Supreme plc (LON:SUP) Chief Executive Officer Sandy Chadha caught up with DirectorsTalk discuss financial highlights from their trading update, what’s driving growth in vaping, the government’s Smokefree 2030 initiative and the outlook for FY24.
Q1: You’ve announced your trading update and you seem comfortably ahead of market expectations. Could you just take us through the financial highlights?
A1: Supreme ended the year at least £150 million, that was £130 million the previous year, our EBITDA adjusted is as least £19.3 million, which is quite a way ahead of market expectations, so overall a good result.
We’ve also nudged up the next year as well which I think is really more important, it shows confidence for the next 12 months.
Q2: What’s driving the tremendous revenue growth in the group’s vaping business?
A2: The vaping business is driven by a few different areas. One is our core 88Vape bottle business has grown and that’s grown because the markets have grown. We have a prison contract that’s been growing nicely over the last couple of years and that’s ticked up this year as well. We’ve then added some MPV in terms of some modern disposable vape pens that have organically grown substantially and finally, we made two acquisitions on the last 12 months, one was Liberty Flights and the other one was Cuts Ice which we have now gone on and sold the IP but we trained the business and a lot of the gross profit.
So, overall, pretty good, we’re really happy with the results.
Q3: Now, the government announced its Smokefree 2030 policy last week, and it’s very much aligned with your long-term strategy. What stood out for you in the government’s initiative?
A3: I think what stood out is the sheer amount of enthusiasm and positivity around it, if you think, there’s so much negative press about vaping , especially when it comes to children and uptake of vaping.
The government has announced that by 2030, they want to stop people smoking. They’re looking at potentially banning cigarettes, we’re not sure if that’s going to happen but they’re looking at smoke-free or tobacco smoke-free Britain. The best way to quit, they realised, is vaping.
There’s nearly 4.5 million vapers now, there was zero when we started. When we started selling vaping in 2013, there was only a couple of hundred thousand vapers at the time. At the same time, smokers have halved.
So, it’s clearly working, it’s 95% healthier so why shouldn’t they push it more because the whole tax thing, as Neil O’Brien said, it’s a myth. They actually spend more on the NHS in terms of treating smoking patients rather than actually saving on the taxes.
Q4: Finally, how do see the outlook for the financial year 2024 for Supreme?
A4: We nudged it up, the analyst has nudged up the EBITDA target by about £22.6 million so that’ll be our best year we’ve had, forever.
So, in terms of actually how we feel, we feel positive, we feel that we do that without any acquisitions and that if we do have acquisitions along the way, hopefully just be incremental to that.
Also, I feel that we’re just positive about the economy. If you think, this time last year, there were headwinds like you’ve never seen, energy prices, raw material doubling up in price, freight costs 10 times, US dollar at an all-time high and the pound was so weak, labour costs, minimum wage etc.
This year, if you think about it, there’s been a lot of U-turn’s, raw materials have come down, the exchange rate has got stronger, the freight rates have come down, we’ve already absorbed a lot of the labour costs, and finally the electricity and energy costs have now stabilised.
So, we’ve got tailwinds and when you have tailwinds in the business, it’s like having a surfboard on a perfect wave and you’re business, if you’ve got a good surfboard, it’s doesn’t matter how good the wave is, he’s going to fly on that surfboard.
We feel it’s going to go really positive this year. We are also, in the back of our mind, don’t know what’s around the corner, we didn’t see the Ukraine war, we didn’t see other things that happened so positive but at the same time, we have got our eyes open at what’s happening.