RNS Number : 0361F
Supreme PLC
05 July 2023
 

5 July 2023

Supreme plc

("Supreme," the "Company" or the "Group")

 

Audited Final Results for the Year Ended 31 March 2023

-       Robust trading across FY23 and a particularly strong second half, underpinned by an outstanding performance from the Vaping category and earnings-enhancing acquisitions

-       Record levels of cash generated from operations

-       Very positive outlook, supported by a significant profit upgrade for FY24

 

Supreme (AIM:SUP), a leading manufacturer, supplier and brand owner of fast-moving consumer products, announces its audited final results for the year ended 31 March 2023 ("FY23").

Financial highlights

  

 

·      Revenue growth of 19%; half of which was driven by earnings-enhancing acquisitions and the remainder from strong organic growth

·      Vaping division delivered a record performance nearly doubling revenues to £76.1 million (FY22: £43.6 million) and increasing gross profit to £28.1 million (FY22: £19.5 million)

·      Highly cash-generative in the period, delivering £19.3 million cash from operations in the period (FY22: £11.8 million), resulting in an Adjusted net cash4 position of £3.2 million by year end (FY22: Adjusted net debt4 of £1.9 million).   

·      Record levels of investment in M&A and capex ("investing activities") of £11.3 million (FY22: £3.8 million) to support future growth

·      Disposal of the T-Juice brand generated £4.0 million of cash in FY23 and the ongoing strategic partnership with the buyer means Supreme retains exclusive manufacturing rights

 

Operational highlights

·      Three acquisitions completed, with two having been successfully integrated and immediately Adjusted EBITDA1 enhancing during the year and the third acquisition completed immediately prior to year-end

·      Secured a 15-year lease on a new facility in Manchester which will significantly expand the Group's in-house distribution capabilities, with activities from the site expected in Q2 of FY24

·      Significant progress reported on the Group's ESG strategy, with a particular focus on energy consumption and its people agenda

 

Dividends

·      A final dividend, subject to shareholder approval at the Annual General Meeting on the 26 September 2023, of 2.2 pence per share.

·      The Group paid an interim dividend of 0.8 pence per share, which together with the final dividend take total dividends for the year to 3.0 pence per share

 

Outlook / Current Trading

·      The Group has made a very solid start to FY24. The core business and the FY23 acquisitions are all performing strongly and as a result the Board expects Adjusted EBITDA1 to be ahead of latest expectations by at least £1 million. 

·      In addition, the Group now expects to generate a further £25-30 million of revenue and around £2 million incremental Adjusted EBITDA1 in FY24 in respect of a master distributor appointment with the UK's leading vaping brands; Elfbar and Lost Mary.

·      As a result, the Board now anticipates that trading in FY24 will be significantly ahead of current consensus5  

 

Sandy Chadha, Chief Executive Officer of Supreme, commented:

"Supreme has delivered a strong performance across the year punctuated by an outstanding contribution from our Vaping division, which has almost doubled revenues in the year.

Our commitment to providing highly affordable but competitively priced products sits at the heart of our business and our diverse client base continues to provide a stable platform for growth.

As we look to the future, we remain committed to expanding our product set, both organically and via acquisition, which in turn creates greater opportunities to cross sell and forge ever closer bonds with our customers.

I am delighted with the strong performance of the Group so far in FY24 and to have had our vaping distribution capabilities recognised by one of the world's biggest vaping brands is testament to our expertise and our reputation.

Lastly, I would like to thank everyone in the business who have been exceptional throughout the year and look forward to updating all our stakeholders later in the year on our continued progress."

 

Retail Investor Presentation:

A presentation for retail investors covering the results for the year ended 31 March 2023 will be held at 11.00 a.m. on Thursday 6th July 2023.

The online presentation is open to all existing and potential shareholders and registration is free. Questions can be submitted during the presentation and will be addressed at the end.

To register for the event, please go to https://www.equitydevelopment.co.uk/news-and-events/supreme-investor-presentation-6july2023

1Adjusted EBITDA means operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and non-recurring items

2Adjusted profit before tax means profit before tax and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and non-recurring items

3Adjusted EPS means Earning per share, where Earnings are defined as profit after tax but before amortisation of acquired intangibles and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments, fair value movements on non-hedge accounted derivatives and non-recurring items

4Adjusted net debt means net debt as defined in Note 29 to these financial statements excluding the impact of IFRS16

5Company compiled analyst consensus for the year ending 31 March 2024 prior to the release of this announcement and the vaping distribution opportunity announcement (dated 5 July 2023) was revenue of £159 million and Adjusted EBITDA1 of £22.6 million.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

Enquiries:

 

Supreme plc

Sandy Chadha, Chief Executive Officer

Suzanne Smith, Chief Finance Officer

 

via Vigo Consulting

Grant Thornton UK LLP (Nominated Adviser)

Samantha Harrison / Harrison Clarke / Samuel Littler

 

+44 (0)20 7383 5100

Berenberg (Broker)

Mark Whitmore / Marie Moy / Mara Grasso

 

+44 (0)20 3207 7800

Vigo Consulting (Financial Public Relations)

Jeremy Garcia / Kendall Hill

supreme@vigoconsulting.com

+44 (0)20 7390 0230

 

About Supreme

Supreme supplies products across five key categories; batteries, lighting, vaping, sports nutrition & wellness, and branded household consumer goods. The Company's capabilities span from product development and manufacturing through to its extensive retail distribution network and direct to consumer capabilities. This vertically integrated platform provides an excellent route to market for well-known brands and products.

The Group has over 3,300 active business accounts with retail customers who manage over 10,000 branded retail outlets. Customers include B&M, Home Bargains, Poundland, The Range, Sainsburys, Sports Direct, Londis, SPAR, Costcutter, Asda, Halfords, Iceland and HM Prison & Probation Service. 

In addition to distributing globally-recognised brands such as Duracell, Energizer and Panasonic, and supplying lighting products exclusively under the Energizer, Eveready and JCB licenses across 45 countries, Supreme has also developed brands in-house, most notably 88Vape and has a growing footprint in Sports Nutrition & Wellness.

https://investors.supreme.co.uk/

Chair Statement

 

I am pleased to report that Supreme delivered a robust performance across the financial year ended 31 March 2023 with strong second half momentum going into FY24. This performance, achieved against a challenging macroeconomic backdrop, includes outstanding organic and acquisitive growth in our key Vaping division, and solid progress across our Batteries and Sports Nutrition & Wellness segments. Despite well-documented global supply chain and inflationary pressures, Supreme has continued to make significant operational and financial progress and is positioned strongly for future growth as we focus on delivering on our strategic aspirations.

 

Supreme delivered revenue of £155.6 million (FY22: £130.8 million), up 19% year-on-year, whilst Adjusted EBITDA1 fell by 8% to £19.4 million (FY22: £21.1 million), a direct result of the temporary setback to Lighting. Supreme remains a highly cash-generative business, having generated cash from operations of £19.3 million (FY22: £11.8 million) and is further supported by a healthy balance sheet and unutilised borrowing facilities of £30 million. The Group's vertically integrated model remains resilient and continues to facilitate the development of the business and our various interconnected functions.

 

In line with our strategy to expand our in-house manufacturing and distribution operations, we secured a 15-year lease on a new facility near our existing warehouse in Manchester and remain on track to commence activities from this site in FY24.

 

The Vaping division remains the Group's key growth driver, and we continued our impressive trading momentum in this category throughout the financial year by delivering a 75% increase in revenue year-on-year. In addition to generating significant organic growth, largely through robust sales and complementary new product development in our market-leading 88vape brand, we delivered the immediately earnings-enhancing acquisitions of Liberty Flights, Cuts Ice and Superdragon. Liberty Flights and Cuts Ice were integrated into the wider Group, significantly scaling Supreme's vaping offering whilst providing considerable cross-sell opportunities. These acquisitions reflect the Company's strategy to support a tobacco-free UK by offering both credible and safer alternatives for nicotine consumption.

 

Acquired as part of the Cuts Ice transaction, we announced the disposal of the intellectual property of T-Juice to an associated company of leading French e-cigarette and e-liquids wholesale La Vape Professional Distribution ('LVP') in March 2023. This new arrangement ensures Supreme retains the exclusive manufacturing rights to T-Juice for five years, enabling the Group to focus on its core manufacturing expertise and the transaction generated £4 million of cash for the Group on completion.

 

Our Sports Nutrition & Wellness segment delivered a credible performance, as we continued to mitigate the effects of well-publicised inflationary raw material pressures and supply chain headwinds on the sector. Following the successful rebrand of Sci-MX in the first half of the financial year, we are well-poised to capitalise on the fast-growing global demand for sports nutrition products, including portable protein snacks and supplements, as whey prices begin to normalise.

 

Stabilising the Lighting division was a key priority for the Group after a temporary setback derived from customer over-stocking in FY22, and pleasingly we continued to make progress recovering the category despite its overall disappointing performance in the financial year where gross profit fell from £9.0 million in FY22 to £4.1 million in FY23. Strengthened by long-term exclusive license and distribution agreements, as well as increased networking and market expansion opportunities generated following the integration of Vendek, we continued to focus on enhancing our manufacturing of private and white label lighting products, ensuring we strive to provide the best service for brands and retailers.

 

As Chair I am particularly proud of the brands we have acquired this year; our extremely talented team continues to identify, execute and integrate complementary, well-priced, immediately earnings-enhancing brands into the Supreme platform, ensuring this does not detract or dilute our core business offering. It is a clear marker of the exceptional talent we have in our business.  We remain focused on exploring further M&A and partnership opportunities to extend our manufacturing and distribution capabilities, retaining a diverse offering of great value, high-quality products to our customers and ultimately the consumer. We firmly believe that Supreme will continue to play an integral role in minimising the economic impact of the cost-of-living crisis on consumers, and we look ahead with confidence as we strive to deliver affordable items to market via leading retailers and our D2C online channels.

 

Supreme responded quickly to the cost-of-living issues faced by our colleagues and awarded an immediate 10% pay increase to more than half of our colleagues, regardless of location, role or length of service in September 2022. The scheme was directed towards those colleagues who were particularly impacted by the cost-of-living crisis. It is testament to the culture and values within our business that Sandy, our founder and CEO, volunteered to sacrifice his entire salary from then until the end of the financial year in order to finance this in FY23. We realise that our colleagues are one of our key assets, many of whom worked tirelessly through the Covid-19 pandemic and who continue to be pivotal to the future success of the Group. 

Encouraged by the recent strong second half trading performance, the Board is pleased with the Group's progress, and on its behalf, I would like to thank all employees for their continued diligence and support. By responding effectively and prudently to turbulent macroeconomic trading conditions, our highly experienced management team continues to drive Supreme forward, and the Board has full confidence in the Company's ability to deliver on our medium to long term growth potential.

 

Paul McDonald

Non-executive Chair

 

4 July 2023

 

1Adjusted EBITDA means operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and non-recurring items

 



 

CEO's Review

 

Introduction

 

I am delighted to announce our results for the year ended 31 March 2023, following a period of substantial financial and operational growth for Supreme, driven by an outstanding performance from our Vaping category.

 

Supreme delivered an 19% increase in revenue to £155.6 million (FY22: 130.8 million), alongside a 6% growth in gross profit to £40.9 million (FY22: £38.5 million). Adjusted EBITDA1 was £19.4 million (FY22: £21.1 million), which despite the impact of destocking within our Lighting category, proved to be a highly credible performance. The business generated cash of £19.3 million from operations in FY23 (FY22: £11.8 million) and I am particularly proud that the Group reported a positive £3.2 million cash position net of bank borrowings at year end; a £16.1 million increase versus the half year position six months earlier. Due to the highly cash-generative nature of its core operations, the Group was able to invest record levels into M&A and capital expenditure totalling £11.3 million (FY22: £3.8 million) and paid dividends of £5.4 million (FY22: £2.5 million).  

 

We gained significant trading momentum in the second half of the year, driven by strong organic growth across our key categories. Our 88vape brand generated excellent sales traction to consolidate our position as a market leader in the vaping sector, alongside additional market traction generated by the acquisitions of Liberty Flights and Cuts Ice.

 

We cemented our approach to M&A during FY23 having acquired three more complementary, earnings-enhancing businesses in the vaping sector. Each acquisition brought its own well-recognised brands together with opportunities for synergies when integrated into the Supreme platform. Liberty Flights and Cuts Ice were acquired in the first half of the year and together contributed to £12.8 million of the Group's revenue growth and Superdragon was acquired immediately before year end and has already made a positive start to FY24. Identifying targets that meet our non-negotiable investment criteria, our speed of deal execution and tenacity of operational and financial integration defines our M&A strategy, which remains a key pillar of growth for Supreme.  

 

As a business, we are actively engaged in the debate to make the UK tobacco free and welcomed the UK Government's recent "Achieving Smoke-free 2030" initiative, particularly its recognition of vaping as "the most effective" tool for smoking cessation. We fully support the new policies adopted, including the proposed launch of a fully funded national 'swap to stop' scheme to provide vapes as a first-line quit aid in local stop smoking services, and are encouraged by the robust plans to penalise brands and manufacturers who actively target young vapers.

 

Our people remain one of the Company's most valuable assets. Internally, we responded rapidly to the emergence of the cost-of-living crisis, announcing in September 2022 permanent and out-of-cycle pay rises for all staff earning less than £30,000. 70% of the workforce qualified, with around 50% of staff receiving 10% pay rises. To finance this scheme and simultaneously keep our profit commitments to our shareholders, I sacrificed my salary for the second half of FY23. We have an excellent track record of retaining talent, and by supporting our employee base, particularly those most affected by the crisis, I am confident we can continue to be recognised as a great place to work.

 

We are proud of the attractive portfolio of great value products we have developed and look forward to continuing to supply an extensive customer base extending over the private and public sectors. The Board firmly believes that the Company can achieve its strategic aspirations as we aim to continue on our upward growth trajectory in FY24 and beyond.

 

Operational Review

 

The Group has continued to evolve its business model in the period, adding new customers and brands alongside broadening the reach of our existing brands and products across our established customer base. Given the majority of our brands are either licensed, own-brand or acquired, as well as white-labelled, Supreme has established incredibly loyal and long-term customer partnerships.

 

During FY23, we agreed a lease for a new warehouse and office site proximal to our existing facilities, further consolidating Manchester as the focal point of our business. Once activities commence from the hub, which is projected to occur in FY24, we will be able to increase the efficiency of our overarching integrated platform, streamline both storage and distribution and accommodate future bolt-on M&A.

 

With this strong platform central to our business, management will continue to focus on the following strategic growth drivers, namely:

 

·      continue to explore and execute on complementary earnings enhancing acquisitions;

·      further leverage cross-sell opportunities to expand our customer footprint and average revenue per customer;

·      continue to explore and develop new product verticals that complement Supreme's customer base, focused on a high quality and good value consumer proposition;

·      increase manufacturing efficiencies through further economies of scale and bringing the manufacture of certain products in-house;

·      enhance online distribution and services to further grow our B2B and D2C sales channels; and

·      expand our international footprint through existing customer relationships and strategic acquisitions.

 

Vaping

 

The Group's Vaping division delivered a record performance in FY23, underpinned by a combination of significant organic growth and the completion and integration of a number of earnings enhancing acquisitions. The division nearly doubled revenues, generating £76.1 million (FY22: £43.6 million), an increase of 75% year-on-year, with incremental revenue from the acquisitions of Liberty Flights and Cuts Ice constituting 40% of the growth.

 

Our core 88vape brand delivered another outstanding performance and, as we continue to expand our product range and optimise our D2C online sales capabilities, we anticipate the brand's growth will accelerate in the medium to long term. Driven by retailer and consumer demand, and to complement our existing hero e-liquid ranges, Supreme launched a range of disposable vapes during FY23 which has generated almost £12 million in incremental revenue in its first year. Pleasingly, our contract with UK prisons also reported growth of 25% year-on-year following further competitive displacement and increased volumes.

 

Following a seamless process, the Liberty Flights and Cuts Ice businesses were integrated into the wider Group, which is testament to the hard work and commitment of the Supreme team and further supports our track record of successful M&A integration. In addition, we also completed the acquisition of Superdragon in March 2023, an experienced manufacturer of e-liquids. Collectively, the vaping acquisitions have significantly scaled the Group, providing Supreme with complementary owned brands, access to new customer bases and territories, wider manufacturing know-how and state-of-the-art technology.  Most importantly, all the acquired vaping brands share Supreme's ethos: to support a tobacco-free UK by offering adults credible, affordable and safer alternatives for nicotine consumption.

 

Acquired as part of the Cuts Ice transaction, we announced the disposal of the intellectual property of T-Juice to an affiliate of leading French e-cigarette and e-liquids wholesaler, LVP, in March 2023. Supreme retains the exclusive manufacturing rights to T-Juice as part of this arrangement and expects to generate around £3 million in annualised revenue. In addition to the ongoing manufacturing revenue, the deal generated £4 million of cash for the Group on completion.

 

Supreme has consolidated its position as a market-leading manufacturer, distributor and brand owner in the vaping sector, and continues to explore additional opportunities to grow both its market share in an ever-expanding industry boosted by increasing Government support.

 

 

 

Lighting

 

As previously reported, the Group's Lighting category experienced a challenging year of trading, with customer overstocking issues, alongside well-documented global supply chain and transportation problems impacting numerous businesses in the industry, with a resulting 43% reduction in revenue to £15.4 million (FY22: £27.0 million). Encouragingly, Supreme has since stabilised the category, and the Company expects it to recover across FY24 and FY25.

 

The category has retained all its listings, whilst every existing customer relationship remains in-tact, facilitating the recovery process in the medium to long term. In addition, our largest retail customers have now provided us with access to their EPOS and stockholding data, previously prohibited, allowing us to measure stock levels and forecast demand more accurately. This initiative potentially de-risks this category going forward with the expectation that the FY23 setback was both temporary and very unlikely to reoccur without warning.

 

Commercially, the Group secured an extension to our existing licenses with Energizer and Eveready, which is now valid until 2030, as we proactively focused on strengthening existing license agreements with well-known global brands and retailers. A new licence agreement has also been agreed with Black and Decker, a trusted brand for retail customers seeking an alternative to their own label products, whilst the integration of Vendek has also presented significant commercial opportunities.

 

Looking ahead, Supreme is committed to building on the significant recovery progress made in the second half of the financial year and we anticipate the division will deliver an improved performance across FY24.

 

Sports Nutrition & Wellness

 

The Sports Nutrition & Wellness category delivered revenues of £16.7 million in FY23 (FY22: £15.9 million), which was a solid performance. During FY23, the Group unveiled a new-look Sci-MX, Supreme's principal powders brand. Relaunching the entire range has delivered strong sales momentum, whilst the Group also brought manufacturing in-house to increase profitability in the longer term and streamline the supply chain following the acquisition of the brand in FY22.

 

Protein powders represent approximately 70% of the segment's revenue and significant inflationary pressures impacting powders, particularly whey, have inevitably impacted the performance of the category. Supreme took a prudent approach to overcoming these macroeconomic headwinds by electing to support retailers through this price hike to protect long-term relationships and future trading aspirations in what is a fast-growing market.

 

Alongside investment in marketing and advertising initiatives, we launched exciting products across a number of our key brands, including new Battle Bites protein bars and other nutritional snacks.

 

Vitamins, which continue to operate from a low base, traded in line with expectations, and we continued to roll-out new vitamins pouches and supplements to expand our great value digital-only Sealions range.

 

As raw material price pressures ease, Supreme is focused on increasing manufacturing capacity for the category in FY24 and remains well-placed to capitalise on strong consumer demand for a diverse range of sports nutrition and wellness products.

 

Batteries

 

The Batteries category delivered another year of solid profitable growth, generating revenue of £39.5million in FY23 (FY22: £34.9 million), 13% growth. Batteries remain a sticky consumer product which, for several retailers, are essential items on their stocklists. Consequently, Supreme has been able to establish long-term customer relationships through this channel, generating opportunities to cross-sell additional products from our portfolio. This highlights not only the integral role the division plays in Supreme's overarching growth strategy, but also the effectiveness of the Group's vertically integrated platform in attracting customers across multiple verticals.

 

The backbone of the business and requiring minimal costs to serve, Supreme is focused on enhancing its battery distribution functions and bolstering existing relationships with retailers to generate increased revenues from the category.

 

Outlook

 

Supreme remains a highly cash-generative business, underpinned by a trusted vertically integrated platform that facilitates new business momentum and ensures products efficiently reach end markets. Continued investment in both our people and facilities demonstrates our commitment to our long-term growth plans, and we look ahead with confidence as we strive to deliver on our strategic priorities.

 

Looking at FY24, the Group expects to maintain its strong growth trajectory, delivering another strong year of profitable growth across all product categories. We have seen a very strong start to FY24 with all areas of the business performing very well.

 

In addition, I am delighted to have recently been appointed as master distributor for Elfbar and Lost Mary, two of the UK's biggest vaping brands. This appointment recognises our unrivalled and scaled UK distribution capabilities as well as our expertise in the vaping sector, particularly with reference to governance and compliance.

 

Accelerated trading in the core business combined with this vaping distribution opportunity means that we expect trading for the year ended 31 March 2024 to be significantly ahead of previous market expectations5

 

Sandy Chadha

Chief Executive Officer

 

4 July 2023

 

 

1Adjusted EBITDA means operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and non-recurring items

5Company compiled analyst consensus for the year ending 31 March 2024 prior to the release of this announcement and the vaping distribution opportunity announcement (dated 5 July 2023) was revenue of £159 million and Adjusted EBITDA1 of £22.6 million.



 

Chief Finance Officer's Review

I am pleased to present these financial results for the year ended 31 March 2023. Overall, the Group delivered a robust financial performance; revenue increased, the balance sheet strengthened and the Group's cash reserves grew. In addition to a pleasing performance from our core business, we completed and integrated two earnings-enhancing acquisitions with a third acquisition completed on the final day of the financial year. The table below summarises the key financial measures and the comparisons to prior year. The commentary in this review references alternative performance measures which are described as 'Adjusted', meaning they exclude share-based payment charges, fair value movements on non-hedge accounted derivatives and non-recurring items referred to in Note 7 to the Financial Statements. In addition, this review also references 'net debt' which is defined as closing cash, as reported on the balance sheet, net of borrowings, as defined in Note 20.

 

Revenue

Revenue for FY23 was £155.6 million (FY22: £130.8 million), an increase of 19%, the drivers for which have been presented in the product categories below. 52% of the growth, £12.8 million, came from acquisitions whilst the remainder of the growth, £12.0 million, came from the core business. Furthermore, this core business growth of £12.0 million was the net effect of a reduction in Lighting revenue of £11.6 million combined with revenue growth across the remainder of the core business of £23.6 million.

Revenue by product category

Revenue for Batteries was £39.5 million in FY23 (FY22: £34.9 million), growth of 13%, arising from a combination of increased volume and price. This increased volume, at a time of overall market decline, was especially pleasing and highlights the strength of Supreme's offering as well as the resilience of its customers. This category grew significantly during COVID and was initially expected to reverse, which makes the continued growth a particularly pleasing result.

Revenue for Lighting was £15.4 million (FY22: £27.0 million), a fall of 43% in what has been a challenging year, and the first year of revenue contraction since the category commenced trading over 15 years ago. This reduction was driven from a slowdown in consumer spending and retailer overstocking in FY22. Importantly, we have retained all customers and retail listings and we are confident that our collaborative approach with customers during this period has cemented our longer-term relationships with these retailers. The category is expected to recover across FY24 and FY25.

Revenue for Vaping was £76.1 million (FY22: £43.6 million), growth of 75%. £12.8m (40% of the growth) came from the acquisitions of Liberty Flights and Cuts Ice and a third acquisition, Superdragon, was completed on the final day of FY23 and has already added to FY24 earnings. Aside from acquisitions, the category reported organic growth of £19.7 million, arising from the launch of a range of disposable vapes as well as strong growth in Supreme's contract with UK prisons following competitive displacement and increased volumes. Importantly, the revenue from the launch of disposable vapes has not had any impact on the sale of the 10ml eliquid product, the category's hero product, which has continued to gain market share.

Revenue for Sports Nutrition & Wellness was £16.7 million (FY22: £15.9 million), growth of 5%, a period characterised by record levels of raw material inflation. The reduction in gross profit as a percentage of sales from 22% in FY22 to 16% in FY23 arose because Supreme chose to absorb some of this price inflation into its own margin, temporarily, in the spirit of fair, honest, low pricing. Whey prices have now started to fall and the gross profit percentage is expected to recover accordingly in FY24.

Revenue from its various 'Other' channels came to £7.8 million (FY22: £9.4 million) a direct result of the rationalisation of the category to redeploy working capital, resource and warehouse space to more higher margin areas of the business.

 

Gross profit

Gross profit for FY23 was £40.9 million (FY22: £38.5 million), growth of 6%. As a percentage of revenue, gross profit was 26% (FY22: 29%). This reduction of 3% was largely a result of sales mix within categories.  In Vaping in particular this was driven by the increased focus on hardware sourced from the Far East in the form of disposable and pod vapes and in Lighting this was due to the sharp reduction in lighting sourced from the Far East and shipped direct to customers in the UK and Europe. Gross profit was also affected by the inflationary price pressures that arose in Sports Nutrition & Wellness and the temporarily lower margins arising from the acquisitions before their operations were integrated into the Supreme platform. 

 

Adjusted EBITDA1

Administrative expenses, excluding depreciation (£2.2 million), amortisation (£0.9 million) and Adjusted items within administrative expenses (£3.6 million) were £21.5 million (FY22: £17.5 million), an increase of £4.0 million.

The largest contributor to this increase was the incremental overheads associated with Liberty Flights (£2.8 million), which was earnings-accretive at an EBITDA level. Secondly, selling costs (that typically increase in line with sales) contributed £0.6 million to the increase. The balance arose from inflationary increases largely in transport, utilities and people costs via the out-of-cycle pay-rise announced in September in response to the cost of living crisis.

As a result, Adjusted EBITDA1 decreased by £1.7 million (8%) in the year to £19.4 million (FY22: £21.1 million).

 

Adjusted Items

Adjusted Items were £0.8 million compared to £1.1 million the year before. These costs related to share-based payment charge of £1.5 million (FY22: £1.7 million), £1.1 million charge in relation to fair value movements on financial derivatives (FY22: £1.0 million credit) and £1.0 million of non-recurring items relating to the acquisitions and subsequent integrations of the business acquired during the year, offset by a credit of £2.8 million relating to the profit on disposal of the T Juice brand. The £1.0 million of acquisition and integrations costs arose principally from the termination of all Cuts Ice staff (£0.6 million) and the closure costs relating to the two Cuts Ice London-based operating sites (£0.2 million), offset by a credit of £0.3 million in respect of accrued but unpaid contingent consideration in respect of the acquisition of Vendek that completed in FY21.

The Board believes that by adjusting these items from profitability, it is able to understand the underlying performance of the business more clearly and further information pertaining to these items can be found in Note 7 to these financial statements.

 

Finance costs

Finance costs were £1.0 million in the year (FY22: £0.7 million), split between interest arising from borrowings in the year of £0.8 million plus the interest relating to the lease liabilities under IFRS16 (£0.2 million).

 

Taxation

Total tax charge in the year was £2.5 million (FY22: £2.6 million), giving rise to an effective tax rate of 17% (FY22: 16%).

 

Profit after tax and Earnings per share

Profit after tax was £12.0 million compared to £13.7 million in FY22, a reduction of £1.7 million. As a result, earnings per share decreased by 13% to 10.3p (FY22: 11.8p) and on a fully diluted basis decreased from 11.4p to 9.7p.

On an adjusted profit after tax basis, which we consider to be a better measure of performance, adjusted earnings (as calculated in note 11) were £13.8 million (FY22: £15.0 million) and adjusted earnings per share3 was 11.8p (FY22: 12.8p).

 

Dividends

The Group's dividend policy is to pay an annual amount equivalent to around 25% of net profit. In January 2023 the Group paid an interim dividend of 0.8p per share and the Directors will recommend a final dividend of 2.2p per share at the 2023 Annual General Meeting to be held on the 26 September 2023.  This will be paid on 29 September 2023 to shareholders on the register at the close of business on 1 September  2023. The ex-dividend date will be 31 August 2023. 

 

Cash flow

 

The Group generated £19.3 million of operating cash in FY23, nearly doubling the level of operating cash generated in FY22; the result of a tightly managed base of working capital.

Specifically in reference to the acquisitions, £7.5 million related to the acquisition of Liberty Flights (with a further £2.0 million of deferred consideration payable in FY24 plus further consideration contingent on performance, expected to be £2.2 million) and £2.6 million related to the acquisition of Cuts Ice. The T-Juice brand (acquired as part of the Cuts Ice acquisition and valued at £1.2 million at the time) was then disposed of 7 months later for £4.0 million, resulting in a profit on disposal of £2.8 million.   

In respect of financing, on 31 March 2022 the Group committed to a Â£25 million revolving credit facility ("RCF") with HSBC.  Initially, the facility was used to settle existing bank and related party borrowings and then was subsequently used to finance acquisitions. At its peak, the Group had drawn £18.4 million against the facility. In the second half of the year much of this was repaid with cash generated from trading activities and at year end the balance on the facility was £4.3 million drawn with the remainder unutilised. In addition, the Group also had access to an £8.5 million working capital facility which was also entirely undrawn at year end. Together with reported cash of £7.5 million (FY22: £3.9 million) and deferred and contingent consideration of £4.1 million, the Group's Adjusted net cash4 position was £3.2 million (FY22: £1.9 million Adjusted net debt4). The IFRS16 lease liability increased from £2.2 million to £15.0 million during the year, wholly in relation to the 15 year lease signed for 'Ark', the facility that will become the Group's principal storage and distribution centre in FY24.

Across the RCF and the working capital facility, there was £30 million of undrawn borrowings facilities on 31 March 2023; providing significant liquidity to finance M&A or organic growth in the form of working capital in the future.

 

Net debt

 

Use of non-GAAP measures in the Group financial statements

Certain measures have been used to increase understanding of the Group's Report and Accounts. These measures are not defined under IFRS and therefore may not be directly comparable with adjusted measures presented by other companies. The non-GAAP measures are not intended to be a substitute for or superior to any IFRS measure of performance; however they are considered by management to be important measures used in the business for assessing performance. The non-GAAP measures used in this strategic review and more widely in this Annual Report are defined in the footnotes below and set out in Note 7 to these financial statements.

Suzanne Smith

Chief Finance Officer

 

4 July 2023

 

1Adjusted EBITDA means operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and non-recurring items

2Adjusted Profit before tax means profit before tax and Adjusted items (as defined in Note 7 of the financial statements) Adjusted items include share-based payments charge, fair value movements on non-hedge accounted derivatives and non-recurring items

3Adjusted EPS means Earning per share, where Earnings are defined as profit after tax but before amortisation of acquired intangibles and Adjusted items (as defined in Note 7 of the financial statements). Adjusted items include share based payments, fair value movements on non-hedge accounted derivatives and non-recurring items.

4Adjusted net debt means net debt as defined in Note 29 to these financial statements excluding the impact of IFRS16.

 



 

Consolidated Statement of Comprehensive Income

for the Year Ended 31 March 2023

 



Year Ended

31 March 2023

Year Ended

31 March 2022


Note

£'000

£'000

 

 

 

 

Revenue

5

155,612

130,789

Cost of sales

6

(114,758)

(92,272)

Gross Profit


40,854

38,517





Profit on disposal of Cuts Ice trademarks

7

2,787

-

Administration expenses

6

(28,192)

(21,498)

Operating profit


15,449

17,019





Adjusted EBITDA1


19,392

21,055

Depreciation

13 & 21

(2,200)

(2,563)

Amortisation

12

(915)

(378)

Adjusted items

7

(828)

(1,095)

 




Operating profit


15,449

17,019

 




Finance income

9

25

-

Finance costs

9

(1,037)

(693)

Profit before taxation


14,437

16,326

 




Income tax

10

(2,469)

(2,579)

Profit for the year


11,968

13,747

 


 

 

Other comprehensive expense


 

 

Items that may be reclassified to profit or loss


 

 

Exchange differences on translation of foreign operations


101

(32)

Total other comprehensive income/(expense)


101

(32)

Total comprehensive income


12,069

13,715





Earnings per share - basic

11

10.3p

11.8p

Earnings per share - diluted

11

9.7p

11.4p

 

 

 

Note 1: Adjusted EBITDA, which is defined as operating profit before depreciation, amortisation and Adjusted items (as defined in Note 7) is a non-GAAP metric used by management and is not an IFRS performance measure.

 

 

All results derive from continuing operations.



 

Consolidated Statement of Financial Position

as at 31 March 2023

 

 

As at

 31 March 2023

As at

 31 March 2022


Note

£'000

£'000

Non-current assets




Assets




Goodwill and other intangibles

12

15,281

3,704

Property, plant and equipment

13

5,238

2,557

Right of use asset

21

15,577

2,116

Deferred tax asset

15

-

1,312

Investments

14

7

7

Total non-current assets


36,103

9,696

 




Current assets




Inventories

16

25,606

25,898

Trade and other receivables

17

20,899

19,035

Forward contract derivative

22.9

-

467

Cash and cash equivalents

18

7,536

3,926

Total current assets


54,041

49,326

Total assets


90,144

59,022

 




Liabilities




 




Current liabilities




Borrowings

20

5,026

6,665

Trade and other payables

19

26,117

17,296

Forward contract derivative

22.9

652

-

Income tax payable


2,536

1,299

Total current liabilities


34,331

25,260

Net current assets


19,710

24,066





Borrowings

20

14,293

1,294

Deferred tax liability

15

789

156

Provisions

21

775

-

Total non-current liabilities


15,857

1,450

Total liabilities


50,188

26,710

Net assets


39,956

32,312

 




Equity




Share capital

23

11,732

11,663

Share premium


7,427

7,231

Merger reserve


(22,000)

(22,000)

Share-based payments reserve


3,043

2,368

Retained earnings


39,754

33,050

Total equity


39,956

32,312

 

The notes are an integral part of these financial statements.

 

The financial statements were approved by the Board of Directors and authorised for issue on 4th July 2023, and were signed on its behalf by:

 

S Smith

Director

Registered number: 05844527

Consolidated Statement of Changes in Equity

for the Year Ended 31 March 2023

 


Share Capital

Share Premium

Merger reserve

Share-based payments reserve

Retained earnings

Total
equity


£'000

£'000

£'000

£'000

£'000

£'000

As at 1 April 2021

11,650

7,195

(22,000)

75

21,901

18,821








Profit for the year

-

-

-

-

13,747

13,747

Other comprehensive expense

-

-

-

-

(32)

(32)

Total comprehensive income for the year

-

-

-

-

13,715

13,715

 

 






Transactions with shareholders:







Issue of shares

13

36

-

-

-

49

Employee share schemes - value of employee services

-

-

-

1,452

-

1,452

Deferred tax on share-based payment charge

-

-

-

841

-

841

Dividends

-

-

-

-

(2,566)

(2,566)


13

36

-

2,293

(2,566)

(224)

As at 31 March 2022

11,663

7,231

(22,000)

2,368

33,050

32,312

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

11,968

11,968

Other comprehensive income

-

-

-

-

101

101

Total comprehensive income for the year

-

-

-

-

12,069

12,069

 

 

 

 

 

 

 

Transactions with shareholders:

 

 

 

 

 

 

Issue of shares

69

196

-

-

-

265

Employee share schemes - value of employee services

-

-

-

1,283

-

1,283

Deferred tax on share-based payment charge

-

-

-

(608)

-

(608)

Dividends

-

-

-

-

(5,365)

(5,365)

 

69

196

-

675

(5,365)

(4,425)

As at 31 March 2023

11,732

7,427

(22,000)

3,043

39,754

39,956



Consolidated Statement of Cash Flows

for the Year Ended 31 March 2023

 

 

Year Ended

31 March 2023

Year Ended

31 March 2022


Note

£'000

£'000

Net cash flow from operating activities




Profit for the year


11,968

13,747

Adjustments for:




Amortisation of intangible assets

12

915

378

Depreciation of tangible assets

13

1,268

1,748

Depreciation of right of use assets

21

932

815

Finance income


(25)

-

Finance costs

9

982

404

Amortisation of capitalised finance costs

9

55

289

Income tax expense

10

2,469

2,579

Gain on disposal of intangible fixed assets

7

(2,787)

-

Movement on forward foreign exchange contracts

22.9

1,119

(1,026)

Share based payments expense

24

1,460

1,663

Working capital adjustments (net of acquired on business combinations)




Decrease/(increase) in inventories


2,920

(4,937)

Increase in trade and other receivables


(671)

(2,226)

Increase in trade and other payables


(27)

2,498

Increase in provisions


349

-

Taxation paid


(1,652)

(4,161)

Net cash from operations


19,275

11,771

Cash flows used in investing activities




Purchase of intangible fixed assets

12

(23)

(1,454)

Purchase of property, plant and equipment

13

(1,254)

(1,296)

Purchase of business combinations net of cash acquired

25

(10,055)

(1,040)

Proceeds from sale of property, plant and equipment


1

378

Proceeds from sale of intangible fixed assets


4,018

-

Payment of deferred consideration


(270)

-

Finance income received


25

-

Net cash used in investing activities


(7,558)

(3,412)

Cash flows used in financing activities




Repayment of long term loans

20

(3,984)

(6,470)

Repayment of related party loans


(1,779)

(1,613)

Repayments of RCF facility


(14,000)

-

Drawdowns of RCF facility


18,418


Issue of options or share capital


265

49

Payment of deferred consideration


-

(66)

Dividends paid


(5,365)

(2,566)

Finance costs paid


(776)

(285)

Interest paid on leases


(153)

(118)

Lease payments


(834)

(837)

Net cash used in financing activities


(8,208)

(11,906)





Net increase/(decrease) in cash and cash equivalents


3,509

(3,547)

Cash and cash equivalents brought forward


3,926

7,505

Effects of exchange rate changes


101

(32)

Cash and cash equivalents carried forward


7,536

3,926

 


 

 

Cash and cash equivalents

18

7,536

3,926

 


7,536

3,926



Notes to the Group Financial Statements

for the Year Ended 31 March 2023

 

1.   Basis of preparation

 

Supreme PLC ("the Company") is a public company limited by shares, registered in England and Wales and domiciled in the UK, with company registration number 05844527. The principal activity is the manufacture (vaping and sports nutrition & wellness only) and wholesale distribution of batteries, lighting, vaping, sports nutrition & wellness and branded household consumer goods. The registered office is 4 Beacon Road, Ashburton Park, Trafford Park, Manchester, M17 1AF.

 The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006.

 These Group financial statements have been prepared on a going concern basis under the historical cost convention, modified for the revaluation of certain financial instruments; in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The results for the year ended 31 March 2023 have been extracted from the full accounts of the Group for that year which received an unqualified auditor's report and which have not yet been delivered to the Registrar of Companies. The financial information for the year ended 31 March 2022 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unqualified. The accounts for the year ended 31 March 2023 and 31 March 2022 did not contain a statement under s498 (1) to (4) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2023 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.supreme.co.uk and on request by contacting the Company Secretary at the Company's Registered Office.

 The Directors have prepared this financial information on the fundamental assumption that the Group is a going concern and will continue to trade for at least 12 months following the date of approval of the financial information.

 The principal accounting policies adopted are set out below.

2.   Summary of significant accounting policies

 

The principal accounting policies adopted are set out below.

 

2.1 Basis of consolidation

The consolidated financial statements present the results of the Company and its own subsidiaries as if they form a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

 

The Group financial statements incorporate the results of business combinations using the acquisition method. In the Consolidated Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. The merger reserve arose on a past business combination of entities that were under common control. The merger reserve is the difference between the cost of investment and the nominal value of the share capital acquired.

 

 

 

 

 

 

Notes to the Group Financial Statements continued

for the Year Ended 31 March 2023

 

2.   Summary of significant accounting policies (continued)

 

2.2 New standards, amendments and interpretations

New and amended standards and adopted by the Group

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 April 2022:

 

Standards and interpretations

Effective from

Annual Improvements to IFRS Standards 2018-2020

1 April 2022

Narrow scope amendments to IFRS 3, IAS 16 and IAS 37

1 April 2022

 

The amendments listed above do not have any impact on the amounts recognised in prior periods and are not expected to significantly affect current or future periods.

 

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2023 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions:

 

 

Standards and interpretations

Effective from

IFRS 17 Insurance Contracts

1 April 2023

Classification of Liabilities as Current or Non-current - Amendments to IAS 1

1 April 2023

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

1 April 2023

Definition of Accounting Estimates - Amendments to IAS 8

1 April 2023

Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12

1 April 2023

Amendments to IAS 1, "Presentation of financial statements" and classification of liabilities

1 April 2024

Amendments to IAS 1, "Presentation of financial statements" on non-current liabilities with covenants

 

1 April 2024

Amendments to IFRS 16, "Leases" Lease Liability in a sale and leaseback

1 April 2024

 

Judgements made by the Directors in the application of these accounting policies that have a significant effect on these financial statements together with estimates with a significant risk of material adjustment in the next year are discussed in Note 4.

 

2.3 Going concern

In assessing the appropriateness of adopting the going concern basis in the preparation of these financial statements, the Directors have prepared cash flow forecasts and projections for the two-year period to 31 March 2025.  The forecasts and projections, which the Directors consider to be prudent, have been further sensitised by applying reductions to revenue and profitability, to consider downside risk. Under both the base and sensitised case the Group is expected to have headroom against covenants, which are based on interest cover and net leverage, and a sufficient level of financial resources available through existing facilities when the future funding requirements of the Group are compared with the level of committed available facilities.

 

In assessing the going concern basis, the Directors have also considered the ongoing conflict in Ukraine and the resulting sanctions imposed on Russia by governments worldwide, the increased cost of borrowing and the ongoing cost of living crisis taking place in the UK, all of which have been reflected in this forecast.

 

 

Notes to the Group Financial Statements continued

for the Year Ended 31 March 2023

 

2.  Summary of significant accounting policies (continued)

 

2.3 Going concern (continued)

 

·      Whilst the Ukraine crisis initially imposed sourcing pressure on Supreme for certain ingredients (specifically sunflower lecithin and wheat protein), alternative sources and replacement ingredients were secured in early FY23 and therefore the risk to Supreme at present is considered minimal and managed.

·      Whilst the Group's debt facilities are priced at a variable rate (SONIA + a margin) the Group's current positive leverage ratio (i.e. having more cash than bank borrowings), meaning that the Group could repay the borrowings in full means that Supreme's exposure to this increased cost is limited. Should the Group increase its level of bank borrowings during the forecast period (likely to be triggered by M&A) then of course this increased cost of borrowing would impact the Group (albeit expected to be offset by the incremental earnings generated by any M&A target).

·      Historically Supreme has been a net beneficiary in periods of economic downturn, owing to the fact more than half of its revenue is derived from the discount retail sector which typically trades buoyantly during these periods (for prudence this has not been assumed in the forecast). The inflationary cost increases (specifically over salary costs, energy and transport) have been specifically factored into the cost base throughout for the forecast period.

 

Based on this, the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group and Company financial statements.

 

2.4 Currencies

Functional and presentational currency

Items included in the Group financial statements are measured using the currency of the primary economic environment in which the Company operates ("the functional currency") which is UK sterling (£). The Group financial statements are presented in UK sterling.

 

Transactions and balances

Foreign currency transactions are translated into the functional currency using a standard exchange rate for a period if the rates do not fluctuate significantly. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Group companies

The results and financial position of foreign operations (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·      assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

·      income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

·      all resulting exchange differences are recognised in other comprehensive income.



 

Notes to the Group Financial Statements continued

for the Year Ended 31 March 2023

 

2.    Summary of significant accounting policies (continued)

 

2.5 Revenue recognition      

Revenue solely relates to the sale of goods and arises from the wholesale distribution and online sales of batteries, lighting, vaping sports nutrition & wellness and other consumer goods.

 

To determine whether to recognise revenue, the Company follows the 5-step process as set out within IFRS 15:

1.     Identifying the contract with a customer.

2.     Identifying the performance obligations.

3.     Determining the transaction price.

4.     Allocating the transaction price to the performance obligations.

5.     Recognising revenue when/as performance obligation(s) are satisfied.

 

Revenue is measured at transaction price, stated net of VAT, and other sales related taxes. Rebates to customers take the form of volume discounts, which are a type of variable consideration, and the transaction price is constrained to reflect the rebate element. The transaction price equates to the invoice amount less an estimate of any applicable rebates and promotional allowances that are due to the customer. Rebate accruals are recognised under the terms of these agreements, to reflect the expected promotional activity and our historical experience. These accruals are reported within trade and other payables.

 

Revenue is recognised at a point in time as the Company satisfies performance obligations by transferring the promised goods to its customers as described below. At any point in time where such obligations haven't been met but the customer has been invoiced, revenue is deferred, as disclosed in note 19.  Variable consideration, in the form of rebates, is also recognised at the point of transfer, however the estimate of variable consideration is constrained at this point and released once it is highly probable there will not be a significant reversal.

 

Contracts with customers take the form of customer orders. There is one distinct performance obligation, being the distribution of products to the customer, for which the transaction price is clearly identified. Revenue is recognised at a point in time when the Group satisfies performance obligations by transferring the promised goods to its customers, i.e. when control has passed from the Group to the customer, which tends to be on receipt by the customer. In respect of certain direct shipments control passes when an invoice is raised, payment received, and title formally transferred to the customer; at which point the customer has the risks and rewards of the goods.

 

2.6 Goodwill

The carrying value of goodwill has arisen following the acquisition of subsidiary entities. Such goodwill is subject to an impairment review, both annually and when there is an indication that the carrying value may be impaired. Any impairment is recognised immediately in the Statement of Comprehensive Income and is not reversed.

 

2.7 Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

 

The amortisation is charged on a straight-line bases as follows:

 

Domain name - 10%

Trademarks - 10%

Customer relationships - 20%

Trade names - 20%

Computer software - 50%

Know how - 10%

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

2.   Summary of significant accounting policies (continued)

 

2.8 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on a straight-line basis starting from the month they are first used, as follows:

 

Land- 0%

Assets under construction - 0%

Plant and machinery - 25%

Fixtures and fittings - 25%

Motor vehicle - 25%

Computer equipment - 33%

Buildings - 2%

 

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Comprehensive Income.

 

At each reporting date, the Company reviews the carrying amounts of its property, plant and equipment assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

2.   Summary of significant accounting policies (continued)

 

2.9 Inventories

Inventories are valued using a first in, first out method and are stated at the lower of cost and net realisable value. Cost includes expenditure incurred in the normal course of business in bringing the products to their present location and condition.

 

At the end of each reporting period inventories are assessed for impairment. If an item of inventory is impaired, the identified inventory is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the income statement. Where a reversal of the impairment is recognised the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the income statement.

 

2.10 Income tax

The tax expense or credit represents the sum of the tax currently payable or recoverable and the movement in deferred tax assets and liabilities.

 

(a)     Current income tax

Current tax is based on taxable income for the year and any adjustment to tax from previous years. Taxable income differs from net income in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years or that are never taxable or deductible. The calculation uses the latest tax rates for the year that have been enacted or substantively enacted by the dates of the Statement of Financial Position.

 

(b)     Deferred tax

Deferred tax is calculated at the latest tax rates that have been substantively enacted by the reporting date that are expected to apply when settled. It is charged or credited in the Statement of Comprehensive Income, except when it relates to items credited or charged directly to equity, in which case it is also dealt with in equity.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Group financial statements and the corresponding tax bases used in the computation of taxable income, and is accounted for using the liability method. It is not discounted.

 

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable income will be available against which the asset can be utilised. Such assets are reduced to the extent that it is no longer probable that the asset can be utilised.

 

Deferred tax assets and liabilities are offset when there is a right to offset current tax assets and liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

2.11 Leases

The Company applies IFRS 16 in the Group financial statements. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liabilities.

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

2.   Summary of significant accounting policies (continued)

 

2.11 Leases (continued)

The lease liability is initially measured at the present value of lease payments that were not paid at the commencement date, discounted using the rate implicit in the lease. Where there is no rate implicit in the lease then the Group's incremental borrowing rate is used.

 

The lease liability is measured at amortised cost using the effective interest method. If there is a remeasurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded directly in profit or loss if the carrying amount of the right of use asset is zero.

 

Short term leases and low value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term lease of machinery that have a lease term of 12 months or less or leases of low value assets. These lease payments are expensed on a straight-line basis over the lease term.

 

2.12 Payroll expense and related contributions

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

 

Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

 

2.13 Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme).

 

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Statement of Comprehensive Income over the remaining vesting period.

 

Where equity instruments are granted to persons other than employees, the Statement of Comprehensive Income is charged with fair value of goods and services received.

 

2.14 Pension costs

The Company operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Company. The annual contributions payable are charged to the statement of comprehensive income.



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

2.   Summary of significant accounting policies (continued)

 

2.15 Divisional reporting

Although revenue is grouped within five product categories, as the directors analyse revenue at this gross level, the directors do not analyse, monitor or review the Groups KPIS (being adjusted EBITDA and profit before tax) by product category. Due to this, the Group do not believe there are any IFRS 8 considerations around the requirement to report operating segments for reporting purposes.

 

2.16 Dividends

Dividends are recognised as a liability and deducted from equity at the time they are approved. Otherwise dividends are disclosed if they have been proposed or declared before the relevant financial statements are approved.

 

2.17 EBITDA and Adjusted EBITDA

Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA are non-GAAP measures used by management to assess the operating performance of the Company. EBITDA is defined as profit before finance costs, tax, depreciation and amortisation. Adjusted items are excluded from EBITDA to calculate Adjusted EBITDA.

 

The Directors primarily use the Adjusted EBITDA measure when making decisions about the Company's activities as this provides useful information for shareholders on underlying trends and performance. As these are non-GAAP measures, EBITDA and Adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.

 

2.18 Adjusted items

The Company's income statement separately identifies Adjusted items. Such items are those that in the Directors' judgement need to be disclosed separately by virtue of either: their volatility year-on-year; their one-off nature; their size, their non-operating nature; or because the adjustment of a particular item is widely accepted and conducted by peers (to ensure comparability with other listed businesses). These may include, but are not limited to, professional fees and other costs directly related to refinancing, acquisitions and capital transactions, fair value movements on open forward contracts, share based payment charges, material impairments of inventories and gains/losses on disposal of intangible assets. In determining whether an item should be disclosed as an Adjusted item, the Directors consider quantitative and qualitative factors such as the frequency, predictability of occurrence and significance. This is consistent with the way financial performance is measured by management and reported to the Board.

 

2.19 Forward contracts derivatives           

Financial assets and financial liabilities are recognised in the Group Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.

 

2.20 Trade and other receivables

Trade and other receivables are initially measured at transaction price less provisions for expected credit losses. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance. This lifetime expected credit losses is used in cases where the credit risk on other receivables has increased significantly since initial recognition. In cases where the credit risk has not increased significantly, the Group measures the loss allowance at an amount equal to the 12-month expected credit loss. This assessment is performed on a collective basis considering forward-looking information.

 

 

 

 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

2.   Summary of significant accounting policies (continued)

 

2.20 Trade and other receivables (continued)

IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'.

 

Recognition of credit losses is determined by considering a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions and reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

 

Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.

 

Credit Insurance is also in place which also mitigates the credit risk in relation to the respective customer. This insurance is applied to most accounts over £5,000 with exception of proforma accounts and accounts agreed by the CEO, although some accounts are excluded from the credit insurance having been assessed by the Board on a cost-benefit analysis - these equate largely to the largest grocery retailers.

 

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

2.21 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

 

2.22 Trade and other payables

Trade and other payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the "effective interest rate" to the carrying amount of the liability.

 

2.23 Invoice discounting facility

The Company has entered into an invoice discounting arrangement with the bank, where a proportion of the debts have been legally transferred but the benefits and risks are retained by the Company. Gross receivables are included within debtors and a corresponding liability in respect of any proceeds received from the bank that haven't yet been paid by customers are shown within liabilities. The interest element of the bank's charges are recognised as they accrue and included in the statement of comprehensive income within other interest payable. Once payments are received into the facility from customers, proceeds are transferred to the main bank account, which is presented within cashflow from working capital within the cashflow statement.

 

2.24 Borrowings

Interest-bearing overdrafts are classified as other liabilities. They are initially recorded at fair value, which represents the fair value of the consideration received, net of any direct transaction costs associated with the relevant borrowings. Borrowings are subsequently stated at amortised cost and finance charges are recognised in the Statement of Comprehensive Income over the term of the instrument using an effective rate of interest. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accruals basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

 

2.25 Classification as debt or equity

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

2.    Summary of significant accounting policies (continued)

 

2.26 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. The excess of proceeds of a share issue over the nominal value is presented within share premium.

 

2.27 Forward contracts

Forward contracts are initially recognised at the fair value on the date the forward contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of forward contracts are recognised in the income statement within cost of sales, on the basis that is where the related expense is recognised, unless they are included in a hedging arrangement. Where the instruments have been traded to take advantage of currency movements and not directly linked to the settlement of purchase requirements the gain or loss is recognised separately in the statement of comprehensive income as other operating income/expense. Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

 

3.     Financial risk management

 

3.1  Financial risk factors

The Company's activities expose it to certain financial risks: market risk, credit risk and liquidity risk. The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out by the Directors, who identify and evaluate financial risks in close co-operation with key staff, for further details see Note 22.

 

(a)     Market risk

Market risk is the risk of loss that may arise from changes in market factors such as competitor pricing, interest rates, foreign exchange rates.

 

(b)     Credit risk

Credit risk is the financial loss to the Group if a customer or counterparty to forward contracts derivatives fails to meet its contractual obligation. Credit risk arises from the Group's cash and cash equivalents and receivables balances. Credit Insurance is applied to all accounts over £5,000 with exception of proforma accounts and accounts agreed by the CEO and therefore credit risk is considered low.

 

(c)     Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining sufficient cash. The Directors monitor rolling forecasts of the Group's liquidity and cash and cash equivalents based on expected cash flow.

 

3.2  Capital risk management

The Group is funded by equity and loans. The components of shareholders' equity are:

 

(a)     The share capital account arising on the issue of shares.

(b)     The retained reserve or deficit reflecting comprehensive income to date.

(c)     The banking facilities comprising a supply chain and invoice discounting facility.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

3.     Financial risk management (continued)

 

The Group's objective when managing capital is to maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term. The capital structure of the Group is managed and adjusted to reflect changes in economic conditions. The Group funds its expenditures on commitments from existing cash and cash equivalent balances, primarily received from issuances of shareholders' equity. There are no externally imposed capital requirements. Financing decisions are made based on forecasts of the expected timing and level of capital and operating expenditure required to meet the Group's commitments and development plans. Quantitative data on what the Group manages as capital is included in the Statement of Changes in Equity and in Note 22 to the Group Financial Statements.

 

3.3  Fair value estimation

The carrying value less impairment provision of trade receivables and payables are assumed to approximate to their fair values because of the short-term nature of such assets and the effect of discounting liabilities is negligible.

 

4.     Critical accounting estimates and judgements

 

The preparation of the Group financial statements require management to make judgements and estimates that affect the reported amounts of assets and liabilities at each Statement of Financial Position date and the reported amounts of revenue during the reporting periods. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies. The key judgements and sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting period are outlined below:

 

Accounting estimates

 

4.1 Goodwill impairment

The Group tests goodwill for impairment every year in accordance with the relevant accounting policies. The recoverable amounts of cash-generating units are determined by calculating value in use. These calculations require the use of estimates.

 

Goodwill relates to various acquisitions and amounts to £7,508,000 at 31 March 2023 (2022: £1,602,000). Management consider that the estimates used in the impairment calculation are set out in Note 12. There are no reasonably possible scenarios in which the goodwill would be impaired.

 

4.2 Useful economic lives of property, plant and equipment

Property, plant and equipment is depreciated over the useful lives of the assets. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness. The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired. When carrying out impairment tests these would be based upon future cash flow forecasts and these forecasts would be based upon management judgement. Future events could cause the assumptions to change, therefore this could have an adverse effect on the future results of the Group.

 

The useful economic lives applied are set out in the accounting policies (Note 2.8) and are reviewed annually.

 

4.3 Valuation of acquired intangibles

IFRS 3 requires separately identifiable intangible assets to be recognised on acquisitions. The principal estimates used in valuing the acquired intangible assets are the future cash flows estimated to be generated from these assets, expected customer attrition, growth in revenues and the selection of appropriate discount rates to apply to the cash flows. The Directors' assessment of these estimates is based on up-to-date information and evidence available at the time of finalising the valuation.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

4.     Critical accounting estimates and judgements (continued)

 

4.4 Right of use assets - discount rate

Management makes use of estimates in determining the discount rate to be applied to the IFRS 16 'Leases' right of use asset and liability. This estimate determines the carrying value of the assets and liabilities, and the resulting depreciation and interest charge that is incurred.

 

4.5 Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. Options with both market and non-market conditions are most impacted by these estimates. The share options charge is subject to an assumption about the number of options that will vest as a result of the expected achievement of certain non-market conditions.

 

4.6 T-Juice disposal

As part of the Cuts Ice acquisition (as detailed in Notes 25 to these financial statements), Supreme acquired the intellectual property of the brand; T Juice out of administration. The purchase price allocation exercise valued the brand, at the time, at £1.2 million. In March 2023, seven months later, the brand was sold to a French distributor, LVP, for £4.0 million. During that seven-month period, Supreme had turned the brand around; the brand had become cash-generative with a more manageable product range, a leaner manufacturing process and a rationalised overhead base, all of which was reflected in the market value of the brand.  

 

At the time of the disposal, Supreme signed two agreements with the buyer; an intellectual property sale-purchase agreement and an associated five-year professional services agreement. The 2 agreements were 'in connection' with one another (as legally drafted), had to be signed simultaneously and were payable upfront and non-refundable. Furthermore, the nature of the services referenced in the professional services agreement were not unlike services offered as standard to other customers without the need for a professional services agreement. Standing back from the 2 agreements, the Board concluded that the consideration assigned to the disposal of the IP should be recognised as the combined consideration paid upfront in respect of both agreements i.e. £4 million.    

 

Accounting judgements

 

4.7 Inventory obsolescence

Management make use of judgement in determining whether certain inventory items are obsolete. Specifically this is done by looking at expiry dates, as well as sales data and forecasts as a proportion of current stock holding. Should these judgements be incorrect there could be a material difference in the recoverable value of inventory.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

5.     Revenue and gross profit analysis

 

The Chief Operating Decision Maker ("CODM") has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The Board of Directors deem the Group to be one operating segment because no balance sheet analysis, cashflows, profit before tax or EBITDA (which are the KPI's for the business) are available by division or reviewed by the CODM. This has changed from prior year due to the changes to the Group following the significant acquisitions in the financial year.

 

However, the Gross profit before foreign exchange is reported and used to make decisions on a product group basis. The below table shows the results using standard foreign exchange rates that are used throughout the year. The foreign exchange adjustment shown before gross profit is to adjust back to the actual rates incurred.


Batteries

Lighting

Vaping

Sports nutrition & wellness

Other consumer goods

Year Ended

31 March 2023


£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Revenue

39,533

15,426

76,098

16,748

7,807

155,612

Cost of sales

(35,613)

(11,301)

(48,018)

(14,089)

(6,992)

(116,013)

Gross profit before foreign exchange

3,920

4,125

28,080

2,659

815

39,599








Foreign exchange






1,255

Gross Profit






40,854








Profit on disposal of Cuts Ice trademarks






2,787

Administration expenses






(28,192)

Operating profit





 

15,449








Adjusted earnings before tax, depreciation, amortisation and adjusted items




 

 

19,392

Depreciation






(2,200)

Amortisation






(915)

Adjusted items






(828)

 







Operating profit




 

 

15,449

 







Finance income






25

Finance costs






(1,037)

Profit before taxation





 

14,437

 







Income tax






(2,469)

Profit for the year



 


 

11,968

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

5.     Revenue and gross profit analysis (continued)


Batteries

Lighting

Vaping

Sports nutrition & wellness

Other consumer goods

Year Ended

31 March 2022


£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Revenue

34,865

27,022

43,594

15,893

9,415

130,789

Cost of sales

(31,184)

(18,066)

(24,092)

(12,351)

(8,219)

(93,912)

Gross profit before foreign exchange

3,681

8,956

19,502

3,542

1,196

36,877








Foreign exchange






1,640

Gross Profit






38,517








Administration expenses






(21,498)

Operating profit





 

17,019








Adjusted earnings before tax, depreciation, amortisation and adjusted items




 

 

21,055

Depreciation






(2,563)

Amortisation






(378)

Adjusted items






(1,095)

 







Operating profit




 

 

17,019

 







Finance income






-

Finance costs






(693)

Profit before taxation





 

16,326

 







Income tax






(2,579)

Profit for the year



 


 

13,747

 

Information about major customers

The Group has generated revenue from individual customers that accounted for greater than 10% of total revenue. The total revenue from each of these 3 customers (2022: 2 customers) was £24,938,000, £19,364,000, and £16,045,000 (2022: £21,111,000 and £18,385,000). These revenues related to all divisions.

 

Analysis of revenue by geographical destination

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

United Kingdom

140,713

115,938

Ireland

8,645

7,779

Netherlands

1,766

2,807

France

2,428

1,617

Rest of Europe

942

1,825

Rest of the World

1,118

823


155,612

130,789

 

The above revenues are all generated from contracts with customers and are recognised at a point in time. All assets of the Group reside in the UK except for total net assets of £3,192,000 held in Europe.

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

6.     Expenses by nature

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

The profit is stated after charging expenses as follows:



Inventories recognised as an expense

103,129

81,813

Impairment of inventories

892

750

Impairment of trade receivables

63

30

Staff costs - Note 8

12,345

9,442

Adjusted items - Note 7

828

1,095

Establishment and general

2,142

1,473

Depreciation of property, plant and equipment

1,268

1,748

Depreciation of right of use assets

932

815

Amortisation of intangible assets

915

378

Auditor's remuneration for audit services

170

112

Auditor's remuneration for non-audit services

-

-

Other operating expenses

17,479

16,114

Total cost of sales and administrative expenses

140,163

113,770

 

7.     Adjusted items

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Covid-19-related cost

-

118

Fair value movements on forward contracts

1,119

(1,027)

Restructuring costs

-

208

Share based payments charge (note 24)

1,460

1,663

Acquisition costs

1,036

133

Profit on disposal of intangible fixed assets

(2,787)

-


828

1,095

 

COVID-19 costs in the year ended 31 March 2022 relate to the entirely incremental agency staff that was hired during November and December 2021 following widespread absence within our manufacturing workforce due to COVID-related sickness and isolation. As these costs were deemed one-off in nature they were reported as Adjusted.

 

The Group typically holds 1 years' worth of USD-denominated purchases on open forward contracts. The charge in the year ended 31 March 2023 and the credit in the year ended 31 March 2022 reflect the movement in the fair value of these open forward contracts at the balance sheet date year-on-year. This charge or credit is reported each year but, due its volatile nature, is reported as Adjusted.

 

Restructuring costs in the year ended 31 March 2022 related to the restructuring of the sales functions within the Group, specifically around electrical wholesale and brand reps where customers have been redirected to the Supreme trade website for self-service ordering going forward. As these costs were deemed one-off in nature they were reported as Adjusted.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

7.     Adjusted items (continued)

 

Acquisition costs relate to adviser fees in respect of the acquisitions undertaken and the subsequent financial and operational integration of these businesses into the core Supreme Group. £599,000 of the costs related to the redundancy costs in respect of the Cuts Ice Limited acquisition. These costs are notably volatile (linked to the volume and complexity of the acquisitions undertaken each year) and due to their size, have been reported as Adjusted.

 

Profit on disposal of the T Juice brand represents the difference between the cost of acquiring the brand (£1,231,000) and the proceeds on disposal (£4,018,000). The disposal of a brand was deemed to be one-off in nature and therefore reported as Adjusted.

 

8.     Employees and Directors

 

Year Ended

31 March 2023

Year Ended

31 March 2022


No.

No.

Average number of employees (including Directors):



Management and administration

116

80

Warehouse

70

50

Sales

46

30

Manufacturing

124

105


356

265

 

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Aggregate remuneration of staff (including Directors):



Wages and salaries

10,670

8,339

Social security costs

1,193

765

Other pension costs

482

338


12,345

9,442

 

Directors' remuneration

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Directors' emoluments

600

635

Social security costs

83

88

Company contributions to defined contribution pension schemes

3

2


686

725

 

The highest paid director received remuneration of £232,000 (2022: £300,000).

 

The value of the Company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £1,000 (2022: £1,000).

 

During the year, retirement benefits were accruing to 2 directors (2022: 2) in respect of defined contribution pension schemes.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

9.     Finance (income)/costs

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Finance income



Bank interest receivable

(25)

-




Finance costs



Bank interest payable

828

153

Other interest payable

-

133

Amortisation of capitalised arrangement fees

55

289

Interest on lease liabilities

154

118


1,037

693

 

10.     Taxation

 

Year Ended

31 March 2023

Year Ended

31 March 2022

Current tax

£'000

£'000

Current year - UK corporation tax

2,967

3,205

Adjustments to tax charge in respect of prior periods

-

(163)

Foreign tax on income

-

(7)

Total current tax

2,967

3,035

 



Deferred tax



Origination and reversal of temporary differences

(566)

(320)

Adjustments to tax charge in respect of prior periods

-

(173)

Adjustments to tax charge due to change in rates

68

37

Total deferred tax

(498)

(456)

 



Total tax expense

2,469

2,579

 

Factors affecting the charge


Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Profit before taxation

14,437

16,326

Tax at the UK corporation tax rate of 19% (2022: 19%)

2,743

3,102




Effects of expenses not deductible for tax purposes

123

317

Adjustments to tax charge due to change in rates

68

37

Adjustments to tax charge in respect of prior periods

-

(336)

Exercise of share options

(123)

-

Deferred tax on Share Based Payments

(118)

(471)

Enhanced Relief

(224)

(70)

Total tax expense

2,469

2,579

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

10.     Taxation (continued)

 

Factors that may affect future tax charges

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25% rather than remaining at 19% as previously enacted. This new law was substantively enacted on 24 May 2021 and the impact of this rate change has been considered when recognising deferred tax in these financial statements. Where the asset or liability is expected to unwind after 1 April 2023 the deferred tax has been recognised at 25% in these financial statements. In the Autumn Statement in November 2022, the government confirmed the increase in corporation tax rate to 25% from April 2023 will go ahead.

 

11.     Earnings per share

 

Basic earnings per share is calculated by dividing the net income for the year attributable to ordinary equity holders after tax by the weighted average number of ordinary shares outstanding during the year.

 

Diluted earnings per share is calculated with reference to the weighted average number of shares adjusted for the impact of dilutive instruments in issue. For the purposes of this calculation an estimate has been made for the share price in order to calculate the number of dilutive share options.

 

The basic and diluted calculations are based on the following:

 

Statutory EPS

 

Year Ended

31 March 2022


£'000

Profit for the year after tax

11,968

13,747




 No.

Weighted average number of shares for the purposes of basic earnings per share

116,605,892

Weighted average dilutive effect of conditional share awards

6,720,523

4,474,425

Weighted average number of shares for the purposes of diluted earnings per share

123,451,834

121,080,317





Pence

Basic earnings per share

11.8

Diluted earnings per share

9.7

11.4

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

11.     Earnings per share (continued)

 

Adjusted EPS

The calculation of adjusted earnings per share is based on the after tax adjusted operating profit after adding back certain costs as detailed in the table below. Adjusted earnings per share figures are given to exclude the effects of depreciation, amortisation and adjusted items, all net of taxation, and are considered to show the underlying performance of the Group.

 

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Adjusted earnings (see below)

13,790

14,976





No.

No.

Weighted average number of shares for the purposes of basic earnings per share

116,731,311

116,605,892

Weighted average dilutive effect of conditional share awards

6,720,523

4,474,425

Weighted average number of shares for the purposes of diluted earnings per share

123,451,834

121,080,317





Pence

Pence

Adjusted basic earnings per share

11.8

12.8

Adjusted diluted earnings per share

11.2

12.4

 

The calculation of basic adjusted earnings per share is based on the following data:

 

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000

Profit for the year attributable to equity shareholders

11,968

13,747

Add back/(deduct):



Amortisation of acquisition related intangible assets

874

196

Adjusted items

828

1,095

Tax effect of the above

120

(62)

Adjusted earnings

13,790

14,976



 


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

12.     Goodwill and other intangible assets

 

Domain name

£'000

Trademarks

£'000

Customer relationships

£'000

Trade name

£'000

Know how

£'000

Computer software

£'000

Goodwill

£'000

Total

£'000

Cost









At 1 April 2021

249

65

760

221

-

-

1,602

2,897

Additions

-

1,436

-

-

-

18

-

1,454

At 31 March 2022

249

1,501

760

221

-

18

1,602

4,351










Additions

-

-

-

-

-

23

-

23

On acquisition

62

43

3,043

4,384

262

-

5,906

13,700

Disposals

-

-

-

(1,231)

-

-

-

(1,231)

At 31 March 2023

311

1,544

3,803

3,374

262

41

7,508

16,843

 









Accumulated amortisation









At 1 April 2021

50

16

159

44

-

-

-

269

Amortisation charged in the year

25

150

152

44

-

7

-

378

At 31 March 2022

75

166

311

88

-

7

-

647










Amortisation charged in the year

25

150

359

359

6

16

-

915

At 31 March 2023

100

316

670

447

6

23

-

1,562










Carrying amount









At 1 April 2021

199

49

601

177

-

-

1,602

2,628

At 31 March 2022

174

1,335

449

133

-

11

1,602

3,704

At 31 March 2023

211

1,228

3,133

2,927

256

18

7,508

15,281

 

The amortisation charge for the year has been included in Administrative expenses in the Statement of Comprehensive Income.


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

12.     Goodwill and other intangible assets (continued)

 

Goodwill arises on acquisitions where the fair value of the consideration given for the business exceeds the fair value of the assets acquired and liabilities assumed.

 

Following acquisition of a business, the directors identify the individual Cash Generating Units (CGUs) acquired and, where possible, allocate the underlying assets acquired and liabilities assumed to each of those CGUs. The carrying value of goodwill has arisen following the acquisition of subsidiary entities, where the trade and assets have subsequently been hived up into this company, and the related investment balance transferred to goodwill. The carrying value of goodwill is allocated to the following cash generating units:

 


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Supreme

3,364

1,602

Liberty Flights

4,144

-


7,508

1,602

 

The above CGU's have changed from prior year due to the changes to the Group following the significant acquisitions in the financial year.

 

Goodwill arising in the year ended 31 March 2023 related to the acquisition of Liberty Flights Limited and Liberty Flights Holdings Limited and Superdragon (note 25). Goodwill arising in the year ended 31 March 2021 related to the acquisition of GT Divisions Limited. Goodwill arising in the year ended 31 March 2020 related to the acquisition of Provider Distribution Limited, Holding Esser Affairs B.V. and its subsidiary AGP Trading B.V. and Monocore Limited. Goodwill arising before 1 April 2019 related to the acquisition of Powerquick, Vape Importers and Sub Ohm that was hived up into Supreme Imports Ltd. No Goodwill arose on the acquisition of Vendek Limited.

 

The key assumptions for the value in use calculations are:

·      cash flows before income taxes are based on approved budgets and prior experience and management projections for the next 3 years;

·      a long term growth rate of 2.0% (2022: 2.0%) for the period beyond which detailed budgets and forecasts do not exist; based on external sources of macroeconomic projections for the geographies in which the entity operates; and

·      a post tax discount rate of 10.4% (2022: 14.4%) based upon risk free rate for government bonds adjusted for a risk premium to reflect increased risk of investing in equities and investing in the Group's specific sector and regions.

 

Impairment testing of goodwill is performed at least annually by reference to value in use calculations which management consider to be in line with the requirements of IAS 36. These calculations show no reasonably possible scenario in which any of the goodwill balances could be impaired as at 31 March 2023 or 31 March 2022. There were no charges for impairment of goodwill in 2023 (2022: nil).


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

13.     Property, plant and equipment

 

Buildings

£'000

Plant and machinery

£'000

Fixtures and

fittings

£'000

 Motor vehicles

£'000

Computer equipment

£'000

Assets under construction

£'000

Total

£'000

Cost or valuation








At 1 April 2021

-

5,316

770

51

100

-

6,237

Additions

-

802

201

57

236

-

1,296

On acquisition

378

21

22

179

-

-

600

Disposals

(378)

-

-

-

-

-

(378)

At 31 March 2022

-

6,139

993

287

336

-

7,755









Additions

57

724

66

111

340

686

1,984

On acquisition

1,492

423

33

7

11

-

1,966

Disposals

-

-

-

(28)

-

-

(28)

At 31 March 2023

1,549

7,286

1,092

377

687

686

11,677

 








Depreciation and impairment








At 1 April 2021

-

2,771

641

27

11

-

3,450

Depreciation charged in the year

-

1,411

181

64

92

-

1,748

At 31 March 2022

-

4,182

822

91

103

-

5,198









Depreciation charged in the year

-

949

63

51

205

-

1,268

Eliminated on disposal

-

-

-

(27)

-

-

(27)

At 31 March 2023

-

5,131

885

115

308

-

6,439









Carrying amount








At 1 April 2021

-

2,545

129

24

89

-

2,787

At 31 March 2022

-

1,957

171

196

233

-

2,557

At 31 March 2023

1,549

2,155

207

262

379

686

5,238

 

The depreciation charge for the year has been included in Administrative expenses in the Statement of Comprehensive Income.

 

Of the additions in the financial year £1,254,000 was paid during the year.

 


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

14.     Investments


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Balance at the beginning of the year

7

7

Balance at the end of the year

7

7

The balance of £7,000 relates to shares held in private entities, by the acquired subsidiary, who are unlisted. IFRS 9 require these to be measured at fair value, however due to the nature of the investment, the cost has been deemed the fair value of the investment.

The Company owns 20% of the share capital of Elena Dolce Limited, with a registered office of 111 Deansgate, Manchester, M3 2BQ. This was written off in the prior year.

At 31 March 2023, the Company directly owned 100% of the ordinary share capital of the following subsidiaries, which are incorporated in England and Wales unless stated:

Subsidiary

Registered address

Principal activity

Supreme Imports Limited

4 Beacon Road, Ashburton Park, Trafford Park, Manchester M17 1AF

Distribution of consumer goods

Provider Distribution Limited

Unit 1 Rosewood Park, St James Road, Blackburn, Lancashire BB1 8ET

Distribution of consumer goods

At 31 March 2022, the Company indirectly owned 100% of the ordinary share capital of the following subsidiaries, which are incorporated in England and Wales unless stated:

Subsidiary

Registered address

Principal activity

VN Labs Limited

4 Beacon Road, Ashburton Park, Trafford Park, Manchester, M17 1AF

Distribution of consumer goods

Battery Force Limited

Dormant

Powerquick Limited

Holding company

Supreme 88 Limited

Holding company

Supreme Nominees Limited

Holding of shares as nominee

Holding Esser Affairs B.V.

Vanadiumweg 13, 3812 PX, Armersfoort, Netherlands

Holding company

AGP Trading B.V.

Distribution of consumer goods

Vendek Limited

Unit C5, South City Business Park, Whitestown Way, Tallaght, Dublin 24, D24 A993

Distribution of consumer goods

Liberty Flights Holdings Limited

Unit 9 Arkwright Court, Commercial Road, Darwen, Lancashire, BB3 0FG

Holding company

Liberty Flights Limited

Distribution of consumer goods

The Directors believe that the carrying value of the investments is supported by their underlying net assets.



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

15.     Deferred tax

 

Deferred tax consists of the following temporary differences


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Share based payments

1,016

1,312

Deferred tax asset

1,016

1,312




Excess of depreciation over taxable allowances

(550)

(53)

Short term temporary differences

339

(103)

Tax losses carried forward

(104)

-

Acquired intangible assets

(1,490)

-

Deferred tax liability

(1,805)

(156)

Net deferred tax (liability)/asset

(789)

1,156

 

Movement in deferred tax in the year


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Balance at the beginning of the year

1,156

(141)

Credited to profit or loss

498

456

(Debited)/credited to reserves

(608)

841

Arising on business combination

(1,849)

-

Other

14

-

Balance at the end of the year

(789)

1,156

 

The Directors consider that the deferred tax assets in respect of temporary differences are recoverable based on the forecast future taxable profits of the Group.

 

16.     Inventories


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Goods for resale

21,080

20,457

Raw materials

4,526

5,441


25,606

25,898

 

The Directors believe that the replacement value of inventories would not be materially different than book value.

 

Inventories at 31 March 2023 are stated after provisions for impairment of £1,492,000 (2022: £600,000).

 

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

17.     Trade and other receivables


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Trade receivables

18,566

17,848

Other receivables

1,507

346

Prepayments

826

841


20,899

19,035

 

The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date.

 

The movement in provisions for impairment are shown below:


Year Ended

 31 March 2023

Year Ended

 31 March 2022


£'000

£'000

Balance at the beginning of the year

32

37

Charged to the statement of comprehensive income

63

30

Arising on acquisition

111

-

Utilisation of provision

(17)

(35)

Balance at the end of the year

189

32

 

Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the reporting date but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable.

 

Ageing of receivables


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Current

11,936

12,177

31 - 60 days

5,253

4,390

61 - 90 days

1,492

1,254

90 days +

74

59

Less provisions for impairment

(189)

(32)


18,566

17,848

 

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Credit insurance is also in place.

 

Details on the Group's credit risk management policies are shown in Note 22. The Group does not hold any collateral as security for its trade and other receivables.

 

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

18.     Cash and cash equivalents


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Cash at bank

7,536

3,926

 

19.     Trade and other payables


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Trade payables

8,697

8,149

Accruals

5,651

6,302

Deferred income

259

-

Other creditors

3,415

-

Other tax and social security

3,951

2,843

Deferred consideration

1,942

-

Contingent consideration

2,200

-

Directors loan account

2

2


26,117

17,296

 

Trade payables principally consist of amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are normally settled on 30 to 60 day terms.

 

The Directors consider that the carrying value of trade and other payables approximates their fair value. Trade and other payables are denominated in Sterling, Euros and US Dollars. Supreme PLC has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period.

 

20.     Borrowings


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Current



Bank loans

4,307

3,984

Amounts owed to related parties

-

1,779

IFRS 16 lease liability (Note 21)

719

902


5,026

6,665




Non-current



IFRS 16 lease liability (Note 21)

14,293

1,294


14,293

1,294




Total borrowings

19,319

7,959

 

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

20.     Borrowings (continued)

 

The earliest that the lenders of the above borrowings require repayment is as follows:

 


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

In less than one year

5,026

6,665

Between two and five years

6,980

1,294

In more than five years

7,313

-


19,319

7,959

 

These amounts when presented gross on an undiscounted basis are as follows:

 


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

In less than one year

5,499

6,751

Between two and five years

7,699

1,388

In more than five years

13,065

-


26,263

8,139

 

 

The Group is funded by revolving credit facility ("RCF") of £25m provided by HSBC that is secured by way of a fixed and floating charge over all assets. Interest is charged at a margin of 2.3%-2.8% over SONIA for all drawn amounts and 35% of the margin for undrawn amounts. The facility is for 3 years and expires 31 March 2025. There are 2 principal covenants attached to the RCF and these are tested quarterly.

 

Current bank facilities include an invoice discounting facility of £8.5m, which is secured by an assignment of, and fixed charge over the trade debtors of Supreme Imports Limited. The facility was not drawn down at year end.

 

Furthermore, the Group has access to a supply chain facility (also provided by HSBC) of $0.5m which is secured by fixed and floating charges over all assets of the Group. This facility is denominated in US Dollars. At the balance sheet date the facility is undrawn (2022: undrawn).

 

Therefore undrawn but committed facilities at 31 March 2023 were £20.7m for the RCF (2022: £25m), £8.5m for the invoice discounting facility (2022: £8.4m) and $0.5m for the supply chain facility (2022: $0.5m).

 

The supply chain facility is utilised to provide short term cash flow to settle liabilities arising out of purchases made in the normal course of business. The amount advanced takes into consideration the cash requirements of the Group and the working capital cycle.

 

 

 

 

 

 

 

 

 

 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

21. Leases

 

Amounts recognised in the Statement of Financial Position

 

The balance sheet shows the following amounts relating to leases:

 

Right-of-use assets

£'000


 

At 1 April 2021

1,476

Additions

1,455

Depreciation charge for the year

(815)

At 31 March 2022

2,116

Additions

12,656

Lease modification

1,737

Depreciation charge for the year

(932)

At 31 March 2023

15,577

 

The net book value of the right of use assets is made up as follows:

 

 

As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Buildings

15,576

2,108

Cars

1

8


15,577

2,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

21. Leases (continued)

Lease liabilities

As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Maturity analysis - contractual undiscounted cash flows



Less than one year

1,192

988

More than one year, less than two years

2,181

514

More than two years, less than three years

2,121

467

More than three years, less than four years

1,714

407

More than four years, less than five years

1,683

-

More than five years

13,065

-

Total undiscounted lease liabilities at year end

21,956

2,376

Finance costs

(6,944)

(180)

Total discounted lease liabilities at year end

15,012

2,196




Lease liabilities included in the statement of financial position



Current

719

902

Non-current

14,293

1,294


15,012

2,196


 

 

Provisions

 

 

Dilapidations provision related to right-of-use assets

 

 

At 1 April

-

-

Additions

774

-

Unwind of discounting

1

-

At 31 March

775

-

 

Amounts recognised in the Consolidated Statement of Comprehensive Income

 

The Consolidated Statement of Comprehensive Income shows the following amounts relating to leases:

 

 

 

Year Ended

 31 March 2023

Year Ended

 31 March 2022

 

£'000

£'000

Depreciation charge - Buildings

925

794

Depreciation charge - Cars

7

21


932

815


 


Interest expense (within finance expense)

154

118

 

The above leases relate to buildings and cars.

 

There are no restrictions or covenants imposed by leases and there have been no sale and leaseback transactions.

 

Any expense for short-term and low-value leases is not material and has not been presented.

 

 

 

 

22.  Financial instruments

 

The Group is exposed to the risks that arise from its financial instruments. The policies for managing those risks and the methods to measure them are described in Notes 2 and 3. Further quantitative information in respect of these risks is presented below and throughout these Group financial statements.

 

22.1 Capital risk management

 

Details of the Group's capital are shown in Note 23, as well as in the Statement of Changes in Equity.

 

22.2. Market risk

 

Competitive pressures remain a principal risk for the Group. The risk is managed through focus on quality of product and service levels, coupled with continuous development of new products to offer uniqueness to the customer. Furthermore, the Group's focus on offering its customers a branded product range provides some protection to its competitive position in the market. Stock obsolescence risk is managed through closely monitoring slow moving lines and prompt action to manage such lines through the various distribution channels available to the Group.

 

In addition, the Group's operations expose it to a variety of financial risks that include price risk, credit risk, liquidity risk, foreign currency risk and interest rate cash flow risk. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by regularly monitoring the financial risks referred to above.

 

Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the Board are implemented by the Group's finance department.

 

22.3. Credit risk

 

The Group's sales are primarily made with credit terms of between 0 and 30 days, exposing the Group to the risk of non-payment by customers. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed regularly by the board. In addition, the Group maintains a suitable level of credit insurance against its debtor book. The maximum exposure to credit risk is £5,000 per individual customer that is covered by the policy, being the insurance excess.

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. Expected losses are based on the Group's historical credit losses, adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. The Group's B2B historic credit losses have been minimal on the back of strong credit control, in addition to the insurance cover in place. This results in an immaterial expected credit loss being provided for.

 

An analysis of past due but not impaired trade receivables is given in Note 17.

 

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

22.     Financial instruments (continued)

 

22.4. Liquidity risk management

 

The Group is funded by external banking facilities provided by HSBC. Within these facilities, the Group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the Group has sufficient available funds for operations and planned expansions. This is monitored on a monthly basis, including re-forecasts of the borrowings required.

 

22.5. Foreign currency risk management

 

The Group's activities expose it to the financial risks of changes in foreign currency exchange rates. The Group's exposure to foreign currency risk is partially hedged by virtue of invoicing a proportion of its turnover in US Dollars. When necessary, the Group uses foreign exchange forward contracts to further mitigate this exposure.

 

The following is a note of the assets and liabilities denominated at each period end in US dollars:

 


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Trade receivables

-

1,498

Cash

58

188

Trade payables

1,154

820


1,212

2,506

 

The effect of a 20 percent strengthening of Pound Sterling at 31 March 2023 on the foreign denominated financial instruments carried at that date would, all variables held constant, have resulted in a decrease to total comprehensive income for the year and a decrease to net assets of £202,000, (2022: £418,000). 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 £303,000 (2022: £627,000).

 

The following is a note of the assets and liabilities denominated at each period end in Euros:

 


As at

 31 March 2023

As at

 31 March 2022


£'000

£'000

Trade receivables

200

51

Cash

453

27

Trade payables

(364)

(261)


289

(183)

 

The effect of a 20 percent strengthening of Pound Sterling at 31 March 2023 on the foreign denominated financial instruments carried at that date would, all variables held constant, have resulted in an increase to total comprehensive income for the year and a decrease to net assets of £48,000 (2022:  increase of £31,000). A 20 percent weakening of the exchange rate on the same basis, would have resulted in a decrease to total comprehensive income and an increase in net assets of £73,000 (2022: decrease of £46,000).

 

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

22.     Financial instruments (continued)

 

Forward contracts

 

The Group mitigates the exchange rate risk for certain foreign currency creditors by entering into forward currency contracts. The Group's forex policy is to purchase forward contracts to mitigate changes in spot rates, based on the timing of purchases to be made. Management forecast the timing of purchases and make assumptions relating to the exchange rate at which the Group costs its products and take out forward contracts to mitigate fluctuations to an acceptable level. At 31 March 2023, the outstanding contracts mature between 1 and 10 months of the year end, (2022: 2 and 10 months). At 31 March 2023 the Group was committed to buy $32,500,000 (2022: $18,700,000) in the next financial year.

 

The forward currency contracts are measured at fair value using the relevant exchange rates for GBP:USD and GBP:EUR. The fair value of the contracts at 31 March 2023 is a liability of £652,000 (2022: asset of £467,000). During the year ended 31 March 2023, a loss of £1,119,000 (2022: profit of £1,027,000) was recognised Adjusted items for changes in the fair value of the forward foreign currency contracts.

 

Forward currency contracts are valued using level 2 inputs. The valuations are calculated using the year end exchange rates for the relevant currencies which are observable quoted values at the year-end dates. Valuations are determined using the hypothetical derivative method which values the contracts based on the changes in the future cashflows based on the change in value of the underlying derivative.

 

22.6. Interest rate cash flow risk

 

The Group's interest-bearing liabilities relate to its variable rate banking facilities. The Group has a policy of keeping the rates associated with funding under review in order to react to any adverse changes in the marketplace that would impact on the interest rates in place. The effect of a 1% increase in interest rates would have resulted in a decrease in net assets of £141,000 (2022: £69,000).

 

22.7. Price risk

 

The Group's profitability is affected by price fluctuations in the sourcing of its products. The Group continually monitors the price and availability of materials but the costs of managing the exposure to price risk exceed any potential benefits given the extensive range of products and suppliers. The Directors will revisit the appropriateness of this policy should the Group's operations change in size or nature.

 

22.8. Maturity of financial assets and liabilities

 

All of the Group's non-derivative financial liabilities and its financial assets at the reporting date are either payable or receivable within one year, except for borrowings as disclosed in Note 20.



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

22.     Financial instruments (continued)

 

22.9 Summary of financial assets and liabilities by category

 

The carrying amount of financial assets and liabilities recognised may also be categorised as follows:

 

 

As at

 31 March 2023

As at

 31 March 2022

 

£'000

£'000

Financial assets



Financial assets measured at amortised cost



Trade and other receivables

20,073

18,194

Cash and cash equivalents

7,536

3,926

 

27,609

22,120

Financial liabilities



Financial liabilities measured at amortised cost



Non-current:



Borrowings

(14,293)

(1,294)

Current:



Borrowings

(5,026)

(6,665)

Trade and other payables

(8,697)

(8,149)

Directors loan account

(2)

(2)

Deferred consideration

(1,942)

-

Contingent consideration

(2,200)

-

Other creditors

(3,415)

-

Accruals

(5,651)

(6,302)


(41,226)

(22,412)




Financial assets / (liabilities) measured at fair value through profit and loss



Forward contracts

(652)

467


(652)

467




Net financial (liabilities) / assets

(14,269)

175




 











 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

23.     Share capital and reserves

 

Share capital and share premium

Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. The excess of proceeds of a share issue over the nominal value is presented within share premium.

 

Number of shares authorised and in issue

 

 

Ordinary £0.10

 

No.

£

At 31 March 2022

116,627,074

11,662,707

Issued

688,968

68,897

At 31 March 2023

117,316,042

11,731,604

 

On 2 February 2023, 561,874 new Ordinary £0.10 shares were issued at a subscription price of £0.38, generating share premium of £159,404.

 

On 6 March 2023, 63,547 new Ordinary £0.10 shares were issued at a subscription price of £0.38, generating share premium of £18,028.

 

On 14 March 2023, 63,547 new Ordinary £0.10 shares were issued at a subscription price of £0.38, generating share premium of £18,028.

 

Dividends

Dividends of £5,365,000 (2022: £2,566,000) were declared in the year. This amounted to £0.046 per share (2022: £0.022).

 

Merger reserve

The merger reserve arose on a past business combination of entities that were under common control. The merger reserve is the difference between the cost of investment and the nominal value of the share capital acquired.

 

Share-based payments reserve

The share-based payments reserve represents the cumulative impact of the share-based payments charge.

 

Retained earnings

Retained earnings includes all current and prior period retained profits and losses, including foreign currency translation differences arising from the translation of financial statements of the Company's foreign entities.

 

All transactions with owners of the parent are recorded separately within equity.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

24.       Share based payments

 

The Group operates a number of share incentive arrangements as set out below.

 

The Supreme plc Enterprise Management Incentive Scheme ("the EMI Scheme")

 

On 14 September 2018, the Group implemented an Enterprise Management Incentive Scheme. This was granted to employees to acquire shares in the Company for a number of ordinary shares of 10p each at the exercise price at the option of the employee.  The exercise of these options was originally subject to the occurrence of a relevant event (a disposal or a listing) in accordance with the EMI Scheme rules, but this condition was satisfied by the 2021 listing of the Company. These options will expire 10 years from grant date. A second scheme was implemented alongside the EMI scheme ('2018 unapproved scheme') for one employee who was eligible for more options that the EMI scheme rules allowed for. All conditions of this scheme were the same as the EMI Scheme.

 

These options were fairly valued upon a valuation of the entity that had been performed by an independent expert.

 

2018 EMI scheme

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£0.38

1,148,850

£0.38

1,281,028

Lapsed

£0.38

(30,504)

£0.38

(5,084)

Granted

- 

-

-

-

Exercised

£0.38

(495,621)

£0.38

(127,094)

At the end of the year

£0.38

622,725

£0.38

1,148,850

 

The profit and loss expense that has been recognised in the current year in respect of these awards is £nil (2022: £nil).

 

2018 unapproved scheme

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£0.38

386,694

£0.38

386,694

Lapsed

-

-

-

Granted

-

-

-

-

Exercised

£0.38

(193,347)

 -

-

At the end of the year

£0.38

193,347

£0.38

386,694

 

The profit and loss expense that has been recognised in the current year in respect of these awards is £94,000 (2022: £300,000).

 

The Supreme plc Sharesave Scheme 2021 ("the SAYE Scheme")

 

The Company established the SAYE Scheme on 26 January 2021. The SAYE Scheme is open to all employees who have achieved the qualifying length of service at the proposed date of grant (initially set at 3 months). Under the SAYE Scheme, an individual who wishes to accept an invitation to apply form options to be granted to him or her must take out a 3 or 5 year savings contract with an approved savings body selected by the Company. The

 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

individual makes a fixed monthly contribution over the life of the savings contract and on maturity receives a tax-free bonus. The monthly contribution can be a minimum of £10 and a maximum of £500.

 

24.       Share based payments (continued)

 

The price at which options may be exercised will be set by the Directors at the date of grant and may be at a discount of up to a maximum of 20 per cent. against the market value at the date of grant of the Shares over which they are granted. The Option will generally be exercisable by the holder within six-month period after the bonus becomes payable on his or her relevant savings contract.

 

All employees of the Group (including executive directors) at 3 March 2021 were invited to participate in the SAYE Scheme. Employees were invited to subscribe for options over the Company's ordinary shares of 10p each with an exercise price of 152p, which represents a 20% discount to the closing middle market price of 190p per Share ("Options") on 2 March 2021, being the trading day before the invitation for employees to participate was made. Other than in the case of a takeover or demerger or similar event, an option will generally be exercisable by the holder in relation to the SAYE Scheme within the 6-month period after the bonus becomes payable on his or her relevant savings contract. Any option not so exercised will lapse. There are no conditions of exercise in relation to options granted under the SAYE Scheme.

 

2021 SAYE scheme

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£1.52

354,078

£1.52

438,620

Lapsed

£1.52

(158,911)

£1.52

(84,542)

Granted

-

-

Exercised

-

-

At the end of the year

£1.52

195,167

£1.52

354,078

 

The Supreme plc Company Share Option Plan 2021 ("the CSOP Scheme")

The Company established the CSOP Scheme on 26 January 2021. Grants under the CSOP Scheme may be made by the Company as subscription Options or, with the consent of the Remuneration Committee, by an existing shareholder over shares already issued.

 

Under the CSOP Scheme certain eligible employees have been granted options to subscribe for ordinary shares in the Company of 10p each with an exercise price of 174 pence per ordinary share equal to the closing middle market price on 15 February 2021. The options were granted on 16 February 2021 and may be exercisable by the holder at any time between the third and tenth anniversaries of the date of the grant. Upon exercise, the relevant Shares will be allotted. A number of employees have been granted additional options on the same basis under the Unapproved Scheme detailed below to the extent that the total number of options granted to them exceeded the maximum number permitted to be granted under the CSOP Scheme by HMRC rules.

 

23 employees were granted options under the CSOP over a total of 206,886 shares and 4 employees have been granted options under the Unapproved Scheme over a total of 94,825 Shares, being in aggregate 301,711 shares. By 31 March 2023, a total of 66,089 options had lapsed and 235,622 remained under option.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

24.       Share based payments (continued)

 

 

 

2021 CSOP

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£1.74

201,140

£1.74

206,886

Lapsed

£1.74

(20,114)

£1.74

(5,746)

Granted

-

-

-

-

Exercised

-

-

-

-

At the end of the year

£1.74

181,026

£1.74

201,140

 

 

 

 

 






2021 unapproved scheme

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£1.74

94,825

£1.74

94,825

Lapsed

£1.74

(40,229)

-

Granted

-

-

-

-

Exercised

-

-

-

-

At the end of the year

£1.74

54,596

£1.74

94,825

 

The profit and loss expense that has been recognised in the current year in respect of these awards is £57,000 (2022: £57,000).

 

The Supreme plc Unapproved Share Option Scheme 2021 ("the Unapproved Scheme")

 

The Company established the Unapproved Scheme on 26 January 2021. Grants under the CSOP Scheme may be made by the Company as subscription Options or, with the consent of the Remuneration Committee, by an existing shareholder over shares already issued.

 

As described in the Directors' Remuneration Report, on 9 March 2021 the Company awarded the following options to the executive directors under the Unapproved Scheme.

 

Options to subscribe for a total of 5,825,000 Shares at nominal value were granted to the CEO in two equal tranches. Each tranche of options will be subject to a performance condition which must be wholly satisfied for the relevant option to be exercisable. The performance condition for the first tranche of options is that total shareholder return per Share ("TSR") from Admission until the third anniversary of Admission is at least 100 per cent. of the placing price of 134 pence as at Admission (the "Placing Price"). The performance condition for the second tranche of options is that the TSR from Admission until the fifth anniversary of Admission is at least 200 per cent. of the Placing Price.

 

Options to subscribe for up to 111,940 Shares at nominal value were granted to the CFO in the year ended 31 March 2022. The options are subject to a performance condition requiring an average annual TSR of 7.5 per cent. to become exercisable in part and an annual average TSR of 10 per cent. to become fully exercisable, in each case measured over a period of 3 years from Admission as against the Placing Price.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

24.       Share based payments (continued)

 

Options to subscribe for a further 174,650 shares at nominal value were granted to the CFO during the year ended 31 March 2023. These options are subject to performance conditions. 50% of the options require an average annual TSR of 7.5% to become exercisable in part and an annual average of TSR of 10% to become fully exercisable measured over a 3-year period. The remaining 50% of options are linked to an EPS performance target where a threshold of 33.7p by the end of a 3-year period is required in order for the options to become exercisable and 41.1p in order for the options to be fully exercisable.

 

2021 3-year CEO award

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£0.00

2,912,500

£0.00

2,912,500

Lapsed

-

-

Granted

-

-

Exercised

-

-

At the end of the year

£0.00

2,912,500

£0.00

2,912,500











2021 5-year CEO award

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£0.00

2,912,500

£0.00

2,912,500

Lapsed

 -

-

-

Granted

 -

-

-

Exercised

 -

-

-

At the end of the year

£0.00

2,912,500

£0.00

2,912,500











2021 CFO award

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

£0.00

111,940

£0.00

111,940

Lapsed

-

-

Granted

-

-

Exercised

-

-

At the end of the year

£0.00

111,940

£0.00

111,940

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

24.       Share based payments (continued)

 

2022 Senior management awards (TSR)

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

-

Lapsed

£0.00

(24,950)

Granted

£0.00

112,275

Exercised

-

At the end of the year

£0.00

87,325

 

2022 Senior management awards (EPS)

Weighted average exercise price 2023 £

2023
No.

Weighted average exercise price 2022 £

2022
No.

At the start of the year

-

Lapsed

£0.00

(24,950)

Granted

£0.00

112,275

Exercised

-

At the end of the year

£0.00

87,325

 

The profit and loss expense that has been recognised in the current year in respect of the Unapproved Scheme is £1,309,000 (2022: £1,295,000).

 

The vesting of most of these awards is subject to the Group achieving certain performance targets under the Unapproved Scheme, measured over a three or five year period, as set out in the Remuneration Report. The options will vest depending on achievement of the Group's absolute total shareholder return ("TSR") as follows:

 

The awards under the CSOP Scheme and Unapproved Scheme to employees other than as noted above are not subject to performance conditions and vest subject to continued employment only.

 

In respect of the CFO and CFO awards, the fair value at grant date is independently determined using a Monte Carlo simulation model which calculates a fair value based on a large number of randomly generated projections of the Company's future share prices. In respect of the CSOP and Unapproved Schemes, the fair value at grant date has been determined using a Black-Scholes model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, and the risk-free interest rate for the term of the option as shown overleaf:



 


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

24.       Share based payments (continued)

 


2018 unapproved scheme

2021 CSOP

2021 unapproved scheme

2021 3 year CEO award

2021 5 year CEO award

2021 CFO awards

2021 SAYE scheme

2022 Senior mgmt. awards - TSR

2022 Senior mgmt. awards - EPS

Grant date

4 Jan 2021

16 Feb 2021

16 Feb 2021

9 Mar 2021

9 Mar 2021

9 Mar 2021

18 Mar 2021

5 Aug 2022

5 Aug 2022

Share price at grant date (pence)

134p

176p

176p

185p

185p

185p

190p

101p

101p

Exercise price (pence)

38.38p

174p

174p

£nil

£nil

£nil

154p

£nil

£nil

Expected volatility (%)

45%

45%

45%

45%

45%

45%

55%

55%

55%

Projection period (yrs)

2.65

n/a

n/a

2.89

0.89

2.89

3.16

2.65

n/a

Expected life (yrs)

3

3

3

3

5

3

3

3

3

Expected dividend yield (%)

5.94%

4.10%

4.10%

3.90%

3.90%

3.90%

3.79%

5.94%

5.94%

Risk free interest rate (%)

-0.09%

0.34%

0.34%

0.12%

0.31%

0.12%

0.14%

1.92%

1.92%

Fair value per award (pence)

71p

50p

50p

74p

59p

109p

59p

31p

75p

 

The expected volatility has been estimated based upon the historical volatility of the FTSE AIM Retailers and Personal & Household goods sub sectors.

 

No awards are exercisable at the end of the year. The charge for share-based payments in the year was £1,460,000 (2022: £1,663,000) which is included within Adjusted items. Of this, £177,000 related to Employers National Insurance Contributions and £1,283,000 related to the share-based payments charge.

 


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

25.       Business combinations

 

Acquisition of Cuts Ice Limited

On 8 August 2022 Supreme Imports Limited acquired the trade and assets of Cuts Ice Limited ("Cuts Ice") and Flavour Core Limited ("Flavour Core"), for consideration of £2,571,000. Cuts Ice is an independent vaping manufacturer with major own brands as well as OEM manufacturing contracts, and Flavour Core is a flavour development and regulatory compliance business in e-liquids.

 

Recognised amounts of identifiable assets acquired and liabilities assumed


Book value

Fair value adjustment

Fair value


£'000

£'000

£'000

Fixed assets




Other intangible assets

-

1,389

1,389

Property, plant and equipment

300

-

300


300

1,389

1,689

Current assets




Inventory

1,188

(339)

849

Debtors due within one year

33

-

33


1,221

(339)

882

Total assets

1,521

1,050

2,571

 

 

 

 

Creditors

 

 

 

Deferred tax

-

(40)

(40)


-

(40)

(40)

Total identifiable net assets

1,521

1,010

2,531

Goodwill



40

Total purchase consideration



2,571

 




Consideration




Cash



2,571

Total purchase consideration



2,571





Cash outflow on acquisition




Purchase consideration settled in cash, as above



2,571

Less: cash and cash equivalents acquired



-

Net cash outflow on acquisition

 

 

2,571

 

Following a purchase price allocation exercise the company identified further acquired intangible assets. The fair value adjustments reflect the recognition of the Trade name of £1,231,000 and other intangible assets of £158,000. Deferred tax of £40,000 was recognised on the acquired intangible assets.

 

Goodwill of £40,000 represents consolidated purchasing and operating synergies.

 

The revenue from Cuts Ice Limited included in the Statement of Comprehensive Income for 2023 was £3,326,000. Cuts Ice Limited also incurred a gross profit of £2,187,000 over the same period. Had the acquisition occurred on 1st April 2022 , consolidated revenue and gross profit would have increased by a further £1,663,000 and £1,090,000 respectively.



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

25.       Business combinations (continued)

 

Acquisition of Liberty Flights Holdings Limited

On 10 June 2022 Supreme Imports Limited acquired the entire share capital of Liberty Flights Holdings Limited ("Liberty Flights"), a leading UK vaping manufacturer best known for their Liberty Flights vaping brand and the market-leading Dot Pro device, for initial consideration of £9,350,000.

 

Recognised amounts of identifiable assets acquired and liabilities assumed


Book value

Fair value adjustment

Fair value


£'000

£'000

£'000

Fixed assets




Other intangible assets

62

5,181

5,243

Property, plant and equipment

1,251

415

1,666


1,313

5,596

6,909

Current assets




Inventory

1,715

-

1,715

Debtors due within one year

1,160

-

1,160

Cash at bank and in hand

1,866

-

1,866


4,741

-

4,741

Total assets

6,054

5,596

11,650





Creditors




Trade and other payables

(894)

-

(894)

Corporation tax

(77)

-

(77)

Deferred tax

(119)

(1,399)

(1,518)


(1,090)

(1,399)

(2,489)

Total identifiable net assets

4,964

4,197

9,161

Goodwill



4,144

Total purchase consideration



13,305

 




Consideration




Cash



9,350

Deferred consideration



1,755

Contingent consideration



2,200

Total purchase consideration



13,305





Cash outflow on acquisition




Purchase consideration settled in cash, as above



9,350

Less: cash and cash equivalents acquired



(1,866)

Net cash outflow on acquisition

 

 

7,484

 

Following a purchase price allocation exercise the company identified further acquired intangible assets. The fair value adjustments reflect the recognition of Customer Relationships of £2,028,000 and the Trade name of £3,153,000. The additional consideration paid over the fair value of the net assets acquired is recognised as goodwill. Deferred tax of £1,295,000 was recognised on the acquired intangible assets.

 

Goodwill of £4,144,000 represents consolidated purchasing synergies, operating efficiencies and cross sell opportunities.

 

Debtors due within one year of £1,160,000 are shown net of a £111,000 bad debt provision.

 



 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

25.       Business combinations (continued)

 

Deferred consideration of £2m is payable of the first anniversary of the acquisition. This amount has been discounted in the previous table.

 

Contingent consideration is based on the performance of Liberty Flights in the 12 months immediately following the acquisition, and could range from £0 to £5,000,000.

 

The Group has adopted the following fair value hierarchy in relation to its forward contracts derivatives that are carried in the balance sheet at the fair values at year end:

·      Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

·      Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2);

·      Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

 

The following table sets out the fair value of all financial assets and liabilities that are measured at fair value:

Group and Company

Level 1

 Â£'000

Level 2

£'000

Level 3

£'000

Liabilities measured at fair value

-

Contingent consideration

-

2,200 

Total

-

-

2,200

 

There is no prior year comparison in the table above due to the acquisition only occurring in 2023. Contingent consideration is included in Level 3 of the fair value hierarchy. The provision for contingent consideration is in respect of the Liberty Flights acquisition in June 2022. The fair value is determined considering the expected payments, discounted to present value using a risk adjusted discount rate. 

The significant unobservable inputs are the financial performance forecasts for the twelve month period post-acquisition and the risk adjusted discount rate of 14%. 

The estimated fair value would increase or decrease if the EBITDA was higher or lower or the risk adjusted 
discount rate was higher or lower. A reasonably possible change to one of these significant unobservable inputs, holding the other inputs constant, would have the following effects:

Group and Company

Effect of change in assumption on income statement

Increase

 Â£'000

Decrease

£'000

EBITDA movement of £100,000

100

100

 

The revenue from Liberty Flights Holdings Limited included in the Statement of Comprehensive Income for 2023 was £9,437,000. Liberty Flights Holdings Limited also incurred a profit after tax of £1,260,000 over the same period. Had the acquisition occurred on 1st April 2022, the Group consolidated revenue and profit after tax would have increased by a further £1,900,000 and £250,000 respectively.

 

 

 

 

 

 

 

Acquisition of Superdragon

On 30 March 2023, Supreme Imports Limited acquired the trade and assets of Superdragon TCM UK Limited, an independent vaping manufacturer, for initial consideration of £2,470,000, with a further £187,000 deferred.

 

Recognised amounts of identifiable assets acquired and liabilities assumed


Book value

Fair value adjustment

Fair value


£'000

£'000

£'000

Fixed assets




Goodwill and other intangible assets

-

1,162

1,162


-

1,162

1,162

Current assets




Inventory

260

(196)

64


260

(196)

64

Total assets

260

966

1,226

 




Creditors




Deferred tax

-

(291)

(291)


-

(291)

(291)

Total identifiable net assets

260

675

935

Goodwill



1,722

Total purchase consideration



2,657

 




Consideration




Cash



2,470

Deferred consideration



187

Total purchase consideration



2,657

 

The above cash consideration of £2,470,000 was settled in April 2023 and as such no cash outflow arose on acquisition for the year ended 31 March 2023.

 

Following a purchase price allocation exercise the company identified further acquired intangible assets. The fair value adjustments reflect the recognition of Customer Relationships of £978,000 and other intangible assets of £184,000. The additional consideration paid over the fair value of the net assets acquired is recognised as goodwill. Deferred tax of £291,000 was recognised on the acquired intangible assets.

 

Goodwill of £1,722,000 represents consolidated purchasing and operating synergies.

 

The revenue from Superdragon included in the Statement of Comprehensive Income for 2023 was £Nil, as was the profit. The assets were acquired on the last day of the financial year.



 

 

Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

26.     Ultimate controlling party

 

The Directors consider the ultimate controlling party to be S Chadha and his concert party.

 

27.     Other financial commitments

 

See note 22.5 for details of the financial commitments under US dollar forward exchange contracts.

 

28.     Related party transactions

 

28.1. Remuneration of key personnel

 

Remuneration of key management personnel, considered to be the Directors of the Company and members of the senior management team is as follows:

 

Year Ended

31 March 2023

Year Ended

31 March 2022


£'000

£'000




Short-term employee benefits

1,152

1,030

Social security costs

159

126

Employee share schemes

1,405

1,402

Post-employment benefits

8

9

Total compensation

2,724

2,567

 

28.2. Transactions and balances with key personnel


As at

31 March 2023

As at

31 March 2022


£'000

£'000

Loan balances with Directors:



Balance outstanding from director

(2)

(2)

 

28.3. Transactions and balances with related companies and businesses


Year Ended / As at

31 March 2023

Year Ended / As at

31 March 2022

 

£'000

£'000

Transactions with related companies:



Rent paid to Chadha Properties Limited

180

180




Balances with related companies:



Amounts owed by Nash Peters Limited

-

-

Amounts owed to Supreme 8 Limited

-

(1,780)

The above companies are related due to common control and Directors.

On 30 March 2023 the landlord of Beacon Road, Supreme's principal operating site, changed from Chadha Properties Limited to Supreme 8 Limited, both of which are related parties. On 5 May 2023 a new lease was signed between Supreme 8 Limited and Supreme Imports Limited for a term of 5 years from 16 March 2023. Rent to be paid to Supreme 8 Limited in respect of Beacon Road will be £374,000 per annum (plus VAT) and will continue to be disclosed as a transaction with related parties.


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

29.     Net cash flows in financing activities

 


 Net debt as at 1 April 2021

 Payments  

 New leases

 Arising on acquisition

 Foreign exchange adjustments

 Interest expense

 Interest payments

 Non current to current movement

 Net debt as at 31 March 2022

 










 Long term loan - current

(6,469)

5,305

-

-

-

(575)

285

(2,530)

(3,984)

 Long term loan - non current

(3,695)

1,165

-

-

-

-

-

2,530

-

 Leases - current

(615)

837

(270)

-

-

(46)

46

(854)

(902)

 Leases - non current

(963)

-

(1,185)

-

-

(72)

72

854

(1,294)

 Amount owed to related parties - current

(1,613)

1,613

-

-

-

-

-

(1,779)

(1,779)

 Amount owed to related parties - non current

(1,779)

-

-

-

-

-

-

1,779

-

 Sub-total

(15,134)

8,920

(1,455)

-

-

(693)

403

-

(7,959)

 Cash at bank and in hand

7,505

(3,818)


271

(32)

-

-

-

3,926

 Total

(7,629)

5,102

(1,455)

271

(32)

(693)

403

-

(4,033)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 Net debt as at 1 April 2022

 Payments

Drawdowns

 New leases

 Arising on acquisition

 Foreign exchange adjustments

 Interest expense

 Interest payments

Movement on loan costs

 Non current to current movement

 Net debt as at 31 March 2023

 Long term loan - current

(3,984)

3,984


-

-

-

-

-

-

-

-

 Long term loan - non current

-

-


-

-

-

-

-

-

-

-

 RCF - non current

-

14,000

(18,418)

-

-

-

(883)

776

218

-

(4,307)

 Leases - current

(902)

834


(647)

-

-

(7)

7

-

(4)

(719)

 Leases - non current

(1,294)

-


(13,003)

-

-

(146)

146

-

4

(14,293)

 Amount owed to related parties - current

(1,779)

1,779


-

-

-

-

-

-

-

-

 Sub-total

(7,959)

20,597

(18,418)

(13,650)

-

-

(1,036)

929

218

-

(19,319)

 Cash at bank and in hand

3,926

1,643


-

1,866

101

-

-

-

-

7,536

 Total

(4,033)

22,240

(18,418)

(13,650)

1,866

101

(1,036)

929

218

-

(11,783)


Notes to the Group financial statements continued

for the Year Ended 31 March 2023

 

30.     Post balance date events

 

There have been no post balance date events to note.

 

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FR FIFIEDAIEIIV