Science in Sport confident following management shake-up

Sports nutrition firm, Science in Sport (SiS), admitted poor strategic decisions were made, previously, leading to an inflated operating structure, in a trading update today.

Last October the business, which has a key supply chain facility in Blackburn, announced that chief executive, Stephen Moon, had stepped down with immediate effect and chairman Dan Wright had been appointed as executive chairman.

In its first announcement since the shake-up, it focused on the year ended December 31, 2023, and looked forward to the current fiscal year.

It said the new leadership team has completed a full business and organisational review, adding: “Whilst the strength of our two core brands, SiS and PhD, is unquestionable the relentless pursuit of top line growth led to some poor strategic decisions and an inflated operating structure.”

It said the immediate challenge faced by the new team was to stem the cash outflow and stabilise the relationships with various stakeholders. The prior strategy of aggressive growth across all channels and markets has been reset, with the revised operating model focused on controlled growth, while delivering sustainable cash generative profitability at improved margins from a reduced cost base.

To date, a number of actions have been taken, benefiting Q4 2023 while providing a stable platform in 2024 for the business to be reset. This will deliver further annualised savings in excess of £2.5m, the majority of which will be delivered in 2024.

Trading in fiscal year 2023 delivered EBITDA in line with market expectations, despite lower revenues, with the focus in the final quarter, in particular, shifting to cash and profit.

The group closed FY23 with revenue of £62.8m (FY22: £63.8m), a reduction of 1.6% from the prior year. The performance in FY23 was driven from growth in the Retail (UK and International) and Marketplace channels, offset by lower trading in China and in the Digital channel.

The SiS brand delivered annual revenue growth of 17%, with PhD closing FY23 with an annual revenue reduction of 18% compared with the prior year, predominantly on account of interrupted trade in the Chinese markets.

Adjusted EBITDA of £2m (FY22: £2.7m loss) was consistent with market expectations, despite the lower revenue forecast, this being driven from improved margins and ongoing cost efficiencies across all areas.

Excluded from the adjusted EBITDA are one-off costs, principally relating to the organisational restructure, transition costs moving to the internally manufactured protein bars and moving to the distributor model in the US.

In addition, an impairment review is being undertaken on historic digital and trading assets which will be completed prior to the signing of the FY23 annual accounts. No impact to adjusted EBITDA and cash for FY23 is anticipated as a result.

The company reported cash of £2.1m (31/12/23: £0.9m) and net debt of £12.9m (31/12/22: £10.9m) with headroom in facilities of more than £3.3m as at December 31, 2023. The increase in net debt at the year end was driven by the timing of restructuring payments and working capital outflow associated with the early termination of a marketing partner, both of which will result in significant savings in 2024.

Looking ahead, management said it is taking a balanced view on prospects for 2024.

The strategic focus areas are embedding the new operating model post the recent restructuring, controlled growth over the medium term, continued margin improvements resulting in cash generation and deleveraging.

With the focus on controlled growth and profitability, revenues are expected to be broadly flat in FY24, with a doubling of underlying EBITDA and reduction in net debt.

The management said: “At the core of the business are two very strong brands operating in a growing marketplace. Management is confident with the revised operating model and new leadership, through re-engaging with core customers, shareholders and financing partners the business is building a more stable platform from which substantial shareholder value can be delivered.”