Strong FY23 results backed by vaping acquisitions
For the year to 31 March 23, Supreme reported revenue of £155.6m, +19%YoY (with H2 revenue rebounding 27%YoY versus H1 +6%YoY), and (adj.) EBITDA of £19.4m, -8%YoY (compared to H1 -19%YoY). Revenue was ahead of our estimate of £150m; (adj.) EBITDA matched our outlook. The Vaping product segment recorded revenue of £76.1m +75%YoY, 49% of total, with 40% of incremental revenue (c.£13m) generated by the acquired Liberty Flights, Cuts Ice and Flavour Core operations. Even excluding the contribution from acquisitions, we estimate that growth was an impressive 45%YoY. Batteries revenue grew 13%YoY to £39.5m, 25% of total. Lighting revenue declined 43%YoY (£15.4m) due to customer overstocking issues, but H2 recovered 50% on H1. Sports Nutrition & Wellness revenue grew 5%YoY (£16.8m), and the Branded Household Goods & Other segment contributed £7.8m of revenue (-17%YoY).As of 31 March, the Group was (pre-IFRS 16) cash positive (£3.2m), having generated £19.3m in (net) cash from operations, in addition to which the disposal of TJuice yielded £4.0m. £30m in borrowing facilities offers the potential to grasp further suitable M&A opportunities. Consistent with Group policy of a 25% of net profit dividend policy, a dividend of 3p/share is payable for the year.
Supreme has announced a master distributor agreement in the UK for the popular Elf Bar and Lost Mary (QM600) range of disposable vapes across its retail network; we estimate that in FY24 this could add c.£25m in additional revenue and c.£2.0m in (adj.) EBITDA. The brands are owned by Shenzhen iMiracle Technology Co. Ltd., in China, and are some of the most popular disposable vape brands in the US (e.g. the Elf Bar BC5000).
Reflecting the potential impact of the Elf Bar distributor agreement, we have raised our FY24 revenue outlook by 20% to £194.5m, and (adj.) EBITDA outlook by 19% to £25.6m. Our Fair Value increases to 200p/share, indicative of a FY24 EV/EBITDA of 8.7x.
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