REG - Supreme PLC - Half-year Results
07/12/2021 07:00
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RNS Number : 7485U Supreme PLC 07 December 2021
7 December 2021
Supreme plc
("Supreme," the "Company" or the "Group")
Unaudited Results for the Half Year Ended 30 September 2021
Strong profit performance driven by organic growth, M&A and product
launches
Supreme (AIM:SUP), a leading manufacturer, distributor and brand owner of
fast-moving consumer products, announces its unaudited results for the
six-month period ended 30 September 2021 ("HY 2022" or the "Period").
Financial highlights
HY 2022 HY 2021 %
£m £m change
UNAUDITED UNAUDITED
Revenue 61.1 56.3 9%
Gross profit 18.1 14.3 27%
Gross profit % 30% 25%
Adjusted EBITDA(1) 10.1 8.4 20%
Adjusted EBITDA(1) margin % 17% 15%
Profit before tax 8.5 6.8 25%
Net debt 8.4 21.7 -61%
EPS 5.8p 5.0p 16%
Adjusted EPS(2) 5.9p 5.2p 13%
Ordinary dividend 2.2p - -
· Revenues increased by 9% to £61.1 million (HY 2021: £56.3 million),
with a greater focus on higher margin categories
- Vaping category grew revenues organically by 13%
- Sports Nutrition and Wellness grew revenues by 192%
· Gross profit margin increased from 25% to 30% due to enhanced product
mix and increased in-house manufacturing
· 20% increase in Adjusted EBITDA(1) to £10.1 million (HY 2021: £8.4
million) with a margin of 17%
· Overheads remain tightly controlled with minimal investment required
to support future growth
· Net debt of £8.4 million (HY 2021: £21.7 million, FY 2021: £7.6
million)
· The Board has declared a maiden dividend of 2.2p per share, payable
on 14(th) January 2022 to all shareholders on the register on 17(th) December
2021
Operational highlights
· Two acquisitions completed and successfully integrated into Supreme's
platform, financed from existing cash resources:
- Vendek - a leading batteries and lighting distributor based in
Republic of Ireland
- Sci-MX - a well-known sports nutrition brand
· Launched Sealions, the Group's first digital-only vitamins brand, in
July 2021, and vitamins retail brand, Millions & Millions, in September
2021, with Davina McCall as brand ambassador
· Successfully began servicing new customer mandates won in the Period
including Sainsbury's and McColl's
· Continued to scale in-house manufacturing capabilities to meet future
demand and drive longer term margin improvement
· Continue to proactively manage supply chain where relevant with
minimal impact on trading, but remain vigilant
Outlook
· Good start to the second half of the year ("H2 2022") achieved with
Adjusted EBITDA(1) expected to be at least in line with market expectations
· The Company has consciously invested in additional stock of key lines
and raw materials to provide further shelter from any potential supply chain
disruption in H2 2022
· The Board remains confident in the future growth prospects for
Supreme in the medium- to long-term
Sandy Chadha, Chief Executive Officer of Supreme, commented:
"The combination of Supreme's extensive retail relationships combined with our
high volume, great value product proposition continued to underpin our strong
profit performance in the first six months of trading in the current financial
year. Our market-leading Vaping category, alongside our high growth Sports
Nutrition & Wellness division, continue to outperform their respective
markets - further demonstrating our ability to attract and maintain consumer
demand.
"When combined with the operational developments we have implemented,
including the acquisitions of Vendek and Sci-MX alongside the launches of
Millions & Millions and Sealions, this has been an important period for
our business, as we continue to leverage our unique capabilities and
integrated approach to accelerate performance.
"The second half of the current financial year has started well and our
established business model, alongside our diverse product portfolio, provides
the Board with confidence in the Group delivering a good performance in the
second half and beyond."
(1 )Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in Note 4 of the financial statements).
Adjusted items include share-based payments charge, fair value movements on
non-hedge accounted derivatives and other non-recurring items (including all
IPO-related costs)
(2) Adjusted 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 4 of the financial statements). Adjusted items include
share-based payments, fair value movements on non-hedge accounted derivatives
and other non-recurring items (including all IPO-related costs).
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014 which is part of UK law by virtue of the European Union (withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
Enquiries:
Supreme plc via Vigo Consulting
Sandy Chadha, Chief Executive Officer
Suzanne Smith, Chief Finance Officer
Grant Thornton UK LLP (Nominated Adviser) +44 (0)20 7383 5100
Philip Secrett / Samantha Harrison / Harrison Clarke / Daphne Zhang
Berenberg (Broker) +44 (0)20 3207 7800
Chris Bowman / Mark Whitmore / Jen Clarke
Vigo Consulting (Financial Public Relations) +44 (0)20 7390 0230
Jeremy Garcia / Antonia Pollock / 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, Sainsbury's, Sports Direct, Londis, SPAR,
Costcutter, Asda, Halfords, McColl's, Iceland and HM Prison & Probation
Service.
In addition to distributing globally-recognised brands such as Duracell,
Energizer and Panasonic, and supplying lighting products exclusively under the
Energizer, Eveready and JCB licenses across 45 countries, Supreme has also
developed brands in-house, most notably 88Vape and has a growing footprint in
Sports Nutrition & Wellness.
www.investors.supreme.co.uk (http://www.investors.supreme.co.uk)
Chief Executive Officer's Review
Introduction
The Group performed strongly in the first half of the year, driven by organic
growth and the benefit of bolt-on M&A, gross margin expansion (achieved
largely through scaling manufacturing) and continuing to tightly manage the
cost base.
In the six months ended 30 September 2021, Supreme achieved a 9% increase in
revenues to £61.1 million (HY 2021: £56.3 million) and delivered a 20%
increase in Adjusted EBITDA(1) to £10.1 million (HY 2021: £8.4 million). The
Group also remained operationally cash generative with net debt as at 30
September 2021 of approximately £8.4 million (31 March 2021: net debt of
£7.6 million) noting that core bank and related party borrowings reduced but
lease obligations under IFRS16 increased.
Our core growth categories of Vaping and Sports Nutrition & Wellness
continued on their growth trajectories. Our Vaping business grew revenues
organically by 13% during the period to £21.7 million and the launch of our
new vitamin brands, along with the acquisition of the stock and brands of
Sci-MX Limited, supported a 192% growth in revenues to £6.4 million for our
Sports Nutrition & Wellness category. The Group's expanding in-house
manufacturing capabilities also ensured that these divisions maintained a high
margin contribution.
We also delivered notable strategic progress in the Period, executing on and
integrating two bolt-on acquisitions, and launching two vitamin brands, all of
which are delivering promising traction since their additions to the Group.
Our teams also successfully achieved strong business continuity in the first
half of the year, despite the widely reported supply chain issues (e.g. raw
materials cost inflation and freight delays) and labour shortages, which have
only had a marginal impact on the Group.
Operational Review
Our strategy is clear, to deliver sustainable growth across the business by
leveraging our distribution network, manufacturing capabilities, customer
relationships and supplier partnerships. We are concentrating on high growth
and high margin categories such as Vaping and Sports Nutrition & Wellness,
which have strong market tailwinds, whilst other divisions such as Lighting
and Batteries deliver a stable and predictable earnings pattern.
We delivered growth both organically and by acquisition through the addition
of new products, the transfer of manufacturing in-house or the entry to new
verticals, and then utilise our significant customer network to increase
penetration of these products.
I am pleased to say that we achieved significant progress against our strategy
in the Period, the benefits of which, we expect to fully realise in future
periods. We successfully upgraded our in-house manufacturing capabilities,
which is key to the growth in our Vaping and Sports Nutrition & Wellness
categories and executed on two strategic bolt-on acquisitions and launched two
new product lines. Further details of which are outlined in the divisional
summary below.
Vaping
Our Vaping division continued to deliver excellent growth, achieving a 13%
increase in revenue in the Period to £21.7 million (HY 2021: £19.2 million)
and a 25% increase in gross profit to £8.9 million (HY 2021: £7.1 million),
continuing to outperform the wider sector.
We secured a number of new business mandates in the first half, including
agreements with Sainsbury's, Core Communications and McColl's, and the
expansion of our contract with HMPPS, all of which are being successfully
serviced by the Group and delivering strong margins as we bring more of the
manufacturing process in-house. Our 88vape consumer website also continued to
deliver a strong performance in the first half of the year.
The vaping market continues to benefit from positive market dynamics,
particularly as the Government has pledged to make the UK smoke-free by 2030,
recognising e-cigarettes as a healthier alternative to smoking. We are also
actively working with the Medicines and Healthcare products Regulatory Agency
("MHRA") in response to the announcement that vaping products will soon be
available on prescription. We therefore anticipate our Vaping division to
remain a core driver of the Group's growth going forward.
Sports Nutrition & Wellness
Revenues of £6.4 million in the first half (HY 2021: £2.1 million) were
delivered by the Group's Sports Nutrition & Wellness category,
representing growth of 192%, which is significant as the division was only
established three years ago. In addition, gross profit increased 136% to £2.1
million (HY 2021: £0.9 million).
In June 2021, the Group acquired the stock and brands of Sci-MX Limited,
adding protein powders, snack bars and beverage ranges under the established
Sci-MX and PRO2GO brand names to the Group. These products are performing well
following their integration, and we have seen little attrition to Sci-MX's
existing customer base, as well as identifying a number of potential
cross-selling opportunities for the Group. All of this has been achieved with
marginal investment into the cost base.
We also successfully launched two new vitamin ranges in the Period; the
sustainable health and wellness brand, Sealions; and Millions & Millions,
the retail vitamin brand. Making vitamins accessible to everyone, these
complementary brand launches have the potential to accelerate our market share
in what we believe has the potential to become an important growth vertical
for the Group.
Lighting
Lighting revenues increased 18% to £13.2 million (HY 2021: £11.1 million) in
the Period, with gross profit increasing 33% to £4.5 million (HY 2021: £3.4
million). This was partly due to a boost in demand in the Period relating to a
legislative change across the sector, however, this is likely to be one-off in
nature and has been considered in management's expectations for the full year.
In June 2021, the Group acquired Vendek Limited ("Vendek Limited"), a leading
Dublin-based batteries and lighting distributor, creating the opportunity to
establish a European export hub in order to target further European sales
growth. In addition, Vendek has a significant customer base in Ireland
including Supervalu, Dunne Stores and Woodies, creating an opportunity for
Supreme to cross-sell products from its other categories across this customer
base.
Batteries
The Group's Batteries division continued to deliver a stable performance, with
demand remaining within budget. The division delivered revenues of £15.0
million (HY 2021: £14.8 million) in the Period, representing an increase of
1.3%, with gross profit increasing 16% to £1.5 million (HY 2021: £1.3
million). The acquisition of Vendek broadens the division's reach and provides
overlap with Supreme for certain customers, which should enable the Group to
enhance margins across the combined business.
Branded Household Consumer Goods
This division recorded unprecedented demand in FY 2021 as a result of COVID-19
and the increased demand for domestic cleaning products which feature heavily
in the range, and has now begun to reset to its pre-COVID levels. Revenue for
the Period was £4.9 million (HY 2021: £9.1 million). Simultaneously, the
cost base associated with the category was significantly rationalised by
transferring all operations to Supreme's principal facility at Trafford Park.
The category is expected to deliver a net profit contribution broadly in-line
with the pre-COVID levels for the year ending 31 March 2022.
Dividend
As highlighted at the time of our IPO, we intend to pay dividends to
shareholders in an aggregate annual amount equivalent to approximately 50% of
net profits, retaining the balance of earnings from operations to finance our
future expansion. Our dividend payments are expected to be split into a one
third interim dividend and a two thirds final dividend.
As an expression of our confidence in the Group's prospects, the Board
proposes an interim dividend of 2.2 pence per share. This dividend will be
payable on 14(th) January 2022 to shareholders on the register at 17(th)
December 2021. The ex-dividend date is 16(th) December 2021.
Outlook
Trading during the start of the second half has been good, building on the
progress made in the first half of the year. The Board therefore expects
Adjusted EBITDA(1) for FY 31 March 2022 to be at least in line with market
expectations.
Operationally, we have made significant progress in HY 2021 across a number of
fronts, including the expansion of our manufacturing facilities, two bolt-on
acquisitions, and several new product launches, all of which we expect to
further underpin our performance in the future. We have also begun the search
for a new larger Group premises to support the continued growth of the
business.
The resilience of our business model has been clearly apparent both as we
navigated the challenges associated with lockdowns, and, more recently, the
widely reported supply chain issues across the UK and internationally. Whilst
the Board continues to monitor the macroeconomic situation very closely, we
remain confident in the outlook for Supreme this financial year and beyond.
Sandy Chadha
Chief Executive Officer
7 December 2021
Chief Finance Officer's Review
The financial metrics for Supreme remain solid with a pleasing set of results
for the period to 30 September 2021 (the "Period" or "HY 2022"). The 20%
increase in Adjusted EBITDA(1) was driven by solid revenue growth, a conscious
and notable step change in the blended gross margin as the Company continued
to increase its propensity for manufacturing and a well-managed cost base. The
balance sheet was also notably stronger; bank borrowings reduced, whilst the
investment into inventories is expected to continue to shelter the business
from any customer disruption owing to any global supply chain issues.
HY 2022 HY 2021 FY 2021 %
£m £m £m change
UNAUDITED UNAUDITED AUDITED
Revenue 61.1 56.3 122.3 9%
Gross profit 18.1 14.3 33.0 27%
Gross profit % 30% 25% 27%
Adjusted EBITDA(1) 10.1 8.4 19.3 20%
Adjusted EBITDA(1) margin % 17% 15% 16%
Adjusted Items 0 0.2 3.4
Profit before tax 8.5 6.8 13.0 25%
Cash generated from operations 4.2 0.7 12.3 500%
Net assets 26.4 8.6 18.8 207%
Net debt 8.4 21.7 7.6 -61%
EPS 5.8p 5.0p 8.9p 16%
Adjusted EPS(2) 5.9p 5.2p 12.0p 13%
Ordinary dividend 2.2p - -
Revenue
Revenue for the Period was £61.1 million (HY 2021: £56.3 million), an
increase of 9% compared to HY 2021. The growth was a result of the combination
of the M&A undertaken in FY 2021 and in HY 2022, the launch of the new
vitamin brands and organic growth within the Sports Nutrition & Wellness,
Vaping and Lighting categories, which remain the Group's fastest growing and
highest margin categories.
Revenue for Batteries was £15.0 million (HY 2021: £14.8 million). This
growth of 1% was a pleasing result given the "COVID reset" that was initially
anticipated in FY 2022.
Revenue for Lighting was £13.2 million (HY 2021: £11.1 million), an increase
of 18%. Whilst the category is expected to report growth on a full year basis,
this result carries some timing benefits that will catch-up in the second half
of the year.
Revenue for Vaping was £21.7 million (HY 2021: £19.2 million), an increase
of 13%. Supreme's primary vaping brand 88vape 10ml e-liquid product grew 21%
in the Period - supported by strong EPOS data from retail customers combined
with new customer wins (Sainsburys and McColls). Hardware, prison units and
consumer website sales all performed well in the Period.
Revenue for Sports Nutrition & Wellness was £6.4 million (HY 2021: £2.1
million), representing growth of 192%. Supreme's core proprietary brands
gathered momentum at retail, adding new listings and extending their ranges
and the category further benefitted from the addition of the Battle Bites and
Sci-MX brands - both of which were added to Supreme via acquisition (in
October 2020 and July 2021 respectively) with minimal incremental overheads.
Finally, the category also benefited from the launch of its online vitamin
brand Sealions in July 2021.
Revenue for Branded Household Consumer Goods was £4.9 million (HY 2021: £9.1
million), a reduction of 46%, owing to a post-COVID reset in the category
(domestic cleaning products feature heavily in the range which performed
exceptionally well during lockdown). The impact of the reduced revenue was
offset by the savings generated in the overhead base when the category's
operations were integrated into the core Supreme platform and its storage and
distribution capabilities were transferred to Supreme's principal site at
Trafford Park in April 2021. The net profit generated by the category in the
Period was broadly in line with pre-COVID levels. As previously flagged, the
one-off pharmaceutical bottling contract (£1 million of revenue in HY 2021)
did not re-occur in HY 2022.
Gross profit
Gross profit as a percentage of revenue was 30% (HY 2021: 25%). This largely
reflects the change in sales mix with Vaping and Sports Nutrition &
Wellness, the highest margin categories in the Group, reporting the highest
rates of growth. In HY 2022 the manufactured categories accounted for 61% of
the total gross profit reported by Supreme (HY 2021: 56%).
Gross profit as a percentage of sales also benefitted from the continued
efficiencies in manufacturing driven by both economies of scale and discrete
initiatives.
Gross profit for Lighting (largely sourced from the Far East) was particularly
noteworthy at 34% (HY 2021: 30%), reaffirming that freight inflation and
disruption did not materially affect the Group in HY 2022.
Adjusted EBITDA(1)
Administrative Expenses reported within Adjusted EBITDA(1) were £8 million
(HY 2021: £5.9 million), an increase of £2.1 million. This increase was
broadly in three categories:
- Selling costs (carriage, distribution and commissions) all of
which grew in line with revenue. In addition, there were discrete listing fees
associated with new customer wins in the Period;
- "PLC-related costs" - overheads associated with Supreme's AIM
quoted status i.e. the costs of the Board and the professional and advisory
fees; and
- Discrete investments into the personnel base as the business has
grown in scale and complexity, particularly in back-office support
Adjusted EBITDA(1) was £10.1 million (HY 2021: £8.4 million), an increase of
20%.
Adjusted EBITDA(1) margin grew to 17% (HY 2021: 15%)
Depreciation and amortisation
The total charge for the Period was £1.4 million (HY 2021: £1.0 million), an
increase of £0.4 million. £0.1 million of the increase related to the
additional depreciation on leases capitalised under IFRS16 and £0.1 million
related to the amortisation of the Sci-MX intangibles acquired in the Period.
Adjusted Items
Adjusted Items of £0.1 million (HY 2021: £0.2m) comprised:
- Share-based payments charge, in accordance with IFRS2, of £0.7
million (HY 2021: £nil) relating to the awards made at IPO as set out in the
Admission Document;
- Fair value movements on open USD forward contracts (£0.9 million
credit) (HY 2021: £nil); and
- Fees associated with the acquisitions completed in the Period of
£0.1 million (HY 2021: £0.1 million).
NB: other Adjusted Items reported in HY 2021 related to restructuring and
refinancing expenses.
Finance costs
Finance costs were £0.3 million (HY 2021: £0.4 million). The reduction in
finance costs related to the reducing balance of the senior debt.
Profit before tax
Profit before tax for the Period was £8.5m (HY 2021: £6.8 million), growth
of 25%.
Taxation
The tax charge for the Period was £1.7 million (HY 2021: £1.3m). For both
periods Supreme's full year expected tax rate is c.19%.
Dividends
On admission to AIM in February 2021, the Group's stated intention was to make
dividend payments of c. 50% of profit after tax, one third of which was to be
paid following the announcement of the interim results. That policy remains in
place and as such the Board has declared of 2.2p per share. This interim
dividend is payable on 14(th) January 2022 to shareholders on the register on
17(th) December.
Cash flow
The Group generated cash from operations in the Period of £4.2 million (HY
2021: £0.7 million); a result of the continued growth in EBITDA offset by a
conscious investment into inventories to support growth and mitigate any
potential shortages / customer disruption relating to any supply chain issues
around the globe.
Outside of operational cash matters, Supreme undertook two acquisitions in the
Period, both of which were funded from free cash (£3.4 million), serviced its
senior debt obligations in the ordinary course (£2.6 million) and repaid 50%
of its related party loan (£1.7 million).
Cash at 30 September was £4.3 million (FY 2021: £7.5 million).
HY 2022 HY 2021 FY 2021
£m £m £m
UNAUDITED UNAUDITED AUDITED
Adjusted EBITDA(1) 10.1 8.4 19.3
Movement in NWC (4.5) (6.5) (1.6)
Tax paid (1.3) (1.0) (3.0)
Cash-impacting Adjusted Items: (0.1) (0.2) (2.4)
Cash generated from operations 4.2 0.7 12.3
Debt (servicing) / raising (4.1) (3.3) (14.4)
Capex (including M&A) (3.4) (1.1) (1.9)
Dividends - (1.0) (3.0)
Proceeds from IPO - - 7.8
Net cash flow (3.3) (4.7) 0.8
Net debt
Whilst Net Debt has increased since year end, the table below highlights that
this is owing to the increase in the IFRS 16 Lease Liability only - all other
elements (senior debt and other bank borrowings as well as related party
borrowings) have reduced.
HY 2022 HY 2021 FY 2021
£m £m £m
UNAUDITED UNAUDITED AUDITED
Cash (4.3) (3.5) (7.5)
Bank Loans 6.3 19.0 9.0
Amounts owed to Related Parties 1.7 3.4 3.4
IFRS 16 Lease Liability 2.6 1.3 1.6
Other 1.9 1.4 1.2
Total net debt 8.4 21.7 7.6
Suzanne Smith
Chief Finance Officer
7 December 2021
(1 )Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in Note 4 of the financial statements).
Adjusted items include share-based payments charge, fair value movements on
non-hedge accounted derivatives and other non-recurring items (including all
IPO-related costs).
(2) Adjusted 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 4 of the financial statements). Adjusted items include
share based payments, fair value movements on non-hedge accounted derivatives
and other non-recurring items (including all IPO-related costs).
( )
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION OF SUPREME PLC
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended 31 March 2021
30 September 2021 30 September 2020
Note £'000 £'000 £'000
Revenue 3 61,082 56,336 122,253
Cost of sales (42,956) (42,054) (89,211)
Gross profit 18,126 14,282 33,042
Administration expenses (9,371) (7,120) (19,416)
Operating profit 8,755 7,162 13,626
Adjusted EBITDA(1) 10,078 8,398 19,272
Depreciation (1,219) (943) (1,998)
Amortisation (146) (51) (225)
Adjusted items 4 42 (242) (3,423)
Operating profit 8,755 7,162 13,626
Finance income - - -
Finance costs (278) (374) (671)
Profit before taxation 8,477 6,788 12,955
Income tax 5 (1,659) (1,341) (3,117)
Profit for the period/year 6,818 5,447 9,838
Other comprehensive income
Currency translation differences (4) 56 -
Total comprehensive income for the period/year 6,814 5,503 9,838
Earnings per share - basic 6 5.8p 5.0p 8.9p
Earnings per share - diluted 6 5.5p 4.9p 8.7p
Note 1: Adjusted EBITDA, which is defined as profit before finance costs, tax,
depreciation, amortisation and adjusted items is a non-GAAP metric used by
management and is not an IFRS disclosure.
All results derive from continuing operations.
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
As at As at As at
30 September 2021 30 September 2020 31 March 2021
£'000 £'000 £'000
Assets
Goodwill and other intangibles 3,796 1,852 2,628
Property, plant and equipment 2,578 3,516 2,787
Right of use asset 2,544 1,239 1,476
Investments 7 7 7
Total non-current assets 8,925 6,614 6,898
Current assets
Inventories 26,711 19,799 19,865
Trade and other receivables 21,465 22,445 16,052
Derivative financial instruments 293 - -
Cash and cash equivalents 4,259 3,494 7,505
Total current assets 52,728 45,738 43,422
Total assets 61,653 52,352 50,320
Liabilities
Current liabilities
Borrowings 9,403 10,601 10,476
Trade and other payables 19,640 15,771 13,295
Derivative financial instruments - - 559
Income tax payable 2,820 2,667 2,370
Total current liabilities 31,863 29,039 26,700
Net current assets 20,865 16,699 16,722
Borrowings 3,239 14,563 4,658
Deferred tax liability 141 183 141
Total non-current liabilities 3,380 14,746 4,799
Total liabilities 35,243 43,785 31,499
Net assets 26,410 8,567 18,821
Equity
Share capital 11,663 11,001 11,650
Share premium 7,231 - 7,195
Merger reserve (22,000) (22,000) (22,000)
Share-based payments reserve 801 - 75
Retained earnings 28,715 19,566 21,901
Total equity 26,410 8,567 18,821
Unaudited Consolidated Statement of Changes in Equity
Share capital Merger reserve Share-based payments reserve Retained earnings Total
equity
Share premium
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 11,001 - (22,000) - 15,063 4,064
Profit for the year - - - - 9,838 9,838
Total comprehensive income for the year - - - - 9,838 9,838
Transactions with shareholders:
Issue of shares - options exercised 89 255 - - - 344
Issue of shares - IPO shares 560 6,940 - - - 7,500
Employee share schemes - value of employee services - - - 75 - 75
Dividends - - - - (3,000) (3,000)
649 7,195 - 75 (3,000) 4,919
As at 31 March 2021 11,650 7,195 (22,000) 75 21,901 18,821
As at 1 April 2020 11,001 - (22,000) - 15,063 4,064
Profit for the period - - - - 5,447 5,447
Other comprehensive income - - - - 56 56
Total comprehensive income for the period - - - - 5,503 5,503
Transactions with shareholders:
Dividends - - - - (1,000) (1,000)
As at 30 September 2020 11,001 - (22,000) - 19,566 8,567
As at 1 April 2021 11,650 7,195 (22,000) 75 21,901 18,821
Profit for the period - - - - 6,818 6,818
Other comprehensive income - - - - (4) (4)
Total comprehensive income for the period - - - - 6,814 6,814
Transactions with shareholders:
Issue of shares - options exercised 13 36 - - - 49
Employee share schemes - value of employee services - - - 726 - 726
As at 30 September 2021 11,663 7,231 (22,000) 801 28,715 26,410
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended 31 March 2021
30 September 2021 30 September 2020
£'000 £'000 £'000
Net cash flow from operating activities
Profit for the period 6,818 5,447 9,838
Adjustments for:
Amortisation of intangible assets 146 51 225
Depreciation of tangible assets 1,219 943 1,998
Finance costs 197 374 671
Amortisation of capitalised finance costs 81 - 177
Loss on disposal of fixed assets 25 - -
Income tax expense 1,659 1,341 3,117
Movement on forward foreign exchange contracts (852) - 768
Share based payments expense 726 - 75
Working capital adjustments
(Increase)/decrease in inventories (4,764) (5,341) (5,286)
(Increase)/decrease in trade and other receivables (4,741) (5,441) 970
Increase in trade and other payables 4,997 4,304 2,726
Taxation (paid)/received (1,271) (1,000) (3,003)
Net cash (used in)/generated from operations 4,240 678 12,276
Cash flows used in investing activities
Purchase of intangible fixed assets (2,300) (125) (125)
Purchase of property, plant and equipment (426) (745) (1,667)
Purchase of subsidiaries net of cash acquired (1,040) - (1,005)
Proceeds from sale of property, plant, and equipment 378 - -
Directors loan account movement (3) 2 890
Net cash used in investing activities (3,391) (868) (1,907)
Cash flows used in financing activities
Drawdown of loans 771 - -
Repayment of loans (4,365) (2,593) (13,021)
Drawdown of other loans - - -
Proceeds from IPO - - 7,500
Proceeds from issue of options 49 - 344
Payment of deferred consideration - (195) (195)
Dividends paid - (1,000) (3,000)
Finance costs paid (101) (360) (591)
Lease payments (449) (283) (619)
Net cash used in financing activities (4,095) (4,431) (9,582)
Net (decrease)/increase in cash and cash equivalents (3,246) (4,621) 787
Cash and cash equivalents brought forward 7,505 6,718 6,718
Foreign exchange - - -
Cash and cash equivalents carried forward 4,259 2,097 7,505
Cash and cash equivalents 4,259 3,494 7,505
Bank overdraft - (1,397) -
4,259 2,097 7,505
Notes to the condensed consolidated interim financial information
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.
These condensed consolidated interim financial statements of the Group are for
the period ended 30 September 2021. They have been prepared on the basis of
the policies set out in the 2021 annual financial statements and in accordance
with UK adopted IAS 34. These half year results are the first half year
results since the IPO in February 2021. For the purpose of providing
comparative information for the six months ended 30 September 2020 and to help
users of this information to assess the underlying financial performance of
the Group, this announcement contains unaudited information derived from Part
VI: Unaudited Interim Financial Information of Supreme plc of the Admission
Document dated 27 January 2021.
The condensed consolidated interim financial statements have not been reviewed
or audited, nor do they comprise statutory accounts for the purpose of Section
434 of the Companies Act 2006, and do not include all of the information or
disclosures required in the annual financial statements and should therefore
be read in conjunction with the Group's 2021 annual financial statements,
which were prepared in accordance with UK adopted international accounting
standards in conformity with the requirements of the Companies Act 2006.
Financial information for the year ended 31 March 2021 included herein is
derived from the statutory accounts for that year, which have been filed with
the Registrar of Companies. The auditors' report on those accounts was
unqualified, did not contain an emphasis of matter paragraph and did not
contain a statement under Section 498 of the Companies Act 2006.
The interim condensed consolidated financial statements are presented in the
Group's functional currency of pounds Sterling and all values are rounded to
the nearest thousand (£'000) except when otherwise indicated.
2. Summary of significant accounting
policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
March 2021 as described in the Group's Annual Report and full financial
statements for that year and as available on the Company's website
(www.supreme.co.uk (http://www.supreme.co.uk) ).
2.1 Taxation
Taxes on income in the interim periods are accrued using management's best
estimate of the weighted average annual tax rate that would be applicable to
expected total annual earnings.
2.2 Forward looking statements
Certain statement in these condensed consolidated interim financial statements
are forward looking with respect to the operations, strategy, performance,
financial condition and growth opportunities of the Group. The terms "expect",
"anticipate", "should be", "will be", "is likely to" and similar expressions
identify forward-looking statements. Although the Board believes that the
expectations reflected in these forward-looking statements are reasonable, by
their nature these statements are based on assumptions and are subject to a
number of risks and uncertainties. Actual events could differ materially from
those expressed or implied by these forward-looking statements. Factors which
may cause future outcomes to differ from those foreseen in forward-looking
statements include, without limitation: general economic conditions and
business conditions in the Group's markets; customers' expectations and
behaviours; supply chain developments; technology changes; the actions of
competitors; exchange rate fluctuations; and legislative, fiscal and
regulatory developments. Information contained in these condensed consolidated
interim financial statements relating to the Group should not be relied upon
as a guide to future performance.
2.3 Key risks and uncertainties
The Group has in place a structured risk management process which identifies
key risks and uncertainties along with their associated mitigants. The key
risks and uncertainties that could affect the Group's medium-term performance,
and the factors that mitigate those risks have not substantially changed from
those set out in the Group's Annual Report which can be found on the Group's
website (www.supreme.co.uk).
2.4 Going concern
Supreme PLC provides essential products to well established retailers. The
nature and price point of the products offered means that the Group is well
positioned to overcome any volatility in the economic climate, which is
further supported by a customer base who perform consistently strongly and are
household names.
The Covid-19 pandemic has not had a material impact on the Group, with many of
Supremes customers being able to remain open throughout. This has allowed the
Group to continue its growth, both organically and through acquisition.
The group is funded by external banking facilities provided by HSBC until
December 2022, as well as through surplus cash held at bank. The Board and
Senior Management regularly reviews revenue, profitability and cash flows
across the short, medium and longer term.
Management has assessed the Group's Going Concern status by undertaking a
3-year cash flow forecast where the modest levels of growth to revenue and
costs have been applied and held all working capital assumptions in line with
existing trends. No new categories or acquisitions have been assumed nor any
significant economies of scale or manufacturing efficiencies. In terms of cash
projections and overall liquidity, the Group reported cash of £4.3m and
unused credit facilities of £10.9m (comprising an invoice discounting
facility and an import loan facility). The cash flow forecasts show increasing
levels of cash generation in FY22 and later years.
Taking account of these facilities and having considered future strong trading
and cash flow forecasts, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Directors continue to adopt the going
concern basis in preparing the condensed consolidated interim financial
statements.
3. Segmental analysis
The Chief Operating Decision Maker ("CODM") has been identified as the Board
of Directors. The Board reviews the Company's internal reporting in order to
assess performance and allocate resources. No balance sheet analysis is
available by segment or reviewed by the CODM. The Board has determined that
the operating segments, based on these reports, are the sale of:
· batteries;
· lighting;
· vaping;
· sports nutrition & wellness; and
· branded household consumer goods.
Batteries Lighting Vaping Sports nutrition & wellness Branded household consumer goods Unaudited
6 months ended
30 September 2021
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 14,959 13,157 21,658 6,367 4,941 61,082
Cost of sales (13,427) (8,674) (12,803) (4,249) (4,420) (43,573)
Gross profit before foreign exchange 1,532 4,483 8,855 2,118 521 17,509
Foreign exchange 617
Gross profit 18,126
Administration expenses (9,371)
Operating profit 8,755
Adjusted earnings before tax, depreciation, amortisation and adjusted items 10,078
Depreciation (1,219)
Amortisation (146)
Adjusted items 42
Operating profit 8,755
Finance income -
Finance costs (278)
Profit before taxation 8,477
Income tax (1,659)
Profit for the period 6,818
Batteries Lighting Vaping Sports nutrition & wellness Branded household consumer goods Unaudited
6 months ended
30 September 2020
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 14,760 11,109 19,189 2,177 9,101 56,336
Cost of sales (13,435) (7,745) (12,084) (1,280) (8,086) (42,630)
Gross profit before foreign exchange 1,325 3,364 7,105 897 1,015 13,706
Foreign exchange 576
Gross profit 14,282
Administration expenses (7,120)
Operating profit 7,162
Adjusted earnings before tax, depreciation, amortisation and adjusted items 8,398
Depreciation (943)
Amortisation (51)
Adjusted items (242)
Operating profit 7,162
Finance income -
Finance costs (374)
Profit before taxation 6,788
Income tax (1,341)
Profit for the period 5,447
Analysis of revenue by geographical destination
Unaudited Unaudited
6 months ended 6 months ended
30 September 2021 30 September 2020
£'000 £'000
United Kingdom 56,127 51,763
Rest of Europe 4,663 4,008
Rest of the World 292 565
61,082 56,336
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.
4. Adjusted items
Unaudited Unaudited
6 months ended 6 months ended
30 September 2021 30 September 2020
£'000 £'000
Share based payments charge 726 -
Fair value movements on financial derivatives (852) -
Transaction related costs 78 40
Refinancing costs - 74
Restructuring costs 6 128
(42) 242
The financial derivatives relate to open foreign exchange forward contracts
(the Group typically holds 1 years' worth of USD-denominated purchases on open
forward contracts). The (credit)/charge in the period reflects the movement in
the fair value of these open forward contracts at the balance sheet date since
the year end. Transaction related costs represent adviser fees for
acquisitions performed to date.
5. Taxation
The income tax expense for the half year ended 30 September 2021 is based upon
management's best estimate of the weighted average annual tax rate expected
for the full year ending 31 March 2022. The income tax expense is broadly
similar to the standard rate of 19%.
6. 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 period.
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:
Unaudited Unaudited
6 months ended 6 months ended
30 September 2021 30 September 2020
£'000 £'000
Profit for the period after tax 6,818 5,447
No. No.
Weighted average number of shares for the purposes of basic earnings per share 116,584,719 110,005,000
Weighted average dilutive effect of conditional share awards 7,324,757 1,256,158
Weighted average number of shares for the purposes of diluted earnings per 123,909,476 111,261,158
share
Pence Pence
Basic profit per share 5.8 5.0
Diluted profit per share 5.5 4.9
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.
Unaudited Unaudited
6 months ended 6 months ended
30 September 2021 30 September 2020
£'000 £'000
Adjusted earnings (see below) 6,906 5,694
No. No.
Weighted average number of shares for the purposes of basic earnings per share 116,584,719 110,005,000
Weighted average dilutive effect of conditional share awards 7,324,757 1,256,158
Weighted average number of shares for the purposes of diluted earnings per 123,909,476 111,261,158
share
Pence Pence
Adjusted basic profit per share 5.9 5.2
Adjusted diluted profit per share 5.6 5.1
The calculation of basic adjusted earnings per share is based on the following
data:
Unaudited Unaudited
6 months ended 6 months ended
30 September 2021 30 September 2020
£'000 £'000
Profit/(loss) for the period attributable to equity shareholders 6,818 5,447
Add back/(deduct):
Amortisation of acquisition related intangible assets 146 51
Adjusted items (42) 242
Tax effect of the above (16) (46)
Adjusted earnings 6,906 5,694
7. Financial instruments
The fair values of all financial instruments included in the statement of
financial position are a reasonable approximation of their carrying values.
8. Business combinations
Acquisition of Vendek Limited
On 10 June 2021 Supreme Imports Limited acquired the entire share capital of
Vendek Limited, a leading Dublin-based distributor of batteries and lighting
products, for initial consideration of £1.3m.
Recognised amounts of identifiable assets acquired and liabilities assumed
(unaudited)
Book value Fair value adjustment Fair value
£'000 £'000 £'000
Fixed assets
Property, plant and equipment 600 - 600
600 - 600
Current assets
Inventory 1,148 (52) 1,096
Debtors due within one year 805 (48) 757
Cash at bank and in hand 271 - 271
2,224 (100) 2,124
Total assets 2,824 (100) 2,724
Creditors
Due within one year (781) - (781)
(781) - (781)
Total identifiable net assets 1,943
Goodwill -
Total purchase consideration 1,943
Consideration
Cash 1,311
Deferred consideration 632
Total purchase consideration 1,943
Cash outflow on acquisition
Purchase consideration settled in cash, as above 1,311
Less: cash and cash equivalents acquired (271)
Net cash outflow on acquisition 1,040
Following a purchase price allocation exercise the company did not identify
further acquired intangible assets. The fair value adjustments reflect
increases to inventory provisions of £52,000 and trade receivables of
£48,000. There was no additional consideration paid over the fair value of
the net assets acquired and therefore no goodwill arose on the acquisition.
In addition, on 30 June 2021, Supreme Imports Limited acquired the
intellectual property rights and inventory of Sci-MX Nutrition Limited, a
leading sports nutrition and supplements business for a consideration of
£2.3m. This purchase does not meet the definition of a business combination
under IFRS3 and the consideration has been allocated to the fair value of the
assets acquired as follows:
£'000
Intellectual property rights 1,314
Inventories 986
2,300
9. Dividends
Dividends of £nil were declared in the 6 months ended 30 September 2021
(2020: £1,000,000).
10. Post balance date events
On the 7(th) December 2021 the Board declared an interim dividend of 2.2p per
share, payable to shareholders on the 14(th) January 2022 to all shareholders
on the register on 17(th) December with an ex-dividend date of 16(th) December
2021.
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