TIDMSUP
RNS Number : 0361F
Supreme PLC
05 July 2023
5 July 2023
Supreme plc
("Supreme," the "Company" or the "Group")
Audited Final Results for the Year Ended 31 March 2023
- Robust trading across FY23 and a particularly strong second
half, underpinned by an outstanding performance from the Vaping
category and earnings-enhancing acquisitions
- Record levels of cash generated from operations
- Very positive outlook, supported by a significant profit upgrade for FY24
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 2023 ("FY23").
Financial highlights
-- Revenue growth of 19%; half of which was driven by
earnings-enhancing acquisitions and the remainder from strong
organic growth
-- Vaping division delivered a record performance nearly
doubling revenues to GBP76.1 million (FY22: GBP43.6 million) and
increasing gross profit to GBP28.1 million (FY22: GBP19.5
million)
-- Highly cash-generative in the period, delivering GBP19.3
million cash from operations in the period (FY22: GBP11.8 million),
resulting in an Adjusted net cash(4) position of GBP3.2 million by
year end (FY22: Adjusted net debt(4) of GBP1.9 million).
-- Record levels of investment in M&A and capex ("investing
activities") of GBP11.3 million (FY22: GBP3.8 million) to support
future growth
-- Disposal of the T-Juice brand generated GBP4.0 million of
cash in FY23 and the ongoing strategic partnership with the buyer
means Supreme retains exclusive manufacturing rights
Operational highlights
-- Three acquisitions completed, with two having been
successfully integrated and immediately Adjusted EBITDA(1)
enhancing during the year and the third acquisition completed
immediately prior to year-end
-- Secured a 15-year lease on a new facility in Manchester which
will significantly expand the Group's in-house distribution
capabilities, with activities from the site expected in Q2 of
FY24
-- Significant progress reported on the Group's ESG strategy,
with a particular focus on energy consumption and its people
agenda
Dividends
-- A final dividend, subject to shareholder approval at the
Annual General Meeting on the 26 September 2023, of 2.2 pence per
share.
-- The Group paid an interim dividend of 0.8 pence per share,
which together with the final dividend take total dividends for the
year to 3.0 pence per share
Outlook / Current Trading
-- The Group has made a very solid start to FY24. The core
business and the FY23 acquisitions are all performing strongly and
as a result the Board expects Adjusted EBITDA(1) to be ahead of
latest expectations by at least GBP1 million.
-- In addition, the Group now expects to generate a further
GBP25-30 million of revenue and around GBP2 million incremental
Adjusted EBITDA(1) in FY24 in respect of a master distributor
appointment with the UK's leading vaping brands; Elfbar and Lost
Mary.
-- As a result, the Board now anticipates that trading in FY24
will be significantly ahead of current consensus(5)
Sandy Chadha, Chief Executive Officer of Supreme, commented:
"Supreme has delivered a strong performance across the year
punctuated by an outstanding contribution from our Vaping division,
which has almost doubled revenues in the year.
Our commitment to providing highly affordable but competitively
priced products sits at the heart of our business and our diverse
client base continues to provide a stable platform for growth.
As we look to the future, we remain committed to expanding our
product set, both organically and via acquisition, which in turn
creates greater opportunities to cross sell and forge ever closer
bonds with our customers.
I am delighted with the strong performance of the Group so far
in FY24 and to have had our vaping distribution capabilities
recognised by one of the world's biggest vaping brands is testament
to our expertise and our reputation.
Lastly, I would like to thank everyone in the business who have
been exceptional throughout the year and look forward to updating
all our stakeholders later in the year on our continued
progress."
Retail Investor Presentation:
A presentation for retail investors covering the results for the
year ended 31 March 2023 will be held at 11.00 a.m. on Thursday
6(th) July 2023.
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-6july2023
(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
non-recurring items
(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 non-recurring
items
(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
non-recurring items
(4) Adjusted net debt means net debt as defined in Note 29 to
these financial statements excluding the impact of IFRS16
(5) Company compiled analyst consensus for the year ending 31
March 2024 prior to the release of this announcement and the vaping
distribution opportunity announcement (dated 5 July 2023) was
revenue of GBP159 million and Adjusted EBITDA(1) of GBP22.6
million.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 which is part of UK law by virtue of
the European Union (withdrawal) Act 2018. Upon the publication of
this announcement, this inside information is now considered to be
in the public domain.
Enquiries:
Supreme plc via Vigo Consulting
Sandy Chadha, Chief Executive Officer
Suzanne Smith, Chief Finance Officer
Grant Thornton UK LLP (Nominated Adviser)
Samantha Harrison / Harrison Clarke / Samuel
Littler +44 (0)20 7383 5100
Berenberg (Broker)
Mark Whitmore / Marie Moy / Mara Grasso +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.
https://investors.supreme.co.uk/
Chair Statement
I am pleased to report that Supreme delivered a robust
performance across the financial year ended 31 March 2023 with
strong second half momentum going into FY24. This performance,
achieved against a challenging macroeconomic backdrop, includes
outstanding organic and acquisitive growth in our key Vaping
division, and solid progress across our Batteries and Sports
Nutrition & Wellness segments. Despite well-documented global
supply chain and inflationary pressures, Supreme has continued to
make significant operational and financial progress and is
positioned strongly for future growth as we focus on delivering on
our strategic aspirations.
Supreme delivered revenue of GBP155.6 million (FY22: GBP130.8
million), up 19% year-on-year, whilst Adjusted EBITDA(1) fell by 8%
to GBP19.4 million (FY22: GBP21.1 million), a direct result of the
temporary setback to Lighting. Supreme remains a highly
cash-generative business, having generated cash from operations of
GBP19.3 million (FY22: GBP11.8 million) and is further supported by
a healthy balance sheet and unutilised borrowing facilities of
GBP30 million. The Group's vertically integrated model remains
resilient and continues to facilitate the development of the
business and our various interconnected functions.
In line with our strategy to expand our in-house manufacturing
and distribution operations, we secured a 15-year lease on a new
facility near our existing warehouse in Manchester and remain on
track to commence activities from this site in FY24.
The Vaping division remains the Group's key growth driver, and
we continued our impressive trading momentum in this category
throughout the financial year by delivering a 75% increase in
revenue year-on-year. In addition to generating significant organic
growth, largely through robust sales and complementary new product
development in our market-leading 88vape brand, we delivered the
immediately earnings-enhancing acquisitions of Liberty Flights,
Cuts Ice and Superdragon. Liberty Flights and Cuts Ice were
integrated into the wider Group, significantly scaling Supreme's
vaping offering whilst providing considerable cross-sell
opportunities. These acquisitions reflect the Company's strategy to
support a tobacco-free UK by offering both credible and safer
alternatives for nicotine consumption.
Acquired as part of the Cuts Ice transaction, we announced the
disposal of the intellectual property of T-Juice to an associated
company of leading French e-cigarette and e-liquids wholesale La
Vape Professional Distribution ('LVP') in March 2023. This new
arrangement ensures Supreme retains the exclusive manufacturing
rights to T-Juice for five years, enabling the Group to focus on
its core manufacturing expertise and the transaction generated GBP4
million of cash for the Group on completion.
Our Sports Nutrition & Wellness segment delivered a credible
performance, as we continued to mitigate the effects of
well-publicised inflationary raw material pressures and supply
chain headwinds on the sector. Following the successful rebrand of
Sci-MX in the first half of the financial year, we are well-poised
to capitalise on the fast-growing global demand for sports
nutrition products, including portable protein snacks and
supplements, as whey prices begin to normalise.
Stabilising the Lighting division was a key priority for the
Group after a temporary setback derived from customer over-stocking
in FY22, and pleasingly we continued to make progress recovering
the category despite its overall disappointing performance in the
financial year where gross profit fell from GBP9.0 million in FY22
to GBP4.1 million in FY23. Strengthened by long-term exclusive
license and distribution agreements, as well as increased
networking and market expansion opportunities generated following
the integration of Vendek, we continued to focus on enhancing our
manufacturing of private and white label lighting products,
ensuring we strive to provide the best service for brands and
retailers.
As Chair I am particularly proud of the brands we have acquired
this year; our extremely talented team continues to identify,
execute and integrate complementary, well-priced, immediately
earnings-enhancing brands into the Supreme platform, ensuring this
does not detract or dilute our core business offering. It is a
clear marker of the exceptional talent we have in our business. We
remain focused on exploring further M&A and partnership
opportunities to extend our manufacturing and distribution
capabilities, retaining a diverse offering of great value,
high-quality products to our customers and ultimately the consumer.
We firmly believe that Supreme will continue to play an integral
role in minimising the economic impact of the cost-of-living crisis
on consumers, and we look ahead with confidence as we strive to
deliver affordable items to market via leading retailers and our
D2C online channels.
Supreme responded quickly to the cost-of-living issues faced by
our colleagues and awarded an immediate 10% pay increase to more
than half of our colleagues, regardless of location, role or length
of service in September 2022. The scheme was directed towards those
colleagues who were particularly impacted by the cost-of-living
crisis. It is testament to the culture and values within our
business that Sandy, our founder and CEO, volunteered to sacrifice
his entire salary from then until the end of the financial year in
order to finance this in FY23. We realise that our colleagues are
one of our key assets, many of whom worked tirelessly through the
Covid-19 pandemic and who continue to be pivotal to the future
success of the Group.
Encouraged by the recent strong second half trading performance,
the Board is pleased with the Group's progress, and on its behalf,
I would like to thank all employees for their continued diligence
and support. By responding effectively and prudently to turbulent
macroeconomic trading conditions, our highly experienced management
team continues to drive Supreme forward, and the Board has full
confidence in the Company's ability to deliver on our medium to
long term growth potential.
Paul McDonald
Non-executive Chair
4 July 2023
(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
non-recurring items
CEO's Review
Introduction
I am delighted to announce our results for the year ended 31
March 2023, following a period of substantial financial and
operational growth for Supreme, driven by an outstanding
performance from our Vaping category.
Supreme delivered an 19% increase in revenue to GBP155.6 million
(FY22: 130.8 million), alongside a 6% growth in gross profit to
GBP40.9 million (FY22: GBP38.5 million). Adjusted EBITDA(1) was
GBP19.4 million (FY22: GBP21.1 million), which despite the impact
of destocking within our Lighting category, proved to be a highly
credible performance. The business generated cash of GBP19.3
million from operations in FY23 (FY22: GBP11.8 million) and I am
particularly proud that the Group reported a positive GBP3.2
million cash position net of bank borrowings at year end; a GBP16.1
million increase versus the half year position six months earlier.
Due to the highly cash-generative nature of its core operations,
the Group was able to invest record levels into M&A and capital
expenditure totalling GBP11.3 million (FY22: GBP3.8 million) and
paid dividends of GBP5.4 million (FY22: GBP2.5 million).
We gained significant trading momentum in the second half of the
year, driven by strong organic growth across our key categories.
Our 88vape brand generated excellent sales traction to consolidate
our position as a market leader in the vaping sector, alongside
additional market traction generated by the acquisitions of Liberty
Flights and Cuts Ice.
We cemented our approach to M&A during FY23 having acquired
three more complementary, earnings-enhancing businesses in the
vaping sector. Each acquisition brought its own well-recognised
brands together with opportunities for synergies when integrated
into the Supreme platform. Liberty Flights and Cuts Ice were
acquired in the first half of the year and together contributed to
GBP12.8 million of the Group's revenue growth and Superdragon was
acquired immediately before year end and has already made a
positive start to FY24. Identifying targets that meet our
non-negotiable investment criteria, our speed of deal execution and
tenacity of operational and financial integration defines our
M&A strategy, which remains a key pillar of growth for
Supreme.
As a business, we are actively engaged in the debate to make the
UK tobacco free and welcomed the UK Government's recent "Achieving
Smoke-free 2030" initiative, particularly its recognition of vaping
as "the most effective" tool for smoking cessation. We fully
support the new policies adopted, including the proposed launch of
a fully funded national 'swap to stop' scheme to provide vapes as a
first-line quit aid in local stop smoking services, and are
encouraged by the robust plans to penalise brands and manufacturers
who actively target young vapers.
Our people remain one of the Company's most valuable assets.
Internally, we responded rapidly to the emergence of the
cost-of-living crisis, announcing in September 2022 permanent and
out-of-cycle pay rises for all staff earning less than GBP30,000.
70% of the workforce qualified, with around 50% of staff receiving
10% pay rises. To finance this scheme and simultaneously keep our
profit commitments to our shareholders, I sacrificed my salary for
the second half of FY23. We have an excellent track record of
retaining talent, and by supporting our employee base, particularly
those most affected by the crisis, I am confident we can continue
to be recognised as a great place to work.
We are proud of the attractive portfolio of great value products
we have developed and look forward to continuing to supply an
extensive customer base extending over the private and public
sectors. The Board firmly believes that the Company can achieve its
strategic aspirations as we aim to continue on our upward growth
trajectory in FY24 and beyond.
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.
During FY23, we agreed a lease for a new warehouse and office
site proximal to our existing facilities, further consolidating
Manchester as the focal point of our business. Once activities
commence from the hub, which is projected to occur in FY24, we will
be able to increase the efficiency of our overarching integrated
platform, streamline both storage and distribution and accommodate
future bolt-on M&A.
With this strong platform central to our business, management
will continue to focus on the following strategic growth drivers,
namely:
-- continue to explore and execute on complementary earnings enhancing acquisitions;
-- further leverage cross-sell opportunities to expand our
customer footprint and average revenue per customer;
-- continue to explore and develop new product verticals that
complement 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;
-- enhance online distribution and services to further grow our
B2B and D2C sales channels; and
-- expand our international footprint through existing customer
relationships and strategic acquisitions.
Vaping
The Group's Vaping division delivered a record performance in
FY23, underpinned by a combination of significant organic growth
and the completion and integration of a number of earnings
enhancing acquisitions. The division nearly doubled revenues,
generating GBP76.1 million (FY22: GBP43.6 million), an increase of
75% year-on-year, with incremental revenue from the acquisitions of
Liberty Flights and Cuts Ice constituting 40% of the growth.
Our core 88vape brand delivered another outstanding performance
and, as we continue to expand our product range and optimise our
D2C online sales capabilities, we anticipate the brand's growth
will accelerate in the medium to long term. Driven by retailer and
consumer demand, and to complement our existing hero e-liquid
ranges, Supreme launched a range of disposable vapes during FY23
which has generated almost GBP12 million in incremental revenue in
its first year. Pleasingly, our contract with UK prisons also
reported growth of 25% year-on-year following further competitive
displacement and increased volumes.
Following a seamless process, the Liberty Flights and Cuts Ice
businesses were integrated into the wider Group, which is testament
to the hard work and commitment of the Supreme team and further
supports our track record of successful M&A integration. In
addition, we also completed the acquisition of Superdragon in March
2023, an experienced manufacturer of e-liquids. Collectively, the
vaping acquisitions have significantly scaled the Group, providing
Supreme with complementary owned brands, access to new customer
bases and territories, wider manufacturing know-how and
state-of-the-art technology. Most importantly, all the acquired
vaping brands share Supreme's ethos: to support a tobacco-free UK
by offering adults credible, affordable and safer alternatives for
nicotine consumption.
Acquired as part of the Cuts Ice transaction, we announced the
disposal of the intellectual property of T-Juice to an affiliate of
leading French e-cigarette and e-liquids wholesaler, LVP, in March
2023. Supreme retains the exclusive manufacturing rights to T-Juice
as part of this arrangement and expects to generate around GBP3
million in annualised revenue. In addition to the ongoing
manufacturing revenue, the deal generated GBP4 million of cash for
the Group on completion.
Supreme has consolidated its position as a market-leading
manufacturer, distributor and brand owner in the vaping sector, and
continues to explore additional opportunities to grow both its
market share in an ever-expanding industry boosted by increasing
Government support.
Lighting
As previously reported, the Group's Lighting category
experienced a challenging year of trading, with customer
overstocking issues, alongside well-documented global supply chain
and transportation problems impacting numerous businesses in the
industry, with a resulting 43% reduction in revenue to GBP15.4
million (FY22: GBP27.0 million). Encouragingly, Supreme has since
stabilised the category, and the Company expects it to recover
across FY24 and FY25.
The category has retained all its listings, whilst every
existing customer relationship remains in-tact, facilitating the
recovery process in the medium to long term. In addition, our
largest retail customers have now provided us with access to their
EPOS and stockholding data, previously prohibited, allowing us to
measure stock levels and forecast demand more accurately. This
initiative potentially de-risks this category going forward with
the expectation that the FY23 setback was both temporary and very
unlikely to reoccur without warning.
Commercially, the Group secured an extension to our existing
licenses with Energizer and Eveready, which is now valid until
2030, as we proactively focused on strengthening existing license
agreements with well-known global brands and retailers. A new
licence agreement has also been agreed with Black and Decker, a
trusted brand for retail customers seeking an alternative to their
own label products, whilst the integration of Vendek has also
presented significant commercial opportunities.
Looking ahead, Supreme is committed to building on the
significant recovery progress made in the second half of the
financial year and we anticipate the division will deliver an
improved performance across FY24.
Sports Nutrition & Wellness
The Sports Nutrition & Wellness category delivered revenues
of GBP16.7 million in FY23 (FY22: GBP15.9 million), which was a
solid performance. During FY23, the Group unveiled a new-look
Sci-MX, Supreme's principal powders brand. Relaunching the entire
range has delivered strong sales momentum, whilst the Group also
brought manufacturing in-house to increase profitability in the
longer term and streamline the supply chain following the
acquisition of the brand in FY22.
Protein powders represent approximately 70% of the segment's
revenue and significant inflationary pressures impacting powders,
particularly whey, have inevitably impacted the performance of the
category. Supreme took a prudent approach to overcoming these
macroeconomic headwinds by electing to support retailers through
this price hike to protect long-term relationships and future
trading aspirations in what is a fast-growing market.
Alongside investment in marketing and advertising initiatives,
we launched exciting products across a number of our key brands,
including new Battle Bites protein bars and other nutritional
snacks.
Vitamins, which continue to operate from a low base, traded in
line with expectations, and we continued to roll-out new vitamins
pouches and supplements to expand our great value digital-only
Sealions range.
As raw material price pressures ease, Supreme is focused on
increasing manufacturing capacity for the category in FY24 and
remains well-placed to capitalise on strong consumer demand for a
diverse range of sports nutrition and wellness products.
Batteries
The Batteries category delivered another year of solid
profitable growth, generating revenue of GBP39.5million in FY23
(FY22: GBP34.9 million), 13% growth. Batteries remain a sticky
consumer product which, for several retailers, are essential items
on their stocklists. Consequently, Supreme has been able to
establish long-term customer relationships through this channel,
generating opportunities to cross-sell additional products from our
portfolio. This highlights not only the integral role the division
plays in Supreme's overarching growth strategy, but also the
effectiveness of the Group's vertically integrated platform in
attracting customers across multiple verticals.
The backbone of the business and requiring minimal costs to
serve, Supreme is focused on enhancing its battery distribution
functions and bolstering existing relationships with retailers to
generate increased revenues from the category.
Outlook
Supreme remains a highly cash-generative business, underpinned
by a trusted vertically integrated platform that facilitates new
business momentum and ensures products efficiently reach end
markets. Continued investment in both our people and facilities
demonstrates our commitment to our long-term growth plans, and we
look ahead with confidence as we strive to deliver on our strategic
priorities.
Looking at FY24, the Group expects to maintain its strong growth
trajectory, delivering another strong year of profitable growth
across all product categories. We have seen a very strong start to
FY24 with all areas of the business performing very well.
In addition, I am delighted to have recently been appointed as
master distributor for Elfbar and Lost Mary, two of the UK's
biggest vaping brands. This appointment recognises our unrivalled
and scaled UK distribution capabilities as well as our expertise in
the vaping sector, particularly with reference to governance and
compliance.
Accelerated trading in the core business combined with this
vaping distribution opportunity means that we expect trading for
the year ended 31 March 2024 to be significantly ahead of previous
market expectations(5)
Sandy Chadha
Chief Executive Officer
4 July 2023
(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
non-recurring items
(5) Company compiled analyst consensus for the year ending 31
March 2024 prior to the release of this announcement and the vaping
distribution opportunity announcement (dated 5 July 2023) was
revenue of GBP159 million and Adjusted EBITDA(1) of GBP22.6
million.
Chief Finance Officer's Review
I am pleased to present these financial results for the year
ended 31 March 2023. Overall, the Group delivered a robust
financial performance; revenue increased, the balance sheet
strengthened and the Group's cash reserves grew. In addition to a
pleasing performance from our core business, we completed and
integrated two earnings-enhancing acquisitions with a third
acquisition completed on the final day of the financial year. 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 non-recurring
items referred to in Note 7 to the Financial Statements. In
addition, this review also references 'net debt' which is defined
as closing cash, as reported on the balance sheet, net of
borrowings, as defined in Note 20.
Revenue
Revenue for FY23 was GBP155.6 million (FY22: GBP130.8 million),
an increase of 19%, the drivers for which have been presented in
the product categories below. 52% of the growth, GBP12.8 million,
came from acquisitions whilst the remainder of the growth, GBP12.0
million, came from the core business. Furthermore, this core
business growth of GBP12.0 million was the net effect of a
reduction in Lighting revenue of GBP11.6 million combined with
revenue growth across the remainder of the core business of GBP23.6
million.
Revenue by product category
Revenue for Batteries was GBP39.5 million in FY23 (FY22: GBP34.9
million), growth of 13%, arising from a combination of increased
volume and price. This increased volume, at a time of overall
market decline, was especially pleasing and highlights the strength
of Supreme's offering as well as the resilience of its customers.
This category grew significantly during COVID and was initially
expected to reverse, which makes the continued growth a
particularly pleasing result.
Revenue for Lighting was GBP15.4 million (FY22: GBP27.0
million), a fall of 43% in what has been a challenging year, and
the first year of revenue contraction since the category commenced
trading over 15 years ago. This reduction was driven from a
slowdown in consumer spending and retailer overstocking in FY22.
Importantly, we have retained all customers and retail listings and
we are confident that our collaborative approach with customers
during this period has cemented our longer-term relationships with
these retailers. The category is expected to recover across FY24
and FY25.
Revenue for Vaping was GBP76.1 million (FY22: GBP43.6 million),
growth of 75%. GBP12.8m (40% of the growth) came from the
acquisitions of Liberty Flights and Cuts Ice and a third
acquisition, Superdragon, was completed on the final day of FY23
and has already added to FY24 earnings. Aside from acquisitions,
the category reported organic growth of GBP19.7 million, arising
from the launch of a range of disposable vapes as well as strong
growth in Supreme's contract with UK prisons following competitive
displacement and increased volumes. Importantly, the revenue from
the launch of disposable vapes has not had any impact on the sale
of the 10ml eliquid product, the category's hero product, which has
continued to gain market share.
Revenue for Sports Nutrition & Wellness was GBP16.7 million
(FY22: GBP15.9 million), growth of 5%, a period characterised by
record levels of raw material inflation. The reduction in gross
profit as a percentage of sales from 22% in FY22 to 16% in FY23
arose because Supreme chose to absorb some of this price inflation
into its own margin, temporarily, in the spirit of fair, honest,
low pricing. Whey prices have now started to fall and the gross
profit percentage is expected to recover accordingly in FY24.
Revenue from its various 'Other' channels came to GBP7.8 million
(FY22: GBP9.4 million) a direct result of the rationalisation of
the category to redeploy working capital, resource and warehouse
space to more higher margin areas of the business.
Gross profit
Gross profit for FY23 was GBP40.9 million (FY22: GBP38.5
million), growth of 6%. As a percentage of revenue, gross profit
was 26% (FY22: 29%). This reduction of 3% was largely a result of
sales mix within categories. In Vaping in particular this was
driven by the increased focus on hardware sourced from the Far East
in the form of disposable and pod vapes and in Lighting this was
due to the sharp reduction in lighting sourced from the Far East
and shipped direct to customers in the UK and Europe. Gross profit
was also affected by the inflationary price pressures that arose in
Sports Nutrition & Wellness and the temporarily lower margins
arising from the acquisitions before their operations were
integrated into the Supreme platform.
Adjusted EBITDA(1)
Administrative expenses, excluding depreciation (GBP2.2
million), amortisation (GBP0.9 million) and Adjusted items within
administrative expenses (GBP3.6 million) were GBP21.5 million
(FY22: GBP17.5 million), an increase of GBP4.0 million.
The largest contributor to this increase was the incremental
overheads associated with Liberty Flights (GBP2.8 million), which
was earnings-accretive at an EBITDA level. Secondly, selling costs
(that typically increase in line with sales) contributed GBP0.6
million to the increase. The balance arose from inflationary
increases largely in transport, utilities and people costs via the
out-of-cycle pay-rise announced in September in response to the
cost of living crisis.
As a result, Adjusted EBITDA(1) decreased by GBP1.7 million (8%)
in the year to GBP19.4 million (FY22: GBP21.1 million).
Adjusted Items
Adjusted Items were GBP0.8 million compared to GBP1.1 million
the year before. These costs related to share-based payment charge
of GBP1.5 million (FY22: GBP1.7 million), GBP1.1 million charge in
relation to fair value movements on financial derivatives (FY22:
GBP1.0 million credit) and GBP1.0 million of non-recurring items
relating to the acquisitions and subsequent integrations of the
business acquired during the year, offset by a credit of GBP2.8
million relating to the profit on disposal of the T Juice brand.
The GBP1.0 million of acquisition and integrations costs arose
principally from the termination of all Cuts Ice staff (GBP0.6
million) and the closure costs relating to the two Cuts Ice
London-based operating sites (GBP0.2 million), offset by a credit
of GBP0.3 million in respect of accrued but unpaid contingent
consideration in respect of the acquisition of Vendek that
completed in FY21.
The Board believes that by adjusting these items from
profitability, it is able to understand the underlying performance
of the business more clearly and further information pertaining to
these items can be found in Note 7 to these financial
statements.
Finance costs
Finance costs were GBP1.0 million in the year (FY22: GBP0.7
million), split between interest arising from borrowings in the
year of GBP0.8 million plus the interest relating to the lease
liabilities under IFRS16 (GBP0.2 million).
Taxation
Total tax charge in the year was GBP2.5 million (FY22: GBP2.6
million), giving rise to an effective tax rate of 17% (FY22:
16%).
Profit after tax and Earnings per share
Profit after tax was GBP12.0 million compared to GBP13.7 million
in FY22, a reduction of GBP1.7 million. As a result, earnings per
share decreased by 13% to 10.3p (FY22: 11.8p) and on a fully
diluted basis decreased from 11.4p to 9.7p.
On an adjusted profit after tax basis, which we consider to be a
better measure of performance, adjusted earnings (as calculated in
note 11) were GBP13.8 million (FY22: GBP15.0 million) and adjusted
earnings per share(3) was 11.8p (FY22: 12.8p).
Dividends
The Group's dividend policy is to pay an annual amount
equivalent to around 25% of net profit. In January 2023 the Group
paid an interim dividend of 0.8p per share and the Directors will
recommend a final dividend of 2.2p per share at the 2023 Annual
General Meeting to be held on the 26 September 2023. This will be
paid on 29 September 2023 to shareholders on the register at the
close of business on 1 September 2023. The ex-dividend date will be
31 August 2023.
Cash flow
The Group generated GBP19.3 million of operating cash in FY23,
nearly doubling the level of operating cash generated in FY22; the
result of a tightly managed base of working capital.
Specifically in reference to the acquisitions, GBP7.5 million
related to the acquisition of Liberty Flights (with a further
GBP2.0 million of deferred consideration payable in FY24 plus
further consideration contingent on performance, expected to be
GBP2.2 million) and GBP2.6 million related to the acquisition of
Cuts Ice. The T-Juice brand (acquired as part of the Cuts Ice
acquisition and valued at GBP1.2 million at the time) was then
disposed of 7 months later for GBP4.0 million, resulting in a
profit on disposal of GBP2.8 million.
In respect of financing, on 31 March 2022 the Group committed to
a GBP25 million revolving credit facility ("RCF") with HSBC.
Initially, the facility was used to settle existing bank and
related party borrowings and then was subsequently used to finance
acquisitions. At its peak, the Group had drawn GBP18.4 million
against the facility. In the second half of the year much of this
was repaid with cash generated from trading activities and at year
end the balance on the facility was GBP4.3 million drawn with the
remainder unutilised. In addition, the Group also had access to an
GBP8.5 million working capital facility which was also entirely
undrawn at year end. Together with reported cash of GBP7.5 million
(FY22: GBP3.9 million) and deferred and contingent consideration of
GBP4.1 million, the Group's Adjusted net cash(4) position was
GBP3.2 million (FY22: GBP1.9 million Adjusted net debt(4) ). The
IFRS16 lease liability increased from GBP2.2 million to GBP15.0
million during the year, wholly in relation to the 15 year lease
signed for 'Ark', the facility that will become the Group's
principal storage
and distribution centre in FY24.
Across the RCF and the working capital facility, there was GBP30
million of undrawn borrowings facilities on 31 March 2023;
providing significant liquidity to finance M&A or organic
growth in the form of working capital in the future.
Net debt
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 7 to these financial statements.
Suzanne Smith
Chief Finance Officer
4 July 2023
(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
non-recurring items
(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 non-recurring
items
(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
non-recurring items.
(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 2023
Year Ended Year Ended
31 March 31 March
2023 2022
Note GBP'000 GBP'000
Revenue 5 155,612 130,789
Cost of sales 6 (114,758) (92,272)
--------------- -----------
Gross Profit 40,854 38,517
Profit on disposal of Cuts Ice
trademarks 7 2,787 -
Administration expenses 6 (28,192) (21,498)
--------------- -----------
Operating profit 15,449 17,019
Adjusted EBITDA(1) 19,392 21,055
Depreciation 13 & 21 (2,200) (2,563)
Amortisation 12 (915) (378)
Adjusted items 7 (828) (1,095)
-------------------------------------------- -------- --------------- -----------
Operating profit 15,449 17,019
Finance income 9 25 -
Finance costs 9 (1,037) (693)
--------------- -----------
Profit before taxation 14,437 16,326
Income tax 10 (2,469) (2,579)
--------------- -----------
Profit for the year 11,968 13,747
=============== ===========
Other comprehensive expense
Items that may be reclassified
to profit or loss
Exchange differences on translation
of foreign operations 101 (32)
--------------- -----------
Total other comprehensive income/(expense) 101 (32)
--------------- -----------
Total comprehensive income 12,069 13,715
Earnings per share - basic 11 10.3p 11.8p
Earnings per share - diluted 11 9.7p 11.4p
=============== ===========
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 2023
As at As at
31 March 31 March
2023 2022
Note GBP'000 GBP'000
Non-current assets
Assets
Goodwill and other intangibles 12 15,281 3,704
Property, plant and equipment 13 5,238 2,557
Right of use asset 21 15,577 2,116
Deferred tax asset 15 - 1,312
Investments 14 7 7
Total non-current assets 36,103 9,696
---------- ----------
Current assets
Inventories 16 25,606 25,898
Trade and other receivables 17 20,899 19,035
Forward contract derivative 22.9 - 467
Cash and cash equivalents 18 7,536 3,926
---------- ----------
Total current assets 54,041 49,326
---------- ----------
Total assets 90,144 59,022
---------- ----------
Liabilities
Current liabilities
Borrowings 20 5,026 6,665
Trade and other payables 19 26,117 17,296
Forward contract derivative 22.9 652 -
Income tax payable 2,536 1,299
Total current liabilities 34,331 25,260
---------- ----------
Net current assets 19,710 24,066
---------- ----------
Borrowings 20 14,293 1,294
Deferred tax liability 15 789 156
Provisions 21 775 -
Total non-current liabilities 15,857 1,450
---------- ----------
Total liabilities 50,188 26,710
Net assets 39,956 32,312
========== ==========
Equity
Share capital 23 11,732 11,663
Share premium 7,427 7,231
Merger reserve (22,000) (22,000)
Share-based payments reserve 3,043 2,368
Retained earnings 39,754 33,050
----------
Total equity 39,956 32,312
========== ==========
The notes are an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 4th July 2023, and were signed on its
behalf by:
S Smith
Director
Registered number: 05844527
Consolidated Statement of Changes in Equity
for the Year Ended 31 March 2023
Share-based
Share Share Merger payments Retained Total
Capital Premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April
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
--------- --------- --------- ------------ ---------- --------
Profit for the
year - - - - 11,968 11,968
Other comprehensive
income - - - - 101 101
--------- --------- --------- ------------ ---------- --------
Total comprehensive
income for the
year - - - - 12,069 12,069
--------- --------- --------- ------------ ---------- --------
Transactions with
shareholders:
Issue of shares 69 196 - - - 265
Employee share
schemes - value
of employee services - - - 1,283 - 1,283
Deferred tax on
share-based payment
charge - - - (608) - (608)
Dividends - - - - (5,365) (5,365)
--------- --------- --------- ------------ ---------- --------
69 196 - 675 (5,365) (4,425)
--------- --------- --------- ------------ ---------- --------
As at 31 March
2023 11,732 7,427 (22,000) 3,043 39,754 39,956
--------- --------- --------- ------------ ---------- --------
Consolidated Statement of Cash Flows
for the Year Ended 31 March 2023
Year Ended Year Ended
31 March 31 March
2023 2022
Note GBP'000 GBP'000
Net cash flow from operating
activities
Profit for the year 11,968 13,747
Adjustments for:
Amortisation of intangible assets 12 915 378
Depreciation of tangible assets 13 1,268 1,748
Depreciation of right of use assets 21 932 815
Finance income (25) -
Finance costs 9 982 404
Amortisation of capitalised finance
costs 9 55 289
Income tax expense 10 2,469 2,579
Gain on disposal of intangible
fixed assets 7 (2,787) -
Movement on forward foreign exchange
contracts 22.9 1,119 (1,026)
Share based payments expense 24 1,460 1,663
Working capital adjustments (net
of acquired on business combinations)
Decrease/(increase) in inventories 2,920 (4,937)
Increase in trade and other receivables (671) (2,226)
Increase in trade and other payables (27) 2,498
Increase in provisions 349 -
Taxation paid (1,652) (4,161)
----------- -----------
Net cash from operations 19,275 11,771
----------- -----------
Cash flows used in investing
activities
Purchase of intangible fixed assets 12 (23) (1,454)
Purchase of property, plant and
equipment 13 (1,254) (1,296)
Purchase of business combinations
net of cash acquired 25 (10,055) (1,040)
Proceeds from sale of property,
plant and equipment 1 378
Proceeds from sale of intangible 4,018 -
fixed assets
Payment of deferred consideration (270) -
Finance income received 25 -
Net cash used in investing activities (7,558) (3,412)
----------- -----------
Cash flows used in financing
activities
Repayment of long term loans 20 (3,984) (6,470)
Repayment of related party loans (1,779) (1,613)
Repayments of RCF facility (14,000) -
Drawdowns of RCF facility 18,418
Issue of options or share capital 265 49
Payment of deferred consideration - (66)
Dividends paid (5,365) (2,566)
Finance costs paid (776) (285)
Interest paid on leases (153) (118)
Lease payments (834) (837)
----------- -----------
Net cash used in financing activities (8,208) (11,906)
----------- -----------
Net increase/(decrease) in cash
and cash equivalents 3,509 (3,547)
Cash and cash equivalents brought
forward 3,926 7,505
Effects of exchange rate changes 101 (32)
Cash and cash equivalents carried
forward 7,536 3,926
=========== ===========
Cash and cash equivalents 18 7,536 3,926
7,536 3,926
=========== ===========
Notes to the Group Financial Statements
for the Year Ended 31 March 2023
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 2023 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 2022 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 2023 and 31 March 2022 did
not contain a statement under s498 (1) to (4) of the Companies Act
2006. The statutory accounts for the year ended 31 March 2023 will
be posted to shareholders at least 21 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. Summary of significant accounting policies
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.
Notes to the Group Financial Statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.2 New standards, amendments and interpretations
New and amended standards and adopted by the Group
The Group has applied the following standards and amendments for
the first time for its annual reporting period commencing 1 April
2022:
Standards and interpretations Effective
from
------------------------------------------------ -------------
Annual Improvements to IFRS Standards 2018-2020 1 April 2022
Narrow scope amendments to IFRS 3, IAS 16 and 1 April 2022
IAS 37
------------------------------------------------ -------------
The amendments listed above do not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect current or future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 March 2023 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
from
------------------------------------------------ -------------
IFRS 17 Insurance Contracts 1 April 2023
Classification of Liabilities as Current or 1 April 2023
Non-current - Amendments to IAS 1
Disclosure of Accounting Policies - Amendments 1 April 2023
to IAS 1 and IFRS Practice Statement 2
Definition of Accounting Estimates - Amendments 1 April 2023
to IAS 8
Deferred Tax related to Assets and Liabilities 1 April 2023
arising from a Single Transaction - Amendments
to IAS 12
Amendments to IAS 1, "Presentation of financial 1 April 2024
statements" and classification of liabilities
Amendments to IAS 1, "Presentation of financial 1 April 2024
statements" on non-current liabilities with
covenants
Amendments to IFRS 16, "Leases" Lease Liability 1 April 2024
in a sale and leaseback
------------------------------------------------ -------------
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.
2.3 Going concern
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
two-year period to 31 March 2025. The forecasts and projections,
which the Directors consider to be prudent, have been further
sensitised by applying reductions to revenue and profitability, to
consider downside risk. Under both the base and sensitised case the
Group is expected to have headroom against covenants, which are
based on interest cover and net leverage, and a sufficient level of
financial resources available through existing facilities when the
future funding requirements of the Group are compared with the
level of committed available facilities.
In assessing the going concern basis, the Directors have also
considered the ongoing conflict in Ukraine and the resulting
sanctions imposed on Russia by governments worldwide, the increased
cost of borrowing and the ongoing cost of living crisis taking
place in the UK, all of which have been reflected in this
forecast.
Notes to the Group Financial Statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.3 Going concern (continued)
-- Whilst the Ukraine crisis initially imposed sourcing pressure
on Supreme for certain ingredients (specifically sunflower lecithin
and wheat protein), alternative sources and replacement ingredients
were secured in early FY23 and therefore the risk to Supreme at
present is considered minimal and managed.
-- Whilst the Group's debt facilities are priced at a variable
rate (SONIA + a margin) the Group's current positive leverage ratio
(i.e. having more cash than bank borrowings), meaning that the
Group could repay the borrowings in full means that Supreme's
exposure to this increased cost is limited. Should the Group
increase its level of bank borrowings during the forecast period
(likely to be triggered by M&A) then of course this increased
cost of borrowing would impact the Group (albeit expected to be
offset by the incremental earnings generated by any M&A
target).
-- Historically Supreme has been a net beneficiary in periods of
economic downturn, owing to the fact more than half of its revenue
is derived from the discount retail sector which typically trades
buoyantly during these periods (for prudence this has not been
assumed in the forecast). The inflationary cost increases
(specifically over salary costs, energy and transport) have been
specifically factored into the cost base throughout for the
forecast period.
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
(GBP). 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.
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.
Notes to the Group Financial Statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
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 other 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. At any point in time
where such obligations haven't been met but the customer has been
invoiced, revenue is deferred, as disclosed in note 19. 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. 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.
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%
Know how - 10%
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
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:
Land- 0%
Assets under construction - 0%
Plant and machinery - 25%
Fixtures and fittings - 25%
Motor vehicle - 25%
Computer equipment - 33%
Buildings - 2%
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).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
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.
(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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.11 Leases (continued)
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.
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.15 Divisional reporting
Although revenue is grouped within five product categories, as
the directors analyse revenue at this gross level, the directors do
not analyse, monitor or review the Groups KPIS (being adjusted
EBITDA and profit before tax) by product category. Due to this, the
Group do not believe there are any IFRS 8 considerations around the
requirement to report operating segments for reporting
purposes.
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.
2.18 Adjusted items
The Company's income statement separately identifies Adjusted
items. Such items are those that in the Directors' judgement need
to be disclosed separately by virtue of either: their volatility
year-on-year; their one-off nature; their size, their non-operating
nature; or because the adjustment of a particular item is widely
accepted and conducted by peers (to ensure comparability with other
listed businesses). These 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, material
impairments of inventories and gains/losses on disposal of
intangible assets. 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 Forward contracts derivatives
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.
2.20 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.20 Trade and other receivables (continued)
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 GBP5,000 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.
2.21 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.
2.22 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.
2.23 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 Company.
Gross receivables are included within debtors and a corresponding
liability in respect of any proceeds received from the bank that
haven't yet been paid by customers 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. Once payments are received into the
facility from customers, proceeds are transferred to the main bank
account, which is presented within cashflow from working capital
within the cashflow statement.
2.24 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.
2.25 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
2. Summary of significant accounting policies (continued)
2.26 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.
2.27 Forward contracts
Forward contracts are initially recognised at the fair value on
the date the forward contract is entered into and are subsequently
re-measured at their fair value. Changes in the fair value of
forward contracts 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.
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 forward contracts derivatives 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 GBP5,000 with exception of proforma
accounts and accounts agreed by the CEO and therefore credit risk
is considered low.
(c) Liquidity risk
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.
(c) The banking facilities comprising a supply chain and invoice discounting facility.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
3. Financial risk management (continued)
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.
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
GBP7,508,000 at 31 March 2023 (2022: GBP1,602,000). 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
4. Critical accounting estimates and judgements (continued)
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.
4.6 T-Juice disposal
As part of the Cuts Ice acquisition (as detailed in Notes 25 to
these financial statements), Supreme acquired the intellectual
property of the brand; T Juice out of administration. The purchase
price allocation exercise valued the brand, at the time, at GBP1.2
million. In March 2023, seven months later, the brand was sold to a
French distributor, LVP, for GBP4.0 million. During that
seven-month period, Supreme had turned the brand around; the brand
had become cash-generative with a more manageable product range, a
leaner manufacturing process and a rationalised overhead base, all
of which was reflected in the market value of the brand.
At the time of the disposal, Supreme signed two agreements with
the buyer; an intellectual property sale-purchase agreement and an
associated five-year professional services agreement. The 2
agreements were 'in connection' with one another (as legally
drafted), had to be signed simultaneously and were payable upfront
and non-refundable. Furthermore, the nature of the services
referenced in the professional services agreement were not unlike
services offered as standard to other customers without the need
for a professional services agreement. Standing back from the 2
agreements, the Board concluded that the consideration assigned to
the disposal of the IP should be recognised as the combined
consideration paid upfront in respect of both agreements i.e. GBP4
million.
Accounting judgements
4.7 Inventory obsolescence
Management make use of judgement in determining whether certain
inventory items are obsolete. Specifically this is done by looking
at expiry dates, as well as sales data and forecasts as a
proportion of current stock holding. Should these judgements be
incorrect there could be a material difference in the recoverable
value of inventory.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
5. Revenue and gross profit 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.
The Board of Directors deem the Group to be one operating segment
because no balance sheet analysis, cashflows, profit before tax or
EBITDA (which are the KPI's for the business) are available by
division or reviewed by the CODM. This has changed from prior year
due to the changes to the Group following the significant
acquisitions in the financial year.
However, the Gross profit before foreign exchange is reported
and used to make decisions on a product group basis. The below
table 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.
Year
Sports Other Ended
nutrition consumer 31 March
Batteries Lighting Vaping & wellness goods 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 39,533 15,426 76,098 16,748 7,807 155,612
Cost of sales (35,613) (11,301) (48,018) (14,089) (6,992) (116,013)
---------- --------- --------- ------------ ---------- ----------
Gross profit before
foreign exchange 3,920 4,125 28,080 2,659 815 39,599
Foreign exchange 1,255
----------
Gross Profit 40,854
Profit on disposal
of Cuts Ice trademarks 2,787
Administration expenses (28,192)
----------
Operating profit 15,449
Adjusted earnings
before tax, depreciation,
amortisation and adjusted
items 19,392
Depreciation (2,200)
Amortisation (915)
Adjusted items (828)
Operating profit 15,449
Finance income 25
Finance costs (1,037)
----------
Profit before taxation 14,437
Income tax (2,469)
----------
Profit for the year 11,968
==========
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
5. Revenue and gross profit analysis (continued)
Year
Sports Other Ended
nutrition consumer 31 March
Batteries Lighting Vaping & wellness goods 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 income -
Finance costs (693)
----------
Profit before taxation 16,326
Income tax (2,579)
----------
Profit for the year 13,747
==========
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 3 customers (2022: 2 customers) was
GBP24,938,000, GBP19,364,000, and GBP16,045,000 (2022:
GBP21,111,000 and GBP18,385,000). These revenues related to all
divisions.
Analysis of revenue by geographical destination
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
United Kingdom 140,713 115,938
Ireland 8,645 7,779
Netherlands 1,766 2,807
France 2,428 1,617
Rest of Europe 942 1,825
Rest of the World 1,118 823
155,612 130,789
=========== ===========
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 net assets of GBP3,192,000
held in Europe.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
6. Expenses by nature
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
The profit is stated after charging expenses
as follows:
Inventories recognised as an expense 103,129 81,813
Impairment of inventories 892 750
Impairment of trade receivables 63 30
Staff costs - Note 8 12,345 9,442
Adjusted items - Note 7 828 1,095
Establishment and general 2,142 1,473
Depreciation of property, plant and equipment 1,268 1,748
Depreciation of right of use assets 932 815
Amortisation of intangible assets 915 378
Auditor's remuneration for audit services 170 112
Auditor's remuneration for non-audit services - -
Other operating expenses 17,479 16,114
----------- -----------
Total cost of sales and administrative expenses 140,163 113,770
=========== ===========
7. Adjusted items
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Covid-19-related cost - 118
Fair value movements on forward contracts 1,119 (1,027)
Restructuring costs - 208
Share based payments charge (note 24) 1,460 1,663
Acquisition costs 1,036 133
Profit on disposal of intangible fixed assets (2,787) -
828 1,095
=========== ===========
COVID-19 costs in the year ended 31 March 2022 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. As these costs were deemed one-off in nature they were
reported as Adjusted.
The Group typically holds 1 years' worth of USD-denominated
purchases on open forward contracts. The charge in the year ended
31 March 2023 and the credit in the year ended 31 March 2022
reflect the movement in the fair value of these open forward
contracts at the balance sheet date year-on-year. This charge or
credit is reported each year but, due its volatile nature, is
reported as Adjusted.
Restructuring costs in the year ended 31 March 2022 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. As these costs were deemed
one-off in nature they were reported as Adjusted.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
7. Adjusted items (continued)
Acquisition costs relate to adviser fees in respect of the
acquisitions undertaken and the subsequent financial and
operational integration of these businesses into the core Supreme
Group. GBP599,000 of the costs related to the redundancy costs in
respect of the Cuts Ice Limited acquisition. These costs are
notably volatile (linked to the volume and complexity of the
acquisitions undertaken each year) and due to their size, have been
reported as Adjusted.
Profit on disposal of the T Juice brand represents the
difference between the cost of acquiring the brand (GBP1,231,000)
and the proceeds on disposal (GBP4,018,000). The disposal of a
brand was deemed to be one-off in nature and therefore reported as
Adjusted.
8. Employees and Directors
Year Ended Year Ended
31 March 31 March
2023 2022
No. No.
Average number of employees (including Directors):
Management and administration 116 80
Warehouse 70 50
Sales 46 30
Manufacturing 124 105
356 265
=========== ===========
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Aggregate remuneration of staff (including
Directors):
Wages and salaries 10,670 8,339
Social security costs 1,193 765
Other pension costs 482 338
12,345 9,442
=========== ===========
Directors' remuneration
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Directors' emoluments 600 635
Social security costs 83 88
Company contributions to defined contribution
pension schemes 3 2
686 725
=========== ===========
The highest paid director received remuneration of GBP232,000
(2022: GBP300,000).
The value of the Company's contributions paid to a defined
contribution pension scheme in respect of the highest paid director
amounted to GBP1,000 (2022: GBP1,000).
During the year, retirement benefits were accruing to 2
directors (2022: 2) in respect of defined contribution pension
schemes.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
9. Finance (income)/costs
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Finance income
Bank interest receivable (25) -
=========== ===========
Finance costs
Bank interest payable 828 153
Other interest payable - 133
Amortisation of capitalised arrangement
fees 55 289
Interest on lease liabilities 154 118
1,037 693
=========== ===========
10. Taxation
Year Ended Year Ended
31 March 31 March
2023 2022
Current tax GBP'000 GBP'000
Current year - UK corporation tax 2,967 3,205
Adjustments to tax charge in respect of
prior periods - (163)
Foreign tax on income - (7)
----------- -----------
Total current tax 2,967 3,035
=========== ===========
Deferred tax
Origination and reversal of temporary differences (566) (320)
Adjustments to tax charge in respect of
prior periods - (173)
Adjustments to tax charge due to change
in rates 68 37
----------- -----------
Total deferred tax (498) (456)
=========== ===========
Total tax expense 2,469 2,579
=========== ===========
Factors affecting the charge
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Profit before taxation 14,437 16,326
----------- -----------
Tax at the UK corporation tax rate of 19%
(2022: 19%) 2,743 3,102
Effects of expenses not deductible for tax
purposes 123 317
Adjustments to tax charge due to change
in rates 68 37
Adjustments to tax charge in respect of
prior periods - (336)
Exercise of share options (123) -
Deferred tax on Share Based Payments (118) (471)
Enhanced Relief (224) (70)
Total tax expense 2,469 2,579
=========== ===========
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
10. Taxation (continued)
Factors that may affect future tax charges
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 the impact of this rate
change has been considered when recognising deferred tax in these
financial statements. Where the asset or liability is expected to
unwind after 1 April 2023 the deferred tax has been recognised at
25% in these financial statements. In the Autumn Statement in
November 2022, the government confirmed the increase in corporation
tax rate to 25% from April 2023 will go ahead.
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 Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Profit for the year after tax 11,968 13,747
============ ============
No. No.
Weighted average number of shares for the
purposes of basic earnings per share 116,731,311 116,605,892
Weighted average dilutive effect of conditional
share awards 6,720,523 4,474,425
------------ ------------
Weighted average number of shares for the
purposes of diluted earnings per share 123,451,834 121,080,317
============ ============
Pence Pence
Basic earnings per share 10.3 11.8
Diluted earnings per share 9.7 11.4
============ ============
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Adjusted earnings (see below) 13,790 14,976
============ ============
No. No.
Weighted average number of shares for the
purposes of basic earnings per share 116,731,311 116,605,892
Weighted average dilutive effect of conditional
share awards 6,720,523 4,474,425
------------ ------------
Weighted average number of shares for the
purposes of diluted earnings per share 123,451,834 121,080,317
============ ============
Pence Pence
Adjusted basic earnings per share 11.8 12.8
Adjusted diluted earnings per share 11.2 12.4
============ ============
The calculation of basic adjusted earnings per share is based on
the following data:
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Profit for the year attributable to equity
shareholders 11,968 13,747
Add back/(deduct):
Amortisation of acquisition related intangible
assets 874 196
Adjusted items 828 1,095
Tax effect of the above 120 (62)
----------- -----------
Adjusted earnings 13,790 14,976
=========== ===========
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
12. Goodwill and other intangible assets
Customer Trade Computer
Domain name Trademarks relationships name Know how software Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 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
============ =========== =============== ========= ========= ========== ========= =========
Additions - - - - - 23 - 23
On acquisition 62 43 3,043 4,384 262 - 5,906 13,700
Disposals - - - (1,231) - - - (1,231)
At 31 March 2023 311 1,544 3,803 3,374 262 41 7,508 16,843
============ =========== =============== ========= ========= ========== ========= =========
Accumulated
amortisation
At 1 April 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
============ =========== =============== ========= ========= ========== ========= =========
Amortisation
charged in
the year 25 150 359 359 6 16 - 915
At 31 March 2023 100 316 670 447 6 23 - 1,562
============ =========== =============== ========= ========= ========== ========= =========
Carrying amount
At 1 April 2021 199 49 601 177 - - 1,602 2,628
============ =========== =============== ========= ========= ========== ========= =========
At 31 March 2022 174 1,335 449 133 - 11 1,602 3,704
============ =========== =============== ========= ========= ========== ========= =========
At 31 March 2023 211 1,228 3,133 2,927 256 18 7,508 15,281
============ =========== =============== ========= ========= ========== ========= =========
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
for the Year Ended 31 March 2023
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 As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Supreme 3,364 1,602
Liberty Flights 4,144 -
7,508 1,602
========== ==========
The above CGU's have changed from prior year due to the changes
to the Group following the significant acquisitions in the
financial year.
Goodwill arising in the year ended 31 March 2023 related to the
acquisition of Liberty Flights Limited and Liberty Flights Holdings
Limited and Superdragon (note 25). 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.
The key assumptions for the value in use calculations are:
-- cash flows before income taxes are based on approved budgets
and prior experience and management projections for the next 3
years;
-- a long term growth rate of 2.0% (2022: 2.0%) for the period
beyond which detailed budgets and forecasts do not exist; based on
external sources of macroeconomic projections for the geographies
in which the entity operates; and
-- a post tax discount rate of 10.4% (2022: 14.4%) based upon
risk free rate for government bonds adjusted for a risk premium to
reflect increased risk of investing in equities and investing in
the Group's specific sector and regions.
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 2023 or 31 March 2022.
There were no charges for impairment of goodwill in 2023 (2022:
nil).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
13. Property, plant and equipment
Fixtures
Plant and Motor Computer Assets
Buildings and machinery fittings vehicles equipment under construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 1 April 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
========== =============== ========== =========== =========== =================== =========
Additions 57 724 66 111 340 686 1,984
On acquisition 1,492 423 33 7 11 - 1,966
Disposals - - - (28) - - (28)
At 31 March 2023 1,549 7,286 1,092 377 687 686 11,677
========== =============== ========== =========== =========== =================== =========
Depreciation and
impairment
At 1 April 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
========== =============== ========== =========== =========== =================== =========
Depreciation
charged in
the year - 949 63 51 205 - 1,268
Eliminated on
disposal - - - (27) - - (27)
At 31 March 2023 - 5,131 885 115 308 - 6,439
========== =============== ========== =========== =========== =================== =========
Carrying amount
At 1 April 2021 - 2,545 129 24 89 - 2,787
========== =============== ========== =========== =========== =================== =========
At 31 March 2022 - 1,957 171 196 233 - 2,557
========== =============== ========== =========== =========== =================== =========
At 31 March 2023 1,549 2,155 207 262 379 686 5,238
========== =============== ========== =========== =========== =================== =========
The depreciation charge for the year has been included in
Administrative expenses in the Statement of Comprehensive
Income.
Of the additions in the financial year GBP1,254,000 was paid
during the year.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
14. Investments
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Balance at the beginning of the year 7 7
Balance at the end of the year 7 7
========== ==========
The balance of GBP7,000 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 2023, the Company directly owned 100% of the
ordinary share capital of the following subsidiaries, which are
incorporated in England and Wales unless stated:
Subsidiary Registered address Principal activity
Supreme Imports Limited 4 Beacon Road, Ashburton Distribution of consumer
Park, Trafford Park, goods
Manchester M17 1AF
Provider Distribution Unit 1 Rosewood Park, Distribution of consumer
Limited St James Road, Blackburn, goods
Lancashire BB1 8ET
At 31 March 2022, the Company indirectly owned 100% of the
ordinary share capital of the following subsidiaries, which are
incorporated in England and Wales unless stated:
Subsidiary Registered address Principal activity
VN Labs Limited 4 Beacon Road, Ashburton Distribution of consumer
Park, Trafford Park, goods
Manchester, M17 1AF
Battery Force Limited Dormant
Powerquick Limited Holding company
Supreme 88 Limited Holding company
Supreme Nominees Holding of shares
Limited as nominee
Holding Esser Affairs Vanadiumweg 13, 3812 Holding company
B.V. PX, Armersfoort,
Netherlands
AGP Trading B.V. Distribution of consumer
goods
Vendek Limited Unit C5, South City Distribution of consumer
Business Park, Whitestown goods
Way, Tallaght, Dublin
24, D24 A993
Liberty Flights Holdings Unit 9 Arkwright Holding company
Limited Court, Commercial
Road, Darwen, Lancashire,
BB3 0FG
Liberty Flights Limited Distribution of consumer
goods
The Directors believe that the carrying value of the investments
is supported by their underlying net assets.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
15. Deferred tax
Deferred tax consists of the following temporary differences
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Share based payments 1,016 1,312
---------- ----------
Deferred tax asset 1,016 1,312
---------- ----------
Excess of depreciation over taxable allowances (550) (53)
Short term temporary differences 339 (103)
Tax losses carried forward (104) -
Acquired intangible assets (1,490) -
---------- ----------
Deferred tax liability (1,805) (156)
---------- ----------
Net deferred tax (liability)/asset (789) 1,156
========== ==========
Movement in deferred tax in the year
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Balance at the beginning of the year 1,156 (141)
Credited to profit or loss 498 456
(Debited)/credited to reserves (608) 841
Arising on business combination (1,849) -
Other 14 -
Balance at the end of the year (789) 1,156
========== ==========
The Directors consider that the deferred tax assets in respect
of temporary differences are recoverable based on the forecast
future taxable profits of the Group.
16. Inventories
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Goods for resale 21,080 20,457
Raw materials 4,526 5,441
25,606 25,898
========== ==========
The Directors believe that the replacement value of inventories
would not be materially different than book value.
Inventories at 31 March 2023 are stated after provisions for
impairment of GBP 1,492,000 (2022: GBP600,000).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
17. Trade and other receivables
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Trade receivables 18,566 17,848
Other receivables 1,507 346
Prepayments 826 841
20,899 19,035
========== ==========
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 Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Balance at the beginning of the year 32 37
Charged to the statement of comprehensive
income 63 30
Arising on acquisition 111 -
Utilisation of provision (17) (35)
Balance at the end of the year 189 32
=========== ===========
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 As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Current 11,936 12,177
31 - 60 days 5,253 4,390
61 - 90 days 1,492 1,254
90 days + 74 59
Less provisions for impairment (189) (32)
18,566 17,848
========== ==========
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
18. Cash and cash equivalents
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Cash at bank 7,536 3,926
========== ==========
19. Trade and other payables
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Trade payables 8,697 8,149
Accruals 5,651 6,302
Deferred income 259 -
Other creditors 3,415 -
Other tax and social security 3,951 2,843
Deferred consideration 1,942 -
Contingent consideration 2,200 -
Directors loan account 2 2
26,117 17,296
========== ==========
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 As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Current
Bank loans 4,307 3,984
Amounts owed to related parties - 1,779
IFRS 16 lease liability (Note 21) 719 902
---------- ----------
5,026 6,665
========== ==========
Non-current
IFRS 16 lease liability (Note 21) 14,293 1,294
14,293 1,294
========== ==========
Total borrowings 19,319 7,959
========== ==========
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
20. Borrowings (continued)
The earliest that the lenders of the above borrowings require
repayment is as follows:
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
In less than one year 5,026 6,665
Between two and five years 6,980 1,294
In more than five years 7,313 -
19,319 7,959
========== ==========
These amounts when presented gross on an undiscounted basis are
as follows:
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
In less than one year 5,499 6,751
Between two and five years 7,699 1,388
In more than five years 13,065 -
26,263 8,139
========== ==========
The Group is funded by revolving credit facility ("RCF") of
GBP25m provided by HSBC that is secured by way of a fixed and
floating charge over all assets. Interest is charged at a margin of
2.3%-2.8% over SONIA for all drawn amounts and 35% of the margin
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 facilities include an invoice discounting facility
of GBP 8.5m , which is secured by an assignment of, and fixed
charge over the trade debtors of Supreme Imports Limited. The
facility was not drawn down 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 (2022: undrawn).
Therefore undrawn but committed facilities at 31 March 2023 were
GBP 20.7m for the RCF (2022: GBP25m), GBP 8.5m for the invoice
discounting facility (2022: GBP8.4m) and $ 0.5m for the supply
chain facility (2022: $0.5m).
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
21. Leases
Amounts recognised in the Statement of Financial Position
The balance sheet shows the following amounts relating to
leases:
Right-of-use assets GBP'000
At 1 April 2021 1,476
Additions 1,455
Depreciation charge for the year (815)
--------
At 31 March 2022 2,116
Additions 12,656
Lease modification 1,737
Depreciation charge for the year (932)
At 31 March 2023 15,577
========
The net book value of the right of use assets is made up as
follows:
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Buildings 15,576 2,108
Cars 1 8
---------- ----------
15,577 2,116
========== ==========
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
21. Leases (continued)
As at As at
31 March 31 March
Lease liabilities 2023 2022
GBP'000 GBP'000
Maturity analysis - contractual undiscounted
cash flows
Less than one year 1,192 988
More than one year, less than two years 2,181 514
More than two years, less than three years 2,121 467
More than three years, less than four years 1,714 407
More than four years, less than five years 1,683 -
More than five years 13,065 -
---------- ----------
Total undiscounted lease liabilities at
year end 21,956 2,376
Finance costs (6,944) (180)
---------- ----------
Total discounted lease liabilities at year
end 15,012 2,196
---------- ----------
Lease liabilities included in the statement
of financial position
Current 719 902
Non-current 14,293 1,294
---------- ----------
15,012 2,196
---------- ----------
Provisions
Dilapidations provision related to right-of-use
assets
At 1 April - -
Additions 774 -
Unwind of discounting 1 -
---------- ----------
At 31 March 775 -
========== ==========
Amounts recognised in the Consolidated Statement of
Comprehensive Income
The Consolidated Statement of Comprehensive Income shows the
following amounts relating to leases:
Year Ended Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Depreciation charge - Buildings 925 794
Depreciation charge - Cars 7 21
----------- -----------
932 815
=========== ===========
Interest expense (within finance expense) 154 118
=========== ===========
The above leases relate to buildings and cars.
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.
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 GBP5,000 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
22. Financial instruments (continued)
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.
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 As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Trade receivables - 1,498
Cash 58 188
Trade payables 1,154 820
1,212 2,506
========== ==========
The effect of a 20 percent strengthening of Pound Sterling at 31
March 2023 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 GBP202,000, (2022: GBP418 ,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 GBP303,000 (2022: GBP 627,000 ).
The following is a note of the assets and liabilities
denominated at each period end in Euros:
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Trade receivables 200 51
Cash 453 27
Trade payables (364) (261)
289 (183)
========== ==========
The effect of a 20 percent strengthening of Pound Sterling at 31
March 2023 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 a
decrease to net assets of GBP48,000 (2022: increase of GBP 31,000
). A 20 percent weakening of the exchange rate on the same basis,
would have resulted in a decrease to total comprehensive income and
an increase in net assets of GBP73,000 (2022: decrease of GBP
46,000 ).
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
22. Financial instruments (continued)
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 2023, the outstanding contracts
mature between 1 and 10 months of the year end, (2022: 2 and 10
months). At 31 March 2023 the Group was committed to buy
$32,500,000 (2022: $18,700,000) in the next financial year.
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 2023 is a liability of GBP 652,000
(2022: asset of GBP467,000). During the year ended 31 March 2023, a
loss of GBP1,119,000 (2022: profit of GBP1,027 ,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 GBP141,000
(2022: GBP 69,000 ).
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
for the Year Ended 31 March 2023
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 As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Financial assets
Financial assets measured at amortised cost
Trade and other receivables 20,073 18,194
Cash and cash equivalents 7,536 3,926
27,609 22,120
Financial liabilities
Financial liabilities measured at amortised
cost
Non-current:
Borrowings (14,293) (1,294)
Current:
Borrowings (5,026) (6,665)
Trade and other payables (8,697) (8,149)
Directors loan account (2) (2)
Deferred consideration (1,942) -
Contingent consideration (2,200) -
Other creditors (3,415) -
Accruals (5,651) (6,302)
(41,226) (22,412)
Financial assets / (liabilities) measured
at fair value through profit and loss
Forward contracts (652) 467
---------- ----------
(652) 467
Net financial (liabilities) / assets (14,269) 175
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 GBP0.10
No. GBP
At 31 March 2022 116,627,074 11,662,707
Issued 688,968 68,897
------------ -----------
At 31 March 2023 117,316,042 11,731,604
============ ===========
On 2 February 2023, 561,874 new Ordinary GBP0.10 shares were
issued at a subscription price of GBP0.38, generating share premium
of GBP159,404.
On 6 March 2023, 63,547 new Ordinary GBP0.10 shares were issued
at a subscription price of GBP0.38, generating share premium of
GBP18,028.
On 14 March 2023, 63,547 new Ordinary GBP0.10 shares were issued
at a subscription price of GBP0.38, generating share premium of
GBP18,028.
Dividends
Dividends of GBP5,365,000 (2022: GBP2,566,000) were declared in
the year. This amounted to GBP 0.046 per share (2022:
GBP0.022).
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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 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. The
exercise of these options was originally subject to the occurrence
of a relevant event (a disposal or a listing) in accordance with
the EMI Scheme rules, but this condition was satisfied by the 2021
listing of the Company. These options will expire 10 years from
grant date. A second scheme was implemented alongside the EMI
scheme ('2018 unapproved scheme') for one employee who was eligible
for more options that the EMI scheme rules allowed for. All
conditions of this scheme were the same as the EMI Scheme.
These options were fairly valued upon a valuation of the entity
that had been performed by an independent expert.
2018 EMI scheme Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP 0.38 1, 148,850 GBP 0.38 1, 281,028
( 5,084
Lapsed GBP0.38 (30,504) GBP0.38 )
Granted - - - -
( 495,621
Exercised GBP0.38 ) GBP0.38 (127,094)
At the end of the year GBP 0.38 622,725 GBP 0.38 1, 148,850
============= =========== ============ ===========
The profit and loss expense that has been recognised in the
current year in respect of these awards is GBPnil (2022:
GBPnil).
2018 unapproved scheme Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP0.38 386,694 GBP0.38 386,694
Lapsed - - - -
Granted - - - -
Exercised GBP0.38 (193,347) - -
At the end of the year GBP0.38 193,347 GBP0.38 386,694
============= ========== ============ ========
The profit and loss expense that has been recognised in the
current year in respect of these awards is GBP94,000 (2022:
GBP300,000).
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 must take out a 3 or 5 year savings contract
with an approved savings body selected by the Company. The
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 GBP10 and a maximum of
GBP500.
24. Share based payments (continued)
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.
2021 SAYE scheme Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP1.52 354,078 GBP1.52 438,620
Lapsed GBP1.52 (158,911) GBP1.52 (84,542)
Granted - - - -
Exercised - - - -
At the end of the year GBP1.52 195,167 GBP1.52 354,078
============= ========== ============ =========
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 were 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. By 31 March 2023, a total of 66,089 options had
lapsed and 235,622 remained under option.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
Weighted Weighted
average average
exercise exercise
2021 CSOP price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP1.74 201,140 GBP1.74 206,886
Lapsed GBP1.74 (20,114) GBP1.74 (5,746)
Granted - - - -
Exercised - - - -
At the end of the year GBP1.74 181,026 GBP1.74 201,140
============= ========= ============ ========
2021 unapproved scheme Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP1.74 94,825 GBP1.74 94,825
Lapsed GBP1.74 (40,229) - -
Granted - - - -
Exercised - - - -
At the end of the year GBP1.74 54,596 GBP1.74 94,825
============= ========= ============ ========
The profit and loss expense that has been recognised in the
current year in respect of these awards is GBP57,000 (2022:
GBP57,000).
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 in the year ended 31 March 2022. 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.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
Options to subscribe for a further 174,650 shares at nominal
value were granted to the CFO during the year ended 31 March 2023.
These options are subject to performance conditions. 50% of the
options require an average annual TSR of 7.5% to become exercisable
in part and an annual average of TSR of 10% to become fully
exercisable measured over a 3-year period. The remaining 50% of
options are linked to an EPS performance target where a threshold
of 33.7p by the end of a 3-year period is required in order for the
options to become exercisable and 41.1p in order for the options to
be fully exercisable.
2021 3-year CEO award Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP0.00 2,912,500 GBP0.00 2,912,500
Lapsed - - - -
Granted - - - -
Exercised - - - -
At the end of the year GBP0.00 2,912,500 GBP0.00 2,912,500
============= ========== ============ ==========
2021 5-year CEO award Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP0.00 2,912,500 GBP0.00 2,912,500
Lapsed - - - -
Granted - - - -
Exercised - - - -
At the end of the year GBP0.00 2,912,500 GBP0.00 2,912,500
============= ========== ============ ==========
2021 CFO award Weighted Weighted
average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year GBP0.00 111,940 GBP0.00 111,940
Lapsed - - - -
Granted - - - -
Exercised - - - -
At the end of the year GBP0.00 111,940 GBP0.00 111,940
============= ========== ============ ==========
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
2022 Senior management Weighted Weighted
awards (TSR) average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year - - - -
Lapsed GBP0.00 (24,950) - -
Granted GBP0.00 112,275 - -
Exercised - - - -
At the end of the year GBP0.00 87,325 - -
============ ========= ============ =====
2022 Senior management Weighted Weighted
awards (EPS) average average
exercise exercise
price 2023 2023 price 2022 2022
GBP No. GBP No.
At the start of the year - - - -
Lapsed GBP0.00 (24,950) - -
Granted GBP0.00 112,275 - -
Exercised - - - -
At the end of the year GBP0.00 87,325 - -
============ ========= ============ =====
The profit and loss expense that has been recognised in the
current year in respect of the Unapproved Scheme is GBP1,309,000
(2022: GBP1,295,000).
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:
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 overleaf:
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
24. Share based payments (continued)
2022 2022
Senior Senior
2018 2021 2021 3 2021 5 2021 mgmt. mgmt.
unapproved 2021 unapproved year CEO year CEO 2021 CFO SAYE awards awards
scheme CSOP scheme award award awards scheme - TSR - EPS
16 Feb 16 Feb 9 Mar 9 Mar 9 Mar 18 Mar 5 Aug 5 Aug
Grant date 4 Jan 2021 2021 2021 2021 2021 2021 2021 2022 2022
Share price
at grant
date
(pence) 134p 176p 176p 185p 185p 185p 190p 101p 101p
Exercise
price
(pence) 38.38p 174p 174p GBPnil GBPnil GBPnil 154p GBPnil GBPnil
Expected
volatility
(%) 45% 45% 45% 45% 45% 45% 55% 55% 55%
Projection
period
( yrs ) 2.65 n/a n/a 2.89 0 .89 2.89 3.16 2.65 n/a
Expected
life ( yrs
) 3 3 3 3 5 3 3 3 3
Expected
dividend
yield (%) 5.94% 4.10% 4.10% 3.90% 3.90% 3.90% 3.79% 5.94% 5.94%
Risk free
interest
rate (%) -0.09% 0.34% 0.34% 0.12% 0.31% 0.12% 0.14% 1.92% 1.92%
Fair value
per award
(pence) 71p 50p 50p 74p 59p 109p 59p 31p 75p
============ =========== ========= =========== ========== ========== ========== ========= ========= =========
The expected volatility has been estimated based upon the
historical volatility of the FTSE AIM Retailers and Personal &
Household goods sub sectors.
No awards are exercisable at the end of the year. The charge for
share-based payments in the year was GBP1,460,000 (2022:
GBP1,663,000) which is included within Adjusted items. Of this,
GBP177,000 related to Employers National Insurance Contributions
and GBP1,283,000 related to the share-based payments charge.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
25. Business combinations
Acquisition of Cuts Ice Limited
On 8 August 2022 Supreme Imports Limited acquired the trade and
assets of Cuts Ice Limited ("Cuts Ice") and Flavour Core Limited
("Flavour Core"), for consideration of GBP2,571,000. Cuts Ice is an
independent vaping manufacturer with major own brands as well as
OEM manufacturing contracts, and Flavour Core is a flavour
development and regulatory compliance business in e-liquids.
Recognised amounts of identifiable assets acquired and
liabilities assumed
Fair value
Book value adjustment Fair value
GBP'000 GBP'000 GBP'000
Fixed assets
Other intangible assets - 1,389 1,389
Property, plant and equipment 300 - 300
300 1,389 1,689
Current assets
Inventory 1,188 (339) 849
Debtors due within one year 33 - 33
1,221 (339) 882
----------- ------------ -----------
Total assets 1,521 1,050 2,571
Creditors
Deferred tax - (40) (40)
----------- ------------ -----------
- (40) (40)
----------- ------------ -----------
Total identifiable net assets 1,521 1,010 2,531
Goodwill 40
-----------
Total purchase consideration 2,571
===========
Consideration
Cash 2,571
Total purchase consideration 2,571
===========
Cash outflow on acquisition
Purchase consideration settled
in cash, as above 2,571
Less: cash and cash equivalents -
acquired
-----------
Net cash outflow on acquisition 2,571
===========
Following a purchase price allocation exercise the company
identified further acquired intangible assets. The fair value
adjustments reflect the recognition of the Trade name of
GBP1,231,000 and other intangible assets of GBP158,000. Deferred
tax of GBP40,000 was recognised on the acquired intangible
assets.
Goodwill of GBP40,000 represents consolidated purchasing and
operating synergies.
The revenue from Cuts Ice Limited included in the Statement of
Comprehensive Income for 2023 was GBP3,326,000. Cuts Ice Limited
also incurred a gross profit of GBP2,187,000 over the same period.
Had the acquisition occurred on 1(st) April 2022 , consolidated
revenue and gross profit would have increased by a further
GBP1,663,000 and GBP1,090,000 respectively.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
25. Business combinations (continued)
Acquisition of Liberty Flights Holdings Limited
On 10 June 2022 Supreme Imports Limited acquired the entire
share capital of Liberty Flights Holdings Limited ("Liberty
Flights"), a leading UK vaping manufacturer best known for their
Liberty Flights vaping brand and the market-leading Dot Pro device,
for initial consideration of GBP9,350,000.
Recognised amounts of identifiable assets acquired and
liabilities assumed
Fair value
Book value adjustment Fair value
GBP'000 GBP'000 GBP'000
Fixed assets
Other intangible assets 62 5,181 5,243
Property, plant and equipment 1,251 415 1,666
1,313 5,596 6,909
Current assets
Inventory 1,715 - 1,715
Debtors due within one year 1,160 - 1,160
Cash at bank and in hand 1,866 - 1,866
----------- ------------ -----------
4,741 - 4,741
----------- ------------ -----------
Total assets 6,054 5,596 11,650
Creditors
Trade and other payables (894) - (894)
Corporation tax (77) - (77)
Deferred tax (119) (1,399) (1,518)
(1,090) (1,399) (2,489)
----------- ------------ -----------
Total identifiable net assets 4,964 4,197 9,161
Goodwill 4,144
-----------
Total purchase consideration 13,305
===========
Consideration
Cash 9,350
Deferred consideration 1,755
Contingent consideration 2,200
Total purchase consideration 13,305
===========
Cash outflow on acquisition
Purchase consideration settled
in cash, as above 9,350
Less: cash and cash equivalents
acquired (1,866)
-----------
Net cash outflow on acquisition 7,484
===========
Following a purchase price allocation exercise the company
identified further acquired intangible assets. The fair value
adjustments reflect the recognition of Customer Relationships of
GBP2,028,000 and the Trade name of GBP3,153,000. The additional
consideration paid over the fair value of the net assets acquired
is recognised as goodwill. Deferred tax of GBP1,295,000 was
recognised on the acquired intangible assets.
Goodwill of GBP4,144,000 represents consolidated purchasing
synergies, operating efficiencies and cross sell opportunities.
Debtors due within one year of GBP1,160,000 are shown net of a
GBP111,000 bad debt provision.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
25. Business combinations (continued)
Deferred consideration of GBP2m is payable of the first
anniversary of the acquisition. This amount has been discounted in
the previous table.
Contingent consideration is based on the performance of Liberty
Flights in the 12 months immediately following the acquisition, and
could range from GBP0 to GBP5,000,000.
The Group has adopted the following fair value hierarchy in
relation to its forward contracts derivatives that are carried in
the balance sheet at the fair values at year end:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2);
-- Inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
The following table sets out the fair value of all financial
assets and liabilities that are measured at fair value:
Group and Company Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- ---------
Liabilities measured - - -
at fair value
Contingent consideration - - 2,200
-------------------------- ---------- ---------- ---------
Total - - 2,200
There is no prior year comparison in the table above due to the
acquisition only occurring in 2023. Contingent consideration is
included in Level 3 of the fair value hierarchy. The provision for
contingent consideration is in respect of the Liberty Flights
acquisition in June 2022. The fair value is determined considering
the expected payments, discounted to present value using a risk
adjusted discount rate.
The significant unobservable inputs are the financial
performance forecasts for the twelve month period post-acquisition
and the risk adjusted discount rate of 14%.
The estimated fair value would increase or decrease if the
EBITDA was higher or lower or the risk adjusted
discount rate was higher or lower. A reasonably possible change
to one of these significant unobservable inputs, holding the other
inputs constant, would have the following effects:
Group and Company Increase Decrease
Effect of change in assumption on GBP'000 GBP'000
income statement
------------------------------------ --------- ---------
EBITDA movement of GBP100,000 100 100
The revenue from Liberty Flights Holdings Limited included in
the Statement of Comprehensive Income for 2023 was GBP9,437,000.
Liberty Flights Holdings Limited also incurred a profit after tax
of GBP1,260,000 over the same period. Had the acquisition occurred
on 1(st) April 2022, the Group consolidated revenue and profit
after tax would have increased by a further GBP1,900,000 and
GBP250,000 respectively.
Acquisition of Superdragon
On 30 March 2023, Supreme Imports Limited acquired the trade and
assets of Superdragon TCM UK Limited, an independent vaping
manufacturer, for initial consideration of GBP2,470,000, with a
further GBP187,000 deferred.
Recognised amounts of identifiable assets acquired and
liabilities assumed
Fair value
Book value adjustment Fair value
GBP'000 GBP'000 GBP'000
Fixed assets
Goodwill and other intangible
assets - 1,162 1,162
- 1, 162 1, 162
Current assets
Inventory 260 (196) 64
260 (196) 64
----------- ------------ -----------
Total assets 260 966 1,226
Creditors
Deferred tax - (291) (291)
----------- ------------ -----------
- (291) (291)
----------- ------------ -----------
Total identifiable net assets 260 675 935
Goodwill 1,722
-----------
Total purchase consideration 2,657
===========
Consideration
Cash 2,470
Deferred consideration 187
Total purchase consideration 2,657
===========
The above cash consideration of GBP2,470,000 was settled in
April 2023 and as such no cash outflow arose on acquisition for the
year ended 31 March 2023.
Following a purchase price allocation exercise the company
identified further acquired intangible assets. The fair value
adjustments reflect the recognition of Customer Relationships of
GBP978,000 and other intangible assets of GBP184,000. The
additional consideration paid over the fair value of the net assets
acquired is recognised as goodwill. Deferred tax of GBP291,000 was
recognised on the acquired intangible assets.
Goodwill of GBP1,722,000 represents consolidated purchasing and
operating synergies.
The revenue from Superdragon included in the Statement of
Comprehensive Income for 2023 was GBPNil, as was the profit. The
assets were acquired on the last day of the financial year.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
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 Year Ended
31 March 31 March
2023 2022
GBP'000 GBP'000
Short-term employee benefits 1,152 1,030
Social security costs 159 126
Employee share schemes 1,405 1,402
Post-employment benefits 8 9
----------- -----------
Total compensation 2, 724 2,567
=========== ===========
28.2. Transactions and balances with key personnel
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Loan balances with Directors:
Balance outstanding from director (2) (2)
========== ==========
28.3. Transactions and balances with related companies and
businesses
Year Ended Year Ended
/ As at / As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Transactions with related companies:
Rent paid to Chadha Properties Limited 180 180
Balances with related companies:
Amounts owed by Nash Peters Limited - -
Amounts owed to Supreme 8 Limited - (1,780)
=========== ===========
The above companies are related due to common control and
Directors.
On 30 March 2023 the landlord of Beacon Road, Supreme's
principal operating site, changed from Chadha Properties Limited to
Supreme 8 Limited, both of which are related parties. On 5 May 2023
a new lease was signed between Supreme 8 Limited and Supreme
Imports Limited for a term of 5 years from 16 March 2023. Rent to
be paid to Supreme 8 Limited in respect of Beacon Road will be
GBP374,000 per annum (plus VAT) and will continue to be disclosed
as a transaction with related parties.
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
29. Net cash flows in financing activities
Net
Net Non debt
debt current as at
as at Arising Foreign to 31
1 April on exchange Interest Interest current March
2021 Payments New leases acquisition adjustments expense payments movement 2022
Long term loan
- current (6,469) 5,305 - - - (575) 285 (2,530) (3,984)
Long term loan
- non current (3,695) 1,165 - - - - - 2,530 -
Leases - current (615) 837 (270) - - (46) 46 (854) (902)
Leases - non
current (963) - (1,185) - - (72) 72 854 (1,294)
Amount owed to
related parties
- current (1,613) 1,613 - - - - - (1,779) (1,779)
Amount owed to
related parties
- non current (1,779) - - - - - - 1,779 -
Sub-total (15,134) 8,920 (1,455) - - (693) 403 - (7,959)
Cash at bank and
in hand 7,505 (3,818) 271 (32) - - - 3,926
Total (7,629) 5,102 (1,455) 271 (32) (693) 403 - (4,033)
Net Net
debt Non debt
as at current as at
1 Arising Foreign Movement to 31
April New on exchange Interest Interest on loan current March
2022 Payments Drawdowns leases acquisition adjustments expense payments costs movement 2023
Long term
loan
- current (3,984) 3,984 - - - - - - - -
Long term
loan
- non
current - - - - - - - - - -
RCF - non
current - 14,000 (18,418) - - - (883) 776 218 - (4,307)
Leases -
current (902) 834 (647) - - (7) 7 - (4) (719)
Leases -
non
current (1,294) - (13,003) - - (146) 146 - 4 (14,293)
Amount
owed to
related
parties
- current (1,779) 1,779 - - - - - - - -
Sub-total (7,959) 20,597 (18,418) (13,650) - - (1,036) 929 218 - (19,319)
Cash at
bank and
in hand 3,926 1,643 - 1,866 101 - - - - 7,536
(4, 033 ( 13,650
Total ) 22,240 (18,418) ) 1,866 101 (1,036) 929 218 - (11,783)
Notes to the Group financial statements continued
for the Year Ended 31 March 2023
30. Post balance date events
There have been no post balance date events to note.
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END
FR FIFIEDAIEIIV
(END) Dow Jones Newswires
July 05, 2023 02:00 ET (06:00 GMT)
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