Question on Revenue vs Net Profits vs Net Debt - looking at SIS

Friday, Jan 06 2017 by

Hi all,

New to the board and new to investing but getting feet wet and not losing much.

I am looking at SIS - Science in Sport. (link to analysis - new browser window will open)

I see that hey have have improved revenue year on year. Good for them. However, their net profit has been getting worse/about the same.

My question: what would be reasons for this steady revenue increase but lack of net profit growth? How would I research this for future companies? How do you do it?

My other question is this: I see they have a net debt of negative -6.62m, meaning they are in profit. Does that mean money they have accumulated over the years or money they saved the last FY?

As they have so much cash (assuming that it's made in the current FY) how come they have a negative Net Profit?

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Science in Sport plc is engaged in developing, manufacturing and marketing sports nutrition products for professional athletes and sports enthusiasts. The Company's product lines include SiS GO isotonic powders and gels, which are digestible carbohydrates for use during exercise; SiS hydration products, which include SiS GO Hydro tablets and SiS GO Electrolyte powders; SiS GO Bars, which include cereal-based food bars; SiS REGO range, which includes drinks and protein bars for recovery after training, and SiS Protein, which is a whey protein range for lean muscle development. The Company offers products in sport categories, including cycling, running, gym, team sports, triathlon and rowing. The Company's products include SiS GO Energy, SiS REGO Rapid Recovery, SiS WHEY20, SiS Whey Protein, SiS GO Isotonic Energy Gel, SiS Elite Team SKY and GO Energy Bar. The Company's subsidiaries include SiS (Science in Sport) Limited, SiS APAC Pty Limited and Science in Sport Inc. more »

LSE Price
53.5p
Change
 
Mkt Cap (£m)
65.7
P/E (fwd)
140.9
Yield (fwd)
n/a



  Is LON:SIS fundamentally strong or weak? Find out More »


2 Posts on this Thread show/hide all

Carey Blunt 6th Jan '17 1 of 2

The negative debt is the cash that they have in the bank which could be accumulated over any time period. They will spend some of it in keeping the business running and get more in from the profit they make but remember that the figure there is a snapshot in time at the point they are releasing those figures.

If they are making money and not spending much on acquisitions or investing in research or marketing or whatever then you would expect the cash in the bank to go up. Of course they may shell that extra cash out to shareholders in the form of a dividend.

If revenues are increasing but the profit isn't then their costs are high, maybe due to marketing spend required to generate that level of revenue. This would be typical of a company trying to grow so isn't necessarily a bad thing, it depends on the company.

I would recommend the Naked Trader as a book to start you going with your investing journey or maybe The Little Book that still Beats the Market which covers some of the things you are asking.

You may also want to look at the Value rank or Quality rank as they combine a number of factors like these into a score that gives you some idea comparitively what the company is like.

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Carey Blunt 6th Jan '17 2 of 2

p.s. I like that you are looking at companies which have cash in the bank. This is generally a good sign as they can use it for acquisitions or to weather any downturn. You could use a Stockopedia screen to find other companies with money in the bank and add other criteria like an increasing EPS to find companies you like the look of.

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