Supreme PLC (SUP)
Supreme has announced the acquisition of Clearly Drinks Ltd., for a total net cash (debt free) consideration of £15m, funded from cash. Clearly Drinks is a manufacturer of specialised canned and bottled-at-source spring water and soft drinks with FY23 annual turnover of £22m and EBITDA of £3.0m1 . This is a significant diversification, which increases the FY25E contribution from non-vaping revenue streams from £85m (38% of total) to £100m (42%).
Clearly Drinks
Clearly Drinks is a long-established (1885), soft drinks and bottled-at-source spring water brand owner and private label manufacturer across the full product range (cans, glass and PET bottles), with c.70 customers nationwide including Waitrose, Aldi, Tesco, Sainsbury’s, and Farm Foods. Clearly is also a contract manufacturer for a number of major overseas soft drinks companies. Its owned brands include Perfectly Clear, Northumbria Spring and Revolution Waves, with products ranging from spring water (pure and flavoured) and energy drinks to isotonic vitamin drinks, mixers, tonics and coffeebased beverages. Employing c.100, Clearly’s 150,000 sq. ft. freehold facility includes three onsite natural spring water boreholes licensed to draw up to 300m litres/year of fresh spring water and a 350m units per year fully-automated canned drinks line.
Acquisition rationale
The acquisition introduces Supreme’s vertically integrated distribution platform to Clearly’s strong market presence, with the opportunity for added sales, marketing and of branded drinks products across Supreme’s client base of supermarkets, discounters and online retailers, plus own-label products or licences under recognised brands, i.e. replicating Supreme’s success in its Batteries and Lighting Business Categories. There is also the opportunity to add wellness and energy drinks products to the Sports Nutrition & Wellness Business Category. The acquisition introduces increased balance in Supreme’s vaping/non-vaping earnings profile, following, for example, the acquisition of the assets of FoodIQ in January to augment Sports Nutrition business category operations. It also serves as a reminder of the Group’s successful underlying business strategy of increasing market and brand reach across a range of popular consumer and household products.
Impact on estimates
The acquisition of Clearly creates a new Supreme Business Category. We estimate that the immediately earnings enhancing acquisition should add £14.7m to our FY25 revenue outlook based on estimated 5%YoY Clearly Drinks growth (pro rata), and (adj.) EBITDA by £2.0m (13.6% margin). FY25E (adj. dil.) EPS increases from 18.5p to 19.8p (+6.7%). Supreme reports full year FY24 results on 2 July, offering the opportunity to review estimates and add the medium-term impact on earnings
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