Shares in consumer group Supreme have been slashed by more than 30% after it issued warnings on its future sales and profits.
The Manchester-headquartered company said it expects to "deliver another solid, profitable year" during its new financial period but that its revenue and EBITDA are set to be below previous levels and market expectations.
The listed business said the fall will be driven by "a recent marked decline in the lighting category following a slow-down in sales compounded by customer overstocking in FY22".
Supreme manufactures and imports vaping products, batteries, lighting, wellness and sports nutrition products and sells its wares in the likes of B&M, Poundland, Home Bargains and The Range.
New figures revealed that its revenue increased from £122.3m to £130.8m in the 12 months to the end of March this year while its pre-tax profits also rose from £13m to £16.3m.
In a statement issued to the London Stock Exchange, the company said: "Following discussions with its key customers the group believes this slowdown in sales and profitability will be temporary and limited to the group's Lighting category due to specific customer over-stocking in the past 12 months.
"Whilst it is still early in the new financial year, the nature of lighting sales where a significant portion are sold 'FOB' on long lead times means that the Board has relatively strong visibility into the latter part of the year and the expected weakness in trading.
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"There are no customer or retail listings losses to report and therefore profit progression for this category is expected to return in FY24 once the supply chain has rebalanced.
"Vaping, the group's largest and most profitable category, continues to perform very strongly and is expected to deliver revenue growth of around 30% in FY23 - half of which driven by new product development, continued market growth and further distribution expansion and the other half from the Liberty Flights acquisition.
"Management remains committed to investing in organic growth opportunities alongside pursuing an active acquisition pipeline, particularly in the vaping division.
"Supreme's established sales and distribution footprint has created an ideal platform from which to accelerate the group's buy and build strategy in the near term.
"With this in mind, the board has reviewed its capital allocation policy and believes that M&A can drive better rates of shareholder return compared to servicing its existing dividend commitments.
"Accordingly, the board proposes to revise its dividend policy from a pay-out ratio of 50% of net profits to a minimum of 25% in respect of FY23 onwards.
"In spite of the short-term trading challenges in Lighting, the board remains confident that the group has a long runway of growth ahead and is increasingly excited by the prospects for growth in the vaping division."
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Chief executive Sandy Chadha added: "We are delighted to have delivered another strong financial performance across FY22, driven by excellent customer traction, alongside completing two strategic acquisitions.
"Batteries and Lighting have performed strongly and although customer inventory levels within Lighting will hold back our progress in the short term, I believe this minor setback should not detract from our operational progress to date.
"We are more excited than ever about the potential for Vaping. Our 88vape range is now well-established across our discount channel and has now started to penetrate grocery and convenience retail as well. With increasing levels of government support for vaping, we expect the revenue growth to continue.
"Whilst there remains considerable opportunity for sports nutrition and wellness, short term commodity price increases are expected to affect demand and profitability, although we have taken steps to mitigate our exposure.
"I am particularly proud of the results of both Vendek and Sci-MX which were both earnings enhancing in FY22 and seamlessly integrated into our core business.
"M&A continues to be a key feature of our strategy as we seek to complement our organic growth initiatives and remain confident in the group's trading prospects for the current financial year and beyond."