Supreme warns on profits amid lighting sales slowdown, shares tank

Supreme shares slid on Tuesday after the company warned on full-year revenue and underlying earnings, citing a slowdown in lighting sales.

In its results for the year to the end of March, Supreme said pre-tax profit rose 25% to £16.3m, on revenue of £130.8m, up 7% on the previous year. Revenue growth was underpinned by new customer momentum and earnings-enhancing acquisitions, it said.

Supreme said that vaping, its largest and most profitable category, continues to perform "very strongly" and is expected to deliver revenue growth of around 30% in FY23. Half of this will be driven by new product development, continued market growth and further distribution expansion and the other half from the Liberty Flights acquisition.

However, it warned that a sales slowdown within the lighting category, compounded by customer overstocking in FY22, will suppress revenue and earnings before interest, tax, depreciation and amortisation in FY23. Revenue and EBITDA are now expected to be below FY22 levels and below previous market expectations.

Supreme also said it was cutting its dividend payout ratio. "Supreme's established sales and distribution footprint has created an ideal platform from which to accelerate the group's buy and build strategy in the near term," it said.

"With this in mind, the board has reviewed its capital allocation policy and believes that M&A can drive better rates of shareholder return compared to servicing its existing dividend commitments." As a result, it has revised its dividend policy from a payout ratio of 50% of net profits to a minimum of 25% in respect of FY23 onwards.

Chief executive officer Sandy Chadha said: "Batteries and Lighting have performed strongly and although customer inventory levels within Lighting will hold back our progress in the short term, I believe this minor setback should not detract from our operational progress to date.

"We are more excited than ever about the potential for Vaping. Our 88vape range is now well-established across our discount channel and has now started to penetrate grocery and convenience retail as well. With increasing levels of government support for vaping, we expect the revenue growth to continue."

At 0820 BST, the shares were down 26% at 93p.