Supreme plc (LON:SUP) Chief Executive Officer Sandy Chadha and Chief Financial Officer Suzanne Smith caught up with DirectorsTalk for an exclusive interview to discuss final results, new distribution contracts, plans for generated cash and what’s driving confidence in the business.
Q1: Now, results for the year ended 31st March 2023 have now been published, Sandy, what would you describe as the highlights? What were the main points we should take from those results?
A1: I think the main point is our revenue growth, it’s been substantial in the last year and we’ve managed to double our vaping category and have growth in the wellness category, even with a tough backdrop of inflationary costs last year.
They’re the main highlights really from last year.
Q2: You also announced a new major distribution agreement with some of the UK biggest retailers, can you tell us more about hat and why it’s important to Supreme?
A2: For people that don’t know the company, we’re in four main categories; batteries, lighting, vaping, and wellness, and £76 million of our total turnover is vaping, it’s the fastest growing area.
The brand ElfBar and Lost Mary are two of the leading, biggest by market share, brands in the UK and it’s a very good honour to be a master distributor supplying into some of the most well-known supermarket with the products.
We’ve just started this process recently so it’s really important in terms of its revenue, incremental revenue bottom line. I think we’ve added £2 million to EBITDA for this year, over a 9-month period, £3 million EBITDA over a 12-month period so that’s why it’s important for all of those reasons.
Q3: Suzanne, the business now highly cash generative and delivering £19.3 million cash from operations in the period. Do you have any plans for the cash that you’re generating?
A3: We have a 25% dividend policy, first of all, so we will continue to honour that dividend policy, and then, as we have done this year, we’d expect to invest that in continued efforts in M&A. We are fairly CapEx light generally in terms of our plant and machinery and investing in our ongoing manufacturing facilities, however there’ll always be some of the cash we generate earmarked for that. Of course, we’re a stock business so we do require working capital even just to grow organically.
So, I suspect a spread of all the above, in what proportions will really be determined by the M&A that we do, and that’s fairly opportunistic in nature so any mix of the above but we’ll definitely find a use for it.
Q4: Just looking ahead, the Board now expects trading to be significantly ahead of consensus, what’s driving that confidence in the Supreme business?
A4: It’s Q1 performance predominantly so we’re delighted with the start that the business has made for the year and the core business is trading very well, particularly in wellness and in vaping.
The acquisitions we undertook in FY23, they’re all performing ahead of how we’d expected them to which is really pleasing and really cements our M&A strategy really. It reaffirms that we’re going after the right businesses, integrating them in the correct fashion and that’s driving £1 million of the £3 million upgrade overall.
The remaining £2 million is as a result of the vaping distribution contracts that we announced.
