Sports nutrition firm confident of healthy recovery after inflation shock

Pre-tax losses at sports nutrition firm, Science in Sport (SiS), doubled in the year to December 31, 2022, but the firm is confident of returning to profitable growth, it said today.

Its unaudited figures for the year showed a two per cent increase in sales, of £63.773m, but a pre-tax loss of £10.6m compared with a pre-tax loss of £5.3m the previous year.

It was hit with £4.3m costs in the financial year including the closure of its Russian business (£1.7m), port congestion issues in the US (£0.9m) and supply chain issues of PhD Smart Bars over the summer from its supplier (£1.7m).

However, the firm said it managed to introduce two price increases during the reporting period, and the opening of its major 160,000 sq ft logistics hub in Blackburn, which consolidates four sites into one, has the capacity to generate more than £200m in revenue. The site involved capital expenditure of £8m, and, having now been completed, will ease financial pressures for fiscal year 2023.

SiS had headroom of £4m in facilities at December 31, 2022, with cash at bank of £0.9m (FY 2021: £4.9m).

The business blamed input price inflation, a challenging consumer environment, and supply chain issues related to global events on its poor performance, which it said was substantially below initial expectations.

However, it said its actions, including the opening of the Blackburn site and a streamlining exercise, have delivered improved margins and, together with the robustness of its brands, have led to a solid start to 2023.

In 2023 the company is seeing building sales momentum to record monthly revenue levels and expects to deliver positive EBITDA for the year. All working capital facilities have successfully been renewed to April 2024.

It said previously reported Q1 2023 revenue was £15.6m representing growth of 2.3% versus Q1 2022, despite COVID affecting the business in China and Amazon executing a global destocking programme.

Momentum is building, as evidenced by revenues for each of April to June being records for the respective months. The company expects revenue growth for the first half to be approximately seven per cent, with quarter two growth of approximately 12%.

Due to its extensive change programme, the trading contribution will be approximately 19% compared with 11% for the same period in 2022. Given the superior trading contribution and tight overhead control, SiS expects to be EBITDA positive in the first half of 2023.

It said with its three-year capital investment programme completed, capital expenditure – including technology and new product development – for 2023 will be approximately £1.5m, against £8m the previous year, with this lower level of spending to continue in 2024.

Chief executive Stephen Moon said: “After a good start to 2022, input price inflation, a challenging consumer environment, and supply chain issues related to global events adversely affected us. We reacted quickly and we spent the summer months restructuring our operations and cost base. In addition, we successfully commissioned our world-class Blackburn supply chain facility.

“In 2023, we are well set for profitable growth, as evidenced by sales growth over the last four months.

“Our retail business, domestically and internationally, is delivering profitable growth, and our Amazon business is performing significantly above the same period last year. A new partnership in the USA has step-changed EBITDA performance in this channel. While China was affected by COVID in Q1 2023, the business delivers a strong EBITDA margin, and we expect the recovery to continue in H2.”

He added: “Our brands are healthy, and the innovation pipeline is strong.

“With improved margins in all channels and markets and building revenue momentum, we are confident of executing our 2023 plan.

“Our goals for the year are profitable growth, a healthy EBITDA margin, and cash breakeven. Our medium and long term ambitions remain unchanged.”