Given the 20%+ bounce in UK small caps since the Trump’s ‘Liberation Day’ lows in early April, the $64m question for investors now is which stocks continue to provide attractive opportunities.
One company that ticks the box is Supreme . A leading UK brand owner, licenser and distributor of FMCG products across Electricals (22% revenues), Vaping (55%) and Drinks & Wellness (22%). Of which offer the right blend of quality and affordability that satisfies the more budget conscious tastes of cash strapped households.
Ok, so how is the business performing?
Well from today’s robust FY25 results and in line guidance, the company is moving from strength to strength despite tough YoY comparatives and the UK’s 1st June 2025 ban on disposable vapes, which led to industry-wide destocking. Albeit it’s important to note that this change hasn’t impacted end use demand for vaping, simply how the products are consumed.
Here FY’25 turnover (+4% to £231.1m), adjusted EBITDA (+6%, £40.5m), and adjusted EPS (+3%, 21.6p) all climbed. As the Drinks & Wellness division more than offset the headwind in vaping, with sales doubling to £48.8m (+104%) driven by an excellent performance from its own Sci-MX brand, alongside the recent acquisitions of Clearly Drinks(Jun’24 for £15.6m) and Typhoo Tea (£10.2m, Nov’24).
Indeed these synergistic deals have not only enhanced its critical mass, manufacturing footprint and exposure to non-vaping products, but also importantly accelerated new product development and create a host of new cross/X-upselling opportunities.
What’s more this has been further augmented by strong cost controls, greater scale & improved mix (eg soft drinks) which has nudged up gross margins by 3% to 32%, churned out £25.1m of operating cashflow (10% yield) and helped net funds (pre IFRS 16) close Mar’25 at £1.2m. In turn enabling the Board to lift the dividend 10% to 5.2p/share.
Looking ahead, Q1’26 trading has been positive, especially in soft drinks thanks to the favourable weather. As such FY26 turnover and EBITDA are anticipated to come in at circa £235m and £36.5m respectively. Thus putting the stock at 200p on modest EV/EVITDA and PE multiples of 6.4x and 10.2x, with a 2.6% dividend yield and equity research valuing #SUP at 225p/share.
CEO Sandy Chadha commenting: “Supreme has made a positive start to FY26 and expects to deliver another profitable and highly cash-generative year, trading in line with current market expectations. Alongside an ongoing focus on accelerating organic growth, strategic cross-selling, and new product R&D, the Group remains committed to exploring complementary acquisitions to further exploit Supreme’s premier distribution footprint.”