REG - Supreme PLC - Half-year Results
28/11/2023 07:00
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RNS Number : 8353U Supreme PLC 28 November 2023
28 November 2023
Supreme plc
("Supreme," the "Company" or the "Group")
Unaudited Results for the Half Year Ended 30 September 2023
Record levels of revenue, Adjusted EBITDA(1) and pre-tax profit driven by
growth across all product categories, alongside extensive operational progress
Strong Q3 trading to-date resulting in a further significant profit upgrade
for FY 2024
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 2023 ("H1 2024" or the "Period").
Financial Highlights
· Revenue growth of 63% to £105.1 million (H1 2023: 64.6 million)
driven by:
o The ElfBar distribution opportunity, which generated £26.4 million
revenue in the Period and has been reported within "Branded Distribution" in
the segmental analysis;
o Strong organic growth of £8.7 million arising from Lighting (21% growth),
Vaping (17% growth) and Sports Nutrition & Wellness (17% growth); and
o The contribution of prior-year acquisitions, which reported growth of
£5.4 million.
· Adjusted EBITDA(1) up 88% to £15.2 million (H1 2023: £8.1
million) driven by incremental revenue and improved margins with very modest
investment in overheads to support the reported revenue growth
· Pre-tax profit up 179% to £12.3 million (H1 2023: £4.4 million)
· Adjusted net debt (i.e. excluding IFRS 16 leases)(4) of £4.8
million (H1 2023: £12.9 million), representing less than 0.2x adjusted LTM
EBITDA, with unutilised borrowing facilities of £35 million
· Interim dividend of 1.5 pence per share declared (H1 2023: 0.8
pence)
H1 2024 H1 2023 Change
£m £m %
Revenue 105.1 64.6 +63%
Gross profit 28.5 18.2 +57%
Gross profit % 27% 28% -1%
Adjusted EBITDA(1) 15.2 8.1 +88%
Profit before tax 12.3 4.4 +179%
Adjusted profit before tax(2) 11.8 5.8 +103%
EPS 7.9p 2.8p +182%
Adjusted EPS(3) 8.1p 4.5p +80%
Net debt (i.e. including IFRS 16 leases) 19.8 14.6 +36%
Adjusted net debt (i.e. excluding IFRS 16 leases)(4) 4.8 12.9 -63%
Dividend 1.5p 0.8p +88%
Operational Highlights
· Delivered a strong operational performance, further underscoring
Supreme's unique operating model and product set
· Completed the fit-out of 'Ark' warehouse on-time and on-budget
with minimal disruption to the wider business. Ark has become the Group's new
principal warehousing and distribution centre which will support both organic
and acquisitive growth
· 25% increase in vaping production capacity of Manchester-based
manufacturing site to accommodate the manufacturing operations of all three
vaping businesses acquired in FY 2023 and to support further organic growth
· Rolled out and significantly scaled the new ElfBar distribution
opportunity, including new customer onboarding and extensive product testing,
which demonstrates the Company's ability to adapt quickly to new opportunities
· Announced a number of proactive measures to combat underage
vaping, which Supreme strongly believes should be adopted by all industry
players:
o Reduce the use of colour in 88vape packaging;
o Discontinue the use of coloured hardware for all 88vape disposables;
o Use only age-appropriate naming conventions to describe 88vape flavours;
o Trade only with retailers and e-tailers who commit to having robust age
verification controls in place; and
o Make recommendations to retail customers to locate vapes away from
confectionery.
Outlook
· The second half of FY24 has begun very well; with continued
growth reported across all divisions within the Group
· This strong performance in the core business and the growing
breadth of ElfBar distribution, combined with a tightly controlled overhead
base have led the Board to, again, significantly increase its expectation of
full year profitability for the year ending 31 March 2024 ("FY 2024")
· The Group now expects trading for FY 2024 to be significantly
ahead of company-issued guidance, with revenue guidance of around £210 - 225
million and Adjusted EBITDA(1) guidance of approximately £32 - 35 million, an
increase of around £4.5 million compared to the previous company-issued
guidance(5), with around £1.5 million of the incremental Adjusted EBITDA(1)
arising from the core business and around £3.0 million incremental Adjusted
EBITDA(1) arising from the ElfBar distribution opportunity
· The consultation on possible new UK e-cigarette regulations ends
on 6 December 2023. The Group remains confident that the Government will
continue to recognise the important role that the vaping industry plays in
delivering the country's 'Achieving Smoke-free 2030' initiative
· Supreme remains ideally positioned to deliver ongoing profit
growth and the Board remains confident in its ability to manage change
Sandy Chadha, Chief Executive Officer of Supreme, commented:
"I am delighted to report another exceptional period of trading for the Group,
delivering record revenue and profit growth. This strong performance has been
undoubtedly driven by our established vaping activities, alongside solid sales
momentum across the remainder of the business including sales growth in
Lighting of 21% and Sports Nutrition & Wellness of 17%.
In light of our growing presence across the UK vaping sector, we remain highly
vigilant to the growing problem of underage vaping and welcome any
preventative measures that prevent the supply of vape products to underage
individuals whilst acknowledging the important role that the vape industry
will continue to play in delivering the UK Government's 'Achieving Smoke-free
2030' initiative.
Looking ahead, the second half of the year is shaping up to be another
significant period for Supreme. The Group remains ideally placed to continue
to deliver robust operational and financial progress as we strive to deliver
ongoing profit momentum."
Investor Presentation
Management will be hosting a presentation for investors in relation to the
Company's interim results on 28 November 2023 at 2pm BST. To register for the
event, please go to:
https://www.equitydevelopment.co.uk/news-and-events/supreme-investor-presentation-28november2023
(https://www.equitydevelopment.co.uk/news-and-events/supreme-investor-presentation-28november2023)
(1) Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in the financial statements).
(2) Adjusted Profit before tax means profit before tax and Adjusted items (as
defined in the financial statements).
(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 the financial statements).
(4) Adjusted net debt (excluding IFRS 16 leases) means net debt as defined in
the year-end financial statements but excluding the impact of IFRS16.
(5)Company-issued guidance immediately before this announcement for the year
ending 31 March 2024 was revenue of £195 - 205 million and Adjusted EBITDA(1)
of £28 - 30 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
Shore Capital (Nominated Adviser and Joint Broker) +44 (0)20 7408 4090
Mark Percy / David Coaten / Rachel Goldstein - Corporate Advisory
Ben Canning - Corporate Broking
Zeus (Joint Broker) +44 (0)161 831 1512
Jordan Warburton / Alex Campbell-Harris - Investment Banking
Benjamin Robertson - Corporate Broking
Vigo Consulting (Financial Public Relations) +44 (0)20 7390 0230
Jeremy Garcia / Kendall Hill
supreme@vigoconsulting.com
About Supreme
Supreme supplies products across five categories; Batteries, Lighting, Vaping,
Sports Nutrition & Wellness, and Branded Distribution. 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, Tesco, Sainsburys, Morrisons, Amazon, The Range,
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, Black & Decker and JCB licences across 45 countries,
Supreme has also developed brands in-house, most notably 88vape and has a
growing footprint in Sports Nutrition & Wellness via its principal brands
Sci-MX and Battle Bites.
investors.supreme.co.uk/ (https://investors.supreme.co.uk/)
Chief Executive Officer's Review
Introduction
I am delighted to report that the Company delivered an excellent operational
and financial performance in H1 2024, underpinned by the impressive
performance of our Vaping activities and solid organic growth across our
remaining categories.
This record performance is evidenced by a 63% increase in Group revenues to
£105.1 million (H1 2023: £64.6 million), alongside an 88% increase in
Adjusted EBIDTA(1), growing to £15.2 million (H1 2023: £8.1 million). This
growth further underpins the inherent confidence we have in our business and
our end markets and highlights the positive trading momentum we have generated
since the beginning of the current financial year, having upgraded market
guidance a number of times.
From our new operational facilities to exciting product launches, Supreme
continues to invest in all areas of the business and enhance our reputation
across the UK retail arena as a trusted and responsible manufacturer, brand
owner and distributor of staple consumer goods.
We have high ambitions for FY 2024 and beyond, and we remain fully focused on
delivering on our ambitious growth targets.
Operational Review
The ongoing cost-of-living crisis is a pressing problem impacting individuals
of all demographics, and Supreme remains firmly committed to helping alleviate
some of these financial pressures by developing and supplying everyday items
at affordable prices to support families across the UK. By leveraging our
vertically integrated platform, we are able to focus on accelerating our
routes to market whilst identifying opportunities to secure new retail
partners to increase the accessibility of our products.
Supreme's move into its new warehouse facility during the Period was completed
seamlessly and without disruption to distribution. Intended to further
streamline the Group's supply chain, 'Ark' is now our principal storage and
distribution centre, with administrative staff set to join our warehousing and
distribution team and move into the state-of-the-art offices at the site in
early 2024.
Not only will the new facilities provide Supreme with options to accommodate
any future M&A, but the transition to 'Ark' also supports our organic
growth plans, enabling us to focus on expanding our manufacturing and
distribution capabilities across the core categories of Vaping and Sports
Nutrition & Wellness. Continued marginal gains in manufacturing reported
in H1 2024, including new ways to onboard and train our manufacturing
personnel and new manufacturing equipment, have also improved the efficiency
of the Group's operations.
In June 2023, Supreme was selected as a master distributor for the UK's
leading vaping brands, ElfBar and Lost Mary. The success of this opportunity
illustrates the agility of Supreme: we have never distributed third party
vaping brands before so to have done this at such scale and to roll out so
quickly is testament to the business' distribution capabilities and our
ability to adapt. The distribution opportunity also entailed third-party
testing and compliance measures which again were adopted without delay.
Supreme now supplies ElfBar and Lost Mary products to some of the UK's biggest
retailers, including Tesco, Morrisons, One Stop and WHSmith, significantly
expanding our retail footprint. The appointment has surpassed initial
expectations, and management anticipates the contribution of the distribution
of ElfBar and Lost Mary brands across FY 2024, based on current legislation,
will be around £7 million of Adjusted EBITDA(1) from around £60 million of
revenue.
In terms of M&A, we have continued to assess opportunities in line with
our acquisition criteria and we are especially keen to broaden our portfolio
and continue to be a multi-faceted consumer goods business. We had around £35
million of unutilised borrowing facilities at the Period end and we continue
to monitor, screen and analyse M&A opportunities.
In reference to the FY 2023 M&A, we have further integrated the Liberty
Flights business during the Period and on 1 November 2023, we consolidated
their manufacturing and warehousing into our principal Trafford Park site.
Further synergies were also realised in the Period by onshoring some of their
manufacturing that was previously undertaken in China. The Superdragon
business (acquired on the last day of the previous financial year) has also
been fully integrated into Supreme during the Period with minimal directly
attributable overheads required to operate this revenue stream.
Vaping
The Vaping division delivered an outstanding performance in H1 2024,
generating revenues of £42.1 million (H1 2023: £31.8 million), a significant
increase of 32%. This includes revenue for owned-brand disposable vapes of
£8.0 million (H1 2023: £3.9 million). Please note, the revenue for
third-party disposable vapes (ElfBar and Lost Mary) is reported separately in
our Branded Distribution category and totalled £26.4 million for the Period
(H1 2023: £nil).
Vaping gross profit as a percentage of sales increased from 38% to 41% owing
to further synergistic gains from manufacturing expansion and the addition of
the brands acquired in FY 2023.
Consumer demand for both reusable and disposable products was strong
throughout the Period, and our 88vape brand successfully expanded both its
product range and market share, with approximately 1.3 million individuals now
regularly using the brand. In H1 2024, the Group's R&D team has been
working on developing and perfecting an own brand pod-system vaping device.
M&A is a fundamental aspect of our vaping growth strategy, and, since
being integrated into the business, recently acquired brands including Liberty
Flights, Cuts Ice and Superdragon have significantly scaled Supreme whilst
further diversifying its customer base.
As evidenced by our strategic work for HM Prison and Probation Service
("HMPPS"), where Supreme has helped create a risk-free vaping environment
within the prison system by producing innovative, tamper-proof vaping devices,
we have a history of working alongside the UK Government on nationwide vaping
initiatives.
The UK Government, in its April 2023 'Achieving Smoke-free 2030' initiative,
confirmed its view that vaping remains "the most effective" tool to ease
smokers away from cigarettes. This was, of course, a conclusion reached after
consultation with leading healthcare officials and one which corroborates the
findings of 'The Khan Review: Making Smoking Obsolete', an independent review
commissioned by the Government in June 2022. Supreme's overarching strategy
has always been to support a tobacco-free UK by offering both credible and
safer alternatives for nicotine consumption and to-date, our own brand,
88vape, has played a significant role in assisting people in quitting smoking.
In light of the ongoing debate about the concerning rise in underage vaping,
post-period end we announced a number of proactive measures across our 88vape
range as follows:
· Reduce the use of colour in 88vape packaging;
· Discontinue the use of coloured hardware for all of the brand's
disposables;
· Use only age-appropriate naming conventions to describe 88vape
flavours;
· Trade only with retailers and e-tailers who commit to having robust
age verification controls in place; and
· Make recommendations to retail customers to locate vapes away from
confectionery.
We firmly believe these measures provide a viable blueprint for the industry
to follow and believe any regulation will take time to enact. We are confident
that the UK Government will seek to strike a sensible balance between
addressing the recent environmental and underage vaping concerns whilst also
not slowing down their efforts to become a smoke-free country by 2030, which
was a cross-party objective of the Government announced in 2019.
With reference to environmental matters, we have now begun to roll out vape
disposal units across the B&M retail estate in a bid to encourage more
responsible disposal of single-use devices. More importantly, Supreme will use
its influence and its network to encourage other players in the industry to
follow suit.
Sports Nutrition & Wellness
The Sports Nutrition & Wellness category delivered revenues of £8.9
million (H1 2023: £7.6 million), a strong 17% year-on-year improvement. Gross
profit as a percentage of revenue grew to 27% (H1 2023: 18%), again the result
of raw material prices beginning to normalise and the gains made in our
manufacturing techniques.
Reflected in its strong H1 2024 performance, Sci-MX has benefitted from the
Group's strategic rebrand and continued investment in R&D and marketing.
With manufacturing of the protein powders brand now in-house, we have
significantly increased the efficiency of our supply chain, accelerating the
delivery of these products to market whilst also reducing the Group's carbon
footprint.
As anticipated, inflationary pressures, particularly those on whey protein
concentrates, began to subside during the Period, and this has validated the
Company's FY 2023 decision to support retailers through the well-publicised
price hike, which will help consolidate our already entrenched relationships
with key suppliers for many years to come. The gradual reduction in raw
material prices has improved margins in the category, and we regard the
expansion of our protein product portfolio as an important long-term growth
driver for the Group as we continue to explore commercial opportunities to
expand our presence in the UK market.
Supreme's own vitamins brands Millions & Millions and Sealions performed
well in H1 2024, and we expect to generate strong demand for our wide array of
products as we enter the peak seasonal trading period for the market. New
product launches have enabled the Company to capture a larger portion of the
market, whilst also opening up additional cross-sell opportunities that we are
beginning to capitalise on.
Branded Distribution (previously 'Branded Household Consumer Goods')
As previously communicated, management chose not to report the ElfBar revenue
stream within Vaping so as not to dilute or detract from its core Vaping
business. ElfBar is not owned or manufactured by Supreme, so has an entirely
different financial profile to the Group's core Vaping business and, in fact,
is much more aligned to the profile of our existing Branded Household Consumer
Goods category, which was already becoming non-core to the Group given efforts
over the last two years to scale back this business unit.
The division, now entitled 'Branded Distribution', reported total revenue of
£30.6 million in the Period (H1 2023: £3.4 million), growth of £27.2
million. £26.4 million of this was from the ElfBar distribution agreement
whilst the remaining £0.8 million arose from growth in its core business,
which is the distribution of branded household laundry and cleaning brands.
The addition of ElfBar has not notably changed the margin profile of the
category.
Lighting
The Lighting category delivered a strong performance in the Period as the
Group continued to prioritise stabilisation. Despite continued challenging
trading conditions where some retailers remain overstocked, revenues grew to
£7.5 million (H1 2023: £6.1 million), whilst gross profit increased 47% to
£2.8 million (H1 2023: £1.9 million).
Since H1 2023, we have made sustained progress recovering the category,
facilitated by the agreement of license extensions with key partners Energizer
and Eveready announced towards the end of FY 2023, as well as our new contract
agreement with Black and Decker, a reputable brand familiar to consumers and
retailers alike.
The Group is focused on further strengthening the category and ensuring it
maintains its position as a go-to manufacturing or distribution partner for
leading brands in the space looking to extend their market share.
Although market headwinds are still prevalent across the lighting sector, we
have made steady progress returning the Lighting division to normality and are
heading in the right direction with the traditionally busier Q3 trading period
imminent.
Batteries
The Batteries division generated revenues of £15.9 million (H1 2023: £15.7
million), up 1% year-on-year. This represents a solid performance from what is
historically a dependable category for Supreme partly due to the stickiness of
the product. Gross profit as a percentage of sales rose to 13% (H1 2023: 11%)
due to product mix within the category.
Supreme is the UK's largest distributor of the product, responsible for over
30% of the UK battery market. Through cross-sell initiatives with our
extensive retail network, we have successfully attracted additional customers
in the Period, with retailers cognisant that batteries are, and will continue
to be, essential products for consumers.
Supreme works with a number of leading brands that are committed to
sustainability and we are delighted that almost all the batteries we sell come
in plastic-free packaging and include recycled materials. We are committed to
continuing to innovate and evolve our packaging, as well as manufacturing and
distribution procedures, to ensure we fulfil our ESG aspirations for the
category.
Dividend
The Board proposes an interim dividend of 1.5 pence per share in line with the
Company's stated dividend policy of 25% of profit after tax. This dividend
will be payable on 12 January 2024 to shareholders on the register at 8
December 2023. The ex-dividend date is 7 December 2023.
Outlook
Through a combination of organic and acquisitive growth, the Vaping category
was once again the standout performer for the Group. Supreme's distribution
capabilities and customer footprint are unparalleled in the vaping industry
and continue to strengthen.
As an industry leader, Supreme acknowledges the wider concerns of youth vaping
and remains fully supportive of any proactive measures or changes in
legislation that potentially restricts specific products, packaging, flavours
or point of sale in the UK.
Supreme's unique operating model is built around providing products at
affordable prices without having to sacrifice quality, an objective that is
becoming all the more important amidst the cost-of-living crisis which is
showing no signs of abating.
The Group has made a strong start to the second half of FY 2024. As a result,
the Group now expects trading for FY 2024 to be significantly ahead of
company-issued guidance, with revenue guidance of around £210 - 225 million
and Adjusted EBITDA(1) guidance of approximately £32 - 35 million, an
increase of around £4.5 million compared to the previous company-issued
guidance(5), with around £1.5 million of the incremental Adjusted EBITDA(1)
arising from the core business and around £3.0 million incremental Adjusted
EBITDA(1) arising from the ElfBar distribution opportunity.
The Board remains pleased with the Group's ongoing financial and operational
strategic progress and believes Supreme remains ideally positioned to deliver
ongoing profit growth.
Sandy Chadha
Chief Executive Officer
27 November 2023
Chief Finance Officer's Review
Introduction
I am delighted to present the financial results for the Period. The Group
traded strongly and this is evidenced in the metrics presented below.
H1 2024 H1 2023 Change
£m £m %
Revenue 105.1 64.6 +63%
Gross profit 28.5 18.2 +57%
Gross profit % 27% 28% -1%
Adjusted EBITDA(1) 15.2 8.1 +88%
Profit before tax 12.3 4.4 +179%
Adjusted profit before tax(2) 11.8 5.8 +103%
EPS 7.9p 2.8p +182%
Adjusted EPS(3) 8.1p 4.5p +80%
Net debt (i.e. including IFRS 16 leases) 19.8 14.6 +36%
Adjusted net debt (i.e. excluding IFRS 16 leases)(4) 4.8 12.9 -63%
Operating cashflow 0.4 4.9 -92%
Net assets 47.8 31.0 +54%
Revenue
Revenue grew by £40.5 million (+63%) to £105.1 million (H1 2023: £64.6
million). £26.4 million of this growth came from the ElfBar distribution
opportunity, £8.7 million from organic growth in the core business and the
remaining £5.4 million from the businesses acquired in FY 2023. In terms of
the £8.7 million organic growth, half arose in Vaping where demand continued
to grow across all product ranges and the other half was driven by growth in
Sports Nutrition & Wellness (17% growth year on year) and Lighting (21%
growth).
Gross profit
Gross profit for the Period was £28.5 million (H1 2023: £18.2 million),
growth of 57%. Gross profit as a percentage of sales of 27% was broadly in
line with prior year and was the result of noteworthy increases to the gross
profit % in Lighting, Vaping and Sports Nutrition & Wellness offset by the
lower gross profit % arising from the distribution of ElfBar. Gross profit as
a percentage of sales in Lighting rose from 31% to 38%, owing to sales mix and
consolidation of supply chain, Vaping gross profit % increased from 38% to 41%
owing to further synergistic gains from manufacturing expansion and the
addition of the brands acquired in FY 2023 and Sports Nutrition & Wellness
gross profit % increased from 18% to 27% as a result of the ongoing recovery
of the raw material inflation we reported last year combined with economies of
scale achieved by bringing the Sci-MX manufacturing in-house.
Adjusted EBITDA(1)
( )
Adjusted EBITDA(1) was £15.2 million (H1 2023: £8.1 million), growth of 88%
and Adjusted EBITDA(1) as a percentage of sales increased from 13% to 14%,
demonstrating the strength and cost-effectiveness of Supreme's business model
where we can add incremental sales into the business without the need for
extensive incremental overhead resource to support this. In absolute terms,
overheads grew by £3.2 million - a result of increased selling costs (which
typically rise directly with sales) including listing fees in respect of the
ElfBar distribution opportunity, cost-of-living pay-rises implemented across
the business in September 2022 and overheads in respect of the FY 2023
acquisitions.
( )
Depreciation and amortisation
Depreciation increased to £1.8 million in the Period (H1 2023: £1.4 million)
as a result of the capital expenditure that was incurred in H2 2023 and H1
2024 in respect of the Ark fitout and also due to the Ark lease reported under
IFRS16. Amortisation increased to £0.8 million (H1 2023: £0.5 million) due
to the intangible assets acquired as part of the FY 2023 M&A programme.
Adjusted items
Adjusted items totalled £0.5 million credit in the Period (H1 2023: £1.4
million debit). This was a result of the share-based payment charge of £0.6
million (H1 2023: £0.7 million), a credit of £1.6 million in respect of the
open foreign exchange forward contracts (H1 2023: £0.4 million credit); its
volatility year-on year is precisely why this entry is reported as an Adjusted
item. £0.4 million charge was also reported in respect of redundancies
relating to the businesses integrated into Supreme's core business during the
Period.
Finance costs
Finance costs rose to £0.8 million (H1 2023: £0.4 million) due to the
increased interest expense in respect of the newly added leases under IFRS 16
and higher borrowings during the period (in order to finance the investment in
ElfBar working capital as shown below in the cash flow summary) at a higher
rate of interest compared to the prior period.
Dividends
The Board has declared an interim dividend of 1.5 pence per share in line with
the Company's stated dividend policy of 25% of profit after tax. This dividend
will be payable on 12 January 2024 to shareholders on the register at 8
December 2023. The ex-dividend date is 7 December 2023.
Cash flow
H1 2024 H1 2023 FY 2023
£m £m £m
Adjusted EBITDA(1) 15.2 8.1 19.4
Movement in working capital in respect of ElfBar (16.4) - -
Movement in working capital 4.6 (0.5) 2.6
Tax paid (2.5) (1.7) (1.7)
Cash-impacting Adjusted items (0.5) (1.1) (1.0)
Operating cash flow 0.4 4.8 19.3
Debt (servicing) / raising 5.2 12.3 (2.1)
Lease payments (0.5) (0.5) (1.0)
Capex (2.8) (0.6) (1.5)
M&A (2.4) (10.1) (6.1)
Dividends (2.6) (4.4) (5.1)
Net cash flow (2.7) 1.5 3.5
During the Period, the Group reported a net cash outflow of £2.7 million.
This included an investment of £16.4 million in working capital to service
the ElfBar opportunity across trade debtors, stock and deposits to the
manufacturer in China. This investment was partly financed by a £5.5 million
drawdown on the Group's borrowing facilities with the remainder being financed
from free cash. Before this investment, the Group generated £16.8 million of
operating cash in the Period. Some of this cash was reinvested back into the
business in the form of capex (namely the fit out of Ark) and also to service
the deferred consideration obligations associated with the FY 2023
acquisitions. In relation to Ark specifically (a one-off capex investment
project to fit-out the facility for it to become the Group's principal
warehousing and distribution site going forward), this represented £2.3
million of the £2.8 million capital expenditure reported in the Period.
Net debt
H1 2024 H1 2023 FY 2023
£m £m £m
Cash (4.9) (5.4) (7.5)
Borrowings 9.7 18.3 4.3
Adjusted net debt (excluding IFRS 16 leases)(4) 4.8 12.9 (3.2)
IFRS 16 (leases) 15.0 1.7 15.0
Net debt (including IFRS 16 leases) 19.8 14.6 11.8
At the Period end, the Group had access to a £25 million RCF facility (£15.3
million undrawn) and a £20 million invoice financing facility (£20 million
undrawn). Adjusted net debt (before IFRS 16)(4) was less than 0.2x of adjusted
LTM EBITDA(1).
Suzanne Smith
Chief Finance Officer
27 November 2023
(1) Adjusted EBITDA means operating profit before depreciation, amortisation
and Adjusted items (as defined in the financial statements).
(2) Adjusted Profit before tax means profit before tax and Adjusted items (as
defined in the financial statements).
(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 the financial statements).
(4) Adjusted net debt (excluding IFRS 16 leases) means net debt as defined in
the year-end financial statements but excluding the impact of IFRS16.
(5) Company-issued guidance immediately before this announcement for the year
ending 31 March 2024 was revenue of £195 - 205 million and Adjusted EBITDA(1)
of £28 - 30 million.
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 2023
30 Sept 2023 30 Sept 2022
Note £'000 £'000 £'000
Revenue 3 105,068 64,636 155,612
Cost of sales (76,538) (46,468) (114,758)
Gross profit 28,530 18,168 40,854
Profit on disposal on Cuts Ice trademarks - - 2,787
Administration expenses (15,461) (13,370) (28,192)
Operating profit 13,069 4,798 15,449
Adjusted EBITDA(1) 15,185 8,119 19,392
Depreciation (1,787) (1,372) (2,200)
Amortisation (842) (511) (915)
Adjusted items 4 513 (1,438) (828)
Operating profit 13,069 4,798 15,449
Finance income 4 - 25
Finance costs (783) (400) (1,037)
Profit before taxation 12,290 4,398 14,437
Income tax 5 (3,016) (1,109) (2,469)
Profit for the period/year 9,274 3,289 11,968
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations 16 (4) 101
Total other comprehensive income/(expense) 16 (4) 101
Total comprehensive income for the period/year 9,290 3,285 12,069
Earnings per share - basic 6 7.9p 2.8p 10.3p
Earnings per share - diluted 6 7.5p 2.7p 9.7p
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 Sept 2023 30 Sept 2022 31 March 2023
£'000 £'000 £'000
Assets
Goodwill and other intangibles 14,439 14,113 15,281
Property, plant and equipment 7,106 3,636 5,238
Right of use asset 14,702 1,688 15,577
Deferred tax asset - 624 -
Investments - 7 7
Total non-current assets 36,247 20,068 36,103
Current assets
Inventories 30,836 30,628 25,606
Trade and other receivables 30,801 26,913 20,899
Derivative financial instruments 948 833 -
Cash and cash equivalents 4,898 5,386 7,536
Total current assets 67,483 63,760 54,041
Total assets 103,730 83,828 90,144
Liabilities
Current liabilities
Borrowings 10,913 443 5,026
Trade and other payables 27,447 31,803 26,117
Forward contract derivative - - 652
Income tax payable 3,230 780 2,536
Total current liabilities 41,590 33,026 34,331
Net current assets 25,893 30,734 19,710
Borrowings 13,790 19,575 14,293
Deferred tax liability 130 263 789
Provisions 426 - 775
Total non-current liabilities 14,346 19,838 15,857
Total liabilities 55,936 52,864 50,188
Net assets 47,794 30,964 39,956
Equity
Share capital 11,732 11,663 11,732
Share premium 7,427 7,231 7,427
Merger reserve (22,000) (22,000) (22,000)
Share-based payments reserve 4,170 2,167 3,043
Retained earnings 46,465 31,903 39,754
Total equity 47,794 30,964 39,956
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 2022 11,663 7,231 (22,000) 2,368 33,050 32,312
Profit for the year - - - - 11,968 11,968
Other comprehensive expense - - - - 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
As at 1 April 2022 11,663 7,231 (22,000) 2,368 33,050 32,312
Profit for the period - - - - 3,289 3,289
Other comprehensive income - - - - (4) (4)
Total comprehensive income for the period - - - - 3,285 3,285
Transactions with shareholders:
Employee share schemes - value of employee services - - - 644 - 644
Deferred tax on share-based payment charge - - - (845) - (845)
Dividends - - - - (4,432) (4,432)
- - - (201) (4,432) (4,633)
As at 30 September 2022 11,663 7,231 (22,000) 2,167 31,903 30,964
As at 1 April 2023 11,732 7,427 (22,000) 3,043 39,754 39,956
Profit for the period - - - - 9,274 9,274
Other comprehensive income - - - - 16 16
Total comprehensive income for the period - - - - 9,290 9,290
Transactions with shareholders:
Employee share schemes - value of employee services - - - 654 - 654
Deferred tax on share-based payment charge - - - 473 - 473
Dividends - - - - (2,579) (2,579)
- - - 1,127 (2,579) (1,452)
As at 30 September 2023 11,732 7,427 (22,000) 4,170 46,465 47,794
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended 31 March 2023
30 Sept 2023 30 Sept 2022
Net cash flow from operating activities £'000 £'000 £'000
Profit for the period 9,274 3,289 11,968
Adjustments for:
Amortisation of intangible assets 842 510 915
Depreciation of tangible assets 911 1,372 1,268
Depreciation of right of use assets 876 - 932
Finance income (4) - (25)
Finance costs 728 372 982
Amortisation of capitalised finance costs 55 28 55
Loss on disposal of fixed assets - 54 -
Gain on disposal of intangible fixed assets - - (2,787)
Investment impairment 7 - -
Income tax expense 3,016 1,109 2,469
Movement on forward foreign exchange contracts (1,600) (366) 1,119
Share based payments expense 654 644 1,460
Working capital adjustments
(Increase)/decrease in inventories (5,228) (2,166) 2,920
Increase in trade and other receivables (9,902) (6,689) (671)
Increase/(decrease) in trade and other payables 3,285 8,354 (27)
Increase in provisions - - 349
Taxation paid (2,510) (1,652) (1,652)
Net cash generated from operations 404 4,859 19,275
Cash flows used in investing activities
Purchase of intangible fixed assets - - (23)
Purchase of property, plant and equipment (2,840) (526) (1,254)
Purchase of Cuts Ice net of cash acquired - (2,571) (10,055)
Purchase of Liberty Flights Holdings Limited net of cash acquired - (7,566) -
Proceeds from sale of property, plant, and equipment 61 - 1
Proceeds from sale of intangible fixed assets - - 4,018
Payment of deferred consideration/contingent (2,338) - (270)
Finance income received - - 25
Directors loan account movement (56) (68) -
Net cash used in investing activities (5,173) (10,731) (7,558)
Cash flows used in financing activities
Repayment of long-term loans - - (3,984)
Repayment of related party loans - - (1,779)
Repayments of RCF facility - - (14,000)
Drawdowns of RCF facility 5,500 - 18,418
Drawdown of loans - 18,252 -
Repayment of loans - (5,769) -
Issue of options or share capital - - 265
Dividends paid (2,579) (4,432) (5,365)
Finance costs paid (353) (218) (776)
Lease payments (453) (501) (987)
Net cash generated from/(used in) financing activities 2,115 7,332 (8,208)
Net (decrease)/increase in cash and cash equivalents (2,654) 1,460 3,509
Cash and cash equivalents brought forward 7,536 3,926 3,926
Foreign exchange 16 - 101
Cash and cash equivalents carried forward 4,898 5,386 7,536
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 2023. They have been prepared on the basis of
the policies set out in the 2023 annual financial statements and in accordance
with UK adopted IAS 34.
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 2023 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 2023 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 2023 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 statements 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.
Notes to the condensed consolidated interim financial information
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, who
perform well and are household names. The nature and price point of the
products offered means that the Group is well positioned to navigate the
current uncertainty in the economic climate.
The Group is funded by external facilities; firstly a £25 million revolving
credit facility ("RCF") until March 2025 and a £20 million invoice financing
facility, both of which are provided by HSBC. The Group also utilises credit
insurance to mitigate any credit risk, and foreign exchange forward contracts
to mitigate foreign currency risk. The Board and senior management regularly
review revenue, profitability and cash flows across the short, medium and
longer term.
In assessing the appropriateness of adopting the going concern basis in the
preparation of these financial statements, the Directors have prepared cash
flow forecasts and projections for the 18- month period to 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.
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.
Notes to the condensed consolidated interim financial information
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 Sept 2023
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 15,883 7,507 42,115 8,947 30,616 105,068
Cost of sales (13,837) (4,661) (24,934) (6,524) (27,171) (77,127)
Gross profit before foreign exchange 2,046 2,846 17,181 2,423 3,445 27,941
Foreign exchange 589
Gross profit 28,530
Administration expenses (15,461)
Operating profit 13,069
Adjusted earnings before tax, depreciation, amortisation and adjusted items 15,185
Depreciation (1,787)
Amortisation (842)
Adjusted items 513
Operating profit 13,069
Finance income 4
Finance costs (783)
Profit before taxation 12,290
Income tax (3,016)
Profit for the period 9,274
Notes to the condensed consolidated interim financial information
3. Segmental analysis (continued)
Batteries Lighting Vaping Sports nutrition & wellness Branded household consumer goods Unaudited
6 months ended
30 Sept 2022
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 15,660 6,161 31,796 7,615 3,404 64,636
Cost of sales (13,844) (4,278) (19,666) (6,273) (2,956) (47,017)
Gross profit before foreign exchange 1,816 1,883 12,130 1,342 448 17,619
Foreign exchange 549
Gross profit 18,168
Administration expenses (13,370)
Operating profit 4,798
Adjusted earnings before tax, depreciation, amortisation and adjusted items 8,119
Depreciation (1,372)
Amortisation (511)
Adjusted items (1,438)
Operating profit 4,798
Finance income -
Finance costs (400)
Profit before taxation 4,398
Income tax (1,109)
Profit for the period 3,289
Analysis of revenue by geographical destination
Unaudited Unaudited
6 months ended 6 months ended
30 Sept 2023 30 Sept 2022
£'000 £'000
United Kingdom 97,509 59,624
Rest of Europe 6,511 4,756
Rest of the World 1,048 256
105,068 64,636
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. The
group has generated revenues from 2 customers totalling more than 10% of total
revenues. The total revenue from these customers totalled £28,729,000.
Notes to the condensed consolidated interim financial information
4. Adjusted items
Unaudited Unaudited
6 months ended 6 months ended
30 Sept 2023 30 Sept 2022
£'000 £'000
Share based payments charge 654 733
Fair value movements on financial derivatives (1,600) (366)
Transaction related costs - 162
Integration costs 433 909
(513) 1,438
The charge for share-based payments is made up of £79,000 related to
Employers National Insurance Contributions and £575,000 related to the
share-based payments charge.
The financial derivatives relate to open foreign exchange forward contracts.
The credit 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.
Integration costs are related to the integration of businesses following
acquisition. In particular, for the prior year, these related to the
integration and streamlining of operations of Cuts Ice, which was based
primarily in London but was transferred up to Supremes HQ in Trafford Park. In
H1 2024, these costs relate to the hive up of the trade and assets in Liberty
Flights Holdings Limited and Liberty Flights Limited into Supreme Imports Ltd
on 1 November 2023 including the transfer of warehousing and manufacturing
operations to Supreme's principal sites in Manchester.
5. Taxation
The income tax expense for the half year ended 30 September 2023 is based upon
management's best estimate of the weighted average annual tax rate expected
for the full year ending 31 March 2024. The income tax expense broadly in line
with the standard rate of 25%.
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.
Notes to the condensed consolidated interim financial information
6. Earnings per share (continued)
The basic and diluted calculations are based on the following:
Unaudited Unaudited
6 months ended 6 months ended
30 Sept 2023 30 Sept 2022
£'000 £'000
Profit for the period after tax 9,274 3,289
No. No.
117,321,074 116,627,074
Weighted average number of shares for the purposes of basic earnings per share
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 124,041,597 121,101,499
share
Pence Pence
Basic profit per share 7.9 2.8
Diluted profit per share 7.5 2.7
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 Sept 2023 30 Sept 2022
£'000 £'000
Adjusted earnings (see below) 9,494 5,207
No. No.
Weighted average number of shares for the purposes of basic earnings per share 117,321,074 116,627,074
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 124,041,597 121,101,499
share
Pence Pence
Adjusted basic profit per share 8.1 4.5
Adjusted diluted profit per share 7.7 4.3
Notes to the condensed consolidated interim financial information
6. Earnings per share (continued)
The calculation of basic adjusted earnings per share is based on the following
data:
Unaudited Unaudited
6 months ended 6 months ended
30 Sept 2023 30 Sept 2022
£'000 £'000
Profit for the period attributable to equity shareholders 9,274 3,289
Add back/(deduct):
Amortisation of acquisition related intangible assets 807 511
Adjusted items (513) 1,438
Tax effect of the above (74) (31)
Adjusted earnings 9,494 5,207
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. Dividends
Dividends of £2,579,000 were declared in the 6 months ended 30 September 2023
(2022: £4,432,000). This amounted to £0.022 per share (2022: £0.038).
9. Post balance date events
On 1 November 2023, the trade and assets of Liberty Flights Holdings Limited
and Liberty Flights Limited were hived up into Supreme Imports Ltd.
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