29 March 2022
 

SCIENCE IN SPORT PLC

("Company" or "Group")

Final Results for the Year ended 31 December 2021

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 final results for the financial year ended 31 December 2021.

HIGHLIGHTS

The Group performed strongly during the year and ahead of expectations, delivering an underlying EBITDA¹ of £2.2 million (FY 2020: £1.1 million) driven by revenue growth of 24% (FY 2020: nil) to £62.5m (FY 2020: £50.4m).

PhD Nutrition, a premium active lifestyle nutrition brand, grew revenue by 19% to £29.6m (FY 2020: £24.9m). SIS, a leading endurance nutrition brand among elite athletes and professional sports teams, generated £32.9m revenue, 30% ahead of the previous year (FY 2020: £25.4m).

Science-led product innovation delivered 32% of total revenue growth, £3.9m up 77% versus 2020. 330 elite sports teams globally in a wide range of sports are customers.

The important USA market grew by 50% to £5.1m, as we made inroads into elite sports, including NBA and NFL teams. Key international markets of the USA, China, Germany, Italy and Australia grew by 50% to £16.0m (FY 2020: £10.7m) despite Brexit and pandemic disruption.

Underlying EBITDA¹ increased to £2.2m, continuing the strong upward trend (FY 2020: £1.1m). Gross margin increased to 50% (FY 2020: 49%), driven by supply chain efficiencies, the continued sales shift to online, and pricing, which together more than offset commodity price increases in the second half.

Capital investment was made in a new supply chain facility with capacity to accommodate £200m per annum of future sales. Investment in technology improved revenue per visit to our digital platform by 8% from installation in May to year-end. The current investment phase underpins our medium-term ambition to deliver £100m of highly cash generative revenue.

Reflecting the capital investment which underpins our growth and profit strategy, the Group's cash at bank on 31 December 2021 was £4.9m (31 December 2020: £10.5m), in line with management expectations.  

The reported loss before tax was £5.3m (FY 2020 £2.3m loss), higher mainly due to the strategic investment in technology and data science, including the cloud accounting policy change requiring costs to be expensed.

CURRENT TRADING AND OUTLOOK

Trading for January and February is up 18% on the same period in 2021. March revenue is forecast to be a new record month. Gross margin is robust with input price increases offset by supply chain efficiencies, favourable channel mix, and price increases implemented across all channels.

Our new Blackburn supply chain facility will commence handling logistics operations in April, with gel manufacturing being fully operational in July. We continue to make good progress with our growth technology strategy underpinning our online channel growth.

Stephen Moon, Science in Sport's Chief Executive Officer, commented:

"The Group has performed well and delivered strong revenue growth. This very encouraging performance reflects the strength of our science-led premium brands which continue to drive strong underlying EBITDA¹ growth."

"We saw revenue growth in all channels and key markets, especially online. Online sales increased by 40% and now account for 56% of total sales, up from 50% a year ago, underpinned by our increased investment in growth technology. Our profitable retail sales grew well in the UK and internationally."

"Prospects for further progress in 2022 look strong, following a good start to the year. While there are input price and supply chain headwinds, we believe that our efficient operations will deliver efficiencies to significantly mitigate such costs. Our revenue, profitability and cash generation ambitions are unchanged and we will continue to invest in the key drivers strategically."

¹ before interest, tax, depreciation, amortisation, share-based payments and foreign exchange variance on intercompany balances, cloud software accounting policy change, and Blackburn transition costs

For further information:

 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, forecast to be £13 billion² worldwide by 2023.

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 fitness influencers Ross Edgley and Obi Vincent.

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 330 professional teams, organisations, and national teams worldwide, including INEOS Grenadiers Cycling Team. SiS supplies more than 150 professional football clubs in the UK, Europe, and the USA. SiS is Performance Research Partner to the English Football Association and Official Vitamins and Supplements Partner to the Milwaukee Bucks, 2021 National Basketball Association Champions.

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

² Euromonitor Passport Database Global Assessment (December 2020)

CHAIRMAN'S STATEMENT

The business demonstrated its resilience by returning to historical levels of revenue growth despite ongoing adverse impacts from COVID-19 related disruption in key markets. In a challenging economic environment, we navigated the Brexit transition at the start of the year and absorbed the headwinds of global supply chain disruption and commodity price increases, whilst increasing gross margin.

We made significant progress on building the strategic platform for future growth with work at an advanced stage on our new Blackburn supply chain facility, and new digital technology which is already driving a strong return on investment. We strengthened our team and our technology capabilities, positioning us well for the next stage of profitable growth.

COVID-19

Our priority throughout the pandemic continues to be the health and safety of our employees. In the factory, the introduced additional safety and hygiene measures, including segregating facilities, breaks between shifts and increased cleaning routines have ensured that operations continue uninterrupted.

Ukraine

The Board has considered the impact of events in Ukraine, and currently do not envisage a material impact on the business, though this is a rapidly changing unpredictable situation. The Board has resolved to discontinue trading in Russia which is not a strategic growth market for the business. In the medium term, we have fixed price energy tariffs in place, reducing the risk of significant energy price inflation.

Overview

We are delighted to announce a robust set of results for the year ended 31 December 2021. Group revenue was £62.5m, up 24% on prior year, with all channels in growth.

Underlying EBITDA¹ was £2.2m, up 100% on 2020, driven by supply chain efficiencies, the continued sales shift to online, and pricing, which more than offset commodity price increases in the second half. The reported loss before tax was £5.3m (2020: £2.3m loss) higher due to share-based payment expenses from a 2021 bonus award and strategic investment in technology and data science.

Our cash at bank position at year-end was £4.9m, in line with expectations. We invested £6.5m in 2021, mainly in a new growth technology function as a strategic enabler and our new Blackburn facility. We have an HSBC invoice credit facility of £8.0m which was unused at year end.

We demonstrated our business's resilience during another year of disruption and made good progress in delivering our strategic objectives.

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

During this challenging year, the continued high performance of the Company is due to the resilience, energy, and focus of all the people who work for our PhD and SiS brands. Their leadership and ability to navigate change have ensured we have come through this stronger together as a business.

The values of the business are growth, change, focus and resilience. This underpins our business performance and is demonstrated by our return to revenue growth in 2021. 

Finally, on behalf of the board and myself, I would like to thank our employees, suppliers and customers for their invaluable contributions and support in these challenging times, as we look forward to a return to normality.

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 March 2022

¹ before interest, tax, depreciation, amortisation, share-based payments and foreign exchange variance on intercompany balances, cloud software accounting policy change, and Blackburn transition costs

CEO's REPORT

Strategic Intent

We continue to see a significant opportunity ahead with the global sports nutrition category forecast to be worth £13 billion² by 2023. The COVID-19 pandemic has accelerated the macro trends of wellbeing and health with customers increasingly shopping online for products to support their active lifestyles beyond the gym. We remain well-positioned to benefit from these trends.

Our medium-term ambition is to deliver £100 million of revenue, with high cash generation. The key drivers of our proven growth strategy remain unchanged:

·    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 Elites

Revenue from new products was £3.9m for the period, up 77% on prior year, and comprising 32% of sales growth in 2021.

PhD launched the Life range with eight products, Complete, Reset, Mind, Vital, Relax, Move, Boost and Digest. Each product is formulated to enhance specific aspects of health needs. This premium range signals a move into higher-margin active lifestyle products. We launched Diet Plant, this underpinning our UK market-leading position in plant protein powders.

SiS Beta Fuel gels, chews and powders were launched, with a new maltodextrin and fructose blend, proven to deliver 120 grams per hour of highly absorbable carbohydrate. This represents a breakthrough in carbohydrate delivery, with the claim supported by a high-quality laboratory-based performance trial.

Our Win in Elites operation extended our reach to over 330 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.

In 2022 we are to extend our world-class banned substance programme putting in place market-specific accreditation for the USA.

²Euromonitor Passport Database Global Assessment (December 2020)

Premium Brand

PhD has made strong progress in brand awareness and is now the number three brand in the UK market, this being a significant improvement since acquiring the brand in late 2018. We enjoy a powerful conversion from awareness to purchase online, and brand equity scores are extremely strong across all measures.

In 2022 we are introducing a new active-lifestyle positioning for PhD, as we start to move the brand further into a premium positioning, and away from the price-led protein powder segment of the market.

Science in Sport continues to enjoy market leadership in endurance nutrition in the UK in awareness, all brand equity scores, and conversion to purchase. This strong position is also being reflected in consumer attitudes in the critical markets of the USA and Italy.

We became an official performance partner to the NBA Champions, the Milwaukee Bucks during the year, this in addition to our long-standing relationship with Ineos Grenadiers cycling. We are Performance Nutrition Partner to the English Football Association. Win in Science and Win in Elites are a key element of the SiS brand strategy.

Our focus on quality remains, and our brands were two of the top four major sports nutrition brands in the UK in 2021, as measured by Trustpilot. We are investing in quality systems, technology, and processes to improve further our offering to our elite and everyday athletes.

Technology and Data Science

2021 saw us build a high-quality in-house technology and data science team, to accelerate our technology and place the growth technology function as a strategic enabler.

We implemented our new Tealium customer data platform in May, with this technology delivering an 8% increase in revenue per visit from launch to year-end. In addition to this new technology, our in-house technology team upgraded and optimised our digital platform, extended the functionality of our SAP ERP system, and implemented a new warehouse management system to facilitate effective operation of the new Blackburn site.

In 2022 the machine learning capability of Tealium is to be extended. In addition, we are investing in technology to optimise digital traffic sourcing and improve cost of acquisition, as well as technology focusing on consumer loyalty. We continue to develop our in-house data science capability as a core part of our strategic footprint. While the initial focus is improving our digital revenue growth, we will extend our data science capability to enhance consumer insight and our innovation pipeline.

Global Online

Online sales rose strongly by 40% to £34.9m (FY 2020: £25.0m). Online sales via the Group's digital platforms were up by 28% with third‐party marketplace sites up 52%. In March. we set a record for online sales, which we exceeded four times in the second half, including setting a new sales record over peak November trading. Online sales accounted for 56% of total sales (FY 2020: 50%).

In the important market of the US, online sales increased by 52% to £4.8m. PhD Japan, which launched in the first half, performed ahead of plan in the second half. A new India platform went live in March 2022. We continue to expand the reach of our marketplace offering, opening new stores for both brands on Amazon across France, Poland, and Sweden.

Investment in technology and talent, and in-sourcing key functions, will ensure online is a core strategic element and significant driver of our global growth and profit strategy.  

Efficient Supply Chain

Gross margin increased to 50% (FY 2020: 49%), driven by supply chain efficiencies, continued sales shift to online, and pricing, which more than offset commodity price increases. Prices of whey, a global commodity, increased sharply in Q4 to record levels. We are confident we can maintain gross margin in 2022 through efficiencies and strategic supply partnerships.

We further streamlined our supply chain by reducing our product line count during the year and focussing on our best-selling lines. We have removed three-quarters of product line in two years. A new demand planning system and processes are being implemented currently, to enable further focus on inventory and service levels.

The new Blackburn supply chain facility is on track, with outbound logistics operations planned to start in April. In early July, a state-of-the-art eight-lane gel manufacturing line will be operational, further enhancing our market leading position in this product format. 

The 160,000 square foot facility give us the headroom to grow to £200m in revenue in the existing configuration. Consolidating the Group's four operational sites into one location drives significant and immediate supply chain savings. Medium-term we foresee improving gross margin as a critical driver of profitability.

UK Retail

Despite being adversely impacted by pandemic restrictions, UK retail sales rose by 12% to £18.0m (FY 2020: £16.1m). Gross margin improved despite UK retail sector pressures. All major grocery accounts grew more than 20%, while independent cycling shops and the convenience channel increased 53% and 217% respectively. High street saw a decline, which was more than offset by other retail and online channels, as consumers switched.

PhD retail sales grew by 9%.  It has the number one protein powder in UK retail and is the number one manufacturer of lean whey powder. PhD is the number one manufacturer of plant-based protein powders, with more sales than the next five manufacturers in total. We are the number three protein bar manufacturer and are comfortably outgrowing the category. In plant protein bars we are number one, and in sports nutrition protein bars we are number two in grocery.

Science in Sport delivered growth of 17% in UK retail, with our high gross margin gels and hydration tablets continuing their consistent growth trend. SiS is the clear number one in endurance nutrition in UK retail. Our Beta Fuel product launched strongly in August 2021, and we will invest in growth in this novel format in 2022 in all channels.

International Retail

International retail sales were £9.6m (FY2020 £9.3m), 3% up on the prior year, returning to growth despite COVID-19 restrictions impacting consumer behaviour in many of our markets. This includes the impact of exiting over 60 sub-scale accounts in late 2020. In 2022 we are to exit a further 16 markets, to focus on building scale in key global economies.

We developed our business with our strategic global partner Shimano which delivered growth of 6%, despite lockdown constraints in key markets, and introduced SiS to Brazil and Spain.

We continued our push with SiS in Italy and started to extend our PhD presence in Germany; both are major future markets for us. While badly hit by supply chain disruption, China delivered sales of £4.1m, up by 73%.

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 protein containers are recyclable, and SiS will follow in 2022. For bar and gel wrappers not currently recyclable at kerb side we offer a specialised recycling solution for customers.

The new Blackburn site will reduce carbon emissions from moving product between the multiple sites in the existing footprint. The new building incorporates many energy saving features and in 2022 we will install solar panels. These actions partly offset increasing emissions from international online sales. We are 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, this 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 2021 45% of our workforce identified as non-UK nationals, well ahead of the 15% UK average in the 2021 ONS Labour Force Survey. 20% of our employees identify as BAME versus 14% in the UK overall.

We became a Real Living Wage employer during 2021, and we welcomed five interns from the social mobility charity Career Ready. Two of the interns were offered permanent roles.

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

The business performed strongly in 2021, returning to 24% revenue growth, with growth across all channels. Despite the uncertain economic environment and the return of inflation, our premium brands are well positioned to drive continued growth and profitability.

We continue to invest in the strategic drivers of product science, premium brand, technology and data science, and efficient supply chain.

These drivers underpin our proven strategic growth model, and we remain committed to our vision of becoming the world's number one premium performance nutrition business, as well as delivering £100m of profitable, highly cash generative revenue in the medium term.

Stephen Moon

Chief Executive Officer

29 March 2022

FINANCIAL REVIEW

Revenue

The Group delivered £62.5m revenue in the year ended 31 December 2021, up 24% on prior year (FY 2020: £50.4m)

Online channels grew 40% year on year and now represent 56% of Group sales, as customers continue to migrate online, though all channels returned to growth in 2021.

Profitability

The Group generated a gross profit of £31.4m (FY 2020: £24.6m) with a gross margin of 50% compared with 49% in 2020. Gross margin improved driven by supply chain efficiencies, continued sales shift to online, and pricing, which combined more than offset commodity price increases

Underlying EBITDA¹ was £2.2m, up 100% on 2020. The reported loss before tax was £5.3m, (FY 2020: £2.3m loss) higher mainly due to increased strategic investment in technology, and data science including the cloud accounting policy change requiring costs to be expensed and a 2021 bonus award. EPS was lower at -5.0p (FY 2020: -1.3p) and included the partial release of a deferred tax asset.

We invested in key strategic areas of technology, data science, online marketing and supply chain, including building in-house teams, which increased overall operating costs. Overheads excluding these areas were lower than prior year.

The Group has chosen to report underlying EBITDA¹ as an alternative performance measure. This is adjusted for depreciation, amortisation, non‐cash share-based payments, forex on intercompany balances, International Financial Reporting Interpretations Committee (IFRIC) new accounting guidance requiring cloud computing configuration and customisation cost of technology investment to be expensed and Blackburn transition 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 EBITDA¹ to profit from operations is presented in Note 1.

Working capital

As at 31 December 2021, the Group held inventory of £8.4m (31 December 2020: £7.0m). Inventory levels increased as we managed potential supply chain disruption risk, increasing stock levels to provide resilience into the new year

Fixed Assets

Capital works in progress include £2.9m fit out costs for the new Blackburn facility. Following commencement of the factory build at Blackburn, which is a leased premises, a right-of-use asset has been recognised with a corresponding lease liability in accordance with IFRS 16. The right-of-use asset will be depreciated over the life of the lease and lease payments will reduce the lease liability with an associated interest cost. Capital commitments at the end of 2021 were £3.2m

¹ before interest, tax, depreciation, amortisation, share-based payments and foreign exchange variance on intercompany balances, cloud software accounting policy change, and Blackburn transition costs

Cash position

Cash at bank at 31 December 2021 was £4.9m (31 December 2020: £10.5m), in line with expectations and lower than prior year due to capital investment of £6.5m (FY 2020: £2.1m), including the new Blackburn site, technology investment in online growth and new product development.

A £8.0m flexible invoice credit facility with HSBC, our principal bankers, was unused at year end. In addition, at year end, asset financing credit facilities of £3.7m are agreed with HSBC and £2.4m with Lombard Asset Finance to finance planned capital investment.

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 2019‐2021 is in place.

A £2.1m charge was recognised for the 2021 LTIP and STIP schemes (FY 2020: nil).

Taxation

The tax charge recognised for the year is £1.5m (FY 2020: £0.5m tax benefit) due to the partial release of a deferred tax asset. The Group has cumulative tax losses of £17.7m (FY 2020: £15.5m), a proportion of which the Group will look to use to cover future profits.

Going concern

The Group made a loss after tax for the year attributable to owners of the parent of £6.8m (FY 2020: loss of £1.7m) of which £7.8m was non-cash items such as depreciation, amortisation, share based payments and deferred tax asset release. The net decrease in cash at bank at the year ended 31 December 2020 was £5.6m (FY 2020: £5.1m increase), this was primarily due to capital investment in the Blackburn facility and technology to drive online sales growth. As at 31 December 2021, the Group had cash at bank of £4.9m (31 December 2020: £10.5m), and an £8m invoice financing credit facility which was not utilised. In addition at year end, asset financing credit facilities of £3.7m are agreed with HSBC and £2.4m with Lombard Asset Finance to finance planned capital investment.

The business proved resilient during the Covid-19 pandemic with a strong return to revenue growth as lockdown eased. Our online channel continues to grow strongly, with retail and international channels now back in growth. Management have prepared sensitivity analysis and scenario planning of different revenue outcomes, including interruption of trade, no sales growth, and reduction in gross margin 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 2023.

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 these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

All amounts relate to continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

These consolidated financial statements were approved and authorised for issue by the Board on 29 March 2022 and signed on its behalf by:  

STEPHEN MOON

Director

CONSOLIDATED STATEMENT OF CASH FLOWS