Sci-MX Limited, a leading
sports nutrition and supplements business, delivering incremental earnings and
manufacturing synergies alongside providing access to Tesco and Morrisons,
both of which have already generated wider cross-sell opportunities.
· Supreme's market-leading 88vape brand continued to grow its
market share with new and existing customers, including Sainsbury's and
Morrisons, and in convenience retail via Core Communications, in addition to
generating sales traction across all its discount retail customers.
· Continued to scale in-house manufacturing capabilities to meet
future demand and drive longer term margin improvement.
Dividends
· A final dividend, subject to shareholder approval at the Annual
General Meeting on the 15 September 2022, 3.8 pence per share. This will be
paid on 30 September 2022 to shareholders on the register at the close of
business on 2 September 2022. The ex-dividend date will be 1 September 2022.
· The Group paid an interim dividend of 2.2 pence per share, which
together with the final dividend take total dividends for the year to 6.0
pence per share.
Outlook / Current Trading
· The Group expects to deliver another solid, profitable year in
FY23 but revenue and EBITDA are both expected to be below FY22 levels and
below previous market expectations, driven by a recent marked decline in the
Lighting category following a slow-down in sales compounded by customer
overstocking in FY22.
· Following discussions with its key customers the Group believes
this slowdown in sales and profitability will be temporary and limited to the
Group's Lighting category due to specific customer over-stocking in the past
12 months. Whilst it is still early in the new financial year, the nature of
lighting sales where a significant portion are sold "FOB" on long lead times
means that the Board has relatively strong visibility into the latter part of
the year and the expected weakness in trading. There are no customer or
retail listings losses to report and therefore profit progression for this
category is expected to return in FY24 once the supply chain has rebalanced.
· Vaping, the Group's largest and most profitable category,
continues to perform very strongly and is expected to deliver revenue growth
of around 30% in FY23 - half of which driven by new product development,
continued market growth and further distribution expansion and the other half
from the Liberty Flights acquisition.
· Management remains committed to investing in organic growth
opportunities alongside pursuing an active acquisition pipeline, particularly
in the vaping division. Supreme's established sales and distribution
footprint has created an ideal platform from which to accelerate the Group's
buy and build strategy in the near term. With this in mind, the Board has
reviewed its capital allocation policy and believes that M&A can drive
better rates of shareholder return compared to servicing its existing dividend
commitments. Accordingly, the Board proposes to revise its dividend policy
from a pay-out ratio of 50% of net profits to a minimum of 25% in respect of
FY23 onwards.
· In spite of the short-term trading challenges in Lighting, the
Board remains confident that the Group has a long runway of growth ahead and
is increasingly excited by the prospects for growth in the vaping division.
Sandy Chadha, Chief Executive Officer of Supreme, commented:
"We are delighted to have delivered another strong financial performance
across FY22, driven by excellent customer traction, alongside completing two
strategic acquisitions.
Batteries and Lighting have performed strongly and although customer inventory
levels within Lighting will hold back our progress in the short term, I
believe this minor setback should not detract from our operational progress to
date. We are more excited than ever about the potential for Vaping. Our 88vape
range is now well-established across our discount channel and has now started
to penetrate grocery and convenience retail as well. With increasing levels of
government support for vaping, we expect the revenue growth to continue.
Whilst there remains considerable opportunity for Sports Nutrition &
Wellness, short term commodity price increases are expected to affect demand
and profitability, although we have taken steps to mitigate our exposure. I am
particularly proud of the results of both Vendek and Sci-MX which were both
earnings enhancing in FY22 and seamlessly integrated into our core business.
M&A continues to be a key feature of our strategy as we seek to complement
our organic growth initiatives and remain confident in the Group's trading
prospects for the current financial year and beyond."
Retail Investor Presentation:
A presentation for retail investors covering the results for the year ended 31
March 2022 will be held at 11.00 a.m. on 6 July 2022.
The online presentation is open to all existing and potential shareholders and
registration is free. Questions can be submitted during the presentation and
will be addressed at the end.
To register for the event, please go to:
https://www.equitydevelopment.co.uk/news-and-events/supreme-investor-presentation-6july22
(https://linklock.titanhq.com/analyse?url=https%3A%2F%2Fwww.equitydevelopment.co.uk%2Fnews-and-events%2Fsupreme-investor-presentation-6july22&data=eJx1jDsOwjAQRE-TdLaCiRJSuICCllzBchbZgD_JrmOF02OkNBRI28y-madlJ06tHnTTD4fhXk8SU1zAAdeBp2ft5HzLo-lH56K61CiN8l6Zqm1gTpa2CVZ4hejA075YiuFdSsDRWfo2f41JGqKI1fFciWu5nDP_4yrUQ0am_MQK84Tls9uY9SsghYWViIUpssGz7pFemxAfrPRNKA%25%25)
(1) Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in Note 7 of the financial statements).
Adjusted items include share-based payments charge, fair value movements on
non-hedge accounted derivatives and other non-recurring items (including all
IPO-related costs)
2 Adjusted profit before tax means profit before tax and Adjusted items (as
defined in Note 7 of the financial statements). Adjusted items include
share-based payments charge, fair value movements on non-hedge accounted
derivatives and other non-recurring items (including all IPO-related costs)
3 Adjusted EPS means Earning per share, where Earnings are defined as profit
after tax but before amortisation of acquired intangibles and Adjusted items
(as defined in Note 7 of the financial statements). Adjusted items include
share based payments, fair value movements on non-hedge accounted derivatives
and other non-recurring items (including all IPO-related costs).
4 Adjusted net debt means net debt as defined in Note 29 to these financial
statements excluding the impact of IFRS16
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014 which is part of UK law by virtue of the European Union (withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
Enquiries:
Supreme plc via Vigo Consulting
Sandy Chadha, Chief Executive Officer
Suzanne Smith, Chief Finance Officer
Grant Thornton UK LLP (Nominated Adviser) +44 (0)20 7383 5100
Philip Secrett / Samantha Harrison / Harrison Clarke
Berenberg (Broker) +44 (0)20 3207 7800
Chris Bowman / Mark Whitmore
Vigo Consulting (Financial Public Relations) +44 (0)20 7390 0230
Jeremy Garcia / Kendall Hill
supreme@vigoconsulting.com (mailto:supreme@vigoconsulting.com)
About Supreme
Supreme supplies products across five key categories; batteries, lighting,
vaping, sports nutrition & wellness, and branded household consumer goods.
The Company's capabilities span from product development and manufacturing
through to its extensive retail distribution network and direct to consumer
capabilities. This vertically integrated platform provides an excellent route
to market for well-known brands and products.
The Group has over 3,300 active business accounts with retail customers who
manage over 10,000 branded retail outlets. Customers include B&M, Home
Bargains, Poundland, The Range, Sainsburys, Sports Direct, Londis, SPAR,
Costcutter, Asda, Halfords, Iceland and HM Prison & Probation Service.
In addition to distributing globally-recognised brands such as Duracell,
Energizer and Panasonic, and supplying lighting products exclusively under the
Energizer, Eveready and JCB licenses across 45 countries, Supreme has also
developed brands in-house, most notably 88Vape and has a growing footprint in
Sports Nutrition & Wellness.
www.investors.supreme.co.uk (http://www.investors.supreme.co.uk)
Chairman's Statement
Financial year ended 31 March 2022 was another positive year for Supreme, as
we continued to build on the strong momentum generated since our IPO.
Alongside sustained organic growth, driven by the strong performance of our
Vaping category as well as continued progress across the Company's established
Lighting and Batteries segments, Supreme completed the strategic acquisitions
of Vendek and Sci-MX, our first transactions as a public company. Directly
in-line with our strategic development roadmap, both have been seamlessly
integrated into the Group and we continue to explore the growth opportunities
presented by the acquisitions.
Supreme delivered a strong trading performance in the year-ended 31 March
2022, generating a 7% increase in revenues to £130.8 million (2021: £122.3
million) alongside a 9% increase in Adjusted EBITDA(1) to £21.1 million.
(2021: £19.3 million). Our operations remains highly cash-generative, with
our robust balance sheet, capital light model and enhanced efficiencies
underpinning Supreme's considerable financial and operational progress, which
was further boosted by the agreement of a new £25 million RCF facility with
HSBC in March 2022. Our strong financial foundations enabled the Board to
declare a maiden dividend of 2.2p per share, with the Company delivering a 30%
growth in earnings per share to 11.8p (2021: 8.9p).
We consolidated our position as a leading player in the vaping market,
securing further mandates with supermarkets including Sainsbury's and
Morrisons, whilst increasing our convenience and discount footprint alongside
retaining our D2C online offering through the 88vape website. Consequently,
Supreme now services over 3,300 retail and public sector customers, which
includes over 70,000 active online accounts.
Despite well-documented inflationary pressures and the ongoing impact of the
Covid-19 pandemic on global trade and logistics, our Sports Nutrition &
Wellness segment delivered a solid performance, underpinned by the launch of
our two new vitamin brands, Millions & Millions and Sealions, which
continue to increase our market share in the sector. The division currently
represents 12% of revenue and we remain confident that the category will
provide an additional pillar of growth in the medium to long term.
Providing quality products at attractive prices is at the core of our
business, and, given the escalating cost-of-living crisis, we anticipate that
demand for Supreme's highly affordable fast-moving consumer goods will
continue to increase. Leveraging our vertically integrated platform, Supreme
is well positioned to play a pivotal role in minimising the financial impact
on retailers and consumers, and our commitment to offering great value to all
stakeholders remains the Company's key priority.
As part of our annual review process, we undertook an internal board
evaluation to ensure the efficacy of the team. Our current board is made up of
hard-working, diligent individuals who bring a wealth of experience and a
complementary breadth of perspectives which facilitate the efficient
functioning of the Company's committees. Moving forward, we are committed to
continuing our cycle of board meetings and strategy days, whilst maintaining
access to the senior management team to provide imperative transparency. I am
certain that, as a Board, we have the right skill set to ensure Supreme
executes on our growth strategy, and we will continue to provide insightful
and independent oversight of the Company's operations.
I am profoundly grateful for the perseverance and dedication of the entire
Supreme team who have worked tirelessly to mitigate the macroeconomic
challenges the business faced across the financial year, most notably
mitigating the impact of Covid-19 on staffing levels across our warehousing
and manufacturing operations in Q3, a key trading period for the Company.
Once again, Supreme has demonstrated its ability to deliver both organic and
acquisitive growth against the current economic backdrop, and we look forward
to realising the benefits of our earnings-enhancing acquisitions and a number
of exciting product launches. Our business remains focused on leveraging our
vertically integrated distribution platform for consumer products that are
easily transported and displayed with a simple consumer offering that people
do not return.
The Board has the utmost confidence in our management team who continue to
drive Supreme's growth. This progress, bolstered by prudent investment in
in-house manufacturing facilities, ensures Supreme remains well placed to
capitalise on future market tailwinds, alongside delivering both organic and
M&A growth in the medium to long term.
Paul McDonald
Non-executive Chairman
4 July 2022
(1) Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in Note 7 of the financial statements).
Adjusted items include share-based payments charge, fair value movements on
non-hedge accounted derivatives and other non-recurring items (including all
IPO-related costs)
Chief Executive Officer's Review
Introduction
It is my pleasure to announce our results for the year ended 31 March 2022, as
the Company delivered another positive financial and operational performance
across the year, reporting strong levels of revenue and profit growth. The
Group made solid progress across its key categories, with Supreme's
market-leading 88vape brand continuing to aggressively increase its market
share with new and existing customers.
Supreme delivered a 7% increase in revenues to £130.8 million in the year
(FY21: £122.3 million) and a 9% increase in Adjusted EBITDA(1) to £21.1
million (FY21: £19.3 million). Gross profit as a percentage of sales grew to
29.4% (FY21: 27.0%) as we focused more closely on our manufactured categories
that continue to generate increasing levels of returns. Our brands, alongside
Supreme's diverse and extensive retail network, sit firmly at the heart of
both the business and our strategy.
The Group has continued to successfully execute on its organic growth strategy
through the successful launches of two vitamins brands, Millions &
Millions and Sealions, which continue to generate good sales momentum. To
complement our organic progress, the Group also completed two acquisitions
during the year: Vendek and Sci-MX,
(https://www.investegate.co.uk/supreme-plc--sup-/rns/acquisition-of-brands-of-sci-mx-limited/202107010700057529D/)
both of which are now fully integrated into the business.
The Supreme team has demonstrated its ability to navigate another year of the
Covid-19 pandemic, showing skill and tenacity to mitigate the impact to
warehousing and manufacturing operations in Q3, a key trading period for the
Company. To successfully undertake two sizeable acquisitions and launch two
new brands whilst experiencing unprecedented levels of freight disruption and
inflationary pressures is a significant achievement, and it cannot be
overstated how thankful I am to each and every member of staff for their
exceptional work across FY22.
Operational Review
The Group has continued to evolve its business model in the period, adding new
customers and brands alongside broadening the reach of our existing brands and
products across our established customer base. Given the majority of our
brands are either licensed, own-brand or acquired, as well as white-labelled,
Supreme has established incredibly loyal and long-term customer partnerships.
On average, the Group distributes c.2,000 products daily across our five
product categories, ensuring Supreme maximises its unique operational platform
which leverages both online ordering and an integrated management system for
retailers.
With this strong platform central to our business, management will continue to
focus on the following strategic growth drivers, namely:
· expand our international footprint through existing customer
relationships and strategic acquisitions;
· further leverage cross-sell opportunities to expand our customer
footprint and average-e revenue per customer;
· continue to explore and develop new product verticals that
complements Supreme's customer base, focused on a high quality and good value
consumer proposition;
· increase manufacturing efficiencies through further economies of
scale and bringing the manufacture of certain products in-house;
· continue to explore and execute on complementary earnings
enhancing acquisitions; and
· enhance online distribution and services to further grow our B2B
and D2C sales channels.
Batteries
Our battery category delivered a highly credible performance, increasing
revenues to £34.9 million compared to £34.4 million in FY21 (noting that
FY21 included a one-off boost in sales as a result of the pandemic). This
growth has been driven by an increase in our UK distribution footprint
alongside the positive impact of Vendek, one of Ireland's leading distributors
of batteries and lighting products, which was acquired in June 2021.
Integrating Vendek into our existing battery category also helped to increase
the gross margin percentage during the year.
The breadth of our distribution and our position as one of the largest battery
distributors of all major brands ensures a high rate of repeat purchasing and
creates a high volume of cross-sell opportunities across the wider, higher
margin categories. In addition, the Group has continued to seek the mitigation
of the environmental impact of our products and has been working hard to drive
higher rates of safe, sustainable, battery recycling. We continue to work
closely with global partners and the high street retailers which has resulted
in changes to packaging to educate the end-consumer.
Lighting
Lighting revenues grew to £27.0 million (FY21: £25.9 million). This strong
performance has been fuelled by increased sales traction, particularly in H1
22 when the country was largely locked down. Gross margin increased to £9.0
million, underpinned by the Group's hugely successful licensing model.
This strong performance from our established sales footprint is particularly
pleasing given the fact that international expansion, a key growth initiative
in this category, has been hindered by pandemic restrictions cancelling a
number of key international trade shows.
With Vendek fully integrated, and pandemic restrictions now considerably
eased, the enlarged group will be able to pursue a number of strategic
opportunities going forward, alongside delivering cross-sell opportunities in
both Ireland and the UK.
As within the Group's Battery category, there have been some important changes
to our product ranges led by our sustainability agenda. In particular we have
seen most blister packs being phased out in favour of cardboard packaging and
single unit offerings replaced by twin packs to reduce packaging altogether.
The slow-down in FOB sales in FY23 will impact the growth trajectory for the
category in the short term. But these setbacks are temporary whilst the supply
chain re-bases and consumer spending adjusts. Our longer-term vision is
unchanged.
Vaping
The Group's Vaping category delivered another strong performance in the
period, growing revenues by 10% to £43.6 million. Supreme's market-leading
88vape brand continued to grow its market share with new and existing
customers including Sainsbury's and Morrisons, and in convenience retail via
Core Communications. In addition the Group continued to generate sales
traction across all its discount retail customers.
Economies of scale and further efficiencies in manufacturing processes,
alongside a more established supply chain for the Group's prison contract, has
resulted in improvements in the gross margin for the category.
Our 88vape.com consumer website experienced good traffic throughout FY22, with
the multitude of new customers gained across lockdown periods in FY21
remaining loyal to Supreme despite non-essential retail re-opening.
The announcement in October 2021 that the government plans to make
e-cigarettes available on prescription is further evidence of the UK
government's support for vaping. With the Company already well-established as
a supplier to the public sector via the prison contract, Supreme is
well-positioned to benefit from this opportunity in the medium term.
With this increasing level of government support for vaping, alongside its
established retail and online (direct) footprint, the Group expects the robust
organic growth for this category to continue, enhanced further by M&A. The
Group's aim is to become the largest vaping player in the UK, supporting a
tobacco-free UK by offering both credible and safe alternatives for nicotine
consumption.
Sports Nutrition & Wellness
The Group's Sports Nutrition & Wellness category continued to gain market
traction in FY22, increasing revenues by 132% to £15.9 million, representing
12% of Group revenues. This excellent performance was underpinned by the
acquisition of Sci-MX, a leading sports nutrition and supplements brand, and
the launch of two vitamins brands, Millions & Millions, and Sealions.
Following its acquisition during the year, Sci-MX is now fully integrated into
the Group, with stock, customers and suppliers, intellectual property and
websites now part of Supreme's core business. All customers were retained
(principally Tesco, Sainsbury's, Morrisons and Amazon), and the acquisition
has been earnings enhancing to the Group in FY22.
Battle Bites, Supreme's branded protein snack bar that was acquired in FY21,
performed well and with the incoming High in Fat, Sugar and Salt ("HFSS")
regulations, is expected to drive sales as retailers seek to replace chocolate
and traditional confectionary for HFSS compliant impulse-purchased snacks.
Moving forward, the Group will seek to migrate Sci-MX away from a third party
supply chain to Supreme's in-house manufacturing facility which will serve to
increase profitability in the longer term. This will also enable the Group to
focus on 100% recyclable packaging with pack sizes prescribed for optimal
pallet configurations and reduced transport requirements.
The protein powders market is undergoing transformational change as raw
material price inflation for both whey and creatine has risen between two and
three times the price versus six months ago. These price increases will be
passed onto the consumer during FY23, and the sector could see fluctuations in
customer demand as consumers absorb these increases.
Since entering the Sports Nutrition & Wellness 4 years ago, revenues have
grown revenue from £nil to £15.9 million and the Board remain confident that
Supreme has the robust foundations in place to capitalise on future growth
opportunities driven by its strategic acquisition of Sci-MX and brand
launches.
Branded Household Consumer Goods
The category delivered £9.4 million in revenue for FY22 (FY21: £15.5
million), reflecting its pre-pandemic performances. Whilst there were
prolonged lockdowns in FY22, these were not characterised by spikes in sales
of cleaning products by consumers in the same way as FY21. In addition, a
one-off £1 million pharmaceutical bottling contract in FY21 did not repeat in
FY22.
The category continues to make a contribution to overall net profitability,
has limited working capital requirements, and has also provided the wider
group with cross-sell opportunities.
Outlook / Current Trading
Whilst the Group expects to deliver another solid year of profits across FY23,
overstocking across a number of key customers within the Group's Lighting
category will result in lower-than-expected revenue and EBITDA generation for
the current financial year.
Supreme's sizable vaping sales footprint, underpinned by the recent
acquisition of Liberty Flights, together with ongoing new product development,
continued market growth and further distribution expansion, underpins the
Group's strong cash generation.
In addition, management has already taken steps to mitigate a number of
external macro headwinds, including buying forward whey, and will also be
continually reviewing potential price increases and ongoing manufacturing and
distribution rationalisation.
With 60% of gross profit generated by Supreme's UK manufacturing base, the
Group has limited exposure to global shipping and logistics delays and foreign
currency fluctuations and remains confident in the Group's core business
operations and resilient end markets.
In the longer term, the Group remains fully focused on driving organic growth,
closely balanced with strategic acquisitions, having agreed a new £25 million
RCF facility with HSBC in March 2022.
Sandy Chadha
Chief Executive Officer
4 July 2022
(1) Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in Note 7 of the financial statements).
Adjusted items include share-based payments charge, fair value movements on
non-hedge accounted derivatives and other non-recurring items (including all
IPO-related costs)
Chief Finance Officer's Review
I am delighted to present these financial results for the year ended 31 March
2022 ("FY22"); our first full year as a public company. The financial
performance remained strong throughout FY22; revenue and profitability
increased, the balance sheet strengthened and net debt reduced. The table
below summarises the key financial measures and the comparisons to prior year.
The commentary in this review references alternative performance measures
which are described as 'Adjusted', meaning they exclude share-based payment
charges, fair value movements on non-hedge accounted derivatives and other
non-recurring items outlined in detail in Note 7 to the Financial Statements.
FY22 FY21 %
£ (millions) £ (millions) change
Revenue 130.8 122.3 +7%
Gross profit 38.5 33.0 +17%
Gross profit % 29.4% 27.0% +2.4%
Adjusted EBITDA(1) 21.1 19.3 +9%
Adjusted items (1.1) (3.4)
Profit before taxation 16.3 13.0 +25%
Adjusted profit before tax(2) 17.4 16.4 +6%
EPS 11.8p 8.9p +33%
Adjusted EPS(3) 12.8p 12.0p +7%
Operating cash flow 11.7 12.3 -5%
Net assets 32.3 18.8 +72%
Net debt 4.0 7.6 +47%
Adjusted net debt(4) 1.9 6.1 +69%
Revenue
Revenue for FY22 was £130.8 million (FY21: £122.3 million), an increase of
7%, the drivers for which have been presented in the divisional summaries
below.
Revenue by division
Revenue for Batteries was £34.9 million in FY22 (FY21: £34.4 million). This
growth was a blend of incremental revenue from the Vendek acquisition offset
by a partial reverse of the COVID "bounce" reported in FY21. As a reminder,
this category grew by £3.5 million in FY21 so to have retained more than half
of this additional revenue in FY22 was a pleasing performance overall.
Revenue for Lighting was £27.0 million (FY21: £25.9m) and was a pleasing
performance given the prolonged pause on our international expansion plans
owing to the ongoing lockdowns and travel restrictions in FY22.
Revenue for Vaping was £43.6 million (FY21: £39.5 million). This growth of
£4.0 million (10%) was entirely organic driven largely by new listings in
grocery via Sainsburys and Morrisons and in convenience retail via Core
Communications as well as increased sales in the long-standing retailers. The
88vape.com website doubled revenue in FY21 and has continued to service these
customers throughout FY22 despite non-essential retail opening back up.
Revenue for Sports Nutrition & Wellness was £15.9 million (FY21: £6.9
million). This growth of £9.0 million (132%) was driven by the acquisition of
Sci-MX, the successful launch of 2 new vitamins brands; Millions &
Millions and Sealions, a full year of sales for Battle Bites, the protein
snack bar acquired in FY21 and underlying organic growth from its core protein
powder business.
Revenue for Branded Household Consumer Goods was £9.4 million (FY21: £15.5
million). FY21 reported a notable spike in revenue (the product range is
dominated by branded domestic cleaning products and hand sanitizers) and a
return to pre-COVID levels was always anticipated for FY22. Whilst the
prolonged lockdowns continued into FY22, these were not characterised by
spikes in sales of cleaning products by consumers in the same way as in FY21.
FY21 also benefitted from £1m of one-time revenue in relation to a one-off
pharmaceutical bottling contract which was never anticipated to reoccur in
FY22.
Gross profit
Gross profit for FY22 was £38.5 million (FY21: £33.0 million), representing
growth of 17%. Importantly, gross profit increased during the year by 2.4ppt
from 27.0% to 29.4%, owing to an increased propensity to manufacture plus
improved margins reported in Batteries and Lighting. In FY22 Vaping reported
gross margin of 44.7% (FY21: 41.4%) - a result of gains in profitability in
the HMPPS contract which was consistently imported via sea in FY22 (as opposed
to by air as in FY21) combined with the increased efficiency gains in core
manufacturing during the year.
The gross margin for Sports Nutrition reduced in FY22 as a result of a change
to the sales mix within the category. The addition of the Sci-MX brand via
acquisition in July 2021 remained distribution-only throughout FY22 (although
there are plans to bring manufacturing inhouse in FY23) whilst vitamins
manufacturing was also yet to establish sufficient scale to warrant
manufacturing in FY22 so relied on its external supply chain to meet some of
this demand (again, inhouse manufacturing is planned for FY23).
Adjusted EBITDA(1)
Adjusted EBITDA(1) increased by £1.8 million (9%) in the year to £21.1
million, driven by growth in revenue and gross profit offset by an increase in
the overhead base as a result of the IPO-required investments (such as the
Board of Directors and additional advisers), advertising costs to support the
launch of the 2 new vitamins brands and additional overheads associated with
the acquisitions.
Adjusted Items
Adjusted Items were £1.1 million compared to £3.4 million the year before
which included £2.0 million in relation to the Group's admissions to AIM in
February 2021. In FY22, these costs related to share-based payment charges of
£1.7 million (FY21: £0.08 million) and £0.4 million of non-recurring items
(restructuring, fees in relation to the acquisitions and short-term resource
requirements during the COVID-related disruption), offset by a £1.0 million
credit in relation to fair value movements on financial derivatives (FY21:
£0.8 million charge).
Finance costs
Finance costs were £0.7 million in the year (FY21: £0.7 million) and
included the interest arising on senior facilities held throughout the period
of £0.2m (FY21: £0.4 million), interest relating to the accelerated write
down of long-standing arrangement fees once the new RCF facility was
established of £0.3 million (FY21: £nil) and interest of £0.1 million
relating to the lease liabilities under IFRS16 (FY21: £0.1 million).
Taxation
Total tax charge in the year was £2.6 million (FY21: £3.1 million), giving
rise to an effective tax rate of 16% (FY20: 24%). The increase in the rate in
FY21 arose from the disallowed expenses in relation to the IPO. The lower rate
in FY22 was the result of a prior period adjustment (relating to the tax
relief on the exercise of EMI options in FY21) and the deferred tax credit on
the Share Based Payments charge.
Profit after tax and Earnings per share
Profit after tax was £13.7 million compared to £9.8 million in FY21, growth
of 39%. Similarly, earnings per share increased by 33% to 11.8p (FY21: 8.9p)
and on a fully diluted basis increased from 8.7p to 11.4p, growth of 31%.
On an adjusted profit after tax basis, which we consider to be a better
measure of performance, adjusted earnings were £15.0 million (FY21: £13.3
million) and Adjusted earnings per share(3) was 12.8p (FY21: 12.0p)
Dividends
· A final dividend, subject to shareholder approval at the Annual
General Meeting on the 15 September 2022, of 3.8 pence per share. This will be
paid on 30 September 2022 to shareholders on the register at the close of
business on 2 September 2022. The ex-dividend date will be 1 September 2022.
· The Group paid an interim dividend of 2.2p per share, which
together with the final dividend take total dividends for the year to 6.0
pence per share.
Cash flow
FY22 FY21 %
£ (millions) £ (millions) change
Adjusted EBITDA(1) 21.1 19.3
Movement in working capital (3.9) (1.6)
Acquisition of Sci-MX stock (0.9)
Taxation paid (4.2) (3.0)
Cash-impacting adjusted items: (0.4) (2.4)
Operating cash flow 11.7 12.3 -5%
Debt (servicing) / raising (8.4) (13.6)
Lease payments (1.0) (0.6)
Capex (including M&A) (3.4) (2.1)
Dividends (2.5) (3.0)
Proceeds from IPO - 7.8
Net cash flow (3.6) 0.8
Cash generated from its trading activities ("Operating cash flow") was £11.7
million (FY21: £12.3 million), a reduction of 5%. This included £0.9 million
in relation to the acquisition of Sci-MX stock in July 2021 and a conscious
investment in Batteries and Lighting stock in the second half of the year to
mitigate any potential freight disruption from the Far East and to forward-buy
whey protein to best-manage ongoing price increases. Higher rates of sales
across the business in the weeks leading up to year-end unexpectedly increased
the closing working capital position at year end.
Specifically in reference to the acquisitions, £1.0 million related to the
acquisition of the entire share capital of Vendek Limited (net of cash
acquired), with a further £0.6 million of deferred consideration payable in
FY23 and FY24. £1.3 million related to the acquisition of the brands of
Sci-MX Limited (no further amounts payable in the future).
With respect to financing, the Group repaid £1.6 million of its related party
loan in the year, repaid £5.4 million during the year in respect of its
existing 5-year facility with HSBC in line with its quarterly interest and
repayment obligations and repaid the balance on the supply chain financing
facility in the year of £1.2 million.
On the 31 March 2022, the Group committed to a £25 million Revolving Credit
Facility ("RCF") with HSBC but this was undrawn at year end. The initial
drawdown of £4.1 million on 4 April 2022 was to settle the existing 5-year
facility in full and cover the arrangement fee on the RCF whilst the remainder
of the RCF is ear-marked largely for acquisitions.
Net debt
FY22 FY21 %
£ (millions) £ (millions) change
Cash (3.9) (7.5)
Bank loans 4.0 9.0
Amounts owed to related parties 1.8 3.4
IFRS 16 lease liability 2.1 1.5
Other - 1.1
Total net debt 4.0 7.6 +47%
Events after the Balance Sheet Date
On 4 April 2022, the Group drew down £4.1 million on the RCF to fully settle
the existing 5-year loan facility with HSBC and cover the arrangement fee
attached to the RCF.
On 27 April 2022, the Group repaid the final tranche of its related party loan
to Supreme8 Limited. No further related party items exist on the balance
sheet.
On 10 June 2022, Supreme acquired the entire share capital of Liberty Flights
Holdings, a long-established and leading brand of e-liquids and vaping devices
for an initial consideration of £7.75 million. The acquisition is expected to
be immediately earnings-enhancing.
Use of non-GAAP measures in the Group financial statements
Certain measures have been used to increase understanding of the Group's
Report and Accounts. These measures are not defined under IFRS and therefore
may not be directly comparable with adjusted measures presented by other
companies. The non-GAAP measures are not intended to be a substitute for or
superior to any IFRS measure of performance; however they are considered by
management to be important measures used in the business for assessing
performance. The non-GAAP measures used in this strategic review and more
widely in this Annual Report are defined in the footnotes below and set out in
Note 2.17.
Suzanne Smith
Chief Finance Officer
4 July 2022
(1)Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in Note 7 of the financial statements).
Adjusted items include share-based payments charge, fair value movements on
non-hedge accounted derivatives and other non-recurring items (including all
IPO-related costs)
( )
(2)Adjusted profit before tax means profit before tax and Adjusted items (as
defined in Note 7 of the financial statements) Adjusted items include
share-based payments charge, fair value movements on non-hedge accounted
derivatives and other non-recurring items (including all IPO-related costs)
( )
(3)Adjusted EPS means Earning per share, where Earnings are defined as profit
after tax but before amortisation of acquired intangibles and Adjusted items
(as defined in Note 7 of the financial statements). Adjusted items include
share based payments, fair value movements on non-hedge accounted derivatives
and other non-recurring items (including all IPO-related costs).
(4) Adjusted net debt means net debt as defined in Note 29 to these financial
statements excluding the impact of IFRS16
Consolidated Statement of Comprehensive Income
for the Year Ended 31 March 2022
Year Ended Year Ended
31 March 2022 31 March 2021
Note £'000 £'000
Revenue 5 130,789 122,253
Cost of sales 6 (92,272) (89,211)
Gross Profit 38,517 33,042
Administration expenses 6 (21,498) (19,416)
Operating profit 17,019 13,626
Adjusted EBITDA(1) 21,055 19,272
Depreciation 13 & 21 (2,563) (1,998)
Amortisation 12 (378) (225)
Adjusted items 7 (1,095) (3,423)
Operating profit 17,019 13,626
Finance costs 9 (693) (671)
Profit before taxation 16,326 12,955
Income tax 10 (2,579) (3,117)
Profit for the year 13,747 9,838
Other comprehensive expense
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations (32) -
Total other comprehensive expense (32) -
Total comprehensive income 13,715 9,838
Earnings per share - basic 11 11.8p 8.9p
Earnings per share - diluted 11 11.4p 8.7p
Note 1: Adjusted EBITDA, which is defined as operating profit before
depreciation, amortisation and Adjusted items (as defined in Note 7) is a
non-GAAP metric used by management and is not an IFRS performance measure.
All results derive from continuing operations.
Consolidated Statement of Financial Position
as at 31 March 2022
As at As at
31 March 2022 31 March 2021
Note £'000 £'000
Non-current assets
Assets
Goodwill and other intangibles 12 3,704 2,628
Property, plant and equipment 13 2,557 2,787
Right of use asset 21 2,116 1,476
Deferred tax asset 15 1,312 -
Investments 14 7 7
Total non-current assets 9,696 6,898
Current assets
Inventories 16 25,898 19,865
Trade and other receivables 17 19,035 16,052
Derivative financial instruments 22.9 467 -
Cash and cash equivalents 18 3,926 7,505
Total current assets 49,326 43,422
Total assets 59,022 50,320
Liabilities
Current liabilities
Borrowings 20 6,665 10,476
Trade and other payables 19 17,296 13,295
Derivative financial instruments 22.9 - 559
Income tax payable 1,299 2,370
Total current liabilities 25,260 26,700
Net current assets 24,066 16,722
Borrowings 20 1,294 4,658
Deferred tax liability 15 156 141
Total non-current liabilities 1,450 4,799
Total liabilities 26,710 31,499
Net assets 32,312 18,821
Equity
Share capital 23 11,663 11,650
Share premium 7,231 7,195
Merger reserve (22,000) (22,000)
Share-based payments reserve 2,368 75
Retained earnings 33,050 21,901
Total equity 32,312 18,821
Consolidated Statement of Changes in Equity
for the Year Ended 31 March 2022
Share Capital Share Premium Merger reserve Share-based payments reserve Retained earnings Total
equity
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 11,001 - (22,000) - 15,063 4,064
Profit for the year - - - - 9,838 9,838
Total comprehensive income for the year - - - - 9,838 9,838
Transactions with shareholders:
Issue of shares - options exercised 89 255 - - - 344
Issue of shares - IPO shares 560 6,940 - - - 7,500
Employee share schemes - value of employee services - - - 75 - 75
Dividends - - - - (3,000) (3,000)
649 7,195 - 75 (3,000) 4,919
As at 31 March 2021 11,650 7,195 (22,000) 75 21,901 18,821
Profit for the year - - - - 13,747 13,747
Other comprehensive expense - - - - (32) (32)
Total comprehensive income for the year - - - - 13,715 13,715
Transactions with shareholders:
Issue of shares 13 36 - - - 49
Employee share schemes - value of employee services - - - 1,452 - 1,452
Deferred tax on share-based payment charge - - - 841 - 841
Dividends - - - - (2,566) (2,566)
13 36 - 2,293 (2,566) (224)
As at 31 March 2022 11,663 7,231 (22,000) 2,368 33,050 32,312
Consolidated Statement of Cash Flows
for the Year Ended 31 March 2021
Year Ended Year Ended
31 March 2022 31 March 2021
Note £'000 £'000
Net cash flow from operating activities
Profit for the year 13,747 9,838
Adjustments for:
Amortisation of intangible assets 12 378 225
Depreciation of tangible assets 13 & 21 2,563 1,998
Finance costs 9 404 671
Amortisation of capitalised finance costs 289 177
Income tax expense 10 2,579 3,117
Movement on forward foreign exchange contracts 22.9 (1,026) 768
Share based payments expense 24 1,663 75
Working capital adjustments
(Increase)/decrease in inventories (4,937) (5,286)
(Increase)/decrease in trade and other receivables (2,226) 970
Increase in trade and other payables 2,498 2,726
Taxation paid (4,161) (3,003)
Net cash from operations 11,771 12,276
Cash flows used in investing activities
Purchase of intangible fixed assets 12 (1,454) (125)
Purchase of property, plant and equipment 13 (1,296) (1,667)
Purchase of subsidiaries net of cash acquired 25 (1,040) (1,005)
Proceeds from sale of property, plant and equipment 378 890
Net cash used in investing activities (3,412) (1,907)
Cash flows used in financing activities
Repayment of loans 20 (8,083) (13,021)
Proceeds from IPO - 7,500
Proceeds from issue of options 49 344
Payment of deferred consideration (66) (195)
Dividends paid (2,566) (3,000)
Finance costs paid (285) (591)
Lease payments 21 (955) (619)
Net cash used in financing activities (11,906) (9,582)
Net (decrease)/increase in cash and cash equivalents (3,547) 787
Cash and cash equivalents brought forward 7,505 6,718
Effects of exchange rate changes on cash and cash equivalents (32) -
Cash and cash equivalents carried forward 3,926 7,505
Cash and cash equivalents 18 3,926 7,505
3,926 7,505
Notes to the Group Financial Statements
as at 31 March 2022
1. Basis of preparation
Supreme PLC ("the Company") is a public company limited by shares, registered
in England and Wales and domiciled in the UK, with company registration number
05844527. The principal activity is the manufacture (vaping and sports
nutrition & wellness only) and wholesale distribution of batteries,
lighting, vaping, sports nutrition & wellness and branded household
consumer goods. The registered office is 4 Beacon Road, Ashburton Park,
Trafford Park, Manchester, M17 1AF.
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined by section 434 of the Companies Act
2006.
These Group financial statements have been prepared on a going concern basis
under the historical cost convention, modified for the revaluation of certain
financial instruments; in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
The results for the year ended 31 March 2022 have been extracted from the full
accounts of the Group for that year which received an unqualified auditor's
report and which have not yet been delivered to the Registrar of Companies.
The financial information for the year ended 31 March 2021 is derived from the
statutory accounts for that year, which have been delivered to the Registrar
of Companies. The report of the auditor on those filed accounts was
unqualified. The accounts for the year ended 31 March 2022 and 31 March 2021
did not contain a statement under s498 (1) to (4) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2022 will be posted to
shareholders at least 30 days before the Annual General Meeting and made
available on our website www.supreme.co.uk (http://www.supreme.co.uk) and on
request by contacting the Company Secretary at the Company's Registered
Office.
The Directors have prepared this financial information on the fundamental
assumption that the Group is a going concern and will continue to trade for at
least 12 months following the date of approval of the financial information.
The principal accounting policies adopted are set out below
2.1 Basis of consolidation
The consolidated financial statements present the results of the Company and
its own subsidiaries as if they form a single entity. Intercompany
transactions and balances between Group companies are therefore eliminated in
full.
The Group financial statements incorporate the results of business
combinations using the acquisition method. In the Consolidated Statement of
Financial Position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the
Consolidated Statement of Comprehensive Income from the date on which control
is obtained. They are deconsolidated from the date control ceases. The merger
reserve arose on a past business combination of entities that were under
common control. The merger reserve is the difference between the cost of
investment and the nominal value of the share capital acquired.
2.2 New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 March 2022 reporting periods and have not been early
adopted by the Group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods and on
foreseeable future transactions:
Standards and interpretations Effective date
IFRS 17 Insurance Contracts 1 January 2023
Property, Plant and Equipment: Proceeds before intended use - Amendments to 1 January 2022
IAS 16
Reference to the Conceptual Framework - Amendments to IFRS 3 1 January 2022
Onerous Contracts - Cost of Fulfilling a Contract Amendments to IAS 37 1 January 2022
Annual Improvements to IFRS Standards 2018-2020 1 January 2022
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 1 January 2022
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2
Definition of Accounting Estimates - Amendments to IAS 8 1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction - Amendments to IAS 12
Judgements made by the Directors in the application of these accounting
policies that have a significant effect on these financial statements together
with estimates with a significant risk of material adjustment in the next year
are discussed in Note 4.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies
2.3 Going concern
Supreme PLC provides essential products to well-established retailers. The
nature and price point of the products offered means that the Group is well
positioned to overcome any volatility in the economic climate, which is
further supported by a customer base that performs well and are household
names.
The Group is funded by external facilities; firstly £25 million revolving
credit facility ("RCF") until March 2025 and a £8.5 million invoice financing
facility, both of which are provided by HSBC. The Board and senior management
regularly review revenue, profitability and cash flows across the short,
medium and longer term.
In assessing the appropriateness of adopting the going concern basis in the
preparation of these financial statements, the Directors have prepared cash
flow forecasts and projections for the 18-month period to 30 September 2023.
The forecasts and projections, which the Directors consider to be prudent,
have been further sensitised by applying reductions to revenue and
profitability, to consider downside risk. Under both the base and sensitised
case the Group is expected to have headroom against covenants, which are based
on interest cover and net leverage, and a sufficient level of financial
resources available through existing facilities when the future funding
requirements of the Group are compared with the level of committed available
facilities.
In assessing the going concern basis, the Directors have also considered the
current conflict in Ukraine and the resulting sanctions imposed on Russia by
governments worldwide. As well as the heightened risk of global economic
downturn, Supreme may experience supply challenges for certain components
contained within its protein powders (specifically sunflower lecithin and
wheat protein). Although this has not directly impacted Supreme to-date, the
risk has been reflected in Management's forecast nonetheless. There are not
expected to be any further specific, direct and material impacts to the Group
as a result of the conflict.
Based on this, the Directors are satisfied that the Group has adequate
resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the
Group and Company financial statements.
2.4 Currencies
Functional and presentational currency
Items included in the Group financial statements are measured using the
currency of the primary economic environment in which the Company operates
("the functional currency") which is UK sterling (£). The Group financial
statements are presented in UK sterling.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using a standard exchange rate for a period if the rates do not fluctuate
significantly. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the statement of comprehensive income. Non-monetary items that
are measured in terms of historical cost in a foreign currency are not
retranslated.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies (continued)
Group companies
The results and financial position of foreign operations (none of which has
the currency of a hyper-inflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
· assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that statement of
financial position;
· income and expenses for each statement of comprehensive income
are translated at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
· all resulting exchange differences are recognised in other
comprehensive income
2.5 Revenue recognition
Revenue solely relates to the sale of goods and arises from the wholesale
distribution and online sales of batteries, lighting, vaping sports nutrition
& wellness and branded household consumer goods.
To determine whether to recognise revenue, the Company follows the 5-step
process as set out within IFRS 15:
1. Identifying the contract with a customer.
2. Identifying the performance obligations.
3. Determining the transaction price.
4. Allocating the transaction price to the performance obligations.
5. Recognising revenue when/as performance obligation(s) are
satisfied.
Revenue is measured at transaction price, stated net of VAT, and other sales
related taxes. Rebates to customers take the form of volume discounts, which
are a type of variable consideration, and the transaction price is constrained
to reflect the rebate element. The transaction price equates to the invoice
amount less an estimate of any applicable rebates and promotional allowances
that are due to the customer. Rebate accruals are recognised under the terms
of these agreements, to reflect the expected promotional activity and our
historical experience. These accruals are reported within trade and other
payables.
Revenue is recognised at a point in time as the Company satisfies performance
obligations by transferring the promised goods to its customers as described
below. Variable consideration, in the form of rebates, is also recognised at
the point of transfer, however the estimate of variable consideration is
constrained at this point and released once it is highly probable there will
not be a significant reversal.
Contracts with customers take the form of customer orders. There is one
distinct performance obligation, being the distribution of products to the
customer, for which the transaction price is clearly identified. Revenue is
recognised at a point in time when the Group satisfies performance obligations
by transferring the promised goods to its customers, i.e. when control has
passed from the Group to the customer, which tends to be on receipt by the
customer. In respect of certain direct shipments control passes when an
invoice is raised, payment received, and title formally transferred to the
customer; at which point the customer has the risks and rewards of the goods.
2.6 Goodwill
The carrying value of goodwill has arisen following the acquisition of
subsidiary entities, where the trade and assets have subsequently been hived
up into this company immediately post acquisition, and the related investment
balance transferred to goodwill. Such goodwill is subject to an impairment
review, both annually and when there is an indication that the carrying value
may be impaired. Any impairment is recognised immediately in the Statement of
Comprehensive Income and is not reversed.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies (continued)
2.7 Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and accumulated impairment losses.
The amortisation is charged on a straight-line bases as follows:
Domain name - 10%
Trademarks - 10%
Customer relationships - 20%
Trade names - 20%
Computer software - 50%
2.8 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any impairment losses. Cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its working
condition for its intended use. Depreciation is charged so as to write off the
costs of assets over their estimated useful lives, on a straight-line basis
starting from the month they are first used, as follows:
Plant and machinery - 25%
Fixtures and fittings - 25%
Motor vehicle - 25%
Fashion hire assets - 25%
The gain or loss arising on the disposal of an asset is determined as the
difference between the sales proceeds and the carrying amount of the asset and
is recognised in the Statement of Comprehensive Income.
At each reporting date, the Company reviews the carrying amounts of its
property, plant and equipment assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
2.9 Inventories
Inventories are valued using a first in, first out method and are stated at
the lower of cost and net realisable value. Cost includes expenditure incurred
in the normal course of business in bringing the products to their present
location and condition.
At the end of each reporting period inventories are assessed for impairment.
If an item of inventory is impaired, the identified inventory is reduced to
its selling price less costs to complete and sell and an impairment charge is
recognised in the income statement. Where a reversal of the impairment is
recognised the impairment charge is reversed, up to the original impairment
loss, and is recognised as a credit in the income statement.
2.10 Income tax
The tax expense or credit represents the sum of the tax currently payable or
recoverable and the movement in deferred tax assets and liabilities.
(a) Current income tax
Current tax is based on taxable income for the year and any adjustment to tax
from previous years. Taxable income differs from net income in the statement
of comprehensive income because it excludes items of income or expense that
are taxable or deductible in other years or that are never taxable or
deductible. The calculation uses the latest tax rates for the year that have
been enacted or substantively enacted by the dates of the Statement of
Financial Position.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies (continued)
(b) Deferred tax
Deferred tax is calculated at the latest tax rates that have been
substantively enacted by the reporting date that are expected to apply when
settled. It is charged or credited in the Statement of Comprehensive Income,
except when it relates to items credited or charged directly to equity, in
which case it is also dealt with in equity.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the Group financial
statements and the corresponding tax bases used in the computation of taxable
income, and is accounted for using the liability method. It is not discounted.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable income will be available against which the asset can be
utilised. Such assets are reduced to the extent that it is no longer probable
that the asset can be utilised.
Deferred tax assets and liabilities are offset when there is a right to offset
current tax assets and liabilities and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
2.11 Leases
The Company applies IFRS 16 in the Group financial statements. At inception of
a contract, the Group assesses whether a contract is, or contains, a lease. A
contract is, or contains, a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for
consideration.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to restore the underlying asset, less
any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liabilities.
The lease liability is initially measured at the present value of lease
payments that were not paid at the commencement date, discounted using the
rate implicit in the lease. Where there is no rate implicit in the lease then
the Group's incremental borrowing rate is used.
The lease liability is measured at amortised cost using the effective interest
method. If there is a remeasurement of the lease liability, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or is
recorded directly in profit or loss if the carrying amount of the right of use
asset is zero.
Short term leases and low value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term lease of machinery that have a lease term of 12
months or less or leases of low value assets. These lease payments are
expensed on a straight-line basis over the lease term.
2.12 Payroll expense and related contributions
The Group provides a range of benefits to employees, including annual bonus
arrangements, paid holiday arrangements and defined contribution pension
plans.
Short term benefits, including holiday pay and other similar non-monetary
benefits, are recognised as an expense in the period in which the service is
received.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies (continued)
2.13 Share based payments
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to profit or loss over the vesting period.
Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each Statement of Financial Position
date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest. Market vesting
conditions are factored into the fair value of the options granted. The
cumulative expense is not adjusted for failure to achieve a market vesting
condition.
The fair value of the award also takes into account non-vesting conditions.
These are either factors beyond the control of either party (such as a target
based on an index) or factors which are within the control of one or other of
the parties (such as the Group keeping the scheme open or the employee
maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to the Statement of Comprehensive
Income over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the
Statement of Comprehensive Income is charged with fair value of goods and
services received.
2.14 Pension costs
The Company operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Company. The annual
contributions payable are charged to the statement of comprehensive income.
2.15 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 five identifiable business segments,
being the manufacture (vaping and sports nutrition & wellness only) and
distribution of batteries, lighting, vaping, sports nutrition & wellness,
and branded household consumer goods.
2.16 Dividends
Dividends are recognised as a liability and deducted from equity at the time
they are approved. Otherwise dividends are disclosed if they have been
proposed or declared before the relevant financial statements are approved.
2.17 EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA")
and Adjusted EBITDA are non-GAAP measures used by management to assess the
operating performance of the Company. EBITDA is defined as profit before
finance costs, tax, depreciation and amortisation. Adjusted items are excluded
from EBITDA to calculate adjusted EBITDA.
The Directors primarily use the Adjusted EBITDA measure when making decisions
about the Company's activities as this provides useful information for
shareholders on underlying trends and performance. As these are non-GAAP
measures, EBITDA and Adjusted EBITDA measures used by other entities may not
be calculated in the same way and hence are not directly comparable.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies (continued)
2.18 Exceptional costs and adjusted items
The Company's income statement separately identifies adjusted items. Such
items are those that in the Directors' judgement are one-off in nature or
non-operating and need to be disclosed separately by virtue of their size or
incidence and may include, but are not limited to, professional fees and other
costs directly related to refinancing, acquisitions and capital transactions,
fair value movements on open forward contracts, share based payment charges
and material impairments of inventories. In determining whether an item should
be disclosed as an adjusted item, the Directors consider quantitative and
qualitative factors such as the frequency, predictability of occurrence and
significance. This is consistent with the way financial performance is
measured by management and reported to the Board.
2.19 Financial instruments
Financial assets and financial liabilities are recognised in the Group
Statement of Financial Position when the Group becomes party to the
contractual provisions of the instrument. Financial assets are de-recognised
when the contractual rights to the cash flows from the financial asset expire
or when the contractual rights to those assets are transferred. Financial
liabilities are de-recognised when the obligation specified in the contract is
discharged, cancelled or expired.
Trade and other receivables
Trade and other receivables are initially measured at transaction price less
provisions for expected credit losses. The Group applies the IFRS 9 simplified
approach to measuring expected credit losses which uses a lifetime expected
loss allowance. This lifetime expected credit losses is used in cases where
the credit risk on other receivables has increased significantly since initial
recognition. In cases where the credit risk has not increased significantly,
the Group measures the loss allowance at an amount equal to the 12-month
expected credit loss. This assessment is performed on a collective basis
considering forward-looking information.
IFRS 9's impairment requirements use forward-looking information to recognise
expected credit losses - the 'expected credit loss (ECL) model'.
Recognition of credit losses is determined by considering a broad range of
information when assessing credit risk and measuring expected credit losses,
including past events, current conditions and reasonable and supportable
forecasts that affect the expected collectability of the future cash flows of
the instrument.
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit losses over the expected life of the
financial instrument.
Credit Insurance is also in place which also mitigates the credit risk in
relation to the respective customer. This insurance is applied to most
accounts over £2,500 with exception of proforma accounts and accounts agreed
by the CEO, although some accounts are excluded from the credit insurance
having been assessed by the Board on a cost-benefit analysis - these equate
largely to the largest grocery retailers.
Interest income is recognised by applying the effective interest rate, except
for short-term receivables when the recognition of interest would be
immaterial.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Trade and other payables
Trade and other payables are initially measured at their fair value and are
subsequently measured at their amortised cost using the effective interest
rate method; this method allocates interest expense over the relevant period
by applying the "effective interest rate" to the carrying amount of the
liability.
Notes to the Group financial statements continued
as at 31 March 2022
2. Summary of significant accounting policies (continued)
Invoice discounting facility
The Company has entered into an invoice discounting arrangement with the bank,
where a proportion of the debts have been legally transferred but the benefits
and risks are retained by the Group. Gross receivables are included within
debtors and a corresponding liability in respect of the proceeds received from
the bank are shown within liabilities. The interest element of the bank's
charges are recognised as they accrue and included in the statement of
comprehensive income within other interest payable.
Borrowings
Interest-bearing overdrafts are classified as other liabilities. They are
initially recorded at fair value, which represents the fair value of the
consideration received, net of any direct transaction costs associated with
the relevant borrowings. Borrowings are subsequently stated at amortised cost
and finance charges are recognised in the Statement of Comprehensive Income
over the term of the instrument using an effective rate of interest. Finance
charges, including premiums payable on settlement or redemption, are accounted
for on an accruals basis and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they
arise. Borrowings are classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability for at least 12
months after the reporting date.
Classification as debt or equity
Debt and equity instruments issued by the Group are classified as either
financial liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial liability and an
equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recognised at the proceeds received, net of direct
issue costs. The excess of proceeds of a share issue over the nominal value is
presented within share premium.
Derivatives
Derivatives are initially recognised at the fair value on the date the
derivative contract is entered into and are subsequently re-measured at their
fair value. Changes in the fair value of derivatives are recognised in the
income statement within cost of sales, on the basis that is where the related
expense is recognised, unless they are included in a hedging arrangement.
Where the instruments have been traded to take advantage of currency movements
and not directly linked to the settlement of purchase requirements the gain or
loss is recognised separately in the statement of comprehensive income as
other operating income/expense. Financial liabilities are derecognised when
the liability is extinguished, that is when the contractual obligation is
discharged, cancelled or expires.
Notes to the Group financial statements continued
as at 31 March 2022
3. Financial risk management
3.1 Financial risk factors
The Company's activities expose it to certain financial risks: market risk,
credit risk and liquidity risk. The overall risk management programme focuses
on 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 co-operation with key staff, for further details see Note 22.
(a) Market risk
Market risk is the risk of loss that may arise from changes in market factors
such as competitor pricing, interest rates, 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.
Credit Insurance is applied to all accounts over £5,000 with exception of
proforma accounts and accounts agreed by the CEO and therefore credit risk is
considered low.
(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 on expected cash flow.
3.2 Capital risk management
The Group is funded by equity and loans. The components of shareholders'
equity are:
(a) The share capital account arising on the issue of shares.
(b) The retained reserve or deficit reflecting comprehensive income to
date.
(c) The banking facilities comprising a supply chain and invoice
discounting facility.
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
expenditures on commitments from existing cash and cash equivalent balances,
primarily received from issuances of shareholders' equity. There are no
externally imposed capital requirements. Financing decisions are made based on
forecasts of the expected timing and level of capital and operating
expenditure required to meet the Group's commitments and development plans.
Quantitative data on what the Group manages as capital is included in the
Statement of Changes in Equity and in Note 22 to the Group Financial
Statements.
3.3 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.
Notes to the Group financial statements continued
as at 31 March 2022
4. Critical accounting estimates and judgements
The preparation of the Group financial statements require management to make
judgements and estimates that affect the reported amounts of assets and
liabilities at each Statement of Financial Position date and the reported
amounts of revenue during the reporting periods. Actual results could differ
from these estimates. Information about such judgements and estimations are
contained in individual accounting policies. The key judgements and sources of
estimation uncertainty that could cause an adjustment to be required to the
carrying amount of asset or liabilities within the next accounting period are
outlined below:
Accounting estimates
4.1 Goodwill impairment
The Group tests goodwill for impairment every year in accordance with the
relevant accounting policies. The recoverable amounts of cash-generating units
are determined by calculating value in use. These calculations require the use
of estimates.
Goodwill relates to various acquisitions and amounts to £1,602,000 at 31
March 2022 (31 March 2021: £1,602,000). Management consider that the
estimates used in the impairment calculation are set out in Note 12. There are
no reasonably possible scenarios in which the goodwill would be impaired.
4.2 Useful economic lives of property, plant and equipment
Property, plant and equipment is depreciated over the useful lives of the
assets. Useful lives are based on the management's estimates of the period
that the assets will generate revenue, which are reviewed annually for
continued appropriateness. The carrying values are tested for impairment when
there is an indication that the value of the assets might be impaired. When
carrying out impairment tests these would be based upon future cash flow
forecasts and these forecasts would be based upon management judgement. Future
events could cause the assumptions to change, therefore this could have an
adverse effect on the future results of the Group.
The useful economic lives applied are set out in the accounting policies (Note
2.8) and are reviewed annually.
4.3 Valuation of acquired intangibles
IFRS 3 requires separately identifiable intangible assets to be recognised on
acquisitions. The principal estimates used in valuing the acquired intangible
assets are the future cash flows estimated to be generated from these assets,
expected customer attrition, growth in revenues and the selection of
appropriate discount rates to apply to the cash flows. The Directors'
assessment of these estimates is based on up-to-date information and evidence
available at the time of finalising the valuation.
4.4 Right of use assets - discount rate
Management makes use of estimates in determining the discount rate to be
applied to the IFRS 16 'Leases' right of use asset and liability. This
estimate determines the carrying value of the assets and liabilities, and the
resulting depreciation and interest charge that is incurred.
4.5 Share-based payments
Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which depends on the
terms and conditions of the grant. This estimate also requires determination
of the most appropriate inputs to the valuation model including the expected
life of the share option or appreciation right, volatility and dividend yield
and making assumptions about them. Options with both market and non-market
conditions are most impacted by these estimates. The share options charge is
subject to an assumption about the number of options that will vest as a
result of the expected achievement of certain non-market conditions.
Notes to the Group financial statements continued
as at 31 March 2022
4. Critical accounting estimates and judgements (continued)
Accounting judgements
4.6 Inventory obsolescence
Management make use of judgement in determining whether certain inventory
items are obsolete. Should these judgements be incorrect there could be a
material difference in the recoverable value of inventory.
5. Segmental analysis
The Chief Operating Decision Maker ("CODM") has been identified as the Board
of Directors. The Board reviews the Group's internal reporting in order to
assess performance and allocate resources. No balance sheet analysis is
available by segment or reviewed by the CODM. The Board has determined that
the operating segments, based on these reports, are the sale of:
· batteries;
· lighting;
· vaping;
· sports nutrition & wellness; and
· branded household consumer goods.
The Gross profit before foreign exchange shows the results using standard
foreign exchange rates that are used throughout the year. The foreign exchange
adjustment shown before gross profit is to adjust back to the actual rates
incurred.
Batteries Lighting Vaping Sports nutrition & wellness Branded household consumer goods Year Ended
31 March 2022
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 34,865 27,022 43,594 15,893 9,415 130,789
Cost of sales (31,184) (18,066) (24,092) (12,351) (8,219) (93,912)
Gross profit before foreign exchange 3,681 8,956 19,502 3,542 1,196 36,877
Foreign exchange 1,640
Gross Profit 38,517
Administration expenses (21,498)
Operating profit 17,019
Adjusted earnings before tax, depreciation, amortisation and adjusted items 21,055
Depreciation (2,563)
Amortisation (378)
Adjusted items (1,095)
Operating profit 17,019
Finance costs (693)
Profit before taxation 16,326
Income tax (2,863)
Profit for the year 13,463
Notes to the Group financial statements continued
as at 31 March 2022
5. Segmental analysis (continued)
Batteries Lighting Vaping Sports nutrition & wellness Branded household consumer goods Year Ended
31 March 2021
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 34,434 25,905 39,544 6,856 15,514 122,253
Cost of sales (31,156) (17,913) (23,186) (4,210) (13,867) (90,332)
Gross profit before foreign exchange 3,278 7,992 16,358 2,646 1,647 31,921
Foreign exchange 1,121
Gross Profit 33,042
Administration expenses (19,416)
Operating profit 13,626
Adjusted earnings before tax, depreciation, amortisation and adjusted items 19,272
Depreciation (1,998)
Amortisation (225)
Adjusted items (3,423)
Operating profit 13,626
Finance costs (671)
Profit before taxation 12,955
Income tax (3,117)
Profit for the year 9,838
Information about major customers
The Group has generated revenue from individual customers that accounted for
greater than 10% of total revenue. The total revenue from each of these 2
customers (2021: 2 customers) was £21,111,000 and £18,385,000 (2021:
£19,406,000 and £17,114,000). These revenues related to all segments.
Analysis of revenue by geographical destination
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
United Kingdom 115,938 112,700
Ireland 7,779 3,035
Netherlands 2,807 1,918
France 1,617 983
Rest of Europe 1,825 2,606
Rest of the World 823 1,011
130,789 122,253
The above revenues are all generated from contracts with customers and are
recognised at a point in time. All assets of the Group reside in the UK except
for total assets of £3,125,000 held in Europe.
Notes to the Group financial statements continued
as at 31 March 2022
6. Expenses by nature
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
The profit is stated after charging expenses as follows:
Inventories recognised as an expense 81,813 80,070
Impairment of inventories 750 406
Impairment of trade receivables 30 20
Staff costs - Note 8 9,442 7,026
Adjusted items - Note 7 1,095 3,423
Establishment and general 1,473 1,365
Depreciation of property, plant and equipment and right of use assets 2,563 1,998
Amortisation of intangible assets 378 225
Auditor's remuneration for audit services 112 92
Auditor's remuneration for non-audit services - 197
Furlough grant income - (342)
Other operating expenses 16,114 14,147
Total cost of sales and administrative expenses 113,770 108,627
7. Adjusted items
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
IPO costs - 1,953
Covid-19-related cost 118 -
Fair value movements on financial derivatives (1,027) 768
Restructuring costs 208 421
Share based payments charge (note 24) 1,663 75
Acquisition costs 133 15
Refinancing costs - 191
1,095 3,423
IPO costs relate to the Group's admission to AIM in February 2021, which
include £1.81m of adviser fees and commission, £0.19m of accelerated debt
arrangement fees (associated with the tranche of debt that was settled on
admission to AIM) and £0.14m in relation to company bonuses that were
contingent on the transaction.
COVID-19 costs relate to the entirely incremental agency staff that was hired
during November and December 2021 following widespread absence within our
manufacturing workforce due to COVID-related sickness and isolation.
The financial derivatives relate to open foreign exchange forward contracts
(the Group typically holds 1 years' worth of USD-denominated purchases on open
forward contracts). The charge in both years reflects the movement in the fair
value of these open forward contracts at the balance sheet date year-on-year.
Restructuring costs in FY21 relate to the integration of businesses and
subsequent streamlining of operations following the acquisitions of Provider
Distribution, the assets of LED Hut and the wider restructuring that took
place as a result of COVID-19. In FY22 these costs related to the
restructuring of the sales functions within the Group, specifically around
electrical wholesale and brand reps where customers have been redirected to
the Supreme trade website for self-service ordering going forward.
Notes to the Group financial statements continued
as at 31 March 2022
7. Adjusted items (continued)
The acquisition costs relate to the adviser fees relating to the acquisitions
that took place during both years.
Refinancing costs represent the amortisation of arrangement fees and
associated adviser fees incurred in obtaining the HSBC Senior Debt in FY20. In
FY21, the amortisation of some of these costs were accelerated and reported as
IPO costs as a result (following early repayment of a tranche of the senior
facility).
8. Employees and Directors
Year Ended Year Ended
31 March 2022 31 March 2021
No. No.
Average number of employees (including Directors):
Management and administration 80 53
Warehouse 50 57
Sales 30 26
Development 105 65
265 201
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Aggregate remuneration of staff (including Directors):
Wages and salaries 8,339 6,300
Social security costs 765 621
Other pension costs 338 105
9,442 7,026
Directors' remuneration
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Directors' emoluments 635 314
Social security costs 88 80
Company contributions to defined contribution pension schemes 2 1
725 395
The highest paid director received remuneration of £300,000 (2021:
£144,000).
The value of the Company's contributions paid to a defined contribution
pension scheme in respect of the highest paid director amounted to £1,000
(2021: £1,000).
During the year retirement benefits were accruing to 2 directors (2021: 2) in
respect of defined contribution pension schemes.
Notes to the Group financial statements continued
as at 31 March 2022
9. Finance costs
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Bank interest payable 153 430
Other interest payable 133 164
Amortisation of capitalised arrangement fees 289 -
Interest on lease liabilities 118 77
693 671
Other interest payable represents interest payable in respect of the invoice
discounting and supply chain facilities.
10. Taxation
Year Ended Year Ended
31 March 2022 31 March 2021
Current tax £'000 £'000
Current year - UK corporation tax 3,205 3,156
Adjustments to tax charge in respect of prior periods (163) -
Foreign tax on income (7) 17
Total current tax 3,035 3,173
Deferred tax
Origination and reversal of temporary differences (320) (56)
Adjustments to tax charge in respect of prior periods (173) -
Adjustments to tax charge due to change in rates 37 -
Total deferred tax (456) (56)
Total tax expense 2,579 3,117
Factors affecting the charge
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Profit before taxation 16,326 12,955
Tax at the UK corporation tax rate of 19% (2021: 19%) 3,102 2,461
Effects of expenses not deductible for tax purposes 317 128
Disallowed IPO fees - 385
Disallowed foreign exchange - 146
Adjustments to tax charge due to change in rates 37 -
Adjustments to tax charge in respect of prior periods (336) -
Recognition of previously unrecognised losses - (3)
Deferred tax on Share Based Payments (471) -
Enhanced Relief (64) -
Income not taxable for tax purposes (6) -
Total tax expense 2,579 3,117
Notes to the Group financial statements continued
as at 31 March 2022
10. Taxation (continued)
Factors that may affect future tax charges
In the Spring Budget 2020, the government announced that the previously
enacted decrease in the corporate tax rate from 19% to 17% from 1 April 2020
would no longer happen and that rates would remain at 19% for the foreseeable
future. The new law was substantively enacted by a resolution under the
Provisional Collection of Taxes Act 1968 on 17 March 2020.
In the Spring Budget 2021, the Government announced that from 1 April 2023 the
corporation tax rate will increase to 25% rather than remaining at 19% as
previously enacted. This new law was substantively enacted on 24 May 2021 and
as such has been reflected in these financial statements.
11. Earnings per share
Basic earnings per share is calculated by dividing the net income for the year
attributable to ordinary equity holders after tax by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated with reference to the weighted
average number of shares adjusted for the impact of dilutive instruments in
issue. For the purposes of this calculation an estimate has been made for the
share price in order to calculate the number of dilutive share options.
The basic and diluted calculations are based on the following:
Statutory EPS
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Profit for the year after tax 13,747 9,838
No. No.
Weighted average number of shares for the purposes of basic earnings per share 116,605,892 111,087,502
Weighted average dilutive effect of conditional share awards 4,474,425 2,124,446
Weighted average number of shares for the purposes of diluted earnings per 121,080,317 113,211,948
share
Pence Pence
Basic profit per share 11.8 8.9
Diluted profit per share 11.4 8.7
Notes to the Group financial statements continued
as at 31 March 2022
11. Earnings per share (continued)
Adjusted EPS
The calculation of adjusted earnings per share is based on the after tax
adjusted operating profit after adding back certain costs as detailed in the
table below. Adjusted earnings per share figures are given to exclude the
effects of depreciation, amortisation and adjusted items, all net of taxation,
and are considered to show the underlying performance of the Group.
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Adjusted earnings (see below) 14,976 13,353
No. No.
Weighted average number of shares for the purposes of basic earnings per share 116,605,892 111,087,502
Weighted average dilutive effect of conditional share awards 4,474,425 2,124,446
Weighted average number of shares for the purposes of diluted earnings per 121,080,317 113,211,948
share
Pence Pence
Adjusted basic profit per share 12.8 12.0
Adjusted diluted profit per share 12.4 11.8
The calculation of basic adjusted earnings per share is based on the following
data:
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Profit/(loss) for the year attributable to equity shareholders 13,747 9,838
Add back/(deduct):
Amortisation of acquisition related intangible assets 196 196
Adjusted items 1,095 3,423
Tax effect of the above (62) (104)
Adjusted earnings 14,976 13,353
Notes to the Group financial statements continued
as at 31 March 2022
12. Goodwill and other intangible assets
Domain name Trademarks Customer relationships Trade name Computer software Goodwill Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2020 124 65 419 - - 1,214 1,822
Arising on business combinations - - 341 221 - 388 950
Additions 125 - - - - - 125
At 31 March 2021 249 65 760 221 - 1,602 2,897
Additions - 1,436 - - 18 - 1,454
At 31 March 2022 249 1,501 760 221 18 1,602 4,351
Accumulated amortisation
At 1 April 2020 28 9 7 - - 44
Amortisation charged in the year 22 7 152 44 - 225
At 31 March 2021 50 16 159 44 - 269
Amortisation charged in the year 25 150 152 44 7 - 378
At 31 March 2022 75 166 311 88 7 - 647
Carrying amount
At 1 April 2020 96 56 412 - - 1,214 1,778
At 31 March 2021 199 49 601 177 - 1,602 2,628
At 31 March 2022 174 1,335 449 133 11 1,602 3,704
The amortisation charge for the year has been included in Administrative
expenses in the Statement of Comprehensive Income.
Notes to the Group financial statements continued
as at 31 March 2022
12. Goodwill and other intangible assets (continued)
Goodwill arises on acquisitions where the fair value of the consideration
given for the business exceeds the fair value of the assets acquired and
liabilities assumed.
Following acquisition of a business, the directors identify the individual
Cash Generating Units (CGUs) acquired and, where possible, allocate the
underlying assets acquired and liabilities assumed to each of those CGUs. The
carrying value of goodwill has arisen following the acquisition of subsidiary
entities, where the trade and assets have subsequently been hived up into this
company, and the related investment balance transferred to goodwill. The
carrying value of goodwill is allocated to the following cash generating
units:
As at As at
31 March 2022 31 March 2021
£'000 £'000
Lighting 159 159
Batteries 492 492
Vaping 121 121
Sports Nutrition & Wellness 400 400
Branded Household Consumer Goods 430 430
1,602 1,602
The Customer relationships, Trade name, and Goodwill arising in the year ended
31 March 2021 related to the acquisition of GT Divisions Limited. Goodwill
arising in the year ended 31 March 2020 related to the acquisition of Provider
Distribution Limited, Holding Esser Affairs B.V. and its subsidiary AGP
Trading B.V. and Monocore Limited. Goodwill arising before 1 April 2019
related to the acquisition of Powerquick, Vape Importers and Sub Ohm that was
hived up into Supreme Imports Ltd. No Goodwill arose on the acquisition of
Vendek Limited.
Impairment testing of goodwill is performed at least annually by reference to
value in use calculations which management consider to be in line with the
requirements of IAS 36. These calculations show no reasonably possible
scenario in which any of the goodwill balances could be impaired as at 31
March 2022 or 31 March 2021. There were no charges for impairment of goodwill
in 2022 (2021: nil). The pre-tax discount rate used in the value in
calculations is 14.4% (2021: 13%). The long term growth rate assumed is 2%
(2021: 2%).
Notes to the Group financial statements continued
as at 31 March 2022
13. Property, plant and equipment
Land and buildings Plant and machinery Fixtures and Motor vehicles Computer equipment Fashion hire assets Total
£'000 £'000 fittings £'000 £'000 £'000 £'000
£'000
Cost or valuation
At 1 April 2020 - 3,870 769 51 - 1,306 5,996
Additions - 1,566 1 - 100 - 1,667
Disposals - (120) - - - (1,306) (1,426)
At 31 March 2021 - 5,316 770 51 100 - 6,237
Additions - 802 201 57 236 - 1,296
On acquisition 378 21 22 179 - - 600
Disposals (378) - - - - - (378)
At 31 March 2022 - 6,139 993 287 336 - 7,755
Depreciation and impairment
At 1 April 2020 - 1,612 449 16 - 461 2,538
Depreciation charged in the year - 1,197 192 11 11 37 1,448
Eliminated on disposal - (38) - - - (498) (536)
At 31 March 2021 - 2,771 641 27 11 - 3,450
Depreciation charged in the year - 1,411 181 64 92 - 1,748
At 31 March 2022 - 4,182 822 91 103 - 5,198
Carrying amount
At 1 April 2020 - 2,258 320 35 - 845 3,458
At 31 March 2021 - 2,545 129 24 89 - 2,787
At 31 March 2022 - 1,957 171 196 233 - 2,557
The depreciation charge for the year has been included in Administrative
expenses in the Statement of Comprehensive Income.
Notes to the Group financial statements continued
as at 31 March 2022
14. Investments
As at As at
31 March 2022 31 March 2021
£'000 £'000
Balance at the beginning of the year 7 7
Balance at the end of the year 7 7
The balance of £7,000 relates to shares held in private entities, by the
acquired subsidiary, who are unlisted. IFRS 9 require these to be measured at
fair value, however due to the nature of the investment, the cost has been
deemed the fair value of the investment.
The Company owns 20% of the share capital of Elena Dolce Limited, with a
registered office of 111 Deansgate, Manchester, M3 2BQ. This was written off
in the prior year.
At 31 March 2022 the Company directly owned 100% of the following
subsidiaries, which are incorporated in England and Wales unless stated:
Subsidiary Registered address Principal activity Class of share Percentage holding
Supreme Imports Limited 4 Beacon Road, Ashburton Park, Trafford Park, Manchester M17 1AF Distribution of consumer goods Ordinary 100%
Provider Distribution Limited Unit 1 Rosewood Park, St James Road, Blackburn, Lancashire BB1 8ET Distribution of consumer goods Ordinary 100%
SI Holdings (Jersey) Limited 11 Bath Street, St Helier, Jersey, JE4 8UT Holding company Ordinary 100%
At 31 March 2022 the Company indirectly owned 100% of the following
subsidiaries, which are incorporated in England and Wales unless stated:
Subsidiary Registered address Principal activity Class of share Percentage holding
GT Divisions Limited 4 Beacon Road, Ashburton Park, Trafford Park, Manchester M17 1AF Distribution of consumer goods Ordinary 100%
VN Labs Limited Distribution of consumer goods Ordinary 100%
Battery Force Limited Dormant Ordinary 100%
Powerquick Limited Holding company Ordinary 100%
Supreme 88 Limited Holding company Ordinary 100%
Supreme Nominees Limited Holding of shares as nominee Ordinary 100%
Holding Esser Affairs B.V. Vanadiumweg 13, 3812 PX, Armersfoort, Netherlands Holding company Ordinary 100%
AGP Trading B.V. Distribution of consumer goods Ordinary 100%
SI Jersey Limited 11 Bath Street, St Helier, Jersey, JE4 8UT Dormant Ordinary 100%
Vendek Limited Unit C5, South City Business Park, Whitestown Way, Tallaght, Dublin 24, D24 Distribution of consumer goods Ordinary 100%
A993
The Directors believe that the carrying value of the investments is supported
by their underlying net assets.
Notes to the Group financial statements continued
as at 31 March 2022
15. Deferred tax
Deferred tax consists of the following temporary differences
As at As at
31 March 2022 31 March 2021
£'000 £'000
Share based payments 1,312 -
Excess of depreciation over taxable allowances (53) (171)
Short term temporary differences (103) 25
Tax losses carried forward - 5
(156) (141)
1,156 (141)
Movement in deferred tax in the year
As at As at
31 March 2022 31 March 2021
£'000 £'000
Balance at the beginning of the year (141) (191)
Credited to profit or loss 456 56
Credited to reserves 841 -
Transfer - (6)
Balance at the end of the year 1,156 (141)
The Directors consider that the deferred tax assets in respect of temporary
differences and tax losses carried forward are recoverable based on the
forecast future taxable profits of the Group.
16. Inventories
As at As at
31 March 2022 31 March 2021
£'000 £'000
Goods for resale 20,457 15,849
Raw materials 5,441 4,016
25,898 19,865
The Directors believe that the replacement value of inventories would not be
materially different than book value.
Inventories at 31 March 2022 are stated after provisions for impairment of
£600,000 (2021: £270,000).
17. Trade and other receivables
As at As at
31 March 2022 31 March 2021
£'000 £'000
Trade receivables 17,848 13,321
Amounts owed by related parties - 1,790
Other receivables 346 172
Prepayments 841 769
19,035 16,052
Notes to the Group financial statements continued
as at 31 March 2022
17. Trade and other receivables (continued)
The Directors believe that the carrying value of trade and other receivables
represents their fair value. 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.
The movement in provisions for impairment are shown below:
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Balance at the beginning of the year 37 26
Charged to the statement of comprehensive income 30 20
Utilisation of provision (35) (9)
Balance at the end of the year 32 37
Trade receivables disclosed above include amounts (see below for aged
analysis) which are past due at the reporting date but against which the Group
has not recognised an allowance for doubtful receivables because there has not
been a significant change in credit quality and the amounts are still
considered recoverable.
Ageing of receivables
As at As at
31 March 2022 31 March 2021
£'000 £'000
Current 12,177 10,814
31 - 60 days 4,390 1,969
61 - 90 days 1,254 126
90 days + 59 449
Less provisions for impairment (32) (37)
17,848 13,321
In determining the recoverability of a trade receivable the Group considers
any change in the credit quality of the trade receivable from the date credit
was initially granted up to the reporting date. The concentration of credit
risk is limited due to the customer base being large and unrelated. Credit
insurance is also in place.
Details on the Group's credit risk management policies are shown in Note 22.
The Group does not hold any collateral as security for its trade and other
receivables.
18. Cash and cash equivalents
As at As at
31 March 2022 31 March 2021
£'000 £'000
Cash at bank 3,926 7,505
Notes to the Group financial statements continued
as at 31 March 2022
19. Trade and other payables
As at As at
31 March 2022 31 March 2021
£'000 £'000
Trade payables 8,149 7,299
Accruals and deferred income 6,302 4,343
Other tax and social security 2,843 1,648
Directors loan account 2 5
17,296 13,295
Trade payables principally consist of amounts outstanding for trade purchases
and ongoing costs. They are non-interest bearing and are normally settled on
30 to 60 day terms.
The Directors consider that the carrying value of trade and other payables
approximates their fair value. Trade and other payables are denominated in
Sterling, Euros and US Dollars. Supreme 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.
20. Borrowings
As at As at
31 March 2022 31 March 2021
£'000 £'000
Current
Bank loans 3,984 5,304
Amounts owed to related parties 1,779 3,392
Other loans - 1,165
IFRS 16 lease liability (Note 21) 902 615
6,665 10,476
Non-current
Bank term loan - 3,695
IFRS 16 lease liability (Note 21) 1,294 963
1,294 4,658
Total borrowings 7,959 15,134
The earliest that the lenders of the above borrowings require repayment is as
follows:
As at As at
31 March 2022 31 March 2021
£'000 £'000
In less than one year 6,665 10,476
Between two and five years 1,294 4,658
In more than five years - -
7,959 15,134
Notes to the Group financial statements continued
as at 31 March 2022
20. Borrowings (continued)
The Group is funded by revolving credit facility ("RCF") of £25m provided by
HSBC that is secured by way of a fixed and floating charge over all assets.
Interest is charged at 2.3%-2.8% over SONIA for all drawn amounts and 35% of
this charge for undrawn amounts. The facility is for 3 years and expires 31
March 2025. There are 2 principal covenants attached to the RCF and these are
tested quarterly.
Current bank borrowings include an invoice discounting facility of £8.5m,
which is secured by an assignment of, and fixed charge over the trade debtors
of Supreme Imports Limited. The facility was drawn down £83,000 at year end.
Furthermore, the Group has access to a supply chain facility (also provided by
HSBC) of $0.5m which is secured by fixed and floating charges over all assets
of the Group. This facility is denominated in US Dollars. At the balance sheet
date the facility is undrawn (FY21: £1,165,000).
Therefore undrawn but committed facilities at 31 March 2022 were £25m for the
RCF (FY21: £nil), £8.4m for the invoice discounting facility (FY21: £8.5m)
and $0.5m for the supply chain facility (FY21: £3.4m).
The supply chain facility is utilised to provide short term cash flow to
settle liabilities arising out of purchases made in the normal course of
business. The amount advanced takes into consideration the cash requirements
of the Group and the working capital cycle.
21. Leases
Amounts recognised in the Statement of Financial Position
The balance sheet shows the following amounts relating to leases:
Right-of-use assets £'000
Balance at 1 April 2020 1,495
Additions 531
Depreciation charge for the year (550)
Balance at 31 March 2021 1,476
Additions 1,455
Depreciation charge for the year (815)
Balance at 31 March 2022 2,116
The net book value of the right of use assets is made up as follows:
As at As at
31 March 2022 31 March 2021
£'000 £'000
Buildings 2,108 1,447
Cars 8 29
2,116 1,476
Notes to the Group financial statements continued
as at 31 March 2022
21. Leases (continued)
Lease liabilities As at As at
31 March 2022 31 March 2021
£'000 £'000
Maturity analysis - contractual undiscounted cash flows
Less than one year 988 678
More than one year, less than two years 514 654
More than two years, less than three years 467 180
More than three years, less than four years 407 120
More than four years, less than five years - 60
More than five years - -
Total undiscounted lease liabilities at year end 2,376 1,692
Finance costs (180) (114)
Total discounted lease liabilities at year end 2,196 1,578
Lease liabilities included in the statement of financial position
Current 902 615
Non-current 1,294 963
2,196 1,578
Amounts recognised in the Consolidated Statement of Comprehensive Income
The Consolidated Statement of Comprehensive Income shows the following amounts
relating to leases:
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Depreciation charge - Buildings 794 498
Depreciation charge - Cars 21 52
815 550
Interest expense (within finance expense) 118 77
The above leases relate to buildings and cars.
There are no future cash outflows to which the Group is potentially exposed
that are not reflected in the measurement of lease liabilities. There are no
restrictions or covenants imposed by leases and there have been no sale and
leaseback transactions
Any expense for short-term and low-value leases is not material and has not
been presented.
Notes to the Group financial statements continued
as at 31 March 2022
22. Financial instruments
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 in Notes 2 and 3. Further quantitative information in respect of
these risks is presented below and throughout these Group financial
statements.
22.1 Capital risk management
Details of the Group's capital are shown in Note 23, as well as in the
Statement of Changes in Equity.
22.2. Market risk
Competitive pressures remain a principal risk for the Group. The risk is
managed through focus on quality of product and service levels, coupled with
continuous development of new products to offer uniqueness to the customer.
Furthermore, the Group's focus on offering its customers a branded product
range provides some protection to its competitive position in the market.
Stock obsolescence risk is managed through closely monitoring slow moving
lines and prompt action to manage such lines through the various distribution
channels available to the Group.
In addition, the Group's operations expose it to a variety of financial risks
that include price risk, credit risk, liquidity risk, foreign currency risk
and interest rate cash flow risk. The Group has in place a risk management
programme that seeks to limit the adverse effects on the financial performance
of the Group by regularly monitoring the financial risks referred to above.
Given the size of the Group, the Directors have not delegated the
responsibility of monitoring financial risk management to a sub-committee of
the board. The policies set by the Board are implemented by the Group's
finance department.
22.3. Credit risk
The Group's sales are primarily made with credit terms of between 0 and 30
days, 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. The maximum exposure to credit risk is £5,000 per
individual customer that is covered by the policy, being the insurance excess.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
Expected losses are based on the Group's historical credit losses, adjusted
for current and forward-looking information on macroeconomic factors affecting
the Group's customers. The Group's B2B historic credit losses have been
minimal on the back of strong credit control, in addition to the insurance
cover in place. This results in an immaterial expected credit loss being
provided for.
An analysis of past due but not impaired trade receivables is given in Note
17.
22.4. 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. This is monitored on a
monthly basis, including re-forecasts of the borrowings required.
Notes to the Group financial statements continued
as at 31 March 2022
22. Financial instruments (continued)
22.5. 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. When necessary, the Group uses foreign exchange forward contracts to
further mitigate this exposure.
The following is a note of the assets and liabilities denominated at each
period end in US dollars:
As at As at
31 March 2022 31 March 2021
£'000 £'000
Trade receivables 1,498 1,481
Net cash and overdrafts 188 58
Supply chain facility - (1,165)
Trade payables 820 830
2,506 1,204
The effect of a 20 percent strengthening of Pound Sterling at 31 March 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 year and a decrease to net assets of £418,000, (2021:
£201,000). A 20 percent 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 £627,000 (2021: £301,000).
The following is a note of the assets and liabilities denominated at each
period end in Euros:
As at As at
31 March 2022 31 March 2021
£'000 £'000
Trade receivables 51 42
Net cash and overdrafts 27 -
Trade payables (261) (269)
(183) (227)
The effect of a 20 percent strengthening of Pound Sterling at 31 March 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 year and an increase to net assets of £31,000 (2021:
£38,000). A 20 percent weakening of the exchange rate on the same basis,
would have resulted in a decrease to total comprehensive income and a decrease
in net assets of £46,000 (2021: £57,000).
Derivative financial instruments - Forward contracts
The Group mitigates the exchange rate risk for certain foreign currency
creditors by entering into forward currency contracts. The Group's forex
policy is to purchase forward contracts to mitigate changes in spot rates,
based on the timing of purchases to be made. Management forecast the timing of
purchases and make assumptions relating to the exchange rate at which the
Group costs its products and take out forward contracts to mitigate
fluctuations to an acceptable level. At 31 March 2022, the outstanding
contracts mature between 2 and 10 months of the year end, (2021: 1 and 12
months). At 31 March 2022 the Group was committed to buy $18,700,000 (2021:
$24,000,000) in the next financial year.
Notes to the Group financial statements continued
as at 31 March 2022
22. Financial instruments (continued)
The forward currency contracts are measured at fair value using the relevant
exchange rates for GBP:USD and GBP:EUR. The fair value of the contracts at 31
March 2022 is an asset of £467,000 (2021: liability of £559,000). During the
year ended 31 March 2022, a profit of £1,027,000 (2021: loss of £768,000)
was recognised Adjusted items for changes in the fair value of the forward
foreign currency contracts.
Forward currency contracts are valued using level 2 inputs. The valuations are
calculated using the year end exchange rates for the relevant currencies which
are observable quoted values at the year-end dates. Valuations are determined
using the hypothetical derivative method which values the contracts based on
the changes in the future cashflows based on the change in value of the
underlying derivative.
22.6. Interest rate cash flow risk
The Group's interest-bearing liabilities relate to its variable rate banking
facilities. The Group has a policy of keeping the rates associated with
funding under review in order to react to any adverse changes in the
marketplace that would impact on the interest rates in place. The effect of a
1% increase in interest rates would have resulted in a decrease in net assets
of £69,000 (2021: £136,000).
22.7. Price risk
The Group's profitability is affected by price fluctuations in the sourcing of
its products. The Group continually monitors the price and availability of
materials but the costs of managing the exposure to price risk exceed any
potential benefits given the extensive range of products and suppliers. The
Directors will revisit the appropriateness of this policy should the Group's
operations change in size or nature.
22.8. 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 as disclosed in Note 20.
Notes to the Group financial statements continued
as at 31 March 2022
22. Financial instruments (continued)
22.9 Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities recognised may also be
categorised as follows:
As at As at
31 March 2022 31 March 2021
£'000 £'000
Financial assets
Financial assets measured at amortised cost
Trade and other receivables 18,194 15,283
Cash and cash equivalents 3,926 7,505
22,120 22,788
Financial liabilities
Financial liabilities measured at amortised cost
Non-current:
Borrowings (1,294) (4,658)
Current:
Borrowings (6,665) (10,476)
Trade and other payables (8,149) (7,304)
Accruals and deferred income (6,304) (4,343)
(22,412) (26,781)
Financial assets / (liabilities) measured at fair value through profit and
loss
Derivative financial instruments 467 (559)
467 (559)
Net financial assets and liabilities 175 (4,552)
Non-financial assets and liabilities
Plant, property and equipment 2,557 2,787
Right of use assets 2,116 1,476
Goodwill and other intangible assets 3,704 2,628
Investments 7 7
Inventory 25,898 19,865
Prepayments 841 769
Deferred tax asset 1,312 -
Deferred tax liability (156) (141)
Other taxation and social security (2,843) (1,648)
Income tax payable (1,299) (2,370)
32,137 23,373
Total equity 32,312 18,821
Notes to the Group financial statements continued
as at 31 March 2022
23. Share capital and reserves
Share capital and share premium
Equity instruments issued by the Company are recognised at the proceeds
received, net of direct issue costs. The excess of proceeds of a share issue
over the nominal value is presented within share premium.
Number of shares authorised and in issue
Ordinary £0.10
No. £
At 31 March 2021 116,499,980 11,649,998
Issued 127,094 12,709
At 31 March 2022 116,627,074 11,662,707
On 8 June 2021, 127,094 new Ordinary £0.10 shares were issued at a
subscription price of £0.38, generating share premium of £36,057.
Dividends
Dividends of £2,566,000 (2021: £3,000,000) were declared in the year. This
amounted to £0.022 per share (2021: £0.027).
Merger reserve
The merger reserve arose on a past business combination of entities that were
under common control. The merger reserve is the difference between the cost of
investment and the nominal value of the share capital acquired.
Share-based payments reserve
The share-based payments reserve represents the cumulative impact of the
share-based payments charge.
Retained earnings
Retained earnings includes all current and prior period retained profits and
losses, including foreign currency translation differences arising from the
translation of financial statements of the Company's foreign entities.
All transactions with owners of the parent are recorded separately within
equity.
24. Share based payments
The Group operates a number of share incentive arrangements as set out below.
The Supreme plc Enterprise Management Incentive Scheme ("the EMI Scheme")
On the 14 September 2018, the Group implemented an Enterprise Management
Incentive Scheme. This was granted to employees to acquire shares in the
Company for a number of ordinary shares of 10p each at the exercise price at
the option of the employee. These options may not be granted unless a relevant
event attached to the option has occurred. These options vested immediately
and will expire after 10 years from grant date.
These option were fairly valued upon a valuation of the entity that had been
performed by an independent expert.
On 4 January 2021 the Company granted options to one employee over 594,914
shares at the same exercise price under an individual unapproved option
arrangement pursuant to a longstanding commitment.
Notes to the Group financial statements continued
as at 31 March 2022
24. Share based payments (continued)
Weighted average exercise price 2022 Weighted average exercise price 2021
2022 2021
£ No. £ No.
Outstanding at the beginning of the year 0.38 1,683,365 0.38 2,174,120
Lapsed - (20,726) - (187,704)
Granted during the year - - - 594,914
Exercised during the year - (127,094) - (897,965)
Outstanding at the end of the year 0.38 1,535,545 0.38 1,683,365
The profit and loss expense that has been recognised in the current year is
£nil (2021: £nil) and included within administrative expenses.
The Supreme plc Sharesave Scheme 2021 ("the SAYE Scheme")
The Company established the SAYE Scheme on 26 January 2021. The SAYE Scheme is
open to all employees who have achieved the qualifying length of service at
the proposed date of grant (initially set at 3 months). Under the SAYE Scheme,
an individual who wishes to accept an invitation to apply form options to be
granted to him or her much take out a 3 or 5 year savings contract with an
approved savings body selected by the Company. The individual makes a fixed
monthly contribution over the life of the savings contract and on maturity
receives a tax-free bonus. The monthly contribution can be a minimum of £10
and a maximum of £500.
The price at which options may be exercised will be set by the Directors at
the date of grant and may be at a discount of up to a maximum of 20 per cent.
against the market value at the date of grant of the Shares over which they
are granted. The Option will generally be exercisable by the holder within
six-month period after the bonus becomes payable on his or her relevant
savings contract.
All employees of the Group (including executive directors) at 3 March
2021 were invited to participate in the SAYE Scheme. Employees were invited
to subscribe for options over the Company's ordinary shares of 10p each with
an exercise price of 152p, which represents a 20% discount to the closing
middle market price of 190p per Share ("Options") on 2 March 2021, being the
trading day before the invitation for employees to participate was made. Other
than in the case of a takeover or demerger or similar event, an option will
generally be exercisable by the holder in relation to the SAYE Scheme within
the 6-month period after the bonus becomes payable on his or her relevant
savings contract. Any option not so exercised will lapse. There are no
conditions of exercise in relation to options granted under the SAYE Scheme.
A total of 100 Eligible Employees elected to participate in the SAYE Scheme,
including and pursuant to these elections, options over a total of 438,620
Shares have been granted.
Notes to the Group financial statements continued
as at 31 March 2022
24. Share based payments (continued)
The Supreme plc Company Share Option Plan 2021 ("the CSOP Scheme")
The Company established the CSOP Scheme on 26 January 2021. Grants under the
CSOP Scheme may be made by the Company as subscription Options or, with the
consent of the Remuneration Committee, by an existing shareholder over shares
already issued.
Under the CSOP Scheme certain eligible employees have been granted options to
subscribe for ordinary shares in the Company of 10p each with an exercise
price of 174 pence per ordinary share equal to the closing middle market
price on 15 February 2021. The options were granted on 16 February 2021 and
may be exercisable by the holder at any time between the third and tenth
anniversaries of the date of the grant. Upon exercise, the relevant Shares
will be allotted. A number of employees have been granted additional options
on the same basis under the Unapproved Scheme detailed below to the extent
that the total number of options granted to them exceeded the maximum number
permitted to be granted under the CSOP Scheme by HMRC rules.
23 employees have been granted options under the CSOP over a total of 206,886
shares and 4 employees have been granted options under the Unapproved Scheme
over a total of 94,825 Shares, being in aggregate 301,711 shares.
The Supreme plc Unapproved Share Option Scheme 2021 ("the Unapproved Scheme")
The Company established the Unapproved Scheme on 26 January 2021. Grants under
the CSOP Scheme may be made by the Company as subscription Options or, with
the consent of the Remuneration Committee, by an existing shareholder over
shares already issued.
As described in the Directors' Remuneration Report, on 9 March 2021 the
Company awarded the following options to the executive directors under the
Unapproved Scheme.
Options to subscribe for a total of 5,825,000 Shares at nominal value were
granted to the CEO in two equal tranches. Each tranche of options will be
subject to a performance condition which must be wholly satisfied for the
relevant option to be exercisable. The performance condition for the first
tranche of options is that total shareholder return per Share ("TSR") from
Admission until the third anniversary of Admission is at least 100 per cent.
of the placing price of 134 pence as at Admission (the "Placing Price"). The
performance condition for the second tranche of options is that the TSR from
Admission until the fifth anniversary of Admission is at least 200 per cent.
of the Placing Price.
Options to subscribe for up to 111,940 Shares at nominal value were granted to
the CFO. The options are subject to a performance condition requiring an
average annual TSR of 7.5 per cent. to become exercisable in part and an
annual average TSR of 10 per cent. to become fully exercisable, in each case
measured over a period of 3 years from Admission as against the Placing Price.
Under the CSOP and Unapproved Schemes, the Group has made awards over
6,238,651 conditional shares to certain Directors and employees.
The vesting of most of these awards is subject to the Group achieving certain
performance targets under the Unapproved Scheme, measured over a three or five
year period, as set out in the Remuneration Report. The options will vest
depending on achievement of the Group's absolute total shareholder return
("TSR") as follows:
Notes to the Group financial statements continued
as at 31 March 2022
24. Share based payments (continued)
Measurement period Absolute TSR p.a % of element vesting
CFO awards 1 February 2021- 1 February 2024 =>10% 100%
1 February 2021- 1 February 2024 7.5% 0%
1 February 2021- 1 February 2024 =<7.5% 0%
CEO awards 1 February 2021- 1 February 2024 =>100% 100%
1 February 2021- 1 February 2024 <100% 0%
CEO awards 1 February 2021- 1 February 2026 =>200% 100%
1 February 2021- 1 February 2026 <200% 0%
The awards under the CSOP Scheme and Unapproved Scheme to employees other than
as noted above are not subject to performance conditions and vest subject to
continued employment only.
In respect of the CFO and CFO awards, the fair value at grant date is
independently determined using a Monte Carlo simulation model which calculates
a fair value based on a large number of randomly generated projections of the
Company's future share prices. In respect of the CSOP and Unapproved Schemes,
the fair value at grant date has been determined using a Black-Scholes model
that takes into account the exercise price, the term of the option, the share
price at grant date and expected price volatility of the underlying share, and
the risk-free interest rate for the term of the option as shown below:
CSOP/ CFO awards CEO awards - 3 year performance period CEO awards - 5 year performance period
unapproved scheme
Grant date 16 February 2021 9 March 2021
Share price at grant date 176p 185p
Exercise price 174p Nil
Expected volatility 45%
Projection period (years) N/A 2.89 4.89
Expected life (years) 6.5 3 5
Expected dividend yield 4.10% 3.90%
Risk-free interest rate 0.34% 0.12% 0.31%
Fair value per award 50p 109p 74p 59p
The expected volatility has been estimated based upon the historical
volatility of the FTSE AIM Retailers and Personal & Household goods sub
sectors.
A summary of the awards made during the year is set out below:
CSOP/ CFO awards CEO awards - 3 year performance period CEO awards - 5 year performance period SAYE Scheme
unapproved scheme
At the start of the year 301,711 111,940 2,912,500 2,912,500 438,620
Awards lapsed in year (5,746) - - - (35,757)
At the end of the year 295,965 111,940 2,912,500 2,912,500 402,863
No awards are exercisable at the end of the year. The charge for share-based
payments in the year was £1,663,000 (2021: £75,000) which is included within
Adjusted items. Of this, £211,000 related to Employers National Insurance
Contributions and £1,452,000 related to the share-based payments charge.
Notes to the Group financial statements continued
as at 31 March 2022
25. Business combinations
Acquisition of Vendek Limited
On 10 June 2021 Supreme Imports Limited acquired the entire share capital of
Vendek Limited, a leading Dublin-based distributor of batteries and lighting
products, for initial consideration of £1.3m.
Recognised amounts of identifiable assets acquired and liabilities assumed
Book value Fair value adjustment Fair value
£'000 £'000 £'000
Fixed assets
Property, plant and equipment 600 - 600
600 - 600
Current assets
Inventory 1,148 (52) 1,096
Debtors due within one year 805 (48) 757
Cash at bank and in hand 271 - 271
2,224 (100) 2,124
Total assets 2,824 (100) 2,724
Creditors
Due within one year (781) - (781)
(781) - (781)
Total identifiable net assets 1,943
Goodwill -
Total purchase consideration 1,943
Consideration
Cash 1,311
Deferred consideration 632
Total purchase consideration 1,943
Cash outflow on acquisition
Purchase consideration settled in cash, as above 1,311
Less: cash and cash equivalents acquired (271)
Net cash outflow on acquisition 1,040
Following a purchase price allocation exercise the Company did not identify
further acquired intangible assets. The fair value adjustments reflect
increases to inventory provisions of £52,000 and trade receivables of
£48,000. There was no additional consideration paid over the fair value of
the net assets acquired and therefore no goodwill arose on the acquisition.
Acquisition costs of £133,000 were incurred and expensed.
The revenue from Vendek Limited included in the Statement of Comprehensive
Income for the year ended 31 March 2022 was £3,898,000. Vendek Limited also
contributed profit of £227,000 over the same period. If the acquisition had
occurred on 1 April 2021, consolidated pro-forma revenue and profit before tax
for the year ended 31 March 2022 would have increased by £565,000 and
decreased by £154,000 respectively.
In addition, on 30 June 2021, Supreme Imports Limited acquired the
intellectual property rights and inventory of Sci-MX Nutrition Limited, a
leading sports nutrition and supplements business for a consideration of
£2.3m. This purchase does not meet the definition of a business combination
under IFRS3 and the consideration has been allocated to the fair value of the
assets acquired as follows:
Notes to the Group financial statements continued
as at 31 March 2022
25. Business combinations (continued)
£'000
Trademarks 1,436
Inventories 893
2,329
26. Ultimate controlling party
The Directors consider the ultimate controlling party to be S Chadha and his
concert party.
27. Other financial commitments
See note 22.5 for details of the financial commitments under US dollar forward
exchange contracts.
28. Related party transactions
28.1. Remuneration of key personnel
Remuneration of key management personnel, considered to be the Directors of
the Company and members of the senior management team is as follows:
Year Ended Year Ended
31 March 2022 31 March 2021
£'000 £'000
Short-term employee benefits 1,030 806
Social security costs 126 104
Employee share schemes 1,402 141
Post-employment benefits 9 6
Total compensation 2,567 1,057
28.2. Transactions and balances with key personnel
As at As at
31 March 2022 31 March 2021
£'000 £'000
Loan balances with Directors:
Balance outstanding from director (2) (5)
28.3. Transactions and balances with related companies and businesses
Year Ended / As at Year Ended / As at
31 March 2022 31 March 2021
£'000 £'000
Transactions with related companies:
Rent paid to Chadha Properties Limited 180 180
Balances with related companies:
Amounts owed by Nash Peters Limited - 1,790
Amounts owed to Supreme 8 Limited (1,780) (3,392)
Notes to the Group financial statements continued
as at 31 March 2022
28. Related party transactions (continued)
The above companies are related due to common control and Directors.
Amounts owed by Nash Peters, related due to common directorships, was due for
repayment on demand and interest was charged on the outstanding balance at a
rate of 5%. This balance was repaid in full during the year.
Amounts owed to Supreme 8 Limited, a minority shareholder, are for a loan due
for repayment on demand and interest is charged on the outstanding balance at
a rate of 3%. £1,790,000 of this balance was repaid during the year and the
remainder was paid shortly after year end and is disclosed as a post balance
sheet event.
29. Analysis and reconciliation of net debt
1 April Acquisitions Other non-cash changes Cashflow 31 March 2021
2020
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 6,718 67 - 720 7,505
Current borrowings (10,573) - (741) 838 (10,476)
Non-current borrowings (17,413) - (47) 12,802 (4,658)
Net debt (21,268) 67 (788) 14,360 (7,629)
1 April Acquisitions Other non-cash changes Cashflow 31 March 2022
2021
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 7,505 271 (32) (3,818) 3,926
Current borrowings (10,476) - (1,817) 5,628 (6,665)
Non-current borrowings (4,658) - (331) 3,695 (1,294)
Net debt (7,629) 271 (2,180) 5,505 (4,033)
30. Post balance date events
On 4 April 2022, the Group drew down £4.1 million on the RCF to fully settle
the existing 5-year loan facility with HSBC and cover the arrangement fee
attached to the RCF.
On 27 April 2022, the Group repaid the final tranche of its related party loan
to Supreme8 Limited. No further related party items exist on the Balance
Sheet.
On 10 June 2022, Supreme acquired the entire share capital of Liberty Flights
Holdings, a long-established and leading brand of e-liquids and vaping devices
for an initial consideration of £7.75 million. The acquisition is expected to
be immediately earnings-enhancing.
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