Science Sprt Regulatory News (SIS)

SCIENCE IN SPORT PLC

("SiS" or the "Company")

PRELIMINARY RESULTS

for the NINE MONTHS ended 31 DECEMBER 2014

Science in Sport plc (AIM: SIS), a leading sports nutrition company, is pleased to announce its preliminary results for the nine months ended 31 December 2014. These results are for a nine-month period owing to a change of year end, for operational reasons, from 31 March to 31 December. This results announcement also includes unaudited pro forma results for the 12 months ended 31 December 2014 and, for comparative purposes, pro forma results for the 12 months ended 31 December 2013, as the directors believe that this will provide the reader with more relevant information with which to assess the performance of the business. Readers are also referred to the consolidated statement of comprehensive income which shows the statutory results for the nine month period.

Highlights in the twelve month period *

· Revenues increased by 23.4% to £8.03 million (12 months to 31 December 2013: £6.51 million), reflecting growth across all sales channels;

· Underlying operating loss** of £0.19 million in line with management expectations (12 months to December 2013: £0.34 million);

· New product development delivered 29% of the growth in the twelve month period;

· Significant progress with e-commerce platform, including three comprehensive technology upgrades;

· Manufacturing facility in Nelson remains the sole UK factory with Evolved Certification from Informed Sport and delivered an improved gross margin at 59.4% (12 months to 31 December 2013: 55.5%); and

· Cash and cash equivalents of £2.03 million at 31 December 2014 (31 December 2013: £0.82 million).

* Highlights are given for the pro forma 12 months to 31 December 2014 and the pro forma 12 months to 31 December 2013 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:"We are delighted with the progress that the Company has made during the period, having generated sustainable growth across all sales channels. The current year has started well with sales in line with management expectations, and a particularly strong performance in the e-commerce channel. We will continue to drive sales growth during 2015 with significant investment in marketing and sales and in new product development.

"We are seeking to achieve further improvements in gross margin and we expect underlying profitability to continue on a positive trend during 2015, particularly as we begin to benefit from operational leverage. We remain confident of delivering robust growth during this year and beyond."

For further information:

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. 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 professional cycling teams Team Wiggins, JLT Condor, Madison Genesis, Team Katusha and Trek Factory Racing. 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 Helen Jenkins 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

We are delighted to announce the results of Science in Sport for the nine months ended 31 December 2014. These statutory results are for a nine-month period owing to a change of year end 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, in order to allow the reader to make meaningful comparison with prior periods, this results announcement primarily focuses on the pro forma results for the 12 months ended 31 December 2014 and, for the 12 months ended 31 December 2013. This Chairman's and CEO's joint review compares the pro forma year 2014 with the pro forma year 2013 unless otherwise stated. These pro forma results are prepared on the same basis as the statutory accounts, but have not been audited. The statutory results for the nine month period are set out in the consolidated statement of comprehensive income.

As this is our results announcement, we will begin by giving a brief introduction to the Company, a highly innovative business focused on the SiS brand of endurance sports nutrition products. Our strategy is to invest in the SiS brand to drive sales growth, exploiting the organic growth of the sports nutrition sector and taking market share within the endurance nutrition category. Our commitment to improving the gross margin to underpin investment in the SiS brand whilst controlling the growth in overhead costs to single digits seeks to allow the Company to benefit from operational gearing. We are driving the brand's sales growth nationally and internationally through multiple retail channels, including our own e-commerce websites.

Our strategy has been developed to exploit the highly differentiated characteristics of the SiS brand, which is widely used by professional and elite athletes. SiS products are based on continuous innovation, resulting from scientific collaborations and in-house development expertise. In addition, the SiS product range is further differentiated by being manufactured at SiS's own low cost factory in Lancashire, which remains unique in having Evolved Certification from Informed Sport, the most rigorous banned substance testing programme for nutritional products used by athletes.

SiS is a trusted brand which, with the growing popularity of endurance sports, is attracting a broad and expanding customer base. These customers include cyclists, triathletes, rowers and runners from activities ranging from park runs to ultra-triathlons. The SiS brand is also beginning to gain traction in sports such as football, rugby and cross-country skiing. We also currently provide product to a number of Premiership football teams, leading international rugby clubs and teams, world-ranked tennis players and professional boxers.

SiS products are endorsed by the Company's Elite Sports Consultants, including the cyclists Sir Chris Hoy MBE and Mark Cavendish MBE and twice Triathlon World Champion Helen Jenkins, 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 a number of professional cycling teams, to individual elite athletes and to 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

SiS is an established brand, dating back to 1992. The brand was acquired by Provexis plc in 2011 and its subsequent demerger and listing as Science in Sport plc in August 2013 has provided the business with the platform and resource to exploit the potential of the brand. If appropriate, we will consider potential acquisitions to complement our existing product range and to deliver synergies from our manufacturing, marketing and distribution capabilities.

Overview of the financial year

The 12 months to 31 December 2014 was a period of rapid revenue growth, with sales up 23.4% at £8.03 million (2013: £6.51 million). This strong growth was achieved across all sales channels and reflects continued investment in our business. We believe that in our marketplace of endurance nutrition we are delivering sector leading revenue growth and also gaining market share from key competitors. The underlying operating loss was on an improving trend and in line with management expectations at £0.19 million (2013: £0.34 million loss). The loss after depreciation, amortisation and non cash share based payment charges was £1.83m (2013: £1.1m loss).

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 particular focus during 2014. We continued to refine the SiS website, with a major update in May 2014, the introduction of a mobile version later in the year, and since the year end a dynamic version of the platform. Around half the traffic and an estimated one third of sales on our own website are now through mobile devices. To drive further traffic to our own e-commerce site we have launched our customer loyalty scheme, SiS Rewards. Nutritional content on the website and interactive nutrition Q&A sessions on social media are also resulting in increased traffic to the website.

Sales from our own e-commerce platform and those of third-party online retailers, such as Wiggle and Chain Reaction, continue to grow strongly. Since the year end we have commenced a trading relationship with Amazon, which further enhances our third-party online retailer strategy.

We have been pleased by resilient sales growth in the heartland of independent cycling and running shops. Our strategy of driving visibility in this important channel has resulted in our gaining dominant product display space in leading stores. We have recently launched a Platinum Store Programme, in which we are targeting key stores with displays, videos and other point of sale material. We are the only brand in the endurance nutrition sector to have our own sales team and during 2014 our representatives made more than 4,400 visits to individual stores across the UK.

We have continued to enjoy strong sales growth in the major grocer and high street channels. Our sales team continues to collaborate closely with Tesco with positive results in terms of in-store placement and we are benefiting from an expanded distribution agreement with Sainsbury's. Our distribution to major grocers will increase significantly from April, with our products being made available in around 350 branches of Asda and almost 100 branches of Morrisons. High street delivered very strong growth for us across a range of key customers, with Halfords being a particularly robust performer.

Whilst the UK continues to dominate our sales, we are making good progress in rolling out the SiS brand with approximately 14% of our revenue coming from international markets. During the year, we recorded strong growth in the Benelux countries from our distribution agreement with Shimano, which commenced in May 2014. This distribution agreement, which includes eight European countries, is proceeding well and has met our growth expectations. Similarly, our distribution agreement in the Asia Pacific region has met growth expectations. In Australia, the market leading retail chain Coles, which has approximately 700 stores, is stocking our brand. We have recently signed new distribution agreements in Italy and Spain and will continue to evaluate opportunities in other countries, with the North American market currently being the focus of review.

Product Innovation

Quality and innovation are the hallmarks of the SiS brand. During the half year we continued to drive our new product development, which is underpinned by robust, evidence-based sports and nutritional science. Product launches during the year included new gels and a protein bar. We also relaunched our market leading REGO recovery product, with a 50% higher level of protein. New products, which we define as products in their first year of launch, accounted for 29% of our sales growth and 6% of total sales.

In January this year, we launched the SiS Whey Protein range, a high quality protein powder range for lean muscle development. The research firm Euromonitor estimates that the value of the protein market for muscle development in the UK in 2013 was £200 million and a 9.7% compound annual growth rate from 2013 to 2018 is forecast.

We benefit from working closely with academic institutions and collaborators and during the year we supported a number of clinical trials, which will help to inform the development of future products. We anticipate that these trials will result in the publication of a number of peer-reviewed articles.

The product pipeline for 2015 is particularly strong, and we have a number of new product launches planned ranging from novel products, extensions into new product categories and line extensions of existing strongly selling products.

Supply chain

Our manufacturing facility in Nelson, Lancashire, performed well during the year and delivered a substantial improvement in gross margin from 55.5% to 59.4%. We continue to focus on efficiencies at the factory, through investment in both the factory and the workforce, and we enjoy cost leadership in the production of gels. In order to accommodate growing demand we recently added a fifth shift at the factory, which operates on a lean 24 hours a day, five days a week basis.

People

We have continued to develop and strengthen the SiS team during the year with the number of employees at the year end reaching 68. In August 2014, we were delighted to announce the appointment of Vivienne Sparks as Finance Director. We also continued to add people and capability in both our e-commerce and supply chain areas.

We would like to take this opportunity to thank the entire team at SiS in London and Lancashire for their energy, dedication and enthusiasm throughout the year.

Financials

Sales in the 12 months to 31 December 2014 increased 23.4% to £8.03 million (2013: £6.51 million). The underlying operating loss was £0.19 million (2013: £0.34 million), reflecting continued expenditure on marketing and sales (2014: £3.08 million, 2013: £2.57 million) to drive revenues. These results are in line with management expectations and reflect our consistent and continued investment in revenue growth.

Ongoing overheads excluding sales and marketing were £1.88 million (2013: £1.38 million) for the year, reflecting a full year of costs as a standalone plc, versus a part period in 2013. The Directors do not anticipate any such significant increase in administrative costs in the future. Depreciation and amortisation costs of £0.31 million (2013: £0.23 million) and non-cash share-based payments related to the management incentive scheme of £1.21 million (2013: £nil) resulted in a pre-tax loss of £1.83 million (2013: pre-tax loss £1.10 million).

Net cash and cash equivalents at the period end were £2.03 million (31 December 2013: £0.82 million). The increase in cash reflects an oversubscribed placing announced on 9 April 2014 in which net proceeds of £2.17 million were raised through the issue of 5,111,116 ordinary shares.

Non-cash share-based payments amounting to £1.21 million (2013: £nil) have been excluded from underlying operating loss.

The statutory audited 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. These results are in line with the Board's expectation.

Outlook

The current year has started well with sales in line with management expectations and a particularly strong performance in the e-commerce channel. The Board expects year on year revenue growth during the new financial reporting period to be weighted towards stronger growth in the second half but overall is confident of achieving financial results in line with expectations. We will continue to drive sales growth during 2015 with significant investment in marketing and sales and in new product development.

We are seeking to achieve further improvements in gross margin and we expect underlying profitability to continue on a positive trend during 2015, particularly as we begin to benefit from operational leverage. We remain confident of delivering robust growth during this year and beyond.

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 nine month period to December 2014 and the year to 31 March 2014. The Board has therefore elected to include pro forma information in this financial review showing the results for the two years ended 31 December 2014 and 2013 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

Revenue

The Company has continued to grow rapidly during the year ended 31 December 2014, with sales up 23% at £8.03 million (2013: £6.51 million). Revenue growth has been achieved through a strong performance across all areas of the Company and reflects the continued investment in the business. In particular, revenue has grown across all distribution channels and includes a number of new accounts won and the launch of the Company's own e-commerce platform in 2013. In total e-commerce sales across our own platform and third party makes up more than one quarter of the business.

In 2014, the Company also continued to invest in product innovation and launched a number of new products including new gels and a protein bar. Subsequent to the year end, the SiS Whey Protein product was also launched. These are all supported by a significant advertising and promotion programme.

Gross margin

The Company generated a gross margin of £4.77 million (2013: £3.61 million) with the gross margin percentage of revenue improving to 59.4% (2013: 55.5%). This has been achieved through a continual focus on improving efficiency and cost saving in the Nelson manufacturing facility and forward buying to secure prices in advance.

Underlying operating loss

The underlying operating loss of £0.19 million (2013: £0.34 million) reflects the ongoing investment in sales and marketing to drive revenue growth together with the increase in administration costs from August 2013 when the Group listed on the AIM market and became a standalone business. 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 for the first time from the date of scheme approval totalling £1.21 million in the year ended 31 December 2014 (2013: £nil). Of this, £0.43 million relates to options vested as at 31 December 2014.

Exceptional costs

Exceptional costs reflect the costs of the demerger from Provexis, joining the AIM market in August 2013 and the restructuring to be a standalone business. In total these costs amounted to £0.64 million with £0.12 million incurred in 2014 and £0.52 million incurred in 2013.

Taxation

The current tax charge is £Nil (2013: £Nil) due to the loss made in the year. The deferred tax credit of £0.54 million (2013: £0.15 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 2014 was £1.29 million (2013: £0.95 million) and the basic and diluted loss per share was 5.5p (2013: 5.6p). The Directors are unable to recommend the payment of a dividend (2013: £Nil).

Capital structure and funding

On 9 April 2014 the Company raised net proceeds of £2.17 million by the issue and allotment of 5,111,116 Ordinary Shares at a placing price of 45 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 invest internally in further revenue generating opportunities.

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 £1.29 million (2013: £0.95 million) and expects to make a further loss in the year ending 31 December 2015.

The total cash outflow from operating activities in the nine months to 31 December 2014 was £0.46 million (12 months to 31 March 2014: £1.31 million). At 31 December 2014 the Company had cash balances of £2.03 million (31 March 2014: £0.63 million). As noted above, the Company raised additional equity of £2.17 million (net of associated costs) on 9 April 2014.

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

All amounts relate to continuing operations.

Consolidated statement of financial position

Consolidated statement of cash flows

Consolidated statement of changes in equity

† In the prior period, and prior to the demerger (as previously dislcosed), the Provexis group undertook a group reorganisation resulting in a capital contribution of £448,000 being recognised in respect of the waiver of intercompany debt.

1. Accounting policies

Basis of preparation

This preliminary statement of results for the nine months to 31 December 2014 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 March 2014.

The financial information contained within this preliminary announcement for the nine months to 31 December 2014 and twelve months to 31 March 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 year to 31 March 2014 have been filed with the Registrar of Companies and those for the nine months to 31 December 2014 will be filed following the Company's annual general meeting. The auditors' report on the statutory accounts for the nine months to 31 December 2014 and twelve months to 31 March 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 two customers of £750,000 and £678,000 individually exceed 10% of Group revenue (year ended 31 March 2014: one, £852,000). These major customers purchase goods from the Company.

3. Operating expenses

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

4. Loss from operations

There were no exceptional costs in the period. In the prior year to 31 March 2014 exceptional costs comprised professional costs of admission to AIM of £262,000 and restructuring costs of £253,000.

5. Taxation

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

At 31 December 2014 UK tax losses of the Company available to be carried forward are estimated to be £2,895,000 (31 March 2014: £1,850,000).

Deferred tax balances are valued at the rate of 20% 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.

As a result of the demerger in the comparative period, the Company became the new parent company of SiS (Science in Sport) Limited. Therefore the weighted average number of ordinary shares outstanding for the comparative period has been calculated using the number of ordinary shares issued by the Company to the shareholders of Provexis plc at the date of the demerger (9 August 2013) and adjusted for:

· movements in the number of ordinary shares of SiS (Science in Sport) Limited from 31 March 2013 to the date of demerger; and

· movements in the number of ordinary shares from the demerger date using the actual number of ordinary shares of the Company outstanding during that period.

7. Inventories

There is a provision of £62,000 included within inventories in relation to the impairment of inventories (31 March 2014: £14,000).

During the period inventories of £2,009,000 (year ended 31 March 2014: £2,149,000) were recognised as an expense within cost of sales.

8. Trade and other receivables

9. Trade and other payables

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 20% (year ended 31 March 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:

A deferred tax asset of £710,000 (31 March 2014: £329,000) 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 have made this assessment based on the evidence available from projected forecasts of profitability.