Management Incentive Plan

Science in Sport PLC

05 July 2024

 

Science in Sport plc

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

Management Incentive Plan

Overview

The Company is proposing to adopt the Growth Plan to incentivise management and to closely align their interests with Shareholders, subject to the approval of shareholders at the General Meeting. It is proposed that one-off awards will be made to Daniel Wright (Executive Chairman), Daniel Lampard (Chief Operating Officer), Christopher Welsh (Chief Financial Officer) and certain other members of executive management.

Background

As set out in the Proposed Placing and Retail Offer announcement released on 4 July 2024, the Company has been extensively restructured since Daniel Wright was appointed Executive Chairman in October last year. Whilst there is still much work to be done ambitious targets have been set to ensure that Science in Sport delivers sustainable cash generative growth in the medium term.  Initially management's focus has been on cash management and restructuring the operational focus of the Company to ensure that there is a strong platform for growth.  The Company proposes to introduce a growth plan which reflects in Tranche 1 some of the foundation work undertaken to date and in Tranche 2 the ambitious growth targets that the broader senior leadership team are tasked with delivering pursuant to the turnaround. 

In designing the Growth Plan, the Remuneration Committee wanted to ensure that remuneration should be geared towards long term variable elements rather than short term cash remuneration and that the value creation targets should be truly rewarding to shareholders, taking into account the illiquid nature of the asset class and the risk premium that investors should expect for supporting growth companies.

As part of this alignment, Dan Wright has undertaken to cap his salary at £80,000 for the duration of the Growth Plan and the leadership team receiving awards under the Growth Plan have reduced their contractual annual discretionary bonus entitlements to no more than 50% of base salary and forfeited any accrued or accruing bonus entitlements under existing STIP or LTIP arrangements. 

The Growth Plan covers the value created over the next three years and will be measured by reference to the difference in market capitalisation of the Company following the Placing calculated by reference to the Enlarged Issued Share Capital at the Issue Price and measured against the 60 day volume weighted average share price after three years post grant (the "Growth in Market Capitalisation").  A summary of the Growth Plan is set out below and importantly no value will accrue to recipients beneath a 20% return and in order for full value to be delivered, the management team must deliver a return of 300% over the next three years, which would equate to a share price of 68p per Ordinary Share.

The maximum dilution to existing Shareholders under the Growth Plan and all other employee share schemes will not exceed 10% of the Company's issued ordinary share capital.

Mechanism of the Growth Plan

The Company will procure the issue and allotment to the Growth Plan Participants of 20,000,000 Ordinary Shares in the capital of SIS (Science in Sport) Limited (a wholly owned subsidiary of the Company). The Growth Shares will attract value in accordance with agreed performance conditions as described in more detail below. 

The Growth Shares will be subject to the operation of a put and call option (the "Put and Call Option") pursuant to which:

(a)          the Company will grant put options to the Growth Plan Participants permitting them to sell some or all of Growth Shares to the Company in certain circumstances; and

(b)           Growth Plan Participants will grant the Company a corresponding call option.

Upon reaching the crystallisation events as set out in the table below (these differ for Tranche 1 and Tranche 2 (as defined below)) the Company and or the Growth Plan Participants can exercise the Put and Call Option pursuant to which the Growth Shares will be sold to the Company for consideration to be satisfied either by the allotment and issue of Ordinary Shares or by the payment of cash to the equivalent value at the discretion of the Remuneration Committee of the Company.

Performance Conditions

The Performance Conditions will be tested at the earlier of (i) the end of three years from the date of issue of the Growth Shares or (ii) a takeover of the Company by way of an offer or scheme of arrangement.

Tranche 1 - if the Growth in Market Capitalisation is 20% or more, participants will be eligible to share in 2.5% of the growth created, increasing to a fixed rate of 3% on reaching a hurdle of 45% growth.  Thereafter participants will share in any additional value creation by reference to the number of shares that they would have become entitled to upon attaining the 45% growth hurdle.

The Growth Shares can be realised by the Growth Scheme Participants on the earlier of (1) the end of the measurement period (being 3 years plus 60 Business Days) or (2) a takeover of the Company by offer or scheme of arrangement.

Tranche 2 - if the Growth in Market Capitalisation is 20% or more, Growth Scheme Participants will be eligible to share in 4% of the value created, increasing to 6.25% up to growth of 85% and increasing pro-rata to a maximum of 7.70% up to growth of 300%.  Above 300% growth the Growth Scheme Participants will be entitled to a fixed 7.7%

The Participants will be restricted from selling any Ordinary Shares received pursuant to Tranche 2 of  the Growth Plan, save in order to meet any tax liabilities, for a further 2 year holding period.  During this period 50% will be released from the Holding Period on the first anniversary of the Measurement Date and 50% on the second anniversary, in other words 4 and 5 years respectively from the award.

The following tables illustrate target value thresholds and both the value that would be delivered to Shareholders and the value attributing to the Growth Scheme Participants, assuming the Placing and the Retail Offer is subscribed in full:

Tranche1	Increase in Measurement Value	Growth in Market Capitalisation	Indicative share price (pence)	% to Growth Plan	Value of Growth Plan	No of shares in the Company*	% of Enlarged Issued Share Capital*
Base vesting value	20%	£7,897,269	20.4	2.50%	£197,432	967,803	0.41%
Full vesting value	45%	£17,768,854	24.65	3.00%	£533,066	2,162,538	0.92%
Full vesting above hurdle	300%	£118,459,030	68.0	1.24%	£1,470,526	2,162,538	0.92%
Tranche 2
Base vesting	20%	£7,897,269	20.4	4.00%	£315,891	1,548,484	0.66%
Mid vesting	85%	£33,563,392	31.45	6.25%	£2,097,712	6,669,990	2.79%
Full vesting	300%	£118,459,030	68.0	7.70%	£9,121,345	13,413,743	5.46%
Tranche 1 & 2 Combined
Base vesting	20%	£7,897,269	20.4	6.50%	£513,322	2,516,287	1.07%
Full vesting	300%	£118,459,030	68.0	8.94%	£10,591,871	15,576,281	6.28%

*figures assume that the issued share capital remains the same.  These numbers will be adjusted for any new issues of ordinary shares, share buybacks or similar event during the period of the Growth Plan). 

			Base Vesting @ 20%			Full Vesting @ 300%
Name	% of Tranche 1	% of Tranche 2	Indicative aggregate value	Indicative PLC Share Entitlement		Indicative aggregate value	Indicative PLC Share Entitlement
Daniel Wright	59%	35%	£226,760	1,111,566		£4,059,261	5,969,501
Daniel Lampard	27%	23%	£127,350	624,266		£2,528,735	3,718,728
Christopher Welsh	0%	22%	£68,832	337,413		£1,987,530	2,922,839
Others	14%	20%	£90,380	443,042		£2,016,345	2,965,214
Total	100%	100%	£513,322	2,516,287		£10,591,871	15,576,281

If there is a variation of share capital of the Company, or in the event of a demerger, special dividend or other event determined by the Board, the Board may make such adjustments as it may determine to the Growth Plan, its allocation and measurements in order to achieve the same intention and an equitable effect for the Company the Growth Plan Participants.

Change of control of the Company

On a change of control of the Company by way of takeover or scheme of arrangement, the Growth Shares will vest immediately with their value to be determined by the relevant offer price per Ordinary Share that forms part of the offer or scheme.

Leaving employment

Growth Plan Participants who cease to be employees of the Company during the performance assessment period of 3 years will forfeit their entitlement unless they are deemed to be 'Good Leavers', being those who cease to be an employee of a Group Company as a result of death, ill health, injury or disability, a relevant transfer within the meaning of the TUPE Regulations or the company in which the Growth Plan Participant is employed ceasing to be under the control of the Company.

Growth Shares held by Growth Plan Participants who are Good Leavers prior to a vesting date will vest at the discretion of the Remuneration Committee of the Company on the normal vesting date and will be pro-rated for time to reflect the proportion of time between acquisition of the Growth Shares and the date on which the relevant performance condition is/was satisfied during which the Good Leaver was an employee.

Malus and clawback

The Growth Plan provides for customary clawback and malus provisions, which allow the Remuneration Committee of the Company discretion to require repayment in defined circumstances.

Taxation

It is a condition of being granted awards that Growth Plan Participants agree to indemnify the Group in respect of tax (including income tax and employee national insurance contributions) which falls due or payable in connection with the Growth Plan.

Corporate governance

The Directors place considerable value on corporate governance. 

The Company continues to operate in line with the QCA Code.  In line with the QCA Code and the QCA Remuneration Guide, the Directors consider that it is good practice to seek the consent of Shareholders in creating any new share scheme that may be dilutive and are therefore seeking such consent at the General Meeting to be held on 24 July 2024.  A circular will be posted to shareholders shortly.

The principles at the heart of the Growth Plan reflect the overarching objectives of the Remuneration Committee of the Company to:

·      develop remuneration packages which motivate directors and support the delivery of business objectives in the short, medium and long-term;

·      align the interests of the executive team with the interests of long-term Shareholders;

·      encourage executive and senior team members to operate within the risk parameters set by the Board; and

·      ensure that the Company can recruit and retain high-quality executives through packages which are fair and attractive, but not excessive.

The Remuneration Committee of the Company considered various alternative including:

(a)           structures across share options, restricted shares and value creation plans; and

(b)           performance measures based on revenue, profits/ earnings and non-financial measures.

It was agreed that the Growth Plan is the most suitable option for the Company at this stage in its growth journey. It is further noted that the Growth Plan will only produce rewards for the executive team if the Company's share price increases.

Directors' Related Party Transactions

Daniel Wright (Executive Chairman), Daniel Lampard (Chief Operating Officer) and Christopher Welsh (Chief Financial Officer) are considered to be related parties of the Company for the purposes of Rule 13 of the AIM Rules for Companies by virtue of their status as Directors.

The Independent Directors (who exclude Daniel Wright, Daniel Lampard and Christopher Welsh), having consulted with the Company's Nominated Adviser, Panmure Liberum, consider that the terms of the Growth Plan are fair and reasonable insofar as the shareholders of the Company are concerned. 

Capitalised terms used but not defined in this announcement are set out on the Definitions section below.

For further information:

Science in Sport plc	T: 020 7400 3700
Daniel Wright, Executive Chairman Daniel Lampard, Chief Operating Officer Christopher Welsh, Chief Financial Officer
Panmure Liberum Limited (Nominated Adviser, Broker and Sole Bookrunner)	T: 020 3100 2000
Richard Lindley John More Anake Singh

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 eBay, 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.

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.

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. 

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

DEFINITIONS

The following definitions apply throughout this announcement, unless the context requires otherwise:

"Board" or "Directors"                                                       the board of directors of the Company

"Broker" or "Panmure Liberum"                                     Panmure Liberum Limited, a company registered in England and Wales with company number 04915201 and whose registered office is at Ropemaker Place, Level 12, 25 Ropemaker Street, London, EC2Y 9LY

"Business Day"                                                                     a day on which banks in the City of London are open for business (excluding Saturdays, Sundays and public holidays in England)

"Enlarged Issued Share Capital"                                       the entire issued share capital of the Company following completion of the Placing and the Retail Offer on Admission, assuming no other Ordinary Shares are issued between the date of this announcement and Admission

"Growth Plan"                                                                     the proposed Growth Plan of the Group in relation to ordinary shares in the capital of SIS (Science in Sport) Limited

"Growth Plan Participants"                                               the participants in the Growth Plan will initially be Daniel Wright, Daniel Lampard, Christopher Welsh and other senior management with flexibility for further Growth Shares to be issued to other management and key personnel of the Group in the future

"Growth Shares"                                                                 the shares in SIS (Science in Sport) Limited to be allotted and issued to the Growth Plan Participants

"Issue Price"                                                                         17 pence per Ordinary Share

"Ordinary Shares"                                                               ordinary shares of 10 pence each in the capital of the Company

"QCA Guide"                                                                        the third edition of the QCA Corporate Governance Code published by the Quoted Companies Alliance

"QCA Remuneration Guide"                                              the remuneration committee guide published by the Quoted Companies Alliance in 2020

 "Shareholders"                                                                   the holders of Ordinary Shares for the time being, each individually a "Shareholder"

"TUPE Regulations"                                                          Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended)

"UK" or "United Kingdom"                                               the United Kingdom of Great Britain and Northern Ireland

"VWAP"                                                                                 the volume weighted average share price

 

END