TIDMSUP
RNS Number : 7453F
Supreme PLC
20 July 2021
20 July 2021
Supreme plc
("Supreme," the "Company" or the "Group")
Unaudited Preliminary Results for the Year Ended 31 March
2021
"Strong revenue and Adjusted EBITDA(1) performance underpins
both
organic and acquisitive growth opportunities"
Supreme (AIM:SUP), a leading manufacturer, supplier and brand
owner of fast-moving consumer products, announces its unaudited
preliminary results for the year ended 31 March 2021 ("FY21").
Financial highlights
FY21 FY20 %
(GBP million) (GBP million) Change
-------------------- --------------- --------------- --------
Revenue 122.3 92.3 +33%
Gross Profit 33.0 26.6 +24%
Gross Profit % 27.0% 28.8% -1.8%
Adjusted EBITDA(1) 19.3 16.0 +21%
Adjusted Profit
before tax(2) 16.4 13.6 +21%
Profit before Tax 13.0 13.2 -2%
Net Debt 7.6 21.3 +64%
EPS 8.9p 9.9p -10%
Adjusted EPS(3) 12.0p 10.3p +17%
-- Strong organic growth across all key categories coupled with
encouraging performances from the recent acquisitions. The
strongest sales growth was generated in the two highest margin
categories
- Vaping 36% revenue growth
- Sports Nutrition & Wellness 38% revenue growth
-- Gross profit grew by 24% driven by increases for manufactured
lines that benefitted from economies of scale and efficiency
improvements. Gross profit as a percentage of sales was marginally
lower (1.8ppt) reflecting the change in the sales mix with the
addition of the Branded Household Consumer Goods category
-- The Balance Sheet was notably stronger, with net assets of
GBP18.8 million (FY20: GBP4.1 million) and net debt of only GBP7.6
million (FY20: GBP21.3 million) at the end of FY21.
Operational highlights
-- Successfully admitted to trading on AIM in February 2021 and
achieved an oversubscribed fundraising with a register of high
calibre institutional investors
-- Strong new business momentum achieved throughout the year
- In June 2020 , secured contract with Scottish Prison Service
for bespoke vaping products providing further endorsement of vaping
from the public sector;
- In March 2021, completed the roll-out of 88Vape products
across McColl's estate adding a further 1,180 retail convenience
stores nationwide; and
- Continued progress in product and category development by
expanding the Sports Nutrition & Wellness category into protein
snack bars (via the acquisition of Battle Bites) and meal
replacements.
-- Rapid response to COVID-19:
- Undisrupted manufacturing and distribution operations throughout the pandemic;
- Early-adoption of full-site weekly testing to ensure the safety of all our staff; and
- Seamless business adaptations to manage the changes to our
distribution channels - most notably the rapid growth of our online
offerings.
Post period-end highlights and outlook
-- The current financial year to 31 March 2022 ("FY22") has
started well, including 2 new customers wins - Sainsburys (who will
begin to stock 88vape in 400 stores starting in late Summer) and
Core Communications who aim to supply 88vape to their network of
25,000 independent retailers. All areas of the business are
performing in line with management expectations.
-- In June 2021, completed the acquisitions of:
- Vendek Limited, Ireland's leading distributor of batteries and
lighting products, creating a hub from which to expand Supreme's
European footprint. The acquisition is expected to be immediately
earnings enhancing for the Group; and
- the stock and brands of Sci-MX Nutrition Limited, a leading
sports nutrition and supplements business.
-- Maiden dividend payment expected following publication of FY22 interim results.
-- The board and management of Supreme continue to monitor the
COVID-19 situation closely but remain confident in the growth
prospects for the Group in the medium-term
Sandy Chadha, Chief Executive Officer of Supreme, commented:
"Supreme performed very strongly in the year ended 31 March
2021, as reflected by the 21% increase in Adjusted EBITDA (1) that
we achieved, underpinned by solid trading across all of our key
categories. I am also extremely proud of the Supreme team and their
response throughout the pandemic. Without their hard work and
dedication, our trading performance would simply not have been
possible.
"The management team has big ambitions to deliver sustained
growth and further leverage the platform we have built at Supreme,
including its status as a quoted company. There are clear and very
exciting opportunities that exist for our business, particularly in
categories like Sports Nutrition & Wellness and Vaping, and I
look forward to providing further updates in due course as we
capitalise on these.
"We have made a good start to the current financial year and
look to the future with confidence."
(1) Adjusted EBITDA means operating profit before depreciation,
amortisation and Adjusted items (as defined in Note 7 of the
financial statements). Adjusted items include share-based payments
charge, fair value movements on non-hedge accounted derivatives and
other non-recurring items (including all IPO-related costs)
2 Adjusted Profit before tax means profit before tax and
Adjusted items (as defined in Note 7 of the financial statements).
Adjusted items include share-based payments charge, fair value
movements on non-hedge accounted derivatives and other
non-recurring items (including all IPO-related costs)
3 Adjusted EPS means Earning per share, where Earnings are
defined as profit after tax but before amortisation of acquired
intangibles and Adjusted items (as defined in Note 7 of the
financial statements). Adjusted items include share based payments,
fair value movements on non-hedge accounted derivatives and other
non-recurring items (including all IPO-related costs).
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)
Philip Secrett / Samantha Harrison / Harrison
Clarke +44 (0)20 7383 5100
Berenberg (B roker )
Chris Bowman / Mark Whitmore / Jen Clarke +44 (0)20 3207 7800
Vigo Consulting (Financial Public Relations)
Jeremy Garcia / Antonia Pollock
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, McColls,
Iceland and HM Prison & Probation Service.
In addition to distributing globally-recognised brands such as
Duracell, Energizer and Panasonic, and supplying lighting products
exclusively under the Energizer, Eveready and JCB licenses across
45 countries, Supreme has also developed brands in-house, most
notably 88Vape and has a growing footprint in Sports Nutrition
& Wellness.
www.investors.supreme.co.uk
Chairman's Statement
It is a pleasure to provide our first set of results for Supreme
as a public company. Our February 2021 IPO was a major milestone
for the Company, which received positive support from the investor
community. We are extremely proud to be publicly quoted and look
forward to capitalising on the many benefits that our public
quotation brings.
Supreme traded strongly in the year-ended 31 March 2021,
achieving a 33% increase in revenues to GBP122.3 million (2020:
GBP92.3 million) and a 21% increase in Adjusted EBITDA (1) to
GBP19.3 million (2020: GBP16.0 million), which was ahead of
expectations. We maintained our attractive financial profile during
the year, with strong EBITDA and cash flow growth, underpinned by
our capital light model and strong balance sheet.
Despite the broader impact of COVID-19 on the UK economy, the
Company was able to maintain strong business continuity,
successfully trading throughout and navigating the challenges
presented, by adapting to the ever-evolving situation. Supreme
continued to benefit from operating in attractive markets,
including the large and fast-growing vaping, lighting and sports
nutrition markets as well as being vertically integrated, our
manufacturing facilities remaining fully operational throughout the
pandemic with the majority of our customers remaining open for
business.
Demand for Supreme's everyday items withstood the economic
pressures of the pandemic and we were able to leverage our
vertically integrated platform and extensive retail network that
includes over 3,300 accounts and 70,000 active online accounts.
I firmly believe that our team's hard work and talent was core
to our business overcoming the many obstacles presented by
COVID-19. To achieve sustained growth and progress in all
categories during a year of disruption and uncertainty is testament
to the strength of Supreme's team and the Company's underlying
business structure.
Ahead of the IPO, we put together a high calibre, well-balanced
Board with a strong blend of skills and relevant experience. Sandy
Chadha, our CEO, was joined by our CFO, Suzanne Smith, as the
Executive Directors. Concurrently, three independent non-executive
directors were appointed including Mark Cashmore as Senior
Non-Executive Director and Chair of the Remuneration Committee and
Simon Lord as Chair of the Audit & Risk Committee. They have
each brought diverse and informed perspectives, enabling our
committees to be fully functional from an early stage and, I am
confident, will also continue to apply independent judgement and
diligent oversight to the operation of the Board.
Looking to the future, the Board firmly believes Supreme will
continue to deliver strong year-on-year growth following a solid
start to the current financial year. We have a highly experienced
management team, great value products, an almost unrivalled
distribution platform and a proven business model, in addition to a
focused growth strategy centred around domestic and overseas
expansion.
Finally, I would like to put on-record my gratitude to the whole
Supreme team for their dedication and tenacity in the last 18
months in navigating our business through the pandemic. This
commitment has been reflected in a strong set of results and we
look to the future with confidence.
Paul McDonald
Non-executive Chairman
19 July 2021
Chief Executive Officer's Review
Introduction
I am delighted to announce our first set of results as a quoted
company, in what was a fantastic year for our business, with the
IPO of the Company a clear highlight. In the year ended 31 March
2021, we achieved significant progress across all of our key
categories, in particular, within our two key growth categories of
Vaping and Sports Nutrition & Wellness, whilst producing a very
strong performance in our Lighting and Batteries categories. This
performance further establishes Supreme as one of the leading
suppliers and manufacturers of fast-moving consumer goods and a
trusted partner to our customers and suppliers.
Supreme delivered a 33% increase in revenues to GBP122.3 million
in the year (2020: GBP92.3 million) and a 21% increase in Adjusted
EBITDA (1) to GBP19.3 million (2020: GBP16.0 million), which was
ahead of expectations. Central to our strong financial performance
is the prominence of our brands and our diverse and extensive
retail network, which includes 3,300 active accounts across
wholesale, discount, supermarket, high street, international and
public sector customers, in addition to 70,000 active online
accounts.
Specifically, Supreme delivered a 36% increase in revenues in
its Vaping division, with its 88Vape brand continuing to achieve
strong customer traction, as demonstrated by the recent agreement
with McColl's. Furthermore, the Group's Sports Nutrition &
Wellness category delivered 38% revenue growth, which was
underpinned by the success of the acquisition of Battle Bites
protein snack bars in October 2020, the expansion of the powdered
protein range into meal replacements under the Solo brand and the
early success of private label vitamins, which will be further
complemented by additional product launches later in 2021.
I am also extremely proud of the way the Supreme team has
responded throughout the COVID-19 pandemic, which has touched the
lives of every individual and had a huge impact on the broader UK
economy. Most importantly, we have kept our people safe throughout
this period, whilst ensuring strong business continuity. We
introduced testing for all our staff well ahead of our peers and
have ensured PPE equipment and social distancing guidelines were
implemented across the Group.
Operational Review
The Supreme business model is simple. We leverage our vertically
integrated platform to introduce new consumer brands and increase
the penetration of our existing brands and products across our
customer base. These brands may be licensed, own-brand or acquired,
as well as white-labeled for certain customers. We typically
distribute over 2,000 products daily across our five product
categories. Whether it be our brands or distribution agreements
with battery brands like Panasonic, Energizer and Duracell, we
continue to strive to maximise our routes to market to ultimately
generate a greater return on our investment.
In addition, our state-of-the-art manufacturing facilities
continue to ensure we yield superior returns for our products, most
notably for our 88Vape e-liquids as well as our powders and
vitamins within the Sports Nutrition & Wellness division. We
also made further progress in developing our online fulfillment
ordering and integrated management systems for retailers during the
year.
The past financial year has highlighted both the robustness and
versatility of our vertically integrated platform. With this strong
platform firmly at the heart of our business, management will
continue to focus on the following strategic growth drivers, which
are to:
-- concentrate on high growth and high margin categories such as
vaping and sports and nutrition, which have strong market
tailwinds;
-- expand our international footprint through existing customer
relationships and strategic acquisitions;
-- broaden our customer base and increase penetration through
cross-sell opportunities and increasing the average revenue per
customer;
-- continue to develop innovative products and enter additional
verticals to cater for Supreme's broad customer base, focused on a
high quality yet good value consumer proposition;
-- increase our manufacturing efficiencies through further
economies of scale and bringing the manufacture of certain products
in-house;
-- evaluate complementary acquisitions to add immediate value,
through increased efficiencies and synergies with the Group's
existing activities; and
-- enhance online distribution and services to further grow our B2B and D2C sales channels.
Batteries
We have over 20 years' experience in the consumer battery
market, holding license agreements with household names including
Panasonic, Duracell and Energizer since the 1990s, in addition to
an exclusive 11-year relationship with JCB, and a 7-year
relationship with Philips. We have grown to become one of the UK's
largest independent distributors of batteries, delivering over 200
million a year. This division performed well in the year-ended 31
March 2021, with a 10% gross profit margin and a number of
successes in capitalising on cross-sell opportunities. The category
brings stability due to repeat customers, which results in high
revenue visibility. Nonetheless, avenues to further growth exist,
including an increase in our B2B sales offering.
Pleasingly, we have seen growth across all of our major brands
and retailers during the year, with unprecedented demand
experienced during lockdown. This excellent performance against a
backdrop of extremely challenging times further highlights our
distribution capabilities and the strength of our relationships
with global battery brands.
Lighting
From licensed, private, and white-label lighting to LED light
fittings, our continued investment in this category has seen us
develop into an expert supplier for the world's leading brands. The
division reported gross profit of GBP8.0 million, representing 24%
of the Group's total gross profit, driven by sales of licensed
brands including Eveready, Energizer and JCB.
Supreme maintained the core revenue base and profitability
within the lighting category during the year, despite a wide-spread
technology shift from halogen to LED during the year, with LEDs
carrying a lower unit selling price. However, our
distribution-based business model ensured Supreme was able to
maintain a strong gross margin of 31%.
Our international expansion plans for our lighting business have
been delayed as a result of the pandemic, but we firmly believe
there are some exciting growth prospects across Europe, and we are
now actively pursuing a number of opportunities.
Vaping
It was an exceptional year for our industry-leading value vaping
brand, 88vape, in which revenues increased by 36% to GBP39.5
million in the period whilst achieving the milestone of 1 million
regular users worldwide. Now perceived as a healthier alternative
to smoking, we have witnessed heightened demand for our products,
resulting in GBP6.3 million in direct sales to consumers in the
period via our 88vape-branded website. The Group now distributes
over 1,800 orders per day and 6 million bottles of e-liquid every
month, following our successful move to a dedicated fulfillment
centre. We have also seen an expansion of core underlying
manufacturing margins delivered through purchasing economies and
changes to core operating procedures.
We added the Scottish Prison Service to our list of public
sector customers including Her Majesty's Prison & Probation
Service ("HMPPS") in the year. We create bespoke products specially
designed for use in prisons, including closed-system vaping
products. This contract is an excellent example of how vaping and
e-cigarettes continue to be supported by the UK Government, NHS
England and a large number of public health organisations as a
means to lower the number of active smokers in the UK, with the UK
government working to make the UK smoke-free by 2030. We continue
to see solid growth trends and, whilst e-cigarettes are not
risk-free, they are a safer alternative compared to traditional
cigarettes.
Finally, we continue to explore ways to bring more of our
manufacturing in-house, which ultimately helps gross margin
progression. This includes exploring opportunities to manufacture
our range of vaping pre-filled cartridges in-house, rather than
importing them from China.
Favourable market conditions and consumer habits, including
strict regulation and low levels of consumer brand switching, makes
88vape well-positioned to increase its footprint in the vaping
market.
Sports Nutrition & Wellness
The Sports Nutrition & Wellness category was one of our
leading performers in the year-ended 31 March 2021, growing
revenues by 38% during the period. Following the GT Divisions
Limited acquisition, we diversified our range, adding Battle Bites
protein snacks to our existing own brand powder and beverage
products, Protein Dynamix and GoNutrition. This acquisition of a
recognised protein snack bar brand delivered an extensive customer
base and an established consumer website with 5,000 visitors per
week.
We have made significant progress in this division since
entering the market just a few years ago, with revenues growing
187% between March 2019 and March 2021. After enjoying some early
success following our expansion into the vitamin supplements
market, we remain optimistic about further growth opportunities
which will be facilitated by our brand-new manufacturing facility
dedicated to vitamin and powder production. In addition, we have
two vitamin launches scheduled for this year, with the introduction
of Sealions, our first digital-only brand, in July 2021, and our
retail brand, Millions & Millions, is due for launch in
September 2021, with Davina McCall as brand ambassador. We also
continue to progress developing our private label vitamins business
and have already delivered GBP0.5 million sales ahead of the
official launch.
Branded Household Consumer Goods
We continue to develop our nascent Branded Household Consumer
Goods category following the acquisition of Provider Distribution
in February 2020. It delivered a strong first year under Supreme's
ownership, undoubtedly boosted by the pandemic, and a GBP1 million
pharmaceutical bottling contract, which we believe is unlikely to
be repeated in the current financial year.
Regardless, we believe the characteristics of this segment,
alongside our other FMCG products, offer potentially significant
market opportunity given the breadth of our distribution
capabilities.
COVID-19 Response
First and foremost, I would like to thank all our staff for
their incredible efforts throughout COVID-19. Health and safety at
all factory sites and office buildings has always been Supreme's
top priority, and our employees have made a concerted effort to
adhere to social distancing guidelines in a difficult period for
all.
Despite the inevitable disruption caused by COVID-19, Supreme
has performed strongly throughout the pandemic. Supply across all
channels to market was uninterrupted throughout the year, with
warehousing and manufacturing facilities remaining operational.
Even between April and July 2020, the strictest period of lockdown,
sales across all categories grew year-on-year, manifesting our
resilience and adaptability. I am extremely proud of all our staff
for reaching their targets and helping to achieve record
growth.
Dividend
As highlighted at the time of our IPO, we intend to pay
dividends to shareholders in an aggregate annual amount equivalent
to approximately 50% of net profits, retaining the balance of
earnings from operations to finance our future expansion. Our
dividend payments are expected to be split into a one third interim
dividend and a two thirds final dividend and we expect to declare
our first interim dividend following the publication of our interim
results for the six-month period to 30 September 2021.
Outlook
Having successfully completed our IPO on the London Stock
Exchange and delivering a record financial performance in the year
ended 31 March 2021, the business is ideally placed for ongoing
sustainable growth. We continue to invest in launching new
products, as well as expanding both our manufacturing and
distribution capabilities whilst maintaining a well-managed cost
base
We have made an encouraging start to the current financial year
with strong demand across all our divisions. Our Vaping segment
continues to be a key profit driver, as we seek to expand our
market share through our B2C online offering, and our Sports
Nutrition & Wellness category is poised for expansion following
the launch of our Sea Lions and Millions & Millions vitamins
brands and the acquisition of the brands and stock of Sci-MX
Nutrition.
The board and management of Supreme continue to monitor the
COVID-19 situation very closely but remain confident in the outlook
for the business for the current financial year and beyond.
Sandy Chadha
Chief Executive Officer
19 July 2021
Chief Finance Officer's Review
Introduction
The year ended 31 March 2021 was a year of unprecedented change
for Supreme. We successfully integrated both new operations and
people following the acquisitions undertaken in FY20; changed the
Group's capital structure and Board as a result of the IPO; and
implemented a number of operational changes as a result of the
pandemic. Pleasingly, the financial performance of the business
remained strong, delivering revenue growth of 33% to GBP122.3
million (FY 20: GBP92.3 million), an increase in gross profit of
24% to GBP33.0 million (FY20: GBP26.6 million) and an increase in
Adjusted EBITDA (1) of 21% to GBP19.3 million (FY20: GBP16.0
million).
FY21 FY20 %
(GBP million) (GBP million) Change
------------------------ --------------- --------------- --------
Revenue 122.3 92.3 +33%
Gross Profit 33.0 26.6 +24%
Gross Profit % 27.0% 28.8% -1.8%
Adjusted EBITDA(1) 19.3 16.0 +21%
Adjusted Items 3.4 0.4
Profit before Tax 13.0 13.2 -2%
Adjusted Profit before
tax(2) 16.4 13.6 +21%
Operating Cash Flow 12.3 17.0 -27%
Adjusted Operating
Cash flow(4) 14.7 17.5 -16%
Net Assets 18.8 4.1 +358%
Net Debt 7.6 21.3 +64%
EPS 8.9p 9.9p -10%
Adjusted EPS(3) 12.0p 10.3p +17%
Revenue
Revenue for FY21 was GBP122.3 million (FY20: GBP92.3 million),
an increase of 33%. Around half of this growth can be attributed to
recent acquisitions, and the remainder to strong organic growth
across all categories. This organic growth was against the backdrop
of national lockdowns that impacted the majority of this reporting
period, where we estimate around 10% of our customers were closed
and many reported lower footfall through their stores.
Revenue by division
-- Revenue for Batteries was GBP34.4 million (FY20: GBP30.9
million). This growth of GBP3.5 million (11%) was entirely organic
and reported across all major brands and distribution channels. The
extent of the COVID-19 "bounce" in these results will be determined
in the coming months.
-- Revenue for Lighting was GBP25.9 million (FY20: GBP25.3m).
Considering the revenue reported in FY20 included a one-off benefit
as a result of the technology shift from halogen to LED,,
management are pleased with the deemed underlying revenue
growth.
-- Revenue for Vaping was GBP39.5 million (FY20: GBP29.0
million). This growth (36%) was a result of the full year impact of
the HMPPS contract, increased sales to consumers via the 88vape.com
website plus underlying organic growth of e-liquids via our core
retail and wholesale channels.
-- Revenue for Sports Nutrition & Wellness was GBP6.9
million (FY20: GBP5.0 million). Year on year growth of 38% was a
result of the incremental revenues from the acquisition of GT
Divisions in October 2020 combined with the success of new product
launches and growth in the core range.
-- Revenue for Branded Household Consumer Goods was GBP15.5
million (FY20: GBP2.0 million) - the full year impact of the
acquisition of Provider Distribution (acquired in February 2020)
accounts for 93% of the growth, with the remainder arising from a
pharmaceutical bottling contract that generated GBP1 million of
revenue in FY21 that is not expected to re-occur in FY22.
Gross profit
Gross profit for FY21 was GBP33.0 million (FY20: GBP26.6m),
representing growth of 24%. Gross profit as a percentage of
turnover decreased during the year by 1.8ppt from 28.8% to 27.0%,
reflecting the change in sales mix (specifically the addition of
the Branded Household Consumer Goods category where reported gross
profit percentage is around 10%).
By category, gross profit margins were largely unchanged
year-on-year (a positive result for Lighting given the technology
changes underpinning FY21 sales and also for Sports Nutrition &
Wellness where the addition of Battle Bites (distribution only)
diluted the impact of the manufacturing margins within the
category. The gross profit gains in Vaping are noteworthy - driven
by the gains in manufacturing (both in terms of process and
volume).
By the end of FY21, gross profit generated from manufactured
categories (Vaping and Sports Nutrition & Wellness) accounted
for 58% of the total gross profit of the group (FY20: 52% of total
gross profit).
Adjusted EBITDA
Adjusted EBITDA (1) increased by GBP3.3 million (21%) in the
year, driven by growth in revenue and gross profit offset by some
modest investment in the overhead base to support growth.
Adjusted Items
Adjusted Items of GBP3.4 million (FY20: GBP0.4 million)
comprised:
- GBP2.0 million relating to the Group's admission to AIM in
February 2021 (which include GBP1.7 million of adviser fees and
commission, GBP0.2 million of accelerated debt arrangement fees
(associated with the tranche of debt that was settled on admission
to AIM) and GBP0.1 million in relation to Company bonuses that were
contingent on the transaction;
- GBP0.4 million in relation to a group-wide reorganisation that
took place during the year following the integration of businesses
and assets acquired in FY20; and
- GBP0.8 million in relation to the fair value movements on non-hedge accounted derivatives.
Finance costs
Finance costs were GBP0.7 million in the year (FY20: GBP0.8
million) arising from the interest-bearing Senior Facility held
throughout the period (GBP0.6 million) plus the interest relating
to the lease liabilities under IFRS16 (GBP0.1 million).
Taxation
Total tax charge in the year was GBP3.1 million (FY20: GBP2.3
million), giving rise to an effective tax rate of 24% (FY20: 18%).
The increase in the rate arose from the disallowed expenses in
relation to the IPO. Going forward, we expect the Group's effective
tax rate to re-align to the UK corporation tax rate.
Profit After Tax and Earnings per share
Profit after tax was GBP9.8 million compared to GBP10.9 million
in FY20 and the fully diluted earnings per share were 8.7p (FY20:
9.8p). On an adjusted profit after tax basis, which we consider to
be a better measure of performance, adjusted earnings were GBP13.3
million (FY20: GBP11.3 million) and Adjusted earnings per share(3)
was 12.0p (FY20: 10.3p)
Dividends
The Group's dividend policy is to pay an annual amount
equivalent to around 50% of net profit. In line with the Group's
policy set out at IPO, the Directors do not intend to declare a
dividend in respect of FY21. The Directors plan to declare its
maiden dividend to shareholders following the FY22 interim results
which, in line with policy, is expected to be 1/3 of the full year
dividend.
Cash flow
FY21 FY20 Change
(GBP million) (GBP million) (GBP million)
------------------------- --------------- --------------- ---------------
Adjusted EBITDA(1) 19.3 16.0 3.3
Movement in working
capital (1.6) 3.2 (4.8)
Taxation paid (3.0) (1.7) (1.3)
Adjusted operating
cash flow (4) 14.7 17.5 (2.8)
Cash-impacting Adjusted
Items:
IPO fees (2.0) - (2.0)
Restructuring (0.4) (0.3) (0.1)
Acquisition costs - (0.2) 0.2
Operating cash flow 12.3 17.0 (4.7)
Debt (servicing) /
raising (14.2) 4.4 (18.6)
Capex (incl M&A) (2.1) (5.1) 3.0
Dividends (3.0) (11.0) 8.0
Proceeds from IPO 7.8 - 7.8
Net cash flow 0.8 5.2 (4.4)
We continued to be cash generative in FY21 with Adjusted
operating cash flow(4) of GBP14.7 million (FY20: GBP17.5 million).
This result is a combination of the continued growth in the Group's
EBITDA offset by the planned investment into working capital to
support growth of GBP1.6 million outflow (FY20: GBP3.2 million
inflow) - last year's closing stock balance was unusually low (due
to delayed shipments from China at the onset of the pandemic) and
last year's reported trade creditors balance was unusually high, as
the Group sought to manage cash cautiously given the initial
uncertainty brought about by COVID-19. The working capital position
reported in FY21 is more aligned to the "normal" cash flows
associated with the Group.
With reference to cash flows associated with the Group's
admission to AIM, the IPO raised funds of GBP7.8 million for the
Group (GBP7.5 million of which was used to repay a tranche of its
senior debt facility). There was also a cash outflow of GBP2.0
million associated with adviser fees, commission and staff bonuses
directly attributable to the IPO.
In reference to cash flows from investing, we report a cash
outflow of GBP1 million in respect of the acquisition of GT
Divisions and Financing cash outflows represented the servicing of
the Senior Debt facility in ordinary course, plus a further GBP7.5
million on admission to AIM as outlined above.
Net debt
FY21 FY20 Change
(GBP million) (GBP million) (GBP million)
------------------------- --------------- --------------- ---------------
Cash (7.5) (6.7) (0.8)
Bank Loan 9 21.6 (12.6)
Amounts owed to related
parties 3.4 3.4 -
IFRS 16 lease liability 1.5 1.5 -
Other 1.1 1.4 (0.3)
Total net debt 7.6 21.3 (13.7)
Borrowings significantly reduced in the year as a result of the
(normal) debt servicing profile of the senior facility, further
enhanced by the GBP7.5 million repayment following the IPO
fundraise. At year end, the Group reported net debt of GBP7.6
million (FY20: GBP21.3 million), only 0.4x Adjusted EBITDA (1) .
Immediately after the period end, the Group also repaid 50% of its
related party obligations (amounting to GBP1.7 million).
Events after the Balance Sheet Date
On 10 June 2021 Supreme acquired the entire share capital of
Vendek Limited, a leading Dublin-based distributor of batteries and
lighting products, for an initial consideration of EUR1.07 million.
The acquisition is expected to be immediately
earnings-enhancing.
On 30(th) June 2021, Supreme acquired the brands and stock of
Sci-MX Nutrition Limited, a leading sports nutrition and
supplements business, for GBP2.3 million. The Acquisition added a
number of well-known brands (including Sci-MX and PRO2GO) to the
Group's growing Sports Nutrition & Wellness category.
Brexit
In light of the EU-UK Trade and Cooperation Agreement signed in
December 2020, the Board continues to monitor the impact of Brexit.
A multi-functional project steering committee manages the impact on
the Group's operations prior to and following Brexit.
The Group has experienced an increased administrative burden
post Brexit although its exposure to EU-UK trade is relatively low
(only 8% of revenue originated in Europe in FY21). The acquisition
of Vendek Limited shortly after year end, based in the Republic of
Ireland, is expected to mitigate some of the impacts of Brexit by
providing a European distribution hub for Supreme within Europe to
better serve the existing and target EU customers.
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
Suzanne Smith
Chief Finance Officer
19 July 2021
(1) Adjusted EBITDA means operating profit before depreciation,
amortisation and Adjusted items (as defined in Note 7 of the
financial statements). Adjusted items include share-based payments
charge, fair value movements on non-hedge accounted derivatives and
other non-recurring items (including all IPO-related costs)
(2) Adjusted Profit before tax means profit before tax and
Adjusted items (as defined in Note 7 of the financial statements)
Adjusted items include share-based payments charge, fair value
movements on non-hedge accounted derivatives and other
non-recurring items (including all IPO-related costs)
(3) Adjusted EPS means Earning per share, where Earnings are
defined as profit after tax but before amortisation of acquired
intangibles and Adjusted items (as defined in Note 7 of the
financial statements). Adjusted items include share based payments,
fair value movements on non-hedge accounted derivatives and other
non-recurring items (including all IPO-related costs).
(4) Adjusted Operating Cash Flow means net cash from operations
before the cash impact of Adjusted items (as defined in Note 7 of
the financial statements).
GROUP FINANCIAL STATEMENTS OF SUPREME PLC
Consolidated Statement of Comprehensive Income
Year Ended Year Ended
31 March 31 March
2021 2020
Note GBP'000 GBP'000
Revenue 5 122,253 92,329
Cost of sales 6 (89,211) (65,717)
----------- -----------
Gross Profit 33,042 26,612
Administration expenses 6 (19,416) (12,619)
----------- -----------
Operating profit 13,626 13,993
Adjusted EBITDA(1) 19,272 16,001
Depreciation 14 & 22 (1,998) (1,548)
Amortisation 13 (225) (25)
Adjusted items 7 (3,423) (435)
Operating profit 13,626 13,993
Finance income 9 - 3
Finance costs 10 (671) (783)
----------- -----------
Profit before taxation 12,955 13,213
Income tax 11 (3,117) (2,318)
----------- -----------
Profit for the year 9,838 10,895
Other comprehensive income/(loss)
Currency translation differences - (9)
----------- -----------
Total comprehensive income for
the year 9,838 10,886
=========== ===========
Earnings per share - basic 12 8.9p 9.9p
Earnings per share - diluted 12 8.7p 9.8p
=========== ===========
Note 1: Adjusted EBITDA, which is defined as profit before
finance costs, tax, depreciation, amortisation and adjusted items
is a non-GAAP metric used by management and is not an IFRS
disclosure.
All results derive from continuing operations.
Consolidated Statement of Financial Position
As at As at
31 March 31 March
2021 2020
Note GBP'000 GBP'000
Non-current assets
Assets
Goodwill and other intangibles 13 2,628 1,778
Property, plant and equipment 14 2,787 3,458
Right of use asset 22 1,476 1,495
Investments 15 7 7
Total non-current assets 6,898 6,738
---------- ----------
Current assets
Inventories 17 19,865 14,458
Trade and other receivables 18 16,052 16,738
Derivative financial instruments 23.9 - 209
Income tax recoverable - 9
Cash and cash equivalents 19 7,505 6,718
---------- ----------
Total current assets 43,422 38,132
---------- ----------
Total assets 50,320 44,870
---------- ----------
Liabilities
Current liabilities
Borrowings 21 10,476 10,573
Trade and other payables 20 13,295 10,289
Derivative financial instruments 23.9 559 -
Income tax payable 2,370 2,340
Total current liabilities 26,700 23,202
---------- ----------
Net current assets 16,722 14,930
---------- ----------
Borrowings 21 4,658 17,413
Deferred tax liability 16 141 191
Total non-current liabilities 4,799 17,604
---------- ----------
Total liabilities 31,499 40,806
Net assets 18,821 4,064
========== ==========
Equity
Share capital 24 11,650 11,001
Share premium 7,195 -
Merger reserve (22,000) (22,000)
Share-based payments reserve 75 -
Retained earnings 21,901 15,063
----------
Total equity 18,821 4,064
========== ==========
Consolidated Statement of Changes in Equity
Share Share-based
Share Premium Merger payments Retained Total
Capital reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 11,001 - (22,000) - 15,177 4,178
--------- --------- --------- ------------ ---------- ---------
Profit for the
year - - - - 10,895 10,895
Other comprehensive
loss - - - - (9) (9)
Total comprehensive
income for the
year - - - - 10,886 10,886
--------- --------- --------- ------------ ---------- ---------
Transactions with
shareholders:
Dividends - - - - (11,000) (11,000)
As at 31 March
2020 11,001 - (22,000) - 15,063 4,064
--------- --------- --------- ------------ ---------- ---------
Profit for the
year - - - - 9,838 9,838
Total comprehensive
income for the
year - - - - 9,838 9,838
--------- --------- --------- ------------ ---------- ---------
Transactions with
shareholders:
Issue of shares
- options exercised 89 255 - - - 344
Issue of shares
- IPO shares 560 6,940 - - - 7,500
Employee share
schemes - value
of employee services - - - 75 - 75
Dividends - - - - (3,000) (3,000)
--------- --------- --------- ------------ ---------- ---------
649 7,195 - 75 (2,925) 4,919
--------- --------- --------- ------------ ---------- ---------
As at 31 March
2021 11,650 7,195 (22,000) 75 21,901 18,821
========= ========= ========= ============ ========== =========
Consolidated Statement of Cash Flows
Year Ended Year Ended
31 March 31 March
2021 2020
Note GBP'000 GBP'000
Net cash flow from operating activities
Profit for the year 9,838 10,895
Adjustments for:
Amortisation of intangible assets 13 225 25
Depreciation of tangible assets 14 & 22 1,998 1,548
Fixed asset investment written
off 15 - 60
Finance income 9 - (3)
Finance costs 10 671 783
Amortisation of capitalised finance
costs 177 149
Income tax expense 11 3,117 2,318
Movement on forward foreign exchange
contracts 23.9 768 -
Share based payments expense 25 75 -
Working capital adjustments
(Increase)/decrease in inventories (5,286) 2,472
Decrease/(increase) in trade and
other receivables 970 (942)
Increase in trade and other payables 2,726 1,442
Taxation paid (3,003) (1,716)
----------- -----------
Net cash from operations 12,276 17,031
----------- -----------
Cash flows used in investing activities
Purchase of intangible fixed assets 13 (125) (26)
Purchase of property, plant and
equipment 14 (1,667) (1,655)
Purchase of subsidiaries net of
cash acquired 26 (1,005) (3,547)
Proceeds from sale of property, 890
plant and equipment -
Interest received - 3
Net cash used in investing activities (1,907) (5,225)
----------- -----------
Cash flows used in financing activities
Drawdown of loans 21 - 6,000
Repayment of loans 21 (13,021) (4,066)
Drawdown of other loans 21 - 3,735
Proceeds from IPO 7,500 -
Proceeds from issue of options 344 -
Payment of deferred consideration (195) -
Dividends paid (3,000) (11,000)
Finance costs paid (591) (691)
Lease payments 22 (619) (579)
----------- -----------
Net cash used in financing activities (9,582) (6,601)
----------- -----------
Net increase in cash and cash
equivalents 787 5,205
Cash and cash equivalents brought
forward 6,718 1,543
Foreign exchange - (30)
----------- -----------
Cash and cash equivalents carried
forward 7,505 6,718
=========== ===========
Cash and cash equivalents 19 7,505 6,718
7,505 6,718
=========== ===========
Notes to the Group Financial Statements
1. Basis of preparation
Supreme PLC ("the Company") is a public company limited by
shares, registered in England and Wales and domiciled in the UK,
with company registration number 05844527. The principal activity
is the manufacture (vaping and sports nutrition & wellness
only) and wholesale distribution of batteries, lighting, vaping,
sports nutrition & wellness and branded household consumer
goods. The registered office is 4 Beacon Road, Ashburton Park,
Trafford Park, Manchester, M17 1AF.
These 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 both international accounting standards in conformity with the
requirements of the Companies Act 2006.
Unaudited preliminary or annual results announcements
The financial information for the year ended 31 March 2021 and
the year ended 31 March 2020 does not constitute the company's
statutory accounts for those years. Statutory accounts for the year
ended 31 March 2020 have been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified,
did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006. The financial information for the year ended 31 March 2021 is
unaudited. The statutory accounts for that year will be delivered
to the Registrar of Companies following the Company's Annual
General Meeting.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs. The Group expects to
publish full financial statements that comply with IFRSs in August
2021.
Initial public offering ("IPO")
In preparation for the IPO, the Company re-registered as a
public limited company on 28 October 2020 and the Company's shares
were admitted to trading on the Alternative Investment Market
("AIM"), a market operated by the London Stock Exchange, on 1
February 2021.
The preparation of Group financial statements requires the
Directors to exercise their judgement in the process of applying
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the Group financial statements are disclosed in
Note 4.
The Group financial statements are presented in sterling and,
unless otherwise stated, amounts are expressed in pounds, to the
nearest thousand. The financial information presented in respect of
the year ended 31 March 2020 has been prepared on a basis
consistent with that presented in the Company's Admission
Document.
The principal accounting policies adopted are set out below.
2.1 Basis of consolidation
The consolidated financial statements present the results of the
Company and its own subsidiaries as if they form a single entity.
Intercompany transactions and balances between group companies are
therefore eliminated in full.
The Group financial statements incorporate the results of
business combinations using the acquisition method. In the
Consolidated Statement of Financial Position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
The results of acquired operations are included in the Consolidated
Statement of Comprehensive Income from the date on which control is
obtained. They are deconsolidated from the date control ceases. The
merger reserve arose on a past business combination of entities
that were under common control. The merger reserve is the
difference between the cost of investment and the nominal value of
the share capital acquired.
2. Summary of significant accounting policies
2.2 New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 March 2021 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.
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
Supreme PLC provides essential products to well established
retailers. The nature and price point of the products offered means
that the Group is well positioned to overcome any volatility in the
economic climate, which is further supported by a customer base who
perform consistently strongly and are household names.
The Covid-19 pandemic has not had a material impact on the
Group, with many of Supremes customers being able to remain open
throughout. This has allowed the Group to continue its growth, both
organically and through acquisition.
The group is funded by external banking facilities provided by
HSBC until December 2022, as well as through surplus cash held at
bank. The Board and Senior Management regularly reviews revenue,
profitability and cash flows across the short, medium and longer
term.
Management has assessed the Company's Going Concern status by
undertaking a 3 year cash flow forecast where the modest levels of
growth to revenue and costs have been applied and held all working
capital assumptions in line with existing trends. No new categories
or acquisitions have been assumed nor any significant economies of
scale or manufacturing efficiencies. In terms of cash projections
and overall liquidity, the Group reported cash of GBP7.5m and
unused credit facilities of GBP11.8m (comprising an invoice
discounting facility and an import loan facility). The cash flow
forecasts show increasing levels of cash generation in FY22 and
later years.
In addition to the 3 year forecast, a more detailed forecast of
trading and cash flows has been performed for a the 12 month period
following the date of these financial statements, including a
downside sensitivity analysis, showing that profit would need to
fall by 47% before an unpermitted breach of banking covenants
occurs or facilities are exhausted.
Taking account of these facilities and having considered future
strong trading and cash flow forecasts, the Directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the Group 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.
2.5 Revenue recognition
Revenue solely relates to the sale of goods and arises from the
wholesale distribution and online sales of batteries, lighting,
vaping sports nutrition & wellness and branded household
consumer goods.
To determine whether to recognise revenue, the Company follows
the 5-step process as set out within IFRS 15:
1. Identifying the contract with a customer.
2. Identifying the performance obligations.
3. Determining the transaction price.
4. Allocating the transaction price to the performance obligations.
5. Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is measured at transaction price, stated net of VAT, and
other sales related taxes. Rebates to customers take the form of
volume discounts, which are a type of variable consideration, and
the transaction price is constrained to reflect the rebate element.
The transaction price equates to the invoice amount less an
estimate of any applicable rebates and promotional allowances that
are due to the customer. Rebate accruals are recognised under the
terms of these agreements, to reflect the expected promotional
activity and our historical experience. These accruals are reported
within trade and other payables.
Revenue is recognised at a point in time as the Company
satisfies performance obligations by transferring the promised
goods to its customers as described below. Variable consideration,
in the form of rebates, is also recognised at the point of
transfer, however the estimate of variable consideration is
constrained at this point and released once it is highly probable
there will not be a significant reversal.
Contracts with customers take the form of customer orders. There
is one distinct performance obligation, being the distribution of
products to the customer, for which the transaction price is
clearly identified. Revenue is recognised at a point in time when
the Company satisfies performance obligations by transferring the
promised goods to its customers, i.e. when control has passed from
the Company to the customer, which tends to be on receipt by the
customer. In respect of certain direct shipments control passes
when an invoice is raised, payment received, and title formally
transferred to the customer; at which point the customer has the
risks and rewards of the goods.
2.6 Goodwill
The carrying value of goodwill has arisen following the
acquisition of subsidiary entities, where the trade and assets have
subsequently been hived up into this company immediately post
acquisition, and the related investment balance transferred to
goodwill. Such goodwill is subject to an impairment review, both
annually and when there is an indication that the carrying value
may be impaired. Any impairment is recognised immediately in the
Statement of Comprehensive Income and is not reversed.
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%
2.8 Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any impairment losses. Cost includes
the original purchase price of the asset and the costs attributable
to bringing the asset to its working condition for its intended
use. Depreciation is charged so as to write off the costs of assets
over their estimated useful lives, on a straight-line basis
starting from the month they are first used, as follows:
Plant and machinery - 25%
Fixtures and fittings - 25%
Motor vehicle - 25%
Fashion hire assets - 25%
The gain or loss arising on the disposal of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the Statement of
Comprehensive Income.
At each reporting date, the Company reviews the carrying amounts
of its property, plant and equipment assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any).
Fashion Hire assets are presented within property, plant and
equipment. Revenue is generated from these assets through hire to
third party customers. In the year ended 31 March 2021 these assets
were sold to a director of the Company.
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 Company 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 Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs
incurred and an estimate of costs to restore the underlying asset,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liabilities.
The lease liability is initially measured at the present value
of lease payments that were not paid at the commencement date,
discounted using the Company's incremental borrowing rate.
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 Company 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 Company 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.
2.15 Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is responsible for allocating
resources and assessing performance of operating segments.
The Directors consider that there are five identifiable business
segments, being the manufacture (vaping and sports nutrition &
wellness only) and distribution of batteries, lighting, vaping,
sports nutrition & wellness, and branded household consumer
goods.
2.16 Dividends
Dividends are recognised as a liability and deducted from equity
at the time they are approved. Otherwise dividends are disclosed if
they have been proposed or declared before the relevant financial
statements are approved.
2.17 EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and
Amortisation ("EBITDA") and Adjusted EBITDA are non-GAAP measures
used by management to assess the operating performance of the
Company. EBITDA is defined as profit before finance costs, tax,
depreciation and amortisation. Adjusted items are excluded from
EBITDA to calculate adjusted EBITDA.
The Directors primarily use the Adjusted EBITDA measure when
making decisions about the Company's activities as this provides
useful information for shareholders on underlying trends and
performance. As these are non-GAAP measures, EBITDA and Adjusted
EBITDA measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
2.18 Exceptional costs and adjusted items
The Company's income statement separately identifies djusted
items. Such items are those that in the Directors' judgement are
one-off in nature or non-operating and need to be disclosed
separately by virtue of their size or incidence and may include,
but are not limited to, professional fees and other costs directly
related to refinancing, acquisitions and capital transactions, fair
value movements on open forward contracts, share based payment
charges, material impairments of inventories and fashion hire
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 Financial instruments
Financial assets and financial liabilities are recognised in the
Company's Statement of Financial Position when the Company becomes
party to the contractual provisions of the instrument. Financial
assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire or when the contractual
rights to those assets are transferred. Financial liabilities are
de-recognised when the obligation specified in the contract is
discharged, cancelled or expired.
Trade and other receivables
Trade and other receivables are initially measured at
transaction price less provisions for expected credit losses. The
group applies the IFRS 9 simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance. This
lifetime expected credit losses is used in cases where the credit
risk on other receivables has increased significantly since initial
recognition. In cases where the credit risk has not increased
significantly, the Group measures the loss allowance at an amount
equal to the 12-month expected credit loss. This assessment is
performed on a collective basis considering forward-looking
information.
IFRS 9's impairment requirements use forward-looking information
to recognise expected credit losses - the 'expected credit loss
(ECL) model'.
Recognition of credit losses is determined by considering a
broad range of information when assessing credit risk and measuring
expected credit losses, including past events, current conditions
and reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit losses over the expected
life of the financial instrument.
Credit Insurance is applied to all accounts over GBP2,500 with
exception of proforma accounts and accounts agreed by the CEO.
Interest income is recognised by applying the effective interest
rate, except for short-term receivables when the recognition of
interest would be immaterial.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Trade and other payables
Trade and other payables are initially measured at their fair
value and are subsequently measured at their amortised cost using
the effective interest rate method; this method allocates interest
expense over the relevant period by applying the "effective
interest rate" to the carrying amount of the liability.
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 the proceeds received from the bank are
shown within liabilities. The interest element of the bank's
charges are recognised as they accrue and included in the statement
of comprehensive income within other interest payable.
Borrowings
Interest-bearing overdrafts are classified as other liabilities.
They are initially recorded at fair value, which represents the
fair value of the consideration received, net of any direct
transaction costs associated with the relevant borrowings.
Borrowings are subsequently stated at amortised cost and finance
charges are recognised in the Statement of Comprehensive Income
over the term of the instrument using an effective rate of
interest. Finance charges, including premiums payable on settlement
or redemption, are accounted for on an accruals basis and are added
to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise. Borrowings are
classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at
least 12 months after the reporting date.
Classification as debt or equity
Debt and equity instruments issued by the Company are classified
as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the 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.
Derivatives
Derivatives are initially recognised at the fair value on the
date the derivative contract is entered into and are subsequently
re-measured at their fair value. Changes in the fair value of
derivatives are recognised in the income statement within cost of
sales, on the basis that is where the related expense is
recognised, unless they are included in a hedging arrangement.
Where the instruments have been traded to take advantage of
currency movements and not directly linked to the settlement of
purchase requirements the gain or loss is recognised separately in
the statement of comprehensive income as other operating
income/expense. Financial liabilities are derecognised when the
liability is extinguished, that is when the contractual obligation
is discharged, cancelled or expires.
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
Company'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 23.
(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 Company if a customer
or counterparty to financial instruments fails to meet its
contractual obligation. Credit risk arises from the Company's cash
and cash equivalents and receivables balances. Credit Insurance is
applied to all accounts over GBP2,500 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 Company will not be able to
meet its financial obligations as they fall due. This risk relates
to the Company's prudent liquidity risk management and implies
maintaining sufficient cash. The Directors monitor rolling
forecasts of the Company's liquidity and cash and cash equivalents
based on expected cash flow.
3.2 Capital risk management
The Company 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.
The Company'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 Company is managed and adjusted to reflect changes
in economic conditions. The Company 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 Company's
commitments and development plans. Quantitative data on what the
Company manages as capital is included in the Statement of Changes
in Equity and in Note 23 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 Company 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
GBP1,602,000 at 31 March 2021 (31 March 2020: GBP1,214,000).
Management consider that the estimates used in the impairment
calculation are set out in Note 13. 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 Company.
The useful economic lives applied are set out in the accounting
policies (Note 2.6) 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.
Accounting judgements
4.4 Inventory obsolescence
Management make use of judgement in determining whether certain
inventory items are obsolete. Should these judgements be incorrect
there could be a material difference in the recoverable value of
inventory.
4.5 Right of use assets - discount rate
Management make use of judgements in determining the discount
rate to be applied to the IFRS 16 'Leases' right of use asset and
liability. This judgement determines the carrying value of the
assets and liabilities, and the resulting depreciation and interest
charge that is incurred.
5. Segmental analysis
The Chief Operating Decision Maker ("CODM") has been identified
as the Board of Directors. The Board reviews the Company's internal
reporting in order to assess performance and allocate resources. No
balance sheet analysis is available by segment or reviewed by the
CODM. The Board has determined that the operating segments, based
on these reports, are the sale of:
-- batteries;
-- lighting;
-- vaping;
-- sports nutrition & wellness; and
-- branded household consumer goods.
The Gross profit before foreign exchange shows the results using
standard foreign exchange rates that are used throughout the year.
The foreign exchange adjustment shown before gross profit is to
adjust back to the actual rates incurred.
Branded
Sports household Year Ended
nutrition consumer 31 March
Batteries Lighting Vaping & wellness goods 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 34,434 25,905 39,544 6,856 15,514 122,253
Cost of sales (31,156) (17,913) (23,186) (4,210) (13,867) (90,332)
---------- --------- --------- ------------ ----------- -----------
Gross profit before
foreign exchange 3,278 7,992 16,358 2,646 1,647 31,921
Foreign exchange 1,121
-----------
Gross Profit 33,052
Administration expenses (19,416)
-----------
Operating profit 13,626
Adjusted earnings
before tax, depreciation,
amortisation and adjusted
items 19,282
Depreciation (1,998)
Amortisation (225)
Adjusted items (3,423)
Operating profit 13,626
Finance income -
Finance costs (671)
-----------
Profit before taxation 12,955
Income tax (3,117)
-----------
Profit for the year 9,838
===========
Branded
Sports household Year Ended
nutrition consumer 31 March
Batteries Lighting Vaping & wellness goods 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 30,944 25,347 29,029 4,980 2,029 92,329
Cost of sales (27,662) (16,869) (17,363) (2,863) (1,703) (66,460)
---------- --------- --------- ------------ ----------- -----------
Gross profit before
foreign exchange 3,282 8,478 11,666 2,117 326 25,869
Foreign exchange 743
-----------
Gross Profit 26,612
Administration expenses (12,619)
-----------
Operating profit 13,993
Adjusted earnings
before tax, depreciation,
amortisation and adjusted
items 16,001
Depreciation (1,548)
Amortisation (25)
Adjusted items (435)
Operating profit 13,993
Finance income 3
Finance costs (783)
-----------
Profit before taxation 13,213
Income tax (2,318)
-----------
Profit for the year 10,895
===========
Information about major customers
The Group has generated revenue from individual customers that
accounted for greater than 10% of total revenue. The total revenue
from each of these 2 customers (2020: 2 customers) was
GBP19,406,000 and GBP17,114,000 (2020: GBP20,853,000 and
GBP12,462,000). These revenues related to all segments.
Analysis of revenue by geographical destination
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
United Kingdom 111,459 82,482
Ireland 3,035 3,734
Netherlands 1,918 2,488
France 983 1,353
Rest of Europe 2,606 2,208
Rest of the World 1,011 1,305
122,253 92,329
=========== ===========
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.
6. Expenses by nature
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
The profit is stated after charging expenses
as follows:
Inventories recognised as an expense 80,070 57,926
Impairment of inventories 406 -
Impairment of trade receivables 20 14
Staff costs - Note 8 7,026 6,561
Adjusted items - Note 7 3,423 435
Establishment and general 1,365 839
Depreciation of property, plant and equipment 1,998 1,548
Amortisation of intangible assets 225 25
Auditor's remuneration 92 73
Furlough grant income (342) -
Other operating expenses 14,344 10,915
----------- -----------
Total cost of sales and administrative expenses 108,627 78,336
=========== ===========
7. Adjusted items
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
IPO costs 1,953 -
Fair value movements on financial derivatives 768 (208)
Restructuring costs 421 318
Share based payments charge (note 25) 75 -
Acquisition costs 15 176
Refinancing costs 191 149
3,423 435
=========== ===========
IPO costs relate to the Group's admission to AIM in February
2021, which include GBP1.81m of adviser fees and commission,
GBP0.19m of accelerated debt arrangement fees (associated with the
tranche of debt that was settled on admission to AIM) and GBP0.14m
in relation to company bonuses that were contingent on the
transaction.
The financial derivatives relate to open foreign exchange
forward contracts (the Group typically holds 1 years' worth of
USD-denominated purchases on open forward contracts). The charge in
both years reflects the movement in the fair value of these open
forward contracts at the balance sheet date year-on-year.
Restructuring costs in FY21 and FY20 relate to the integration
of businesses and subsequent streamlining of operations following
the acquisitions of Provider Distribution, the assets of LED Hut
and the wider restructuring that took place as a result of
COVID-19.
In FY21 and FY20, acquisition costs relate to the adviser fees
relating to the acquisitions that took place during the year.
Refinancing costs represent the amortisation of arrangement fees
and associated adviser fees incurred in obtaining the HSBC Senior
Debt in F20. In FY21, the amortisation of some of these costs were
accelerated and reported as IPO costs as a result (following early
repayment of a tranche of the senior facility).
8. Employees and Directors
Year Ended Year Ended
31 March 31 March
2021 2020
No. No.
Average number of employees (including Directors):
Management and administration 53 49
Warehouse 57 52
Sales 26 31
Development 65 67
201 199
=========== ===========
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Aggregate remuneration of staff (including
Directors):
Wages and salaries 6,300 5,747
Social security costs 621 564
Other pension costs 105 250
7,026 6,561
=========== ===========
Directors' remuneration
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Directors' emoluments 314 9
Social security costs 80 -
Company contributions to defined contribution 1 -
pension schemes
395 9
=========== ===========
The highest paid director received remuneration of GBP144,000
(2020: n/a).
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 (2020: n/a).
During the year retirement benefits were accruing to 2 directors
(2020: 2) in respect of defined contribution pension schemes.
9. Finance income
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Other interest receivable - 3
- 3
======================================== ===========
10. Finance costs
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Bank interest payable 164 55
Other interest payable 430 637
Interest on right-of-use assets 77 91
671 783
=========== ===========
Other interest payable represents interest payable in respect of
the invoice discounting and supply chain facilities.
11. Taxation
Year Ended Year Ended
31 March 31 March
2021 2020
Current tax GBP'000 GBP'000
Current year - UK corporation tax 3,156 2,459
Adjustments in respect of prior periods - (374)
Foreign tax on income 17 13
----------- -----------
Total current tax 3,173 2,098
=========== ===========
Deferred tax
Origination and reversal of timing differences (56) 118
Adjustment for prior periods - 94
Effect of tax rate change - 8
----------- -----------
Total deferred tax (56) 220
=========== ===========
Total tax expense 3,117 2,318
=========== ===========
Factors affecting the charge
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Profit before taxation 12,955 13,213
----------- -----------
Tax at the UK corporation tax rate of 19%
(2021: 19%) 2,461 2,510
Effects of expenses not deductible for tax
purposes 128 88
Disallowed IPO fees 385 -
Disallowed foreign exchange 146 (40)
Fixed asset differences - 36
Adjustments to tax charge due to change
in rates - 8
Adjustments to tax charge in respect of
prior periods - (280)
Recognition of previously unrecognised losses (3) -
Income not taxable for tax purposes - (5)
Difference in foreign tax rates - 1
Total tax expense 3,117 2,318
=========== ===========
Factors that may affect future tax charges
In the Spring Budget 2020, the Government announced that the
previously enacted decrease in the corporate tax rate from 19% to
17% from 1 April 2020 would no longer happen and that rates would
remain at 19% for the foreseeable future. The new law was
substantively enacted post year end by a resolution under the
Provisional Collection of Taxes Act 1968 on 17 March 2020. As the
new law was substantively enacted pre year end, the impact of the
change to 19% was reflected in the Group financial statements for
the year ended 31 March 2020.
In the Spring Budget 2021, the Government announced an increase
in the corporation tax rate from 19% to 25% from 1 April 2023. As
the new law had not been substantively enacted by the balance sheet
date, its impact has not been reflected in the financial
statements. The impact of the increase would be to increase the
deferred tax liability by approximately GBP45,000.
12. 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
2021 2020
GBP'000 GBP'000
Profit for the year after tax 9,838 10,895
============ ============
No. No.
Weighted average number of shares for the
purposes of basic earnings per share 111,087,502 110,005,000
Weighted average dilutive effect of conditional
share awards 2,124,446 1,256,158
------------ ------------
Weighted average number of shares for the
purposes of diluted earnings per share 113,211,948 111,261,158
============ ============
Pence Pence
Basic profit per share 8.9 9.9
Diluted profit per share 8.7 9.8
============ ============
Adjusted EPS
The calculation of adjusted earnings per share is based on the
post-tax profit after adding back certain costs as detailed in the
table below, namely the amortisation of acquired intangibles and
Adjusted items. Management considers that this measure shows the
underlying performance of the Group and enables comparisons to be
drawn to other listed business who also use this measure.
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Adjusted earnings (see below) 13,353 11,288
============ ============
No. No.
Weighted average number of shares for the
purposes of basic earnings per share 111,087,502 110,005,000
Weighted average dilutive effect of conditional
share awards 2,124,446 1,256,158
------------ ------------
Weighted average number of shares for the
purposes of diluted earnings per share 113,211,948 111,261,158
============ ============
Pence Pence
Adjusted basic profit per share 12.0 10.3
Adjusted diluted profit per share 11.8 10.1
============ ============
The calculation of basic adjusted earnings per share is based on
the following data:
Year Ended Year Ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Profit/(loss) for the year attributable
to equity shareholders 9,838 10,895
Add back/(deduct):
Amortisation of acquisition related intangible
assets 196 7
Adjusted items 3,423 435
Tax effect of the above (104) (49)
----------- -----------
Adjusted earnings 13,353 11,288
=========== ===========
13. Goodwill and other intangible assets
Domain Customer Trade
name Trademarks relationships name Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2019 124 50 - - 613 787
Arising on business
combinations - - 419 - 601 1,020
Additions - 15 - - - 15
At 31 March 2020 124 65 419 - 1,214 1,822
========= =========== =============== ========= ========= =========
Arising on business
combinations - - 341 221 388 950
Additions 125 - - - - 125
At 31 March 2021 249 65 760 221 1,602 2,897
========= =========== =============== ========= ========= =========
Accumulated amortisation
At 1 April 2019 16 3 - - - 19
Amortisation charged
in the year 12 6 7 - - 25
--------- ----------- --------------- --------- --------- ---------
At 31 March 2020 28 9 7 - - 44
========= =========== =============== ========= ========= =========
Amortisation charged
in the year 22 7 152 44 - 225
At 31 March 2021 50 16 159 44 - 269
========= =========== =============== ========= ========= =========
Carrying amount
At 1 April 2019 108 47 - - 613 768
========= =========== =============== ========= ========= =========
At 31 March 2020 96 56 412 - 1,214 1,778
========= =========== =============== ========= ========= =========
At 31 March 2021 199 49 601 177 1,602 2,628
========= =========== =============== ========= ========= =========
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
2021 2020
GBP'000 GBP'000
Lighting 159 159
Batteries 492 492
Vaping 121 121
Sports Nutrition & Wellness 400 12
Branded Household Consumer Goods 430 430
1,602 1,214
========== ==========
The Customer relationships, Trade name, and Goodwill arising in
the year ended 31 March 2021 related to the acquisition of GT
Divisions Limited, see note 26 for further detail. 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.
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 2021 or 31 March 2020.
There were no charges for impairment of goodwill in 2021 (2020:
nil). The pre-tax discount rate used in the value in calculations
was 13%, the long term growth rate assumed was 2% and the gross
profit margins applied were 10% for batteries, 33% for lighting,
47% for vaping, 35% for sports nutrition & wellness and 10% for
branded household consumer goods.
14. Property, plant and equipment
Fixtures Computer
Plant and and Motor equipment Fashion
machinery fittings vehicles GBP'000 hire assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 1 April 2019 2,513 466 32 - 1,306 4,317
Additions 1,342 301 12 - - 1,655
Acquisition of subsidiary 15 2 7 - - 24
At 31 March 2020 3,870 769 51 - 1,306 5,996
=========== ========== =========== =========== ============= =========
Additions 1,566 1 - 100 - 1,667
Disposals (120) - - - (1,306) (1,426)
At 31 March 2021 5,316 770 51 100 - 6,237
=========== ========== =========== =========== ============= =========
Depreciation and impairment
At 1 April 2019 797 314 6 - 392 1,509
Depreciation charged
in the year 815 135 10 - 69 1,029
At 31 March 2020 1,612 449 16 - 461 2,538
=========== ========== =========== =========== ============= =========
Depreciation charged
in the year 1,197 192 11 11 37 1,448
Eliminated on disposal (38) - - - (498) (536)
At 31 March 2021 2,771 641 27 11 - 3,450
=========== ========== =========== =========== ============= =========
Carrying amount
At 1 April 2019 1,716 152 26 - 914 2,808
=========== ========== =========== =========== ============= =========
At 31 March 2020 2,258 320 35 - 845 3,458
=========== ========== =========== =========== ============= =========
At 31 March 2021 2,545 129 24 89 - 2,787
=========== ========== =========== =========== ============= =========
The depreciation charge for the year has been included in
Administrative expenses in the Statement of Comprehensive
Income.
15. Investments
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
At beginning of year 7 60
Amounts written off - (60)
On acquisition of subsidiaries - 7
At end of year 7 7
========== ==========
The balance of GBP7,000 arising on acquisition of subsidiaries
relates to shares held in public entities, by the acquired
subsidiary, who are listed on the stock market.
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 2021 the Company directly owned 100% of the
following subsidiaries, which are incorporated in England and Wales
unless stated:
Class of Percentage
Subsidiary Registered address Principal activity share holding
4 Beacon Road,
Ashburton Park,
Trafford Park,
Supreme Imports Manchester M17 Distribution
Limited 1AF of consumer goods Ordinary 100%
Unit 1 Rosewood
Park, St James
Road, Blackburn,
Provider Distribution Lancashire BB1 Distribution
Limited 8ET of consumer goods Ordinary 100%
11 Bath Street,
SI Holdings (Jersey) St Helier, Jersey,
Limited JE4 8UT Holding company Ordinary 100%
At 31 March 2021 the Company indirectly owned 100% of the
following subsidiaries, which are incorporated in England and Wales
unless stated:
Class of Percentage
Subsidiary Registered address Principal activity share holding
4 Beacon Road,
Ashburton Park,
Trafford Park,
Manchester M17 Distribution
GT Divisions Limited 1AF of consumer goods Ordinary 100%
Distribution
VN Labs Limited of consumer goods Ordinary 100%
Battery Force Limited Dormant Ordinary 100%
Saira Shoes Limited Dormant Ordinary 100%
Powerquick Limited Holding company Ordinary 100%
Sub OHM Juice Limited Dormant Ordinary 100%
Supreme 88 Limited Holding company Ordinary 100%
Supreme Nominees Holding of shares
Limited as nominee Ordinary 100%
Vanadiumweg 13,
Holding Esser Affairs 3812 PX, Armersfoort,
B.V. Netherlands Holding company Ordinary 100%
Distribution
AGP Trading B.V. of consumer goods Ordinary 100%
11 Bath Street,
St Helier, Jersey,
SI Jersey Limited JE4 8UT Dormant Ordinary 100%
The Directors believe that the carrying value of the investments
is supported by their underlying net assets.
16. Deferred tax
Deferred tax consists of the following timing differences
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Excess of depreciation over taxable allowances (171) (221)
Short term timing differences 25 25
Tax losses carried forward 5 5
(141) (191)
========== ==========
Movement in deferred tax in the year
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Balance brought forward (191) 31
Credited/(charged) to profit or loss 56 (220)
Arising on acquisitions - (3)
Transfer (6) 1
Balance carried forward (141) (191)
========== ==========
The Directors consider that the deferred tax assets in respect
of timing differences and tax losses carried forward are
recoverable based on the forecast future taxable profits of the
Company.
17. Inventories
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Goods for resale 15,849 12,282
Raw materials 4,016 2,176
19,865 14,458
========== ==========
The Directors believe that the replacement value of inventories
would not be materially different than book value.
Inventories at 31 March 2021 are stated after provisions for
impairment of GBP270,000 (2020: GBP96,000).
18. Trade and other receivables
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Trade receivables 13,321 13,588
Amounts owed by related parties 1,790 1,790
Other receivables 172 405
Prepayments 769 955
16,052 16,738
========== ==========
The Directors believe that the carrying value of trade and other
receivables represents their fair value. In determining the
recoverability of trade receivables, the Company 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:
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Balance at the beginning of the year 26 52
Charged to the statement of comprehensive
income 20 14
Utilisation of provision (9) (40)
Balance at the end of the year 37 26
========== ==========
Trade receivables disclosed above include amounts (see below for
aged analysis) which are past due at the reporting date but against
which the Company 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
2021 2020
GBP'000 GBP'000
Current 10,814 13,892
Less than 30 days - -
31 - 60 days 1,969 (285)
61 - 90 days 126 (4)
90 days + 449 11
Less provisions for impairment (37) (26)
13,321 13,588
========== ==========
In determining the recoverability of a trade receivable the
Company 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 Company's credit risk management policies are
shown in Note 23. The Company does not hold any collateral as
security for its trade and other receivables.
19. Cash and cash equivalents
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Cash at bank 7,505 6,718
========== ==========
20. Trade and other payables
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Trade payables 7,299 6,907
Accruals and deferred income 4,343 1,618
Other tax and social security 1,648 1,541
Other payables - 27
Directors loan account 5 1
Deferred consideration - 195
13,295 10,289
========== ==========
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.
21. Borrowings
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Current
Bank loans 5,304 5,310
Amounts owed to related parties 3,392 3,392
Other loans 1,165 1,378
IFRS 16 lease liability (Note 22) 615 493
---------- ----------
10,476 10,573
========== ==========
Non-current
Bank term loan 3,695 16,317
IFRS 16 lease liability (Note 22) 963 1,096
4,658 17,413
========== ==========
Total borrowings 15,134 27,986
========== ==========
The earliest that the lenders of the above borrowings require
repayment is as follows:
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
In less than one year 10,476 10,573
Between two and five years 4,658 17,413
In more than five years - -
15,134 27,986
========== ==========
The Company is funded by external banking facilities provided by
HSBC. Current bank borrowings includes invoice discounting
facilities, which are secured by an assignment of, and fixed charge
over the trade debtors of Supreme Imports Limited. Furthermore,
current bank borrowings include an amount of GBP1,165,000 at 31
March 2021, (2020: GBP 1,378,000 ) due under a supply chain
facility which is secured by fixed and floating charges over all
assets of the company. This facility is denominated in US
Dollars.
The total facilities available were a GBP8.5m invoice
discounting facility (repayable on demand) and a GBP4.5m supply
chain facility (renewed each year). Therefore undrawn but committed
facilities at 31 March 2021 were
GBP8,500,000 and GBP3,335,000 respectively (2020: GBP8,500,000 and GBP3,122,000).
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 Company and the working
capital cycle.
The bank term loan is made up of GBP12,500,000 repayable in
quarterly instalments of GBP 781,000 over a 5 year term, and
GBP7,500,000 repaid on maturity. In March 2020, the facility was
increased by GBP6,000,000, which is repayable in quarterly
instalments of GBP545,000 per quarter over the 5 year term.
Interest is charged at a rate of 5 % over LIBOR. The bank loan is
secured by way of a fixed and floating charge over all assets. On
Admission to AIM on 1 February 2021, GBP7,5000,000 of the
GBP12,500,000 facility was repaid at the request of the lender.
There are three principal covenants attached to the Senior
Facilities. These are tested quarterly and include gross leverage,
cash flow and interest cover.
22. 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
Balance at 1 April 2019 2,014
Depreciation charge for the year (519)
--------
Balance at 31 March 2020 1,495
Additions 531
Depreciation charge for the year (550)
Balance at 31 March 2021 1,476
========
The net book value of the right of use assets is made up as
follows:
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Buildings 1,447 1,414
Cars 29 81
---------- ----------
1,476 1,495
========== ==========
As at As at
31 March 31 March
Lease liabilities 2021 2020
GBP'000 GBP'000
Maturity analysis - contractual undiscounted
cash flows
Less than one year 678 559
More than one year, less than two years 654 559
More than two years, less than three years 180 535
More than three years, less than four years 120 60
More than four years, less than five years 60 -
More than five years - -
---------- ----------
Total undiscounted lease liabilities at
year end 1,692 1,713
Finance costs (114) (124)
---------- ----------
Total discounted lease liabilities at year
end 1,578 1,589
---------- ----------
Lease liabilities included in the statement
of financial position
Current 615 493
Non-current 963 1,096
---------- ----------
1,578 1,589
---------- ----------
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
2021 2020
GBP'000 GBP'000
Depreciation charge - Buildings 498 445
Depreciation charge - Cars 52 74
----------- -----------
550 519
=========== ===========
Interest expense (within finance expense) 77 91
=========== ===========
23. Financial instruments
The Company 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.
23.1 Capital risk management
Details of the Company's capital are shown in Note 24, as well
as in the Statement of Changes in Equity.
23.2. Market risk
Competitive pressures remain a principal risk for the Company.
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 Company'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 Company.
In addition, the Company'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
Company has in place a risk management programme that seeks to
limit the adverse effects on the financial performance of the
Company by regularly monitoring the financial risks referred to
above.
Given the size of the Company, 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 Company's finance department.
23.3. Credit risk
The Company's sales are primarily made with credit terms of
between 0 and 30 days, exposing the Company to the risk of
non-payment by customers. The Company 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 Company maintains a suitable level
of credit insurance against its debtor book. The maximum exposure
to credit risk is GBP2,500 per individual customer, being the
insurance excess.
An analysis of past due but not impaired trade receivables is
given in Note 18.
23.4. Liquidity risk management
The Company is funded by external banking facilities provided by
HSBC. Within these facilities, the Company actively maintains a
mixture of long-term and short-term debt finance that is designed
to ensure the Company has sufficient available funds for operations
and planned expansions. This is monitored on a monthly basis,
including re-forecasts of the borrowings required.
23.5. Foreign currency risk management
The Company's activities expose it to the financial risks of
changes in foreign currency exchange rates. The Company's exposure
to foreign currency risk is partially hedged by virtue of invoicing
a proportion of its turnover in US Dollars. When necessary, the
Company 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
2021 2020
GBP'000 GBP'000
Trade receivables 1,481 266
Net cash and overdrafts 58 1,370
Supply chain facility (1,165) (1,378)
Trade payables 830 (89)
1,204 169
========== ==========
The effect of a 20 percent strengthening of Pound Sterling at 31
March 2021 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 GBP201,000, (2020: GBP 28,000 ). 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 GBP301,000 (2020: GBP 42,000 ).
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
2021 2020
GBP'000 GBP'000
Inventory - 289
Trade receivables 42 483
Net cash and overdrafts - 322
Trade payables (269) (464)
(227) 630
========== ==========
The effect of a 20 percent strengthening of Pound Sterling at 31
March 2021 on the foreign denominated financial instruments carried
at that date would, all variables held constant, have resulted in
an increase to total comprehensive income for the year and an
increase to net assets of GBP38,000 (2021: GBP 105,000 decrease). A
20 percent weakening of the exchange rate on the same basis, would
have resulted in a decrease to total comprehensive income and a
decrease in net assets of GBP57,000 (2021: GBP 158,000
increase).
Derivative financial instruments - Forward contracts
The Company mitigates the exchange rate risk for certain foreign
currency creditors by entering into forward currency contracts. The
Company'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 Company costs its
products and take out forward contracts to mitigate fluctuations to
an acceptable level. At 31 March 2021, the outstanding contracts
mature between 1 and 12 months of the year end, (2020: 1 and 12
months). At 31 March 2021 the Company was committed to buy $24,000
,000 (2020: $1,726,000) 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 2021 is a liability of GBP559,000
(2020: asset of GBP209,000). During the year ended 31 March 2021, a
loss of GBP768,000 (2020: gain of GBP 209,000 ) 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.
23.6. Interest rate cash flow risk
The Company's interest-bearing liabilities relate to its
variable rate banking facilities. The Company 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
GBP136,000 (2020: GBP 230,000 decrease).
23.7. Price risk
The Company's profitability is affected by price fluctuations in
the sourcing of its products. The Company 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 Company's
operations change in size or nature.
23.8. Maturity of financial assets and liabilities
All of the Company'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 21.
23.9 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
2021 2020
GBP'000 GBP'000
Financial assets
Financial assets measured at amortised cost
Trade and other receivables 15,283 15,783
Cash and cash equivalents 7,505 6,718
22,788 22,501
Financial liabilities
Financial liabilities measured at amortised
cost
Non-current:
Borrowings (4,658) (17,413)
Current:
Borrowings (10,476) (10,573)
Trade and other payables (7,304) (7,130)
Accruals (4,343) (1,618)
(26,781) (36,734)
Financial liabilities measured at fair value
through profit and loss
Derivative financial instruments (559) 209
---------- ----------
(559) 209
Net financial assets and liabilities (4,552) (14,024)
Non-financial assets and liabilities
Plant, property and equipment 2,787 3,458
Right of use assets 1,476 1,495
Goodwill and other intangible assets 2,628 1,778
Investments 7 7
Inventory 19,865 14,458
Prepayments and accrued income 769 955
Deferred tax liability (141) (191)
Other taxation and social security (1,648) (1,541)
Income tax recoverable - 9
Income tax payable (2,370) (2,340)
23,373 18,088
Total equity 18,821 4,064
========== ==========
24. Share capital
Number of shares authorised and in issue
A Ordinary B Ordinary Ordinary Total Total
GBP0.10 GBP0.10 GBP0.10
No. No. No. No. GBP
At 31 March 2019
and 2020 82,503,750 27,501,250 - 110,005,000 11,000,500
Re-designated in
year (82,503,750) (27,501,250) 110,005,000 - -
Issued to settle
EMI awards on IPO - - 897,965 897,965 89,796
Issued on IPO - - 5,597,015 5,597,015 559,702
------------- ------------- ------------ ------------ -----------
At 31 March 2021 - - 116,499,980 116,499,980 11,649,998
============= ============= ============ ============ ===========
Rights of share capital
The A Ordinary shares had attached to them full voting, dividend
and capital distribution rights. They did not confer any rights or
redemption. The Ordinary B shares were entitled to an initial
dividend of GBP16,500,000. In all other aspects the A Ordinary and
B Ordinary shares shared the same rights.
On 2 September 2020, the two share classes were designated as
"Ordinary shares" of GBP0.10.
The Company invited each holder of outstanding options under the
EMI scheme (see note 25) to exercise up to 35% of the options held
conditional upon Admission and as a result, 897,965 new Ordinary
GBP0.10 shares were issued to satisfy the options at a subscription
price of GBP0.38, generating a premium of GBP254,753.
On Admission 5,597,015 new Ordinary GBP0.10 shares were issued
at a subscription price of GBP1.34, generating share premium of
GBP6,940,299.
Dividends
Dividends of GBP3,000,000 (2020: GBP11,000,000) were declared in
the year. This amounted to GBP0.027 per share (2020: GBP0.10).
25. Share based payments
The Company operates a number of share incentive arrangements as
set out below.
The Supreme plc Enterprise Management Incentive Scheme ("the EMI
Scheme")
On the 14 September 2018, the Company implemented an Enterprise
Management Incentive Scheme. This was granted to employees to
acquire shares in the Company for a number of ordinary shares of
10p each at the exercise price at the option of the employee. These
options may not be granted unless a relevant event attached to the
option has occurred. These options vested immediately and will
expire after 10 years from grant date.
These option were fairly valued upon a valuation of the entity
that had been performed by an independent expert.
On 4 January 2021 the Company granted options to one employee
over 594,914 shares at the same exercise price under an individual
unapproved option arrangement pursuant to a longstanding
commitment.
Weighted Weighted
average average
exercise exercise
price price
2021 2021 2020 2020
GBP No. GBP No.
Outstanding at the beginning
of the year 0.38 2,174,120 0.38 2,174,120
Lapsed - (187,704) - -
Granted during the year - 594,914 - -
Exercised on IPO - (897,965) - -
---------- ---------- ---------- ----------
Outstanding at the end
of the year 0.38 1,683,365 0.38 2,174,120
========== ========== ========== ==========
The profit and loss expense that has been recognised in the
current year is GBPnil (2020: GBPnil) and included within
administrative expenses.
The Supreme plc Sharesave Scheme 2021 ("the SAYE Scheme")
The Company established the SAYE Scheme on 26 January 2021. The
SAYE Scheme is open to all employees who have achieved the
qualifying length of service at the proposed date of grant
(initially set at 3months). Under the SAYE Scheme, an individual
who wishes to accept an invitation to apply form options to be
granted to him or her much take out a 3 or 5 year savings contract
with an approved savings body selected by the Company. The
individual makes a fixed monthly contribution over the life of the
savings contract and on maturity receives a tax-free bonus. The
monthly contribution can be a minimum of GBP10 and a maximum of
GBP500.
The price at which options may be exercised will be set by the
Directors at the date of grant and may be at a discount of up to a
maximum of 20 per cent. against the market value at the date of
grant of the Shares over which they are granted. The Option will
generally be exercisable by the holder within six-month period
after the bonus becomes payable on his or her relevant savings
contract.
All employees of the Group (including executive directors) at 3
March 2021 were invited to participate in the SAYE Scheme.
Employees were invited to subscribe for options over the Company's
ordinary shares of 10p each with an exercise price of 152p, which
represents a 20% discount to the closing middle market price of
190p per Share ("Options") on 2 March 2021, being the trading day
before the invitation for employees to participate was made. Other
than in the case of a takeover or demerger or similar event, an
option will generally be exercisable by the holder in relation to
the SAYE Scheme within the 6-month period after the bonus becomes
payable on his or her relevant savings contract. Any option not so
exercised will lapse. There are no conditions of exercise in
relation to options granted under the SAYE Scheme.
A total of 100 Eligible Employees elected to participate in the
SAYE Scheme, including and pursuant to these elections, options
over a total of 438,620 Shares have been granted. No charge in
respect of these awards has been recorded given the immateriality
of the amounts in the 1-month period to year-end.
The Supreme plc Company Share Option Plan 2021 ("the CSOP
Scheme")
The Company established the CSOP Scheme on 26 January 2021.
Grants under the CSOP Scheme may be made by the Company as
subscription Options or, with the consent of the Remuneration
Committee, by an existing shareholder over shares already
issued.
Under the CSOP Scheme certain eligible employees have been
granted options to subscribe for ordinary shares in the Company of
10p each with an exercise price of 174 pence per ordinary share
equal to the closing middle market price on 15 February 2021. The
options were granted on 16 February 2021 and may be exercisable by
the holder at any time between the third and tenth anniversaries of
the date of the grant. Upon exercise, the relevant Shares will be
allotted. A number of employees have been granted additional
options on the same basis under the Unapproved Scheme detailed
below to the extent that the total number of options granted to
them exceeded the maximum number permitted to be granted under the
CSOP Scheme by HMRC rules.
23 employees have been granted options under the CSOP over a
total of 206,886 shares and 4 employees have been granted options
under the Unapproved Scheme over a total of 94,825 Shares, being in
aggregate 301,711 shares.
The Supreme plc Unapproved Share Option Scheme 2021 ("the
Unapproved Scheme")
The Company established the Unapproved Scheme on 26 January
2021. Grants under the CSOP Scheme may be made by the Company as
subscription Options or, with the consent of the Remuneration
Committee, by an existing shareholder over shares already
issued.
As described in the Directors' Remuneration Report, on 9 March
2021 the Company awarded the following options to the executive
directors under the Unapproved Scheme.
Options to subscribe for a total of 5,825,000 Shares at nominal
value were granted to the CEO in two equal tranches. Each tranche
of options will be subject to a performance condition which must be
wholly satisfied for the relevant option to be exercisable. The
performance condition for the first tranche of options is that
total shareholder return per Share ("TSR") from Admission until the
third anniversary of Admission is at least 100 per cent. of the
placing price of 134 pence as at Admission (the "Placing Price").
The performance condition for the second tranche of options is that
the TSR from Admission until the fifth anniversary of Admission is
at least 200 per cent. of the Placing Price.
Options to subscribe for up to 111,940 Shares at nominal value
were granted to the CFO. The options are subject to a performance
condition requiring an average annual TSR of 7.5 per cent. to
become exercisable in part and an annual average TSR of 10 per
cent. to become fully exercisable, in each case measured over a
period of 3 years from Admission as against the Placing Price.
Under the CSOP and Unapproved Schemes, the Group has made awards
over 6,238,651 conditional shares to certain Directors and
employees.
The vesting of most of these awards is subject to the Group
achieving certain performance targets under the Unapproved Scheme,
measured over a three or five year period, as set out in the
Remuneration Report. The options will vest depending on achievement
of the Group's absolute total shareholder return ("TSR") as
follows:
Absolute % of element
Measurement period TSR p.a vesting
1 February 2021- 1 February
CFO awards 2024 =>10% 100%
1 February 2021- 1 February
2024 7.5% 0%
1 February 2021- 1 February
2024 =<7.5% 0%
1 February 2021- 1 February
CEO awards 2024 =>100% 100%
1 February 2021- 1 February
2024 <100% 0%
------------------------------------------ ---------
1 February 2021- 1 February
CEO awards 2026 =>200% 100%
1 February 2021- 1 February
2026 <200% 0%
------------------------------------------ --------- -------------
The awards under the CSOP Scheme and Unapproved Scheme to
employees other than as noted above are not subject to performance
conditions and vest subject to continued employment only.
In respect of the CFO and CFO awards, the fair value at grant
date is independently determined using a Monte Carlo simulation
model which calculates a fair value based on a large number of
randomly generated projections of the company's future share
prices. In respect of the CSOP and Unapproved Schemes, the fair
value at grant date has been determined using a Black-Scholes model
that takes into account the exercise price, the term of the option,
the share price at grant date and expected price volatility of the
underlying share, and the risk-free interest rate for the term of
the option as shown below:
CSOP/ CEO awards CEO awards
unapproved - 3 year performance - 5 year performance
scheme CFO awards period period
Grant date 16 February 9 March 2021
2021
--------------------- ------------ -----------------------------------------------------------
Share price at
grant date 176p 185p
--------------------- ------------ -----------------------------------------------------------
Exercise price 174p Nil
--------------------- ------------ -----------------------------------------------------------
Expected volatility 45%
--------------------- -------------------------------------------------------------------------
Projection period
(years) N/A 2.89 4.89
--------------------- ------------ ----------------------------------- ----------------------
Expected life
(years) 6.5 3 5
--------------------- ------------ ----------------------------------- ----------------------
Expected dividend
yield 4.10% 3.90%
--------------------- ------------ -----------------------------------------------------------
Risk-free interest
rate 0.34% 0.12% 0.31%
--------------------- ------------ ----------------------------------- ----------------------
Fair value per
award 50p 109p 74p 59p
--------------------- ------------ ----------- ---------------------- ----------------------
The expected volatility has been estimated based upon the
historical volatility of the FTSE AIM Retailers and Personal &
Household goods sub sectors.
A summary of the awards made during the year is set out
below:
CSOP/ CEO awards CEO awards
unapproved - 3 year performance - 5 year performance
scheme CFO awards period period
At the start - - -
of the year -
------------ ----------- ---------------------- ----------------------
Awards granted
in year 301,711 111,940 2,912,500 2,912,500
------------ ----------- ---------------------- ----------------------
At the end of
the year 301,711 111,940 2,912,500 2,912,500
------------ ----------- ---------------------- ----------------------
No awards are exercisable at the end of the year. The charge for
share-based payments in the year was GBP75,000 which is included
within Adjusted items.
26. Business combinations
Acquisition of GT Divisions Limited
On 30 October 2020, the Company purchased 100% share capital of
GT Divisions Limited for consideration of GBP1,072,000 excluding
costs of acquisition of GBP15,000.
Recognised amounts of identifiable assets acquired and
liabilities assumed
Fair value
Book value adjustment Fair value
GBP'000 GBP'000 GBP'000
Fixed assets
Customer relationships - 341 341
Trade name - 221 221
- 562 562
Current assets
Inventory 121 - 121
Debtors due within one year 284 - 284
Cash at bank and in hand 67 - 67
----------- ------------ -----------
472 - 472
----------- ------------ -----------
Total assets 472 562 1,034
Creditors
Due within one year (350) - (350)
(350) - (350)
----------- ------------ -----------
Total identifiable net assets 684
Goodwill 388
-----------
Total purchase consideration 1,072
===========
Consideration
Cash 1,000
Deferred consideration 72
Total purchase consideration 1,072
===========
Cash outflow on acquisition
Purchase consideration settled
in cash, as above 1,072
Less: cash and cash equivalents
acquired (67)
-----------
Net cash outflow on acquisition 1,005
===========
Following an extensive purchase price allocation exercise the
company considers customer relationships to be the primary asset
acquired. The multi-period excess earnings method was used in order
to value the customer relationships. The multi-period excess
earnings method considers the present value of net cash flows
expected to be generated by the customer relationships, by
excluding any cash flows related to contributory assets. In
addition, the company considers the trade name to be a secondary
asset acquired, which was valued using the relief from royalty
method. There were no further intangible assets identified and as
such the remaining consideration is represented as goodwill, which
stems from expected synergies from combining the operations of
Supreme Imports Limited and GT Divisions Limited
The deferred consideration was due for payment on finalisation
of the completion accounts, which occurred shortly after the
acquisition.
The revenue from GT Divisions Limited included in the Statement
of Comprehensive Income for 2021 was GBP478,000. GT Divisions
Limited also incurred a profit of GBP72,000 over the same
period.
If the acquisition had occurred on 1 April 2020, and we had not
hived up trade and assets of the business into Supreme Imports,
consolidated pro-forma revenue and profit for the year ended 31
March 2021 would have increased by GBP2,000,000 and GBP200,000
respectively.
27. Ultimate controlling party
The Directors consider the ultimate controlling party to be S
Chadha and his concert party.
28. Other financial commitments
See note 23.5 or details of the financial commitments under US
dollar forward exchange contracts.
29. Related party transactions
29.1. 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
2021 2020
GBP'000 GBP'000
Short-term employee benefits 806 560
Post-employment benefits 6 6
----------- -----------
Total compensation 812 566
=========== ===========
29.2. Transactions and balances with key personnel
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Loan balances with Directors:
Balance outstanding from director (5) (1)
========== ==========
During the year S Chadha purchased certain fashion hire assets,
with a net book value of GBP583,000, for GBP552,000, which was
deemed to be market value.
29.3. Transactions and balances with related companies and
businesses
Year Ended Year Ended
/ As at / As at
31 March 31 March
2021 2020
GBP'000 GBP'000
Transactions with related companies:
Rent paid to Chadha Properties Limited 180 180
Loans provided to Nash Peters Limited - 174
=========== ===========
Balances with related companies:
Amounts owed by Nash Peters Limited 1,790 1,790
Amounts owed to Supreme 8 Limited (3,392) (3,392)
=========== ===========
The above companies are related due to common control and
Directors.
Amounts owed by Nash Peters, related due to common
directorships, are due for repayment on demand and interest is
charged on the outstanding balance at a rate of 5%. This balance
was repaid in full shortly after year end.
Amounts owed to Supreme 8 Limited, a minority shareholder, are
for a loan due for repayment on demand and interest is charged on
the outstanding balance at a rate of 3%. GBP1,790,000 of this
balance was settled shortly after year end.
30. Analysis and reconciliation of net debt
1 April Other non-cash 31 March
2019 Acquisitions changes Cashflow 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank
and in hand 1,694 - (30) 5,054 6,718
Current borrowings (4,799) - (835) (1,547) (7,181)
Non-current
borrowings (18,082) - 669 (3,392) (20,805)
--------- ------------- --------------- --------- ---------
Net debt (21,187) - (196) 115 (21,268)
========= ============= =============== ========= =========
1 April Other non-cash 31 March
2020 Acquisitions changes Cashflow 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank
and in hand 6,718 67 - 720 7,505
Current borrowings (7,181 ) - (741) 838 (7,084)
Non-current (20,805
borrowings ) - (47) 12,802 (8,050)
--------- ------------- --------------- --------- ---------
(21,268
Net debt ) 67 (788) 14,360 (7,629)
========= ============= =============== ========= =========
31. Post balance date events
On 8 June 2021, a total of 127,094 share options were exercised
by a former employee under the Company's EMI Scheme as an
acknowledgement of his contribution and long service to the
Company.
Pursuant to the exercise of the above share options, 127,094 new
ordinary shares were admitted to trading on AIM on 10 June
2021.
At the date of signing these financial statements the total
number of Ordinary Shares in issue is 116,627,074 and the total
number of voting rights is 116,627,074.
On 10 June 2021 Supreme Imports Limited acquired the entire
share capital of Vendek Limited, a leading Dublin-based distributor
of batteries and lighting products, for initial consideration of
EUR1.32m. The completion mechanism has not been finalised at the
date of signing these financial statements and this, together with
a full purchase price allocation exercise, will be finalised and
reported in the interim accounts for the period to 30 September
2021.
On 30 June 2021, Supreme Imports Limited acquired the brands and
stock of Sci-MX Nutrition Limited, a leading sports nutrition and
supplements business for a consideration of GBP2.3m, the accounting
for which (given the proximity to the date of signing these
financial statements) had not been finalised.
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END
FR RLMBTMTJBTLB
(END) Dow Jones Newswires
July 20, 2021 02:00 ET (06:00 GMT)
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