Conclusion of Strategic Review and Trading Update

RNS Number : 0376W

Science in Sport PLC

13 April 2023

 

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

Science in Sport plc

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

 Conclusion of Strategic Review and Trading Update

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

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

Strategic Review conclusion 

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

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

The key drivers of the Board's decision are: 

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

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

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

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

Business model

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

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

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

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

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

Comprehensive Profitable Growth Plan

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

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

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

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

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

Current Trading

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

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

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

Review Concludes

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

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

For further information:

Science in Sport plc	T: 020 7400 3700
Stephen Moon, CEO Daniel Lampard, CFO
Liberum (Nominated Adviser and Broker)	T: 020 3100 2000
Richard Lindley William Hall Lucas Bamber

Notes to Editors:

About Science in Sport plc

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

The two brands sell through the Company's phd.com and scienceinsport.com digital platforms, third-party online sites, including Amazon and Tmall, and extensive retail distribution in the UK and internationally, including major supermarkets, high street chains and specialist sports retailers. This omnichannel footprint enables the Company to address the full breadth of the sports nutrition market, worth $42.9bn in 2022 and forecast to grow CAGR 7.4% from 2023 to 2030.¹

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

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

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

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

¹  Grand View Research (2022)

 

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