Science in Sport
plc
("Science in Sport", "the
Company" or the "Group")
Trading update
Fundamental Change in Operating Model and
Restructuring of Cost Base
Science in Sport plc (AIM:
SIS), the premium performance nutrition
company serving elite athletes, sports enthusiasts, and the active
lifestyle community, announces an unaudited
trading update in respect of the financial year ended 31 December
2023 ("FY23") and also the outlook for 2024.
Operating Model
A new leadership team has been in
place from Q4 2023 and we have completed a full business and
organisational review. Whilst the strength of our two core brands,
SiS and PhD, is unquestionable the relentless pursuit of top line
growth led to some poor strategic decisions and an inflated
operating structure. The immediate challenge faced by the new team
was to stem the cash outflow and stabilise the relationships with
our various stakeholders. The prior strategy of aggressive growth
across all channels and markets has been reset, with the revised
operating model focused on controlled growth, while delivering
sustainable cash generative profitability at improved margins from
a reduced cost base.
To date, a number of actions have
been taken, benefiting Q4 2023 while providing a stable platform in
2024 for the business to be reset. Key actions completed and
ongoing are:
·
Restructure of the executive and leadership team
with several senior roles exiting the business.
·
Marginal revenue channels have been reset and
measures implemented to secure and grow the Company's profitable
revenue streams. In particular, overseas distribution agreements
were uncommercial and based on prioritisation of revenue growth
over profitability. Whilst core channels are expected to return to
growth during 2024 and beyond, we will ensure that our distribution
arrangements are 2-way partnerships whereby the strength of the
brand is supported by both parties with measurable
deliverables.
·
Supplier and operational review underway in
conjunction with product inventory rationalisation.
·
While brand health is robust and both brands
remain leading in their respective categories, a significant number
of uncommercial marketing contracts have been exited in 2023 and
further savings will be made throughout 2024. Marketing spend will
be aligned to identifiable commercial traction.
·
Significant other operational cost savings have
been extracted under the new leadership in Q4 2023 and progress in
implementing operational efficiencies continues to be made. This is
anticipated to generate improved contribution to cashflow and
earnings through 2024.
·
In aggregate this will deliver further annualised
savings in excess of £2.5m, the majority of which will be delivered
in 2024.
Trading
FY23 delivered EBITDA in-line with
market expectations despite lower revenues, with the focus in the
final quarter in particular shifting to cash and profit as noted
above.
The Group closed FY23 with revenue
of £62.8m (FY22: £63.8m), a reduction of 1.6% from the prior year.
The performance in FY23 was driven from growth in the Retail (UK
and International) and Marketplace channels, offset by lower
trading in China and in the Digital channel.
The SiS brand delivered annual
revenue growth of 17%, with PhD closing FY23 with an annual revenue
reduction of 18% compared to the prior year, predominantly on
account of interrupted trade in the Chinese markets.
Whilst gross margin improved by 1
percentage point to 43% (FY22: 42%), the underlying improvement is
better reflected by the significantly improved trading contribution
of 21% (FY22: 16%). Whilst the gross margin is adversely impacted
by the increase in international and wholesale revenue mix, the
trading margin reflects the benefit of the distributor model,
particularly in the US together with the operational efficiencies
and cost savings at all levels. The FY23 trading contribution
margin percentage achieved the highest levels during the Q4 2023
period, which gives confidence in further improvements in
FY24.
Adjusted EBITDA1 of £2.0m
(FY22: £(2.7)m loss) consistent with market expectations despite
the lower revenue forecast, this being driven from improved margins
and ongoing cost efficiencies across all areas. Excluded from the
adjusted EBITDA1 are one-off costs, principally relating
to the organisational restructure, transition costs moving to the
internally manufactured protein bars and moving to the distributor
model in the US. In addition, an impairment review is being
undertaken on historic digital and trading assets which will be
completed prior to the signing of the FY23 annual accounts. No
impact to adjusted EBITDA and cash for FY23 is anticipated as a
result.
Cash of £2.1m (31/12/23: £0.9m) and
net debt2 of £12.9m (31/12/22: £10.9m) with headroom in
facilities of over £3.3m as at 31 December 2023. The increase in
net debt at the year-end was driven by the timing of restructuring
payments and working capital outflow associated with the early
termination of a marketing partner, both of which will result in
significant savings in 2024.
Outlook
Management is taking a balanced view
on prospects for 2024. The strategic focus areas are embedding the
new operating model post the recent restructuring; controlled
growth over the medium term; continued margin improvements
resulting in cash generation and deleveraging. With the focus
on controlled growth and profitability, revenues are expected to be
broadly flat in FY24, with a doubling of underlying EBITDA and
reduction in net debt.
At the core of the business are two
very strong brands operating in a growing marketplace. Management
is confident with the revised operating model and new leadership,
through re-engaging with core customers, shareholders and financing
partners the business is building a more stable platform from which
substantial shareholder value can be delivered.
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").
For
further information:
Science in Sport plc
|
T: 020 7400 3700
|
Dan
Wright, Executive Chairman
Daniel Lampard, CFO
|
|
|
|
Liberum (Nominated
Adviser and Broker)
|
T: 020 3100 2000
|
Richard Lindley
John More
|
|
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 ebay, 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.
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.
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.
For further information, please
visit phd.com and scienceinsport.com
1 Earnings before interest, tax, depreciation, amortisation,
share-based payments and foreign exchange variance on intercompany
balances, restructuring costs, transition costs and material
one-off items
2 Net debt is defined as cash, less banking working capital
facilities and asset financing and excludes property
leases