REG - Science in Sport PLC - Final results
29/06/2023 07:00
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RNS Number : 3025E Science in Sport PLC 29 June 2023
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ABUSE REGULATION (EU NO. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY
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Science in Sport plc
("Science in Sport", the "Company" or the "Group")
Unaudited Preliminary Results for the Year Ended 31 December 2022
Science in Sport plc (AIM: SIS), the premium performance nutrition company
serving elite athletes, sports enthusiasts, and the active lifestyle
community, is pleased to announce its unaudited results for the financial year
ended 31 December 2022.
Stephen Moon, Chief Executive Officer of Science in Sport plc, said:
'After a good start to 2022, input price inflation, a challenging consumer
environment, and supply chain issues related to global events adversely
affected us. We reacted quickly and we spent the summer months restructuring
our operations and cost base. In addition, we successfully commissioned our
world-class Blackburn supply chain facility.'
'In 2023, we are well set for profitable growth, as evidenced by sales growth
over the last four months. Our retail business, domestically and
internationally, is delivering profitable growth, and our Amazon business is
performing significantly above the same period last year . A new partnership
in the USA has step-changed EBITDA performance in this channel. While China
was affected by COVID in Q1 2023, the business delivers a strong EBITDA
margin, and we expect the recovery to continue in H2.'
'Our brands are healthy, and the innovation pipeline is strong. With improved
margins in all channels and markets and building revenue momentum, we are
confident of executing our 2023 plan. Our goals for the year are profitable
growth, a healthy EBITDA margin, and cash breakeven. Our medium and long-term
ambitions remain unchanged.'
Highlights
For the year-ended 31 December 2022, the business responded to unprecedented
increases in input costs, a weakening in consumer confidence, and one-offs
related to global events by quickly introducing a range of mitigating actions.
We successfully commissioned the new Blackburn supply chain operation in
parallel, which is now delivering substantial efficiencies.
While financial results for the year were substantially below our initial
expectations given these external factors, our actions have delivered improved
margins and, together with the robustness of our brands, have led to a solid
start to 2023.
In 2023 we are seeing building sales momentum to record monthly revenue levels
and expect to deliver positive EBITDA(1) for the year. All working capital
facilities have successfully been renewed to April 2024.
Trading results
· Revenue growth of 2.0% to £63.8m (FY 2021: £62.5m). Adversely
impacted in the year by -£4.3m due to the closure of our Russian business
(£1.7m), port congestion issues in the US (£0.9m) and supply chain issues of
PhD Smart Bars over the summer from our supplier (£1.7m)
· Underlying EBITDA(1) loss of £2.7m (FY 2021: £1.5m profit) with H2
being EBITDA break-even
· Loss before tax of £10.6m (FY 2021: £5.3m) impacted by raw material
cost pressures and transition costs to the new Blackburn facility
· PhD Nutrition revenue grew by 15% to £34.1m (FY 2021: £29.6m) with
strong growth in Marketplace and Retail channels
· Science in Sport revenue reduced by 10% to £29.7m (FY 2021: £32.9m)
predominantly due to reduced Digital revenue partially offset by growth in
Retail channels
· Capital investment of £8m (FY 2021: £6.5m) which completed the
strategic investment cycle, culminating in the transition to the fully
operational Blackburn facility
· Headroom of £4m in facilities at 31 December 2022 with cash at bank
of £0.9m (FY 2021: £4.9m),
· Pre IFRS 16 net debt(2) of £10.9m as a result of full-year peak
cash outflow, given the strategic capital investment at the Blackburn site is
now complete
Execution of long-term strategy
· A strategic review completed in April 2023 by an independent
consultant concluded shareholders' interests were best served by maximising
value through the execution of the profitable growth plan
· The peak capital investment cycle was completed with the successful
transition to the state-of-the-art Blackburn facility, which has the capacity
to generate over £200m in revenue
· Continued execution of the global omnichannel route to market,
leveraging existing and new partnerships
· The realisation of margin improvements driven by the new Blackburn
facility and customer price rises put in place across all channels
· Delivery of sustainable cash-generative profitability in the medium
term, with a target of cash breakeven for FY 2023.
Current Trading and Outlook
Previously reported Q1 2023 revenue was £15.6m representing growth of 2.3%
versus Q1 2022, despite COVID affecting our business in China and Amazon
executing a global destocking programme.
Momentum is building, as evidenced by revenues for each of April to June being
records for the respective months. We expect revenue growth for H1 to be
approximately 7%, with Q2 growth of approximately 12%. Due to our extensive
change programme, the trading contribution(3) will be approximately 19%
compared with 11% for the same period in 2022. Given the superior trading
contribution and tight overhead control, we expect to be EBITDA positive in
H1.
With our three-year capital investment programme completed, capital
expenditure (including technology and new product development) for 2023 will
be approximately £1.5m (FY2022: £8.0m), with this lower level of spending to
continue in 2024.
Notes
(1) before interest, tax, depreciation, amortisation, share-based payments and
foreign exchange variance on intercompany balances, restructuring costs,
Blackburn transition costs and costs related to the equity raise and strategic
review
(2) Net debt is defined as cash, less banking working capital facilities and
asset financing and excludes property leases
(3) gross margin less advertising and promotions, carriage and online selling
costs
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
CHAIRMAN'S STATEMENT
After a strong start in the first quarter of 2022, including a record sales
month in March and following the Company's consistent ten‐year high growth
track record, the business was impacted in the second quarter of 2022 by
global events, reduced consumer confidence and specific one‐off events
affecting sales and costs.
In light of the economic and trading environment, in September 2022 the Board
took the decision to strengthen the balance sheet with a placing of new
ordinary shares raising gross proceeds of £5m.
At the same time in September 2022 the Board announced the initiation of a
Strategic Review.
This review was completed in April 2023, and the Board 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.
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 were:
· A high level of confidence that the business model, operational and
marketing assets and strategy will provide long term profitable growth in
global markets; and
· A high level of confidence in the Board's comprehensive prioritised
profitable growth plan to build progressively to industry profitability
benchmarks.
· Trading in the year to date in 2023 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.
Strategic investment complete
Our decade-long high growth trajectory required us to invest in additional
manufacturing and supply chain capacity to meet our strategic plan and
maintain our competitive edge in gross margin. We completed
a £7.5m investment in our 160,000 sq. ft. world-class supply chain site
with supply capability to generate over £200m in revenue. It opened on
schedule as a logistics operation in April. In September, we finished the
commissioning of the gel line, two protein powder lines and installed our
e-commerce packing operation.
At the end of 2022 we commissioned a state-of-the-art protein bar line which
is now fully operational. This asset eliminates proposed substantial 2023
co-manufacturing cost increases and will contribute significantly to
profitability. In addition to a transformation in margin, the new line
underpins innovation projects which are expected to deliver incremental
revenue in 2023.
We are pleased to report that the Blackburn operation is delivering savings in
line with the investment case, with further efficiencies anticipated in 2023.
In February 2023, our USA business transferred to 'The Feed', the leading
online distributor of endurance nutrition brands in the region. As well as
accessing our core consumer market, the deal results in a strong improvement
in expected cash generation for 2023.
A strategic partnership has been agreed for our already strong Marketplace
business with Flywheel Digital, the global leader in Amazon growth delivery.
2023 sales to consumers are showing good growth, and we expect to see this
continue because of the new partnership.
Overview
While our results reflect a challenging year with an unprecedented backdrop of
reduced consumer confidence, input price increases, supply chain issues and
the closure of our Russia business, we put in place a number of actions during
H2 which are delivering positive results.
Group revenue was £63.8m (FY 2021: £62.5m), up 2.0% on prior year, with our
UK Retail, International and Marketplace delivering encouraging growth.
Underlying EBITDA(1) loss of £2.7m (FY 2021: £1.5m profit), due
predominantly to the higher input costs in H1, with H2 being break-even as
mitigations of customer price rises, supply chain efficiencies and the
benefits of the restructuring came into effect.
The reported loss before tax was £10.6m (FY 2021: £5.3m loss), the increased
loss predominantly due to the impact of underlying trading EBITDA,
non-recurring costs related to the transition to Blackburn and the one-off
restructuring costs.
As noted above, we completed the strategic investment cycle resulting in peak
cash outflows for the Group. The Group's cash at bank on 31 December 2022 was
£0.9m (31 December 2021: cash at bank of £4.9m), with over £4m headroom in
place as at 31 December 2022.
We demonstrated our business's ability to react promptly to unprecedented
challenges in the year, executing mitigating and value enhancing actions to
place the business in a strong position as we exited 2022.
Our proven growth strategy remains unchanged, focusing on science and
elite-led product innovation, building brand equity, driving global online
scale supported with world-class data science, through an efficient supply
chain.
Our People
We streamlined the business during 2022 and now have in place a leaner
executive and senior leadership team which is optimal for the Company. This
has delivered cost savings and improved the efficiency of executing the
strategic objectives.
The business underwent huge change during the year with the transition to the
Blackburn facility, and due to the huge effort and commitment of the entire
workforce the project was delivered on-time with minimal business disruption.
We have a world class team in place across all parts of the organisation who
have shown outstanding commitment during a turbulent year.
On behalf of the board and myself, I would like to thank our employees,
suppliers and customers for their invaluable contributions and support in what
has been an unprecedented trading environment with significant challenges.
Development of the Board
The Board must ensure the Group is managed for the long‐term benefit of all
shareholders, with effective and efficient decision‐making. Corporate
governance is an essential part of that role, reducing risk and adding value
to our business.
The board regularly reviews the environmental, social and governance
performance of the group. This year we have shown industry leadership in
recyclable packaging, Real Living Wage and Carbon Neutral accreditation.
John Clarke
Non-Executive Chairman
29 June 2023
Notes
1 before interest, tax, depreciation, amortisation, share-based payments and
foreign exchange variance on intercompany balances, restructuring costs,
Blackburn transition costs and costs related to the equity raise and strategic
review
CEO's REPORT
Strategic Intent
Although 2022 was challenging, we ended the year in a much stronger position
and are well positioned for 2023. The macro trends of the COVID-19 pandemic,
with consumers increasing focus on health and wellbeing expected to continue,
and the sports nutrition market, worth $24.6bn in 2022 is forecast to grow by
a 5.9% CAGR from 2022 to 2027(4).
Our medium-term ambition is unchanged, to deliver £100 million of revenue,
with high cash generation. The key drivers of our proven growth strategy
remain:
· Win in Science, Win in Product, Win in Elites: premium products based
on leading scientific research and used by elite teams globally to win
· Premium Brand: investment in brand awareness, driving conversion and
usage with the highly engaged consumers in the category
· Best in Class Data Science: driving customer acquisition, retention,
and revenue through investing in our customer data platform and technology
· Global Online Scale: growth driven by the two pillars of our digital
platform and marketplace business, enabling us to grow strategic markets
globally
· Efficient Supply Chain: simpler, more cost-effective, scalable, and
increasingly in-house, driven from our new Blackburn supply chain site
Win in Science, Win in Product, Win in Elites
Revenue from new products was £2.9m for the period (FY 2021: £3.9m)
reflecting a lower number of new product launches in the year, consistent with
management's plan.
Our Win in Elites operation supported over 320 elite teams globally during the
year. We have customer relationships at the highest levels in football,
cycling, cricket, professional basketball, American football, rugby union,
rugby league, running and other sports. The strong link between our Win in
Science team and elite sport is critical in our strategy and underpins our
premium brands.
We have extended our reach into world class running with the signing of the
Elite Running team (over 90 individuals) which includes Gotytom Gebreslase
(World Champion Marathon holder) and numerous gold and world record holders.
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Premium Brands
PhD has made strong progress in brand awareness and has maintained its
position as the number #3 brand in the UK market, and is number #1 in Lean
Whey and the number #2 sports nutrition bar in the UK(5).
Science in Sport continues to enjoy market leadership in endurance nutrition
in the UK in awareness, all brand equity scores, and conversion to purchase.
We remain the number #1 Endurance Brand in UK Retail(5).
Both brands have market leading conversion from awareness to purchase online,
and brand equity scores are extremely strong across all measures.
We became an official performance partner to Tottenham Hotspur and Nice
football clubs during the year. We continued our partnership with the
Milwaukee Bucks and retained our long-standing relationship with Ineos
Grenadiers cycling. Win in Science and Win in Elites are a key element of the
Science in Sport brand strategy.
Our focus on quality remains, and our brands continue to be two of the top
four major sports nutrition brands in the UK in 2022, as measured by
Trustpilot.
Blackburn investment complete
Gross margin decreased to 42% (FY 2021: 50%), due to higher input costs,
reduced mix of online revenue and the lag in achieving price rise increases
that came into effect in the latter half of FY 2022. We have reacted quickly
to these challenges through two waves of customer price increases,
restructuring the business and having the Blackburn site fully operational.
The 160,000 sq ft facility gives headroom to grow in excess of £200m in
revenue, consolidating the Group's four operational sites to one has delivered
immediate supply chain savings. Medium-term we foresee improving margins as a
key driver of profitability.
In addition to the gel line and two protein lines we invested in a bar line at
the end of the year which will give us both cost and operational efficiencies
that will benefit margin in 2023.
Technology and Data Science
2021 saw us build a high-quality in-house technology and data science team,
this being a key strategic enabler to providing valuable consumer insight, and
we continued to invest during 2022.
Although our own channel digital online revenue volumes reduced during the
year, this was driven from lower traffic volumes, while both our conversion
and average order value ('AOV') grew year on year (on a like for like basis).
The benefits in conversion and AOV were both being driven from the investment
we have made in the ecommerce platform.
We have recently launched our subscription offering to customers, which is
underpinned by the ecommerce platform and consumer insight we have generated
over the last 18 months.
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Segmental Performance
2022 2021
SiS PhD Total SiS PhD Total
£'000 £'000 £'000 £'000 £'000 £'000
Digital 8,859 3,618 12,477 10,974 5,105 16,079
Marketplace 6,377 14,882 21,259 8,230 10,581 18,811
Global Online 15,236 18,500 33,736 19,204 15,686 34,890
International Retail 6,491 3,904 10,395 6,208 3,374 9,582
UK Retail 7,981 11,661 19,642 7,527 10,540 18,067
Retail 14,472 15,565 30,037 13,735 13,914 27,649
Total sales 29,708 34,065 63,773 32,939 29,600 62,539
Global Online
Online sales decreased 4% to £33.7m (FY 2021: £34.9m). Online sales via the
Group's digital platforms were down 23% with third‐party marketplace sites
up 12%. The reduction in our own channel digital sales was driven from lower
traffic and the decision to cease operating the Japanese and Australian sites.
Our marketplace channel (comprising Amazon, China and smaller marketplace
channels such as eBay) performed well with growth of 12%, driven from strong
growth in China partially offset by a reduction in our Amazon sales due to
their global destocking in the latter half of FY 2022. Overall, online sales
accounted for 53% of total sales (FY 2021: 56%).
Our US business was broadly flat delivering £4.7m (FY 2021: £4.8m). We have
recently formed an exclusive partnership with the feed.com, who are the number
one endurance sports nutrition direct to consumer business in the US. The
feed.com will be responsible for operations and fulfilment of our products in
the US to both direct to consumer and marketplace channels. The partnership
took effect in Q1 FY 2023 and is expected to yield significant improvements in
overall contribution in FY 2023.
UK Retail
UK Retail delivered another year of solid growth, with sales rising by 9% to
£19.6m (FY 2021: £18.1m). Major grocery accounts grew steadily at 3%, but
the main source of growth was through our High Street channel which grew by
24%. We strategically exited from some smaller, lower margin convenience
stores.
PhD Retail sales grew by 11%. We are the second largest manufacturer on sports
nutrition shelves in UK Retail as well as the number #1 manufacturer of lean
whey powder and plant-based protein powders, with our growth outperforming the
category. In plant protein bars, we are number #1, and in sports nutrition
protein bars we are number #2 in grocery.
Science in Sport delivered growth of 6% in UK Retail, with our high gross
margin gels continuing their consistent growth trend. Science in Sport is
still the clear number #1 in endurance nutrition in UK Retail.
International Retail
International Retail had strong growth, and sales were £10.4m (FY 2021:
£9.6m), 8% up on the prior year. This was achieved despite the closure of our
Russian business resulting in lost revenue of £1.4m.
In 2022, we exited multiple markets, to focus on building scale in key global
economies. We developed our business with our strategic global partner Shimano
which delivered growth of 23%. Both PhD and Science in Sport grew in the
Baltics very strongly and continued to grow in Germany and Italy.
Overall, PhD International Retail grew 16%, with Science in Sport also growing
solidly by 5%.
ESG
As a premium performance nutrition business, we recognise our impact on the
wellness of our colleagues and the wider community. It is important our
actions help to drive positive, sustainable change in the environment and
society.
All PhD and Science in Sport protein containers are recyclable. For bar and
gel wrappers not currently recyclable at kerb side we offered a specialised
recycling solution for customers.
Consolidating operations into the new Blackburn site is reducing carbon
emissions, as we previously were moving product between the multiple sites in
the existing footprint. The new building incorporates many energy saving
features such as low flow plumbing fixtures, programmable air temperature
control units, LED lighting and the use of natural daylight to reduce lighting
requirements. These actions partly offset increasing emissions from
international online sales. We continue to be accredited as Carbon Neutral by
Carbon Neutral Britain.
We support a wide range of initiatives to facilitate sportswomen and men from
disadvantaged and under-represented communities. We have a long-term
relationship with Los Angeles Bike Academy to support underserved communities
and give young athletes new opportunities in the workplace and in cycle
racing.
We are partners to Black Unity Bike Ride, Football Beyond Frontiers, and Tour
de Lunsar cycling race in Sierra Leone, which is West Africa's largest
grassroots race. We partner L39ION of Los Angeles cycling team, whose aim is
to eliminate boundaries, promote diversity, and provide a pathway for young
athletes from all backgrounds.
The diversity of our workforce is a strength, and in 2022 19% of our workforce
identified as non-UK nationals, ahead of the 15% UK average in the 2022 ONS
Labour Force Survey. We completed the Gender Pay Gap report in 2022 with a
55%/45% divide of men and women in relation to pay.
We retained our position as a Real Living Wage employer during, following the
success of the second year of the partnerships, we continued working with
Career Ready and expanded employment and work experience opportunities by
working with local colleges in low-income areas.
We have an extensive wellbeing programme in place for all our colleagues,
which ranges from company-wide wellness events, through to access to
confidential mental health support.
The Board has adopted the QCA corporate governance Code in line with the LSE
requirement that AIM-listed companies adopt and comply with a recognised
corporate governance code. This policy is reviewed and updated annually. Full
corporate governance disclosure can be found on our sisplc.com website.
Outlook
We are delivering a return to profitable growth year to date for 2023.
Previously reported Q1 2023 revenue was £15.6m representing growth of 2.3%
versus Q1 2022, despite COVID affecting our business in China and Amazon
executing a global destocking programme.
Momentum is building, as evidenced by revenues for each of April to June being
records for the respective months. We expect revenue growth for H1 to be
approximately 7%, with Q2 growth of approximately 12%. Due to our extensive
change programme, the trading contribution(3) will be approximately 19%
compared with 11% for the same period in 2022. Given the superior trading
contribution and tight overhead control, we expect to be EBITDA positive in
2023.
With our three-year capital expenditure programme completed, capital
expenditure (including technology and new product development) for 2023 will
be approximately £1.5m (FY2022: £8.0m), with this lower level of spending to
continue in 2024.
Stephen Moon
Chief Executive Officer
29 June 2023
Notes
3 gross margin less advertising and promotions, carriage and online selling
costs
4 Euromonitor Passport Database Global Assessment (October 2022)
5 Nielsen IQ L52week, L12wks 11th Feb 2023
FINANCIAL REVIEW
Revenue
The Group delivered £63.8m revenue in the year ended 31 December 2022, up
2.0% on prior year (FY 2021: £62.5m).
Retail channels grew 9% year on year and now represent 47% of Group sales,
with online channels declining by 4% being 53% of the Group sales.
Profitability
2022 2021
H1 H2 Total H1 H2 Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 32,279 31,494 63,773 29,264 33,275 62,539
Cost of goods (18,473) (18,364) (36,837) (14,048) (17,141) (31,189)
Gross profit 13,806 13,130 26,936 15,216 16,134 31,350
Selling & general administration costs (10,223) (7,388) (17,611) (9,850) (9,780) (19,630)
Trading contribution 3,583 5,742 9,325 5,366 6,354 11,720
Underlying operating expenses (6,383) (5,631) (12,014) (5,083) (5,131) (10,214)
Underlying EBITDA (2,800) 111 (2,689) 283 1,223 1,506
Depreciation and amortisation (2,571) (2,237) (4,808) (1,660) (1,974) (3,634)
Foreign exchange variances on intercompany balances 60 (159) (99) (44) (28) (72)
Share-based payment charges (660) 398 (262) (1,418) (1,480) (2,898)
Blackburn transition costs (618) (457) (1,075) - (125) (125)
Restructuring and one-off costs (272) (616) (888) - - -
Loss from operations (6,861) (2,960) (9,821) (2,839) (2,384) (5,223)
The Group generated a gross profit of £26.9m (FY 2021: £31.4m) with a gross
margin of 42% compared with 50% in 2021. Gross margin was significantly
impacted by raw material price increases of over £4m in 2022, offset by
£0.6m of price increases, with channel and brand mix having a negative impact
of £1.8m partially offset by a positive volume impact of £0.6m. Further
price rises were introduced in Q4 FY 2022 and Q1 FY 2023 addressing the input
price increases that occurred in 2022.
Trading contribution was £9.3m (14.6% contribution margin) (FY 2021: £11.7m;
18.7% contribution margin) which was impacted by the flow through of raw
material price increases. Cost mitigations from reduced advertising and
promotion spend and logistic efficiencies with moving into the site at
Blackburn delivering a partial offset. The H2 position showing significant
recovery, with trading contribution margin in H2 FY 2022 of 18.2% compared to
H1 FY 2022 of 11.1%.
Selling and administration costs of £17.6m (FY 2021: £19.6m) decreased by
£2m in the year, with significant reductions year on year in H2. This being
due to advertising and promotional efficiencies, largely through reduced
digital performance marketing spend and logistical cost savings due to
Blackburn efficiencies and lower direct to consumer costs as a result of lower
volumes.
Underlying operating costs increased by £1.8m year on year, with the increase
predominantly being in H1. As a result of people restructuring and
efficiencies due to the transition to the Blackburn site, the costs reduced
significantly in H2 by £0.8m when comparing H2 FY 2022 (£5.6m) to H1 FY 2022
(£6.4m). The Group has good levels of visibility on these costs due to them
relating to people, premises and related overhead costs. The Group has fixed
energy tariffs in place utill 2025 for electricity and 2027 for gas.
Underlying EBITDA(1) was a loss of £2.7m, a reduction from a profit of £1.5m
in FY 2021. The reported loss before tax is £10.6m (FY 2021: £5.3m loss).
EPS was lower at -7.9p (FY 2021: -4.1p as restated).
The Group has chosen to report underlying EBITDA(1) as an alternative
performance measure. This is adjusted for depreciation, amortisation,
non‐cash share-based payments, forex on intercompany balances, Blackburn
transition costs and material one-off costs. The Board believes this provides
additional useful information for Shareholders to assess an underlying profit
performance more closely aligned to a cash profit value, excluding one-offs.
This measure is used by the Board for internal performance analysis. A
reconciliation of underlying EBITDA to profit from operations is presented in
note 1.
Working capital
As at 31 December 2022, the Group held inventory of £6.6m (31 December 2021:
£8.4m). Inventory levels decreased as we managed the supply chain tightly to
ensure efficient working capital and ensure optimal cover.
The year on year increase in trade debtors of £2.9m was due to the increased
mix of B2B revenue compared to direct to consumer. The latter channel results
in cash receipts within days of sales compared to B2B which typically ranges
between 60 to 90 days.
Correspondingly, the year on year increase in trade and other payables of
£5.1m, has predominantly been due to the introduction of an invoice financing
facility of £4.5m to assist with the Group's management of working capital
due to the increased mix of B2B revenues.
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Intangible Assets
Total intangible additions during 2022 were £1.9m, with £1.2m being on
technology spend and £0.7m on product development. Technology spend relates
to investment on the warehouse management system and ecommerce platform, and
product development spend in relation to a number of elite and commercial
products across both brands.
Fixed Assets
Total fixed asset additions during 2022 were £6.0m with a further £1.3m work
in progress related to the new bar line delivered in December 2022. This
completes the strategic investment cycle of peak cash outflows with the
Blackburn investment complete. Ongoing capital expenditure of fixed assets
is anticipated to be in the range of £0.5m-£0.75m excluding any strategic
investment opportunities.
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Cash position
Cash at bank at year end 2022 was £0.9m (FY 2021: £4.9m), lower than prior
year due to capital investment of £8.0m (FY 2021: £6.5m), for the new
Blackburn site, technology investment and new product development.
A £6.0m flexible invoice credit facility with HSBC, our principal bankers,
was drawn to £4.5m. Additional trade finance facilities of £2.7m were drawn
at year-end. Total headroom on the combined working capital facilities
(including the undrawn element of the virtual card) including cash was over
£4m at the year-end. All banking working capital facilities were successfully
renewed to April 2024, as part of an annual renewal cycle. As our business
continues to grow, particularly through the B2B channels, we will continue to
work with HSBC during FY 2023 on the optimal structure of our facilities to
ensure the appropriate financing over the medium term.
Additionally the Group has a £3.4m asset finance agreement with Lombard and
residual equipment leases of £0.3m.
Share-based payments
The Company operates both a Short-Term Incentive Programme ("STIP") and a
Long-Term Incentive Programme ("LTIP"). Together, the Share Option Plan
("SOP") was approved by the Remuneration Committee in June 2014 in line with
the proposal contained in the Company's AIM Admission document published in
August 2013. A LTIP scheme for financial years 2020‐2022 is in place.
No charge was recognised for the 2022 LTIP and STIP schemes (2021 schemes:
£2.1m).
Taxation
The tax charge in the year is £0.3m (FY 2021: £0.2m charge following a prior
year restatement. The Group has cumulative tax losses of £29.1m (FY 2021:
£17.7m), a proportion of which the Group will look to use to cover future
profits. The restatement was necessary as in the prior year the deferred tax
asset recognised in respect of losses was linked to management's estimate of
future taxable profits, rather than initially looking to the deferred tax
liabilities already recognised.
Going concern
The Group made a loss after tax for the year attributable to owners of the
parent of £10.9m (FY 2021: loss of £5.6m) of which £5.1m was non-cash items
such as depreciation, amortisation and share-based payments. The net decrease
in cash at bank at the year ended 31 December 2022 was £3.9m (FY 2021: £5.6m
decrease), this was primarily due the trading performance in H1 FY 2022, the
transition to Blackburn and completion of the strategic capital investment
cycle.
As at 31 December 2022, following the equity raise, the Group had cash at bank
of £0.9m (31 December 2021: £4.9m), and headroom in facilities of over £4m.
These facilities include working capital facilities of £11.1m which are
renewed annually and are currently due to be next renewed in April 2024. Due
to the nature of these facilities, which are secured against the working
capital of the business and includes a blue chip trade debtor book and
realisable inventory, and the strong relationship with the bank, the Directors
expect this to be renewed annually going forward.
While FY 2022 was a challenging year, particularly during H1, a number of
corrective actions occurred during H2 which position the business in a
stronger position. Customer price rises have been put in place, the operating
model of the business is much leaner, the consolidation into Blackburn is
driving efficiencies and we have no significant fixed asset capital investment
requirements. Trading at the start of 2023 has been positive and we have
delivered our highest revenue month in the history of the business in March
2023, with the positive growth continuing into Q2, with May YTD FY 2023
revenue growth of 6% to £27.7m (FY 2022: £26.1m).
In the event of a shock or prolonged economic downturn we have a number of
mitigating actions that could be taken, plus a high level of cost protection
in place.
Over 70% of our raw materials are on fixed pricing for the remainder of FY
2023 and we have fixed prices for our utilities (electricity fixed to 2025;
gas fixed to 2027), rent, rates and insurance costs. In addition we have
significant non-commited budgeted spend for marketing and technology that
could be reduced with immediate effect if required.
With regards sensitivity analysis, management have prepared scenario planning
of different revenue outcomes, including interruption of trade, no sales
growth, and customer failure to stress-test potential impacts on the cash
position of the business, and concluded that in each of these downside stress
tests sufficient liquidity is in place. The Directors have prepared projected
cash flow information for the period ending 31 December 2024.
Accordingly, the Directors have a reasonable expectation that the Company will
have sufficient cash to meet all liabilities as they fall due for a period of
at least 12 months from the date of approval of t
hese financial statements.
Notes
1 before interest, tax, depreciation, amortisation, share-based payments and
foreign exchange variance on intercompany balances, restructuring, Blackburn
transition costs, costs related to the equity raise and strategic review
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2022 2021
(as restated)
Notes £'000 £'000
Revenue 2 63,773 62,539
Cost of goods (36,837) (31,189)
Gross profit 26,936 31,350
Operating expenses 4 (36,757) (36,573)
Loss from operations (9,821) (5,223)
Comprising:
Underlying EBITDA 1 (2,689) 1,506
Share-based payment expense (262) (2,898)
Depreciation and amortisation (4,808) (3,634)
Foreign exchange variances on intercompany balances (99) (72)
Restructuring and one-off costs (888) -
Blackburn new facility transition costs (1,075) (125)
Loss from operations (9,821) (5,223)
Finance income - 5
Finance costs (757) (119)
Loss before taxation (10,578) (5,337)
Taxation expense (332) (216)
Loss for the year (10,910) (5,553)
Other comprehensive income
Cash flow hedges 2 9
Exchange differences on translation of foreign operations (21) (62)
Income tax relating to these items - (2)
Total comprehensive loss for the year (10,929) (5,608)
Loss per share to owners of the parent
Basic and diluted - pence 5 (7.9p) (4.1p)
All amounts relate to continuing operations.
As at As at 31 December
Company number: 08535116 31 December 2021
2022 (as restated)
Notes £'000 £'000
Non-current assets
Intangible assets 30,739 31,717
Right-of-use assets 10,536 10,659
Property, plant and equipment 10,338 5,251
Total non-current assets 51,613 47,627
Current assets
Inventories 6 6,638 8,447
Trade and other receivables 7 16,524 12,679
Cash and cash equivalents 930 4,850
Total current assets 24,092 25,976
Total assets 75,705 73,603
Current liabilities
Trade and other payables 8 (19,993) (14,865)
Provision for liabilities (901) -
Lease liabilities (415) (161)
Asset financing (843) (316)
Hire purchase agreement (80) (77)
Total current liabilities (22,232) (15,419)
Non-current liabilities
Lease liabilities (10,261) (10,511)
Asset financing (2,839) (1,182)
Hire purchase agreement (82) (162)
Total non-current liabilities (13,182) (11,855)
Total liabilities (35,414) (27,274)
Net assets 40,291 46,329
Capital and reserves attributable to owners of the parent company
Share capital 17,242 13,510
Share premium reserve 53,134 51,839
Employee benefit trust reserve (429) (158)
Other reserve (907) (907)
Foreign exchange reserve (138) (117)
Cash flow hedge reserve - (2)
Retained deficit (28,611) (17,836)
Total equity 40,291 46,329
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended
Year ended 31 December
31 December 2021
2022 (as restated)
£'000 £'000
Cash flows from operating activities
Loss for the financial year (10,910) (5,553)
Adjustments for:
Amortisation of intangible assets 2,919 2,702
Depreciation of right-of-use asset 963 226
Depreciation of property, plant and equipment 926 706
Interest expense 757 112
Taxation 332 216
Share based payment charge 262 2,898
Operating cash (outflow)/inflow before changes in working capital (4,751) 1,307
Changes in inventories 1,809 (1,473)
Changes in trade and other receivables (3,737) (2,838)
Changes in trade and other payables (1,970) 2,842
Total cash outflow from operations (8,649) (162)
Cash flow from investing activities
Purchase of property, plant and equipment (6,013) (4,119)
Purchase of intangible assets (1,941) (2,420)
Net cash outflow from investing activities (7,954) (6,539)
Cash flow from financing activities
Gross proceeds from issue of share capital 5,000 -
Share issue costs (371) -
Net proceeds from asset financing 2,184 1,498
Interest paid on asset financing (143) (2)
Net proceeds from invoice financing 4,523 -
Interest paid on invoice financing (119) -
Net proceeds from trade facility 2,733 -
Interest paid on trade facility (53) -
Principal repayments of lease liabilities (629) (359)
Interest paid on lease liabilities (442) (57)
Finance income - 5
Net cash inflow from financing activities 12,683 1,085
Net decrease in cash and cash equivalents (3,920) (5,616)
Opening cash and cash equivalents 4,850 10,466
Closing cash and cash equivalents 930 4,850
Share capital Share premium Employee Benefit Trust reserve Other reserve Foreign exchange reserve Cash flow hedge reserve Retained deficit Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 13,510 51,839 (191) (907) (55) (9) (15,148) 49,039
Total comprehensive loss for the year (as restated) - - - - (62) 7 (5,553) (5,608)
Transactions with owners:
Issue of shares held by EBT to employees - - 33 - - - (33) -
Share based payments - - - - - - 2,898 2,898
At 31 December 2021 (as restated) 13,510 51,839 (158) (907) (117) (2) (17,836) 46,329
Total comprehensive loss for the year - - - - (21) 2 (10,910) (10,929)
Transactions with owners:
Issue of shares 3,732 1,295 (398) - - - - 4,629
Issue of shares held by EBT to employees - - 127 - - - (127) -
Share based payments - - - - - - 262 262
At 31 December 2022 17,242 53,134 (429) (907) (138) - (28,611) 40,291
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
This results announcement for the year ended 31 December 2022 has been
prepared in accordance with UK adopted International Accounting Standards. The
accounting policies applied are consistent with those set out in the Science
in Sport plc Annual Report and Accounts for the year ended 31 December 2022.
The financial information contained within this results announcement for the
year ended 31 December 2022 and the year ended 31 December 2021 is derived
from but does not comprise statutory financial statements within the meaning
of section 434 of the Companies Act 2006. Statutory accounts for the year
ended 31 December 2021 have been filed with the Registrar of Companies and
those for the year ended 31 December 2022 will be filed following the
Company's annual general meeting. The auditors' report on the statutory
accounts for the year ended 31 December 2022 and the year ended 31 December
2021 is unqualified, does not draw attention to any matters by way of
emphasis, and does not contain any statement under section 498 of the
Companies Act 2006.
Use of non‐GAAP profit measure ‐ underlying EBITDA
The Group has chosen to report underlying EBITDA. This is adjusted for
depreciation, amortisation, non‐cash share‐ based payments, forex on
intercompany balances, restructuring and Blackburn transitional one‐off
costs. The Board believes this provides additional useful information for
Shareholders to assess an underlying profit performance more closely aligned
to a cash profit value, excluding one‐offs. This measure is used by the
Board for internal performance analysis. A reconciliation of underlying EBITDA
to profit from operations is presented in the accounts.
Underlying EBITDA is not defined by IFRS and therefore may not be directly
comparable with other companies' adjusted profit measures. It is not intended
to be a substitute for, or superior to IFRS measurements of profit
A reconciliation of the underlying EBITDA to statutory operating loss is
provided below:
Year Ended 31 December Year Ended 31 December
2022 2021
(£'000) (£'000)
Loss from operations (9,821) (5,223)
Share-based payment expense 262 2,898
Depreciation & amortisation 4,808 3,634
Foreign exchange variances on intercompany balances 99 72
Restructuring and one-off costs 888 -
Blackburn new facility transition costs 1,075 125
Underlying EBITDA (2,689) 1,506
2. Segmental reporting
Operating segments are identified on the basis of internal reporting and
decision making. The Group's Chief Operating Decision Maker ("CODM") is
considered to be the Board, with support from the senior management teams, as
it is primarily responsible for the allocation of resources to segments and
the assessments of performance by segment.
The Group's reportable segments have been split into the two brands, Science
in Sport (SiS) and PhD Nutrition (PhD). Operating segments are reported in a
manner consistent with the internal reporting provided to the CODM as
described above. The single largest customer makes up 13% of revenue and is
not separately identified in segmental reporting.
The Board uses revenue, EBITDA, profit before tax and cash, as key measures of
the segment's performance. These are reviewed regularly.
2022 2021
SiS PhD Total SiS PhD Total
£'000 £'000 £'000 £'000 £'000 £'000
Sales 29,708 34,065 63,773 32,939 29,600 62,539
Gross profit 17,383 9,553 26,936 20,064 11,286 31,350
Advertising and promotions (6,602) (2,387) (8,989) (6,066) (4,143) (10,209)
Carriage (6,356) (756) (7,112) (6,662) (1,534) (8,196)
Online Selling Costs (1,424) (86) (1,510) (1,141) (84) (1,225)
Trading contribution 3,001 6,324 9,325 6,195 5,525 11,720
Other operating expenses (19,146) (16,943)
Loss from operations (9,821) (5,223)
3. Revenue from contracts with customers
The Group operates four primary sales channels, which form the basis on which
management monitor revenue. UK Retail includes domestic grocers and high
street retailers, Digital is sales through the phd.com and scienceinsport.com
platforms, Export relates to retailers and distributors outside of the UK and
Marketplace relates to online marketplaces such as Amazon and TMall.
2022 2021
SiS PhD Total SiS PhD Total
£'000 £'000 £'000 £'000 £'000 £'000
Digital 8,859 3,618 12,477 10,974 5,105 16,079
Marketplace 6,377 14,882 21,259 8,230 10,581 18,811
Global Online 15,236 18,500 33,736 19,204 15,686 34,890
International Retail 6,491 3,904 10,395 6,208 3,374 9,582
UK Retail 7,981 11,661 19,642 7,527 10,540 18,067
Retail 14,472 15,565 30,037 13,735 13,914 27,649
Total sales 29,708 34,065 63,773 32,939 29,600 62,539
Turnover by geographic destination of sales may be analysed as follows:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
United Kingdom 36,574 36,622
Rest of Europe 11,391 11,419
USA 4,670 5,088
Rest of the World 11,138 9,410
Total sales 63,773 62,539
4. Operating expenses
Year ended Year ended
31 December 2022 31 December 2021
£'000 £'000
Sales and marketing costs 17,611 19,630
Operating costs 14,076 10,411
Depreciation and amortisation 4,808 3,634
Share based payment charge (1) 262 2,898
Administrative expenses 19,146 16,943
Total operating expenses 36,757 36,573
(1) Includes associated social security credits of £218,000
(2021: costs of £238,000)
5. Loss per share
Basic and diluted loss per share is calculated by dividing the loss
attributable to owners of the parent by the weighted average number of
Ordinary shares in issue during the period. The exercise of share options
would have the effect of reducing the loss per share and is therefore
anti-dilutive under the terms of IAS 33 'Earnings per share'.
Year ended
Year ended
31 December 31 December
2022 2021
(as restated)
Loss for the year attributable to owners of the parent - £'000 (10,910) (5,553)
Weighted average number of shares 138,860,015 135,100,931
Basic loss per share - pence (7.9p) (4.1p)
Diluted loss per share - pence (7.9p) (4.1p)
The number of vested but unexercised share options is 16,446,937 (2021:
10,820,373).
6. Inventories
31 December 31 December
2022 2021
£'000 £'000
Raw materials 2,455 2,534
Finished goods 4,183 5,913
Total inventories 6,638 8,447
There is a provision of £452,000 included within inventories in relation to
the impairment of inventories (2021: £251,000). The increase in provision
during the year relates to the impairment of residual packaging stock
following the change in gel machinery and a reduction in the number of active
stock keeping units (SKUs). During the year, inventories of £36,042,000
(2021: £29,856,000) were recognised as an expense within cost of sales.
7. Trade and other receivables
31 December 31 December
2022 2021
£'000 £'000
Trade receivables 15,274 12,452
Less: provision for impairment of trade receivables (281) (350)
Trade receivables - net 14,993 12,102
Other receivables 1,046 21
Total financial assets other than cash and cash equivalents classified as 16,039 12,123
amortised cost
Prepayments and accrued income 485 556
Total trade and other receivables 16,524 12,679
Trade receivables represent debts due for the sale of goods to customers.
Trade receivables are denominated in local currency of the operating entity
and converted to Sterling at the prevailing exchange rate as at 31 December
2022. The Directors consider that the carrying amount of these receivables
approximates to their fair value. There has been an increase in debtor days
due to increased mix of B2B revenue compared to direct to consumer. All
amounts shown under receivables fall due for payment within one year. The
Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses on a collective basis,
trade receivables and contract assets are grouped based on similar credit risk
and aging.
The expected loss rates are based on the Group's historical credit losses
experienced over 2022, this is due to Science in Sport using SAP which has
provided more visibility over debtors. The historical loss rates are then
adjusted for current and forward-looking information affecting the Group's
customers.
At 31 December 2022 the lifetime expected loss provision for trade receivables
is as follows:
More than 60 days past due More than 90 days past due Total
At 31 December 2022
Expected loss rate (%) 0% 5%
Gross carrying amount (£'000) 776 1,726
Loss provision (£'000) - 93 93
At 31 December 2021
Expected loss rate (%) 0% 9%
Gross carrying amount (£'000) 407 876
Loss provision (£'000) - 81 81
A further provision of £188,000 (2021: £269,000) has been included against
specific debts considered impaired.
8. Trade and other payables
31 December 31 December
2022 2021
£'000 £'000
4,981 7,643
Trade payables
Accruals 7,226 6,108
Invoice financing 4,523 -
Trade facility 2,733 -
Total financial liabilities measured at amortised cost 19,463 13,751
Other taxes and social security 530 1,114
Total trade and other payables 19,993 14,865
The Directors consider that the carrying amount of these liabilities
approximates to their fair value.
All amounts shown fall due within one year.
Invoice financing is the amount due to HSBC after drawing down from the £6.0m
flexible invoice credit facility during the year. This facility contains both
fixed and floating charges over all the property and undertakings of the
parent company. Additionally, a £3.5m uncommitted trade facility was entered
into during the year which is secured on stock. The drawdowns on the trade
facility during the year were £2,733,000 (2021: £nil) and this balance is
included within accruals above.
END
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