As we go through, that'd be great. As a reminder, we have published a new note this morning that you can also find on our website. For now, I will hand over to Sandy Chadha, CEO.
Thank you, Hannah. Yeah, I'm Sandy Chadha. I'm CEO of Supreme. Supreme is a fast-moving consumer goods business. We are in multiple categories: batteries, lighting, vaping, wellness, soft drinks, hot drinks, and slimming products like SlimFast. Our main categories there are vaping, wellness, and electrical. We sort of narrowed it down from having seven categories into three, just for reporting purposes, makes our life a lot easier. I'll cover off the categories as we go through the slides. Hannah, if you don't mind moving on to the next slide. Okay, first, I just want to just shout a little bit about some of the brands that Supreme own. I mean, a lot of companies have not heard of Supreme as an entity, but they would have certainly heard of some of the brands like 88 Vape or Typhoo, 1001.
These brands that we either license or we own are what we call disruptor brands. A lot of them sit above or same price as private label, and they are at the bottom of the sort of price spectrum, but yet still the highest quality. On the left side is some of the licensed brands that we own. Energizer in l ighting, soft drinks to TONINO LAMBORGHINI, which we are launching in January. Some of the drinks that we are also a distributor for, sorry, some of the brands that we are also a distributor for are like Energizer and D uraCell, and other brands in terms of the branded distribution like LOST MARY and ELFBAR . The next slide, please, Hannah. Just a little bit of snapshot on our customer base. We have over 50,000, 55,000 retail points.
Some of these customers have been Supreme's customers now since the early 1990s. Over the years, we are generating more and more customers and more and more penetration into retailers. You'll find that a lot of these retailers that we have, I mean, we've got 6,000 or so customers. A lot of these retailers will sell five or six of our product categories. They won't just sell one. We are dealing with a lot of different buyers at the same retailer. More recently, we sort of started being a lot more senior to senior, top-to-top level with some of these big retailers in terms of a cross-category approach with a joint vision as part across a lot of our brands. We're getting more and more important for the retailers, and likewise, they're becoming more important for us too.
Moving on to the next slide. What sets us Supreme apart from everyone else is that our overheads across our whole business are actually split. We do not have actually a P&L per division. It is actually a shared overhead base. We call this our vertically integrated platform, where we put products and businesses at the top, and they share the overhead services. A lot of the sales and the gross profit falls straight to the bottom line. Now, some of the recent businesses that we have brought, Suzanne will come on to, it is not always possible to reduce a lot of the overheads. Sometimes it takes longer to reduce the overheads than we would like because of certain times of when you are buying a brand and integration times involved and costs involved in that. We like to look for brands that we can manufacture.
We like to look for brands that our customers sell, that we can also license. We like to look for brands that are actually disruptive in terms of price. We actually have done that across some of our acquisitions in the last year. We have bought brands that are well-known that we can manufacture that are really disruptive on price in terms of the lower end of the spectrum. I have really actually sort of like getting more momentum in the last 18 months in terms of some of the brands that we have owned in the company. Okay, the next slide, please, Hannah. Suzanne.
Yeah, afternoon, everyone. Let me take you through the financial highlights and operational highlights. We'll come back to the numbers later on in the presentation and deep dive them a little bit further. Just to give you, as I said, the headlines. Delighted to report 17% growth in revenue. It's GBP 20 million increase for the first half of this year versus last, which is set against an ongoing difficult retail trading environment. We're really happy with that, with GBP 20 million growth. GBP 15 million of that has come from acquisitive growth. The acquisitions that we made in the previous year, they have annualized this year, and we've seen the benefit of those. They are namely Clearly Drinks and Typhoo, which we'll talk about a little bit more in this presentation. Most of that volume growth in revenue has translated into gross profits.
We have increased absolute gross profit by 13% as well. EBITDA is GBP 18.5 million, aligned to last year, demonstrating a robust performance overall. We will talk about later how we have bridged the GBP 18.5 million YoY, given the increases in gross profit and where the overhead growth has come from. We have ended the year with GBP 4 million of bank borrowings net of any cash on our balance sheet, which, given the acquisitions that we have undertaken in the last 14 months, having spent almost GBP 27 million, we feel this is a positive result. Having spent also GBP 2.5 million of CapEx in the period, which is higher than we have seen in previous periods. When we talk about the operational highlights, I will explain what we have been spending that money on.
Post-period end, you'll know that we also acquired SlimFast, so that M&A spending spree carried on into the second half. Despite all of that, we still expect to end the year bank debt-free, net cash neutral, which just indicates the ongoing amounts of operating cash that this business generates year in, year out. Positive set of financial results, and I'll deep dive them later on. In terms of operationally, it once again has been a very busy six months for Supreme. We've continued to deliver on our commitment to diversify revenue, having acquired 1001, the recognized cleaning brand, across the summer. We also acquired SlimFast shortly after period end, both of which were acquisitions that stuck rigidly to our M&A criteria. Collectively, they'll deliver about GBP 30 million worth of annualized revenue.
When I talk about our M&A criteria, you've heard me say it before, but it is acquiring and targeting well-known, trusted, followed, fast-moving consumer brands that are immediately earnings-enhancing to Supreme that can be distributed amongst our existing network of retailers, and that we can potentially manufacture ourselves currently or in the future. Both of those acquisitions stuck rigidly to that criteria. Both were good deals as well in terms of the multiple in which we paid for them. 1001, we estimate to be less than two times EBITDA and SlimFast around just over three times. Yeah, really pleased with the acquisitions that we've undertaken. That's four acquisitions in the last sort of 18 months. We will now focus inwards on integrating those businesses as we have done with integrating Clearly Drinks and Typhoo that we acquired last year.
Typhoo, in particular, we have opened up our own tea factory now. We've brought manufacturing in-house. We've reformulated and rebranded Typhoo and worked really hard in terms of turning around their financial challenges. The business had been in a prolonged loss-making position before we acquired the brand, and it has been immediately an earnings-enhancing for Supreme, which we're obviously delighted about. Another element of the last six months has been the transition from disposable vape into pod vapes. You may be aware that disposable vapes were banned in this country in June earlier this year. We have seamlessly and successfully, both financially and from a stock obsolescence perspective, transitioned that book of business away from disposable vapes and onto pod vapes. Finally, we've also been busy innovating. We have worked really hard across our brands and actually collaborating across the group.
Our soft drinks business and our wellness category have got together and borne out of that have been a number of functional hydration drinks, vitamin drinks, and most notably Juicy Protein, which is now launched in the Far East and will launch imminently in the U.K. Also, our soft drinks manufacturing capabilities and talent have combined with our tea brand, Typhoo, and we are now in the process of launching Typhoo Iced Tea. Those collaborations, that innovation does not happen overnight. It takes a lot of hard work. There is a lot of testing that has to be done to get these brands to market. We are really pleased to see some of this now kind of coming to fruition. Between the M&A, the transition in vaping, and the ongoing innovation that we see across the group, we have been very busy this last six months.
Do you want to move forward onto the Typhoo slide? In terms of Typhoo in particular, I think I've just touched on it there. As I said, we bought this business 12 months ago out of administration. In fact, as we were doing this roadshow this time last year was when the news hit that the brand had gone into administration. We bought this business in just over three days. You'll remember that we bought the business for GBP 10 million, but GBP 7 million of that was actually the stock and the debtors that came along with the acquisition. Really, the brand and the book of business cost us about GBP 3 million. We expect it will turn over annually upwards of GBP 15 million of revenue and will generate incremental amounts of EBITDA for the group.
Really, the focus for this six months has been more strategically and operationally in terms of rebranding and reformulating the Typhoo brand. What you see here on the screen is really how the brand looked many years ago, and we have now brought that back to the original OOing Typhoo strapline, and it just looks much more comfortable on shelf. We have invested in innovation, having launched now a Gold Blend, a decaf SKU, and also you see here the iced tea. Most importantly, having begun in-house manufacturing and bringing some of that supply chain onshore and opening up the supply chain in terms of the tea gardens in Africa that we are working with, we have managed to bring the brand back to profitability almost immediately. In the six-month period under review here, we have carried more costs than we would expect to on an ongoing basis.
We've carried the talent and the expertise of the people that we inherited whilst we really learn our craft in the tea market. Now we start to transition away from that and lean more into Supreme's existing vertically integrated platform. That is where you really start to see the overhead synergies on an acquisition like this. Onto the next slide in terms of SlimFast. This actually is a post-period end acquisition. We acquired SlimFast just last month. SlimFast, hopefully, you will all be aware of the brand. It's been around a long time. Again, go back to our M&A criteria. It's a very recognized, well-followed brand. It has great distribution amongst our existing customers, but also has a lot of potential with other customers that we currently work with that do not stock SlimFast. The most noteworthy elements being international.
We've already had some inbound inquiries internationally from within Europe and further afield. Also within the convenience channel, SlimFast doesn't exist currently in the convenience channel. There's plenty of distribution opportunities. In addition, we are a powder manufacturer. You'll know that. We've also been fitting out and kitting out a brand new powder facility that we expect to open in the spring, for which the powdered SKUs within the SlimFast range will form part of that manufacturing facility. There's plenty of elements, whether it's overhead synergies, whether it's manufacturing scale, whether it's cross-sell within distribution. For a number of reasons, this brand fits seamlessly into the portfolio that Supreme is building. If we move on to the next slide. We talked briefly about the acquisition that we did in the summer, the acquisition of 1001.
1001 is primarily a carpet cleaning and carpet freshness brand that's been around a long time, previously owned by WD-40. Again, has good distribution amongst some of our existing customers, but has some promise with other customers that it currently doesn't exist in. It's been a little bit neglected in terms of it's been a small part of a much wider portfolio at WD-40, and we can see that there is definitely innovation opportunities within this range that just haven't been explored up to now. 1001 were not a manufacturer of these cleaning products. WD-40 were not a manufacturer of these cleaning products historically, but that is now something that we are exploring ourselves. Again, another element of diversification away from our core product portfolio and something that we see some real potential in.
If we move on then to our kind of category roundup, Sandy, I'll pass to you.
Yeah, sure. Vaping, as you can see, the first half, we've actually done pretty well. We're really happy with the 13% uplift in sales. The transition from disposables to pods has gone exceptionally well, better than we actually thought. You've got to bear in mind in the first half here, there's been a pipe fill for retailers. Some of this success is down to actual stores stocking up for the first time, having sold off their disposable vapes before the ban. Just to note, 88 Vape still does really well and still is very strong out there, and still is a lion's share of our profits. This is an area where everyone's probably going to be a lot of questions next year around the tax, which comes in in October 2026.
We then have a six-month window to sell stock through and have available stock with tax stamps ready by April 2027. I think we'll come back to this with Q&A. I'm sure there'll be lots of questions on this area. Overall, we're really, really satisfied how the transition's gone from a disposable ban into a pod system. Okay, next slide, please. The drinks and wellness category, which obviously includes Clearly Drinks, the Typhoo, and also SCI-MX, and now SlimFast. I guess this area is the area where we're going to see the most growth in the next year, especially with the acquisition that we've just done with SlimFast. We're happy with the core business. If you think about the core business being GBP 20 million before we bought SlimFast, all of a sudden, it's going to be approaching over GBP 49-GBP 50 million.
I think that this is an area where we believe that our future growth is going to come from. There's a lot of innovation in this area with drinks. There are a few drinks that we've been launching in January. The TONINO LAMBORGHINI is launching in January. That's at the higher end of the spectrum. We've also got a budget energy drink joint launching at the same time. Also, with Clearly Drinks, we've had a very hot summer. Our actual contract manufacturing has done really well with the likes of some of our big contract manufacturers. We've also done a lot of private label for the discounters, like with sparkling waters or with energy drinks, which you don't really see or we don't shout about only because they are private label contracts and being confidential, a lot of them in nature.
Also in this area, I guess the thing to consider is the manufacturing. So we're manufacturing drinks. We're manufacturing powders in our new facility, and we are also manufacturing tea. On the tea, we inherited most of the CapEx from when we bought the business, and we've probably spent maybe GBP 800,000 on extra CapEx to make a factory. On the Clearly Drinks, we've probably invested about GBP 1.5 million, one of the part of it being pallet lines in that area. And then on the powders, where we're going to obviously introduce SlimFast into our powders manufacturing, we've invested about GBP 2.5 million-GBP 3 million so far in our facility there. So overall, it's been quite a big year for CapEx, but going forward, I don't see that it should be, I mean, Suzanne will say more.
I do not see it being more than a couple of million a year across the group, but again, Suzanne will clarify that. Moving on to the next slide, which will be on it. This has probably been the most disappointing for two reasons on the household. One is that Panasonic have decided to pull out of batteries, and that happened quite surprisingly, and it has left us a little bit scrambling around into replacements. We have successfully started to integrate Eveready Gold Seal and, in certain cases, Philips into our portfolio. The likes of Vendek in Ireland, that is all they sell is batteries and lighting, and half their business was actually Panasonic. They have transitioned to Philips in Ireland. The other area of disappointment was that actually lighting is slowing down in terms of the price has actually come down another 30% from last year.
The light bulbs are just getting that bit better as well now. The quality is starting to last longer. We believe in the next few years, there will be a slow down decline. However, it is still cash generative and it is still part of our portfolio, and we cannot really sell these businesses or do much with them. I was more concerned about the lighting than the batteries in the sense that longer term, I think batteries market itself is stable, whereas the lighting market is in decline right now. Again, disappointing, but at the same time, because we have diversified so much away, if you went back, if we went back to 2000 and went back to 2015, actually now 10 years ago, this is all we were selling as a company. It shows how much we have moved on in the last 10 years, really.
Moving on to the next slide. Suzanne.
Yeah, thanks, Sandy. Just a little more of a deep dive in terms of the different elements for revenue. Hannah, could you just skip forward two slides onto the revenue bridge? I think it's easiest to talk it through there. That's it, thank you. Okay, this shows us how we get from GBP 113 million in the first half last year right up to GBP 132 million. As I'd said, that GBP 20 million is a result of the acquisitions that we made in FY 2025, the full year impact of those. GBP 8.3 million for Clearly Drinks and GBP 7.1 million for Typhoo. Spot on in terms of where we would expect those businesses to be at this time of year. In the red, there is electricals, as Sandy said, batteries and lighting have declined.
As we've well signposted for lighting in particular, as Sandy said, light bulbs have never lasted longer, and they've also never cost so little to buy as a consumer, which as a distributor just makes life increasingly hard to kind of keep up pace. On batteries, as Sandy mentioned, Panasonic have exited the battery market, particularly in Europe. Now we're in the process of transitioning customers over from the Panasonic brand over to Eveready Gold or even to Philips. There's some disruption in our battery revenue there, which we see under electricals. That means that take those elements away, that means the core business, everything else that's left has grown GBP 10.5 million. The stars within that, the core business there has been within wellness.
Aside from any acquisitive growth, the core kind of legacy brand within there, which is SCI-MX, has grown 10% year on year, GBP 1 million of incremental revenue. As a reminder, that's a brand we bought back in 2021 for GBP 1.4 million. This year, SCI-MX will contribute almost GBP 10 million of revenue to the group. Most of those products are manufactured, so we're at really decent gross margins as well. The remainder of that growth really has come from vaping. That is a standout performance in terms of the disposable vape to pod vape transition that Sandy said has gone better than we had expected. It's buoyed a little bit by the fact we have this one-time pipe fill revenue.
There is probably seven, if not maybe eight months' worth of revenue within that six-month period because of the surge of sales that had to happen immediately before the ban. We will not see that in the second half, obviously, but that has definitely helped with the core revenue growth. The rest of the vaping categories remain solid, and we have seen some growth within our cleaning category as well that we now report within electricals and household, aside from the acquired cleaning revenue of 1001. They are the building blocks that make up the revenue bridge. If you then go back to the income statement, sorry, Hannah, if you go back two slides. And one more. That is it, great.
In terms of absolute amounts of gross profit, you'll know that we talk more about absolute gross profit than we do about gross profit as a percentage of revenue. 13% increase year on year, which is largely a result of the incremental sales volume that we have reported. As a percentage, it has come down from 30% to 29%. In vaping, that's a result of the pods being a lower gross margin percentage than their disposable counterparts. Disposable vape was almost at 20% margin, a little bit higher, and the pods are down at the low teens as it stands. Now, as we become more proficient in shipping and buying and distributing the pods, I expect that, as the disposable did, that the pod margin will go on a journey of expansion over the next one to two years.
Also, within gross margin, we've seen the blended gross margin within wellness reduce slightly, and that's a result of sales mix. That category has doubled this year to last, and it's gone through a substantial amount of change. A lot of the margin that we've derived from Typhoo has been diluted by fair value accounting adjustments that we're required to make on some of the acquired stock, which we'll see improve in the second half and into next year. As well as the tea manufacturing facility really finds its feet and drives scale through that facility going forward. With incremental amounts of gross profit, have come incremental amounts of overheads. We've spent GBP 4.3 million more on overheads in this half year versus last, which is quite a leap. Almost GBP 3 million of that has come from the acquired businesses.
Let me just take each one in turn. Clearly Drinks first and then Typhoo. Actually, no, Typhoo first. Typhoo's overhead base that we inherited initially was made up of two key factors: people and third-party logistics, third-party storage costs. The people we inherited, more than 20 people from Typhoo. We worked with a lot of those people for a prolonged period whilst we learned our craft within tea, and we understood the market, we settled the customers, we re-engineered manufacturing and brought that on shore. Now, as we have done historically with other acquisitions, now we've leaned in more to our existing vertically integrated platform, our own back office support functions, which means we need the people that we inherited less and less, and that's really when the synergy starts to grow.
We will see that going into FY 2027 as well, as we at that point move away from third-party logistics is the plan. Most of the overheads that you see within Typhoo are temporary in nature. Within Clearly Drinks, however, Clearly Drinks is based up in Sunderland. It sits above three boreholes into the ground where it extracts the spring water that it uses within its soft drinks manufacturing processes. We cannot move that business. We do not plan to. We physically cannot. Its cost base is large and permanent, and it is centered around that independent business that operates up in the Northeast. In addition to the overheads that come with the acquisitions, there have also been some discrete investments into the core business. We have investments in the variable cost elements, so the things that grow in line with sales, distribution costs largely, carriage, postage.
There are the required increases, such as national insurance, increases in living wage, and inflation. Specifically, we have made some discrete one-off investments into our senior management layer, specifically within sales, within new hires to grow our business more internationally, and just to evolve our sales function. If you then go further down the P&L, we have some adjusted items, which, as is always the case, is our movement in forward contracts, share-based payments, all of which are routinely reported within adjusted items. Increasing amounts of depreciation and amortization. We have become more capital CapEx sort of heavy as a business, particularly following the acquisition of Clearly Drinks. It is a highly automated, accredited manufacturing facility, which we have invested in this year to derive incremental revenue, particularly around the pilot line.
We have also built out and fit out a tea manufacturing facility, and we are also in the process of kitting and fitting out a brand new wellness facility. We are certainly in the investment phase, an investment phase within our business. Is this the go-forward kind of profile of CapEx? As Sandy said, no. I think historically we would spend about GBP 1 million on CapEx a year. It is probably closer to GBP 2 million a year now that we have more facilities, more plant machinery. Do I expect it to be as high as it has been in the last 12-18 months as a new norm? No, we have definitely been through an investment phase. If we move on to segmental, onto the next slide. I think we have covered most of this, but just to sum up, vaping revenue grew 13%.
As it says here, underpinned by the transition from disposables to pods, as Sandy said, it's gone much better than we've anticipated. Aside from that, the rest of the category has performed well. It's been a solid performance. Drinks and wellness, it's doubled the category as recognizable compared to where it was last year now with the addition of soft drinks and also tea. The underlying sort of core business also performing well, particularly in terms of SCI-MX. Electricals and household, as we've said, we've now had the addition of 1001, but that's been offset by reduced volumes across lighting and batteries. If we skip over onto the balance sheet, actually, to move to the next one, we've done the bridge on revenue. Let's have a quick look at the bridge on EBITDA.
I think this just illustrates the movements YoY that shows that whilst we are flat YoY in terms of EBITDA, there are different elements to consider, which is the incremental contributions from Clearly Drinks and Typhoo, offset unfortunately by the decline in electricals, but then complemented by the growth in the core that we see fall all the way down to EBITDA, but then those discrete investments that I talked about, national insurance specifically and the distribution and marketing costs that come along with just selling more product. If you move to the balance sheet, there is not much to say specifically on the balance sheet here other than just a nod to the investment into working capital.
You'll see that stock is higher this year than it was either at the end of last year or even this time, at the end of the period or even this time last year. We have acquired since this time last year, so where the GBP 10 million increase is, we've got Typhoo now on top of that, which is finished goods and raw materials, not forgetting as the manufacturer of the tea now. We've acquired 1001, so there's GBP 1 million of stock there. We have also invested in stock as a result of going into our peak season, which we do at this time of year every year. We have also transitioned some of our branded vape stock from air freight to sea freight, which has benefits in terms of gross profit margin, but means that we have to invest more heavily into working capital to support it.
IFRS 16 is a little bit higher than it was last year, and that's a result of the new lease, the HIVE, the new protein and wellness facility that we are in the process of kitting out. Over the page onto cash flow, we've seen lower levels of operating cash flow this year. Seasonally, there's always a working capital outflow, but this has been more pronounced this year than in previous years as a result of the 1001 stock coming in. As I said, this movement that we've seen in the period from air freight to sea freight, which really just extends that working capital cycle. We also, last year, were delayed in paying our corporation tax, which is much more normalized this year.
Further down, you'll see the outflows of CapEx that we've talked about, so the investment into the HIVE, the protein powder facility, the investment into Clearly Drinks, the two pilot canning lines that are already operating at good levels of capacity. The M&A there, the outflow in respect of 1001. Everything else is as you would expect. If we move on to the next slide. Just to summarize, I know we come back to this slide each and every time we do this meeting with everyone, but I do think that sometimes there's so much going on that I think it's worth reminding everybody of the elements that make this business really special.
We talk a lot about our unrivaled business model, and by that, we mean our vertically integrated platform, this central bank of overheads, of talent, of resource, of space and capacity that means we can continue to take on these well-known consumer brands and service them and operate them almost entirely from our existing or pre-existing base of resource. We own most of the brands that we distribute, and we manufacture a lot of them, or we license a lot of them. That means that the retailers have to come to us to buy them. Our customer base and our revenue base is not transient. It is not subject to marketing spend or changes in market dynamics. Our revenue is very sticky.
It's not contractually recurring revenue, but it's probably as close as you would ever see in terms of the order patterns that we see from our big customers week in, week out. The business has strong historic rates of revenue growth, of good levels of gross profit, and also cash generation. We'll skip over high-quality management team. We'll let you guys decide whether you think that we are or we're not. Our M&A becomes an ever-increasing part of our growth strategy. We talk a lot about the criteria that we follow, and we stick really rigidly to only going after brands that we know we can service from that platform I just talked about, that we know we can manufacture, that we know will be earnings-enhancing for Supreme, and that we know that we can pick up for a really good price.
We get asked a lot about what makes our products successful because we do not see that you spend a lot of money on marketing. The answer is we stay really fixed on value, on being disruptively priced. The way that we can offer these products at disruptively low prices comes back to all those previous elements I have just talked about, the fact that we are driving down our cost to serve on an ongoing basis, that with scale of manufacturing means incrementally, we are driving down, sorry, our cost to manufacture and therefore the prices that we can offer these products out. That means they sit on shelf with really great distribution, really disruptive, eye-catchingly low prices, and that is really what drives the success of the business.
Diversification this year, I think more than ever, is something that's been a commitment we've really delivered on. Only about half of our revenue currently comes from vaping. If you looked at our business two years ago, it would have been much more like 70%-75%. We have worked hard to diversify and de-risk our portfolio. We do not over-rely on one particular product or one particular customer. As we have seen this year with the decline in electricals, that diversification, we are really reassured that that is the right route for this business to follow. If we move on to the next slide, in terms of then looking to the future, the next six months, we have started the next six months. October and November have traded well.
We've continued to do particularly well on our branded vaping category where we have been particularly cautious in terms of our forecasting. Strategically and from an integration perspective, Typhoo and Clearly Drinks are exactly where we expected them to be at this point. I suspect we'll follow a similar trajectory for 1001 and SlimFast. We are kind of in deep integration mode now with 1001 and SlimFast and coming out the other side of Typhoo and Clearly Drinks. I think you may hear less of us in terms of M&A for the next six months while we ensure that these businesses are seamlessly integrated and really optimally performing for the group. That being said, acquisitions will remain a core driver for growth. It has been for the entirety of this business's journey on the stock market. I don't see that changing, but of course, it comes in waves.
is a lot of change on the horizon in terms of the U.K. vaping market. We have some tax coming in this time next year, which we are well progressed in terms of making our adaptations operationally and the dialogue that we are having with retailers. Just like the disposable vape ban, it does project some uncertainty into our business, but what the disposable vape ban has taught us and has kind of reinforced is actually this business is really good at navigating change. It can manage stock, it can adjust its manufacturing, and it can communicate and service that particularly well for customers. Yes, it is a big change, but we are kind of quietly confident about the impact that that might have on our business. Innovation just continues to be a key point of our business and will as we go into the second half.
I think the acquisition of Clearly Drinks has really pushed that further. Having the ability to lean on that kind of talent internally into our business rather than having to deal with external parties makes that innovation process so much more slicker and makes us more agile. A lot for us to do with going into the second half, especially with the decline in electricals and the margin differentials between pod vapes and disposable vapes, but also lots to look forward to as well.
Great. Guest questions, Hannah? Is Hannah not here anymore?
Should we ask? Should we do it ourselves?
Oh, sorry. Thank you, pardon. I forgot to switch my camera on. Right, yes, we have a number of questions, so let's make a start. Can you talk a little bit more about the timeline for drinks and launching new products?
Obviously, FC UK and Bench were announced a year ago. What's been happening over the last year with them?
Yeah, so a lot of our drinks, you'll remember when you launch a drink and you put it onto the market, everyone's not going to buy it straight away. Most supermarkets only have a window twice a year, maybe once or twice a year. Discounters, again, scrambling for space in terms of Christmas coming. We have Juicy Protein launching in both the biggest two discounters in the U.K., Home Bargains and B&M in January. They're going in FSDUs and in the fitness event. We've also launched in Hong Kong as well. In January, also launching TONINO LAMBORGHINI. So far, we've got one retailer with 1,000 stores that's interested in that.
We are interested in launching a budget brand again, early part of next year, seeing the success of a private label we've done for another retailer. Again, that's not decided on exactly when and how much that's going to do. You have to remember that anything that you launch and do, you won't get overnight success. It's going to take time to build, to get listings. When you're in the Far East, the decision-making process is a lot quicker and faster. In the U.K. and in Europe, their decision-making and their launch dates are a lot slower. We just have to be patient. We're doing everything we can to get things listed as much as we can.
Okay, thank you. How has the Juicy Protein launch gone, and has it met initial expectations?
Yeah, so we've only launched in Hong Kong because they were so fast in deciding and circled here at 400 stores, and they said, "Yeah, we want it straight away." It's there on sale, and it's selling exceptionally well. I think it's selling, if I'm not correct, 12 units per store per day. I think that's what it is, but I have to double-check that if I got that right. In the U.K., it's launching in January, so I'll know more in terms of launching. It's available for sale for wholesalers and smaller retailers right now, but we'll only gauge e-post by January when it goes live into 2,000 retailers, and that will be January, the first week of January. I don't know right. I've got strong hopes, though.
Excellent. Just sticking with drinks for a moment longer, what's the strategic logic behind launching Typhoo Iced Tea?
Obviously, it's a slightly legacy brand associated with older customers, and now you have a youth-targeted drink. Is this why perhaps it hasn't landed in mainstream retail?
It’s not landed in mainstream retail because it's more of a summer drink. Unfortunately, with timings, it's here now and available now. We have got cash and carries and wholesalers that are buying this by the pallet, but the retailers have all expressed interest around about February, March time. You have got to remember the reason for launching Typhoo Iced Tea. There is only one other credible brand on the market, and that's Lipton, and we will be disruptive on price. If you talk about legacy brands and old-fashioned brands, Lipton's up there as well. It is well known for the older group as well as the younger.
There's no reason that it's just young gen that are buying the iced tea. It's also an older generation that wants an alternative drink to a Coca-Cola. I think it actually suits itself to both markets. The fact that we'll be at a lower price than the only alternative credible brand, and we are the only really U.K. tea brand to launch an iced tea, I think it's really good. However, the proof is all in the pudding. Let's see how the sales go next summer, and I'll tell you the answer to the question in our results next summer.
Sounds good. Can you elaborate a little bit on the rationale behind a new protein facility?
We've maximized our current one, to be fair, and the new one was over the road, and we thought, "Let's get this BRC accredited.
Let's start making for other people as well. The beauty with the facility we bought, when we bought it and started putting the investment in, we had no idea about SlimFast. Now with SlimFast in there, we're going to be at 60%-70% capacity, which on one shift when we can go to double shift, which means not only does the cost of SlimFast products come down, but Suzanne will explain it better to you, that our cost of everything we make will come down in terms of labor costs because it's spread over a bigger volume. I guess the advantage now is that our products for everything we're doing will cost us less than they did before. Is that right, Suzanne?
Okay. Definitely. You've explained it perfectly. Yeah.
Okay, let's move on to SlimFast.
I have a couple of questions here, which are all essentially trying to make the same point, which is that if it is a weight loss product, how does it sit alongside GLP-1 sort of assessments when perhaps you're not going to be eating if you're taking those jabs? Would it not then have a detrimental impact to its demand?
Okay, you have to remember that you still have to eat with the jabs, and you have to come off the jabs at some point. Whilst you're on the jabs, firstly, let me explain that SlimFast over the last two years or three years has not declined in the U.K. Even with the jabs being around this last 12 months, they have not declined. The sales are still flat.
Number one, whilst you're on the jab, you will need supporting products in a form of drink or in food in terms of actually, even though your appetite is suppressed, you still need to have nutritional products with high in protein and high in fiber. That's what SlimFast products are doing, but we are going to bring specific products that actually support the jab, number one. Number two, when you come off the jab, you definitely do need to have the right types of food and stay off the weight by reducing your calories. Again, SlimFast comes into the mix again. Number one, we haven't declined because of the jab. Number two, we are bringing things out whether it's got health or high protein or high nutritional value to support the jab.
There are a few things there we just need to consider. I believe the brand is so strong that any products that we bring out that are slightly lower in calorie, whether it be snacks or whether it be protein bars or whatever, whatever we bring out, if it's lower in calorie, the brand will suit it. I think there's a lot of opportunities there as well.
Okay, thank you. Moving on to vapes. What are the gross margin differences between core vapes, pod systems, and the old disposables? Why did you decide to cut the price of liquid in pods by 50% compared to disposables?
Let me answer the first part first. Our legacy manufactured 10 ml e-liquid business, of which we sell tens of millions of bottles each year.
That part of our business, the manufactured element, the margins there are upwards of 50%. That really is kind of the jewel in our kind of gross margin crown, if you like. The branded vapes that we are simply the distributor for, we know that's not a brand we own and we don't manufacture them. For disposables, the margins went by the time we exited disposables were low 20s in terms of percentage, and pods today are down at sort of 13%-14%. Albeit, we hope that that 13%-14% will expand closer to 20% once we become more proficient at importing and distributing those products. There is definitely a big range between the lowest margin and the highest margin part of that vaping category. The next question then was, why are we halving the price? What was he question?
Yeah, why did you decide to cut the price of the liquid in pods by 50% compared to disposables?
We're not, because the pods come with two. By the way, we don't own these brands, so we're not in control of what we sell here. We're a distributor for the brands. The pods come two pods in a kit, and the price of a pod is obviously a lot lower than a kit. When someone buys one pod, they're not going to buy at the same price as a kit with a battery. They're just buying a refillable bit, so it's only going to be cheaper. I think we understand the question, but that's the best we can.
Okay, how much of vaping revenues come from pouches?
Very little. The pouches have not been successful for us.
Unfortunately, we've not managed to get sales to a traction that's even worth talking about now. Would that change?
Less than GBP 200,000 for this period?
Yeah, GBP 200,000 a year. It's not significant, and we don't know why. We've tried everything.
Okay. And 88Vape, last price increase has been more than a year ago. Why have we seen no adjustment this year given a 5p rise would likely be demand inelastic?
Yeah, no, we have put the price in. That's absolutely right. We have seen some increased revenue as a result of the price. Vaping is a big category, and there's a lot of different factors at play. We've lost some volume in putting the price up, which we had anticipated and built into our forecasts.
There are also other elements within our wider vaping category that have slowed down, which really is being displaced by the price increase. Specifically, this time last year and the year before, 88Vape had an extensive range of disposable vapes. When it has come to the transition from disposables into pods, the 88Vape brand has not transitioned into a pod system. We have been more encouraging of our customers to move to the more well-known brands, the ELFBAR and LOST MARY brands. Within our core vaping category, putting aside branded vapes, the category is solid. It is fairly flat, and that is a mix of some of the revenue coming off of things like hardware and disposables being offset by the increased amount of revenue from the price increase. It is in there, but it is just one of the factors.
Okay, with the tax change for vaping, how large do you think the pipe fill effect was, and how much negative destocking went on?
To where disposables went, say?
I think it's how large do you think the pipe fill effect was for vaping? Obviously, the disposable range, yes, before the ban, and then negative destocking after the ban.
We definitely had a benefit in Q1 this year as a result of pipe fill, I'd say GBP 5 million-GBP 6 million. I think I said earlier we've had more like in a six-month period, had like seven, maybe even eight months' worth of revenue in that period because we had this one-time benefit, and we won't see that again. What was the question? What about the impact of destocking?
Correct.
We saw that leading up to the ban really in the last couple of months of FY 2025. Sales started to slow down in February and March, which is why, if you remember, I think last year's vaping revenue was something like GBP 129 million, and the year before was GBP 140 million. That was because in the last couple of months, we saw disposable vape revenue start to slow down because our retailers were then eating into their store and their stock so that they ran down their stock by June when the disposable ban came in. It was only really April and May when they started to buy pods from us. Yeah, we're through that. We've seen that it's not into these numbers. It was in the year before.
Demand versus price increase in terms of your vaping price increase on the 10 ml liquid, how much of your increase did come from demand?
Say that again, sorry.
Any rise in vaping revenue, can you break down how much was down to price increases and how much was down to demand?
In terms of volume versus price, volume was virtually flat. Any of the increase was due to the price increase.
Thank you. Okay, let's move on to Seal ions. Is Seal ions profitable? Given the increasing demand for resources within the allied group, does it show signs of being worth future investment?
Seal ions turns over about GBP 100,000 a month roughly. It does not make much money, but it does not lose any money right now. It is a platform for us to one day, hopefully, it is going to take off.
It is growing, but growing very slowly. The problem is in that area, there is a lot of high cost of acquisition. For us, we could grow that business to GBP 10 million probably next year, but it would cost us a lot of money to grow to that level and lose money. That is why a lot of e-commerce businesses, if you think about it, for the first 5, 10 years, lose lots and lots of money. You look at Huel, look at all of the big ones that have done well after 10 years. The first 5 or 6 years are really invested in acquisition costs. I am not saying it is the right thing for us to do right now because we have got so much on our plate in other areas that are probably going to be better use of our time, I guess.
Okay, thank you.
What is the viable, feasible level of revenue for the electrical segment to bottom out at?
I think lighting, unfortunately, will just continue to decline until it does not exist, or we take a view at some point once it gets to a level that we will then gracefully exit. I think we are a while off that yet. For every pound of gross profit it continues to generate, it is generating a net return for us because, as you know, there is almost no cost to serve, especially in lighting. Batteries is a totally different story. As Sandy said, we have disrupted the revenue this year as a result of the Panasonic exit, a little bit of volume drop, but I suspect that it has been for a long time a GBP 40 million category. It might rebase itself as a GBP 30 million category.
I can't see it going much lower than that unless, Sandy, you massively disagree.
Also, lighting, just you know, we're at GBP 12 million a year revenue now. I mean, it was GBP 27 million a few years ago. At GBP 12 million, there isn't a lot to go. As it goes down, the decrease should lower because it isn't that much left to lose, if you know what I mean.
Appreciate that. When you report, you focus on gross profit and EBITDA, yet you have transitioned from an asset light to a capital-intensive model. PPE has grown by more than 50% since the 2024 year end, and depreciation is now a significant cost. Would you consider reporting return on investment on deployed capital and replace that as a metric for gross profit?
No. It's a short answer.
I think absolute gross profit is the key metric that this business is run by on a day-to-day basis. If Sandy was looking at return on capital every day rather than gross profit, I think we would lose our minds. No, I think we've definitely, I think I said earlier, actually, we've been through a surge of capital investment in a couple of our manufacturing facilities, and that's really to facilitate growth. If we don't invest, we can't and we won't grow. That isn't our new norm of level of ongoing investment. That has been a surge that will then slow back down and kind of settle back to this of GBP 1.5 million a year, I suspect, to maintain that level of investment. Yeah, it's a fair point. We are definitely more capital-intensive now than we were historically, but we are a bigger, more extensive manufacturer.
I think on the deck that we did at year-end, we had a picture of all of our manufacturing facilities. There's kind of five or six across the group now, which I'm really proud of. It gives retailers more of a reason to come back to us. It expands our gross margin. It means we can be more vertically integrated. The downside is it just costs some capital to maintain and to invest in. No, I think the key metrics for this business is revenue, gross profit, and ultimately cash.
Suzanne's saying in terms of actually ongoing CapEx going forward, you're thinking about one after GBP 2 million a year.
Yeah.
Because there were GBP 250 million, of which 60% is manufacturing, right?
Yeah. That kind of gets, yeah, that gives you the scale of it.
In terms of payback, we look at anything from two, three years to pay back, and return on investment would be then something like 30% a year.
Thank you. I'm trying to, next question wants an idea of how EBITDA will translate into cash flow. If you're talking, as you just have, about normalized CapEx of GBP 1.5 million-GBP 2 million, what will annualized lease payments be after absorbing the acquisitions?
The annualized lease payments won't really change versus what they are now. We've just taken on a new lease. We don't plan to take on any more in the next, certainly not in the next year or so. In terms of our EBITDA profile, in terms of operating cash, I think you can see what our annualized level of dividends are. People can work out what tax we need to pay.
In terms of working capital to support growth, we've always talked about investing 15% of our revenue back into working capital. For every pound of revenue we add onto the top line, we'd need to invest 15p back into working capital to support it. Those metrics haven't really changed as a result of all the acquisitions that we've done recently.
Thank you. How successful was Typhoo in collecting acquired debt as post-acquisition?
Extremely successful.
There have not been any losses.
No charge for bad debts. Excellent. I guess then, because I'm conscious we are near the end of our time, what potential measures in tomorrow's budget concern you most?
Tell you tomorrow. Crystal ball. I'm hoping not so much, but I really don't know the answer to that question.
That's fair enough. What are your thoughts on share buybacks going forward?
Now, we've always thought it's not the best use of capital. I mean, I already own nearly 57% of the business. Just it means my shareholding is getting more and more towards a private company. If that's a good use of capital, then I disagree with that. I think we could probably use that money to either buy more businesses, invest in the current business, or give it back to shareholders in dividends.
How is international expansion going?
You know what? We've got a really good person that's now running our international side, and we're just taking on a second person in the Middle East. Too early to say, and I want to be here in a year, two years' time and say, "This is what we've done," rather than say, "This is what we're thinking of doing right now."
Okay. How is Liberty Flights doing?
Liberty Flights is still doing okay. I mean, if you think about the core 10ml users, they are really stable and they are really loyal. It has declined from the amount when we bought it, but there is virtually any overhead to running the business. So probably net profit-wise, we're probably much higher than we were when we bought the business. In terms of actually decline, there's probably been a reducing volume of that because it just has been squeezed on both ends in terms of bottom end and with the big brands at the top end. Overall, our profitability is probably more profitable than it was when we bought the business.
Definitely is.
Super. Right. I think last question, will you be putting a copy of the slides up on your website?
I think so. I think we'll.
Yeah. Yeah, I think we will as well.
Super.
Thank you.
We will leave it there then. It just leaves me to thank everyone for their questions and contributions and to you both for taking the time to present today. Very best of luck, and we'll look forward to an update in six months' time.
Thank you. Thank you, Diane.