Shares in fast-moving consumer products maker Supreme (SUP:AIM) improved 7.7% to 195p as investors applauded a positive first half trading update from the batteries, vaping and vitamins supplier.
Margins have proved ‘particularly strong’, enabling the Manchester-headquartered group to generate ‘significant’ year-on-year growth in profitability, while the in-house manufacture of key products has shielded Supreme from the supply chain problems impacting the world economy.
STRONG SHOWING
Steered by energetic founder and chief executive Sandy Chadha, Supreme owns, licenses and distributes a slew of consumer brands across the vaping, sports nutrition, lighting, batteries and household segments.
It distributes globally recognised brands such as Duracell, Energizer and Panasonic and also boasts the in-house developed 88Vape brand.
In a well-received update, Supreme flagged a strong performance in the first half ended 30 September 2021 and insisted it remains confident in achieving full year expectations.
Specifically, Supreme said positive momentum has continued in its vaping division, it has seen ‘particularly strong growth’ in the sports nutrition and wellness category, while the organically-growing lighting business has benefitted from some brought forward sales.
Elsewhere, the batteries category ‘continues to be a defensive and predictable profit contributor’ for the company.
IN-HOUSE ADVANTAGE
Since Supreme, whose growth and income attractions Shares highlighted here in May, manufactures key vaping and sports nutrition products in-house, it has proved ‘relatively unaffected’ by the global supply chain issues affecting other areas of the economy.
Furthermore, ‘active management’ in the batteries and lighting divisions has also ‘largely insulated Supreme from these issues’, leaving management confident the AIM-listed company can manage supply chain and labour constraints and continue to churn out growth, supplemented by the recent Sci-Mx and Vendek acquisitions.
Supreme has a strong track record of introducing new brands and categories to a retail customer base and should be able to scale in the years ahead, with its focus on high growth categories such as vaping and sports nutrition set to drive earnings.
Issued in July, results for the year to March 2021 showed an impressive 21% surge in adjusted pre-tax profits to £16.4 million on sales up a third to £122.3 million.
