5th Jul 2023 12:01
(Alliance News) - Supreme PLC posted some well-received updates on Wednesday, and its outlook "has certainly not disappointed", said Berenberg analysts.
Supreme is a Manchester-based firm that manufactures and distributes battery, lighting and vaping products. It reported a year of robust trading in the 12 months to March 31, and raised its expectations for the current year.
"A combination of strong performance in the existing business, alongside a sizeable new vaping distribution contract, both [contribute] to meaningful upgrades to our estimates," said analysts Michael Benedict and Matthew Chadwick.
It said revenue rose 19% year-on-year to GBP155.6 million from GBP130.8 million, though pretax profit fell 11% to GBP14.4 million from GBP16.3 million. It plans to pay out a final dividend of 2.2p, bringing the annual total to 3.0p - down from 6.0p a year before.
"[The lower earnings] were as expected, primarily as a result of temporary headwinds relating to recent acquisitions (eg carrying duplicate cost basis prior to consolidation), Lighting weakness and cost inflation in the Sports Nutrition and Wellness category," said Berenberg analyst Michael Benedict.
Despite the lower profit and payouts, the market responded favourably to the results, with a firm eye on its Vaping division.
Shares in Supreme were up 8.5% at 113.36 pence each in London on Wednesday around midday.
The revenue growth was boosted by an "outstanding" performance from its Vaping division, where revenue nearly doubled to GBP76.1 million.
Further, it announced a "significant" vaping distribution agreement. It has been selected as the master distributor for the UK vape brands, ElfBar and Lost Mary. It will supply the products to various large UK retailers including Morrisons, Tesco PLC and WH Smith PLC's Travel business.
The contract should provide the company with a chance to "cross-sell additional Supreme products" to the retailers, Berenberg considered.
Supreme expects the deal to generate between GBP25 million and GBP30 million in revenue and around GBP12 million in incremental adjusted Ebitda for the current year.
The company now expects trading in the year to be "significantly ahead" of market consensus of GBP159 million in revenue, and adjusted Ebitda of GBP22.6 million.
In response, Berenberg reiterated its Buy recommendation, increasing the target price for the stock to 190p from 170p.
By Elizabeth Winter, Alliance News senior markets reporter
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