Short recap

We first bought Supreme roughly a year ago and added once since. In the half-year update in November, I asked three questions:

Has the company become stronger?
Is it cheaper
Is the price move about the market or about the business?

Supreme delivered revenue of £270.2m and adjusted EBITDA of £40.6m, with the EBITDA coming in ahead of the £37.0m analysts were carrying before the April 2026 trading update. The shares are nonetheless lower than they were in November.

What was in the full year

Revenue: £270.2m, up 17% (FY25: £231.1m)
Gross profit: £78.9m, up 7%. Gross margin: 29% versus 32%
Adjusted EBITDA: £40.6m, flat (FY25: £40.5m)
Profit before tax: £26.7m, down 14%
EPS: 15.4p, down 23%. Adjusted EPS 18.9p, down 13%
Free cash flow: £23m, up 12%
Adjusted net cash: £7.5m
Dividend: 5.4p, up 4%

The good

Vaping grew 15% to £148.1m, entirely organic, through the category’s largest regulatory disruption. The disposable ban took effect on 1 June 2025 and removed £54.1m of FY25 revenue at the format level. Supreme retained every major retail customer, transitioned them to pods, added Hayati and IVG to its distribution portfolio, and took no material stock write-offs.

Drinks and Wellness grew 60% to £69.3m, from £23.9m two years ago. This was mainly driven by M&A. Their gross margin held at 31%. Soft drinks grew to £26.3m, roughly 20% above pre-acquisition levels. That came despite a material headwind from the post-deal reduction in contract manufacturing (c.£5m to £10m), which was more than offset by new product launches and international expansion. All other sub-segments also saw strong organic growth.

The balance sheet ended in net cash despite £12.9m of acquisition outflow and £6.0m of capex.

The bad

Vaping added £19.1m of revenue and £0.1m of gross profit. Drinks and Wellness added £26.1m of revenue and £8.2m of gross profit. Electricals and Household lost £6.1m of revenue and £3.1m of gross profit. Net gross profit gain: £5.2m. Administrative expenses inside EBITDA rose by £5.0m (of which £3.9m due to M&A). Hence EBITDA of £40.6m versus £40.5m.

Vaping gross margin fell from 36.4% to 31.8%. Management attributes this to the structurally lower margin of pods versus disposables and to early purchasing inefficiency, and expects it to improve meaningfully as buying disciplines mature, as happened with disposables. That is plausible, but we don’t have any evidence yet.

Electricals & Household is the ugly part. Revenue down 10%, but gross profit down 26%, with margin from 20.7% to 17.1%. Panasonic exited the European battery market, and Amazon moved to direct supply, cutting out resellers. Management explicitly says the Amazon stream is not expected to return. I had modeled this segment as a stable cash cow. It is now a shrinking one. Though the rate of decline should slow down from here, to c.5% p.a. on my estimate.

Organic EBITDA Growth: Strip out the acquisitions and FY26 EBITDA was likely down c.5%. The legacy business went backward while the company deployed a very large amount of capital, and flat headline EBITDA is hiding it.

The case for reading this as a timing problem.

100 Bagger Hunting

Supreme PLC FY26 Earnings Update - Record…

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