Final Results

RNS Number : 8235S

Science in Sport PLC

22 March 2016

 

22 March 2016

 SCIENCE IN SPORT PLC

("SiS" or the "Company")

FINAL RESULTS

for the YEAR ended 31 DECEMBER 2015

Science in Sport plc (AIM: SIS), a leading sports nutrition company, is pleased to announce its audited final results for the year ended 31 December 2015.  The comparative figures in this results announcement are for a nine month period owing to a change of year end in 2014, for operational reasons, from 31 March to 31 December. As in the prior year the directors have also set out unaudited pro forma results for the 12 months ended 31 December 2014, for comparative purposes, as they believe that this will provide the reader with more relevant information with which to assess the performance of the business.

Highlights in the twelve month period *

·      Revenues increased by 18% to £9.45 million (12 months to 31 December 2014: £8.03 million), with particularly strong growth in online channels and international markets;

·      Underlying operating loss** of £0.25 million (12 months to December 2014: £0.19 million) in line with expectations and reflecting investment in brand awareness, e-commerce and development of Australian and US market entry strategies;

·      New product development continued to be a key growth driver, delivering 46% of the growth in the year (12 months to December 2014: 29%);

·      Robust supply chain performance, with factory efficiencies increased 7% and improved customer service levels;

·      Cash and cash equivalents of £8.75 million at 31 December 2015 (31 December 2014: £2.03 million) following oversubscribed share placing raising £8.20 million net of costs in November 2015; and

·      Strong start to 2016 with innovation playing a key role in further future growth.

* Highlights are given for the year to 31 December 2015 and the pro forma 12 months to 31 December 2014 to aid comparison. The pro forma figures are unaudited.

** excludes depreciation and amortisation, non-cash share based payments and exceptional items

Stephen Moon, Science in Sport's CEO, said: "This was another year of continued strong revenue improvement and, we believe, we led the endurance nutrition sector in growth. We have invested heavily in marketing and innovation, with the benefits evident in both revenue growth and sharply improved brand awareness.

International and online growth has been particularly strong and we believe these channels will continue to play a key role in the development of the business. In addition to existing international markets, we have set up a wholly owned subsidiary in Australia and have invested in launch plans for the US.

Our model is working, as consistent investment in the brand and development of our e-commerce operation results in top line growth. This is underpinned by close attention to gross margin and tight control of overheads. We remain very confident in our strategy and believe we will continue to deliver sector leading growth. The Company is pleased with its start to 2016 with growth in line with expectations."

For further information:

Science in Sport plc	[phone]
Stephen Moon, CEO
Cenkos Securities	[phone]
Bobbie Hilliam - NOMAD and Broker

About Science in Sport plc

Science in Sport plc is a leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts. SiS is a strong brand in the elite athlete community.

The SiS core product ranges include: SiS GO, comprising energy powders, isotonic gels, energy bars and hydration tablets; SiS REGO, including protein-based recovery powders and bars; and SiS Protein, a whey protein range for lean muscle development including WHEY20, a novel ready to consume whey protein product. SiS products are sold in a range of retail channels, including specialist sport retailers, major grocers, high street retailers and e-commerce websites. The Company sold product in more than 100 countries in 2015.

SiS is the official sports nutrition supplier to professional cycling teams Team Sky and Team WIGGINS. SiS is also the official supplier of sports drinks and sports nutrition to the GB Rowing Team. In addition, Olympians Sir Chris Hoy MBE, Mark Cavendish MBE and Katarina Johnson-Thompson are Elite Sports Consultants and brand ambassadors.

SiS was founded in 1992 and is headquartered in Hatton Garden, London. Its manufacturing facility is in Nelson, Lancashire.

SiS shares are traded on the AIM market of the London Stock Exchange under the ticker symbol SIS.

For further information, please visit www.scienceinsport.com

 

CHAIRMAN'S AND CEO'S JOINT REVIEW

Overview and Strategy

We are delighted to announce the results of Science in Sport for the year ended 31 December 2015.  Revenue of £9.45m for the year was 18% ahead of the same period in 2014 and saw the Company deliver a third consecutive year of strong revenue growth. This is well ahead of the 8% growth forecast by Euromonitor for 2015 for the sports nutrition sector in the UK.

The statutory comparative results are for a nine-month period owing to a change of year end in 2014 from 31 March to 31 December. The decision to change the year end was made for operational reasons in that March, and the weeks immediately following, coincide with the busiest time of the year for our business in the UK.

Due to this seasonality, and in order to allow the reader to make a meaningful comparison with the prior period, this results announcement primarily uses, as comparator, the unaudited pro forma results for the 12 months ended 31 December 2014. This Chairman's and CEO's joint review compares the results of the year ended 31 December 2015 with the pro forma year 2014 unless otherwise stated. These pro forma results are prepared on the same basis as the statutory accounts, but have not been audited. The statutory comparative results for the nine month period are set out in the consolidated statement of comprehensive income.

The Company strategy is to invest consistently in awareness of the SiS brand and to broaden distribution across all retail and online channels, both domestically and internationally. We seek to maintain and improve gross margin, as well as looking to limit overhead growth to single per cent points, in order to underpin investment in the brand and to benefit from operational gearing.

The Board believes that there are significant growth opportunities for the Company over the next few years and in order to maximize these opportunities the Company raised £8.7 million before costs in November 2015 to fund growth in existing and new markets, including Australia and the US. The funds raised will also support investment in supply chain and developing our e-commerce business. As well as the heavily oversubscribed placing being supported by existing shareholders, we were pleased to welcome a range of new institutional investors to SiS. If appropriate, we will consider potential acquisitions to complement our existing product range and to deliver synergies from our manufacturing, marketing and distribution capabilities.

Brand and Range

Our brand strategy has been developed to exploit the highly differentiated characteristics of SiS, which is widely used by professional and elite athletes. SiS is a leader in innovation and science, supported by in-house scientific and nutritional expertise, and a range of collaborations with academic institutes, as well as elite athletes and teams. Further differentiation is derived from the Company's low cost factory in Lancashire having the only Evolved Certification from Informed Sport, the most rigorous banned substance testing programme for nutritional products used by athletes.

SiS is a trusted brand which is used widely by enthusiasts and elite athletes in a growing range of endurance sports. These customers include cyclists, triathletes, rowers, tennis players and runners. More recently the brand has started to extend into new sports including professional football at the highest level, international rugby and the rapidly growing sport of obstacle course racing.

SiS products are endorsed by the Company's Elite Sports Consultants, including the cyclists Sir Chris Hoy MBE and Mark Cavendish MBE and heptathlete Katarina Johnson-Thompson, who have an active role in new product development. The products are further endorsed by the brand's role as an official nutrition supplier to professional cycling teams Team Sky and Team Wiggins, as well as the GB Rowing Team. SiS also benefits from a close relationship with organisations and training centres focused on athletes' development including the English Institute of Sport.

SiS products are designed to sustain performance, to aid recovery and to build lean muscle. The core product range comprises five key product lines:

•           SiS GO isotonic powders and gels - easily digestible carbohydrates for use during exercise

•           SiS hydration products - including SiS GO Hydro tablets and SiS GO Electrolyte powders

•           SiS GO Bars - cereal-based food bars

•           SiS REGO range - drinks and protein bars for recovery after training

•           SiS Protein - a whey protein range for lean muscle development

Overview of the financial year

The 12 months to 31 December 2015 was a period of strong revenue growth, with sales up 18% at £9.45 million (2014: £8.03 million). International and e-commerce sales, both from our own website and third-party online retailers were particularly strong, reflecting the continued investment in brand awareness and e-commerce technology and management. We believe that in our marketplace of endurance nutrition we delivered sector leading revenue growth, the sources being both organic category growth and by taking market share from key competitors.

The underlying operating loss was in line with management expectations at £0.25 million (2014: £0.19 million loss) and this reflected continued investment in marketing, sales and e-commerce of £3.68 million (2014: £3.08 million). 

Overheads excluding sales and marketing were £2.08 million (2014: £1.88 million) for the year, this included market assessment and strategy development costs for the US market. Management continue to seek to limit underlying overheads to single digit per cent increases in the future.

Depreciation and amortisation costs of £0.36 million (2014: £0.31 million), non-cash share-based payments related to short and long-term management incentive schemes of £1.00 million (2014: £1.21 million) and exceptional costs of £0.12 million (2014: £0.12 million), relating to the termination of the SiS APAC distributorship, resulted in a pre-tax loss of £1.74 million (2014: pre-tax loss £1.83 million).

Net cash and cash equivalents at the year-end were £8.75 million (31 December 2014: £2.03 million). The increase in cash reflects an oversubscribed placing announced on 23 October 2015 in which net proceeds of £8.2 million were raised through the issue of 14,676,262 ordinary shares.

Non-cash share-based payments amounting to £1.00 million (2014: £1.21 million), which have been excluded from underlying operating loss, continue to reflect grant of shares to employees under the Company LTIP and the decision of management to make awards under the STIP in shares as opposed to cash.

The statutory audited comparative results are for the nine months to 31 December 2014 and show revenue of £6.25 million, gross margin of 58.6% and an underlying operating loss of £0.30 million.

Sales Channels

The Company's sales channels comprise our heartland of independent sports retailers, major grocers, high street chains, third party online retailers, international sales and our own e-commerce platform.

Our e-commerce platform was a focus during 2015 and it delivered very strong growth, as we invested in driving more traffic to the site, together with a new trading strategy to drive stronger conversion. A completely new platform is to be introduced in early 2016 to further enhance trading effectiveness, and to allow for commerce in a range of territories and currencies. Third-party online retailers, led by Wiggle, Chain Reaction and Amazon delivered outstanding growth, as we continued to invest in this channel.

We worked very closely with the leading five major grocery chains during the year. Growth met our expectations for the year, and in addition we jointly developed strong plans for 2016, with major new distribution gains across the grocery channel. High Street delivered growth for SiS, with Halfords and Decathlon being leading customers. The Heartland of independent cycle and running shops had a challenging year, given the continued growth of High Street and online sales. We will continue to invest in this important and opinion leading channel in 2016 and beyond. 

International sales grew very strongly and some 17% of total revenues came from existing and new overseas markets. Our strategic relationship with Shimano in eight European countries continues to be very effective and we doubled the number of outlets stocking SiS. New distributors in Spain and Italy also performed well. In December we terminated our distributorship with SiS Asia Pacific and set up a wholly owned subsidiary in Sydney to develop this strategically important region directly from 2016 onwards.

   

Product Innovation

Trust, quality and innovation are the key characteristics for which SiS is recognised and we continue to invest in this strategically important area. Once again, innovation has been a key driver of growth, with 7% of sales and 46% of total revenue growth coming from new products, continuing the trend of the previous three years.

During 2015 we launched our new SiS Whey Protein and Overnight Protein range and added an Advanced Isolate whey protein range during the year. We also added two new SiS Electrolyte GO Gels to supplement our market leading GO gel range.

We developed our novel WHEY20 ready to consume protein product during the year and this launched in Q1 2016. This will be the largest launch in the history of SiS in terms of distribution gained for launch and investment in marketing and selling the new product. WHEY20 is the subject of new patent applications by SiS. In addition to WHEY20, the pipeline of new products for the second half of 2016 is strong.

Supply chain

Gross margin at our Lancashire manufacturing facility was 58.4%, with the 1% reduction from the previous year reflecting the successful launch of variety pack formats to drive new customer trial. Factory efficiencies improved by 7% during the year, and customer service levels also improved. The low cost base of the Nelson site, together with the controls afforded in the banned substance testing programme, continue to provide a strategic advantage for the Company.

People

The Board was pleased to announce the appointment of Raymond Duignan as a Non-executive Director on 18 June 2015, effective from 1 July 2015. He has extensive industry experience having set up the specialist investment bank Stamford Partners in the mid-1990s, advising the European food and drink industries.

The Company announced on 27 August 2015 that Vivienne Sparks stepped down from her position as Finance Director, effective from 23 September 2015. An Interim Finance Director is in place whilst the Company is in the process of selecting and appointing a permanent Finance Director.

We continued to strengthen the commercial team during 2015, with e-commerce seeing a number of new appointments. Early in 2016 we strengthened the marketing team and added new management to support international sales. An unprecedented amount of training took place at the Nelson factory and in addition a number of key management appointments were made in the supply chain function.

The Board wishes to thank all the team in London and Nelson for their professionalism, enthusiasm and dedication in delivering another sector leading performance for the Company.

Outlook

We are seeking to achieve further strong revenue growth in 2016 and the year has started strongly for us. Increased distribution in major grocers will support growth and we expect a further strong performance from third-party online retail. A completely new web platform has launched in Q1 and this will drive growth both in the UK and internationally. Our team is in place in Australia and we will look to establish both retail distribution, as well as an online presence.

Focus will be given to further efficiency improvements in the factory, and we will invest in systems to support growth, particularly in the e-commerce area. Detailed attention to control of overheads will continue.

Innovation will continue to play a key role, through the launch of our innovative WHEY20 product in the first quarter of 2016, and a strong pipeline which will come to market in the second half of the year.

Our strategy of investing in brand awareness and developing distribution in all channels will continue to be implemented, both in the UK and internationally, as we seek to take share from the competition and enjoy organic category growth.

John Clarke                                                                              Stephen Moon

Chairman                                                                                 CEO

 

Financial review - pro forma financial results

As noted in the prior period's Annual Report, the Board took the decision to change the Company's accounting reference date and financial year end from 31 March to 31 December to enable the Company's external reporting period to be better aligned with demand seasonality and subsequent resource management within the business.

Due to the seasonality in the business, it is difficult to make meaningful comparisons between the results for the year ended 31 December 2015 and the nine month period ended December 2014. The Board has therefore elected to include pro forma information in this financial review showing the results for the 12 months ended 31 December 2014 in order to illustrate the underlying year on year business performance. These pro forma results are prepared on the same basis as the statutory accounts, but have not been audited.

Pro forma consolidated statement of comprehensive income

For the year ended 31 December

		Audited	Unaudited
		2015	2014
		£000	£000
Revenue		9,446	8,032
Cost of goods		(3,927)	(3,265)
Gross profit		5,519	4,767
Underlying operating (loss)		(251)	(192)
Depreciation and amortisation		(362)	(307)
Share based payment charge		(995)	(1,208)
Exceptional costs		(125)	(120)
Loss from operations		(1,733)	(1,827)
Finance income		2	4
Finance costs		(5)	(5)
Loss before taxation		(1,736)	(1,828)
Taxation		227	539
Loss and total comprehensive expense for the year		(1,509)	(1,289)
Attributable to:
Owners of the parent		(1,509)	(1,289)
Loss and total comprehensive expense for the year		(1,509)	(1,289)
Loss per share to owners of the parent
Basic and diluted - pence		(5.5p)	(5.5p)

Revenue

The Company has continued to grow strongly during the year ended 31 December 2015, with sales up 18% at £9.45 million (2014: £8.03 million). Revenue growth has been achieved through a particularly strong performance across the e-commerce, third-party online retailers and international channels and reflects the continued investment in the business across all channels.  The investment in, and focus on, online sales means more than one third of the business revenues are derived from e-commerce sales across our own platform and third party.

In 2015, the Company also continued to invest in product innovation and launched a number of new products including the SiS Whey Protein product range and two new SiS Electrolyte GO Gels.

We developed our novel WHEY20 ready to consume protein product during the year and this launched in Q1 2016. This will be the largest launch in the history of SiS in terms of distribution gained for launch and investment in marketing and selling the new product. WHEY20 is the subject of new patent applications by SiS.

All new innovation products are supported by a significant advertising and promotion programme.

Gross margin

The Company generated a gross margin of £5.52 million (2014: £4.77 million) with the gross margin achieving a percentage of revenue of 58.4% (2014: 59.4%).  Although year on year reducing by one percentage point, this reflected the successful launch of variety pack formats to drive customer trial with factory efficiencies improving by 7%. 

Underlying operating loss

The underlying operating loss of £0.25 million (2014: £0.19 million) reflects the ongoing investment in sales and marketing to drive revenue growth.  Operating loss is in line with management expectations.

The Group's cost base and its resources have been, and will continue to be, tightly managed within budgets approved and monitored by the Board.

The Group has chosen to report underlying operating loss as the Directors believe that the operating loss before depreciation, amortisation, non cash share based payments and exceptional items provides additional useful information for shareholders on underlying trends and performance. This measure is used for internal performance analysis. A reconciliation of underlying operating loss to loss from operations is presented on the face of the consolidated statement of comprehensive income. 

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") were approved by the Remuneration Committee in June 2014 in line with the proposal contained in the Company's AIM Admission document in August 2013. 

Accordingly, the Company has recognised a share based payment charge totalling £1.00 million in the year ended 31 December 2015 (2014: £1.21 million).

Exceptional costs

Exceptional costs of £0.12 million reflect the costs incurred in terminating the distributorship of SiS APAC which the Company will now be handling directly via a newly formed 100% owned Australian subsidiary (2014: £0.12 million in relation to the demerger from Provexis).

Taxation

The current tax charge is £Nil (2014: £Nil) due to the loss made in the year. The deferred tax credit of £0.23 million (2014: £0.54 million) is primarily due to the recognition of a deferred tax asset in respect of taxable losses created in the year.

Losses and dividends

The loss attributable to equity holders of the parent for the year ended 31 December 2015 was £1.51 million (2014: £1.29 million) and the basic and diluted loss per share was 5.5p (2014: 5.5p). The Directors are unable to recommend the payment of a dividend (2014: £Nil).

   

Capital structure and funding

On 11 November 2015 the Company raised net proceeds of £8.2 million by the issue and allotment of 14,676,262 Ordinary Shares at a placing price of 59 pence per share. The placing was undertaken with new and existing institutional shareholders and was oversubscribed. The placing has enabled the Company to fund the working capital required to underpin further revenue growth and also to expand into the Australian and US markets.

The latest placing also introduced a number of new and significant institutional investors onto the shareholder register of the Company. The Directors believe establishing a broader institutional shareholder base is in the long term interests of the Company.

The loan agreement with HSBC Equipment Finance drawn down in September 2012 is secured against a number of assets acquired by the Company for use in the Nelson factory and continues to be repaid.

Going concern

The Company made a loss after tax for the year attributable to owners of the parent of £1.51 million (2014: £1.29 million) and expects to make a further loss in the year ending 31 December 2016.

The total cash outflow from operating activities in the year ended 31 December 2015 was £0.86 million (nine month period ended 31 December 2014: £0.46 million).  At 31 December 2015 the Company had cash balances of £8.75 million (2014: £2.03 million). As noted above, the Company raised additional equity of £8.2 million (net of associated costs) on 11 November 2015.

The Directors have prepared projected cash flow information for a period including twelve months from the date of approval of these financial statements.

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. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Consolidated statement of comprehensive income

			Nine month
		Year	period
		ended	ended
		31 December	31 December
		2015	2014
	Notes	£000	£000
Revenue	2	9,446	6,252
Cost of goods		(3,927)	(2,589)
Gross profit		5,519	3,663
Underlying operating loss		(251)	(295)
Depreciation and amortisation		(362)	(227)
Share based payments charge		(995)	(1,208)
Exceptional costs	4	(125)	-
Loss from operations	3,4	(1,733)	(1,730)
Finance income		2	4
Finance costs		(5)	(4)
Loss before taxation		(1,736)	(1,730)
Taxation	5	227	381
Loss and total comprehensive expense for the period		(1,509)	(1,349)
Attributable to:
Owners of the parent		(1,509)	(1,349)
Loss and total comprehensive expense for the period		(1,509)	(1,349)
Loss per share to owners of the parent
Basic and diluted - pence	6	(5.5p)	(5.4p)

All amounts relate to continuing operations.

 

Consolidated statement of financial position

		As at	As at
Company number 08535116		31 December	31 December
		2015	2014
	Notes	£000	£000
Assets
Non-current assets
Intangible assets		486	253
Property, plant and equipment		657	729
Deferred tax	10	937	710
Total non-current assets		2,080	1,692
Current assets
Inventories	7	1,471	1,435
Trade and other receivables	8	1,249	1,042
Cash and cash equivalents		8,753	2,026
Total current assets		11,473	4,503
Total assets		13,553	6,195
Liabilities
Current liabilities
Trade and other payables	9	(1,488)	(1,685)
Borrowings		(49)	(65)
Total current liabilities		(1,537)	(1,750)
Net current assets		9,936	2,753
Non-current liabilities
Borrowings		-	(49)
Total non-current liabilities		-	(49)
Total liabilities		(1,537)	(1,799)
Total net assets		12,016	4,396
Capital and reserves attributable to owners of the parent company
Share capital		4,025	2,519
Share premium reserve		10,228	3,519
Employee benefit trust reserve		(61)	(33)
Other reserve		(907)	(907)
Retained deficit		(1,269)	(702)
Total equity		12,016	4,396

Consolidated statement of cash flows

		Year	Nine month period
		ended	ended
		31 December	31 December
		2015	2014
	Notes	£000	£000
Cash flows from operating activities
Loss after tax		(1,509)	(1,349)
Adjustments for:
Amortisation		87	45
Depreciation		277	182
Profit on sale of fixed assets		(2)	-
Net finance cost		3	-
Taxation	5	(227)	(381)
Share based payment charge		995	1,208
Operating cash outflow before changes in working capital		(376)	(295)
Changes in inventories		(36)	(411)
Changes in trade and other receivables		(207)	329
Changes in trade and other payables		(240)	(87)
Total cash outflow from operations		(859)	(464)
Cash flow from investing activities
Purchase of property, plant and equipment		(205)	(175)
Proceeds from sale of property, plant and equipment		2	-
Purchase of intangible assets		(320)	(92)
Interest received		2	3
Net cash outflow from investing activities		(521)	(264)
Cash flow from financing activities
Proceeds from issue of share capital		8,659	2,300
Expenses paid on share issues		(482)	(125)
Repayment of borrowings		(65)	(49)
Interest paid		(5)	(3)
Net cash inflow from financing activities		8,107	2,123
Net increase in cash and cash equivalents		6,727	1,395
Opening cash and cash equivalents		2,026	631
Closing cash and cash equivalents		8,753	2,026

 

Consolidated statement of changes in equity

	Share capital	Share premium	Employee benefit trust reserve	Other reserve	Retained deficit	Total equity
	£000	£000	£000	£000	£000	£000
At 31 March 2014	1,952	1,855	-	(907)	(448)	2,452
Issue of shares - placing on 9 April 2014	511	1,789	-	-	-	2,300
Transaction costs of placing	-	(125)	-	-	-	(125)
Issue of shares to EBT on 15 August 2014	56	-	(56)	-	-	-
Exercise of share options	-	-	23	-	(23)	-
Share based payments	-	-	-	-	1,118	1,118
Total comprehensive expense for the year	-	-	-	-	(1,349)	(1,349)
At 31 December 2014	2,519	3,519	(33)	(907)	(702)	4,396
	Share capital	Share premium	Employee benefit trust reserve	Other reserve	Retained deficit	Total equity
	£000	£000	£000	£000	£000	£000
At 31 December 2014	2,519	3,519	(33)	(907)	(702)	4,396
Issue of shares to EBT on 16 June 2015	38	-	(38)	-	-	-
Issue of shares -  placing on 11 November 2015	1,468	7,191	-	-	-	8,659
Transaction costs of placings	-	(482)	-	-	-	(482)
Exercise of share options	-	-	10	-	(10)	-
Share based payments	-	-	-	-	952	952
Total comprehensive expense for the period	-	-	-	-	(1,509)	(1,509)
At 31 December 2015	4,025	10,228	(61)	(907)	(1,269)	12,016

 

1. Accounting policies

Basis of preparation

This final results announcement for the year ended 31 December 2015 has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted for use in the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies applied are consistent with those set out in the Science in Sport plc Annual Report and Accounts for the nine month period ended 31 December 2014.

The financial information contained within this final results announcement for the year ended 31 December 2015 and nine month period to 31 December 2014 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 nine month period to 31 December 2014 have been filed with the Registrar of Companies and those for the year ended 31 December 2015 will be filed following the Company's annual general meeting. The auditors' report on the statutory accounts for the year ended 31 December 2015 and nine months to 31 December 2014 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.

2. Segmental reporting

The Directors have determined that only one operating segment exists under the terms of IFRS 8 Operating Segments, as the Group is organised and operates as a single business unit.

Revenues from one customer of £1,244,000 individually exceeds 10% of Group revenue (nine month period ended 31 December 2014: two of £750,000 and £678,000). These major customers purchase goods from the Company.

Turnover by geographic destination may be analysed as follows:			Year ended 31 December 2015		Nine month period ended 31 December 2014
			£000		£000
United Kingdom			7,656		5,291
EU excluding the UK			1,472		721
Rest of the World			318		240
			9,446		6,252

3. Operating expenses

		Year ended 31 December 2015	Nine month period ended 31 December 2014
		£000	£000
Sales and marketing costs		3,685	2,433
Operating costs		2,085	1,525
Depreciation and amortisation		362	227
Share based payment charge (1)		995	1,208
Exceptional costs		125	-
Administrative expenses		3,567	2,960

Total operating expenses

7,252

5,393

(1)    Includes associated social security costs of £43,000 (31 December 2014: £90,000).

4. Loss from operations

Loss from operations is stated after charging/(crediting):	Year ended 31 December 2015	Nine month period ended 31 December 2014
	£000	£000
Depreciation of property, plant and equipment	277	182
Amortisation of intangible assets	87	45
Research and development costs	223	237
Foreign exchange losses	6	2
Profit on disposal of property, plant and equipment	(2)	-
Operating lease costs	196	158
Exceptional operating costs	125	-

In the year ended 31 December 2015 exceptional costs comprised the costs incurred in terminating the distributorship of SiS APAC (2014: nil).

5. Taxation

	Year ended 31 December 2015	Nine month period ended 31 December 2014
	£000	£000
Current tax income
United Kingdom corporation tax	-	-
Adjustment in respect of prior period	-	-
Total current tax income	-	-
Deferred tax
Effect of change in tax rates	-	-
Origination and reversal of temporary differences	227	381
Tax on loss for the period	227	381

The tax assessed for the year is different from the standard rate of corporation tax in the UK. The differences are explained below:

Loss before tax	1,736	1,730
Loss before tax multiplied by the standard rate of corporation tax in the UK of 20% (nine month period ended 31 December 2014: 20%)	347	346
Effects of:
Expenses not deductible for tax purposes	(4)	(1)
Additional deduction for R&D expenditure	55	39
Share scheme deduction	(22)	(3)
Effect of changes in tax rate	(114)	-
Adjustment in respect of previous period	(35)
Total tax credit for the year	227	381

At 31 December 2015 UK tax losses of the Company available to be carried forward are estimated to be £3,951,000 (31 December 2014: £2,895,000).

Deferred tax balances are valued at the rate of 18% in these accounts to the extent that timing differences are expected to reverse after this later date.

6. 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.

	Year ended 31 December 2015	Nine month period ended 31 December 2014
Loss for the year/period attributable to owners of the parent - £000	(1,509)	(1,349)
Weighted average number of shares	27,403,716	24,831,154
Basic and diluted loss per share - pence	(5.5p)	(5.4p)

7. Inventories

	31 December 2015	31 December 2014
	£000	£000
Raw materials	706	798
Finished goods	765	637
	1,471	1,435

There is a provision of £24,000 included within inventories in relation to the impairment of inventories (31 December 2014: £62,000).

During the year inventories of £2,935,000 (nine month period ended 31 December 2014: £2,009,000) were recognised as an expense within cost of sales.

8. Trade and other receivables

	31 December 2015	31 December 2014
	£000	£000
Trade receivables	989	930
Less: provision for impairment of trade receivables	(37)	(37)
Trade receivables - net	952	893
Other receivables	66	41
Total financial assets other than cash and cash equivalents classified as loans and receivables	1,018	934
Prepayments and accrued income	231	108
Total trade and other receivables	1,249	1,042

9. Trade and other payables

	31 December 2015	31 December 2014
	£000	£000
Trade payables	756	541
Accruals	665	1,036
Total financial liabilities measured at amortised cost	1,421	1,577
Other taxes and social security	67	108
Total trade and other payables	1,488	1,685

The Directors consider that the carrying amount of these liabilities approximates to their fair value.

All amounts shown fall due within one year.

10. Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 18% (nine month period ended 31 December 2014: 20%). Details of the deferred tax asset and liability, amounts recognised in profit or loss and amounts recognised in other comprehensive income are as follows:

	At 1 April  2014	Credited/ (charged) to income statement in the period	At 31 December 2014	Credited/ (charged) to income statement in the year	At 31 December 2015
	£000	£000	£000	£000	£000
Capital allowances in excess of depreciation	(52)	(30)	(82)	(21)	(103)
Unutilised tax losses	370	209	579	132	711
Other short term timing differences	11	202	213	116	329
	329	381	710	227	937

A deferred tax asset of £937,000 (31 December 2014: £710,000) has been recognised in respect of tax losses and other temporary differences where the Directors believe it is probable that these assets will be recovered. The Directors consider it appropriate to recognise a deferred tax asset in respect of tax losses on the basis that the losses incurred to date are as a result of the Group's current strategy to invest in growing revenue and they therefore consider it reasonable to conclude that suitable taxable profits against which losses can be utilised will be generated in the foreseeable future.

 

END

 

 

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