Science in Sport : Final Results

20 March 2019

SCIENCE IN SPORT PLC

('SiS', the 'Company' or the 'Group')

FINAL RESULTS

FOR THE YEAR ENDED 31DECEMBER 2018

Science in Sportplc (AIM: SIS), a leading premium performance nutrition company that develops, manufactures and markets performance nutrition products for elite athletes, sports and gym lifestyle enthusiasts, is pleased to announce its audited final results for the year ended 31 December 2018.

HIGHLIGHTS

FINANCIAL HIGHLIGHTS - GROUP

·	A 37% increase in Group revenue to £21.3 million (2017 - £15.6 million), including a 25‐day contribution of £1.5 million from PhD Nutrition Limited ('PhD') acquired on 6 December 2018;
·	Increase in gross profit to £12.0 million (2017 - £9.3 million) including £0.4 million gross profit following the acquisition of PhD;
·	Underlying operating loss1 of £2.5 million (2017 - £1.7 million) in line with growth strategy and expectations, reflecting continued investment in brand awareness, e-commerce and international expansion; and
·	Cash and cash equivalents of £8.0 million (2017 - £16.6 million) in line with market expectations following the acquisition of PhD.
·	Post period end the Group continues to perform in line with full year market expectation.

HIGHLIGHTS - SiS

·	A 27% increase in underlying SiS revenue to £19.8 million (2017 - £15.6 million), with acceleration in growth during H2 to 34% reflecting first half investment initiatives;
·	Revenue growth significantly ahead of the sports nutrition sector, with particularly strong growth in online channels +26% and international markets +55% driven by consistent investment in marketing resulting in significant brand awareness improvement versus the Group's competitors;
·	Robust gross profit margin 58.2% (2017 - 59.7%);
·	New product development - a key growth driver delivering £1.1 million of revenue in the year (2017 - £0.9 million) contributing 26% of overall revenue growth;
·	SiS Core2 business increasingly profitable with operating profits of £2.0 million (2017 - £0.5million); and
·	On plan delivery in strategic markets of USA, Italy and Australia.

PhD

·	In December, SiS acquired PhD, a premium performance nutrition brand, for £32.0 million. The transformational deal doubles the size of the Group, extends its product range, and enhances international presence;
·	PhD contributed £0.1million of operating profit in 2018; and
·	Integration plans are on track.

¹ excludes depreciation, amortisation, non-cash share based payments and costs relating to the acquisition of PhD Nutrition.

²core business is defined as UK, EU, RoW excluding strategic markets US, Italy and Australia consistent with segmental reporting (note 3)

Stephen Moon, Science in Sport's CEO, said:

'We were delighted to have acquired the PhD business and its excellent management team. Integration is on track to maximise the potential of the combined group. Our ambition is to build the world's #1 premium performance nutrition business. In the last five years the Science in Sport business has delivered sales compound annual growth rate (CAGR) of 25% and with our proven strategy and the PhD acquisition, the Board remains confident of continued strong growth in 2019 and beyond.'

'2018 was another period of very strong growth, the sixth consecutive year where SiS has significantly outperformed the sector. We saw strong performance in all online channels and international markets. Our strategy of consistent investment in brand equity, our best in class e-commerce platform and product innovation contributed to this success. Continuing improvements in factory and supply chain efficiencies underpinned a very robust gross margin. Our core business generated operating profits of £2.0m.'

This announcement contains inside information for the purposes of EU Regulation 596/2014.

For further information:

Science in Sport plc	[phone]
Stephen Moon, CEO Elizabeth Lake, FD
Liberum Capital Ltd Nominated adviser and broker	[phone]
Clayton Bush Chris Clarke
James Greenwood Instinctif Partners Financial PR Matthew Smallwood Tom Berger	[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 shots; SiS REGO, including protein-based recovery powders; SiS Protein, products specifically designed to contribute to athletes' lean muscle mass growth and maintenance; SiS Supplements, comprising BCAA Perform, Creatine, Beta Alanine and L Glutamine; SiS Athlete Health, vitamins and supplements range designed to support and maintain immune function, digestive health and bone health. 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 organisations Team SKY, British Cycling, Cycling Australia and USA Cycling. SiS is also a partner to British Triathlon & Rock n Roll Marathon Series. Along with supplying over 80 professional English & Scottish League football teams, SiS is Sports Nutrition Partner to the world's most popular football club, Manchester United FC. In addition, Olympians Sir Chris Hoy MBE, Mark Cavendish MBE and Adam Peaty MBE are 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.

About PhD

PhD is a UK-headquartered premium protein brand. Since being founded by Jason Rickaby and Mark Bowering in 2005, PhD has developed into one of the UK's leading protein brands with a reputation for high quality and innovative products aimed at sports enthusiasts and gym lifestyle consumers.

It has c.24 employees and an experienced management team that has a track record of delivering consistent revenue growth and profitability. For the year ended August 2018, PhD reported revenues of £20.8 million and adjusted EBITDA of £2.8 million.

For further information, please visitwww.scienceinsport.com

CHAIRMAN'S STATEMENT

'2018 will be seen as a landmark year for the Group. In December we acquired the PhD business to bring together two of the premium brands in the performance nutrition sector. The Science in Sport business delivered another strong year of revenue growth, underpinned by investment in brand equity and a science-led innovation pipeline. We believe the expanded Group has the potential to be a global leader in performance nutrition.'

Overview

We are delighted to announce a strong set of results for the year ended 31 December 2018. Underlying revenue excluding the acquisition of PhD in December was £19.8 million, 27% ahead of the same period in 2017, with second half growth accelerating to 34%, following first half investment in growth initiatives.

The acquisition of PhD on 6 December 2018 added a further £1.5 million of revenue to the Group results, with full year revenue totalling £21.3 million.

The underlying operating loss was £2.5 million (2017 - £1.7 million) which reflected continued investment in growth opportunities, namely in the USA, Italy and football.

Our cash position remains strong with a year-end balance of £8.0 million. £1.5 million of Science in Sport plc cash reserves were used to finance the acquisition of PhD in December, together with proceeds from a fundraise and the issue of shares, and consideration shares.

We are targeting further strong revenue growth in 2019 for both brands, PhD and Science in Sport. We will be focusing on realising the untapped e-commerce opportunity for PhD, including the launch of a new website in Q2. Both brands will continue to invest in innovation, product launches and international growth. The Science in Sport business will continue its expansion into football with a new, innovative product range specifically formulated for footballers launched in Q1. Additionally, we will deliver revenue and cost synergies through bringing together PhD and SiS.

Even though the UK is facing some economic uncertainty our confidence for the year ahead remains unchanged. The Board continues to be focused on building shareholder value through driving core profitability and developing our strategic growth markets to profitability. Our strategy remains unchanged, focusing on innovation, brand, online and new markets.

Our people

The continued strength of the Group is the hard work and dedication of all the people who work for PhD and Science in Sport. I would like to thank them all for their contribution, especially for the determination and commitment they have shown through this exciting phase in the Group's development, and for delivering another sector leading performance.

The Group has continued to invest in its people, with a number of employees being supported through professional training relevant to their functional areas, as well as other relevant role-specific training. We have also attracted a great deal of new talent during the year as we continue to expand in markets around the world.

Development of the Board

It is the Board's task to ensure the Group is managed for the long term benefit of all Shareholders, with effective and efficient decision-making. Corporate governance is an important part of that role, reducing risk and adding value to our business.

Governance priorities for 2019

1. Strengthen the Board

2. Continued training for Board members

3. Strategy delivery

4. Compliance and risk management

5. Stakeholder engagement

Culture

The culture of the Group is to be entrepreneurial and innovative, always committed and striving for excellence, as our customers do. Acting responsibly is critical to our business performance and the Group takes its obligations to act very seriously.

Further detail is included in the Corporate Social Responsibility section of the Annual report but some examples of actions taken to support our values this year include; our market leading banned substance testing programme, the significant investment in innovation and support provided to our employees to help them excel in their chosen sports.

JOHN CLARKE

Non-Executive Chairman

19 March 2019

CHIEF EXECUTIVE'S REPORT

Core Market Growth

The Company's revenue channels comprise our own e-commerce platform, third-party online retailers, independent sports retailers, major grocers, high street health chains, and international sales distributors.

Our e-commerce platform was a focus again during 2018 and delivered 40% revenue growth. The new Magento 2 platform enabled us to make substantial gains in traffic from mobile devices and this was reflected in very high conversion rates. Third-party online retailers, led by Wiggle, Chain Reaction and Amazon, also delivered ahead of market growth, as we continued to invest in this channel. Overall, 54% of revenue was derived from all online channels, and we expect this online share of revenue to continue to grow in 2019.

We have continued to work closely with the leading five major grocers during what has been a challenging year for this channel but nevertheless we delivered like-for-like growth of 1%. High street revenue grew 34% in 2018 with this growth being driven by additional distribution in Superdrug and Holland & Barrett. Our heartland of independent cycle and running shops remained flat in a challenging market. We remain committed to our distribution in this important and opinion leading channel.

International distributors grew strongly by 44% to £3.2m. Within this our strategic heartland distributor Shimano performed well again across all our European geographies, growing 23% to £1.3m. International distributors made good progress in a wide range of global markets, with Russia and Turkey delivering strong growth. In the second half of the year we made progress in markets including Argentina, Brazil, China and Colombia and believe these will become important in 2019 and beyond.

The new vertical of football started well and delivered £0.7m of revenue. We made major inroads into elite football and more than 80 UK clubs are supplied by us. Good progress was made with our e-commerce business and we launched a new sisfootball.com portal in early 2019. Our exclusive nutrition supplier relationship with Manchester United Football club underpins our marketing efforts and we expect it to a key driver of awareness and revenue in the future.

Strategic Markets

Our business in the USA grew from £0.4m to £1.4m of revenue in line with plan. The scienceinsport.com platform delivered 62% of the total and also become a major source of brand awareness and athlete education for the brand. We set up our Amazon Seller platform during the year and expect this to grow significantly in 2019. We continue to extend our retail presence in the heartland of running and cycle stores, as a key awareness and product trial tool.

The Italian business grew 61% to £1m with scienceinsport.com delivering 60% of these revenues. Late in the year we established our business with Amazon and this is expected to perform well in 2019. Retail is important in the Italian market and is underpinned by Shimano distributing to cycle stores, with Nutramis servicing its own health chain stores and seeking to extend into pharmacy in 2019.

We streamlined our Australian business during the year and brought more focus to our scienceinsport.com platform. This channel exited the year well and has started 2019 strongly. We were a first mover into Amazon's new Australian business, listing on the platform in Q4. The business grew 11% to £0.8m. With a streamlined approach in place and the online channels performing well, we expect good growth in 2019.

International markets, both distributors and strategic markets, comprised 34% of total revenues and delivered 55% growth.

Acquisition of PhD

The acquisition of PhD in December 2018 was a transformational transaction for our business. It has delivered on our strategic intent to grow through acquisition to complement our portfolio.

PhD is a premium performance nutrition brand which operates in the complementary protein category. It has well established retail sales channels in the UK alongside a growing third party online channel. PhD also has an established and growing international presence in over 45 countries accessed through selected distributors.

Strategically, PhD provides SiS with a premium protein-based product range and the opportunity for sales channel optimisation across the enlarged Group particularly online and internationally. Cost synergies will be delivered through in-sourcing production of PhD protein powders. During the period between the acquisition of PhD on 6 December 2018 and 31 December 2018, the acquired business contributed a profit before tax of £0.1million.

Significant progress is being made on the integration of PhD, to deliver strong growth in PhD revenue and improved gross margin.

The enhanced PhD website is on schedule to launch at the beginning of Q2, with plans in place to expand our picking and packing facility in Nelson to bring the PhD operation in-house. This will deliver customer service benefits as well as some cost benefits.

Strategic intent

Our intent is for the combined PhD and SiS Group to become the world's #1 premium performance nutrition business.

This is underpinned by the following key principles and strategic actions:

·	Continuing to drive growth for both brands through a science and innovation-led pipeline, including current and new technologies and formats;
·	Developing the manufacturing facility and International logistics footprint to underpin market leading gross margins;
·	Continued investment in building the equity in both the PhD and SiS brands to drive sales through increased awareness and usage; and
·	Growing our sales presence in markets globally, through both online and retail channels.

Specific initiatives to leverage the combined strength of the Group include:

·	Collaborating in existing international markets;
·	Building an e-commerce capability for PhD;
·	Improving PhD's gross margin by bringing its powder manufacture into the Nelson facility;
·	Combining third-party logistics operations to enhance customer service and optimise costs; and
·	Bringing PhD e-commerce picking & packing into a new Nelson facility.

We see several structural growth opportunities including developing a combined business in both the USA and Asia, as well as new verticals, the first of these being the SiS football business.

The Board believes there continues to be a significant growth opportunity and if appropriate, we will acquire relevant, complementary businesses to grow and extend our existing product range and deliver synergies from our distribution, e-commerce and supply chain capabilities.

Outlook

We are seeking further strong revenue growth in 2019 and the year has started well for us. Our intention is for the Group to move to a breakeven situation at EBITDA* level this year.

There are a number of growth opportunities presenting themselves to us and we will assess these and act accordingly. Key themes are online and international growth.

Integration of the PhD and SiS businesses is on track and we expect to deliver revenue growth and cost savings in line with expectations.

We look forward to 2019 with optimism as we continue to deliver strong growth on the path to becoming the world's #1 premium performance nutrition brand.

STEPHEN MOON

Chief Executive Officer

19 March 2019

*Earnings before interest, tax, depreciation and amortisation.

PRINCIPLE RISKS AND UNCERTAINTIES

In the course of its normal business the Company is exposed to a range of risks and uncertainties which could impact on the results of the Company. The Board considers that risk management is an integral part of good business process and, on a quarterly basis, reviews the industry, operational and financial risks facing the Company and considers the adequacy of the controls and mitigations to manage these risks.

FINANCIAL REVIEW

DELIVERING STRONG FINANCIAL PERFORMANCE

Revenue

The Company has continued to grow strongly during the year ended 31 December 2018, with revenue increasing 37% to £21.3 million (2017 - £15.6 million). This includes £1.5 million of revenue from PhD following its acquisition on 6 December. 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 57% of revenue being derived from e-commerce sales across our own platform and third party platforms.

Our International growth strategy has delivered significant growth with 34% of revenue now coming from International customers (2017 - 28%).

During 2018, the Company also continued to invest in product innovation and launched a number of new products.

Gross margin

The Company generated a gross profit of £12.0 million (2017 - £9.3 million) achieving a gross margin of 56.1% (2017 - 59.7%). Gross margin of 28% from the newly acquired PhD business reduced overall Group margin. We see this as a key opportunity for the combined business through initiatives such as insourcing PhD protein manufacture and scale benefits in areas including purchasing and logistics. The gross margin for the SiS brand was 58.2% (2017 - 59.7%). This has reduced slightly due to the impact of more product being sold through overseas subsidiaries which increased the shipping and duty costs. However, an increase in the cost of raw materials was offset by the factory delivering further efficiencies.

Underlying operating loss

The underlying operating loss of £2.5 million (2017 - £1.7 million) reflects the ongoing investment in science and innovation, building brand equity, developing our e-commerce capability and international expansion. The 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 Board believe that the operating loss before depreciation, amortisation, non-cash share based payments and PhD acquisition related expenses 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.

At the reporting date the Company held inventory of £7.1 million (31 December 2017 - £2.7 million), comprising £4.7 million of SiS stock (2017 - £2.7 million) and £2.4 million of PhD stock post acquisition. Inventory levels increased due to overseas expansion, new product launches and planning for Brexit. Trade and other receivables were £8.9 million (31 December 2017 - £2.9 million) and equates to 57 debtor days (2017 - 45 days). The increase in receivables arises from the acquisition of PhD (£4.5m) and the revenue growth in SiS. The cash balance as at 31 December 2018 was £8.0 million (31 December 2017 - £16.6 million). During the year cash use primarily relates to investment in brand, new markets and infrastructure efficiencies together with working capital requirements and the acquisition of PhD.

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') 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 LTIP at the end of 2015.

Accordingly, the Company has recognised a share based payment charge totalling £1.9 million in the year ended 31 December 2018 (2017 - £1.6 million).

The Company intends to put in place a new incentive scheme following the equity raise in December 2018 and will update Shareholders on this matter in due course.

Taxation

The current tax charge is £Nil (2017 - £Nil) due to the loss made in the year. The deferred tax credit of £0.1 million (2017 - £0.2 million) is primarily due to the recognition of a deferred tax asset in respect of taxable losses created in the year. The Group has estimated tax losses of £10.1m. With the acquisition of PhD which generates taxable profits, the Group expects to be able to utilise its tax losses over the next 3 -5 years.

Losses and dividends

The loss attributable to equity holders of the parent for the year ended 31 December 2018 was £5.9 million (2017 - £3.6 million) and the basic and diluted loss per share was 8.2p (2017 - 7.7p). The payment of a dividend cannot be recommended due to negative retained earnings (2017 - £nil).

Capital structure and funding

On 6 December 2018 the Group acquired the entire share capital of PhD for £32 million. The acquisition was funded through the issue and allotment of 46,533,333 ordinary shares at a placing price of 60p per share with the balance of consideration coming from existing cash reserves. The placing was undertaken with new and existing institutional Shareholders and shares forming part of consideration. A further 7,694,667 Ordinary shares were issued pursuant to this transaction.

The latest placing resulted in significant institutional investors consolidating their position on the Shareholder register of the Company. The Directors believe establishing a broader institutional shareholder base is in the long term interests of the Company.

Going concern

The Group made a loss after tax for the year attributable to owners of the parent of £5.9 million (2017 - £3.6 million) and expects to make a further loss in the year ending 31 December 2019.

The net decrease in cash and cash equivalents in the year ended 31 December 2018 was £8.6 million(2017 - £10.4 million increase). At 31 December 2018 the Group had cash balances of £8.0 million (2017 - £16.6 million).

The Directors have prepared projected cash flow information for a period ending 31 December 2020.

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
		2018	2017
	Notes	£'000	£'000
Revenue		21,318	15,615
Cost of goods		(9,363)	(6,300)
Gross profit		11,955	9,315
Operating expenses	4	(17,950)	(13,167)
Underlying operating loss		(2,548)	(1,704)
Depreciation and amortisation		(926)	(567)
Share based payments charge		(1,922)	(1,581)
Costs associated with acquisition of PhD		(599)	-
Loss from operations	5	(5,995)	(3,852)
Finance income		5	-
Loss before taxation		(5,990)	(3,852)
Taxation	6	115	246
Loss for the year		(5,875)	(3,606)
Other comprehensive income
Exchange differences on translation of foreign operations		(125)	78
Total comprehensive loss for the year		(6,000)	(3,528)

Loss per share to owners of the parent
Basic and diluted - pence	7	(8.2p)	(7.7p)

All amounts relate to continuing operations.

Consolidated statement of financial position

		As at	As at
		31 December	31 December
		2018	2017
	Notes	£'000	£'000
Assets
Non-current assets
Intangible assets		33,742	1,359
Property, plant and equipment		1,033	793
Deferred tax	11	1,430	1,332
Total non-current assets		36,205	3,484
Current assets
Inventories	8	7,102	2,713
Trade and other receivables	9	8,939	2,851
Cash and cash equivalents		8,002	16,570
Total current assets		24,043	22,134
Total assets		60,248	25,618
Liabilities
Current liabilities
Trade and other payables	10	(7,970)	(2,810)
Total current liabilities		(7,970)	(2,810)
Non-current liabilities
Deferred tax	11	(2,461)	-
Total non-current liabilities		(2,461)	-
Total liabilities		(10,431)	(2,810)
Net assets		49,817	22,808
Capital and reserves attributable to owners of the Parent company
Share capital		12,197	6,683
Share premium reserve		48,464	22,339
Employee Benefit Trust reserve		(372)	(397)
Other reserve		(907)	(907)
Foreign exchange reserve		(97)	28
Retained deficit		(9,468)	(4,938)
Total equity		49,817	22,808

Consolidated statement of cash flows

		Year	Year
		ended	ended
		31 December	31 December
		2018	2017
	Notes	£'000	£'000
Cash flows from operating activities
Loss for the financial year		(5,875)	(3,606)
Adjustments for:
Amortisation		555	307
Depreciation		371	260
Loss on sale of fixed assets		-	17
Net finance income		(5)	-
Taxation		(115)	(246)
Share based payment charge		1,922	1,581
Operating cash outflow before changes in working capital		(3,147)	(1,687)
Changes in inventories		(2,070)	(475)
Changes in trade and other receivables		(1,707)	(635)
Changes in trade and other payables		503	271
Total cash outflow from operations		(6,421)	(2,526)
Cash flow from investing activities
Purchase of property, plant and equipment		(519)	(255)
Purchase of intangible assets		(945)	(799)
Acquisition of subsidiary, net of cash acquired	2	(28,363)	-
Net cash outflow from investing activities		(29,827)	(1,054)
Cash flow from financing activities
Gross proceeds from issue of share capital		27,920	14,848
Expenses paid on share issues		(240)	(828)
Net cash (outflow)/inflow from financing activities		27,680	14,020
Net (decrease)/increase in cash and cash equivalents		(8,568)	10,440
Opening cash and cash equivalents		16,570	6,130
Closing cash and cash equivalents		8,002	16,570

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 2016	4,322	10,331	(215)	(907)	(50)	(2,662)	10,819
Total comprehensive loss for the year	-	-	-	-	78	(3,606)	(3,528)
Transactions with owners
Issue of shares:
- Issued in return for sponsorship services	16	109	-	-	-	-	125
- Placing	2,121	12,727	-	-	-	-	14,848
Transaction costs of placing	-	(828)	-	-	-	-	(828)
Issue of shares to EBT	224	-	(224)	-	-	-	-
Issue of shares held by EBT to employees	-	-	42	-	-	(42)	-
Share based payments	-	-	-	-	-	1,372	1,372
At 31 December 2017	6,683	22,339	(397)	(907)	28	(4,938)	22,808
Total comprehensive loss for the year	-	-	-	-	(125)	(5,875)	(6,000)
Transactions with owners
Issue of shares:
- Issued in return for sponsorship services	57	368	-	-	-	-	425
- Placing	4,840	24,197	-	-	-	-	29,037
Transaction costs of placing	-	(1,357)	-	-	-	-	(1,357)
- Consideration shares issued on acquisition of PhD	583	2,917	-	-	-	-	3,500
Issue of shares to EBT	34	-	(34)	-	-	-	-
Issue of shares held by EBT to employees	-	-	59	-	-	(59)	-
Share based payments	-	-	-	-	-	1,404	1,404
At 31 December 2018	12,197	48,464	(372)	(907)	(97)	(9,468)	49,817

1. Accounting policies

Basis of preparation

This final results announcement for the year ended 31 December 2018 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 2018.

The financial information contained within this final results announcement for the year ended 31 December 2018 and the year ended 31 December 2017 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 2017 have been filed with the Registrar of Companies and those for the year ended 31 December 2018 will be filed following the Company's annual general meeting. The auditors' report on the statutory accounts for the year ended 31 December 2018 and the year ended 31 December 2017 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.

Use of non-GAAP profit measure - underlying operating loss

The Directors believe that the operating loss before depreciation, amortisation, share based payments and costs relating to the acquisition of PhD as a measure provides additional useful information for Shareholders on underlying trends and performance. This measure is used for internal performance analysis. Underlying operating loss is not defined by IFRS and therefore may not be directly comparable with other companies' adjusted profit measures. It is not intended to be a substitute for, or superior to IFRS measurements of profit. A reconciliation of underlying operating loss to statutory operating loss is set out on the face of the consolidated Statement of Comprehensive Income.

2. Acquisitions

On 6 December 2018 the Group acquired the entire share capital of PhD Nutrition Ltd ('PhD') for £32.0 million plus £2.8m working capital adjustment. PhD is a premium performance nutrition brand operating in the protein category through UK retail channels and international distributers. Strategic and financial benefits of the acquisition include complementary product ranges within the sports nutrition category, sales channel optimisation across the enlarged Group particularly online and international, as well as cost synergies through in-sourcing production of protein powders.

In the period between acquisition date and 31 December 2018, the acquired business contributed revenue of £1.5 million and a profit before tax of £0.1 million. If PhD had been acquired on the first day of 2018 Group revenue would have been £41.0 million and Group loss before tax would have been £3.3 million.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

Fair value of net assets acquired:		Book value £000		Adjustment £000	Fair value £000
Property, plant and equipment Intangible assets Intangible assets on acquisition: - Brands - Customer relationships Inventories Cash and cash equivalents Trade and other receivables Trade and other payables Deferred tax Deferred tax - intangibles		94 33 - - 2,319 2,743 4,381 (3,877) 19 -		- (33) 8,957 5,638 - - - (362) (19) (2,482)	94 - 8,957 5,638 2,319 2,743 4,381 (4,239) - (2,482)
Total identifiable net assets		5,712		11,699	17,411

Fair value of consideration paid:

					Fair value £000
Cash Consideration settled in equity (5,833,334 ordinary shares) Equity value Working capital adjustment W&I insurance					28,500 3,500 32,000 2,607 202
Total Consideration					34,809
Goodwill					17,398

Cash outflow in respect of the acquisition comprised:					£000
Cash paid Cash acquired					31,106 (2,743)
Total cash outflow					28,363

Acquisition costs amounting to £599,000 have been recognised as an expense and have been included as an exceptional item on the face of the consolidated statement of comprehensive income. Share placing costs of £1,357,000 relating to an equity raise to part fund the acquisition have been written off against the share premium account.

The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled workforce of the acquired entity, which do not qualify for separate recognition, opportunities for synergies in production, supply chain and sales channels.

3.Segmental reporting

Operating segments are identified on the basis of internal reporting and decision making. The Group's Chief Operating Decision Maker ('CODM') is considered to be the Board, with support from the senior management teams, as it is primarily responsible for the allocation of resources to segments and the assessments of performance by segment.

The Group's reportable segments are strategic business units that operate in different markets. They are managed separately because each business requires different sales and marketing strategies. Operating segments are reported in a manner consistent with the internal reporting provided to the CODM as described above.

The business has expanded significantly during 2018 and operating segments have been increased to provide greater granularity and to reflect the way the business is managed. The number of segments has expanded from two in 2017 to six in 2018, reflecting the growth of International markets and football as separate segments. This is consistent with changes to internal reporting to the CODM.

The Core segment manufactures and sells endurance sports nutrition in the UK through SiS.com, third-party retailers, grocers, high street and heartland bike shops. Also included in this segment is sales to Europe (excluding Italy) through distributors and online.

Sales through the Football website and of football products through any channel are included as a separate segment.

Each International subsidiary is also considered as a separate segment.

PHD was acquired by Science in Sport plc on 6 December 2018 and is reported as a separate segment. The PhD brand is a premium protein brand that appeals to the gym Lifestyle consumer.

The Board uses underlying operating loss reviewed on regular basis, as the key measure of the segment's performance. The segment profit is also stated before the allocation of central administration costs and Directors' salaries.

The following is an analysis of the Group's revenue and results from continuing operations by reportable segment.

Turnover by geographic destination of sales may be analysed as follows:			Year ended 31 December 2018		Year ended 31 December 2017
			£'000		£'000
United Kingdom			14,062		11,217
EU excluding the UK			3,849		2,880
Australia			755		680
Rest of the World			2,652		838
			21,318		15,615

	Segment revenue			Segment profit
	Year ended 31 December 2018	Year ended 31 December 2017		Year ended 31 December 2018	Year ended 31 December 2017
	£'000	£'000		£'000	£'000
Core	16,047	13,907		2,033	463
USA	1,373	418		(2,451)	(1,055)
Italy	983	610		(608)	(433)
Australia	755	680		(545)	(679)
Football	655	-		(1,113)	-
PhD	1,505	-		136	-
	21,318	15,615		(2,548)	(1,704)
Depreciation and amortisation				(926)	(567)
Share based payments				(1,922)	(1,581)
Costs associated with acquisition of PhD				(599)	-
				(5,995)	(3,852)

Segment revenue reported above represents revenue generated from external customers

The 2017 numbers have been restated due to the change in the composition of operating segments

	Segment assets			Segment liabilities
	Year ended 31 December 2018	Year ended 31 December 2017		Year ended 31 December 2018	Year ended 31 December 2017
	£'000	£'000		£'000	£'000
Core	14,313	10,551		(2,770)	(2,489)
USA	945	455		(240)	(85)
Italy	521	86		(117)	(75)
Australia	698	436		(153)	(89)
Football	-	-		-	-
PhD	41,499	-		(6,295)	-
	57,976	11,528		(9,575)	(2,738)
Unallocated assets/ (liabilities)	2,272	14,090		(856)	(72)
Total assets/ (liabilities)	60,248	25,618		(10,431)	(2,810)

Goodwill and intangibles recognised on acquisition are included in the PhD segment.

Unallocated assets includes cash held by the parent company of £2,185,000 (2017 - £14,090,000).

Revenue from one customer in the Core segment of £2,632,000 individually exceeds 10% of Group revenue (2017 - one, £2,181,000). All non-current assets, except for an immaterial amount of fixed assets, are located in the UK.

4.Operating expenses

		Year ended 31 December 2018	Year ended 31 December 2017
		£'000	£'000
Sales and marketing costs		10,753	7,982
Operating costs		3,750	3,037
Depreciation and amortisation		926	567
Share based payment charge (1)		1,922	1,581
Costs associated with acquisition of PhD		599	-
Administrative expenses		7,197	5,185

Total operating expenses

17,950

13,167

(1) Includes associated social security costs of £93,000 (31 December 2017- £84,000)and consideration in respect of sponsorship services of £425,000 (31 December 2017- £125,000).

5. Loss from operations

Loss from operations is stated after charging:	Year ended 31 December 2018	Year ended 31 December 2017
	£'000	£'000
Depreciation of property, plant and equipment	371	260
Amortisation of intangible assets	555	307
Research and development costs	320	339
Grant income in respect of research and development tax credits	(60)	(125)
Foreign exchange losses/(gains)	(161)	121
Loss on disposal of property, plant and equipment	-	17
Operating lease costs	177	196

6. Taxation

	Year ended 31 December 2018	Year ended 31 December 2017
	£000	£000
Current tax income
United Kingdom corporation tax	-	-
Adjustment in respect of prior period	(4)	-
Total current tax income	(4)	-
Deferred tax
Effect of change in tax rates	-	-
Origination and reversal of temporary differences	119	246
Tax on loss for the period	115	246

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	5,990	3,852
Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% (2016: 20%)	1,138	741
Effects of:
Expenses not deductible for tax purposes	(7)	(289)
Unprovided deferred tax asset on losses carried forward	(575)	-
Additional deduction for R&D expenditure	(34)	(72)
Share scheme deduction	(147)	(14)
Effect of changes in tax rate	(31)	(3)
Adjustment in respect of prior periods	(229)	(94)
Capital allowances in excess of depreciation	-	(23)
Total tax credit for the period	115	246

At 31 December 2018 UK tax losses of the Company available to be carried forward are estimated to be £10,100,000 (31 December 2017: £6,307,000).

Deferred tax balances are valued at the rate of 17% in these accounts to the extent that timing differences are expected to reverse after this later date.

7. 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. The exercise of share options would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'

	Year ended 31 December 2018	Year ended 31 December 2017
Loss for the year/period attributable to owners of the parent - £000	(5,875)	(3,606)
Weighted average number of shares	71,422,400	46,695,814
Basic and diluted loss per share - pence	(8.2p)	(7.7p)

8. Inventories

	31 December 2018	31 December 2017
	£000	£000
Raw materials	2,164	883
Finished goods	4,938	1,830
	7,102	2,713

There is a provision of £27,000 included within inventories in relation to the impairment of inventories (31 December 2017: £27,000).

During the period inventories of £9,094,000 (31 December 2017: £6,189,000) were recognised as an expense within cost of sales.

9. Trade and other receivables

	31 December 2018	31 December 2017
	£000	£000
Trade receivables	7,513	1,947
Less: provision for impairment of trade receivables	(43)	(43)
Trade receivables - net	7,470	1,904
Other receivables	480	436
Total financial assets other than cash and cash equivalents classified as loans and receivables	7,950	2,340
Prepayments and accrued income	989	511
Total trade and other receivables	8,939	2,851

10. Trade and other payables

	31 December 2018	31 December 2017
	£000	£000
Trade payables	4,661	1,222
Accruals	2,631	1,382
Total financial liabilities measured at amortised cost	7,292	2,604
Other taxes and social security	678	206
Total trade and other payables	7,970	2,810

The Directors consider that the carrying amount of these liabilities approximates to their fair value.

All amounts shown fall due within one year.

11. Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17% (31 December 2017: 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:

Year ended 31 December 2018:	Asset	Liability	Net	(Charged)/ credited to profit or loss
	£'000	£'000	£'000	£'000
Accelerated capital allowances	-	(319)	(319)	(206)
Available losses	1,325	-	1,325	558
Other temporary and deductible differences	424	-	424	(254)
Business combinations	-	(2,461)	(2,461)	21
Tax asset/ (liabilities)	1,749	(2,780)	(1,031)	119
Set off of tax	(319)	319	-	-
Net tax assets/ (liabilities)	1,430	(2,461)	(1,031)	119

Year ended 31 December 2017:	Asset	Liability	Net	(Charged)/ credited to profit or loss
	£'000	£'000	£'000	£'000
Accelerated capital allowances	-	(113)	(113)	(10)
Available losses	767	-	767	45
Other temporary and deductible differences	678	-	678	211
Business combinations	-	-	-	-
Tax asset/ (liabilities)	1,445	(113)	(1,332)	246
Set off of tax	(113)	113	-	-
Net tax assets/ (liabilities)	1,332	-	(1,332)	246

Recoverability of deferred tax asset:

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. At the point of acquisition PhD Nutrition has historically realised taxable profits and it is therefore expected that future taxable losses generated by SiS (Science in Sport) Limited will be eligible to offset against these profits.