Half-year Results

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 EBITDA1	10.1	8.4	20%
Adjusted EBITDA1 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 EPS2	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 EBITDA¹ 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 EBITDA¹ 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 Sandy Chadha, Chief Executive Officer Suzanne Smith, Chief Finance Officer	via Vigo Consulting
Grant Thornton UK LLP (Nominated Adviser) Philip Secrett / Samantha Harrison / Harrison Clarke / Daphne Zhang	[phone]
Berenberg (Broker) Chris Bowman / Mark Whitmore / Jen Clarke	[phone]
Vigo Consulting (Financial Public Relations) Jeremy Garcia / Antonia Pollock / Kendall Hill [e-mail]	[phone]

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  

 

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 EBITDA¹ 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 EBITDA¹ 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 EBITDA¹ 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 EBITDA1	10.1	8.4	19.3	20%
Adjusted EBITDA1 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 EPS2	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 EBITDA¹

Administrative Expenses reported within Adjusted EBITDA¹ 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 EBITDA¹ was £10.1 million (HY 2021: £8.4 million), an increase of 20%.

Adjusted EBITDA¹ 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 EBITDA1	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 6 months ended 30 September 2021	Unaudited 6 months ended 30 September 2020	Audited Year ended 31 March 2021
	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 EBITDA1		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 As at  30 September 2021	Unaudited As at  30 September 2020	Audited As at 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	Share premium	Merger reserve	Share-based payments reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 April 2020	11,001	-	(22,000)	-	15,063	4,064
Profit for the year	-	-	-	-	9,838	9,838
Total comprehensive income for the year	-	-	-	-	9,838	9,838
Transactions with shareholders:
Issue of shares - options exercised	89	255	-	-	-	344
Issue of shares - IPO shares	560	6,940	-	-	-	7,500
Employee share schemes - value of employee services	-	-	-	75	-	75
Dividends	-	-	-	-	(3,000)	(3,000)
	649	7,195	-	75	(3,000)	4,919
As at 31 March 2021	11,650	7,195	(22,000)	75	21,901	18,821
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 6 months ended 30 September 2021	Unaudited 6 months ended 30 September 2020	Audited Year ended 31 March 2021
	£'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).

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 6 months ended 30 September 2021	Unaudited 6 months ended 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 6 months ended 30 September 2021	Unaudited 6 months ended 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 6 months ended 30 September 2021	Unaudited 6 months ended 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 share	123,909,476	111,261,158
	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 6 months ended 30 September 2021	Unaudited 6 months ended 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 share	123,909,476	111,261,158
	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 6 months ended 30 September 2021	Unaudited 6 months ended 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.

 

END

 

 

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