Final Results

RNS Number : 2850R

Supreme PLC

05 July 2022

5 July 2022

Supreme plc

("Supreme," the "Company" or the "Group")

Audited Final Results for the Year Ended 31 March 2022

- Strong organic and acquisitive progress across FY22

- Sales slowdown within Lighting category will supress Revenue and EBITDA performance in FY23

Supreme (AIM:SUP), a leading manufacturer, supplier and brand owner of fast-moving consumer products, announces its audited final results for the year ended 31 March 2022 ("FY22").

Financial highlights

	FY22	FY21	%
	£ (millions)	£ (millions)	change
Revenue	130.8	122.3	+7%
Gross profit	38.5	33.0	+17%
Gross profit %	29.4%	27.0%	+2.4%
Adjusted EBITDA¹	21.1	19.3	+9%
Profit before tax	16.3	13.0	+25%
Adjusted profit before tax²	17.4	16.4	+6%
EPS	11.8p	8.9p	+33%
Adjusted EPS³	12.8p	12.0p	+7%
Net debt	4.0	7.6	+47%
Adjusted net debt⁴	1.9	6.1	+69%

· Revenue growth of 7%, underpinned by new customer momentum and earnings enhancing acquisitions. Most notably:

- Vaping revenue growth of £4.1 million (10%)

- Sports Nutrition & Wellness revenue growth of £9.0 million (132%).

· Further gains in gross margin, growing to 29.4% (FY21: 27.0%) driven by an increased propensity for manufacturing across the Group and a focus on higher margin business.

· The Balance Sheet remains strong with net assets of £32.3 million (FY21: £18.8 million) and net debt of £4.0 million at the end of FY22 (FY21: £7.6 million), alongside a new £25 million RCF facility with HSBC in March 2022 for acquisitions.

Operational highlights

· Strong organic growth supported by new contract momentum and the expansion of the UK sales footprint

- Launched two vitamins brands; Millions & Millions and Sealions

- Secured additional vaping contracts with Sainsbury's, Morrisons and in convenience retail via Core Communications

- Supreme now services over 3,300 retail and public sector customers, in addition to over 70,000 active unique online accounts.

· Delivered and integrated two earnings-enhancing acquisitions in the period

- Acquired Vendek Limited, one of Ireland's leading distributors of batteries and lighting products, providing a cost-effective shelter from export challenges generated by Brexit, whilst creating an additional hub from which to expand Supreme's European footprint alongside facilitating access to some of Ireland's largest retailers and distributors

- Acquired the stock and brands of Sci-MX Limited, a leading sports nutrition and supplements business, delivering incremental earnings and manufacturing synergies alongside providing access to Tesco and Morrisons, both of which have already generated wider cross-sell opportunities.

· Supreme's market-leading 88vape brand continued to grow its market share with new and existing customers, including Sainsbury's and Morrisons, and in convenience retail via Core Communications, in addition to generating sales traction across all its discount retail customers.

· Continued to scale in-house manufacturing capabilities to meet future demand and drive longer term margin improvement.

Dividends

· A final dividend, subject to shareholder approval at the Annual General Meeting on the 15 September 2022, 3.8 pence per share. This will be paid on 30 September 2022 to shareholders on the register at the close of business on 2 September 2022. The ex-dividend date will be 1 September 2022.

· The Group paid an interim dividend of 2.2 pence per share, which together with the final dividend take total dividends for the year to 6.0 pence per share.

Outlook / Current Trading

· The Group expects to deliver another solid, profitable year in FY23 but revenue and EBITDA are both expected to be below FY22 levels and below previous market expectations, driven by a recent marked decline in the Lighting category following a slow-down in sales compounded by customer overstocking in FY22.

· Following discussions with its key customers the Group believes this slowdown in sales and profitability will be temporary and limited to the Group's Lighting category due to specific customer over-stocking in the past 12 months. Whilst it is still early in the new financial year, the nature of lighting sales where a significant portion are sold "FOB" on long lead times means that the Board has relatively strong visibility into the latter part of the year and the expected weakness in trading. There are no customer or retail listings losses to report and therefore profit progression for this category is expected to return in FY24 once the supply chain has rebalanced.

· Vaping, the Group's largest and most profitable category, continues to perform very strongly and is expected to deliver revenue growth of around 30% in FY23 - half of which driven by new product development, continued market growth and further distribution expansion and the other half from the Liberty Flights acquisition.

· Management remains committed to investing in organic growth opportunities alongside pursuing an active acquisition pipeline, particularly in the vaping division. Supreme's established sales and distribution footprint has created an ideal platform from which to accelerate the Group's buy and build strategy in the near term. With this in mind, the Board has reviewed its capital allocation policy and believes that M&A can drive better rates of shareholder return compared to servicing its existing dividend commitments. Accordingly, the Board proposes to revise its dividend policy from a pay-out ratio of 50% of net profits to a minimum of 25% in respect of FY23 onwards.

· In spite of the short-term trading challenges in Lighting, the Board remains confident that the Group has a long runway of growth ahead and is increasingly excited by the prospects for growth in the vaping division.

Sandy Chadha, Chief Executive Officer of Supreme, commented:

"We are delighted to have delivered another strong financial performance across FY22, driven by excellent customer traction, alongside completing two strategic acquisitions.

Batteries and Lighting have performed strongly and although customer inventory levels within Lighting will hold back our progress in the short term, I believe this minor setback should not detract from our operational progress to date. We are more excited than ever about the potential for Vaping. Our 88vape range is now well-established across our discount channel and has now started to penetrate grocery and convenience retail as well. With increasing levels of government support for vaping, we expect the revenue growth to continue.

Whilst there remains considerable opportunity for Sports Nutrition & Wellness, short term commodity price increases are expected to affect demand and profitability, although we have taken steps to mitigate our exposure. I am particularly proud of the results of both Vendek and Sci-MX which were both earnings enhancing in FY22 and seamlessly integrated into our core business.

M&A continues to be a key feature of our strategy as we seek to complement our organic growth initiatives and remain confident in the Group's trading prospects for the current financial year and beyond."

Retail Investor Presentation:

A presentation for retail investors covering the results for the year ended 31 March 2022 will be held at 11.00 a.m. on 6 July 2022.

The online presentation is open to all existing and potential shareholders and registration is free. Questions can be submitted during the presentation and will be addressed at the end.

To register for the event, please go to: https://www.equitydevelopment.co.uk/news-and-events/supreme-investor-presentation-6july22

¹ Adjusted EBITDA means operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and other non-recurring items (including all IPO-related costs)

2 Adjusted profit before tax means profit before tax and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and other non-recurring items (including all IPO-related costs)

3 Adjusted EPS means Earning per share, where Earnings are defined as profit after tax but before amortisation of acquired intangibles and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share based payments, fair value movements on non-hedge accounted derivatives and other non-recurring items (including all IPO-related costs).

4 Adjusted net debt means net debt as defined in Note 29 to these financial statements excluding the impact of IFRS16

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Enquiries:

Supreme plc 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	+44 (0)20 7383 5100
Berenberg (B roker ) Chris Bowman / Mark Whitmore	+44 (0)20 3207 7800
Vigo Consulting (Financial Public Relations) Jeremy Garcia / Kendall Hill supreme@vigoconsulting.com	+44 (0)20 7390 0230

About Supreme

Supreme supplies products across five key categories; batteries, lighting, vaping, sports nutrition & wellness, and branded household consumer goods. The Company's capabilities span from product development and manufacturing through to its extensive retail distribution network and direct to consumer capabilities. This vertically integrated platform provides an excellent route to market for well-known brands and products.

The Group has over 3,300 active business accounts with retail customers who manage over 10,000 branded retail outlets. Customers include B&M, Home Bargains, Poundland, The Range, Sainsburys, Sports Direct, Londis, SPAR, Costcutter, Asda, Halfords, Iceland and HM Prison & Probation Service.

In addition to distributing globally-recognised brands such as Duracell, Energizer and Panasonic, and supplying lighting products exclusively under the Energizer, Eveready and JCB licenses across 45 countries, Supreme has also developed brands in-house, most notably 88Vape and has a growing footprint in Sports Nutrition & Wellness.

www.investors.supreme.co.uk

Chairman's Statement

Financial year ended 31 March 2022 was another positive year for Supreme, as we continued to build on the strong momentum generated since our IPO. Alongside sustained organic growth, driven by the strong performance of our Vaping category as well as continued progress across the Company's established Lighting and Batteries segments, Supreme completed the strategic acquisitions of Vendek and Sci-MX, our first transactions as a public company. Directly in-line with our strategic development roadmap, both have been seamlessly integrated into the Group and we continue to explore the growth opportunities presented by the acquisitions .

Supreme delivered a strong trading performance in the year-ended 31 March 2022, generating a 7% increase in revenues to £130.8 million (2021: £122.3 million) alongside a 9% increase in Adjusted EBITDA¹ to £21.1 million. (2021: £19.3 million). Our operations remains highly cash-generative, with our robust balance sheet, capital light model and enhanced efficiencies underpinning Supreme's considerable financial and operational progress, which was further boosted by the agreement of a new £25 million RCF facility with HSBC in March 2022. Our strong financial foundations enabled the Board to declare a maiden dividend of 2.2p per share, with the Company delivering a 30% growth in earnings per share to 11.8p (2021: 8.9p).

We consolidated our position as a leading player in the vaping market, securing further mandates with supermarkets including Sainsbury's and Morrisons, whilst increasing our convenience and discount footprint alongside retaining our D2C online offering through the 88vape website. Consequently, Supreme now services over 3,300 retail and public sector customers, which includes over 70,000 active online accounts.

Despite well-documented inflationary pressures and the ongoing impact of the Covid-19 pandemic on global trade and logistics, our Sports Nutrition & Wellness segment delivered a solid performance, underpinned by the launch of our two new vitamin brands, Millions & Millions and Sealions, which continue to increase our market share in the sector. The division currently represents 12% of revenue and we remain confident that the category will provide an additional pillar of growth in the medium to long term.

Providing quality products at attractive prices is at the core of our business, and, given the escalating cost-of-living crisis, we anticipate that demand for Supreme's highly affordable fast-moving consumer goods will continue to increase. Leveraging our vertically integrated platform, Supreme is well positioned to play a pivotal role in minimising the financial impact on retailers and consumers, and our commitment to offering great value to all stakeholders remains the Company's key priority.

As part of our annual review process, we undertook an internal board evaluation to ensure the efficacy of the team. Our current board is made up of hard-working, diligent individuals who bring a wealth of experience and a complementary breadth of perspectives which facilitate the efficient functioning of the Company's committees. Moving forward, we are committed to continuing our cycle of board meetings and strategy days, whilst maintaining access to the senior management team to provide imperative transparency. I am certain that, as a Board, we have the right skill set to ensure Supreme executes on our growth strategy, and we will continue to provide insightful and independent oversight of the Company's operations.

I am profoundly grateful for the perseverance and dedication of the entire Supreme team who have worked tirelessly to mitigate the macroeconomic challenges the business faced across the financial year, most notably mitigating the impact of Covid-19 on staffing levels across our warehousing and manufacturing operations in Q3, a key trading period for the Company.

Once again, Supreme has demonstrated its ability to deliver both organic and acquisitive growth against the current economic backdrop, and we look forward to realising the benefits of our earnings-enhancing acquisitions and a number of exciting product launches. Our business remains focused on leveraging our vertically integrated distribution platform for consumer products that are easily transported and displayed with a simple consumer offering that people do not return.

The Board has the utmost confidence in our management team who continue to drive Supreme's growth. This progress, bolstered by prudent investment in in-house manufacturing facilities, ensures Supreme remains well placed to capitalise on future market tailwinds, alongside delivering both organic and M&A growth in the medium to long term.

Paul McDonald

Non-executive Chairman

4 July 2022

Chief Executive Officer's Review

Introduction

It is my pleasure to announce our results for the year ended 31 March 2022, as the Company delivered another positive financial and operational performance across the year, reporting strong levels of revenue and profit growth. The Group made solid progress across its key categories, with Supreme's market-leading 88vape brand continuing to aggressively increase its market share with new and existing customers.

Supreme delivered a 7% increase in revenues to £130.8 million in the year (FY21: £122.3 million) and a 9% increase in Adjusted EBITDA¹ to £21.1 million (FY21: £19.3 million). Gross profit as a percentage of sales grew to 29.4% (FY21: 27.0%) as we focused more closely on our manufactured categories that continue to generate increasing levels of returns. Our brands, alongside Supreme's diverse and extensive retail network, sit firmly at the heart of both the business and our strategy.

The Group has continued to successfully execute on its organic growth strategy through the successful launches of two vitamins brands, Millions & Millions and Sealions, which continue to generate good sales momentum. To complement our organic progress, the Group also completed two acquisitions during the year: Vendek and Sci-MX, both of which are now fully integrated into the business.

The Supreme team has demonstrated its ability to navigate another year of the Covid-19 pandemic, showing skill and tenacity to mitigate the impact to warehousing and manufacturing operations in Q3, a key trading period for the Company. To successfully undertake two sizeable acquisitions and launch two new brands whilst experiencing unprecedented levels of freight disruption and inflationary pressures is a significant achievement, and it cannot be overstated how thankful I am to each and every member of staff for their exceptional work across FY22.

Operational Review

The Group has continued to evolve its business model in the period, adding new customers and brands alongside broadening the reach of our existing brands and products across our established customer base. Given the majority of our brands are either licensed, own-brand or acquired, as well as white-labelled, Supreme has established incredibly loyal and long-term customer partnerships.

On average, the Group distributes c.2,000 products daily across our five product categories, ensuring Supreme maximises its unique operational platform which leverages both online ordering and an integrated management system for retailers.

With this strong platform central to our business, management will continue to focus on the following strategic growth drivers, namely:

· expand our international footprint through existing customer relationships and strategic acquisitions;

· further leverage cross-sell opportunities to expand our customer footprint and average-e revenue per customer;

· continue to explore and develop new product verticals that complements Supreme's customer base, focused on a high quality and good value consumer proposition;

· increase manufacturing efficiencies through further economies of scale and bringing the manufacture of certain products in-house;

· continue to explore and execute on complementary earnings enhancing acquisitions; and

· enhance online distribution and services to further grow our B2B and D2C sales channels.

Batteries

Our battery category delivered a highly credible performance, increasing revenues to £34.9 million compared to £34.4 million in FY21 (noting that FY21 included a one-off boost in sales as a result of the pandemic). This growth has been driven by an increase in our UK distribution footprint alongside the positive impact of Vendek, one of Ireland's leading distributors of batteries and lighting products, which was acquired in June 2021. Integrating Vendek into our existing battery category also helped to increase the gross margin percentage during the year.

The breadth of our distribution and our position as one of the largest battery distributors of all major brands ensures a high rate of repeat purchasing and creates a high volume of cross-sell opportunities across the wider, higher margin categories. In addition, the Group has continued to seek the mitigation of the environmental impact of our products and has been working hard to drive higher rates of safe, sustainable, battery recycling. We continue to work closely with global partners and the high street retailers which has resulted in changes to packaging to educate the end-consumer.

Lighting

Lighting revenues grew to £27.0 million (FY21: £25.9 million). This strong performance has been fuelled by increased sales traction, particularly in H1 22 when the country was largely locked down. Gross margin increased to £9.0 million, underpinned by the Group's hugely successful licensing model.

This strong performance from our established sales footprint is particularly pleasing given the fact that international expansion, a key growth initiative in this category, has been hindered by pandemic restrictions cancelling a number of key international trade shows.

With Vendek fully integrated, and pandemic restrictions now considerably eased, the enlarged group will be able to pursue a number of strategic opportunities going forward, alongside delivering cross-sell opportunities in both Ireland and the UK.

As within the Group's Battery category, there have been some important changes to our product ranges led by our sustainability agenda. In particular we have seen most blister packs being phased out in favour of cardboard packaging and single unit offerings replaced by twin packs to reduce packaging altogether.

The slow-down in FOB sales in FY23 will impact the growth trajectory for the category in the short term. But these setbacks are temporary whilst the supply chain re-bases and consumer spending adjusts. Our longer-term vision is unchanged.

Vaping

The Group's Vaping category delivered another strong performance in the period, growing revenues by 10% to £43.6 million. Supreme's market-leading 88vape brand continued to grow its market share with new and existing customers including Sainsbury's and Morrisons, and in convenience retail via Core Communications. In addition the Group continued to generate sales traction across all its discount retail customers.

Economies of scale and further efficiencies in manufacturing processes, alongside a more established supply chain for the Group's prison contract, has resulted in improvements in the gross margin for the category.

Our 88vape.com consumer website experienced good traffic throughout FY22, with the multitude of new customers gained across lockdown periods in FY21 remaining loyal to Supreme despite non-essential retail re-opening.

The announcement in October 2021 that the government plans to make e-cigarettes available on prescription is further evidence of the UK government's support for vaping. With the Company already well-established as a supplier to the public sector via the prison contract, Supreme is well-positioned to benefit from this opportunity in the medium term.

With this increasing level of government support for vaping, alongside its established retail and online (direct) footprint, the Group expects the robust organic growth for this category to continue, enhanced further by M&A. The Group's aim is to become the largest vaping player in the UK, supporting a tobacco-free UK by offering both credible and safe alternatives for nicotine consumption.

Sports Nutrition & Wellness

The Group's Sports Nutrition & Wellness category continued to gain market traction in FY22, increasing revenues by 132% to £15.9 million, representing 12% of Group revenues. This excellent performance was underpinned by the acquisition of Sci-MX, a leading sports nutrition and supplements brand, and the launch of two vitamins brands, Millions & Millions, and Sealions.

Following its acquisition during the year, Sci-MX is now fully integrated into the Group, with stock, customers and suppliers, intellectual property and websites now part of Supreme's core business. All customers were retained (principally Tesco, Sainsbury's, Morrisons and Amazon), and the acquisition has been earnings enhancing to the Group in FY22.

Battle Bites, Supreme's branded protein snack bar that was acquired in FY21, performed well and with the incoming High in Fat, Sugar and Salt ("HFSS") regulations, is expected to drive sales as retailers seek to replace chocolate and traditional confectionary for HFSS compliant impulse-purchased snacks.

Moving forward, the Group will seek to migrate Sci-MX away from a third party supply chain to Supreme's in-house manufacturing facility which will serve to increase profitability in the longer term. This will also enable the Group to focus on 100% recyclable packaging with pack sizes prescribed for optimal pallet configurations and reduced transport requirements.

The protein powders market is undergoing transformational change as raw material price inflation for both whey and creatine has risen between two and three times the price versus six months ago. These price increases will be passed onto the consumer during FY23, and the sector could see fluctuations in customer demand as consumers absorb these increases.

Since entering the Sports Nutrition & Wellness 4 years ago, revenues have grown revenue from £nil to £15.9 million and the Board remain confident that Supreme has the robust foundations in place to capitalise on future growth opportunities driven by its strategic acquisition of Sci-MX and brand launches.

Branded Household Consumer Goods

The category delivered £ 9.4 million in revenue for FY22 (FY21: £15.5 million), reflecting its pre-pandemic performances. Whilst there were prolonged lockdowns in FY22, these were not characterised by spikes in sales of cleaning products by consumers in the same way as FY21. In addition, a one-off £1 million pharmaceutical bottling contract in FY21 did not repeat in FY22.

The category continues to make a contribution to overall net profitability, has limited working capital requirements, and has also provided the wider group with cross-sell opportunities.

Outlook / Current Trading

Whilst the Group expects to deliver another solid year of profits across FY23, overstocking across a number of key customers within the Group's Lighting category will result in lower-than-expected revenue and EBITDA generation for the current financial year.

Supreme's sizable vaping sales footprint, underpinned by the recent acquisition of Liberty Flights, together with ongoing new product development, continued market growth and further distribution expansion, underpins the Group's strong cash generation.

In addition, management has already taken steps to mitigate a number of external macro headwinds, including buying forward whey, and will also be continually reviewing potential price increases and ongoing manufacturing and distribution rationalisation.

With 60% of gross profit generated by Supreme's UK manufacturing base, the Group has limited exposure to global shipping and logistics delays and foreign currency fluctuations and remains confident in the Group's core business operations and resilient end markets.

In the longer term, the Group remains fully focused on driving organic growth, closely balanced with strategic acquisitions, having agreed a new £25 million RCF facility with HSBC in March 2022.

Sandy Chadha

Chief Executive Officer

4 July 2022

Chief Finance Officer's Review

I am delighted to present these financial results for the year ended 31 March 2022 ("FY22"); our first full year as a public company. The financial performance remained strong throughout FY22; revenue and profitability increased, the balance sheet strengthened and net debt reduced. The table below summarises the key financial measures and the comparisons to prior year. The commentary in this review references alternative performance measures which are described as 'Adjusted', meaning they exclude share-based payment charges, fair value movements on non-hedge accounted derivatives and other non-recurring items outlined in detail in Note 7 to the Financial Statements.

	FY22	FY21	%
	£ (millions)	£ (millions)	change
Revenue	130.8	122.3	+7%
Gross profit	38.5	33.0	+17%
Gross profit %	29.4%	27.0%	+2.4%
Adjusted EBITDA¹	21.1	19.3	+9%
Adjusted items	(1.1)	(3.4)
Profit before taxation	16.3	13.0	+25%
Adjusted profit before tax²	17.4	16.4	+6%
EPS	11.8p	8.9p	+33%
Adjusted EPS³	12.8p	12.0p	+7%
Operating cash flow	11.7	12.3	-5%
Net assets	32.3	18.8	+72%
Net debt	4.0	7.6	+47%
Adjusted net debt⁴	1.9	6.1	+69%

Revenue

Revenue for FY22 was £130.8 million (FY21: £122.3 million), an increase of 7%, the drivers for which have been presented in the divisional summaries below.

Revenue by division

Revenue for Batteries was £34.9 million in FY22 (FY21: £34.4 million). This growth was a blend of incremental revenue from the Vendek acquisition offset by a partial reverse of the COVID "bounce" reported in FY21. As a reminder, this category grew by £3.5 million in FY21 so to have retained more than half of this additional revenue in FY22 was a pleasing performance overall.

Revenue for Lighting was £27.0 million (FY21: £25.9m) and was a pleasing performance given the prolonged pause on our international expansion plans owing to the ongoing lockdowns and travel restrictions in FY22.

Revenue for Vaping was £43.6 million (FY21: £39.5 million). This growth of £4.0 million (10%) was entirely organic driven largely by new listings in grocery via Sainsburys and Morrisons and in convenience retail via Core Communications as well as increased sales in the long-standing retailers. The 88vape.com website doubled revenue in FY21 and has continued to service these customers throughout FY22 despite non-essential retail opening back up.

Revenue for Sports Nutrition & Wellness was £15.9 million (FY21: £6.9 million). This growth of £9.0 million (132%) was driven by the acquisition of Sci-MX, the successful launch of 2 new vitamins brands; Millions & Millions and Sealions, a full year of sales for Battle Bites, the protein snack bar acquired in FY21 and underlying organic growth from its core protein powder business.

Revenue for Branded Household Consumer Goods was £9.4 million (FY21: £15.5 million). FY21 reported a notable spike in revenue (the product range is dominated by branded domestic cleaning products and hand sanitizers) and a return to pre-COVID levels was always anticipated for FY22. Whilst the prolonged lockdowns continued into FY22, these were not characterised by spikes in sales of cleaning products by consumers in the same way as in FY21. FY21 also benefitted from £1m of one-time revenue in relation to a one-off pharmaceutical bottling contract which was never anticipated to reoccur in FY22.

Gross profit

Gross profit for FY22 was £38.5 million (FY21: £33.0 million), representing growth of 17%. Importantly, gross profit increased during the year by 2.4ppt from 27.0% to 29.4%, owing to an increased propensity to manufacture plus improved margins reported in Batteries and Lighting. In FY22 Vaping reported gross margin of 44.7% (FY21: 41.4%) - a result of gains in profitability in the HMPPS contract which was consistently imported via sea in FY22 (as opposed to by air as in FY21) combined with the increased efficiency gains in core manufacturing during the year.

The gross margin for Sports Nutrition reduced in FY22 as a result of a change to the sales mix within the category. The addition of the Sci-MX brand via acquisition in July 2021 remained distribution-only throughout FY22 (although there are plans to bring manufacturing inhouse in FY23) whilst vitamins manufacturing was also yet to establish sufficient scale to warrant manufacturing in FY22 so relied on its external supply chain to meet some of this demand (again, inhouse manufacturing is planned for FY23).

Adjusted EBITDA¹

Adjusted EBITDA¹ increased by £1.8 million (9%) in the year to £21.1 million, driven by growth in revenue and gross profit offset by an increase in the overhead base as a result of the IPO-required investments (such as the Board of Directors and additional advisers), advertising costs to support the launch of the 2 new vitamins brands and additional overheads associated with the acquisitions.

Adjusted Items

Adjusted Items were £1.1 million compared to £3.4 million the year before which included £2.0 million in relation to the Group's admissions to AIM in February 2021. In FY22, these costs related to share-based payment charges of £1.7 million (FY21: £0.08 million) and £0.4 million of non-recurring items (restructuring, fees in relation to the acquisitions and short-term resource requirements during the COVID-related disruption), offset by a £1.0 million credit in relation to fair value movements on financial derivatives (FY21: £0.8 million charge).

Finance costs

Finance costs were £0.7 million in the year (FY21: £0.7 million) and included the interest arising on senior facilities held throughout the period of £0.2m (FY21: £0.4 million), interest relating to the accelerated write down of long-standing arrangement fees once the new RCF facility was established of £0.3 million (FY21: £nil) and interest of £0.1 million relating to the lease liabilities under IFRS16 (FY21: £0.1 million).

Taxation

Total tax charge in the year was £2.6 million (FY21: £3.1 million), giving rise to an effective tax rate of 16% (FY20: 24%). The increase in the rate in FY21 arose from the disallowed expenses in relation to the IPO. The lower rate in FY22 was the result of a prior period adjustment (relating to the tax relief on the exercise of EMI options in FY21) and the deferred tax credit on the Share Based Payments charge.

Profit after tax and Earnings per share

Profit after tax was £13.7 million compared to £9.8 million in FY21, growth of 39%. Similarly, earnings per share increased by 33% to 11.8p (FY21: 8.9p) and on a fully diluted basis increased from 8.7p to 11.4p, growth of 31%.

On an adjusted profit after tax basis, which we consider to be a better measure of performance, adjusted earnings were £15.0 million (FY21: £13.3 million) and Adjusted earnings per share³ was 12.8p (FY21: 12.0p)

Dividends

· A final dividend, subject to shareholder approval at the Annual General Meeting on the 15 September 2022, of 3.8 pence per share. This will be paid on 30 September 2022 to shareholders on the register at the close of business on 2 September 2022. The ex-dividend date will be 1 September 2022.

· The Group paid an interim dividend of 2.2p per share, which together with the final dividend take total dividends for the year to 6.0 pence per share.

Cash flow

	FY22	FY21	%
	£ (millions)	£ (millions)	change
Adjusted EBITDA¹	21.1	19.3
Movement in working capital	(3.9)	(1.6)
Acquisition of Sci-MX stock	(0.9)
Taxation paid	(4.2)	(3.0)
Cash-impacting adjusted items:	(0.4)	(2.4)
Operating cash flow	11.7	12.3	-5%
Debt (servicing) / raising	(8.4)	(13.6)
Lease payments	(1.0)	(0.6)
Capex (including M&A)	(3.4)	(2.1)
Dividends	(2.5)	(3.0)
Proceeds from IPO	-	7.8
Net cash flow	(3.6)	0.8

Cash generated from its trading activities ("Operating cash flow") was £11.7 million (FY21: £12.3 million), a reduction of 5%. This included £0.9 million in relation to the acquisition of Sci-MX stock in July 2021 and a conscious investment in Batteries and Lighting stock in the second half of the year to mitigate any potential freight disruption from the Far East and to forward-buy whey protein to best-manage ongoing price increases. Higher rates of sales across the business in the weeks leading up to year-end unexpectedly increased the closing working capital position at year end.

Specifically in reference to the acquisitions, £1.0 million related to the acquisition of the entire share capital of Vendek Limited (net of cash acquired), with a further £0.6 million of deferred consideration payable in FY23 and FY24. 1.3 million related to the acquisition of the brands of Sci-MX Limited (no further amounts payable in the future).

With respect to financing, the Group repaid £1.6 million of its related party loan in the year, repaid £5.4 million during the year in respect of its existing 5-year facility with HSBC in line with its quarterly interest and repayment obligations and repaid the balance on the supply chain financing facility in the year of £1.2 million.

On the 31 March 2022, the Group committed to a £25 million Revolving Credit Facility ("RCF") with HSBC but this was undrawn at year end. The initial drawdown of £4.1 million on 4 April 2022 was to settle the existing 5-year facility in full and cover the arrangement fee on the RCF whilst the remainder of the RCF is ear-marked largely for acquisitions.

Net debt

	FY22	FY21	%
	£ (millions)	£ (millions)	change
Cash	(3.9)	(7.5)
Bank loans	4.0	9.0
Amounts owed to related parties	1.8	3.4
IFRS 16 lease liability	2.1	1.5
Other	-	1.1
Total net debt	4.0	7.6	+47%

Events after the Balance Sheet Date

On 4 April 2022, the Group drew down £4.1 million on the RCF to fully settle the existing 5-year loan facility with HSBC and cover the arrangement fee attached to the RCF.

On 27 April 2022, the Group repaid the final tranche of its related party loan to Supreme8 Limited. No further related party items exist on the balance sheet.

On 10 June 2022, Supreme acquired the entire share capital of Liberty Flights Holdings, a long-established and leading brand of e-liquids and vaping devices for an initial consideration of £7.75 million. The acquisition is expected to be immediately earnings-enhancing.

Use of non-GAAP measures in the Group financial statements

Certain measures have been used to increase understanding of the Group's Report and Accounts. These measures are not defined under IFRS and therefore may not be directly comparable with adjusted measures presented by other companies. The non-GAAP measures are not intended to be a substitute for or superior to any IFRS measure of performance; however they are considered by management to be important measures used in the business for assessing performance. The non-GAAP measures used in this strategic review and more widely in this Annual Report are defined in the footnotes below and set out in Note 2.17.

Suzanne Smith

Chief Finance Officer

4 July 2022

² Adjusted profit before tax means profit before tax and Adjusted items (as defined in Note 7 of the financial statements) Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and other non-recurring items (including all IPO-related costs)

³ Adjusted EPS means Earning per share, where Earnings are defined as profit after tax but before amortisation of acquired intangibles and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share based payments, fair value movements on non-hedge accounted derivatives and other non-recurring items (including all IPO-related costs).

⁴ Adjusted net debt means net debt as defined in Note 29 to these financial statements excluding the impact of IFRS16

Consolidated Statement of Comprehensive Income

for the Year Ended 31 March 2022

		Year Ended 31 March 2022	Year Ended 31 March 2021
	Note	£'000	£'000

Revenue	5	130,789	122,253
Cost of sales	6	(92,272)	(89,211)
Gross Profit		38,517	33,042

Administration expenses	6	(21,498)	(19,416)
Operating profit		17,019	13,626

Adjusted EBITDA¹		21,055	19,272
Depreciation	13 & 21	(2,563)	(1,998)
Amortisation	12	(378)	(225)
Adjusted items	7	(1,095)	(3,423)

Operating profit		17,019	13,626

Finance costs	9	(693)	(671)
Profit before taxation		16,326	12,955

Income tax	10	(2,579)	(3,117)
Profit for the year		13,747	9,838

Other comprehensive expense
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations		(32)	-
Total other comprehensive expense		(32)	-
Total comprehensive income		13,715	9,838

Earnings per share - basic	11	11.8p	8.9p
Earnings per share - diluted	11	11.4p	8.7p

Note 1: Adjusted EBITDA, which is defined as operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7) is a non-GAAP metric used by management and is not an IFRS performance measure.

All results derive from continuing operations.

Consolidated Statement of Financial Position

as at 31 March 2022

		As at 31 March 2022	As at 31 March 2021
	Note	£'000	£'000
Non-current assets
Assets
Goodwill and other intangibles	12	3,704	2,628
Property, plant and equipment	13	2,557	2,787
Right of use asset	21	2,116	1,476
Deferred tax asset	15	1,312	-
Investments	14	7	7
Total non-current assets		9,696	6,898

Current assets
Inventories	16	25,898	19,865
Trade and other receivables	17	19,035	16,052
Derivative financial instruments	22.9	467	-
Cash and cash equivalents	18	3,926	7,505
Total current assets		49,326	43,422
Total assets		59,022	50,320

Liabilities

Current liabilities
Borrowings	20	6,665	10,476
Trade and other payables	19	17,296	13,295
Derivative financial instruments	22.9	-	559
Income tax payable		1,299	2,370
Total current liabilities		25,260	26,700
Net current assets		24,066	16,722

Borrowings	20	1,294	4,658
Deferred tax liability	15	156	141
Total non-current liabilities		1,450	4,799
Total liabilities		26,710	31,499
Net assets		32,312	18,821

Equity
Share capital	23	11,663	11,650
Share premium		7,231	7,195
Merger reserve		(22,000)	(22,000)
Share-based payments reserve		2,368	75
Retained earnings		33,050	21,901
Total equity		32,312	18,821

Consolidated Statement of Changes in Equity

for the Year Ended 31 March 2022

	Share Capital	Share Premium	Merger reserve	Share-based payments reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 April 2020	11,001	-	(22,000)	-	15,063	4,064

Profit for the year	-	-	-	-	9,838	9,838
Total comprehensive income for the year	-	-	-	-	9,838	9,838

Transactions with shareholders:
Issue of shares - options exercised	89	255	-	-	-	344
Issue of shares - IPO shares	560	6,940	-	-	-	7,500
Employee share schemes - value of employee services	-	-	-	75	-	75
Dividends	-	-	-	-	(3,000)	(3,000)
	649	7,195	-	75	(3,000)	4,919
As at 31 March 2021	11,650	7,195	(22,000)	75	21,901	18,821

Profit for the year	-	-	-	-	13,747	13,747
Other comprehensive expense	-	-	-	-	(32)	(32)
Total comprehensive income for the year	-	-	-	-	13,715	13,715

Transactions with shareholders:
Issue of shares	13	36	-	-	-	49
Employee share schemes - value of employee services	-	-	-	1,452	-	1,452
Deferred tax on share-based payment charge	-	-	-	841	-	841
Dividends	-	-	-	-	(2,566)	(2,566)
	13	36	-	2,293	(2,566)	(224)
As at 31 March 2022	11,663	7,231	(22,000)	2,368	33,050	32,312

Consolidated Statement of Cash Flows

for the Year Ended 31 March 2021

		Year Ended 31 March 2022	Year Ended 31 March 2021
	Note	£'000	£'000
Net cash flow from operating activities
Profit for the year		13,747	9,838
Adjustments for:
Amortisation of intangible assets	12	378	225
Depreciation of tangible assets	13 & 21	2,563	1,998
Finance costs	9	404	671
Amortisation of capitalised finance costs		289	177
Income tax expense	10	2,579	3,117
Movement on forward foreign exchange contracts	22.9	(1,026)	768
Share based payments expense	24	1,663	75
Working capital adjustments
(Increase)/decrease in inventories		(4,937)	(5,286)
(Increase)/decrease in trade and other receivables		(2,226)	970
Increase in trade and other payables		2,498	2,726
Taxation paid		(4,161)	(3,003)
Net cash from operations		11,771	12,276
Cash flows used in investing activities
Purchase of intangible fixed assets	12	(1,454)	(125)
Purchase of property, plant and equipment	13	(1,296)	(1,667)
Purchase of subsidiaries net of cash acquired	25	(1,040)	(1,005)
Proceeds from sale of property, plant and equipment		378	890
Net cash used in investing activities		(3,412)	(1,907)
Cash flows used in financing activities
Repayment of loans	20	(8,083)	(13,021)
Proceeds from IPO		-	7,500
Proceeds from issue of options		49	344
Payment of deferred consideration		(66)	(195)
Dividends paid		(2,566)	(3,000)
Finance costs paid		(285)	(591)
Lease payments	21	(955)	(619)
Net cash used in financing activities		(11,906)	(9,582)

Net (decrease)/increase in cash and cash equivalents		(3,547)	787
Cash and cash equivalents brought forward		7,505	6,718
Effects of exchange rate changes on cash and cash equivalents		(32)	-
Cash and cash equivalents carried forward		3,926	7,505

Cash and cash equivalents	18	3,926	7,505
		3,926	7,505

Notes to the Group Financial Statements

as at 31 March 2022

1. Basis of preparation

Supreme PLC ("the Company") is a public company limited by shares, registered in England and Wales and domiciled in the UK, with company registration number 05844527. The principal activity is the manufacture (vaping and sports nutrition & wellness only) and wholesale distribution of batteries, lighting, vaping, sports nutrition & wellness and branded household consumer goods. The registered office is 4 Beacon Road, Ashburton Park, Trafford Park, Manchester, M17 1AF.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006.

These Group financial statements have been prepared on a going concern basis under the historical cost convention, modified for the revaluation of certain financial instruments; in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The results for the year ended 31 March 2022 have been extracted from the full accounts of the Group for that year which received an unqualified auditor's report and which have not yet been delivered to the Registrar of Companies. The financial information for the year ended 31 March 2021 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unqualified. The accounts for the year ended 31 March 2022 and 31 March 2021 did not contain a statement under s498 (1) to (4) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2022 will be posted to shareholders at least 30 days before the Annual General Meeting and made available on our website www.supreme.co.uk and on request by contacting the Company Secretary at the Company's Registered Office.

The Directors have prepared this financial information on the fundamental assumption that the Group is a going concern and will continue to trade for at least 12 months following the date of approval of the financial information.

The principal accounting policies adopted are set out below

2.1 Basis of consolidation

The consolidated financial statements present the results of the Company and its own subsidiaries as if they form a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

The Group financial statements incorporate the results of business combinations using the acquisition method. In the Consolidated Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. The merger reserve arose on a past business combination of entities that were under common control. The merger reserve is the difference between the cost of investment and the nominal value of the share capital acquired.

2.2 New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions:

Standards and interpretations	Effective date
IFRS 17 Insurance Contracts	1 January 2023
Property, Plant and Equipment: Proceeds before intended use - Amendments to IAS 16	1 January 2022
Reference to the Conceptual Framework - Amendments to IFRS 3	1 January 2022
Onerous Contracts - Cost of Fulfilling a Contract Amendments to IAS 37	1 January 2022
Annual Improvements to IFRS Standards 2018-2020	1 January 2022
Classification of Liabilities as Current or Non-current - Amendments to IAS 1	1 January 2022
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2	1 January 2023
Definition of Accounting Estimates - Amendments to IAS 8	1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12	1 January 2023

Judgements made by the Directors in the application of these accounting policies that have a significant effect on these financial statements together with estimates with a significant risk of material adjustment in the next year are discussed in Note 4.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies

2.3 Going concern

Supreme PLC provides essential products to well-established retailers. The nature and price point of the products offered means that the Group is well positioned to overcome any volatility in the economic climate, which is further supported by a customer base that performs well and are household names.

The Group is funded by external facilities; firstly £25 million revolving credit facility ("RCF") until March 2025 and a £8.5 million invoice financing facility, both of which are provided by HSBC. The Board and senior management regularly review revenue, profitability and cash flows across the short, medium and longer term.

In assessing the appropriateness of adopting the going concern basis in the preparation of these financial statements, the Directors have prepared cash flow forecasts and projections for the 18-month period to 30 September 2023. The forecasts and projections, which the Directors consider to be prudent, have been further sensitised by applying reductions to revenue and profitability, to consider downside risk. Under both the base and sensitised case the Group is expected to have headroom against covenants, which are based on interest cover and net leverage, and a sufficient level of financial resources available through existing facilities when the future funding requirements of the Group are compared with the level of committed available facilities.

In assessing the going concern basis, the Directors have also considered the current conflict in Ukraine and the resulting sanctions imposed on Russia by governments worldwide. As well as the heightened risk of global economic downturn, Supreme may experience supply challenges for certain components contained within its protein powders (specifically sunflower lecithin and wheat protein). Although this has not directly impacted Supreme to-date, the risk has been reflected in Management's forecast nonetheless. There are not expected to be any further specific, direct and material impacts to the Group as a result of the conflict.

Based on this, the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group and Company financial statements.

2.4 Currencies

Functional and presentational currency

Items included in the Group financial statements are measured using the currency of the primary economic environment in which the Company operates ("the functional currency") which is UK sterling (£). The Group financial statements are presented in UK sterling.

Transactions and balances

Foreign currency transactions are translated into the functional currency using a standard exchange rate for a period if the rates do not fluctuate significantly. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies (continued)

Group companies

The results and financial position of foreign operations (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

· income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

· all resulting exchange differences are recognised in other comprehensive income

2.5 Revenue recognition

Revenue solely relates to the sale of goods and arises from the wholesale distribution and online sales of batteries, lighting, vaping sports nutrition & wellness and branded household consumer goods.

To determine whether to recognise revenue, the Company follows the 5-step process as set out within IFRS 15:

1. Identifying the contract with a customer.

2. Identifying the performance obligations.

3. Determining the transaction price.

4. Allocating the transaction price to the performance obligations.

5. Recognising revenue when/as performance obligation(s) are satisfied.

Revenue is measured at transaction price, stated net of VAT, and other sales related taxes. Rebates to customers take the form of volume discounts, which are a type of variable consideration, and the transaction price is constrained to reflect the rebate element. The transaction price equates to the invoice amount less an estimate of any applicable rebates and promotional allowances that are due to the customer. Rebate accruals are recognised under the terms of these agreements, to reflect the expected promotional activity and our historical experience. These accruals are reported within trade and other payables.

Revenue is recognised at a point in time as the Company satisfies performance obligations by transferring the promised goods to its customers as described below. Variable consideration, in the form of rebates, is also recognised at the point of transfer, however the estimate of variable consideration is constrained at this point and released once it is highly probable there will not be a significant reversal.

Contracts with customers take the form of customer orders. There is one distinct performance obligation, being the distribution of products to the customer, for which the transaction price is clearly identified. Revenue is recognised at a point in time when the Group satisfies performance obligations by transferring the promised goods to its customers, i.e. when control has passed from the Group to the customer, which tends to be on receipt by the customer. In respect of certain direct shipments control passes when an invoice is raised, payment received, and title formally transferred to the customer; at which point the customer has the risks and rewards of the goods.

2.6 Goodwill

The carrying value of goodwill has arisen following the acquisition of subsidiary entities, where the trade and assets have subsequently been hived up into this company immediately post acquisition, and the related investment balance transferred to goodwill. Such goodwill is subject to an impairment review, both annually and when there is an indication that the carrying value may be impaired. Any impairment is recognised immediately in the Statement of Comprehensive Income and is not reversed.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies (continued)

2.7 Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

The amortisation is charged on a straight-line bases as follows:

Domain name - 10%

Trademarks - 10%

Customer relationships - 20%

Trade names - 20%

Computer software - 50%

2.8 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on a straight-line basis starting from the month they are first used, as follows:

Plant and machinery - 25%

Fixtures and fittings - 25%

Motor vehicle - 25%

Fashion hire assets - 25%

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Comprehensive Income.

At each reporting date, the Company reviews the carrying amounts of its property, plant and equipment assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

2.9 Inventories

Inventories are valued using a first in, first out method and are stated at the lower of cost and net realisable value. Cost includes expenditure incurred in the normal course of business in bringing the products to their present location and condition.

At the end of each reporting period inventories are assessed for impairment. If an item of inventory is impaired, the identified inventory is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the income statement. Where a reversal of the impairment is recognised the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the income statement.

2.10 Income tax

The tax expense or credit represents the sum of the tax currently payable or recoverable and the movement in deferred tax assets and liabilities.

(a) Current income tax

Current tax is based on taxable income for the year and any adjustment to tax from previous years. Taxable income differs from net income in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years or that are never taxable or deductible. The calculation uses the latest tax rates for the year that have been enacted or substantively enacted by the dates of the Statement of Financial Position.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies (continued)

(b) Deferred tax

Deferred tax is calculated at the latest tax rates that have been substantively enacted by the reporting date that are expected to apply when settled. It is charged or credited in the Statement of Comprehensive Income, except when it relates to items credited or charged directly to equity, in which case it is also dealt with in equity.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Group financial statements and the corresponding tax bases used in the computation of taxable income, and is accounted for using the liability method. It is not discounted.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable income will be available against which the asset can be utilised. Such assets are reduced to the extent that it is no longer probable that the asset can be utilised.

Deferred tax assets and liabilities are offset when there is a right to offset current tax assets and liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.11 Leases

The Company applies IFRS 16 in the Group financial statements. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liabilities.

The lease liability is initially measured at the present value of lease payments that were not paid at the commencement date, discounted using the rate implicit in the lease. Where there is no rate implicit in the lease then the Group's incremental borrowing rate is used.

The lease liability is measured at amortised cost using the effective interest method. If there is a remeasurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded directly in profit or loss if the carrying amount of the right of use asset is zero.

Short term leases and low value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term lease of machinery that have a lease term of 12 months or less or leases of low value assets. These lease payments are expensed on a straight-line basis over the lease term.

2.12 Payroll expense and related contributions

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies (continued)

2.13 Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme).

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Statement of Comprehensive Income over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the Statement of Comprehensive Income is charged with fair value of goods and services received.

2.14 Pension costs

The Company operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Company. The annual contributions payable are charged to the statement of comprehensive income.

2.15 Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of operating segments.

The Directors consider that there are five identifiable business segments, being the manufacture (vaping and sports nutrition & wellness only) and distribution of batteries, lighting, vaping, sports nutrition & wellness, and branded household consumer goods.

2.16 Dividends

Dividends are recognised as a liability and deducted from equity at the time they are approved. Otherwise dividends are disclosed if they have been proposed or declared before the relevant financial statements are approved.

2.17 EBITDA and Adjusted EBITDA

Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA are non-GAAP measures used by management to assess the operating performance of the Company. EBITDA is defined as profit before finance costs, tax, depreciation and amortisation. Adjusted items are excluded from EBITDA to calculate adjusted EBITDA.

The Directors primarily use the Adjusted EBITDA measure when making decisions about the Company's activities as this provides useful information for shareholders on underlying trends and performance. As these are non-GAAP measures, EBITDA and Adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies (continued)

2.18 Exceptional costs and adjusted items

The Company's income statement separately identifies adjusted items. Such items are those that in the Directors' judgement are one-off in nature or non-operating and need to be disclosed separately by virtue of their size or incidence and may include, but are not limited to, professional fees and other costs directly related to refinancing, acquisitions and capital transactions, fair value movements on open forward contracts, share based payment charges and material impairments of inventories. In determining whether an item should be disclosed as an adjusted item, the Directors consider quantitative and qualitative factors such as the frequency, predictability of occurrence and significance. This is consistent with the way financial performance is measured by management and reported to the Board.

2.19 Financial instruments

Financial assets and financial liabilities are recognised in the Group Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.

Trade and other receivables

Trade and other receivables are initially measured at transaction price less provisions for expected credit losses. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance. This lifetime expected credit losses is used in cases where the credit risk on other receivables has increased significantly since initial recognition. In cases where the credit risk has not increased significantly, the Group measures the loss allowance at an amount equal to the 12-month expected credit loss. This assessment is performed on a collective basis considering forward-looking information.

IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'.

Recognition of credit losses is determined by considering a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions and reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.

Credit Insurance is also in place which also mitigates the credit risk in relation to the respective customer. This insurance is applied to most accounts over £2,500 with exception of proforma accounts and accounts agreed by the CEO, although some accounts are excluded from the credit insurance having been assessed by the Board on a cost-benefit analysis - these equate largely to the largest grocery retailers.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Trade and other payables

Trade and other payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the "effective interest rate" to the carrying amount of the liability.

Notes to the Group financial statements continued

as at 31 March 2022

2. Summary of significant accounting policies (continued)

Invoice discounting facility

The Company has entered into an invoice discounting arrangement with the bank, where a proportion of the debts have been legally transferred but the benefits and risks are retained by the Group. Gross receivables are included within debtors and a corresponding liability in respect of the proceeds received from the bank are shown within liabilities. The interest element of the bank's charges are recognised as they accrue and included in the statement of comprehensive income within other interest payable.

Borrowings

Interest-bearing overdrafts are classified as other liabilities. They are initially recorded at fair value, which represents the fair value of the consideration received, net of any direct transaction costs associated with the relevant borrowings. Borrowings are subsequently stated at amortised cost and finance charges are recognised in the Statement of Comprehensive Income over the term of the instrument using an effective rate of interest. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accruals basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Classification as debt or equity

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. The excess of proceeds of a share issue over the nominal value is presented within share premium.

Derivatives

Derivatives are initially recognised at the fair value on the date the derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in the income statement within cost of sales, on the basis that is where the related expense is recognised, unless they are included in a hedging arrangement. Where the instruments have been traded to take advantage of currency movements and not directly linked to the settlement of purchase requirements the gain or loss is recognised separately in the statement of comprehensive income as other operating income/expense. Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

Notes to the Group financial statements continued

as at 31 March 2022

3. Financial risk management

3.1 Financial risk factors

The Company's activities expose it to certain financial risks: market risk, credit risk and liquidity risk. The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out by the Directors, who identify and evaluate financial risks in close co-operation with key staff, for further details see Note 22.

(a) Market risk

Market risk is the risk of loss that may arise from changes in market factors such as competitor pricing, interest rates, foreign exchange rates.

(b) Credit risk

Credit risk is the financial loss to the Group if a customer or counterparty to financial instruments fails to meet its contractual obligation. Credit risk arises from the Group's cash and cash equivalents and receivables balances. Credit Insurance is applied to all accounts over £5,000 with exception of proforma accounts and accounts agreed by the CEO and therefore credit risk is considered low.

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining sufficient cash. The Directors monitor rolling forecasts of the Group's liquidity and cash and cash equivalents based on expected cash flow.

3.2 Capital risk management

The Group is funded by equity and loans. The components of shareholders' equity are:

(a) The share capital account arising on the issue of shares.

(b) The retained reserve or deficit reflecting comprehensive income to date.

The Group's objective when managing capital is to maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term. The capital structure of the Group is managed and adjusted to reflect changes in economic conditions. The Group funds its expenditures on commitments from existing cash and cash equivalent balances, primarily received from issuances of shareholders' equity. There are no externally imposed capital requirements. Financing decisions are made based on forecasts of the expected timing and level of capital and operating expenditure required to meet the Group's commitments and development plans. Quantitative data on what the Group manages as capital is included in the Statement of Changes in Equity and in Note 22 to the Group Financial Statements.

3.3 Fair value estimation

The carrying value less impairment provision of trade receivables and payables are assumed to approximate to their fair values because of the short-term nature of such assets and the effect of discounting liabilities is negligible.

Notes to the Group financial statements continued

as at 31 March 2022

4. Critical accounting estimates and judgements

The preparation of the Group financial statements require management to make judgements and estimates that affect the reported amounts of assets and liabilities at each Statement of Financial Position date and the reported amounts of revenue during the reporting periods. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies. The key judgements and sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting period are outlined below:

Accounting estimates

4.1 Goodwill impairment

The Group tests goodwill for impairment every year in accordance with the relevant accounting policies. The recoverable amounts of cash-generating units are determined by calculating value in use. These calculations require the use of estimates.

Goodwill relates to various acquisitions and amounts to £1,602,000 at 31 March 2022 (31 March 2021: £1,602,000). Management consider that the estimates used in the impairment calculation are set out in Note 12. There are no reasonably possible scenarios in which the goodwill would be impaired.

4.2 Useful economic lives of property, plant and equipment

Property, plant and equipment is depreciated over the useful lives of the assets. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness. The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired. When carrying out impairment tests these would be based upon future cash flow forecasts and these forecasts would be based upon management judgement. Future events could cause the assumptions to change, therefore this could have an adverse effect on the future results of the Group.

The useful economic lives applied are set out in the accounting policies (Note 2.8) and are reviewed annually.

4.3 Valuation of acquired intangibles

IFRS 3 requires separately identifiable intangible assets to be recognised on acquisitions. The principal estimates used in valuing the acquired intangible assets are the future cash flows estimated to be generated from these assets, expected customer attrition, growth in revenues and the selection of appropriate discount rates to apply to the cash flows. The Directors' assessment of these estimates is based on up-to-date information and evidence available at the time of finalising the valuation.

4.4 Right of use assets - discount rate

Management makes use of estimates in determining the discount rate to be applied to the IFRS 16 'Leases' right of use asset and liability. This estimate determines the carrying value of the assets and liabilities, and the resulting depreciation and interest charge that is incurred.

4.5 Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. Options with both market and non-market conditions are most impacted by these estimates. The share options charge is subject to an assumption about the number of options that will vest as a result of the expected achievement of certain non-market conditions.

Notes to the Group financial statements continued

as at 31 March 2022

4. Critical accounting estimates and judgements (continued)

Accounting judgements

4.6 Inventory obsolescence

Management make use of judgement in determining whether certain inventory items are obsolete. Should these judgements be incorrect there could be a material difference in the recoverable value of inventory.

5. Segmental analysis

The Chief Operating Decision Maker ("CODM") has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. No balance sheet analysis is available by segment or reviewed by the CODM. The Board has determined that the operating segments, based on these reports, are the sale of:

· batteries;

· lighting;

· vaping;

· sports nutrition & wellness; and

· branded household consumer goods.

The Gross profit before foreign exchange shows the results using standard foreign exchange rates that are used throughout the year. The foreign exchange adjustment shown before gross profit is to adjust back to the actual rates incurred.

	Batteries	Lighting	Vaping	Sports nutrition & wellness	Branded household consumer goods	Year Ended 31 March 2022
	£'000	£'000	£'000	£'000	£'000	£'000

Revenue	34,865	27,022	43,594	15,893	9,415	130,789
Cost of sales	(31,184)	(18,066)	(24,092)	(12,351)	(8,219)	(93,912)
Gross profit before foreign exchange	3,681	8,956	19,502	3,542	1,196	36,877

Foreign exchange						1,640
Gross Profit						38,517

Administration expenses						(21,498)
Operating profit						17,019

Adjusted earnings before tax, depreciation, amortisation and adjusted items						21,055
Depreciation						(2,563)
Amortisation						(378)
Adjusted items						(1,095)

Operating profit						17,019

Finance costs						(693)
Profit before taxation						16,326

Income tax						(2,863)
Profit for the year						13,463

Notes to the Group financial statements continued

as at 31 March 2022

5. Segmental analysis (continued)

	Batteries	Lighting	Vaping	Sports nutrition & wellness	Branded household consumer goods	Year Ended 31 March 2021
	£'000	£'000	£'000	£'000	£'000	£'000

Revenue	34,434	25,905	39,544	6,856	15,514	122,253
Cost of sales	(31,156)	(17,913)	(23,186)	(4,210)	(13,867)	(90,332)
Gross profit before foreign exchange	3,278	7,992	16,358	2,646	1,647	31,921

Foreign exchange						1,121
Gross Profit						33,042

Administration expenses						(19,416)
Operating profit						13,626

Adjusted earnings before tax, depreciation, amortisation and adjusted items						19,272
Depreciation						(1,998)
Amortisation						(225)
Adjusted items						(3,423)

Operating profit						13,626

Finance costs						(671)
Profit before taxation						12,955

Income tax						(3,117)
Profit for the year						9,838

Information about major customers

The Group has generated revenue from individual customers that accounted for greater than 10% of total revenue. The total revenue from each of these 2 customers (2021: 2 customers) was £21,111,000 and £18,385,000 (2021: £19,406,000 and £17,114,000). These revenues related to all segments.

Analysis of revenue by geographical destination

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
United Kingdom	115,938	112,700
Ireland	7,779	3,035
Netherlands	2,807	1,918
France	1,617	983
Rest of Europe	1,825	2,606
Rest of the World	823	1,011
	130,789	122,253

The above revenues are all generated from contracts with customers and are recognised at a point in time. All assets of the Group reside in the UK except for total assets of £3,125,000 held in Europe.

Notes to the Group financial statements continued

as at 31 March 2022

6. Expenses by nature

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
The profit is stated after charging expenses as follows:
Inventories recognised as an expense	81,813	80,070
Impairment of inventories	750	406
Impairment of trade receivables	30	20
Staff costs - Note 8	9,442	7,026
Adjusted items - Note 7	1,095	3,423
Establishment and general	1,473	1,365
Depreciation of property, plant and equipment and right of use assets	2,563	1,998
Amortisation of intangible assets	378	225
Auditor's remuneration for audit services	112	92
Auditor's remuneration for non-audit services	-	197
Furlough grant income	-	(342)
Other operating expenses	16,114	14,147
Total cost of sales and administrative expenses	113,770	108,627

7. Adjusted items

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000

IPO costs	-	1,953
Covid-19-related cost	118	-
Fair value movements on financial derivatives	(1,027)	768
Restructuring costs	208	421
Share based payments charge (note 24)	1,663	75
Acquisition costs	133	15
Refinancing costs	-	191
	1,095	3,423

IPO costs relate to the Group's admission to AIM in February 2021, which include £1.81m of adviser fees and commission, £0.19m of accelerated debt arrangement fees (associated with the tranche of debt that was settled on admission to AIM) and £0.14m in relation to company bonuses that were contingent on the transaction.

COVID-19 costs relate to the entirely incremental agency staff that was hired during November and December 2021 following widespread absence within our manufacturing workforce due to COVID-related sickness and isolation.

The financial derivatives relate to open foreign exchange forward contracts (the Group typically holds 1 years' worth of USD-denominated purchases on open forward contracts). The charge in both years reflects the movement in the fair value of these open forward contracts at the balance sheet date year-on-year.

Restructuring costs in FY21 relate to the integration of businesses and subsequent streamlining of operations following the acquisitions of Provider Distribution, the assets of LED Hut and the wider restructuring that took place as a result of COVID-19. In FY22 these costs related to the restructuring of the sales functions within the Group, specifically around electrical wholesale and brand reps where customers have been redirected to the Supreme trade website for self-service ordering going forward.

Notes to the Group financial statements continued

as at 31 March 2022

7. Adjusted items (continued)

The acquisition costs relate to the adviser fees relating to the acquisitions that took place during both years.

Refinancing costs represent the amortisation of arrangement fees and associated adviser fees incurred in obtaining the HSBC Senior Debt in FY20. In FY21, the amortisation of some of these costs were accelerated and reported as IPO costs as a result (following early repayment of a tranche of the senior facility).

8. Employees and Directors

	Year Ended 31 March 2022	Year Ended 31 March 2021
	No.	No.
Average number of employees (including Directors):
Management and administration	80	53
Warehouse	50	57
Sales	30	26
Development	105	65
	265	201

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Aggregate remuneration of staff (including Directors):
Wages and salaries	8,339	6,300
Social security costs	765	621
Other pension costs	338	105
	9,442	7,026

Directors' remuneration

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Directors' emoluments	635	314
Social security costs	88	80
Company contributions to defined contribution pension schemes	2	1
	725	395

The highest paid director received remuneration of £300,000 (2021: £144,000).

The value of the Company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £1,000 (2021: £1,000).

During the year retirement benefits were accruing to 2 directors (2021: 2) in respect of defined contribution pension schemes.

Notes to the Group financial statements continued

as at 31 March 2022

9. Finance costs

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Bank interest payable	153	430
Other interest payable	133	164
Amortisation of capitalised arrangement fees	289	-
Interest on lease liabilities	118	77
	693	671

Other interest payable represents interest payable in respect of the invoice discounting and supply chain facilities.

10. Taxation

	Year Ended 31 March 2022	Year Ended 31 March 2021
Current tax	£'000	£'000
Current year - UK corporation tax	3,205	3,156
Adjustments to tax charge in respect of prior periods	(163)	-
Foreign tax on income	(7)	17
Total current tax	3,035	3,173

Deferred tax
Origination and reversal of temporary differences	(320)	(56)
Adjustments to tax charge in respect of prior periods	(173)	-
Adjustments to tax charge due to change in rates	37	-
Total deferred tax	(456)	(56)

Total tax expense	2,579	3,117

Factors affecting the charge

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Profit before taxation	16,326	12,955

Tax at the UK corporation tax rate of 19% (2021: 19%)	3,102	2,461
Effects of expenses not deductible for tax purposes	317	128
Disallowed IPO fees	-	385
Disallowed foreign exchange	-	146
Adjustments to tax charge due to change in rates	37	-
Adjustments to tax charge in respect of prior periods	(336)	-
Recognition of previously unrecognised losses	-	(3)
Deferred tax on Share Based Payments	(471)	-
Enhanced Relief	(64)	-
Income not taxable for tax purposes	(6)	-
Total tax expense	2,579	3,117

Notes to the Group financial statements continued

as at 31 March 2022

10. Taxation (continued)

Factors that may affect future tax charges

In the Spring Budget 2020, the government announced that the previously enacted decrease in the corporate tax rate from 19% to 17% from 1 April 2020 would no longer happen and that rates would remain at 19% for the foreseeable future. The new law was substantively enacted by a resolution under the Provisional Collection of Taxes Act 1968 on 17 March 2020.

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25% rather than remaining at 19% as previously enacted. This new law was substantively enacted on 24 May 2021 and as such has been reflected in these financial statements.

11. Earnings per share

Basic earnings per share is calculated by dividing the net income for the year attributable to ordinary equity holders after tax by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated with reference to the weighted average number of shares adjusted for the impact of dilutive instruments in issue. For the purposes of this calculation an estimate has been made for the share price in order to calculate the number of dilutive share options.

The basic and diluted calculations are based on the following:

Statutory EPS

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Profit for the year after tax	13,747	9,838

	No.	No.
Weighted average number of shares for the purposes of basic earnings per share	116,605,892	111,087,502
Weighted average dilutive effect of conditional share awards	4,474,425	2,124,446
Weighted average number of shares for the purposes of diluted earnings per share	121,080,317	113,211,948

	Pence	Pence
Basic profit per share	11.8	8.9
Diluted profit per share	11.4	8.7

Notes to the Group financial statements continued

as at 31 March 2022

11. Earnings per share (continued)

Adjusted EPS

The calculation of adjusted earnings per share is based on the after tax adjusted operating profit after adding back certain costs as detailed in the table below. Adjusted earnings per share figures are given to exclude the effects of depreciation, amortisation and adjusted items, all net of taxation, and are considered to show the underlying performance of the Group.

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Adjusted earnings (see below)	14,976	13,353

	No.	No.
Weighted average number of shares for the purposes of basic earnings per share	116,605,892	111,087,502
Weighted average dilutive effect of conditional share awards	4,474,425	2,124,446
Weighted average number of shares for the purposes of diluted earnings per share	121,080,317	113,211,948

	Pence	Pence
Adjusted basic profit per share	12.8	12.0
Adjusted diluted profit per share	12.4	11.8

The calculation of basic adjusted earnings per share is based on the following data:

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Profit/(loss) for the year attributable to equity shareholders	13,747	9,838
Add back/(deduct):
Amortisation of acquisition related intangible assets	196	196
Adjusted items	1,095	3,423
Tax effect of the above	(62)	(104)
Adjusted earnings	14,976	13,353

Notes to the Group financial statements continued

as at 31 March 2022

12. Goodwill and other intangible assets

	Domain name £'000	Trademarks £'000	Customer relationships £'000	Trade name £'000	Computer software £'000	Goodwill £'000	Total £'000
Cost
At 1 April 2020	124	65	419	-	-	1,214	1,822
Arising on business combinations	-	-	341	221	-	388	950
Additions	125	-	-	-	-	-	125
At 31 March 2021	249	65	760	221	-	1,602	2,897

Additions	-	1,436	-	-	18	-	1,454
At 31 March 2022	249	1,501	760	221	18	1,602	4,351

Accumulated amortisation
At 1 April 2020	28	9	7	-		-	44
Amortisation charged in the year	22	7	152	44		-	225
At 31 March 2021	50	16	159	44		-	269

Amortisation charged in the year	25	150	152	44	7	-	378
At 31 March 2022	75	166	311	88	7	-	647

Carrying amount
At 1 April 2020	96	56	412	-	-	1,214	1,778
At 31 March 2021	199	49	601	177	-	1,602	2,628
At 31 March 2022	174	1,335	449	133	11	1,602	3,704

The amortisation charge for the year has been included in Administrative expenses in the Statement of Comprehensive Income.

Notes to the Group financial statements continued

as at 31 March 2022

12. Goodwill and other intangible assets (continued)

Goodwill arises on acquisitions where the fair value of the consideration given for the business exceeds the fair value of the assets acquired and liabilities assumed.

Following acquisition of a business, the directors identify the individual Cash Generating Units (CGUs) acquired and, where possible, allocate the underlying assets acquired and liabilities assumed to each of those CGUs. The carrying value of goodwill has arisen following the acquisition of subsidiary entities, where the trade and assets have subsequently been hived up into this company, and the related investment balance transferred to goodwill. The carrying value of goodwill is allocated to the following cash generating units:

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Lighting	159	159
Batteries	492	492
Vaping	121	121
Sports Nutrition & Wellness	400	400
Branded Household Consumer Goods	430	430
	1,602	1,602

The Customer relationships, Trade name, and Goodwill arising in the year ended 31 March 2021 related to the acquisition of GT Divisions Limited. Goodwill arising in the year ended 31 March 2020 related to the acquisition of Provider Distribution Limited, Holding Esser Affairs B.V. and its subsidiary AGP Trading B.V. and Monocore Limited. Goodwill arising before 1 April 2019 related to the acquisition of Powerquick, Vape Importers and Sub Ohm that was hived up into Supreme Imports Ltd. No Goodwill arose on the acquisition of Vendek Limited.

Impairment testing of goodwill is performed at least annually by reference to value in use calculations which management consider to be in line with the requirements of IAS 36. These calculations show no reasonably possible scenario in which any of the goodwill balances could be impaired as at 31 March 2022 or 31 March 2021. There were no charges for impairment of goodwill in 2022 (2021: nil). The pre-tax discount rate used in the value in calculations is 14.4% (2021: 13%). The long term growth rate assumed is 2% (2021: 2%).

Notes to the Group financial statements continued

as at 31 March 2022

13. Property, plant and equipment

	Land and buildings £'000	Plant and machinery £'000	Fixtures and fittings £'000	Motor vehicles £'000	Computer equipment £'000	Fashion hire assets £'000	Total £'000
Cost or valuation
At 1 April 2020	-	3,870	769	51	-	1,306	5,996
Additions	-	1,566	1	-	100	-	1,667
Disposals	-	(120)	-	-	-	(1,306)	(1,426)
At 31 March 2021	-	5,316	770	51	100	-	6,237

Additions	-	802	201	57	236	-	1,296
On acquisition	378	21	22	179	-	-	600
Disposals	(378)	-	-	-	-	-	(378)
At 31 March 2022	-	6,139	993	287	336	-	7,755

Depreciation and impairment
At 1 April 2020	-	1,612	449	16	-	461	2,538
Depreciation charged in the year	-	1,197	192	11	11	37	1,448
Eliminated on disposal	-	(38)	-	-	-	(498)	(536)
At 31 March 2021	-	2,771	641	27	11	-	3,450

Depreciation charged in the year	-	1,411	181	64	92	-	1,748
At 31 March 2022	-	4,182	822	91	103	-	5,198

Carrying amount
At 1 April 2020	-	2,258	320	35	-	845	3,458
At 31 March 2021	-	2,545	129	24	89	-	2,787
At 31 March 2022	-	1,957	171	196	233	-	2,557

The depreciation charge for the year has been included in Administrative expenses in the Statement of Comprehensive Income.

Notes to the Group financial statements continued

as at 31 March 2022

14. Investments

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Balance at the beginning of the year	7	7
Balance at the end of the year	7	7

The balance of £7,000 relates to shares held in private entities, by the acquired subsidiary, who are unlisted. IFRS 9 require these to be measured at fair value, however due to the nature of the investment, the cost has been deemed the fair value of the investment.

The Company owns 20% of the share capital of Elena Dolce Limited, with a registered office of 111 Deansgate, Manchester, M3 2BQ. This was written off in the prior year.

At 31 March 2022 the Company directly owned 100% of the following subsidiaries, which are incorporated in England and Wales unless stated:

Subsidiary	Registered address	Principal activity	Class of share	Percentage holding
Supreme Imports Limited	4 Beacon Road, Ashburton Park, Trafford Park, Manchester M17 1AF	Distribution of consumer goods	Ordinary	100%
Provider Distribution Limited	Unit 1 Rosewood Park, St James Road, Blackburn, Lancashire BB1 8ET	Distribution of consumer goods	Ordinary	100%
SI Holdings (Jersey) Limited	11 Bath Street, St Helier, Jersey, JE4 8UT	Holding company	Ordinary	100%

At 31 March 2022 the Company indirectly owned 100% of the following subsidiaries, which are incorporated in England and Wales unless stated:

Subsidiary	Registered address	Principal activity	Class of share	Percentage holding
GT Divisions Limited	4 Beacon Road, Ashburton Park, Trafford Park, Manchester M17 1AF	Distribution of consumer goods	Ordinary	100%
VN Labs Limited		Distribution of consumer goods	Ordinary	100%
Battery Force Limited		Dormant	Ordinary	100%
Powerquick Limited		Holding company	Ordinary	100%
Supreme 88 Limited		Holding company	Ordinary	100%
Supreme Nominees Limited		Holding of shares as nominee	Ordinary	100%
Holding Esser Affairs B.V.	Vanadiumweg 13, 3812 PX, Armersfoort, Netherlands	Holding company	Ordinary	100%
AGP Trading B.V.	Vanadiumweg 13, 3812 PX, Armersfoort, Netherlands	Distribution of consumer goods	Ordinary	100%
SI Jersey Limited	11 Bath Street, St Helier, Jersey, JE4 8UT	Dormant	Ordinary	100%
Vendek Limited	Unit C5, South City Business Park, Whitestown Way, Tallaght, Dublin 24, D24 A993	Distribution of consumer goods	Ordinary	100%

The Directors believe that the carrying value of the investments is supported by their underlying net assets.

Notes to the Group financial statements continued

as at 31 March 2022

15. Deferred tax

Deferred tax consists of the following temporary differences

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Share based payments	1,312	-

Excess of depreciation over taxable allowances	(53)	(171)
Short term temporary differences	(103)	25
Tax losses carried forward	-	5
	(156)	(141)
	1,156	(141)

Movement in deferred tax in the year

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Balance at the beginning of the year	(141)	(191)
Credited to profit or loss	456	56
Credited to reserves	841	-
Transfer	-	(6)
Balance at the end of the year	1,156	(141)

The Directors consider that the deferred tax assets in respect of temporary differences and tax losses carried forward are recoverable based on the forecast future taxable profits of the Group.

16. Inventories

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Goods for resale	20,457	15,849
Raw materials	5,441	4,016
	25,898	19,865

The Directors believe that the replacement value of inventories would not be materially different than book value.

Inventories at 31 March 2022 are stated after provisions for impairment of £600,000 (2021: £270,000).

17. Trade and other receivables

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Trade receivables	17,848	13,321
Amounts owed by related parties	-	1,790
Other receivables	346	172
Prepayments	841	769
	19,035	16,052

Notes to the Group financial statements continued

as at 31 March 2022

17. Trade and other receivables (continued)

The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date.

The movement in provisions for impairment are shown below:

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Balance at the beginning of the year	37	26
Charged to the statement of comprehensive income	30	20
Utilisation of provision	(35)	(9)
Balance at the end of the year	32	37

Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the reporting date but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable.

Ageing of receivables

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Current	12,177	10,814
31 - 60 days	4,390	1,969
61 - 90 days	1,254	126
90 days +	59	449
Less provisions for impairment	(32)	(37)
	17,848	13,321

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Credit insurance is also in place.

Details on the Group's credit risk management policies are shown in Note 22. The Group does not hold any collateral as security for its trade and other receivables.

18. Cash and cash equivalents

As at

31 March 2022

As at

31 March 2021

£'000

Cash at bank

3,926

7,505

Notes to the Group financial statements continued

as at 31 March 2022

19. Trade and other payables

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Trade payables	8,149	7,299
Accruals and deferred income	6,302	4,343
Other tax and social security	2,843	1,648
Directors loan account	2	5
	17,296	13,295

Trade payables principally consist of amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are normally settled on 30 to 60 day terms.

The Directors consider that the carrying value of trade and other payables approximates their fair value. Trade and other payables are denominated in Sterling, Euros and US Dollars. Supreme PLC has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period.

20. Borrowings

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Current
Bank loans	3,984	5,304
Amounts owed to related parties	1,779	3,392
Other loans	-	1,165
IFRS 16 lease liability (Note 21)	902	615
	6,665	10,476

Non-current
Bank term loan	-	3,695
IFRS 16 lease liability (Note 21)	1,294	963
	1,294	4,658

Total borrowings	7,959	15,134

The earliest that the lenders of the above borrowings require repayment is as follows:

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
In less than one year	6,665	10,476
Between two and five years	1,294	4,658
In more than five years	-	-
	7,959	15,134

Notes to the Group financial statements continued

as at 31 March 2022

20. Borrowings (continued)

The Group is funded by revolving credit facility ("RCF") of £25m provided by HSBC that is secured by way of a fixed and floating charge over all assets. Interest is charged at 2.3%-2.8% over SONIA for all drawn amounts and 35% of this charge for undrawn amounts. The facility is for 3 years and expires 31 March 2025. There are 2 principal covenants attached to the RCF and these are tested quarterly.

Current bank borrowings include an invoice discounting facility of £8.5m, which is secured by an assignment of, and fixed charge over the trade debtors of Supreme Imports Limited. The facility was drawn down £83,000 at year end.

Furthermore, the Group has access to a supply chain facility (also provided by HSBC) of $0.5m which is secured by fixed and floating charges over all assets of the Group . This facility is denominated in US Dollars. At the balance sheet date the facility is undrawn (FY21: £1,165,000).

Therefore undrawn but committed facilities at 31 March 2022 were £25m for the RCF (FY21: £nil), £8.4m for the invoice discounting facility (FY21: £8.5m) and $0.5m for the supply chain facility (FY21: £3.4m).

The supply chain facility is utilised to provide short term cash flow to settle liabilities arising out of purchases made in the normal course of business. The amount advanced takes into consideration the cash requirements of the Group and the working capital cycle.

21. Leases

Amounts recognised in the Statement of Financial Position

The balance sheet shows the following amounts relating to leases:

Right-of-use assets	£'000

Balance at 1 April 2020	1,495
Additions	531
Depreciation charge for the year	(550)
Balance at 31 March 2021	1,476
Additions	1,455
Depreciation charge for the year	(815)
Balance at 31 March 2022	2,116

The net book value of the right of use assets is made up as follows:

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Buildings	2,108	1,447
Cars	8	29
	2,116	1,476

Notes to the Group financial statements continued

as at 31 March 2022

21. Leases (continued)

Lease liabilities	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Maturity analysis - contractual undiscounted cash flows
Less than one year	988	678
More than one year, less than two years	514	654
More than two years, less than three years	467	180
More than three years, less than four years	407	120
More than four years, less than five years	-	60
More than five years	-	-
Total undiscounted lease liabilities at year end	2,376	1,692
Finance costs	(180)	(114)
Total discounted lease liabilities at year end	2,196	1,578

Lease liabilities included in the statement of financial position
Current	902	615
Non-current	1,294	963
	2,196	1,578

Amounts recognised in the Consolidated Statement of Comprehensive Income

The Consolidated Statement of Comprehensive Income shows the following amounts relating to leases:

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000
Depreciation charge - Buildings	794	498
Depreciation charge - Cars	21	52
	815	550

Interest expense (within finance expense)	118	77

The above leases relate to buildings and cars.

There are no future cash outflows to which the Group is potentially exposed that are not reflected in the measurement of lease liabilities. There are no restrictions or covenants imposed by leases and there have been no sale and leaseback transactions

Any expense for short-term and low-value leases is not material and has not been presented.

Notes to the Group financial statements continued

as at 31 March 2022

22. Financial instruments

The Group is exposed to the risks that arise from its financial instruments. The policies for managing those risks and the methods to measure them are described in Notes 2 and 3. Further quantitative information in respect of these risks is presented below and throughout these Group financial statements.

22.1 Capital risk management

Details of the Group's capital are shown in Note 23, as well as in the Statement of Changes in Equity.

22.2. Market risk

Competitive pressures remain a principal risk for the Group. The risk is managed through focus on quality of product and service levels, coupled with continuous development of new products to offer uniqueness to the customer. Furthermore, the Group's focus on offering its customers a branded product range provides some protection to its competitive position in the market. Stock obsolescence risk is managed through closely monitoring slow moving lines and prompt action to manage such lines through the various distribution channels available to the Group.

In addition, the Group's operations expose it to a variety of financial risks that include price risk, credit risk, liquidity risk, foreign currency risk and interest rate cash flow risk. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by regularly monitoring the financial risks referred to above.

Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the Board are implemented by the Group's finance department.

22.3. Credit risk

The Group's sales are primarily made with credit terms of between 0 and 30 days, exposing the Group to the risk of non-payment by customers. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed regularly by the board. In addition, the Group maintains a suitable level of credit insurance against its debtor book. The maximum exposure to credit risk is £5,000 per individual customer that is covered by the policy, being the insurance excess.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. Expected losses are based on the Group's historical credit losses, adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. The Group's B2B historic credit losses have been minimal on the back of strong credit control, in addition to the insurance cover in place. This results in an immaterial expected credit loss being provided for.

An analysis of past due but not impaired trade receivables is given in Note 17.

22.4. Liquidity risk management

The Group is funded by external banking facilities provided by HSBC. Within these facilities, the Group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the Group has sufficient available funds for operations and planned expansions. This is monitored on a monthly basis, including re-forecasts of the borrowings required.

Notes to the Group financial statements continued

as at 31 March 2022

22. Financial instruments (continued)

22.5. Foreign currency risk management

The Group's activities expose it to the financial risks of changes in foreign currency exchange rates. The Group's exposure to foreign currency risk is partially hedged by virtue of invoicing a proportion of its turnover in US Dollars. When necessary, the Group uses foreign exchange forward contracts to further mitigate this exposure.

The following is a note of the assets and liabilities denominated at each period end in US dollars:

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Trade receivables	1,498	1,481
Net cash and overdrafts	188	58
Supply chain facility	-	(1,165)
Trade payables	820	830
	2,506	1,204

The effect of a 20 percent strengthening of Pound Sterling at 31 March 2022 on the foreign denominated financial instruments carried at that date would, all variables held constant, have resulted in a decrease to total comprehensive income for the year and a decrease to net assets of £418,000, (2021: £ 201,000 ). A 20 percent weakening of the exchange rate on the same basis, would have resulted in an increase to total comprehensive income and an increase to net assets of £627,000 (2021: £ 301,000 ).

The following is a note of the assets and liabilities denominated at each period end in Euros:

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Trade receivables	51	42
Net cash and overdrafts	27	-
Trade payables	(261)	(269)
	(183)	(227)

The effect of a 20 percent strengthening of Pound Sterling at 31 March 2022 on the foreign denominated financial instruments carried at that date would, all variables held constant, have resulted in an increase to total comprehensive income for the year and an increase to net assets of £31,000 (2021: £ 38,000 ). A 20 percent weakening of the exchange rate on the same basis, would have resulted in a decrease to total comprehensive income and a decrease in net assets of £46,000 (2021: £ 57,000 ).

Derivative financial instruments - Forward contracts

The Group mitigates the exchange rate risk for certain foreign currency creditors by entering into forward currency contracts. The Group's forex policy is to purchase forward contracts to mitigate changes in spot rates, based on the timing of purchases to be made. Management forecast the timing of purchases and make assumptions relating to the exchange rate at which the Group costs its products and take out forward contracts to mitigate fluctuations to an acceptable level. At 31 March 2022, the outstanding contracts mature between 2 and 10 months of the year end, (2021: 1 and 12 months). At 31 March 2022 the Group was committed to buy $18,700 ,000 (2021: $24,000,000) in the next financial year.

Notes to the Group financial statements continued

as at 31 March 2022

22. Financial instruments (continued)

The forward currency contracts are measured at fair value using the relevant exchange rates for GBP:USD and GBP:EUR. The fair value of the contracts at 31 March 2022 is an asset of £467,000 (2021: liability of £559,000). During the year ended 31 March 2022, a profit of £1,027,000 (2021: loss of £768 ,000 ) was recognised Adjusted items for changes in the fair value of the forward foreign currency contracts.

Forward currency contracts are valued using level 2 inputs. The valuations are calculated using the year end exchange rates for the relevant currencies which are observable quoted values at the year-end dates. Valuations are determined using the hypothetical derivative method which values the contracts based on the changes in the future cashflows based on the change in value of the underlying derivative.

22.6. Interest rate cash flow risk

The Group's interest-bearing liabilities relate to its variable rate banking facilities. The Group has a policy of keeping the rates associated with funding under review in order to react to any adverse changes in the marketplace that would impact on the interest rates in place. The effect of a 1% increase in interest rates would have resulted in a decrease in net assets of £69,000 (2021: £ 136,000 ).

22.7. Price risk

The Group's profitability is affected by price fluctuations in the sourcing of its products. The Group continually monitors the price and availability of materials but the costs of managing the exposure to price risk exceed any potential benefits given the extensive range of products and suppliers. The Directors will revisit the appropriateness of this policy should the Group's operations change in size or nature.

22.8. Maturity of financial assets and liabilities

All of the Group's non-derivative financial liabilities and its financial assets at the reporting date are either payable or receivable within one year, except for borrowings as disclosed in Note 20.

Notes to the Group financial statements continued

as at 31 March 2022

22. Financial instruments (continued)

22.9 Summary of financial assets and liabilities by category

The carrying amount of financial assets and liabilities recognised may also be categorised as follows:

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Financial assets
Financial assets measured at amortised cost
Trade and other receivables	18,194	15,283
Cash and cash equivalents	3,926	7,505
	22,120	22,788
Financial liabilities
Financial liabilities measured at amortised cost
Non-current:
Borrowings	(1,294)	(4,658)
Current:
Borrowings	(6,665)	(10,476)
Trade and other payables	(8,149)	(7,304)
Accruals and deferred income	(6,304)	(4,343)
	(22,412)	(26,781)

Financial assets / (liabilities) measured at fair value through profit and loss
Derivative financial instruments	467	(559)
	467	(559)

Net financial assets and liabilities	175	(4,552)

Non-financial assets and liabilities
Plant, property and equipment	2,557	2,787
Right of use assets	2,116	1,476
Goodwill and other intangible assets	3,704	2,628
Investments	7	7
Inventory	25,898	19,865
Prepayments	841	769
Deferred tax asset	1,312	-
Deferred tax liability	(156)	(141)
Other taxation and social security	(2,843)	(1,648)
Income tax payable	(1,299)	(2,370)
	32,137	23,373

Total equity	32,312	18,821

Notes to the Group financial statements continued

as at 31 March 2022

23. Share capital and reserves

Share capital and share premium

Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. The excess of proceeds of a share issue over the nominal value is presented within share premium.

Number of shares authorised and in issue

	Ordinary £0.10
	No.	£
At 31 March 2021	116,499,980	11,649,998
Issued	127,094	12,709
At 31 March 2022	116,627,074	11,662,707

On 8 June 2021, 127,094 new Ordinary £0.10 shares were issued at a subscription price of £0.38, generating share premium of £36,057.

Dividends

Dividends of £2,566,000 (2021: £3,000,000) were declared in the year. This amounted to £0.022 per share (2021: £0.027).

Merger reserve

The merger reserve arose on a past business combination of entities that were under common control. The merger reserve is the difference between the cost of investment and the nominal value of the share capital acquired.

Share-based payments reserve

The share-based payments reserve represents the cumulative impact of the share-based payments charge.

Retained earnings

Retained earnings includes all current and prior period retained profits and losses, including foreign currency translation differences arising from the translation of financial statements of the Company's foreign entities.

All transactions with owners of the parent are recorded separately within equity.

24. Share based payments

The Group operates a number of share incentive arrangements as set out below.

The Supreme plc Enterprise Management Incentive Scheme ("the EMI Scheme")

On the 14 September 2018, the Group implemented an Enterprise Management Incentive Scheme. This was granted to employees to acquire shares in the Company for a number of ordinary shares of 10p each at the exercise price at the option of the employee. These options may not be granted unless a relevant event attached to the option has occurred. These options vested immediately and will expire after 10 years from grant date.

These option were fairly valued upon a valuation of the entity that had been performed by an independent expert.

On 4 January 2021 the Company granted options to one employee over 594,914 shares at the same exercise price under an individual unapproved option arrangement pursuant to a longstanding commitment.

Notes to the Group financial statements continued

as at 31 March 2022

24. Share based payments (continued)

	Weighted average exercise price 2022	2022	Weighted average exercise price 2021	2021
	£	No.	£	No.
Outstanding at the beginning of the year	0.38	1,683,365	0.38	2,174,120
Lapsed	-	(20,726)	-	(187,704)
Granted during the year	-	-	-	594,914
Exercised during the year	-	(127,094)	-	(897,965)
Outstanding at the end of the year	0.38	1,535,545	0.38	1,683,365

The profit and loss expense that has been recognised in the current year is £nil (2021: £nil) and included within administrative expenses.

The Supreme plc Sharesave Scheme 2021 ("the SAYE Scheme")

The Company established the SAYE Scheme on 26 January 2021. The SAYE Scheme is open to all employees who have achieved the qualifying length of service at the proposed date of grant (initially set at 3 months). Under the SAYE Scheme, an individual who wishes to accept an invitation to apply form options to be granted to him or her much take out a 3 or 5 year savings contract with an approved savings body selected by the Company. The individual makes a fixed monthly contribution over the life of the savings contract and on maturity receives a tax-free bonus. The monthly contribution can be a minimum of £10 and a maximum of £500.

The price at which options may be exercised will be set by the Directors at the date of grant and may be at a discount of up to a maximum of 20 per cent. against the market value at the date of grant of the Shares over which they are granted. The Option will generally be exercisable by the holder within six-month period after the bonus becomes payable on his or her relevant savings contract.

All employees of the Group (including executive directors) at 3 March 2021 were invited to participate in the SAYE Scheme. Employees were invited to subscribe for options over the Company's ordinary shares of 10p each with an exercise price of 152p, which represents a 20% discount to the closing middle market price of 190p per Share ("Options") on 2 March 2021, being the trading day before the invitation for employees to participate was made. Other than in the case of a takeover or demerger or similar event, an option will generally be exercisable by the holder in relation to the SAYE Scheme within the 6-month period after the bonus becomes payable on his or her relevant savings contract. Any option not so exercised will lapse. There are no conditions of exercise in relation to options granted under the SAYE Scheme.

A total of 100 Eligible Employees elected to participate in the SAYE Scheme, including and pursuant to these elections, options over a total of 438,620 Shares have been granted.

Notes to the Group financial statements continued

as at 31 March 2022

24. Share based payments (continued)

The Supreme plc Company Share Option Plan 2021 ("the CSOP Scheme")

The Company established the CSOP Scheme on 26 January 2021. Grants under the CSOP Scheme may be made by the Company as subscription Options or, with the consent of the Remuneration Committee, by an existing shareholder over shares already issued.

Under the CSOP Scheme certain eligible employees have been granted options to subscribe for ordinary shares in the Company of 10p each with an exercise price of 174 pence per ordinary share equal to the closing middle market price on 15 February 2021. The options were granted on 16 February 2021 and may be exercisable by the holder at any time between the third and tenth anniversaries of the date of the grant. Upon exercise, the relevant Shares will be allotted. A number of employees have been granted additional options on the same basis under the Unapproved Scheme detailed below to the extent that the total number of options granted to them exceeded the maximum number permitted to be granted under the CSOP Scheme by HMRC rules.

23 employees have been granted options under the CSOP over a total of 206,886 shares and 4 employees have been granted options under the Unapproved Scheme over a total of 94,825 Shares, being in aggregate 301,711 shares.

The Supreme plc Unapproved Share Option Scheme 2021 ("the Unapproved Scheme")

The Company established the Unapproved Scheme on 26 January 2021. Grants under the CSOP Scheme may be made by the Company as subscription Options or, with the consent of the Remuneration Committee, by an existing shareholder over shares already issued.

As described in the Directors' Remuneration Report, on 9 March 2021 the Company awarded the following options to the executive directors under the Unapproved Scheme.

Options to subscribe for a total of 5,825,000 Shares at nominal value were granted to the CEO in two equal tranches. Each tranche of options will be subject to a performance condition which must be wholly satisfied for the relevant option to be exercisable. The performance condition for the first tranche of options is that total shareholder return per Share ("TSR") from Admission until the third anniversary of Admission is at least 100 per cent. of the placing price of 134 pence as at Admission (the "Placing Price"). The performance condition for the second tranche of options is that the TSR from Admission until the fifth anniversary of Admission is at least 200 per cent. of the Placing Price.

Options to subscribe for up to 111,940 Shares at nominal value were granted to the CFO. The options are subject to a performance condition requiring an average annual TSR of 7.5 per cent. to become exercisable in part and an annual average TSR of 10 per cent. to become fully exercisable, in each case measured over a period of 3 years from Admission as against the Placing Price.

Under the CSOP and Unapproved Schemes, the Group has made awards over 6,238,651 conditional shares to certain Directors and employees.

The vesting of most of these awards is subject to the Group achieving certain performance targets under the Unapproved Scheme, measured over a three or five year period, as set out in the Remuneration Report. The options will vest depending on achievement of the Group's absolute total shareholder return ("TSR") as follows:

Notes to the Group financial statements continued

as at 31 March 2022

24. Share based payments (continued)

	Measurement period	Absolute TSR p.a	% of element vesting
CFO awards	1 February 2021- 1 February 2024	=>10%	100%
	1 February 2021- 1 February 2024	7.5%	0%
	1 February 2021- 1 February 2024	=<7.5%	0%
CEO awards	1 February 2021- 1 February 2024	=>100%	100%
	1 February 2021- 1 February 2024	<100%	0%
CEO awards	1 February 2021- 1 February 2026	=>200%	100%
	1 February 2021- 1 February 2026	<200%	0%

The awards under the CSOP Scheme and Unapproved Scheme to employees other than as noted above are not subject to performance conditions and vest subject to continued employment only.

In respect of the CFO and CFO awards, the fair value at grant date is independently determined using a Monte Carlo simulation model which calculates a fair value based on a large number of randomly generated projections of the Company's future share prices. In respect of the CSOP and Unapproved Schemes, the fair value at grant date has been determined using a Black-Scholes model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, and the risk-free interest rate for the term of the option as shown below:

	CSOP/ unapproved scheme	CFO awards	CEO awards - 3 year performance period	CEO awards - 5 year performance period
Grant date	16 February 2021	9 March 2021
Share price at grant date	176p	185p
Exercise price	174p	Nil
Expected volatility	45%
Projection period (years)	N/A	2.89		4.89
Expected life (years)	6.5	3		5
Expected dividend yield	4.10%	3.90%
Risk-free interest rate	0.34%	0.12%		0.31%
Fair value per award	50p	109p	74p	59p

The expected volatility has been estimated based upon the historical volatility of the FTSE AIM Retailers and Personal & Household goods sub sectors.

A summary of the awards made during the year is set out below:

	CSOP/ unapproved scheme	CFO awards	CEO awards - 3 year performance period	CEO awards - 5 year performance period	SAYE Scheme
At the start of the year	301,711	111,940	2,912,500	2,912,500	438,620
Awards lapsed in year	(5,746)	-	-	-	(35,757)
At the end of the year	295,965	111,940	2,912,500	2,912,500	402,863

No awards are exercisable at the end of the year. The charge for share-based payments in the year was £1,663,000 (2021: £75,000) which is included within Adjusted items. Of this, £211,000 related to Employers National Insurance Contributions and £1,452,000 related to the share-based payments charge.

Notes to the Group financial statements continued

as at 31 March 2022

25. Business combinations

Acquisition of Vendek Limited

On 10 June 2021 Supreme Imports Limited acquired the entire share capital of Vendek Limited, a leading Dublin-based distributor of batteries and lighting products, for initial consideration of £1.3m.

Recognised amounts of identifiable assets acquired and liabilities assumed

	Book value	Fair value adjustment	Fair value
	£'000	£'000	£'000
Fixed assets
Property, plant and equipment	600	-	600
	600	-	600
Current assets
Inventory	1,148	(52)	1,096
Debtors due within one year	805	(48)	757
Cash at bank and in hand	271	-	271
	2,224	(100)	2,124
Total assets	2,824	(100)	2,724

Creditors
Due within one year	(781)	-	(781)
	(781)	-	(781)
Total identifiable net assets			1,943
Goodwill			-
Total purchase consideration			1,943

Consideration
Cash			1,311
Deferred consideration			632
Total purchase consideration			1,943

Cash outflow on acquisition
Purchase consideration settled in cash, as above			1,311
Less: cash and cash equivalents acquired			(271)
Net cash outflow on acquisition			1,040

Following a purchase price allocation exercise the Company did not identify further acquired intangible assets. The fair value adjustments reflect increases to inventory provisions of £52,000 and trade receivables of £48,000. There was no additional consideration paid over the fair value of the net assets acquired and therefore no goodwill arose on the acquisition. Acquisition costs of £133,000 were incurred and expensed.

The revenue from Vendek Limited included in the Statement of Comprehensive Income for the year ended 31 March 2022 was £3,898,000. Vendek Limited also contributed profit of £227,000 over the same period. If the acquisition had occurred on 1 April 2021, consolidated pro-forma revenue and profit before tax for the year ended 31 March 2022 would have increased by £565,000 and decreased by £154,000 respectively.

In addition, on 30 June 2021, Supreme Imports Limited acquired the intellectual property rights and inventory of Sci-MX Nutrition Limited, a leading sports nutrition and supplements business for a consideration of £2.3m. This purchase does not meet the definition of a business combination under IFRS3 and the consideration has been allocated to the fair value of the assets acquired as follows:

Notes to the Group financial statements continued

as at 31 March 2022

25. Business combinations (continued)

	£'000
Trademarks	1,436
Inventories	893
	2,329

26. Ultimate controlling party

The Directors consider the ultimate controlling party to be S Chadha and his concert party.

27. Other financial commitments

See note 22.5 for details of the financial commitments under US dollar forward exchange contracts.

28. Related party transactions

28.1. Remuneration of key personnel

Remuneration of key management personnel, considered to be the Directors of the Company and members of the senior management team is as follows:

	Year Ended 31 March 2022	Year Ended 31 March 2021
	£'000	£'000

Short-term employee benefits	1,030	806
Social security costs	126	104
Employee share schemes	1,402	141
Post-employment benefits	9	6
Total compensation	2,567	1,057

28.2. Transactions and balances with key personnel

	As at 31 March 2022	As at 31 March 2021
	£'000	£'000
Loan balances with Directors:
Balance outstanding from director	(2)	(5)

28.3. Transactions and balances with related companies and businesses

	Year Ended / As at 31 March 2022	Year Ended / As at 31 March 2021
	£'000	£'000
Transactions with related companies:
Rent paid to Chadha Properties Limited	180	180

Balances with related companies:
Amounts owed by Nash Peters Limited	-	1,790
Amounts owed to Supreme 8 Limited	(1,780)	(3,392)

Notes to the Group financial statements continued

as at 31 March 2022

28. Related party transactions (continued)

The above companies are related due to common control and Directors.

Amounts owed by Nash Peters, related due to common directorships, was due for repayment on demand and interest was charged on the outstanding balance at a rate of 5%. This balance was repaid in full during the year.

Amounts owed to Supreme 8 Limited, a minority shareholder, are for a loan due for repayment on demand and interest is charged on the outstanding balance at a rate of 3%. £1,790,000 of this balance was repaid during the year and the remainder was paid shortly after year end and is disclosed as a post balance sheet event.

29. Analysis and reconciliation of net debt

	1 April 2020	Acquisitions	Other non-cash changes	Cashflow	31 March 2021
	£'000	£'000	£'000	£'000	£'000
Cash at bank and in hand	6,718	67	-	720	7,505
Current borrowings	(10,573)	-	(741)	838	(10,476)
Non-current borrowings	(17,413)	-	(47)	12,802	(4,658)
Net debt	(21,268)	67	(788)	14,360	(7,629)

	1 April 2021	Acquisitions	Other non-cash changes	Cashflow	31 March 2022
	£'000	£'000	£'000	£'000	£'000
Cash at bank and in hand	7,505	271	(32)	(3,818)	3,926
Current borrowings	(10,476)	-	(1,817)	5,628	(6,665)
Non-current borrowings	(4,658)	-	(331)	3,695	(1,294)
Net debt	(7,629)	271	(2,180)	5,505	(4,033)

30. Post balance date events

On 4 April 2022, the Group drew down £4.1 million on the RCF to fully settle the existing 5-year loan facility with HSBC and cover the arrangement fee attached to the RCF.

On 27 April 2022, the Group repaid the final tranche of its related party loan to Supreme8 Limited. No further related party items exist on the Balance Sheet.

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Supreme (SUP)

Friday, 24th January 2025

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