Final Results

RNS Number : 2640A

Science in Sport PLC

23 March 2017

 

23 March 2017

 SCIENCE IN SPORT PLC

("SiS" or the "Company")

FINAL RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2016

Science in Sport plc (AIM: SIS), a leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts, is pleased to announce its audited final results for the year ended 31 December 2016. 

Financial Highlights

·    Revenues increased by 30% to £12.24 million (2015: £9.45 million) significantly ahead of market growth, with particularly strong growth in Online channels and International markets

·     New product development continued to be a key growth driver and delivered £0.8 million of sales in the year (2015: £0.6 million) and contributed 29% of growth

·     Newly launched Australian business performed ahead of plan, USA and Italy businesses established in Q3

·   Gross profit increased to £7.4 million (2015: £5.5 million) with gross margin improving 1.8% to 60.3%, reflecting factory efficiency improvements

·    Underlying operating loss* of £0.8 million (2015: £0.25 million) in line with expectations and growth strategy, reflecting continued investment in brand awareness, e-commerce and International expansion

·     Cash and cash equivalents of £6.13 million (2015: £8.75 million)

·     Strong start to 2017 sales, core UK and EU market forecast to be EBITDA positive this year

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

Operational Highlights

·    Consistent investment in brand resulted in further improvements in brand awareness and usage

·    49% of revenue derived from Online channels, forecast to exceed this in 2017

·    Continued investment in e-commerce platform:

o Delivered 100% year on year growth

o Germany, Italy, Netherlands and USA site launches in Q3

·    Innovation and new product development:

o Novel Whey 20 ready to consume protein performed ahead of plan

o Strong launch pipeline for 2017 and major new technologies being developed for 2018

·    Significant line efficiency improvements in factory underpinned margin improvement

·    Investment in e-commerce logistics systems improved service levels and reduced costs

·    Further enhanced world-class banned substance testing regime introduced January 2017

·    New brand partnerships including British Cycling, USA Cycling and Liverpool FC

·    Continued investment in people:

o Elizabeth Lake joined as Finance Director July 2016 and Tim Wright as Non-executive Director in September 2016

o Science capability further enhanced with appointment of Dr Rob Child and Dr James Morton, globally recognised sports science experts

Stephen Moon, Science in Sport's CEO, said: "This was a year of exceptional revenue growth for SiS where we continued to outperform our peers and grab market share in the highly attractive endurance sports nutrition sector.  In line with our growth strategy, we continued to invest heavily in brand equity, marketing, product innovation, e-commerce and International markets, with the benefits evident in both our 30% increase in revenues and growing brand awareness in all markets."

"Online and International growth has been particularly strong during 2016. Our new Australian business delivered sales ahead of plan and in the second half we launched e-commerce websites in the USA, Italy, Germany and Netherlands. Our scienceinsport.com business doubled in size in the year."

"Our model is working, we have exceeded our revenue growth targets, and we are committed to our strategy of investing in science, brand, e-commerce and International markets. We expect our core UK and EU business to be EBITDA profitable in 2017 and we will deploy cash to support growth in International markets."

For further information:

Science in Sport plc	[phone]
Stephen Moon, CEO Elizabeth Lake, FD
Cenkos Securities NOMAD and Broker	[phone]
Bobbie Hilliam - NOMAD Alex Aylen - Sales
Yellow Jersey PR
Felicity Winkles	[phone]
Harriet Jackson	[phone]

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 - in the 2016 Rio Olympics, 34 medal-winning athletes or teams used SiS products (compared with 24 in 2012).

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, products specifically designed to contribute to athletes' lean muscle mass growth and maintenance. SiS products are sold in a range of retail channels, including specialist sport retailers, major grocers, high street retailers and e-commerce websites.

SiS is currently the official sports nutrition supplier to the professional cycling team Team Sky, British Cycling and USA Cycling. SiS is also the official sports nutrition partner to Liverpool FC. In addition, Olympians Sir Chris Hoy MBE and Katarina Johnson-Thompson are Brand Ambassadors and Mark Cavendish MBE is an Elite Sports Consultant to the brand.

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 a strong set of results for the year ended 31 December 2016. Revenue of £12.24 million for the year was 30% ahead of the same period in 2015 and saw the Company deliver a fourth consecutive year of strong revenue growth. Growth was well ahead of the 8% CAGR forecast by Euromonitor for 2016 for the sports nutrition sector in the UK.

The Company's growth strategy is predicated on consistent investment in science and innovation, developing brand awareness, building e-commerce capability and reach through its scienceinsport.com e-commerce platform and developing new International markets. In our core UK market we remain committed to a multi-channel distribution strategy in all Online and retail channels. We underpin growth by seeking to maintain and grow gross margin, while limiting overhead growth, to benefit from operational gearing.

The Board believes there continues to be significant growth opportunities for the Company and in order to maximise this, the Company raised £8.7 million before costs in November 2015 to fund growth in existing and new markets, as well as continuing to support the development of our e-commerce business. If appropriate, we will consider acquisitions to complement our existing product range and to deliver synergies from our e-commerce and supply chain capabilities.

Brand and Range

Our brand strategy is to consistently invest in building equity in the SiS brand, which is widely recognised by professional and elite athletes. SiS is a leader in science and innovation, supported by world-class in-house expertise, together with a range of collaborations with academic institutes, elite athletes and sports teams. Further differentiation is derived from the Company's factory in Lancashire which has Informed Sports accreditation. Our banned substance testing regime was further enhanced at the beginning of 2017. We are confident that our full supply chain approach to preventing banned substances across our products is best in class in the sports nutrition industry globally.

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, rugby league and Australian rules football.

SiS products are endorsed by the Company's Brand Ambassadors, including Sir Chris Hoy MBE and heptathlete Katarina Johnson-Thompson. Mark Cavendish MBE is an Elite Sports Consultant to the brand. SIS is an official nutrition supplier to professional cycling team Team Sky and both British Cycling and USA Cycling, as well as Liverpool Football Club. The Company works closely with its ambassadors and partners on product innovation. SiS also benefits from a close relationship with organisations and training centres focused on athlete 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:

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

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

o SiS GO Bars - cereal-based food bars

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

o SiS Protein - a whey protein range for lean muscle development, including the novel WHEY 20 ready to consume protein product

Overview of the financial year

The year ended 31 December 2016 saw sales up 30% at £12.24 million (2015: £9.45 million). 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.  Our International channels also grew significantly over the period under review. We believe that in our marketplace of endurance sport nutrition we delivered sector leading revenue growth, both organic growth and by taking market share from key competitors.

The underlying operating loss was in line with management expectations at £0.80 million (2015: £0.25 million loss) and this reflected continued investment in marketing, sales and e-commerce of £5.93 million (2015: £3.68 million). 

Overheads excluding sales and marketing were £2.25 million (2015: £2.09 million) for the year. Management continue to seek to limit underlying overheads to single digit per cent increases in the future.

Depreciation and amortisation costs of £0.42 million (2015: £0.36 million), non-cash share-based payments related to short and long-term management incentive schemes of £1.57 million (2015: £1.00 million) and exceptional costs of £Nil (2015: £0.12 million), resulted in a statutory pre-tax loss of £2.79 million (2015: pre-tax loss £1.73 million).

Net cash and cash equivalents at the year-end were £6.13 million (31 December 2015: £8.75 million). The reduction in cash reflects investment in brand, new markets and infrastructure development. 

Non-cash share-based payments amounting to £1.57 million (2015: £1.00 million), which have been excluded from underlying operating loss, continue to reflect the grant of options to employees under the Company Long Term Incentive Plan ("LTIP") and the decision of management to receive awards under the Short Term Incentive Plan ("STIP") in shares instead of cash.

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 again during 2016 and delivered 100% growth, as we continued to invest in developing our consumer database and driving stronger conversion and improved loyalty. A new platform was introduced in early 2016 to further enhance trading effectiveness, and to allow for commerce in a range of territories and currencies. Websites were launched in Germany, Italy, Netherlands and the USA in Q3 2016 and trading in 2017 is promising. Third-party Online retailers, led by Wiggle, Chain Reaction and Amazon also delivered another year of outstanding growth, as we continued to invest in this channel. Overall 49% of revenue was derived from Online channels and we expect more than half our business in 2017 to be through these channels.

We worked very closely with the leading five major Grocery chains during the year. Growth of 25% was slightly ahead of our expectations for the year, and was delivered through distribution gains and good uptake of our innovation pipeline. We expect the Grocer channel to deliver solid results again in 2017. High Street revenue declined 28% in 2016, reflecting the wider difficult market conditions in this channel. The Heartland of independent cycle and running shops also had a challenging year, declining 7% from 2015, however we were pleased to broaden distribution in this important and opinion leading channel. We remain committed to our multi-channel distribution strategy.

International sales grew significantly and some 22% of total revenues came from existing and new overseas markets. Our new Australian subsidiary exceeded plan, delivering over £0.5 million revenue. In addition, our strategic Heartland distributor Shimano performed well across all geographies in Europe. We saw very strong growth from the Italian market both through our own new website and Heartland distributors. We expect the Italian market to deliver strong growth in 2017 and have recently appointed a Milan-based Country Manager. The USA subsidiary was set up in late 2016 and we have had a promising start to 2017, with the website operating effectively, a distribution hub in place and a new California-based Country Manager.

Product Innovation

Trust, quality and innovation are the key qualities 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 total sales and 29% of revenue growth coming from new products, continuing the trend of the previous three years.

We were delighted to launch our novel WHEY20 ready to consume protein product in Q1 2016 and sales exceeded expectations. This was the largest launch in the history of SiS in terms of distribution gained and investment in marketing the new product. WHEY20 is the subject of new patent applications by SiS. SiS Immune tablets and SiS GO Electrolyte Gel ranges with caffeine were also launched in 2016 and have exceeded initial targets.

In line with our strategy we continuously invest in science and new product development and as a result, the pipeline for new products in 2017 is very strong. We are also investing in major new technologies for 2018 onwards.

Supply chain

Gross margin at our Lancashire manufacturing facility was 60.3%, with an increase of 1.9% from the previous period. This gain reflects the efficiency improvements achieved through investment in the gel and bar lines. In addition, investment in the e-commerce picking and packing technology has improved customer service and reduced carriage costs.

Our banned substance testing regime was also enhanced at the beginning of 2017. We are confident that our full supply chain approach to preventing banned substances across our products is best in class in the sports nutrition industry globally.

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 Elizabeth Lake as Finance Director on 6 May 2016, effective from 18 July 2016. She has extensive financial and commercial experience having been Finance Director at Hugo Boss prior to joining and having listed company experience at Marks & Spencer, Pearson and Thomson Reuters.

The Board was also pleased to announce the appointment of Tim Wright as Non-executive Director on 21 September 2016. Tim brings extensive industry knowledge and international experience to the Board, as well as his marketing expertise, gained in his role as global Chief Marketing Officer for GlaxoSmithKline Consumer Healthcare.

In September 2016 we were delighted to welcome Dr Robert Child as Chief Scientific Officer and Dr James Morton as World Class Knowledge Director as part of our leadership team.  These globally recognised sports science practitioners further enhanced our science and innovation credentials in the industry.

We continued to further strengthen the commercial team during 2016, with e-commerce seeing a number of new appointments to support high growth in both core and new International markets. Early in 2016 we strengthened the marketing team and during the year added new management in International markets.

The Board wishes to thank all the team in London, Nelson and strategic International markets 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 2017 and the year has started well for us. Science and innovation, brand investment, e-commerce and International growth will be the four pillars of this growth.

The innovation pipeline for 2017 is very strong and the first launch, SiS GO Caffeine Shot, is now in market. A number of launches will reach the market in Q2 and Q3.

Australia continues to perform well, the Italian market is expected to deliver a strong year, and we are bringing resource to bear on our new USA business from Q2.

We continue to invest heavily in brand equity and awareness in all markets, as well as aggressively building our e-commerce consumer database and seeking to improve conversion and loyalty.

We expect the core UK and EU market to be profitable at EBITDA level for the year, while in parallel we invest with a tightly controlled strategy in strategic International markets.  

We look forward to 2017 with optimism as we continue to build SiS as a global leader in the endurance sports nutrition market.

John Clarke                                                                              Stephen Moon

Chairman                                                                                 CEO

FINANCIAL REVIEW

Revenue

The Company has continued to grow strongly during the year ended 31 December 2016, with sales up 30% at £12.24 million (2015: £9.45 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 has resulted in half of total revenues being derived from e-commerce sales across our own platform and Third-party Online.

In 2016, the Company also continued to invest in product innovation and launched a number of new products. We launched our novel WHEY20 ready to consume protein product during Q1 2016 and sales have exceeded plan. This was 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. SiS Immune tablets and SiS GO Electrolyte Gels ranges with caffeine were also launched and have exceeded initial targets

Gross margin

The Company generated a gross margin of £7.38 million (2015: £5.52 million) with the gross margin achieving a percentage of revenue of 60.3% (2015: 58.4%).  Investment in the gel and bar lines has resulted in margin improvements through the factory efficiencies. 

Underlying operating loss

The underlying operating loss of £0.80 million (2015: £0.25 million) reflects the ongoing investment in sales and marketing to drive revenue growth, together with ex plan investment in the e-commerce teams to drive revenue growth in overseas markets and the UK market.  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. If a growth opportunity is identified then ex plan investment will be approved.

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") under the Share Option Plan ("SOP") which was approved by the Remuneration Committee in June 2014 in line with the proposal contained in the Company's AIM Admission document in August 2013. A new LTIP was approved by the Remuneration Committee in September 2016, following the completion of the previous three year revenue element of the LTIP at the end of 2015.

Accordingly, the Company has recognised a share based payment charge totalling £1.57 million in the year ended 31 December 2016 (2015: £1.00 million).

Exceptional costs

The 2015 exceptional costs of £0.12 million reflect the costs incurred in terminating the distributorship of SiS APAC which the Company is now handling directly via the 100% owned Australian subsidiary.

Taxation

The current tax charge is £Nil (2015: £Nil) due to the loss made in the year. The deferred tax credit of £0.15 million (2015: £0.23 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 2016 was £2.64 million (2015: £1.51 million) and the basic and diluted loss per share was 6.2p (2015: 5.5p). The Directors are unable to recommend the payment of a dividend (2015: £Nil).

Going concern

The Company made a loss after tax for the year attributable to owners of the parent of £2.64 million (2015: £1.51 million) and expects to make a further loss in the year ending 31 December 2017.

The total cash outflow from operating activities in the year ended 31 December 2016 was £1.61 million (2015: £0.86 million).  At 31 December 2016 the Company had cash balances of £6.13 million (2015: £8.75 million).

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

		Year	Year
		ended	ended
		31 December	31 December
		2016	2015
	Notes	£000	£000
Revenue	2	12,243	9,446
Cost of goods		(4,865)	(3,927)
Gross profit		7,378	5,519
Underlying operating loss		(799)	(251)
Depreciation and amortisation		(419)	(362)
Share based payments charge		(1,572)	(995)
Exceptional costs	4	-	(125)
Loss from operations	3,4	(2,790)	(1,733)
Finance income		1	2
Finance costs		(4)	(5)
Loss before taxation		(2,793)	(1,736)
Taxation	5	149	227
Loss for the year		(2,644)	(1,509)
Other comprehensive income
Those that are recyclable		-	-
Exchange differences on translation of foreign operations		(50)	-
Total comprehensive expense for the year		(2,694)	(1,509)
Attributable to:
Owners of the parent		(2,644)	(1,509)
Loss and total comprehensive expense for the year		(2,644)	(1,509)
Loss per share to owners of the parent
Basic and diluted - pence	6	(6.2p)	(5.5p)

All amounts relate to continuing operations.

Consolidated statement of financial position

		As at	As at
		31 December	31 December
		2016	2015
	Notes	£000	£000
Assets
Non-current assets
Intangible assets		884	486
Property, plant and equipment		798	657
Deferred tax	10	1,086	937
Total non-current assets		2,768	2,080
Current assets
Inventories	7	2,238	1,471
Trade and other receivables	8	2,217	1,249
Cash and cash equivalents		6,130	8,753
Total current assets		10,585	11,473
Total assets		13,353	13,553
Liabilities
Current liabilities
Trade and other payables	9	(2,534)	(1,488)
Borrowings		-	(49)
Total current liabilities		(2,534)	(1,537)
Net current assets/(liabilities)		8,051	9,936
Total liabilities		(2,534)	(1,537)
Total net assets		10,819	12,016
Capital and reserves attributable to owners of the parent company
Share capital		4,322	4,025
Share premium reserve		10,331	10,228
Employee benefit trust reserve		(215)	(61)
Other reserve		(907)	(907)
Foreign exchange reserve		(50)	-
Retained deficit		(2,662)	(1,269)
Total equity		10,819	12,016

Consolidated statement of cash flows

		Year	Year
		ended	ended
		31 December	31 December
		2016	2015
	Notes	£000	£000
Cash flows from operating activities
Total comprehensive loss for the year		(2,644)	(1,509)
Adjustments for:
Amortisation		160	87
Depreciation		261	277
Profit on sale of fixed assets		-	(2)
Net finance cost		3	3
Taxation	5	(149)	(227)
Share based payment charge		1,572	995
Operating cash outflow before changes in working capital		(797)	(376)
Changes in inventories		(767)	(36)
Changes in trade and other receivables		(968)	(207)
Changes in trade and other payables		921	(240)
Total cash outflow from operations		(1,611)	(859)
Cash flow from investing activities
Purchase of property, plant and equipment		(402)	(205)
Proceeds from sale of property, plant and equipment		-	2
Purchase of intangible assets		(558)	(320)
Interest received		1	2
Net cash outflow from investing activities		(959)	(521)
Cash flow from financing activities
Proceeds from issue of share capital		-	8,659
Expenses paid on share issues		-	(482)
Repayment of borrowings		(49)	(65)
Interest paid		(4)	(5)
Net cash inflow from financing activities		(53)	2,123
Net increase in cash and cash equivalents		(2,623)	6,727
Opening cash and cash equivalents		8,753	2,026
Closing cash and cash equivalents		6,130	8,753

Consolidated statement of changes in equity

	Share capital	Share premium	Employee benefit trust reserve	Other reserve	Foreign exchange reserve	Retained deficit	Total equity
	£000	£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 cost of placings	-	(482)	-	-	-	-	(482)
Exercise of share options	-	-	10	-	-	(10)	-
Share based payments	-	-	-	-	-	952	952
Total comprehensive expense for the year	-	-	-	-	-	(1,509)	(1,509)
At 31 December 2015	4,025	10,228	(61)	(907)	-	(1,269)	12,016
	Share capital	Share premium	Employee benefit trust reserve	Other reserve	Foreign exchange reserve	Retained deficit	Total equity
	£000	£000	£000	£000	£'000	£000	£000
At 31 December 2015	4,025	10,228	(61)	(907)	-	(1,269)	12,016
Issue of shares - consideration related to sponsorship Jan 16	22	103	-	-	-	-	125
Issue of shares to EBT - 23 March 2016	275	-	(275)	-	-	-	-
Exercise of share options	-	-	121	-	-	(121)	-
Share based payments	-	-	-	-	-	1,372	1,372
Total comprehensive expense for the period	-	-	-	-	(50)	(2,644)	(2,694)
At 31 December 2016	4,322	10,331	(215)	(907)	(50)	(2,662)	10,819

 1. Accounting policies

Basis of preparation

This final results announcement for the year ended 31 December 2016 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 year ended 31 December 2015.

The financial information contained within this final results announcement for the year ended 31 December 2016 and the year ended 31 December 2015 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 year ended 31 December 2015 have been filed with the Registrar of Companies and those for the year ended 31 December 2016 will be filed following the Company's annual general meeting. The auditors' report on the statutory accounts for the year ended 31 December 2016 and the year ended 31 December 2015 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 £1,867,000 individually exceeds 10% of Group revenue (2015: one, £1,244,000).

Turnover by geographic destination may be analysed as follows:			Year ended 31 December 2016		Year ended 31 December 2015
			£000		£000
United Kingdom			9,370		7,656
EU excluding the UK			1,930		1,472
Australia			530		84
Rest of the World			413		234
			12,243		9,446

3. Operating expenses

		Year ended 31 December 2016	Year ended 31 December 2015
		£000	£000
Sales and marketing costs		5,931	3,685
Operating costs		2,246	2,085
Depreciation and amortisation		419	362
Share based payment charge (1)		1,572	995
Exceptional costs		-	125
Administrative expenses		4,237	3,567

Total operating expenses

10,168

7,252

(1)    Includes associated social security costs of £75,000 (31December 2015: £43,000).

4. Loss from operations

Loss from operations is stated after charging/(crediting):	Year ended 31 December 2016	Year ended 31 December 2015
	£000	£000
Depreciation of property, plant and equipment	261	277
Amortisation of intangible assets	160	87
Research and development costs	337	223
Foreign exchange losses	69	6
Profit on disposal of property, plant and equipment	-	(2)
Operating lease costs	177	196
Exceptional operating costs	-	125

In the year ended 31 December 2015 exceptional costs comprised the costs incurred in terminating the distributorship of SiS APAC (2016: nil).

5. Taxation

	Year ended 31 December 2016	Year 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	149	227
Tax on loss for the period	149	227

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	2,793	1,736
Loss before tax multiplied by the standard rate of corporation tax in the UK of 20% (2015: 20%)	559	347
Effects of:
Expenses not deductible for tax purposes	(183)	(4)
Additional deduction for R&D expenditure	(36)	55
Share scheme deduction	(16)	(22)
Effect of changes in tax rate	(3)	(114)
Adjustment in respect of previous period	(172)	(35)
Total tax credit for the year	149	227

At 31 December 2016 UK tax losses of the Company available to be carried forward are estimated to be £4,011,000 (31 December 2015: £3,951,000).

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 2016	Year ended 31 December 2015
Loss for the year/period attributable to owners of the parent - £000	(2,644)	(1,509)
Weighted average number of shares	42,527,844	27,403,716
Basic and diluted loss per share - pence	(6.2p)	(5.5p)

7. Inventories

	31 December 2016	31 December 2015
	£000	£000
Raw materials	824	706
Finished goods	1,414	765
	2,238	1,471

There is a provision of £23,000 included within inventories in relation to the impairment of inventories (31 December 2015: £24,000).

During the year inventories of £3,651,000 (31 December 2015: £2,935,000) were recognised as an expense within cost of sales.

8. Trade and other receivables

	31 December 2016	31 December 2015
	£000	£000
Trade receivables	1,678	989
Less: provision for impairment of trade receivables	(42)	(37)
Trade receivables - net	1,636	952
Other receivables	334	66
Total financial assets other than cash and cash equivalents classified as loans and receivables	1,970	1,018
Prepayments and accrued income	247	231
Total trade and other receivables	2,217	1,249

9. Trade and other payables

	31 December 2016	31 December 2015
	£000	£000
Trade payables	1,130	756
Accruals	1,324	665
Total financial liabilities measured at amortised cost	2,454	1,421
Other taxes and social security	80	67
Total trade and other payables	2,534	1,488

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% (31 December 2015: 18%). 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 31 December 2015	Credited/ (charged) to income statement in the year	At 31 December 2016
	£000	£000	£000
Capital allowances in excess of depreciation	(103)	-	(103)
Unutilised tax losses	711	11	722
Other short term timing differences	329	138	467
	937	149	1,086

A deferred tax asset of £1,086,000 (31 December 2015: £937,000) 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

 

 

FR SEIEEEFWSELD