REG - Supreme PLC - Final Results
05/07/2023 07:00
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RNS Number : 0361F Supreme PLC 05 July 2023
5 July 2023
Supreme plc
("Supreme," the "Company" or the "Group")
Audited Final Results for the Year Ended 31 March 2023
- Robust trading across FY23 and a particularly strong second
half, underpinned by an outstanding performance from the Vaping category and
earnings-enhancing acquisitions
- Record levels of cash generated from operations
- Very positive outlook, supported by a significant profit upgrade
for FY24
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 2023 ("FY23").
Financial highlights
· Revenue growth of 19%; half of which was driven by
earnings-enhancing acquisitions and the remainder from strong organic growth
· Vaping division delivered a record performance nearly doubling
revenues to £76.1 million (FY22: £43.6 million) and increasing gross profit
to £28.1 million (FY22: £19.5 million)
· Highly cash-generative in the period, delivering £19.3 million
cash from operations in the period (FY22: £11.8 million), resulting in an
Adjusted net cash(4) position of £3.2 million by year end (FY22: Adjusted net
debt(4) of £1.9 million).
· Record levels of investment in M&A and capex ("investing
activities") of £11.3 million (FY22: £3.8 million) to support future growth
· Disposal of the T-Juice brand generated £4.0 million of cash in
FY23 and the ongoing strategic partnership with the buyer means Supreme
retains exclusive manufacturing rights
Operational highlights
· Three acquisitions completed, with two having been successfully
integrated and immediately Adjusted EBITDA(1) enhancing during the year and
the third acquisition completed immediately prior to year-end
· Secured a 15-year lease on a new facility in Manchester which
will significantly expand the Group's in-house distribution capabilities, with
activities from the site expected in Q2 of FY24
· Significant progress reported on the Group's ESG strategy, with a
particular focus on energy consumption and its people agenda
Dividends
· A final dividend, subject to shareholder approval at the Annual
General Meeting on the 26 September 2023, of 2.2 pence per share.
· The Group paid an interim dividend of 0.8 pence per share, which
together with the final dividend take total dividends for the year to 3.0
pence per share
Outlook / Current Trading
· The Group has made a very solid start to FY24. The core business
and the FY23 acquisitions are all performing strongly and as a result the
Board expects Adjusted EBITDA(1) to be ahead of latest expectations by at
least £1 million.
· In addition, the Group now expects to generate a further £25-30
million of revenue and around £2 million incremental Adjusted EBITDA(1) in
FY24 in respect of a master distributor appointment with the UK's leading
vaping brands; Elfbar and Lost Mary.
· As a result, the Board now anticipates that trading in FY24 will
be significantly ahead of current consensus(5)
Sandy Chadha, Chief Executive Officer of Supreme, commented:
"Supreme has delivered a strong performance across the year punctuated by an
outstanding contribution from our Vaping division, which has almost doubled
revenues in the year.
Our commitment to providing highly affordable but competitively priced
products sits at the heart of our business and our diverse client base
continues to provide a stable platform for growth.
As we look to the future, we remain committed to expanding our product set,
both organically and via acquisition, which in turn creates greater
opportunities to cross sell and forge ever closer bonds with our customers.
I am delighted with the strong performance of the Group so far in FY24 and to
have had our vaping distribution capabilities recognised by one of the world's
biggest vaping brands is testament to our expertise and our reputation.
Lastly, I would like to thank everyone in the business who have been
exceptional throughout the year and look forward to updating all our
stakeholders later in the year on our continued progress."
Retail Investor Presentation:
A presentation for retail investors covering the results for the year ended 31
March 2023 will be held at 11.00 a.m. on Thursday 6(th) July 2023.
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-6july2023
(https://www.equitydevelopment.co.uk/news-and-events/supreme-investor-presentation-6july2023)
(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 non-recurring items
(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 non-recurring items
(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 non-recurring items
(4)Adjusted net debt means net debt as defined in Note 29 to these financial
statements excluding the impact of IFRS16
(5)Company compiled analyst consensus for the year ending 31 March 2024 prior
to the release of this announcement and the vaping distribution opportunity
announcement (dated 5 July 2023) was revenue of £159 million and Adjusted
EBITDA(1) of £22.6 million.
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
Samantha Harrison / Harrison Clarke / Samuel Littler
Berenberg (Broker) +44 (0)20 3207 7800
Mark Whitmore / Marie Moy / Mara Grasso
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.
https://investors.supreme.co.uk/ (https://investors.supreme.co.uk/)
Chair Statement
I am pleased to report that Supreme delivered a robust performance across the
financial year ended 31 March 2023 with strong second half momentum going into
FY24. This performance, achieved against a challenging macroeconomic backdrop,
includes outstanding organic and acquisitive growth in our key Vaping
division, and solid progress across our Batteries and Sports Nutrition &
Wellness segments. Despite well-documented global supply chain and
inflationary pressures, Supreme has continued to make significant operational
and financial progress and is positioned strongly for future growth as we
focus on delivering on our strategic aspirations.
Supreme delivered revenue of £155.6 million (FY22: £130.8 million), up 19%
year-on-year, whilst Adjusted EBITDA(1) fell by 8% to £19.4 million (FY22:
£21.1 million), a direct result of the temporary setback to Lighting. Supreme
remains a highly cash-generative business, having generated cash from
operations of £19.3 million (FY22: £11.8 million) and is further supported
by a healthy balance sheet and unutilised borrowing facilities of £30
million. The Group's vertically integrated model remains resilient and
continues to facilitate the development of the business and our various
interconnected functions.
In line with our strategy to expand our in-house manufacturing and
distribution operations, we secured a 15-year lease on a new facility near our
existing warehouse in Manchester and remain on track to commence activities
from this site in FY24.
The Vaping division remains the Group's key growth driver, and we continued
our impressive trading momentum in this category throughout the financial year
by delivering a 75% increase in revenue year-on-year. In addition to
generating significant organic growth, largely through robust sales and
complementary new product development in our market-leading 88vape brand, we
delivered the immediately earnings-enhancing acquisitions of Liberty Flights,
Cuts Ice and Superdragon. Liberty Flights and Cuts Ice were integrated into
the wider Group, significantly scaling Supreme's vaping offering whilst
providing considerable cross-sell opportunities. These acquisitions reflect
the Company's strategy to support a tobacco-free UK by offering both credible
and safer alternatives for nicotine consumption.
Acquired as part of the Cuts Ice transaction, we announced the disposal of the
intellectual property of T-Juice to an associated company of leading French
e-cigarette and e-liquids wholesale La Vape Professional Distribution ('LVP')
in March 2023. This new arrangement ensures Supreme retains the exclusive
manufacturing rights to T-Juice for five years, enabling the Group to focus on
its core manufacturing expertise and the transaction generated £4 million of
cash for the Group on completion.
Our Sports Nutrition & Wellness segment delivered a credible performance,
as we continued to mitigate the effects of well-publicised inflationary raw
material pressures and supply chain headwinds on the sector. Following the
successful rebrand of Sci-MX in the first half of the financial year, we are
well-poised to capitalise on the fast-growing global demand for sports
nutrition products, including portable protein snacks and supplements, as whey
prices begin to normalise.
Stabilising the Lighting division was a key priority for the Group after a
temporary setback derived from customer over-stocking in FY22, and pleasingly
we continued to make progress recovering the category despite its overall
disappointing performance in the financial year where gross profit fell from
£9.0 million in FY22 to £4.1 million in FY23. Strengthened by long-term
exclusive license and distribution agreements, as well as increased networking
and market expansion opportunities generated following the integration of
Vendek, we continued to focus on enhancing our manufacturing of private and
white label lighting products, ensuring we strive to provide the best service
for brands and retailers.
As Chair I am particularly proud of the brands we have acquired this year; our
extremely talented team continues to identify, execute and integrate
complementary, well-priced, immediately earnings-enhancing brands into the
Supreme platform, ensuring this does not detract or dilute our core business
offering. It is a clear marker of the exceptional talent we have in our
business. We remain focused on exploring further M&A and partnership
opportunities to extend our manufacturing and distribution capabilities,
retaining a diverse offering of great value, high-quality products to our
customers and ultimately the consumer. We firmly believe that Supreme will
continue to play an integral role in minimising the economic impact of the
cost-of-living crisis on consumers, and we look ahead with confidence as we
strive to deliver affordable items to market via leading retailers and our D2C
online channels.
Supreme responded quickly to the cost-of-living issues faced by our colleagues
and awarded an immediate 10% pay increase to more than half of our colleagues,
regardless of location, role or length of service in September 2022. The
scheme was directed towards those colleagues who were particularly impacted by
the cost-of-living crisis. It is testament to the culture and values within
our business that Sandy, our founder and CEO, volunteered to sacrifice his
entire salary from then until the end of the financial year in order to
finance this in FY23. We realise that our colleagues are one of our key
assets, many of whom worked tirelessly through the Covid-19 pandemic and who
continue to be pivotal to the future success of the Group.
Encouraged by the recent strong second half trading performance, the Board is
pleased with the Group's progress, and on its behalf, I would like to thank
all employees for their continued diligence and support. By responding
effectively and prudently to turbulent macroeconomic trading conditions, our
highly experienced management team continues to drive Supreme forward, and the
Board has full confidence in the Company's ability to deliver on our medium to
long term growth potential.
Paul McDonald
Non-executive Chair
4 July 2023
(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 non-recurring items
CEO's Review
Introduction
I am delighted to announce our results for the year ended 31 March 2023,
following a period of substantial financial and operational growth for
Supreme, driven by an outstanding performance from our Vaping category.
Supreme delivered an 19% increase in revenue to £155.6 million (FY22: 130.8
million), alongside a 6% growth in gross profit to £40.9 million (FY22:
£38.5 million). Adjusted EBITDA(1) was £19.4 million (FY22: £21.1 million),
which despite the impact of destocking within our Lighting category, proved to
be a highly credible performance. The business generated cash of £19.3
million from operations in FY23 (FY22: £11.8 million) and I am particularly
proud that the Group reported a positive £3.2 million cash position net of
bank borrowings at year end; a £16.1 million increase versus the half year
position six months earlier. Due to the highly cash-generative nature of its
core operations, the Group was able to invest record levels into M&A and
capital expenditure totalling £11.3 million (FY22: £3.8 million) and paid
dividends of £5.4 million (FY22: £2.5 million).
We gained significant trading momentum in the second half of the year, driven
by strong organic growth across our key categories. Our 88vape brand generated
excellent sales traction to consolidate our position as a market leader in the
vaping sector, alongside additional market traction generated by the
acquisitions of Liberty Flights and Cuts Ice.
We cemented our approach to M&A during FY23 having acquired three more
complementary, earnings-enhancing businesses in the vaping sector. Each
acquisition brought its own well-recognised brands together with opportunities
for synergies when integrated into the Supreme platform. Liberty Flights and
Cuts Ice were acquired in the first half of the year and together contributed
to £12.8 million of the Group's revenue growth and Superdragon was acquired
immediately before year end and has already made a positive start to FY24.
Identifying targets that meet our non-negotiable investment criteria, our
speed of deal execution and tenacity of operational and financial integration
defines our M&A strategy, which remains a key pillar of growth for
Supreme.
As a business, we are actively engaged in the debate to make the UK tobacco
free and welcomed the UK Government's recent "Achieving Smoke-free 2030"
initiative, particularly its recognition of vaping as "the most effective"
tool for smoking cessation. We fully support the new policies adopted,
including the proposed launch of a fully funded national 'swap to stop' scheme
to provide vapes as a first-line quit aid in local stop smoking services, and
are encouraged by the robust plans to penalise brands and manufacturers who
actively target young vapers.
Our people remain one of the Company's most valuable assets. Internally, we
responded rapidly to the emergence of the cost-of-living crisis, announcing in
September 2022 permanent and out-of-cycle pay rises for all staff earning less
than £30,000. 70% of the workforce qualified, with around 50% of staff
receiving 10% pay rises. To finance this scheme and simultaneously keep our
profit commitments to our shareholders, I sacrificed my salary for the second
half of FY23. We have an excellent track record of retaining talent, and by
supporting our employee base, particularly those most affected by the crisis,
I am confident we can continue to be recognised as a great place to work.
We are proud of the attractive portfolio of great value products we have
developed and look forward to continuing to supply an extensive customer base
extending over the private and public sectors. The Board firmly believes that
the Company can achieve its strategic aspirations as we aim to continue on our
upward growth trajectory in FY24 and beyond.
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.
During FY23, we agreed a lease for a new warehouse and office site proximal to
our existing facilities, further consolidating Manchester as the focal point
of our business. Once activities commence from the hub, which is projected to
occur in FY24, we will be able to increase the efficiency of our overarching
integrated platform, streamline both storage and distribution and accommodate
future bolt-on M&A.
With this strong platform central to our business, management will continue to
focus on the following strategic growth drivers, namely:
· continue to explore and execute on complementary earnings
enhancing acquisitions;
· further leverage cross-sell opportunities to expand our customer
footprint and average revenue per customer;
· continue to explore and develop new product verticals that
complement 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;
· enhance online distribution and services to further grow our B2B
and D2C sales channels; and
· expand our international footprint through existing customer
relationships and strategic acquisitions.
Vaping
The Group's Vaping division delivered a record performance in FY23,
underpinned by a combination of significant organic growth and the completion
and integration of a number of earnings enhancing acquisitions. The division
nearly doubled revenues, generating £76.1 million (FY22: £43.6 million), an
increase of 75% year-on-year, with incremental revenue from the acquisitions
of Liberty Flights and Cuts Ice constituting 40% of the growth.
Our core 88vape brand delivered another outstanding performance and, as we
continue to expand our product range and optimise our D2C online sales
capabilities, we anticipate the brand's growth will accelerate in the medium
to long term. Driven by retailer and consumer demand, and to complement our
existing hero e-liquid ranges, Supreme launched a range of disposable vapes
during FY23 which has generated almost £12 million in incremental revenue in
its first year. Pleasingly, our contract with UK prisons also reported growth
of 25% year-on-year following further competitive displacement and increased
volumes.
Following a seamless process, the Liberty Flights and Cuts Ice businesses were
integrated into the wider Group, which is testament to the hard work and
commitment of the Supreme team and further supports our track record of
successful M&A integration. In addition, we also completed the acquisition
of Superdragon in March 2023, an experienced manufacturer of e-liquids.
Collectively, the vaping acquisitions have significantly scaled the Group,
providing Supreme with complementary owned brands, access to new customer
bases and territories, wider manufacturing know-how and state-of-the-art
technology. Most importantly, all the acquired vaping brands share Supreme's
ethos: to support a tobacco-free UK by offering adults credible, affordable
and safer alternatives for nicotine consumption.
Acquired as part of the Cuts Ice transaction, we announced the disposal of the
intellectual property of T-Juice to an affiliate of leading French e-cigarette
and e-liquids wholesaler, LVP, in March 2023. Supreme retains the exclusive
manufacturing rights to T-Juice as part of this arrangement and expects to
generate around £3 million in annualised revenue. In addition to the ongoing
manufacturing revenue, the deal generated £4 million of cash for the Group on
completion.
Supreme has consolidated its position as a market-leading manufacturer,
distributor and brand owner in the vaping sector, and continues to explore
additional opportunities to grow both its market share in an ever-expanding
industry boosted by increasing Government support.
Lighting
As previously reported, the Group's Lighting category experienced a
challenging year of trading, with customer overstocking issues, alongside
well-documented global supply chain and transportation problems impacting
numerous businesses in the industry, with a resulting 43% reduction in revenue
to £15.4 million (FY22: £27.0 million). Encouragingly, Supreme has since
stabilised the category, and the Company expects it to recover across FY24 and
FY25.
The category has retained all its listings, whilst every existing customer
relationship remains in-tact, facilitating the recovery process in the medium
to long term. In addition, our largest retail customers have now provided us
with access to their EPOS and stockholding data, previously prohibited,
allowing us to measure stock levels and forecast demand more accurately. This
initiative potentially de-risks this category going forward with the
expectation that the FY23 setback was both temporary and very unlikely to
reoccur without warning.
Commercially, the Group secured an extension to our existing licenses with
Energizer and Eveready, which is now valid until 2030, as we proactively
focused on strengthening existing license agreements with well-known global
brands and retailers. A new licence agreement has also been agreed with Black
and Decker, a trusted brand for retail customers seeking an alternative to
their own label products, whilst the integration of Vendek has also presented
significant commercial opportunities.
Looking ahead, Supreme is committed to building on the significant recovery
progress made in the second half of the financial year and we anticipate the
division will deliver an improved performance across FY24.
Sports Nutrition & Wellness
The Sports Nutrition & Wellness category delivered revenues of £16.7
million in FY23 (FY22: £15.9 million), which was a solid performance. During
FY23, the Group unveiled a new-look Sci-MX, Supreme's principal powders brand.
Relaunching the entire range has delivered strong sales momentum, whilst the
Group also brought manufacturing in-house to increase profitability in the
longer term and streamline the supply chain following the acquisition of the
brand in FY22.
Protein powders represent approximately 70% of the segment's revenue and
significant inflationary pressures impacting powders, particularly whey, have
inevitably impacted the performance of the category. Supreme took a prudent
approach to overcoming these macroeconomic headwinds by electing to support
retailers through this price hike to protect long-term relationships and
future trading aspirations in what is a fast-growing market.
Alongside investment in marketing and advertising initiatives, we launched
exciting products across a number of our key brands, including new Battle
Bites protein bars and other nutritional snacks.
Vitamins, which continue to operate from a low base, traded in line with
expectations, and we continued to roll-out new vitamins pouches and
supplements to expand our great value digital-only Sealions range.
As raw material price pressures ease, Supreme is focused on increasing
manufacturing capacity for the category in FY24 and remains well-placed to
capitalise on strong consumer demand for a diverse range of sports nutrition
and wellness products.
Batteries
The Batteries category delivered another year of solid profitable growth,
generating revenue of £39.5million in FY23 (FY22: £34.9 million), 13%
growth. Batteries remain a sticky consumer product which, for several
retailers, are essential items on their stocklists. Consequently, Supreme has
been able to establish long-term customer relationships through this channel,
generating opportunities to cross-sell additional products from our portfolio.
This highlights not only the integral role the division plays in Supreme's
overarching growth strategy, but also the effectiveness of the Group's
vertically integrated platform in attracting customers across multiple
verticals.
The backbone of the business and requiring minimal costs to serve, Supreme is
focused on enhancing its battery distribution functions and bolstering
existing relationships with retailers to generate increased revenues from the
category.
Outlook
Supreme remains a highly cash-generative business, underpinned by a trusted
vertically integrated platform that facilitates new business momentum and
ensures products efficiently reach end markets. Continued investment in both
our people and facilities demonstrates our commitment to our long-term growth
plans, and we look ahead with confidence as we strive to deliver on our
strategic priorities.
Looking at FY24, the Group expects to maintain its strong growth trajectory,
delivering another strong year of profitable growth across all product
categories. We have seen a very strong start to FY24 with all areas of the
business performing very well.
In addition, I am delighted to have recently been appointed as master
distributor for Elfbar and Lost Mary, two of the UK's biggest vaping brands.
This appointment recognises our unrivalled and scaled UK distribution
capabilities as well as our expertise in the vaping sector, particularly with
reference to governance and compliance.
Accelerated trading in the core business combined with this vaping
distribution opportunity means that we expect trading for the year ended 31
March 2024 to be significantly ahead of previous market expectations(5)
Sandy Chadha
Chief Executive Officer
4 July 2023
(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 non-recurring items
(5)Company compiled analyst consensus for the year ending 31 March 2024 prior
to the release of this announcement and the vaping distribution opportunity
announcement (dated 5 July 2023) was revenue of £159 million and Adjusted
EBITDA(1) of £22.6 million.
Chief Finance Officer's Review
I am pleased to present these financial results for the year ended 31 March
2023. Overall, the Group delivered a robust financial performance; revenue
increased, the balance sheet strengthened and the Group's cash reserves grew.
In addition to a pleasing performance from our core business, we completed and
integrated two earnings-enhancing acquisitions with a third acquisition
completed on the final day of the financial year. 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 non-recurring items referred
to in Note 7 to the Financial Statements. In addition, this review also
references 'net debt' which is defined as closing cash, as reported on the
balance sheet, net of borrowings, as defined in Note 20.
Revenue
Revenue for FY23 was £155.6 million (FY22: £130.8 million), an increase of
19%, the drivers for which have been presented in the product categories
below. 52% of the growth, £12.8 million, came from acquisitions whilst the
remainder of the growth, £12.0 million, came from the core business.
Furthermore, this core business growth of £12.0 million was the net effect of
a reduction in Lighting revenue of £11.6 million combined with revenue growth
across the remainder of the core business of £23.6 million.
Revenue by product category
Revenue for Batteries was £39.5 million in FY23 (FY22: £34.9 million),
growth of 13%, arising from a combination of increased volume and price. This
increased volume, at a time of overall market decline, was especially pleasing
and highlights the strength of Supreme's offering as well as the resilience of
its customers. This category grew significantly during COVID and was initially
expected to reverse, which makes the continued growth a particularly pleasing
result.
Revenue for Lighting was £15.4 million (FY22: £27.0 million), a fall of 43%
in what has been a challenging year, and the first year of revenue contraction
since the category commenced trading over 15 years ago. This reduction was
driven from a slowdown in consumer spending and retailer overstocking in FY22.
Importantly, we have retained all customers and retail listings and we are
confident that our collaborative approach with customers during this period
has cemented our longer-term relationships with these retailers. The category
is expected to recover across FY24 and FY25.
Revenue for Vaping was £76.1 million (FY22: £43.6 million), growth of 75%.
£12.8m (40% of the growth) came from the acquisitions of Liberty Flights and
Cuts Ice and a third acquisition, Superdragon, was completed on the final day
of FY23 and has already added to FY24 earnings. Aside from acquisitions, the
category reported organic growth of £19.7 million, arising from the launch of
a range of disposable vapes as well as strong growth in Supreme's contract
with UK prisons following competitive displacement and increased volumes.
Importantly, the revenue from the launch of disposable vapes has not had any
impact on the sale of the 10ml eliquid product, the category's hero product,
which has continued to gain market share.
Revenue for Sports Nutrition & Wellness was £16.7 million (FY22: £15.9
million), growth of 5%, a period characterised by record levels of raw
material inflation. The reduction in gross profit as a percentage of sales
from 22% in FY22 to 16% in FY23 arose because Supreme chose to absorb some of
this price inflation into its own margin, temporarily, in the spirit of fair,
honest, low pricing. Whey prices have now started to fall and the gross profit
percentage is expected to recover accordingly in FY24.
Revenue from its various 'Other' channels came to £7.8 million (FY22: £9.4
million) a direct result of the rationalisation of the category to redeploy
working capital, resource and warehouse space to more higher margin areas of
the business.
Gross profit
Gross profit for FY23 was £40.9 million (FY22: £38.5 million), growth of 6%.
As a percentage of revenue, gross profit was 26% (FY22: 29%). This reduction
of 3% was largely a result of sales mix within categories. In Vaping in
particular this was driven by the increased focus on hardware sourced from the
Far East in the form of disposable and pod vapes and in Lighting this was due
to the sharp reduction in lighting sourced from the Far East and shipped
direct to customers in the UK and Europe. Gross profit was also affected by
the inflationary price pressures that arose in Sports Nutrition & Wellness
and the temporarily lower margins arising from the acquisitions before their
operations were integrated into the Supreme platform.
Adjusted EBITDA(1)
Administrative expenses, excluding depreciation (£2.2 million), amortisation
(£0.9 million) and Adjusted items within administrative expenses (£3.6
million) were £21.5 million (FY22: £17.5 million), an increase of £4.0
million.
The largest contributor to this increase was the incremental overheads
associated with Liberty Flights (£2.8 million), which was earnings-accretive
at an EBITDA level. Secondly, selling costs (that typically increase in line
with sales) contributed £0.6 million to the increase. The balance arose from
inflationary increases largely in transport, utilities and people costs via
the out-of-cycle pay-rise announced in September in response to the cost of
living crisis.
As a result, Adjusted EBITDA(1) decreased by £1.7 million (8%) in the year to
£19.4 million (FY22: £21.1 million).
Adjusted Items
Adjusted Items were £0.8 million compared to £1.1 million the year before.
These costs related to share-based payment charge of £1.5 million (FY22:
£1.7 million), £1.1 million charge in relation to fair value movements on
financial derivatives (FY22: £1.0 million credit) and £1.0 million of
non-recurring items relating to the acquisitions and subsequent integrations
of the business acquired during the year, offset by a credit of £2.8 million
relating to the profit on disposal of the T Juice brand. The £1.0 million of
acquisition and integrations costs arose principally from the termination of
all Cuts Ice staff (£0.6 million) and the closure costs relating to the two
Cuts Ice London-based operating sites (£0.2 million), offset by a credit of
£0.3 million in respect of accrued but unpaid contingent consideration in
respect of the acquisition of Vendek that completed in FY21.
The Board believes that by adjusting these items from profitability, it is
able to understand the underlying performance of the business more clearly and
further information pertaining to these items can be found in Note 7 to these
financial statements.
Finance costs
Finance costs were £1.0 million in the year (FY22: £0.7 million), split
between interest arising from borrowings in the year of £0.8 million plus the
interest relating to the lease liabilities under IFRS16 (£0.2 million).
Taxation
Total tax charge in the year was £2.5 million (FY22: £2.6 million), giving
rise to an effective tax rate of 17% (FY22: 16%).
Profit after tax and Earnings per share
Profit after tax was £12.0 million compared to £13.7 million in FY22, a
reduction of £1.7 million. As a result, earnings per share decreased by 13%
to 10.3p (FY22: 11.8p) and on a fully diluted basis decreased from 11.4p to
9.7p.
On an adjusted profit after tax basis, which we consider to be a better
measure of performance, adjusted earnings (as calculated in note 11) were
£13.8 million (FY22: £15.0 million) and adjusted earnings per share(3) was
11.8p (FY22: 12.8p).
Dividends
The Group's dividend policy is to pay an annual amount equivalent to around
25% of net profit. In January 2023 the Group paid an interim dividend of 0.8p
per share and the Directors will recommend a final dividend of 2.2p per share
at the 2023 Annual General Meeting to be held on the 26 September 2023. This
will be paid on 29 September 2023 to shareholders on the register at the close
of business on 1 September 2023. The ex-dividend date will be 31 August
2023.
Cash flow
The Group generated £19.3 million of operating cash in FY23, nearly doubling
the level of operating cash generated in FY22; the result of a tightly managed
base of working capital.
Specifically in reference to the acquisitions, £7.5 million related to the
acquisition of Liberty Flights (with a further £2.0 million of deferred
consideration payable in FY24 plus further consideration contingent on
performance, expected to be £2.2 million) and £2.6 million related to the
acquisition of Cuts Ice. The T-Juice brand (acquired as part of the Cuts Ice
acquisition and valued at £1.2 million at the time) was then disposed of 7
months later for £4.0 million, resulting in a profit on disposal of £2.8
million.
In respect of financing, on 31 March 2022 the Group committed to a £25
million revolving credit facility ("RCF") with HSBC. Initially, the
facility was used to settle existing bank and related party borrowings and
then was subsequently used to finance acquisitions. At its peak, the Group had
drawn £18.4 million against the facility. In the second half of the year much
of this was repaid with cash generated from trading activities and at year end
the balance on the facility was £4.3 million drawn with the remainder
unutilised. In addition, the Group also had access to an £8.5 million working
capital facility which was also entirely undrawn at year end. Together with
reported cash of £7.5 million (FY22: £3.9 million) and deferred and
contingent consideration of £4.1 million, the Group's Adjusted net cash(4)
position was £3.2 million (FY22: £1.9 million Adjusted net debt(4)). The
IFRS16 lease liability increased from £2.2 million to £15.0 million during
the year, wholly in relation to the 15 year lease signed for 'Ark', the
facility that will become the Group's principal storage and distribution
centre in FY24.
Across the RCF and the working capital facility, there was £30 million of
undrawn borrowings facilities on 31 March 2023; providing significant
liquidity to finance M&A or organic growth in the form of working capital
in the future.
Net debt
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 7 to these financial statements.
Suzanne Smith
Chief Finance Officer
4 July 2023
(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 non-recurring items
(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 non-recurring items
(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 non-recurring items.
(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 2023
Year Ended Year Ended
31 March 2023 31 March 2022
Note £'000 £'000
Revenue 5 155,612 130,789
Cost of sales 6 (114,758) (92,272)
Gross Profit 40,854 38,517
Profit on disposal of Cuts Ice trademarks 7 2,787 -
Administration expenses 6 (28,192) (21,498)
Operating profit 15,449 17,019
Adjusted EBITDA(1) 19,392 21,055
Depreciation 13 & 21 (2,200) (2,563)
Amortisation 12 (915) (378)
Adjusted items 7 (828) (1,095)
Operating profit 15,449 17,019
Finance income 9 25 -
Finance costs 9 (1,037) (693)
Profit before taxation 14,437 16,326
Income tax 10 (2,469) (2,579)
Profit for the year 11,968 13,747
Other comprehensive expense
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations 101 (32)
Total other comprehensive income/(expense) 101 (32)
Total comprehensive income 12,069 13,715
Earnings per share - basic 11 10.3p 11.8p
Earnings per share - diluted 11 9.7p 11.4p
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 2023
As at As at
31 March 2023 31 March 2022
Note £'000 £'000
Non-current assets
Assets
Goodwill and other intangibles 12 15,281 3,704
Property, plant and equipment 13 5,238 2,557
Right of use asset 21 15,577 2,116
Deferred tax asset 15 - 1,312
Investments 14 7 7
Total non-current assets 36,103 9,696
Current assets
Inventories 16 25,606 25,898
Trade and other receivables 17 20,899 19,035
Forward contract derivative 22.9 - 467
Cash and cash equivalents 18 7,536 3,926
Total current assets 54,041 49,326
Total assets 90,144 59,022
Liabilities
Current liabilities
Borrowings 20 5,026 6,665
Trade and other payables 19 26,117 17,296
Forward contract derivative 22.9 652 -
Income tax payable 2,536 1,299
Total current liabilities 34,331 25,260
Net current assets 19,710 24,066
Borrowings 20 14,293 1,294
Deferred tax liability 15 789 156
Provisions 21 775 -
Total non-current liabilities 15,857 1,450
Total liabilities 50,188 26,710
Net assets 39,956 32,312
Equity
Share capital 23 11,732 11,663
Share premium 7,427 7,231
Merger reserve (22,000) (22,000)
Share-based payments reserve 3,043 2,368
Retained earnings 39,754 33,050
Total equity 39,956 32,312
The notes are an integral part of these financial statements.
The financial statements were approved by the Board of Directors and
authorised for issue on 4th July 2023, and were signed on its behalf by:
S Smith
Director
Registered number: 05844527
Consolidated Statement of Changes in Equity
for the Year Ended 31 March 2023
Share Capital Share Premium Merger reserve Share-based payments reserve Retained earnings Total
equity
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 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
Profit for the year - - - - 11,968 11,968
Other comprehensive income - - - - 101 101
Total comprehensive income for the year - - - - 12,069 12,069
Transactions with shareholders:
Issue of shares 69 196 - - - 265
Employee share schemes - value of employee services - - - 1,283 - 1,283
Deferred tax on share-based payment charge - - - (608) - (608)
Dividends - - - - (5,365) (5,365)
69 196 - 675 (5,365) (4,425)
As at 31 March 2023 11,732 7,427 (22,000) 3,043 39,754 39,956
Consolidated Statement of Cash Flows
for the Year Ended 31 March 2023
Year Ended Year Ended
31 March 2023 31 March 2022
Note £'000 £'000
Net cash flow from operating activities
Profit for the year 11,968 13,747
Adjustments for:
Amortisation of intangible assets 12 915 378
Depreciation of tangible assets 13 1,268 1,748
Depreciation of right of use assets 21 932 815
Finance income (25) -
Finance costs 9 982 404
Amortisation of capitalised finance costs 9 55 289
Income tax expense 10 2,469 2,579
Gain on disposal of intangible fixed assets 7 (2,787) -
Movement on forward foreign exchange contracts 22.9 1,119 (1,026)
Share based payments expense 24 1,460 1,663
Working capital adjustments (net of acquired on business combinations)
Decrease/(increase) in inventories 2,920 (4,937)
Increase in trade and other receivables (671) (2,226)
Increase in trade and other payables (27) 2,498
Increase in provisions 349 -
Taxation paid (1,652) (4,161)
Net cash from operations 19,275 11,771
Cash flows used in investing activities
Purchase of intangible fixed assets 12 (23) (1,454)
Purchase of property, plant and equipment 13 (1,254) (1,296)
Purchase of business combinations net of cash acquired 25 (10,055) (1,040)
Proceeds from sale of property, plant and equipment 1 378
Proceeds from sale of intangible fixed assets 4,018 -
Payment of deferred consideration (270) -
Finance income received 25 -
Net cash used in investing activities (7,558) (3,412)
Cash flows used in financing activities
Repayment of long term loans 20 (3,984) (6,470)
Repayment of related party loans (1,779) (1,613)
Repayments of RCF facility (14,000) -
Drawdowns of RCF facility 18,418
Issue of options or share capital 265 49
Payment of deferred consideration - (66)
Dividends paid (5,365) (2,566)
Finance costs paid (776) (285)
Interest paid on leases (153) (118)
Lease payments (834) (837)
Net cash used in financing activities (8,208) (11,906)
Net increase/(decrease) in cash and cash equivalents 3,509 (3,547)
Cash and cash equivalents brought forward 3,926 7,505
Effects of exchange rate changes 101 (32)
Cash and cash equivalents carried forward 7,536 3,926
Cash and cash equivalents 18 7,536 3,926
7,536 3,926
Notes to the Group Financial Statements
for the Year Ended 31 March 2023
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 2023 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 2022 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 2023 and 31 March 2022
did not contain a statement under s498 (1) to (4) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2023 will be posted to
shareholders at least 21 days before the Annual General Meeting and made
available on our website 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. Summary of significant accounting policies
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.
Notes to the Group Financial Statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.2 New standards, amendments and interpretations
New and amended standards and adopted by the Group
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 April 2022:
Standards and interpretations Effective from
Annual Improvements to IFRS Standards 2018-2020 1 April 2022
Narrow scope amendments to IFRS 3, IAS 16 and IAS 37 1 April 2022
The amendments listed above do not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect current or
future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 March 2023 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 from
IFRS 17 Insurance Contracts 1 April 2023
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 1 April 2023
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice 1 April 2023
Statement 2
Definition of Accounting Estimates - Amendments to IAS 8 1 April 2023
Deferred Tax related to Assets and Liabilities arising from a Single 1 April 2023
Transaction - Amendments to IAS 12
Amendments to IAS 1, "Presentation of financial statements" and classification 1 April 2024
of liabilities
Amendments to IAS 1, "Presentation of financial statements" on non-current 1 April 2024
liabilities with covenants
Amendments to IFRS 16, "Leases" Lease Liability in a sale and leaseback 1 April 2024
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.
2.3 Going concern
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 two-year period to 31 March 2025. 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
ongoing conflict in Ukraine and the resulting sanctions imposed on Russia by
governments worldwide, the increased cost of borrowing and the ongoing cost of
living crisis taking place in the UK, all of which have been reflected in this
forecast.
Notes to the Group Financial Statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.3 Going concern (continued)
· Whilst the Ukraine crisis initially imposed sourcing pressure on
Supreme for certain ingredients (specifically sunflower lecithin and wheat
protein), alternative sources and replacement ingredients were secured in
early FY23 and therefore the risk to Supreme at present is considered minimal
and managed.
· Whilst the Group's debt facilities are priced at a variable rate
(SONIA + a margin) the Group's current positive leverage ratio (i.e. having
more cash than bank borrowings), meaning that the Group could repay the
borrowings in full means that Supreme's exposure to this increased cost is
limited. Should the Group increase its level of bank borrowings during the
forecast period (likely to be triggered by M&A) then of course this
increased cost of borrowing would impact the Group (albeit expected to be
offset by the incremental earnings generated by any M&A target).
· Historically Supreme has been a net beneficiary in periods of
economic downturn, owing to the fact more than half of its revenue is derived
from the discount retail sector which typically trades buoyantly during these
periods (for prudence this has not been assumed in the forecast). The
inflationary cost increases (specifically over salary costs, energy and
transport) have been specifically factored into the cost base throughout for
the forecast period.
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.
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.
Notes to the Group Financial Statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
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 other 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. At any point in time where such obligations haven't been met but the
customer has been invoiced, revenue is deferred, as disclosed in note 19.
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. 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.
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%
Know how - 10%
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
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:
Land- 0%
Assets under construction - 0%
Plant and machinery - 25%
Fixtures and fittings - 25%
Motor vehicle - 25%
Computer equipment - 33%
Buildings - 2%
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).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
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.
(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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.11 Leases (continued)
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.
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.15 Divisional reporting
Although revenue is grouped within five product categories, as the directors
analyse revenue at this gross level, the directors do not analyse, monitor or
review the Groups KPIS (being adjusted EBITDA and profit before tax) by
product category. Due to this, the Group do not believe there are any IFRS 8
considerations around the requirement to report operating segments for
reporting purposes.
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.
2.18 Adjusted items
The Company's income statement separately identifies Adjusted items. Such
items are those that in the Directors' judgement need to be disclosed
separately by virtue of either: their volatility year-on-year; their one-off
nature; their size, their non-operating nature; or because the adjustment of a
particular item is widely accepted and conducted by peers (to ensure
comparability with other listed businesses). These 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, material impairments of inventories
and gains/losses on disposal of intangible assets. 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 Forward contracts derivatives
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.
2.20 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.20 Trade and other receivables (continued)
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 £5,000 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.
2.21 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.
2.22 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.
2.23 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 Company. Gross receivables are included within
debtors and a corresponding liability in respect of any proceeds received from
the bank that haven't yet been paid by customers 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. Once payments are received into the facility from customers, proceeds
are transferred to the main bank account, which is presented within cashflow
from working capital within the cashflow statement.
2.24 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.
2.25 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.26 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.
2.27 Forward contracts
Forward contracts are initially recognised at the fair value on the date the
forward contract is entered into and are subsequently re-measured at their
fair value. Changes in the fair value of forward contracts 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.
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 forward contracts derivatives 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
3. Financial risk management (continued)
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.
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 £7,508,000 at 31
March 2023 (2022: £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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
4. Critical accounting estimates and judgements (continued)
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.
4.6 T-Juice disposal
As part of the Cuts Ice acquisition (as detailed in Notes 25 to these
financial statements), Supreme acquired the intellectual property of the
brand; T Juice out of administration. The purchase price allocation exercise
valued the brand, at the time, at £1.2 million. In March 2023, seven months
later, the brand was sold to a French distributor, LVP, for £4.0 million.
During that seven-month period, Supreme had turned the brand around; the brand
had become cash-generative with a more manageable product range, a leaner
manufacturing process and a rationalised overhead base, all of which was
reflected in the market value of the brand.
At the time of the disposal, Supreme signed two agreements with the buyer; an
intellectual property sale-purchase agreement and an associated five-year
professional services agreement. The 2 agreements were 'in connection' with
one another (as legally drafted), had to be signed simultaneously and were
payable upfront and non-refundable. Furthermore, the nature of the services
referenced in the professional services agreement were not unlike services
offered as standard to other customers without the need for a professional
services agreement. Standing back from the 2 agreements, the Board concluded
that the consideration assigned to the disposal of the IP should be recognised
as the combined consideration paid upfront in respect of both agreements i.e.
£4 million.
Accounting judgements
4.7 Inventory obsolescence
Management make use of judgement in determining whether certain inventory
items are obsolete. Specifically this is done by looking at expiry dates, as
well as sales data and forecasts as a proportion of current stock holding.
Should these judgements be incorrect there could be a material difference in
the recoverable value of inventory.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
5. Revenue and gross profit 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. The Board of Directors deem the
Group to be one operating segment because no balance sheet analysis,
cashflows, profit before tax or EBITDA (which are the KPI's for the business)
are available by division or reviewed by the CODM. This has changed from prior
year due to the changes to the Group following the significant acquisitions in
the financial year.
However, the Gross profit before foreign exchange is reported and used to make
decisions on a product group basis. The below table 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 Other consumer goods Year Ended
31 March 2023
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 39,533 15,426 76,098 16,748 7,807 155,612
Cost of sales (35,613) (11,301) (48,018) (14,089) (6,992) (116,013)
Gross profit before foreign exchange 3,920 4,125 28,080 2,659 815 39,599
Foreign exchange 1,255
Gross Profit 40,854
Profit on disposal of Cuts Ice trademarks 2,787
Administration expenses (28,192)
Operating profit 15,449
Adjusted earnings before tax, depreciation, amortisation and adjusted items 19,392
Depreciation (2,200)
Amortisation (915)
Adjusted items (828)
Operating profit 15,449
Finance income 25
Finance costs (1,037)
Profit before taxation 14,437
Income tax (2,469)
Profit for the year 11,968
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
5. Revenue and gross profit analysis (continued)
Batteries Lighting Vaping Sports nutrition & wellness Other 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 income -
Finance costs (693)
Profit before taxation 16,326
Income tax (2,579)
Profit for the year 13,747
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 3
customers (2022: 2 customers) was £24,938,000, £19,364,000, and £16,045,000
(2022: £21,111,000 and £18,385,000). These revenues related to all
divisions.
Analysis of revenue by geographical destination
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
United Kingdom 140,713 115,938
Ireland 8,645 7,779
Netherlands 1,766 2,807
France 2,428 1,617
Rest of Europe 942 1,825
Rest of the World 1,118 823
155,612 130,789
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 net assets of £3,192,000 held in Europe.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
6. Expenses by nature
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
The profit is stated after charging expenses as follows:
Inventories recognised as an expense 103,129 81,813
Impairment of inventories 892 750
Impairment of trade receivables 63 30
Staff costs - Note 8 12,345 9,442
Adjusted items - Note 7 828 1,095
Establishment and general 2,142 1,473
Depreciation of property, plant and equipment 1,268 1,748
Depreciation of right of use assets 932 815
Amortisation of intangible assets 915 378
Auditor's remuneration for audit services 170 112
Auditor's remuneration for non-audit services - -
Other operating expenses 17,479 16,114
Total cost of sales and administrative expenses 140,163 113,770
7. Adjusted items
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
Covid-19-related cost - 118
Fair value movements on forward contracts 1,119 (1,027)
Restructuring costs - 208
Share based payments charge (note 24) 1,460 1,663
Acquisition costs 1,036 133
Profit on disposal of intangible fixed assets (2,787) -
828 1,095
COVID-19 costs in the year ended 31 March 2022 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. As these costs were deemed one-off in
nature they were reported as Adjusted.
The Group typically holds 1 years' worth of USD-denominated purchases on open
forward contracts. The charge in the year ended 31 March 2023 and the credit
in the year ended 31 March 2022 reflect the movement in the fair value of
these open forward contracts at the balance sheet date year-on-year. This
charge or credit is reported each year but, due its volatile nature, is
reported as Adjusted.
Restructuring costs in the year ended 31 March 2022 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. As these
costs were deemed one-off in nature they were reported as Adjusted.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
7. Adjusted items (continued)
Acquisition costs relate to adviser fees in respect of the acquisitions
undertaken and the subsequent financial and operational integration of these
businesses into the core Supreme Group. £599,000 of the costs related to the
redundancy costs in respect of the Cuts Ice Limited acquisition. These costs
are notably volatile (linked to the volume and complexity of the acquisitions
undertaken each year) and due to their size, have been reported as Adjusted.
Profit on disposal of the T Juice brand represents the difference between the
cost of acquiring the brand (£1,231,000) and the proceeds on disposal
(£4,018,000). The disposal of a brand was deemed to be one-off in nature and
therefore reported as Adjusted.
8. Employees and Directors
Year Ended Year Ended
31 March 2023 31 March 2022
No. No.
Average number of employees (including Directors):
Management and administration 116 80
Warehouse 70 50
Sales 46 30
Manufacturing 124 105
356 265
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
Aggregate remuneration of staff (including Directors):
Wages and salaries 10,670 8,339
Social security costs 1,193 765
Other pension costs 482 338
12,345 9,442
Directors' remuneration
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
Directors' emoluments 600 635
Social security costs 83 88
Company contributions to defined contribution pension schemes 3 2
686 725
The highest paid director received remuneration of £232,000 (2022:
£300,000).
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
(2022: £1,000).
During the year, retirement benefits were accruing to 2 directors (2022: 2) in
respect of defined contribution pension schemes.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
9. Finance (income)/costs
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
Finance income
Bank interest receivable (25) -
Finance costs
Bank interest payable 828 153
Other interest payable - 133
Amortisation of capitalised arrangement fees 55 289
Interest on lease liabilities 154 118
1,037 693
10. Taxation
Year Ended Year Ended
31 March 2023 31 March 2022
Current tax £'000 £'000
Current year - UK corporation tax 2,967 3,205
Adjustments to tax charge in respect of prior periods - (163)
Foreign tax on income - (7)
Total current tax 2,967 3,035
Deferred tax
Origination and reversal of temporary differences (566) (320)
Adjustments to tax charge in respect of prior periods - (173)
Adjustments to tax charge due to change in rates 68 37
Total deferred tax (498) (456)
Total tax expense 2,469 2,579
Factors affecting the charge
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
Profit before taxation 14,437 16,326
Tax at the UK corporation tax rate of 19% (2022: 19%) 2,743 3,102
Effects of expenses not deductible for tax purposes 123 317
Adjustments to tax charge due to change in rates 68 37
Adjustments to tax charge in respect of prior periods - (336)
Exercise of share options (123) -
Deferred tax on Share Based Payments (118) (471)
Enhanced Relief (224) (70)
Total tax expense 2,469 2,579
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
10. Taxation (continued)
Factors that may affect future tax charges
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
the impact of this rate change has been considered when recognising deferred
tax in these financial statements. Where the asset or liability is expected to
unwind after 1 April 2023 the deferred tax has been recognised at 25% in these
financial statements. In the Autumn Statement in November 2022, the government
confirmed the increase in corporation tax rate to 25% from April 2023 will go
ahead.
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 2023 31 March 2022
£'000 £'000
Profit for the year after tax 11,968 13,747
No. No.
Weighted average number of shares for the purposes of basic earnings per share 116,731,311 116,605,892
Weighted average dilutive effect of conditional share awards 6,720,523 4,474,425
Weighted average number of shares for the purposes of diluted earnings per 123,451,834 121,080,317
share
Pence Pence
Basic earnings per share 10.3 11.8
Diluted earnings per share 9.7 11.4
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 2023 31 March 2022
£'000 £'000
Adjusted earnings (see below) 13,790 14,976
No. No.
Weighted average number of shares for the purposes of basic earnings per share 116,731,311 116,605,892
Weighted average dilutive effect of conditional share awards 6,720,523 4,474,425
Weighted average number of shares for the purposes of diluted earnings per 123,451,834 121,080,317
share
Pence Pence
Adjusted basic earnings per share 11.8 12.8
Adjusted diluted earnings per share 11.2 12.4
The calculation of basic adjusted earnings per share is based on the following
data:
Year Ended Year Ended
31 March 2023 31 March 2022
£'000 £'000
Profit for the year attributable to equity shareholders 11,968 13,747
Add back/(deduct):
Amortisation of acquisition related intangible assets 874 196
Adjusted items 828 1,095
Tax effect of the above 120 (62)
Adjusted earnings 13,790 14,976
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
12. Goodwill and other intangible assets
Domain name Trademarks Customer relationships Trade name Know how Computer software Goodwill Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 April 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
Additions - - - - - 23 - 23
On acquisition 62 43 3,043 4,384 262 - 5,906 13,700
Disposals - - - (1,231) - - - (1,231)
At 31 March 2023 311 1,544 3,803 3,374 262 41 7,508 16,843
Accumulated amortisation
At 1 April 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
Amortisation charged in the year 25 150 359 359 6 16 - 915
At 31 March 2023 100 316 670 447 6 23 - 1,562
Carrying amount
At 1 April 2021 199 49 601 177 - - 1,602 2,628
At 31 March 2022 174 1,335 449 133 - 11 1,602 3,704
At 31 March 2023 211 1,228 3,133 2,927 256 18 7,508 15,281
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
for the Year Ended 31 March 2023
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 2023 31 March 2022
£'000 £'000
Supreme 3,364 1,602
Liberty Flights 4,144 -
7,508 1,602
The above CGU's have changed from prior year due to the changes to the Group
following the significant acquisitions in the financial year.
Goodwill arising in the year ended 31 March 2023 related to the acquisition of
Liberty Flights Limited and Liberty Flights Holdings Limited and Superdragon
(note 25). 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.
The key assumptions for the value in use calculations are:
· cash flows before income taxes are based on approved budgets and
prior experience and management projections for the next 3 years;
· a long term growth rate of 2.0% (2022: 2.0%) for the period
beyond which detailed budgets and forecasts do not exist; based on external
sources of macroeconomic projections for the geographies in which the entity
operates; and
· a post tax discount rate of 10.4% (2022: 14.4%) based upon risk
free rate for government bonds adjusted for a risk premium to reflect
increased risk of investing in equities and investing in the Group's specific
sector and regions.
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 2023 or 31 March 2022. There were no charges for impairment of goodwill
in 2023 (2022: nil).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
13. Property, plant and equipment
Buildings Plant and machinery Fixtures and Motor vehicles Computer equipment Assets under construction Total
£'000 £'000 fittings £'000 £'000 £'000 £'000
£'000
Cost or valuation
At 1 April 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
Additions 57 724 66 111 340 686 1,984
On acquisition 1,492 423 33 7 11 - 1,966
Disposals - - - (28) - - (28)
At 31 March 2023 1,549 7,286 1,092 377 687 686 11,677
Depreciation and impairment
At 1 April 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
Depreciation charged in the year - 949 63 51 205 - 1,268
Eliminated on disposal - - - (27) - - (27)
At 31 March 2023 - 5,131 885 115 308 - 6,439
Carrying amount
At 1 April 2021 - 2,545 129 24 89 - 2,787
At 31 March 2022 - 1,957 171 196 233 - 2,557
At 31 March 2023 1,549 2,155 207 262 379 686 5,238
The depreciation charge for the year has been included in Administrative
expenses in the Statement of Comprehensive Income.
Of the additions in the financial year £1,254,000 was paid during the year.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
14. Investments
As at As at
31 March 2023 31 March 2022
£'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 2023, the Company directly owned 100% of the ordinary share
capital of the following subsidiaries, which are incorporated in England and
Wales unless stated:
Subsidiary Registered address Principal activity
Supreme Imports Limited 4 Beacon Road, Ashburton Park, Trafford Park, Manchester M17 1AF Distribution of consumer goods
Provider Distribution Limited Unit 1 Rosewood Park, St James Road, Blackburn, Lancashire BB1 8ET Distribution of consumer goods
At 31 March 2022, the Company indirectly owned 100% of the ordinary share
capital of the following subsidiaries, which are incorporated in England and
Wales unless stated:
Subsidiary Registered address Principal activity
VN Labs Limited 4 Beacon Road, Ashburton Park, Trafford Park, Manchester, M17 1AF Distribution of consumer goods
Battery Force Limited Dormant
Powerquick Limited Holding company
Supreme 88 Limited Holding company
Supreme Nominees Limited Holding of shares as nominee
Holding Esser Affairs B.V. Vanadiumweg 13, 3812 PX, Armersfoort, Netherlands Holding company
AGP Trading B.V. Distribution of consumer goods
Vendek Limited Unit C5, South City Business Park, Whitestown Way, Tallaght, Dublin 24, D24 Distribution of consumer goods
A993
Liberty Flights Holdings Limited Unit 9 Arkwright Court, Commercial Road, Darwen, Lancashire, BB3 0FG Holding company
Liberty Flights Limited Distribution of consumer goods
The Directors believe that the carrying value of the investments is supported
by their underlying net assets.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
15. Deferred tax
Deferred tax consists of the following temporary differences
As at As at
31 March 2023 31 March 2022
£'000 £'000
Share based payments 1,016 1,312
Deferred tax asset 1,016 1,312
Excess of depreciation over taxable allowances (550) (53)
Short term temporary differences 339 (103)
Tax losses carried forward (104) -
Acquired intangible assets (1,490) -
Deferred tax liability (1,805) (156)
Net deferred tax (liability)/asset (789) 1,156
Movement in deferred tax in the year
As at As at
31 March 2023 31 March 2022
£'000 £'000
Balance at the beginning of the year 1,156 (141)
Credited to profit or loss 498 456
(Debited)/credited to reserves (608) 841
Arising on business combination (1,849) -
Other 14 -
Balance at the end of the year (789) 1,156
The Directors consider that the deferred tax assets in respect of temporary
differences are recoverable based on the forecast future taxable profits of
the Group.
16. Inventories
As at As at
31 March 2023 31 March 2022
£'000 £'000
Goods for resale 21,080 20,457
Raw materials 4,526 5,441
25,606 25,898
The Directors believe that the replacement value of inventories would not be
materially different than book value.
Inventories at 31 March 2023 are stated after provisions for impairment of
£1,492,000 (2022: £600,000).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
17. Trade and other receivables
As at As at
31 March 2023 31 March 2022
£'000 £'000
Trade receivables 18,566 17,848
Other receivables 1,507 346
Prepayments 826 841
20,899 19,035
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 2023 31 March 2022
£'000 £'000
Balance at the beginning of the year 32 37
Charged to the statement of comprehensive income 63 30
Arising on acquisition 111 -
Utilisation of provision (17) (35)
Balance at the end of the year 189 32
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 2023 31 March 2022
£'000 £'000
Current 11,936 12,177
31 - 60 days 5,253 4,390
61 - 90 days 1,492 1,254
90 days + 74 59
Less provisions for impairment (189) (32)
18,566 17,848
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
18. Cash and cash equivalents
As at As at
31 March 2023 31 March 2022
£'000 £'000
Cash at bank 7,536 3,926
19. Trade and other payables
As at As at
31 March 2023 31 March 2022
£'000 £'000
Trade payables 8,697 8,149
Accruals 5,651 6,302
Deferred income 259 -
Other creditors 3,415 -
Other tax and social security 3,951 2,843
Deferred consideration 1,942 -
Contingent consideration 2,200 -
Directors loan account 2 2
26,117 17,296
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 2023 31 March 2022
£'000 £'000
Current
Bank loans 4,307 3,984
Amounts owed to related parties - 1,779
IFRS 16 lease liability (Note 21) 719 902
5,026 6,665
Non-current
IFRS 16 lease liability (Note 21) 14,293 1,294
14,293 1,294
Total borrowings 19,319 7,959
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
20. Borrowings (continued)
The earliest that the lenders of the above borrowings require repayment is as
follows:
As at As at
31 March 2023 31 March 2022
£'000 £'000
In less than one year 5,026 6,665
Between two and five years 6,980 1,294
In more than five years 7,313 -
19,319 7,959
These amounts when presented gross on an undiscounted basis are as follows:
As at As at
31 March 2023 31 March 2022
£'000 £'000
In less than one year 5,499 6,751
Between two and five years 7,699 1,388
In more than five years 13,065 -
26,263 8,139
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 a margin of 2.3%-2.8% over SONIA for all drawn amounts
and 35% of the margin 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 facilities 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 not drawn down 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 (2022: undrawn).
Therefore undrawn but committed facilities at 31 March 2023 were £20.7m for
the RCF (2022: £25m), £8.5m for the invoice discounting facility (2022:
£8.4m) and $0.5m for the supply chain facility (2022: $0.5m).
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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
At 1 April 2021 1,476
Additions 1,455
Depreciation charge for the year (815)
At 31 March 2022 2,116
Additions 12,656
Lease modification 1,737
Depreciation charge for the year (932)
At 31 March 2023 15,577
The net book value of the right of use assets is made up as follows:
As at As at
31 March 2023 31 March 2022
£'000 £'000
Buildings 15,576 2,108
Cars 1 8
15,577 2,116
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
21. Leases (continued)
Lease liabilities As at As at
31 March 2023 31 March 2022
£'000 £'000
Maturity analysis - contractual undiscounted cash flows
Less than one year 1,192 988
More than one year, less than two years 2,181 514
More than two years, less than three years 2,121 467
More than three years, less than four years 1,714 407
More than four years, less than five years 1,683 -
More than five years 13,065 -
Total undiscounted lease liabilities at year end 21,956 2,376
Finance costs (6,944) (180)
Total discounted lease liabilities at year end 15,012 2,196
Lease liabilities included in the statement of financial position
Current 719 902
Non-current 14,293 1,294
15,012 2,196
Provisions
Dilapidations provision related to right-of-use assets
At 1 April - -
Additions 774 -
Unwind of discounting 1 -
At 31 March 775 -
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 2023 31 March 2022
£'000 £'000
Depreciation charge - Buildings 925 794
Depreciation charge - Cars 7 21
932 815
Interest expense (within finance expense) 154 118
The above leases relate to buildings and cars.
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.
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
22. Financial instruments (continued)
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.
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 2023 31 March 2022
£'000 £'000
Trade receivables - 1,498
Cash 58 188
Trade payables 1,154 820
1,212 2,506
The effect of a 20 percent strengthening of Pound Sterling at 31 March 2023 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 £202,000, (2022:
£418,000). 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 £303,000 (2022: £627,000).
The following is a note of the assets and liabilities denominated at each
period end in Euros:
As at As at
31 March 2023 31 March 2022
£'000 £'000
Trade receivables 200 51
Cash 453 27
Trade payables (364) (261)
289 (183)
The effect of a 20 percent strengthening of Pound Sterling at 31 March 2023 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 a decrease to net assets of £48,000 (2022: increase
of £31,000). A 20 percent weakening of the exchange rate on the same basis,
would have resulted in a decrease to total comprehensive income and an
increase in net assets of £73,000 (2022: decrease of £46,000).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
22. Financial instruments (continued)
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 2023, the outstanding
contracts mature between 1 and 10 months of the year end, (2022: 2 and 10
months). At 31 March 2023 the Group was committed to buy $32,500,000 (2022:
$18,700,000) in the next financial year.
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 2023 is a liability of £652,000 (2022: asset of £467,000). During the
year ended 31 March 2023, a loss of £1,119,000 (2022: profit of £1,027,000)
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 £141,000 (2022: £69,000).
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
for the Year Ended 31 March 2023
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 2023 31 March 2022
£'000 £'000
Financial assets
Financial assets measured at amortised cost
Trade and other receivables 20,073 18,194
Cash and cash equivalents 7,536 3,926
27,609 22,120
Financial liabilities
Financial liabilities measured at amortised cost
Non-current:
Borrowings (14,293) (1,294)
Current:
Borrowings (5,026) (6,665)
Trade and other payables (8,697) (8,149)
Directors loan account (2) (2)
Deferred consideration (1,942) -
Contingent consideration (2,200) -
Other creditors (3,415) -
Accruals (5,651) (6,302)
(41,226) (22,412)
Financial assets / (liabilities) measured at fair value through profit and
loss
Forward contracts (652) 467
(652) 467
Net financial (liabilities) / assets (14,269) 175
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 2022 116,627,074 11,662,707
Issued 688,968 68,897
At 31 March 2023 117,316,042 11,731,604
On 2 February 2023, 561,874 new Ordinary £0.10 shares were issued at a
subscription price of £0.38, generating share premium of £159,404.
On 6 March 2023, 63,547 new Ordinary £0.10 shares were issued at a
subscription price of £0.38, generating share premium of £18,028.
On 14 March 2023, 63,547 new Ordinary £0.10 shares were issued at a
subscription price of £0.38, generating share premium of £18,028.
Dividends
Dividends of £5,365,000 (2022: £2,566,000) were declared in the year. This
amounted to £0.046 per share (2022: £0.022).
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 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. The exercise of these options was originally subject to the
occurrence of a relevant event (a disposal or a listing) in accordance with
the EMI Scheme rules, but this condition was satisfied by the 2021 listing of
the Company. These options will expire 10 years from grant date. A second
scheme was implemented alongside the EMI scheme ('2018 unapproved scheme') for
one employee who was eligible for more options that the EMI scheme rules
allowed for. All conditions of this scheme were the same as the EMI Scheme.
These options were fairly valued upon a valuation of the entity that had been
performed by an independent expert.
2018 EMI scheme Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £0.38 1,148,850 £0.38 1,281,028
Lapsed £0.38 (30,504) £0.38 (5,084)
Granted - - - -
Exercised £0.38 (495,621) £0.38 (127,094)
At the end of the year £0.38 622,725 £0.38 1,148,850
The profit and loss expense that has been recognised in the current year in
respect of these awards is £nil (2022: £nil).
2018 unapproved scheme Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £0.38 386,694 £0.38 386,694
Lapsed - - - -
Granted - - - -
Exercised £0.38 (193,347) - -
At the end of the year £0.38 193,347 £0.38 386,694
The profit and loss expense that has been recognised in the current year in
respect of these awards is £94,000 (2022: £300,000).
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 must take out a 3 or 5 year savings contract with an
approved savings body selected by the Company. The
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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.
24. Share based payments (continued)
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.
2021 SAYE scheme Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £1.52 354,078 £1.52 438,620
Lapsed £1.52 (158,911) £1.52 (84,542)
Granted - - - -
Exercised - - - -
At the end of the year £1.52 195,167 £1.52 354,078
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 were 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. By 31 March
2023, a total of 66,089 options had lapsed and 235,622 remained under option.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
2021 CSOP
At the start of the year £1.74 201,140 £1.74 206,886
Lapsed £1.74 (20,114) £1.74 (5,746)
Granted - - - -
Exercised - - - -
At the end of the year £1.74 181,026 £1.74 201,140
2021 unapproved scheme Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £1.74 94,825 £1.74 94,825
Lapsed £1.74 (40,229) - -
Granted - - - -
Exercised - - - -
At the end of the year £1.74 54,596 £1.74 94,825
The profit and loss expense that has been recognised in the current year in
respect of these awards is £57,000 (2022: £57,000).
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 in the year ended 31 March 2022. 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
Options to subscribe for a further 174,650 shares at nominal value were
granted to the CFO during the year ended 31 March 2023. These options are
subject to performance conditions. 50% of the options require an average
annual TSR of 7.5% to become exercisable in part and an annual average of TSR
of 10% to become fully exercisable measured over a 3-year period. The
remaining 50% of options are linked to an EPS performance target where a
threshold of 33.7p by the end of a 3-year period is required in order for the
options to become exercisable and 41.1p in order for the options to be fully
exercisable.
2021 3-year CEO award Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £0.00 2,912,500 £0.00 2,912,500
Lapsed - - - -
Granted - - - -
Exercised - - - -
At the end of the year £0.00 2,912,500 £0.00 2,912,500
2021 5-year CEO award Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £0.00 2,912,500 £0.00 2,912,500
Lapsed - - - -
Granted - - - -
Exercised - - - -
At the end of the year £0.00 2,912,500 £0.00 2,912,500
2021 CFO award Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year £0.00 111,940 £0.00 111,940
Lapsed - - - -
Granted - - - -
Exercised - - - -
At the end of the year £0.00 111,940 £0.00 111,940
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
2022 Senior management awards (TSR) Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year - - - -
Lapsed £0.00 (24,950) - -
Granted £0.00 112,275 - -
Exercised - - - -
At the end of the year £0.00 87,325 - -
2022 Senior management awards (EPS) Weighted average exercise price 2023 £ 2023 Weighted average exercise price 2022 £ 2022
No.
No.
At the start of the year - - - -
Lapsed £0.00 (24,950) - -
Granted £0.00 112,275 - -
Exercised - - - -
At the end of the year £0.00 87,325 - -
The profit and loss expense that has been recognised in the current year in
respect of the Unapproved Scheme is £1,309,000 (2022: £1,295,000).
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:
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 overleaf:
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
2018 unapproved scheme 2021 CSOP 2021 unapproved scheme 2021 3 year CEO award 2021 5 year CEO award 2021 CFO awards 2021 SAYE scheme 2022 Senior mgmt. awards - TSR 2022 Senior mgmt. awards - EPS
Grant date 4 Jan 2021 16 Feb 2021 16 Feb 2021 9 Mar 2021 9 Mar 2021 9 Mar 2021 18 Mar 2021 5 Aug 2022 5 Aug 2022
Share price at grant date (pence) 134p 176p 176p 185p 185p 185p 190p 101p 101p
Exercise price (pence) 38.38p 174p 174p £nil £nil £nil 154p £nil £nil
Expected volatility (%) 45% 45% 45% 45% 45% 45% 55% 55% 55%
Projection period (yrs) 2.65 n/a n/a 2.89 0.89 2.89 3.16 2.65 n/a
Expected life (yrs) 3 3 3 3 5 3 3 3 3
Expected dividend yield (%) 5.94% 4.10% 4.10% 3.90% 3.90% 3.90% 3.79% 5.94% 5.94%
Risk free interest rate (%) -0.09% 0.34% 0.34% 0.12% 0.31% 0.12% 0.14% 1.92% 1.92%
Fair value per award (pence) 71p 50p 50p 74p 59p 109p 59p 31p 75p
The expected volatility has been estimated based upon the historical
volatility of the FTSE AIM Retailers and Personal & Household goods sub
sectors.
No awards are exercisable at the end of the year. The charge for share-based
payments in the year was £1,460,000 (2022: £1,663,000) which is included
within Adjusted items. Of this, £177,000 related to Employers National
Insurance Contributions and £1,283,000 related to the share-based payments
charge.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
25. Business combinations
Acquisition of Cuts Ice Limited
On 8 August 2022 Supreme Imports Limited acquired the trade and assets of Cuts
Ice Limited ("Cuts Ice") and Flavour Core Limited ("Flavour Core"), for
consideration of £2,571,000. Cuts Ice is an independent vaping manufacturer
with major own brands as well as OEM manufacturing contracts, and Flavour Core
is a flavour development and regulatory compliance business in e-liquids.
Recognised amounts of identifiable assets acquired and liabilities assumed
Book value Fair value adjustment Fair value
£'000 £'000 £'000
Fixed assets
Other intangible assets - 1,389 1,389
Property, plant and equipment 300 - 300
300 1,389 1,689
Current assets
Inventory 1,188 (339) 849
Debtors due within one year 33 - 33
1,221 (339) 882
Total assets 1,521 1,050 2,571
Creditors
Deferred tax - (40) (40)
- (40) (40)
Total identifiable net assets 1,521 1,010 2,531
Goodwill 40
Total purchase consideration 2,571
Consideration
Cash 2,571
Total purchase consideration 2,571
Cash outflow on acquisition
Purchase consideration settled in cash, as above 2,571
Less: cash and cash equivalents acquired -
Net cash outflow on acquisition 2,571
Following a purchase price allocation exercise the company identified further
acquired intangible assets. The fair value adjustments reflect the recognition
of the Trade name of £1,231,000 and other intangible assets of £158,000.
Deferred tax of £40,000 was recognised on the acquired intangible assets.
Goodwill of £40,000 represents consolidated purchasing and operating
synergies.
The revenue from Cuts Ice Limited included in the Statement of Comprehensive
Income for 2023 was £3,326,000. Cuts Ice Limited also incurred a gross profit
of £2,187,000 over the same period. Had the acquisition occurred on 1(st)
April 2022 , consolidated revenue and gross profit would have increased by a
further £1,663,000 and £1,090,000 respectively.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
25. Business combinations (continued)
Acquisition of Liberty Flights Holdings Limited
On 10 June 2022 Supreme Imports Limited acquired the entire share capital of
Liberty Flights Holdings Limited ("Liberty Flights"), a leading UK vaping
manufacturer best known for their Liberty Flights vaping brand and the
market-leading Dot Pro device, for initial consideration of £9,350,000.
Recognised amounts of identifiable assets acquired and liabilities assumed
Book value Fair value adjustment Fair value
£'000 £'000 £'000
Fixed assets
Other intangible assets 62 5,181 5,243
Property, plant and equipment 1,251 415 1,666
1,313 5,596 6,909
Current assets
Inventory 1,715 - 1,715
Debtors due within one year 1,160 - 1,160
Cash at bank and in hand 1,866 - 1,866
4,741 - 4,741
Total assets 6,054 5,596 11,650
Creditors
Trade and other payables (894) - (894)
Corporation tax (77) - (77)
Deferred tax (119) (1,399) (1,518)
(1,090) (1,399) (2,489)
Total identifiable net assets 4,964 4,197 9,161
Goodwill 4,144
Total purchase consideration 13,305
Consideration
Cash 9,350
Deferred consideration 1,755
Contingent consideration 2,200
Total purchase consideration 13,305
Cash outflow on acquisition
Purchase consideration settled in cash, as above 9,350
Less: cash and cash equivalents acquired (1,866)
Net cash outflow on acquisition 7,484
Following a purchase price allocation exercise the company identified further
acquired intangible assets. The fair value adjustments reflect the recognition
of Customer Relationships of £2,028,000 and the Trade name of £3,153,000.
The additional consideration paid over the fair value of the net assets
acquired is recognised as goodwill. Deferred tax of £1,295,000 was recognised
on the acquired intangible assets.
Goodwill of £4,144,000 represents consolidated purchasing synergies,
operating efficiencies and cross sell opportunities.
Debtors due within one year of £1,160,000 are shown net of a £111,000 bad
debt provision.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
25. Business combinations (continued)
Deferred consideration of £2m is payable of the first anniversary of the
acquisition. This amount has been discounted in the previous table.
Contingent consideration is based on the performance of Liberty Flights in the
12 months immediately following the acquisition, and could range from £0 to
£5,000,000.
The Group has adopted the following fair value hierarchy in relation to its
forward contracts derivatives that are carried in the balance sheet at the
fair values at year end:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1);
· Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2);
· Inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
The following table sets out the fair value of all financial assets and
liabilities that are measured at fair value:
Group and Company Level 1 Level 2 Level 3
£'000 £'000 £'000
Liabilities measured at fair value - - -
Contingent consideration - - 2,200
Total - - 2,200
There is no prior year comparison in the table above due to the acquisition
only occurring in 2023. Contingent consideration is included in Level 3 of the
fair value hierarchy. The provision for contingent consideration is in
respect of the Liberty Flights acquisition in June 2022. The fair value is
determined considering the expected payments, discounted to present value
using a risk adjusted discount rate.
The significant unobservable inputs are the financial performance forecasts
for the twelve month period post-acquisition and the risk adjusted discount
rate of 14%.
The estimated fair value would increase or decrease if the EBITDA was higher
or lower or the risk adjusted
discount rate was higher or lower. A reasonably possible change to one of
these significant unobservable inputs, holding the other inputs constant,
would have the following effects:
Group and Company Increase Decrease
Effect of change in assumption on income statement £'000 £'000
EBITDA movement of £100,000 100 100
The revenue from Liberty Flights Holdings Limited included in the Statement of
Comprehensive Income for 2023 was £9,437,000. Liberty Flights Holdings
Limited also incurred a profit after tax of £1,260,000 over the same period.
Had the acquisition occurred on 1(st) April 2022, the Group consolidated
revenue and profit after tax would have increased by a further £1,900,000 and
£250,000 respectively.
Acquisition of Superdragon
On 30 March 2023, Supreme Imports Limited acquired the trade and assets of
Superdragon TCM UK Limited, an independent vaping manufacturer, for initial
consideration of £2,470,000, with a further £187,000 deferred.
Recognised amounts of identifiable assets acquired and liabilities assumed
Book value Fair value adjustment Fair value
£'000 £'000 £'000
Fixed assets
Goodwill and other intangible assets - 1,162 1,162
- 1,162 1,162
Current assets
Inventory 260 (196) 64
260 (196) 64
Total assets 260 966 1,226
Creditors
Deferred tax - (291) (291)
- (291) (291)
Total identifiable net assets 260 675 935
Goodwill 1,722
Total purchase consideration 2,657
Consideration
Cash 2,470
Deferred consideration 187
Total purchase consideration 2,657
The above cash consideration of £2,470,000 was settled in April 2023 and as
such no cash outflow arose on acquisition for the year ended 31 March 2023.
Following a purchase price allocation exercise the company identified further
acquired intangible assets. The fair value adjustments reflect the recognition
of Customer Relationships of £978,000 and other intangible assets of
£184,000. The additional consideration paid over the fair value of the net
assets acquired is recognised as goodwill. Deferred tax of £291,000 was
recognised on the acquired intangible assets.
Goodwill of £1,722,000 represents consolidated purchasing and operating
synergies.
The revenue from Superdragon included in the Statement of Comprehensive Income
for 2023 was £Nil, as was the profit. The assets were acquired on the last
day of the financial year.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 2023 31 March 2022
£'000 £'000
Short-term employee benefits 1,152 1,030
Social security costs 159 126
Employee share schemes 1,405 1,402
Post-employment benefits 8 9
Total compensation 2,724 2,567
28.2. Transactions and balances with key personnel
As at As at
31 March 2023 31 March 2022
£'000 £'000
Loan balances with Directors:
Balance outstanding from director (2) (2)
28.3. Transactions and balances with related companies and businesses
Year Ended / As at Year Ended / As at
31 March 2023 31 March 2022
£'000 £'000
Transactions with related companies:
Rent paid to Chadha Properties Limited 180 180
Balances with related companies:
Amounts owed by Nash Peters Limited - -
Amounts owed to Supreme 8 Limited - (1,780)
The above companies are related due to common control and Directors.
On 30 March 2023 the landlord of Beacon Road, Supreme's principal operating
site, changed from Chadha Properties Limited to Supreme 8 Limited, both of
which are related parties. On 5 May 2023 a new lease was signed between
Supreme 8 Limited and Supreme Imports Limited for a term of 5 years from 16
March 2023. Rent to be paid to Supreme 8 Limited in respect of Beacon Road
will be £374,000 per annum (plus VAT) and will continue to be disclosed as a
transaction with related parties.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
29. Net cash flows in financing activities
Net debt as at 1 April 2021 Payments New leases Arising on acquisition Foreign exchange adjustments Interest expense Interest payments Non current to current movement Net debt as at 31 March 2022
Long term loan - current (6,469) 5,305 - - - (575) 285 (2,530) (3,984)
Long term loan - non current (3,695) 1,165 - - - - - 2,530 -
Leases - current (615) 837 (270) - - (46) 46 (854) (902)
Leases - non current (963) - (1,185) - - (72) 72 854 (1,294)
Amount owed to related parties - current (1,613) 1,613 - - - - - (1,779) (1,779)
Amount owed to related parties - non current (1,779) - - - - - - 1,779 -
Sub-total (15,134) 8,920 (1,455) - - (693) 403 - (7,959)
Cash at bank and in hand 7,505 (3,818) 271 (32) - - - 3,926
Total (7,629) 5,102 (1,455) 271 (32) (693) 403 - (4,033)
Net debt as at 1 April 2022 Payments Drawdowns New leases Arising on acquisition Foreign exchange adjustments Interest expense Interest payments Movement on loan costs Non current to current movement Net debt as at 31 March 2023
Long term loan - current (3,984) 3,984 - - - - - - - -
Long term loan - non current - - - - - - - - - -
RCF - non current - 14,000 (18,418) - - - (883) 776 218 - (4,307)
Leases - current (902) 834 (647) - - (7) 7 - (4) (719)
Leases - non current (1,294) - (13,003) - - (146) 146 - 4 (14,293)
Amount owed to related parties - current (1,779) 1,779 - - - - - - - -
Sub-total (7,959) 20,597 (18,418) (13,650) - - (1,036) 929 218 - (19,319)
Cash at bank and in hand 3,926 1,643 - 1,866 101 - - - - 7,536
Total (4,033) 22,240 (18,418) (13,650) 1,866 101 (1,036) 929 218 - (11,783)
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
30. Post balance date events
There have been no post balance date events to note.
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