Supreme Plc: Equity Development
In a Trading Update for the twelve months to 31 March 2024, Supreme expects to report revenue of c.£225m, and (adj.) EBITDA of at least £38.0m, in line with market expectations1 , which had been revised upwards during the course of the year and represents almost double the FY23 level. The Group closed the year debt free.
The update highlights the scale of Supreme’s growth in recent years with FY24 backed by organic revenue and profit growth across all divisions. Comparison of our FY25E outlook with a group of (18) companies representative of each of Supreme’s core Business Categories highlights the Group’s relative discount on a FY25E EV/(adj.) EBITDA 4.2x multiple compared to an overall average of 11.0x2 . Our Fair Value remains 225p/share, indicative of 7.5x FY25 EV/EBITDA.
Our FY25 outlook reiterated
We have adjusted our FY25 revenue outlook slightly, by -1%, to reflect the shift away from disposable vapes, but retain our (adj.) EBITDA estimate of £35.0m due the positive impact of more profitable rechargeable vaping products.
As noted at the January Trading Update (Trading update: an excellent quarter), we assume a 70% customer transfer rate to pod-type vapes, with the addition of the one-off impact of retail disposable vape restocking ahead the April 2025 ban on disposable vapes. Supreme notes that it remains well positioned to adapt to changes in the UK vaping market in part due to its investment in and progress in developing a diverse vaping product mix.
Revenue doubled in four years
Our outlook highlights the extent to which Supreme has expanded, through both acquisition and organic growth during the period. From 2020 to 2024E the Group will have grown sales by 144%; Vaping +3.9x and all other Business Categories outside Vaping (Batteries, Lighting, Sports Nutrition & Wellness and Branded Distribution) +31%. Notwithstanding the impressive growth track record to date, the Group remains committed to complementary acquisition opportunities.
On the same basis, FY20-FY24E revenue will have grown at a 25% CAGR (FY20-FY25E, 20% CAGR) and (adj.) EBITDA at a 24% CAGR (FY20-FY25E,15.1% CAGR).
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