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Looking forward to the final results, lighting stock that caused the share price to half (Oversold, negative market generally) is now sorted, batteries and nutrition solid vaping doubled from a year ago after M&A. I’m sure the forward statement aspect will be as good as the numbers also. Sandy and team doing all the right things here…..
We know things are going really really well. If the markets normalized we would be back over 200p for sure - Amazing value at the moment. Ridiculously undervalued IMHO.
https://www.voxmarkets.co.uk/articles/q-a-with-supreme-ceo-sandy-chadha-02d21e8/
It's an illiquid stock so could just be one seller.
I have another theory on why share price up so little: there were actually EPS downgrades even though this is based on literally a maths mistake plus poor guiding by the company. So if you aren't deep in the detail, Supreme is still showing negative (EPS) forecast momentum which is a turn-off for many investors.
The poor guiding is that
A) the brokers have been slow-played on EBITDA growth for Mar24 - see my arguments here and on another bulletin board. So EBITDA forecasts for 2024 only raised by a few hundred thousand when they should be up far more, millions, in my view.
B) brokers haven't cut interest cost forecasts despite big fall in debt, near- elimination of old amortisation of facility costs, and I believe the removal of the interest cost that they used to pay on a receivable financing facility now that all facilities merged into one. I think there's half a million quid upgrades to come from this by 2024 or latest 2025.
Plus:
C) brokers have been guided to raise Amortisation (and less so Depreciation) costs for Mar23 and Mar24, which is fair enough. But bizarrely both brokers are not adding back intangible amortisation to calculate Adjusted PBT even though Supreme has done this in 2021, 2022 and 1H23 reporting. This is in my view a literal mistake, not a matter of brokers thinking Supreme's exceptionalisation rules are not fair. Berenberg analyst is new so a forgivable mistake. This is a £1.2m error (0.8p or c. 8% of EPS) for 2023 on my estimates, 1.4m (0.9p of EPS, again about 8%) next year.
Listen to the 2 interviews from Sandy (Vox Markets yesterday, Directors Talk this morning) and he's dripping with confidence about 2024 and basically says "but in case something bad happens we don't want the market to get too excited'" Mgmt is sorry for the earnings downgrades from the Whey and Lighting surprises in the last year-and-a-bit so wants to make sure they don't disappoint us again. Fill your boots before the wider market wakes up.
Good note, the finances are compelling so something is weighing on sentiment. I'm guessing the vaping's marmite effect is holding the price back. Regardless, I'm staying in hoping at some point the financial's win the day and we get our rightful rewards.
This is a very good note thanks for showing the detail. Per my other post, I think mgmt has sandbagged you like they did after the Q3 trading statement - you'll be upgrading during the year!
Massive revenue beat, decent EBITDA beat, strong cash beats today yet the 2 brokers only upgrading next year by 2-3%. This is stone cold wrong, the company must be slow-playing the brokers to keep forecasts easy to beat. Even on new consensus EPS of around 10.5p, Supreme trades on only 10x earnings but it's now back to strong growth and should be in the mid-teens it traded at before Whey then Lighting problems. This is a debt-free, high-return-on-capital, owner-managed, entrepreneurial, decent-margin, strongly-growing, M&A-wizard company. I think consensus is nearly 20% too low so I see the stock as nearly a double.
1. Supreme just did >£85m revenue in H2. I'm not aware of much seasonality, so double it to 'annualise' the recent run-rate. That's £170m. Brokers are at £159 and £162m. Nothing in either broker note to explain why the biz should be shrinking sequentially when they've just posted c. 30% revenue growth in Q3 and c. 15% revenue growth in Q4. NB also that lighting is at trough in FY23 (including in the half just reported), and is guided to recover in 2024. My model says revenue will be £172m in FY24 and even this has little sequential growth in vaping, which would be upside. So +10m at say 30% gross margin = +£3m to PBT (consensus c. £16.1m).
2. EBITDA didn't grow as well as revenue did in H2, and this seems to have been mainly a Q4 thing. We can't yet see whether it's a gross profit thing or a central cost thing. There are clearly temporary factors suppressing margin: a) still Whey as Supreme hedged, whey now fallen; b) double running costs as they move to new warehouse and potentially as they transfer acquisitions' activity to Manchester c) operational deleverage from the collapse in Lighting. And some permanent, e.g. mix shift to lower-margin Disposables within Vape category. While brokers do have margin recovery (EBITDA level) in FY2024, by around 1%age point, I don't think that's enough to 'normalise' the short-term factors out.
3. Brokers have raised D&A costs. But much of this jump is amortising intangibles from the Liberty Flights acquisition, and most companies rightly 'exceptionalise' this kind of amortisation. If the new warehouse means higher D&A costs even after they've consolidated into it (there are currently double costs), then that's fair enough.
4. Brokers still show 3.4m net debt for end March 2023 though company just said it was zero ish net debt. Paying down c. £12m debt (£4m from the French sale) this half is amazing, as there was huge revenue growth which should have needed working capital build. NB there's still a few £m to flow out of deferred consideration for their recent acquisitions. It shows how cash-generative Supreme is.
5. Brokers still have interest costs in 2024 and 2025, but the co is now no net debt and highly cash generative, and their debt's a revolver so freely payable down (i.e. it's not that they are paying high rates on term debt and getting low rates
New research note with audio summary here: https://www.equitydevelopment.co.uk/research/a-positive-update-of-further-momentum
Supreme has issued a Trading Update for FY23 performance (year to 31 March) which it expects to be ahead of market expectations, and again in FY24 to slightly exceed the current market outlook. We have revised up our FY23 revenue outlook by 8.5% and, for FY24, by 7.6%.
At the Interim we raised our outlook on the basis of strong results (see ED report 29th November 2022: "H1 23 results buoyed by strong performance from Vaping"): FY23 revenue by 7% to £138.3m, and FY23 EBITDA (adj.) by 6% to £18.5m. The subsequent Trading Update added evidence of continuing positive momentum (see ED report 10th January 2023: "Positive trading update – strong busiest quarter").
On the basis of the strength of trading Supreme now reports, we again raise our outlook: FY23 revenue, in line with the trading update, by 8.5% to £150.0m and (adj.) EBITDA by 5.2% to £22.6m. For FY24 we have raised our revenue outlook by 7.6% to £162.0m and (adj.) EBITDA from £22.2m to £22.6m. There is evident margin dilution to 13.9% from our prior 14.7% estimate; this principally reflects the surge in Vaping revenue such that FY23(E) already exceeds our prior FY24 estimate.
Our Fair Value remains 190p/share – a price indicative of a FY24 EV/EBITDA of 9.4x (see note for full details).
New research note from Equity Development - link here: https://www.equitydevelopment.co.uk/research/disposal-of-t-juice-intellectual-property
Supreme reports that it has entered into an agreement with an associated company of La Vape Professionelle Distribution (LVP), a leading French wholesaler of e-cigarettes and e-liquids, for the disposal of the intellectual property (IP) of T-Juice, inclusive of the Red Astaire brand.
Supreme will receive an upfront payment of €4.5m (£3.97m) in respect of T-Juice brand IP, with the addition of income from consultancy services. The agreement ushers in a new strategic partnership in which Supreme will have exclusive manufacturing rights for T-Juice brands. We estimate that this will amount to at least €15.0m (£13.3m) in revenue over the coming five years, although the terms of the partnership – involving wholesale pricing arrangements – mean that our earnings outlook for the Group is unchanged.
Under the terms of the agreement with LVP:
• Supreme retains responsibility for flavour development and manufacturing, thus maintaining opportunities for supply chain synergies and improved margins.
• Enjoys simplified access to European distribution and expansion, at reduced cost, with LVP as the single point of reference.
• Has further cross-selling opportunities from the Supreme product portfolio.
We raised our outlook on the basis of strong Interim results and the subsequent Trading Update added evidence of continuing positive momentum supporting our outlook and our Fair Value of 190p indicative of a FY24 EV/EBITDA of 9.0x.
Agree, I just topped again yesterday at 100p. It’s great to see these impatient sellers keeping the price down. Fair value around 180p to 200p all day long. Next results plus a more normal market will see that back over 200p in 12 to 18 months time.
They have just processed their One Millionth order via Shopify!
Madness this share is still at 100p! A sleeping giant surely.
Miti, whey is used in the ketosis drinks but wellness covers much more like vitamins and supplements - those don’t contain whey.
Meanwhile 105p is very tempting for a top up. These are trading lower than they did prior to the positive update. Makes no sense to me.
The market has overlooked SUP
Gla
Chacha,
I was very noticeable that the wellness , vitamin and sports nutrition category was omitted from the last trading update .I really thought that going forward that it was this category that would be the big growth opportunity for Supreme. I realise that whey prices have hammered the margins but are you still as confident in this sector as you were before and have sales so far reinforced your belief that you can and will challenge the likes of Holland and Barrett ? TIA>
Increasing their holdings today, not surprising really as our next full year results will be almost identical the ones that lifted our SP to 240p. This is very undervalued right now (generating a lot of cash and firing on all cylinders very nicely). Very glad to have 130k shares ave 101p with 3 more years to retirement.
When one looks at the direction, revenue and profit increases at year end they will be very similar or uplifted from when the SP was 240p but a bigger better Net book value company. So above and beyond 190p fair value, I think we will be around 250p within 12 months (Assuming a normal semi bullish market).
Supreme PLC reports that trading in the three months up to 31 December 2022 was significantly ahead year-on-year, with revenue and gross profit up 30%YoY. As a result, the Group is “well placed” to meet market expectations - which were raised in November - for the year to 31 March 2023.
Following strong Interim results (ED report 29th November 2022 H1 23 results buoyed by strong performance from Vaping) we raised our FY23 revenue outlook by 7% from £129.5m to £138.3m, and raised our FY23 EBITDA (adj.) outlook by 6% to £18.5m. As the Trading Update indicates, Supreme has maintained the momentum of H1 performance adding confidence to our raised estimates for the current year; for FY24, we maintain the revenue forecast which was raised by 6% from £142.2m to £150.5m at the Interim.
Our Fair Value remains 190p/share.
https://www.equitydevelopment.co.uk/research/positive-trading-update-strong-busiest-quarter
Link to video: https://www.equitydevelopment.co.uk/research/supreme-plc-investor-presentation-29nov2022
Supreme (AIM:SUP), a leading manufacturer, supplier and brand owner of fast-moving consumer products, conducted an Investor Presentation covering its Interim Results for the period to 30th September.
Sandy Chadha (CEO), Suzanne Smith (CFO) and Mike Holliday (Vaping Divisional Lead) ran viewers through the details of their financial performance that included strong ongoing growth in Vaping as well as the already-trailed challenges in Lighting. The team touched on acquisitions, latest developments in Sports Nutrition & Wellness and answered a range of investor questions.
If you missed the live event, the full video presentation recording is available at the above link, divided into chapters:
0:00:03 Introduction to Supreme / key investment highlights
0:03:23 Financial highlights and analysis
0:15:58 Lighting
0:18:19 Sports Nutrition & Wellness
0:19:40 Vaping
0:28:02 Acquisitions & Investment
0:37:16 Questions & Answers
Really good results, well on the way back to full recovery. Broker buy at 190p and we are sitting around 100p. I would expect it will get noticed and climb a lot, it’s just a matter of probably weeks or worst case their new year trading update. I’ll be looking to add when I have some readies to invest.
Mad share price reaction to the Results this morning - closed yesterday at 109p, then shoots up to 117p first thing this morning, and then straight down to 105p now.
Make yr mind up - what a febrile market!
Link to full note & audio summary (free and accessible): https://www.equitydevelopment.co.uk/research/h123-results-buoyed-by-strong-performance-from-vaping
For the six months to 30 September, Supreme reported revenue growth of 6%YoY to £64.6m, EBITDA (adj.) of £8.1m, -19%YoY and PBT (adj.) of £5.8m, -31%YoY. Revenue was underpinned by 47%YoY growth in the Vaping division, with, notably, 31%YoY organic growth. Interim revenue was 5% ahead of our outlook and EBITDA (adj.) 4% below. The Group notes that trading in the Lighting division, which had negatively impacted the FY23 outlook, is now recovering; Supreme notes that improved overall revenue momentum indicates that full year Group performance should be ahead of prior market expectations.
Interim operating cashflow was £4.9m (H1 22, £4.2m), with (adj.) net debt of £14.6m and cash of £5.4m (FY22, £3.9m). Reflecting a policy of 25% net profit pay-out, the Board has proposed an Interim dividend of 0.8p/share (payable: 13.01.2023). We have raised our FY23 revenue outlook by 7% from £129.5m to £138.3m, based principally on strong organic growth in Vaping, and raised our FY23 EBITDA (adj.) outlook from by 6% to £18.5m. For FY24, we have raised our revenue forecast by 6% from £142.2m to £150.5m. However, given continued uncertainties for the impact of inflation on consumer demand, input costs and pricing, we have maintained our FY24 EBITDA outlook at £22.2m. Our estimates indicate a FY24 EV/EBITDA of 5.6x.
Our Fair Value remains 190p/share.
Closing bell - Yesterday?
On first look over of the results - glad I didn't!
@pinky how are you going to sell before the bell ?
I'm averaging 87 - As I've (for once) actually managed to buy some lows and take some profit here and there.
Medium to long term this has legs as Monty mentions below... But i'm still thinking of selling half before the bell as these markets are treacherous - Then stick it back in on any short term weakness.
40 mins to make a decision!
Well what do we know, I’m quite positive:
> Expanding in vaping, it’s all the rage now. New acquisitions revenue to be included.
> Lighting solid after a stock overhang that halted the share price (note trading updates).
> Nutrition should be good whey and protein prices lower and gathering traction.
> Batteries solid.
So why did we lose more than half our value, Carl Bly on lower than expected lighting. The Sirectors topped up a few respectable weeks before the closed period when of course they are not allowed to trade. I think we will be back on course big time (vaping growth) and back over 200p as soon as markets steady down and we will be re rated to 150p in these terrible unloved UK markets. The numbers will speak, Sandy and Team are honest & straight shooting. GLA I’m
Pl asked to be heavily invested at an average price of 100p & looking forward to see the progress tomorrow
This is a very interesting article that covers the legal status of vaping in European countries vs India.
Well worth a read:
https://blog.ipleaders.in/is-vape-legal-in-india/#:~:text=The%20objective%20of%20the%20Act,and%20advertisement%20of%20electronic%20cigarettes.