Like clockwork, UK FMCG products firm Supreme (mrkcap £192m at 165p) has over the past 2 years been either meeting or beating consensus estimates.
Similarly today, this owner, licenser, and distributor of soft drinks, vaping, sports & nutrition, batteries and lighting brands - said that after a "solid" first 5 months, trading for March FY'25 was "in line with expectations" (re £37m of adjusted EBITDA on turnover of £242m).
Indeed, one of the reasons behind this consistency is that Supreme sells high-quality, yet affordable everyday items to a wide range of UK customers, at a time when household discretionary spend remains under pressure.
Better still, the group is diversely spread across its chosen FMCG sectors (eg £100m+ non-vape sales), cash generative (13% FCF yield), profitable (13% EBIT margin) and dividend paying (2.9% yield) - whilst equally having a strong balance sheet (est £17m of Mar'25 net cash), which provides plenty of ammunition for further value/earnings accretive M&A.
For investors, the stock (at 165p) trades on attractive forward multiples of 8.7x PER and 5.8x EV/EBIT, representing almost as much value as its popular products.
Chairman Paul McDonald commenting: "Following a solid start in H1'25, Supreme expects trading for March FY25 to be in line with market expectations. The earnings enhancing £15m acquisition of Clearly Drinks in June'24 has accelerated our broader diversification strategy, with our teams already leveraging Supreme's extensive UK distribution network to create additional cross-selling opportunities and expand our market footprint."
"The core lines within our Vaping category continue to perform well and we remain well positioned to comfortably manage the anticipated changes to the UK vaping market. Having continued investment in rechargeable pod system vaping devices, adapted our flavour range and own-brand packaging, and ensured all retail partners enforce rigid age verification checks."
Lastly, Equity Development has a 225p/share fair value on the stock, based on FY'25 revenues, EBITDA and adjusted EPS of £239.7m, £37.0m and 19.5p respectively.
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