29th Jan 2024 15:00
(Alliance News) - London listings Chill Brands Group PLC and Supreme PLC looked to ease investor worry, to varying degrees of success, after they fell into the cross-hairs of measures by the UK government to regulate disposable vape products.
Chill Brands distanced its product range from the disposable types, while Supreme has previously talked up its efforts to mitigate a growing rise of underage people vaping.
Chill Brands shares tumbled 31% to 2.70 pence. Supreme was 8.6% higher at 114.00p, paring earlier losses and surging into the green on a buyback announcement and bullish trading update.
Supreme said it enjoyed an "excellent trading performance" in the three months to December 31, its third-quarter which is traditionally its busiest.
Supreme said: "Building on our operational success and strategic response to regulatory changes and the board's ongoing confidence in the business, Supreme proposes to launch up to GBP1 million share buyback programme over the next three months. This initiative reflects the board's confidence in the company's future value and our dedication to enhancing shareholder returns."
The announcement came after the UK announced a possible crackdown on disposable vapes. Supreme said it is "ahead of the curve" and has already implemented "a number of proactive measures".
"Supreme remains confident that vaping is, and will continue to be, the most credible and effective alternative to cigarettes. Supreme has an established suite of fully compliant rechargeable pod systems, produces over 60 million 10ml bottles of e-liquid annually and has already become a principal supplier to the UK government's "swap to stop" scheme. None of these revenue streams are expected to be adversely affected by the changes proposed by the government earlier today," it added.
Back in October, it said it was tackling an increased interest from underage people in its vaping products, another key issue hanging over the vaping sector.
It said it would adopt plain packaging, discontinue all brightly coloured disposables, change names of flavours to remove its appeal for underage people, trade only with retailers with age robust verification, and co-operate with the UK government.
On disposable vapes, Supreme said it was out vape disposal units across the entire estate of its largest retail customer, B&M European Value Retail SA.
Prime Minister Rishi Sunak is set to announce the plan to implement the ban, which is aimed at tackling the rise in young people vaping and protecting children's health, during a visit to a school.
The announcement forms part of the UK government's response to its consultation on smoking and vaping, which was launched in October last year.
The ban is expected to come into force at the end of 2024 or the start of 2025.
Chill Brands said it is "committed to strict compliance with all relevant laws". It noted its nicotine-free vape products are differentiated from others in the market due to the inclusion of USB-C recharging ports.
"This feature sets Chill Brands' vape product apart from more commonplace disposable options, providing for a longer period of use by consumers," the firm added.
"Chill Brands is already preparing to launch a fully compliant reusable pod system vapour device and will accelerate its efforts to bring this product to market. The company will work with its existing contracted retailers to prepare them to stock this range extension while they continue to sell through the existing range of Chill ZERO products."
Chief Executive Officer Callum Sommerton said the company is "agile" and can adjust to legislative changes.
AJ Bell analyst Russ Mould commented: "Sales of vapes have grown in recent years, with numerous manufacturers and suppliers capitalising on the trend by offering more products in as many flavours and styles as you can imagine. Naturally, companies caught up in the government's clampdown face a sharp hit to earnings if there continue to be new measures to stamp out bad habits involving vaping among consumers.
"Chill Brands implies it is not affected by the latest announcement because recharging ports on its products mean they are not classified as disposable. The market seems to question this logic given the fierce share price sell-off. Effectively, investors are saying there is a major risk to earnings, whether it is from Sunak's latest announcement or the general direction of travel by the government to stop young people getting into the vaping habit."
By Eric Cunha, Alliance News news editor
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