Company Announcements

15 September 2021

AIM: SIS

SCIENCE IN SPORT PLC

("Group" or "Company")

Interim results for the six months ended 30 June 2021

Growth momentum regained 

Company strongly positioned for further progress in H2

HIGHLIGHTS

·      Revenue up 24% to £29.3m (H1 2020: £23.6m), returning to 20%+ growth rates while negotiating ongoing coronavirus challenges

o  both brands contributed, with PhD sales up 15% to £13.4m and SiS sales up 34% to £15.9m

o  new product innovation accounted for £1.5m (26%) of H1 growth (H1 2020: £1.4m)

o  non-UK sales increased to 40% of total sales (H1 2020: 38%)

·      Online sales up 44% to £15.7m (H1 2020: £10.9m), supported by increased investment - 54% of total revenue (H1 2020: 46%)

·      Retail sales returned to growth despite pandemic restrictions in many key markets;

o  UK retail sales up by 8% to £8.4m (H1 2020: £7.7m)

o  International retail sales up by 6% to £5.2m (H1 2020: £4.9m)

·      Gross margin increased by 400bps to 52% (H1 2020: 48%), reflecting continued supply chain efficiencies, increased online sales, and product mix

·      Underlying* EBITDA of £0.6m - after one-off Brexit-related costs of c.£0.7m (H1 2020: underlying loss of £0.2m)

·      Capital investment increased to £2.7m (H1 2020: £0.9m);  investment was focused on the new customer data platform and new supply chain facility in Blackburn

·      Robust balance sheet with cash of £8.2m at 30 June 2021 - ahead of management expectations (31 Dec 2020: £10.5m and 30 June 2020: £9.0m)

·      Trading  has been strong in the first two months of H2, and while there are still some challenges and uncertainties, the Group expects to exceed its revenue targets for the year

*excludes depreciation, amortisation, share-based payments, and foreign exchange variances on intercompany balances

Stephen Moon, Chief Executive Officer of Science in Sport plc, said:

"Trading over the first half of the financial year recovered well, gaining momentum as coronavirus pandemic restrictions lifted. The Group returned to over 20% revenue growth, overcoming Brexit supply chain disruptions.

"Gross margin percentage and underlying profitability continued to improve. This reflected last year's strategic progress and  continued investment in our premium brands and online capability.

" The second half has started strongly for us, and we are continuing to manage successfully input cost pressure. While uncertainties remain, we expect to exceed revenue targets for the year, and continue to be very optimistic about growth prospects over the medium and long-term."

About Science in Sport plc

www.sisplc.com

Headquartered in London, Science in Sport plc is a leading sports nutrition business, which 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 are sold internationally through the Company's phd.com and scienceinsport.com digital platforms, third-party online sites, including Amazon and Tmall, and an 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 growing 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, based on its core protein powders, 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 fitness influencers Ross Edgley and Obi Vincent. The PhD brand is an official partner to the Tough Mudder Challenge and Race Series.

SiS, founded in 1992, has a core range comprising gels, powders and bars focused on energy, hydration and recovery. SiS is an official sports nutrition supplier to over 250 professional teams, organisations and national teams around the world, including INEOS Grenadiers Cycling Team. SiS supplies more than 150 professional football clubs in the UK, Europe and the USA and is Performance Research Partner to the English Football Association.

INTERIM REPORT

Introduction

Trading over the first half of the financial year recovered well, gaining momentum as coronavirus pandemic restrictions lifted, and the Group returned to over 20% revenue growth, overcoming supply chain disruptions. Gross margin percentage and underlying profitability continued to improve as we focussed on profitable growth.

Revenue rose by 24% to £29.3m.  Group gross margin percentage increased to 52% from 48%, moving closer to our mid-50% target in the medium term. Underlying* EBITDA improved by £0.8m to £0.6m, which was after c.£0.7m of one-off Brexit-related costs.

These results built on continued progress with our strategic objectives. We invested in our brand, improved our online platform capability and strengthened our team in strategic areas to help drive the next stage of the Group's growth.

Financial Results

Revenue for the six months to 30 June increased by 24% to £29.3m (H1 2020: £23.6m). Both brands, PhD Nutrition ("PhD") and SiS, showed good growth despite pandemic disruptions. Sales of PhD products increased by 15% to £13.4m (H1 2020: £11.7m) and sales of SiS products rose by 34% to £15.9m (H1 2020: £11.9m).  We continued to increase sales from international markets, including the USA, and non-UK sales now account for approximately 40% of the total (H1 2020: 38%).

Online sales increased by 44% to £15.7m (H1 2020: £10.9m), and made up 54% of total revenue (H1 2020: 46%).  Sales via the Group's own digital platforms increased by 35% to £7.7m (H1 2020: £5.7m), and sales from marketplace sites rose by 53% to £8.0m (H1 2020: £5.2m).

Gross profit increased by 36% to £15.2m (H1 2020: £11.2m) and gross margin continued to improve, rising by 400bps to 52% (H1 2020: 48%).  This improvement was mainly driven by supply chain efficiencies, the continuing shift to digital sales and the product mix. Underlying* EBITDA of £0.6m benefited from gross margin progression as well as a tight focus on overheads, improving by £0.8m on the same period last year (H1 2020: loss of £0.2m). This was after approximately £0.7m of additional costs, arising from Brexit. These extra costs fell away from September after a new third-party logistics facility became operational.

We accelerated the Group's capital investment programme during the period, investing a total of £2.7m (H1 2020: £0.9m).  This supported the launch of a new customer data platform, which is integral to our digital growth strategy, and the first phase of investment at the new, leased supply chain facility in Blackburn, which we will take possession of in December 2021. 

The Group's balance sheet remains robust, with £8.2m of cash at bank at 30 June 2021 (31 December 2020: £10.5m and 30 June 2020: £9.0m).  This was better than expected.  We also retain a £8.0m flexible invoice credit facility with our principal bank, which remains unused.

*excludes depreciation, amortisation, share-based payments, and foreign exchange variances on intercompany balances.

Operational Review

We are continuing to target revenues of £100m in the medium term and our growth strategy remains unchanged, with a number of principal levers.

Growing brand strength

Our product strategy remains to concentrate on science-led innovation and superior customer service together with strong premium brand awareness.  The integrity of our products is a critical differentiator and we believe that our approach to banned-substance control is unmatched. The relationships and partnerships we have established as official sports nutrition supplier to over 250 professional teams, organisations and national teams around the world demonstrate the world-class credentials of our products. 

We retain relationships with many leading professional sports teams and, in May 2021, extended our partnership with the UK's INEOS Grenadiers, one of the world's most successful cycling teams. The new agreement continues our successful five year relationship with INEOS Grenadiers, which supported the team's seven 'Grand Tours' cycling victories.  An important element in the relationship is the provision of our Performance Solutions experts.  These expert nutritionists are embedded in the coaching team, and manage INEOS Grenadiers' nutrition strategy.

Our Performance Solutions experts are similarly embedded in many leagues and sports associations across a wide range of sports, including the Welsh and Irish national football teams, England and India's national cricket teams, and NBA (National Basketball Association) teams.

Product innovation

New products generated £1.5m of sales, 26% of H1 sales growth, and we have a strong pipeline of new products under development.  Post period, in July 2021, we launched a new, formulation of SiS's 'Beta Fuel' product range, a category-leading fuelling product. The new formulation was developed over a number of years, with research conducted at Liverpool John Moores University, the world-leading sport science institution and supported British cyclist Tao Geoghegan Hart's victory in the Giro d'Italia race in 2020.

In August 2021, we launched the PhD 'Life' range of premium supplements. The new range marks a significant expansion of PhD's offering and has been designed to optimise both physical and mental well-being based on scientifically validated active ingredients. It comprises products formulated to enhance particular aspects of health, including gut health, sleep, mental performance and metabolic wellness. As well as being aimed at PhD's core active lifestyle audience, we expect 'Life' products to appeal to a wide range of consumers, and early indications are very promising.

Digital and international expansion

Online sales are a major focus of our growth strategy, particularly internationally, and we increased sales by 44% to £15.7m from £10.9m last year. With 54% of total sales now being generated digitally, up from 46% in H1 2020, we are making progress towards our target of 70% of total sales coming from online.

Sales from our own websites increased by 35% in H1, with continued strong growth in our key trading metrics including average order value ("AOV") up 20%, and customers recorded on our database up by 36%. During the first half, we launched websites for PhD and SiS in Japan and South Korea, and are pleased with their progress to date. The sites are growing well and gross margins are already ahead of plan. We are now preparing for the launches of websites in India and Middle East in the second half of the year.

We also strengthened our trading team to support international growth and made significant investment in our online trading platform and internal technology team. This investment helped to drive overall sales growth from both own websites and marketplace sites up by 60% in the USA to £2.2m (H1 2020: £1.4m) and by 67% in Germany, both strategic online markets.

Sales via marketplace sites, including Amazon, rose by 53% over the period. This was mainly driven by the USA where dollar sales nearly doubled compared to the same half last year. We increased the online product range in our core markets and launched through Amazon in France and the Netherlands. All key online trading metrics were up as we continued to strengthen our marketplace presence as a category leader.

Towards the end of the first half, we launched our new customer data platform. This market-leading platform will help to drive a deeper level of customer understanding and should improve marketing efficiency and brand loyalty. We are already seeing a strong return on investment from improved online personalisation and customer targeting.

Retail sales recovering

UK and international retail sales returned to growth despite ongoing pandemic restrictions in many of our key markets over the period. Retail remains a highly profitable channel and a key driver of brand awareness.  It is also very helpful as a gauge of consumer reaction to new product. UK retail sales were 8% higher at £8.4m (H1 2020: £7.7m) with grocers growing well and new convenience sector account wins. International retail sales increased by 6% to £5.2m (H1 2020: £4.9m) with strong growth in Russia and Germany. These results are after our exit from over 60 sub-scale accounts in H2 2020 to focus on key accounts in scale markets. 

Supply chain a key driver of margin growth

We continued to focus on supply chain efficiencies, which helped to support the improvement in gross margin in the period. Our new facility in Blackburn is expected to deliver further operational and efficiency gains when it becomes fully operational, expected in late Q1 2022. When completed, the Blackburn site will serve as factory, warehouse and e-commerce dispatch facility for both brands. The new eight-lane gel manufacturing plant has been ordered and construction of the leased facility is on schedule. To mitigate the impact of first half Brexit transition costs, we transferred European customer dispatch to a third-party site in Italy, which became fully operational during August.

Environmental, Social & Governance ("ESG")

We produced our first ESG report in 2020, and are building on these foundations in order to establish more clearly our goals and policies for the next few years. We are especially focused on environmental and social matters this year, having adopted fully the QCA Corporate Governance Code.

We achieved Carbon Neutral accreditation, following a carbon audit of the Group. We see further opportunities to improve our carbon footprint as we move to the new Blackburn site.

We introduced recyclable pouch packaging for PhD protein powders at the start of the year, and this is now being extended to SiS powder products. A free recycling scheme was also launched for consumers to recycle all our gel, bar and sachet wrappers, which is proving popular.

To support our colleagues with the continued impact of lockdown, we ran 'Wellbeing Week' with a wide range of activities and external experts providing well-being sessions. We extended our employee assistance scheme and provided specific training for line managers on looking after their teams.

In the summer, we took on the first cohort of interns in our new initiative with Career Ready, a national social mobility charity. This was supported by mentors from across the business, and following the successful completion of the programme, we offered several interns roles in the business.

We were pleased to gain formal accreditation as a 'Real Living Wage' employer committed to paying a fair living wage based on the cost of living.

People

On behalf of the Board, I would like to thank all my colleagues for their hard work and efforts over the first half.  The pandemic continued to present challenges both professional and personal, and I am deeply grateful for the commitment, resilience and energy our teams have shown through this difficult period.

Outlook

After record monthly sales in June, sales in July and August have performed very strongly, supported by our investment in technology and brand. Online sales have accelerated and retail sales have continued to recover. We are continuing to manage input cost inflation. While there are still challenges and uncertainties in the current environment, the Group remains very well-positioned to exceed revenue targets for the financial year. We remain very optimistic about growth prospects over the medium and long-term.

Stephen Moon

Chief Executive Officer

Consolidated statement of comprehensive income

Six months ended 30 June 2021

All amounts relate to continuing operations

Consolidated statement of financial position

30 June 2021