13 June 2022

Supreme plc

("Supreme," the "Company" or the "Group")

Acquisition of Liberty Flights for an initial consideration of £7.75 million

-      Strategic acquisition of leading vaping manufacturer accelerates product development and expands UK customer footprint

-      Transaction will deliver earnings growth alongside synergy benefits and cost savings

Supreme (AIM:SUP), a leading manufacturer, supplier, and brand owner of fast-moving consumer products, announces the acquisition of Liberty Flights Holdings Limited ("Liberty Flights"), a leading UK vaping manufacturer best known for their Liberty Flights vaping brand and the market-leading Dot Pro device, for an initial consideration of £7.75 million plus deferred consideration of £2 million, in addition to a performance related earn-out (the "Acquisition").

Founded in 2010, Liberty Flights specialises in premium e-liquid and high-quality vaping devices, alongside distributing a large catalogue of global third-party e-liquid brands. The brand is sold largely through convenience retailers, either directly or via wholesalers, as well as through an expanding direct to consumer online footprint.

The Acquisition is firmly in line with the Company's strategy to support a tobacco free UK by offering both credible and safer alternatives for nicotine consumption.

For the year ended 31 January 2021, Liberty Flights generated revenues of approximately £9 million and EBITDA of £1.5 million.

The Acquisition is expected to be immediately earnings enhancing for the Group, with Liberty Flights expected to operate as a standalone entity for an initial 12-month period before being fully integrated into Supreme.

All financials for Liberty Flights are unaudited.

Strategic rationale

·    Immediately earnings enhancing with further manufacturing and sourcing synergies expected post-integration;

·    Significant product and customer overlap with Supreme across the Group's vaping category with potential to enhance margins across the enlarged business;

·   Expands Supreme's access to the closed system vaping market, further broadening the Group's existing vaping proposition; and

·    The enlarged product range creates a strong platform from which to explore a number of cross-sell opportunities across Supreme's existing customer base.

Transaction structure

Supreme Imports Limited, a subsidiary of Supreme, will acquire 100% of the share capital of Liberty Flights on a cash-free debt-free basis, from its three shareholders, Matthew Moden, Christopher Parker and Abraham Spain, for a total consideration of up to £14.75 million, which will be funded from the Company's newly established rolling credit facility with HSBC.

The total consideration comprises an £7.75 million cash payment on completion of the Acquisition, a £2 million deferred payment (payable in 12 months) and an earn-out to be paid based on performance over a one-year period, subject to certain stretched performance metrics being met post the Acquisition, of up to £5 million (under current performance expectations, management estimate this will be approximately £2 million). The balance sheet of Liberty Flights carries property with a market value of £1.3 million. 

Sandy Chadha, Chief Executive Officer of Supreme, commented:

"We are delighted to be acquiring Liberty Flights, a business I have personally known since its inception and a brand I have long admired. The combination of Liberty Flights and Supreme's existing vape offerings couldn't be more aligned and is highly complementary across our respective manufacturing, product, and customer profiles.

In addition, the acquisition further builds on our significant market reach in the UK, accelerating our product presence in the fast-growing pod system market, a sizeable growth opportunity for Supreme.

We look forward to welcoming Liberty Flights into the Supreme group and updating shareholders on our progress over the course of the current financial year."

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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About Supreme

Supreme supplies products across five key categories; batteries, lighting, vaping, sports nutrition & wellness, and branded household consumer goods. The Company's capabilities span from product development and manufacturing through to its extensive retail distribution network and direct to consumer capabilities. This vertically integrated platform provides an excellent route to market for well-known brands and products.

The Group has over 3,300 active business accounts with retail customers who manage over 10,000 branded retail outlets. Customers include B&M, Home Bargains, Poundland, The Range, Sports Direct, Londis, SPAR, Costcutter, Asda, Halfords, Iceland and HM Prison & Probation Service.  

In addition to distributing globally-recognised brands such as Duracell, Energizer and Panasonic, and supplying lighting products exclusively under the Energizer, Eveready and JCB licences across 45 countries, Supreme has also developed brands in-house, most notably 88Vape and has a growing footprint in Sports Nutrition and Wellness.

www.investors.supreme.co.uk