Supreme PLC (SUP)
For the year to 31 March 2024 Supreme reported revenue of £221.2m, +42%YoY, (adj.) EBITDA of £38.1m, +97%YoY and (rptd). PBT of £30.1m, +109%YoY. Net cash from operations grew 40%YoY to £27.1m, with year-end net cash1 of £11.6m (FY23: £3.2m). (adj.) diluted EPS was 18.19p/share (ED E, 20.2p). We see strong performance at gross level, +55%YoY with margin improvement from 26.3% to 28.7%. Supreme trades on a FY25E (adj.) EV/EBITDA 5.5x and PE of 9.1x, offers a dividend yielding 2.6% and remains highly cash-generative, as evident in the recent cash-based acquisition of Clearly Drinks for £15.0m.
Strong performance across all Business Categories
The Vaping Business Category recorded revenue of £82.8m, +8.8%YoY (ED E £83.0m), with the addition of £57.0m of revenue from disposable vapes in the Branded Distribution segment taking the total to £140m, 63% of Group total. Batteries revenue was £40.5m, +2.5%YoY (ED E £41.1m), with a marked improvement in gross margin at 13.7% compared to 9.9% in FY23. Lighting recorded revenue of £16.5m, +6.9%YoY (ED E £17.1m), with gross profitability at 39.3%, up on 26.7% in FY23. Sports Nutrition & Wellness revenue matched our estimate at £18.0m, +7.2%YoY, with a gross margin of 28.6%, compared to 15.9% in FY23. Branded Distribution category revenue was £63.5m, +7xYoY, (ED E £66.0m) of which £57.0m was derived from Elf Bar and Lost Mary disposable vapes.
We note the recent addition of Soft Drinks to the Group range of household and consumer products, via the acquisition of Clearly Drinks Ltd., apart from being immediately earnings-accretive, serves as a reminder of the underlying strength, and demonstrable success, of Supreme’s business strategy. The acquisition of a significant market presence, combined with practised, efficient distribution and marketing systems, offers the opportunity to both expand the soft drinks Business Category and augment other operations such as Sports Nutrition & Wellness.
Outlook to FY26
The Group has made timely preparation for the transition to traditional refillable, rechargeable ecigarettes, allowing it to further scale its c.60 m bottle annual production volumes, or to newer pod devices. Supported by strong cash generation, Supreme has maintained its strategy of acquisition in a new product area – Soft Drinks, where we expect a full year of contribution in FY26.
Valuation
Our Fair Value remains at 225p/share, still well above current levels despite recent strength.
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