REG - Science in Sport PLC - Conclusion of Strategic Review and Trading Update

Science in SportAnnouncement

13/04/2023 07:00

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RNS Number : 0376W  Science in Sport PLC  13 April 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET
ABUSE REGULATION (EU NO. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR").

 

Science in Sport plc

("Science in Sport", the "Company" or the "Group")

 Conclusion of Strategic Review and Trading Update

Science in Sport, the premium performance nutrition company serving elite
athletes, sports enthusiasts, and the active lifestyle community, announces
the conclusion of its strategic review, which was initiated on 30 September
2022 (the "Strategic Review").

Although 2022 started positively, the Group was adversely impacted during
April 2022 onwards by a combination of the rapid global increase in input
costs and a levelling off in market growth. This coincided with a period of
peak investment in new supply chain facilities designed to support future
growth and resulted in a market capitalisation that the Board believed
undervalued the Company and failed to recognise the inherent value of its
premium brands and strong market position.

Strategic Review conclusion

 

Following the Strategic Review, the Board has concluded that shareholders'
interests are best served by seeking to maximise value through focusing on
accelerating the profitable growth of the business under an ambitious growth
and efficiency plan that is currently delivering in line with management's
expectations.

 

The Board's decision is consistent with that of the independent corporate
adviser appointed to advise on the Strategic Review.

The key drivers of the Board's decision are:

 

·      Renewal of growth trajectory that saw Science in Sport CAGR brand
sales growth from 2012 to 2021 of 23%;

 

·      A high level of confidence that the business model, operational
and marketing assets and strategy will provide long term profitable growth in
global markets;

 

·      A high level of confidence in the Board's comprehensive
prioritised profitable growth plan to build progressively to industry
profitability benchmarks; and

 

·    Trading in the year to date, as further noted below, indicates that
the business is responding well to the new plan, with growth across both
different geographies and sales channels, price increases, and lower costs
attributed to the recently commissioned manufacturing and distribution
facility, all contributing to improved profitability.

 

Business model

 

The Company owns two strong brands in complementary market sectors and the
review validated the significant differentiation and superiority of both
brands compared to the competition and their ability to attract new users and
retain loyalty.

 

Brand strength has been built by the significant in-house scientific
capability which has provided a long-term pipeline of advanced products that
attracts Elite athletes competing in world level events including the Olympic
games and World and National championships. The Company has an ever-expanding
roster of contracted renowned global level athletes believed to be one of the
most expansive in the industry, who provide persuasive influence of product
superiority in media campaigns.

 

The Company has an omnichannel route to market, including an industry
exclusive partnership with the Amazon-favoured Flywheel Digital organisation,
as well as expanding distribution partnerships in China and the USA. The
business has historically had and retains a very strong retail capability in
its important UK market.

 

To deliver increased profitable growth in the long run, the Company has
completed its investment in a state-of-the-art fully integrated supply chain
facility including warehousing, manufacturing, distribution, and
administrative offices in Blackburn.

 

The cost benefits of the facility, now being delivered, are expected to
provide operational leverage and expansion capacity over the foreseeable
future for continued operationally leveraged global growth.

 

Comprehensive Profitable Growth Plan

 

The Board has agreed a business plan which has been developed to regain
growth levels of former years and step change margins to build profitability
to industry benchmarks.

 

The global £18.7bn Sports Nutrition market is regaining its momentum and is
forecast to grow at its historic rate of almost 10% per annum over the next
five years and, importantly, the Company has implemented price increases to
offset the global industry cost increases experienced in the past year.

 

For purposes of channel growth, and an improved margin plan to capitalise on
this growth opportunity there is a focus on a category exclusive partnership
with the Amazon-favoured Flywheel Digital, a new exclusive distribution
partner, The Feed, in the large USA market, and significantly strengthened
distribution in APAC.

 

The Board has developed an expansion plan for the rapidly growing Chinese
market where Science in Sport GO Gels have recently been launched, leveraging
the distribution platform of the already successful and growing PHD business.
 Marking the launch, Science in Sport is the official nutrition sponsor of
the widely publicised Shanghai Marathon.

 

The new Blackburn distribution facility is expected to significantly expand
margins due to its market leading low operating costs. The Company has
installed a new highly efficient bar line taking all bar production in-house.
The line is fully operational and is expected to be a significant contributor
to the anticipated improvement in profitability.

 

Current Trading

 

The Group has had a good start to FY23 with Q1 revenue of £15.6m delivering
growth of 2.3% compared to the prior year. While January and February were
affected by Amazon global destocking and COVID in China, momentum is
gathering, as evidenced by a record March revenue of £7.2m (FY22 £6.4m) and
current trading performance in April.

 

Q1 trading contribution margin was 20.9% (FY22 13.7%), delivering a
significant improvement over the comparative period, because of the
implementation of the growth plan. Overheads were in line with management
expectations.

 

A further trading update will be given when the Company announces the 2022
annual results prior to the end of Q2 FY23.

 

Review Concludes

The Board confirms that it is not in receipt of any approaches for the Company
at the date of this announcement.

With the conclusion of the Strategic Review, the Company is no longer in an
"offer period" as defined by the City Code on Takeovers and Mergers (the
"Takeover Code") and the disclosure requirements pursuant to Rule 8 of the
Takeover Code are no longer applicable.

For further information:

 

 Science in Sport plc                     T: 020 7400 3700
 Stephen Moon, CEO

 Daniel Lampard, CFO

 Liberum (Nominated Adviser and Broker)   T: 020 3100 2000
 Richard Lindley

 William Hall

 Lucas Bamber

 

Notes to Editors:

 

About Science in Sport plc

 

Headquartered in London, Science in Sport plc is a leading sports nutrition
business that develops, manufactures, and markets innovative nutrition
products for professional athletes, sports and fitness enthusiasts and the
active lifestyle community. The Company has two highly regarded brands, PhD
Nutrition, a premium active-nutrition brand targeting the active lifestyle
community, and SiS, a leading endurance nutrition brand among elite athletes
and professional sports teams.

 

The two brands sell through the Company's phd.com and scienceinsport.com
digital platforms, third-party online sites, including Amazon and Tmall, and
extensive retail distribution in the UK and internationally, including major
supermarkets, high street chains and specialist sports retailers. This
omnichannel footprint enables the Company to address the full breadth of the
sports nutrition market, worth $42.9bn in 2022 and forecast to grow CAGR 7.4%
from 2023 to 2030.(1)

 

PhD is one of the UK's leading active nutrition brands with a reputation for
high quality and product innovation. The brand has grown rapidly since its
launch in 2005. The range now comprises powders, bars, and supplements,
including the high protein, low sugar range, PhD Smart. PhD brand ambassadors
include leading endurance and strength athlete Ross Edgley and influencer
Gabby Allen.

 

SiS, a leading endurance nutrition business founded in 1992, has a core range
comprising gels, powders and bars focused on energy, hydration, and recovery.
SiS is an official endurance nutrition supplier to over 320 professional
teams, organisations, and national teams worldwide. SiS supplies more than 150
professional football clubs in the UK, Europe, and the USA.

 

SiS is Performance Solutions partner to Ineos Grenadiers cycling team, and
Tottenham Hotspur and CGC Nice football clubs, as well as Official Nutrition
Partner to the Milwaukee Bucks, 2021 National Basketball Association
Champions.

 

For further information, please visit phd.com and scienceinsport.com

 

(1 )Grand View Research (2022)

 

 

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