Science in Sport plc
Annual report and accounts
Year ended 31 December 2019
Company number 08535116
CONTENTS
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STRATEGIC REPORT:
Highlights
Key performance indicators
Business Model
Strategic Model
PhD Integration & Performance Solutions
Chairman’s report
Chief Executive’s report
Principle risks & uncertainties
Financial review
Corporate social responsibility
Board Engagement with our stakeholders
GOVERNANCE:
Directors’ report
Corporate governance report
Board of directors
Audit Committee report
Remuneration Committee report
FINANCIAL STATEMENTS
Independent Auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Parent company statement of financial position
Parent company statement of cash flows
Parent company statement of changes in equity
Notes to the Parent company financial statements
Company information
STRATEGIC REPORT
HIGHLIGHTS
Financial Highlights
A 23% increase in Group revenue to £50.6m (2018: pro forma1 £41.0m, reported £21.3m),
reflecting the first full year contribution of PhD and strong organic growth by both brands. PhD
delivered record revenue growth of 23% (pro forma1), and the SiS brand delivered 24% revenue
growth contributing to a 6-year 25% revenue Compound Annual Growth Rate (“CAGR”);
Integration of PhD completed on time and in full including launch of PhD.com, new E-
Commerce fulfilment operation and installation of protein powder line at the Nelson factory
Online revenue, a key strategic focus for the Group, grew strongly up 36% to £16.4m (2018:
pro forma1 £12.1m);
Strategic markets of USA and Football grew 92% and 94% respectively, in line with
expectations, to £3.9m in total;
International Retail revenue up 41% to £12.3m (2018: pro forma1 £8.7m), with strong growth in
existing markets in Europe and Asia, plus new territories including PhD launching in Saudi
Arabia and SiS expanding into Latin America;
Innovation-driven new products delivered 28% of total Group revenue growth and included
PhD's vegan Smart Bar Plant, SiS’s Protein20 bars and the SiS Football range;
Group gross margin of 44% (2018: 45% pro forma1) impacted by one-off items from inventory
and global whey commodity pricing;
Underlying operating loss2 of £0.3m (2018: loss of £2.7m) in line with growth strategy and
market expectations, reflecting continued investment in brand awareness, e-commerce and
international expansion;
Cash and cash equivalents of £5.4m (2018: £8.0m) in line with market expectations; and
Post period end the Group continues to perform in-line with expectations, with Covid-19
preparations having been in place for some weeks.
1pro forma compares to full year 2018 results for PhD and SiS brands (see page 16)
2excludes depreciation, amortisation, non-cash share-based payments, costs relating to the acquisition and integration of PhD
Nutrition, IFRS 16 Lease payments and foreign exchange variances on intercompany balances (see Note 1.9)
“2019 was a transformational year for Science in Sport as we integrated the PhD business as planned
and continued our strategic growth focus on e‐commerce and international, positioning the Group for
the next stage of its growth.
Our preparations for Covid-19 disruption have been underway for several weeks and measures
include buying sensitive raw materials, securing the supply chain operation, and remote working for
commercial and operations staff. Costs are being managed very tightly and contingency plans are in
place. We are well prepared to protect the Company and its workforce should the impact from Covid-
19 become extended.”
STEPHEN MOON
Chief Executive Officer
1
STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
£50.6 million revenue
2018: Pro forma1 - £41.0m, reported - £21.3m
Increase of 23% on pro forma, 137% on reported
£22.2 million Gross profit
2018: Pro forma1 - £18.4m, reported - £12.0m
£0.3 million underlying operating loss2
2018: £2.7m
£2.4 million Innovation revenue up 50%
2018: £1.6m
£5.4 million cash and cash equivalents
2018: £8.0m
Trustpilot ‘Excellent’ rating for both SiS and
PhD brands based on over 30,000 reviews
1pro forma compares to full year 2018 results for PhD and SiS brands (see page 16)
2excludes depreciation, amortisation, non-cash share-based payments, costs relating to the acquisition and integration of PhD
Nutrition, IFRS 16 Lease payments and foreign exchange variances on intercompany balances (see Note 1.9)
2
STRATEGIC REPORT
BUSINESS MODEL
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 gym lifestyle community. The Company has two highly regarded brands: PhD
Nutrition, a premium protein brand targeting gym lifestyle and sports enthusiasts, and SiS, a
leading brand among elite athletes and professional sports teams.
The two brands are sold internationally through multiple retail channels, both traditional and
online, including major supermarkets and high street chains, specialist sports retailers and e-
commerce sites including Amazon and the brands' own websites. They enable the Company
to address the full breadth of the performance nutrition market currently estimated at
approximately £10 billion worldwide.
Customer segments
PhD and SiS have highly complementary products ranges, operations and sales channels,
and unrivalled expertise in differing categories and geographies. Combined, these leading
brands create significant synergies, and the opportunity to leverage each others existing
markets, and together further penetrate existing markets and conquer new markets. Our
brands offer consumers an extended range of unbeatable products, helping to drive forward
our ambition to be the world’s #1 premium performance nutrition business.
Brands
SiS Science in Sport is a premium endurance sports nutrition brand. But above all else, it
represents constant progression. A desire to continually improve, push boundaries, translate
science to performance
Premium endurance sport nutrition brand for professional athletes and sports
enthusiasts;
Unrivalled reputation of scientific innovation and banned substance control;
Established presence in 80+ markets including the UK, USA, Italy, Australia, Russia
and China;
Strong online presence with established E-Commerce platform a strategic growth
driver;
Established third-party online partnerships include Amazon and TMall.
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STRATEGIC REPORT
BUSINESS MODEL
PhD is a premium performance nutrition brand with a wide range of protein products and
formats. Delivering performance nutrition that inspires and enables you to achieve your
goals.
Premium protein brand for gym lifestyle;
Exceptional reputation for innovation and portfolio extension through sub brands;
Established presence in 45+ markets including the Middle East and China;
Strong retail presence through key retail partners;
Growing E-Commerce platform and strong presence on Amazon and TMall.
Sales channels
The group operates four primary sales channels, which form the basis on which management monitor
revenue. UK Retail includes domestic grocers and high street retailers, e-Commerce is sales through
the phd.com and scienceinsport.com platforms, Export relates to retailers and distributors outside
of the UK and Market place relates to the Amazon and eBay platforms.
We continue to invest in online channels in line with our strategic model. Total online revenue across
e-commerce and marketplace grew from 30% in 2018 to 32% in 2019 on a pro forma full year basis.
Products for enhanced performance
SiS:
The SIS energy gel is the world’s first isotonic energy gel, delivering energy fast, clinically
proven to be absorbed more quickly in the gut, and with no need for added water. Using fully
patented technology and manufactured in-house, the gels are our most profitable product. The
gel range makes up 42% of SiS revenue (2018: 38%)
The range of SiS products includes:
o Energy – Bars, shots, gels and powders to give athletes energy
o Hydration – Gels, tablets and powders to keep athletes energised and hydrated
o Recovery – Powder range to aid athletes’ recovery post-exercise
o Rebuild – Powders, gels and bars to build and maintain lean muscle mass
o Athlete health – Vitamins and supplements range designed to support and maintain
immune function, digestive health and bone health amongst athletes
“I first started using SiS products in the mid-90s, and have used for three decades now, once
I found a company that I trusted I stuck with them. I trust Science in Sport for their rigorous
testing”
Sir Chris Hoy, Brand Ambassador
PhD:
The PhD Smart Range is made up of great tasting high protein, low sugar foods, bars and
snacks. This includes the Smart Bar, an on-the-go protein hit, the multi-use Smart Protein
suitable for cooking with, a ready-to-drink Smart Protein shake, and an oven-baked high
protein flapjack, Smartjack.
4
STRATEGIC REPORT
BUSINESS MODEL
The range of PhD products includes:
Fat loss High protein products like Diet Whey with additional ingredients such as
CLA, green tea and L Carnitine
Muscle Protein quality is vital to ensure muscle isn’t lost during exercise; PhD
performance nutrition has a superior range with delicious flavours
Strength & performance Ingredients such as creatine, BCAAs, glutamine, caffeine,
electrolytes, protein variants and vitamins and minerals, amongst many others are
targeted towards naturally and safely enhancing your performance
Energy Explosive energy or endurance. You decide your goals and PhD have the
products to make the difference
Recovery Protein, branch chain amino acids and various other active performance
ingredients play a vital role in optimising recovery after exercise and throughout the
day so you can go harder, faster and better the next day
Food & drink PhD have a market leading range of protein and performance bars,
ready-to-drink formulas and brand-new single serve squeezy smoothies, all
developed with the serious athlete in mind, but equally ideal for the beginner
Natural Plant proteins, superfoods, greens, wholefoods, naturally sourced
polyphenols, nitrates and vitamins and minerals all play a huge part in optimising
performance, which is why PhD have dedicated an entire range to them
Accessories From hoodies to shakers, you’ll find everything you need to make your
life that bit easier
“I have been using PhD products now for 4 years. I chose them because they are intelligent
and authentic and a perfect fit for me as an artist and athlete.”
Bugzy Malone, Brand Ambassador
“I am beyond excited to be joining the PhD family as you can be the most physically gifted
(or mentally resilient) human to ever pick up a barbell or lace up your trainers, but none of
this will matter unless you’re fuelled efficiently.”
Ross Edgley, Brand Ambassador
Where we operate
We have offices in the UK, US, Italy, and the Middle East, and have customers in over 80
countries worldwide.
Revenue in our US business has increased by 92% year on year and we have seen an
increase in gross profit margins due to favourable channel and product mix.
SiS Italy has increased revenue by 66% from the prior year and we expect this company to
become profitable in 2020.
SiS Australia recorded 46% revenue growth and was profitable in 2019.
Our people and culture
Our people make our business and we attract and develop the best. Our teams are passionate
about the brands, our customers, and the business. Performance matters to everyone. We
have committed teams in all our locations and invest in training and development as well as
opportunities to pursue individual and team sporting challenges, whatever they may be.
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STRATEGIC REPORT
STRATEGIC MODEL
Proven strategic model drives long-term value
We invest in our proven strategic model to drive growth across both our PhD and SiS brands.
The 5 strategic goals are illustrated below including details of how we drive them, and the
impact in 2019:
1. Performance Innovation:
Strong science and innovation-led product development
New research laboratory and partnership with Liverpool John Moores University, a
world recognised sports research centre of excellence
Performance solutions support to England Women’s Football Teams, Team INEOS
Cycling and INEOS TEAM UK, Britain’s entry in the 36th America’s Cup yacht race
25% of 2019 revenue growth from new product innovation
2. Brand experience
Market leading brand equity measures underpinning consistent, multi-year
improvement in brand awareness, consideration and usage.
SiS Partnerships with globally recognised leading sports teams such as Manchester
United, Team Ineos, USA Cycling and events like Tough Mudder and Rock n Roll
Marathon.
Inspiring and relevant brand ambassadors such as cyclist Sir Chris Hoy, musician
Bugzy Malone, swimmer Adam Peaty and Ross Edgley the first person to swim
round the UK the World’s longest staged sea swim
Marketing investment up 22% year on year to nearly £8m in 2019, and new brand
partnerships with Arsenal and Celtic signed
3. Drive ecommerce growth
PhD.com platform is a strategic priority given global scale of protein product sector.
Global Marketplace growth across Amazon, TMall and eBay platforms.
Significant investment in people capability across digital marketing, trading and
platform development.
Online revenue, a key strategic focus for the Group, grew strongly up 36% in 2019 to
£16.4million (2018: pro forma £12.0million)
4. World Class Customer Experience
New E-Commerce fulfilment facility with increased operational efficiency
Extended delivery reach and cut-off times plus enhanced customer service capability
New US logistics provider with improved delivery solutions options
‘Excellent’ Trustpilot Scores for both PhD and SiS brands from over 30,000 reviews
in 2019
5. Efficient manufacturing
Patented gel manufacturing technology with world’s only isotonic energy gel
World class approach to banned substance testing with both Informed-Sport and
Informed-Choice accreditations in place on our certified Nelson site.
New protein powder production line live on plan at Nelson factory in November 2019
6
STRATEGIC REPORT
PHD INTEGRATION AND PERFORMANCE SOLUTIONS
PhD Integration completed
On 6th December 2018 we acquired PhD Nutrition, a transformational acquisition for the
Group. During 2019 we completed the four integration goals in line with plan:
1. PhD.com relaunched on our Group online platform and increased investment
committed
2. New E-Commerce fulfilment facility supporting UK and International online revenue
growth with increased operational efficiencies
3. Integrated commercial team selling both brands across our UK and International Retail
businesses
4. New protein powder production line live on budget and on time, increased efficiency
from new infra-red blending technology and greater capacity driving margin savings
During the integration the PhD brand grew 23% ahead of the 6-year CAGR of 8% which PhD
had previously achieved prior to acquisition.
Performance solutions
Performance Solutions builds on Science in Sport’s world-leading sports nutrition by
embedding dedicated SiS nutritionists in athletes’ support teams to provide tailored nutrition
strategies to meet individual athlete’s complex and varying needs.
Three initial Partnerships: England Women’s Football Teams, Team INEOS Cycling and
INEOS TEAM UK, Britain’s entry in the 36th America’s Cup yacht race. represent three different
endurance sports.
Dr James Morton, Professor of Exercise Metabolism at Liverpool John Moores, one of the
world’s leading academic institutes on sports science, is the new SiS Director of Performance
Solutions, accessing the university’s best-in-class sports laboratories to conduct research and
create bespoke performance solutions.
“We are bringing a combination of academic rigour and world class practitioner skills to the
frontline of elite sports. By bringing a performance first approach, we are going to help athletes
get faster, stronger, fresher, smarter and, above all, hopefully contribute to winning. I’m excited
about SiS making a difference to performances across multiple sports and seeing the
performance solution methodology come to life.”
Dr Morton, SiS Director of Performance Solutions,
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STRATEGIC REPORT
CHAIRMAN’S REPORT
“2019 was a transformational year for the Group. We successfully integrated the commercial,
operational and online elements of PhD, whilst delivering record revenue growth. Our strategy
of investment in brand equity and science-led product innovation for both of our premium
brands remains unchanged. Strategic routes to market are e-commerce and international and
we have invested in both of these areas, to position the business to be a global leader in
premium performance nutrition.
We are in uncertain times given the current Covid-19 crisis and the Board are working closely
with the executive management team on contingency planning.”
Overview
We are delighted to announce another strong set of results for the year ended 31 December
2019. Group revenue was £50.6m, 23% ahead of the same period in 2018 on a pro forma
basis1.
Underlying operating loss2 was £0.3m (2018: loss of £2.7m) in line with market expectations
and reflected continued investment in our online and international businesses. Reported loss
before tax was £5.1m (2018: loss of £6.0m).
Our cash position remains strong with a year-end balance of £5.4m (2018: £8.0m).
Our long-term priority continues to be further developing the e-commerce opportunity and
seeking strong growth in international markets. Science-led innovation will continue to be a
growth driver for the business.
We continue to see further margin improvement opportunities from supply chain optimisation
following the integration of PhD and favourable channel and product mix.
The Board continues to be focused on building shareholder value through improving
profitability and driving our strategic growth markets towards profitability.
Our strategy remains unchanged, focusing on science-led innovation, building brand equity,
taking our share of e-commerce business and developing global markets.
Our people
The continued strength of the Group is due to the hard work and dedication of all the people
who work for our PhD and SiS brands. I would like to thank them all for their contribution,
especially for the commitment and focus they have shown throughout this year, during the
integration of the PhD business and for delivering another sector leading performance.
This year we have strengthened the executive management team and senior leadership by
attracting experienced talent from market-leading businesses to drive the next stage of our
growth. In addition, we have continued to invest in existing employees who are being
supported through professional training relevant to their functional areas, as well as other
relevant role-specific training.
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.
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STRATEGIC REPORT
CHAIRMAN’S REPORT
Since the period end the Company has appointed Roger Mather to the Board and nominated
him as Chair of the Audit Committee. Tim Wright, an existing Board member, has been
nominated as Chair of the Remuneration Committee.
The culture of the Group is to be entrepreneurial and innovative, always committed and striving
for excellence, as our consumers do. Acting responsibly is critical to our business performance
and the Group takes its obligations to act responsibly 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
17 March 2020
1pro forma compares to full year 2018 results for PhD and SiS brands (see page 16)
2excludes depreciation, amortisation, non-cash share-based payments, costs relating to the acquisition and integration of PhD
Nutrition, IFRS 16 Lease payments and foreign exchange variances on intercompany balances (see Note 1.9)
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STRATEGIC REPORT
CHIEF EXECUTIVE’S REPORT
Strategic intent
Our intent is for the Group to become the world's leading premium performance nutrition
business through its PhD and SiS brands. This is underpinned by the following key principles
and strategic actions:
1. Continuing to drive growth for both brands through a science and innovation-led
pipeline, including current and new technologies and formats;
2. Developing the manufacturing facility and international logistics footprint to underpin
market leading gross margins;
3. Continued investment in building the equity in both the PhD and SiS brands to drive
sales through increased awareness and usage;
4. Developing our online business through a combination of our own proven e-commerce
platform and key marketplace channels; and
5. Extending our international presence in all major global markets, using an omni-
channel approach to maximise the opportunity.
The Board believes there continues to be a significant growth opportunity, both organic and
inorganic, to extend our existing product range and deliver synergies from our distribution, e-
commerce and supply chain capabilities.
Online
Our PhD.com and scienceinsport.com e-commerce platforms are central to our growth
strategy in our key domestic and international markets and we were pleased to deliver revenue
of £10.1m, up 39% (pro forma1) compared with the previous year. Our new PhD.com e-
commerce business launched online in the second half and had a strong finish to the year.
2020 will see PhD.com as a priority in the UK and we also intend to launch new sites for both
of our brands in key markets including Germany and Italy. To support this growth, we have
now completed a major recruiting campaign, which has seen an influx of new talent from
leading brands including Heineken and Virgin Active.
Marketplace channels including Amazon and TMall are an integral part of our strategy and in
some international markets are seen as the lead growth channel. Revenue was £6.2m for the
year, 30% ahead of 2018 (pro forma1). A new Head of Marketplace joined the team in January
2020, and we will continue to recruit and develop talent to underpin our growth ambition for
this channel.
International
Distributor serviced international markets grew 42% (pro forma1) to £12.3m in 2019. This
included strong organic growth in existing markets for both brands, including PhD in the Middle
East and China, and SiS in Europe. New markets opened up for PhD included Russia, Saudi
Arabia and Turkey. SiS made inroads into the Middle East and several Latin American markets
including Colombia and Brazil.
We continued to invest in our SiS brand in the USA and delivered 92% revenue growth year-
on-year, with gross margin improving given the favourable channel and product mix. We made
strong progress with our own e-commerce platform, our Amazon business and through retail
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STRATEGIC REPORT
CHIEF EXECUTIVE’S REPORT
distributors, this latter channel being important for awareness and product trial. During the
year we carried out extensive consumer research to assess the potential for the PhD brand
and this delivered highly promising data which we will act on in due course.
Our SiS businesses in Italy and Australia grew revenues by 66% and 46% respectively, again
with progress made in e-commerce, Amazon and through running and cycling retail channels.
The Australian business was breakeven in 2019 and we expect the Italian business to become
profitable in 2020.
UK Retail
The retail environment continues to be challenging in our core market. Despite this, our
success in delivering innovation and bringing our category presence to bear through our brand
portfolio resulted in new distribution and strong organic growth in the grocery channel.
Innovation and new distribution drove growth in Tesco and Sainsbury’s, while we gained new
listings for PhD in Aldi and for SiS in Lidl.
We continued to develop our High Street business, with Holland & Barrett representing a major
source of revenue for the Group. The third-party online channel was challenging, although
given our focus on our own e-commerce platform and Amazon, this was expected.
Overall, revenue from our UK retail business grew by 8% (pro forma1), which was a pleasing
result given the climate in the high street and independent channels.
Football
We continue to invest in this channel and believe it represents a long-term strategic initiative.
As well as being official nutrition partners to Manchester United, Arsenal and Celtic, we sell
products to more than 100 elite clubs across the UK, Europe and the USA. Our sisfootball.com
e-commerce platform is also performing strongly, and overall revenue from our Football
business grew 94% year-on-year.
Supply Chain
The integration of PhD into our supply chain was a major focus in the year. We opened a new
e-commerce fulfilment facility to combine operations for both the PhD and SiS brands in June
2019 which is performing very effectively and delivering high levels of customer service. A
new protein powder filling line was commissioned during November, on time and in line with
cost estimates and we expect this project to payback in under 14 months.
Gross margin for the overall business was 44%, slightly down on 45% pro forma1 2018 margin.
This was driven by one-off inventory costs, together with increased whey protein costs in the
final months of the year. We remain positive on gross margin given we expect further
manufacturing efficiencies and favourable channel and product mix benefits.
Outlook
We have planned for a further strong year of revenue growth in 2020 with innovation, e-
commerce and international expansion being key drivers. With integration of the PhD and SiS
brands complete, we expect to deliver further cost savings as a result of supply chain
efficiencies.
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STRATEGIC REPORT
CHIEF EXECUTIVE’S REPORT
COVID-19 preparations
At present trading is in line with expectations. While we are seeing sharply reduced revenue
in Italy, China revenues have recovered in March and we have received strong forward orders.
We are working with key customers to ensure their inventory protects the next weeks of
consumer demand.
Preparations for Covid-19 related disruption have been in place for some weeks. Several
months cover of certain sensitive raw materials are secured. Our Nelson manufacturing site
and two third-party logistics operations have been isolated from each other and shift patterns
in both operational units have also been separated, with cleaning processes taking place
between shifts. Our office based teams in all functions, including e-commerce operations and
customer service, have commenced a full work from home policy.
The situation is being monitored daily and management has developed contingency plans to
protect the Company and its workforce should the impact from Covid-19 become extended
STEPHEN MOON
Chief Executive Officer
17 March 2020
1pro forma compares to full year 2018 results for PhD and SiS brands (see page 16)
2excludes depreciation, amortisation, non-cash share-based payments, costs relating to the acquisition and integration of PhD
Nutrition, IFRS 16 Lease payments and foreign exchange variances on intercompany balances (see Note 1.9)
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STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
In the course of its normal business, the Group is exposed to a range of risks and uncertainties, which
could impact on the future results of the Group. 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 Group and considers the adequacy of the controls and mitigations to manage these
risks.
Internal Controls
The Group has an established framework of internal controls, the effectiveness of which is reviewed
regularly by the Executive team, the Audit Committee and the Board as part of an ongoing assessment
of significant risks facing the Group.
The Group’s key risks (financial, operational and reputational) are recorded on a Business Risk Register
and those risks together with their controls, mitigating and corrective actions are reviewed regularly by
the Board. Risk is a standing agenda item for the Board and senior managers are required to review,
identify and report on risks on an ongoing basis and review all key risks on a quarterly basis.
The key features of the Group’s system of internal control are as follows:
An ongoing process of risk assessment to identify, evaluate and manage business risks and
opportunities;
Comprehensive procedures for budgeting and planning and for monitoring and reporting to the
Board business performance against plans;
A consistent system of prior appraisal for investments overseen by the Chief Financial Officer and
Chief Executive Officer;
An organisational structure with defined levels of responsibility, which promotes entrepreneurial
decision- making and rapid implementation while minimising risk;
Central control over key areas such as capital expenditure, authorisation and banking facilities;
The Group continues to review its system of internal control to ensure compliance with best practice,
while also having regard to its size and the resources available. Due to the size of the business there
is no internal audit function. As part of the Group’s review a number of non-financial controls covering
areas such as regulatory compliance, business integrity, health and safety, risk management and
business continuity have been assessed.
The Directors have identified the following principal risks and uncertainties that could have the most
significant impact on the Group’s long-term value generation.
PRINCIPLE RISK HEAT MAP
High
1
7
2 8
9
Impact
5
Low
Low Likelihood
High
4
6
6
3
i
n
d
i
v
i
d
u
a
l
a
t
h
l
e
t
e
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STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
RISK
RATING
2019
2018
RISK
1 FOOD QUALITY & SAFETY
Accidental or malicious ingredient
contamination, or supply chain
contamination caused by human error
or equipment fault or due to
manufacturing or design faults could
compromise the safety and quality of
SIS and PhD products.
2019
2018
2019
2018
2019
2018
2 COMMODITY PRICING RISK
Movement in the commodity prices of
raw materials and, in the case of
imported raw materials and other
goods, the value of Sterling against
other currencies may have a
corresponding impact on finished
product cost.
3 BREXIT IMPACT
Risk to the import of raw materials and
the export of finished goods following
UK exit from EU on 31st January 2020
4 CUSTOMERS & CONSUMERS
The Group operates in a competitive
market sector and its ability to
compete effectively requires an
ongoing commitment to marketing,
product development, innovation,
product quality and ability to offer
value for money as well as first-class
customer service.
POTENTIAL IMPACT
MITIGATION CONTROLS
The consequences could be severe and
may include adverse effects on
consumer health, loss of market share,
financial costs and loss of revenue to
SIS. A product recall may be required
as a result, a subsequent product re-
launch may not successfully return the
relevant brand to its previous market
position.
The Group’s stringent approach to food
quality and safety is controlled via quality
assurance procedures which are based on
a risk management approach. Internal
systems are reviewed continuously and
potential for improvement is monitored.
The manufacturing facility at Nelson is
subject to regular food safety and quality
control audits. At the beginning of 2018 we
enhanced our banned substance testing
regime to ensure we remain best in class.
The Group maintains product liability
insurance cover to mitigate the potential
impact of such an event.
Failure to manage the Group’s exposure
to price increase may adversely affect
the Group’s financial performance,
through increasing production costs
which cannot be mitigated through price
increases.
The risk is mitigated by securing supplies
in advance based on estimated volumes,
thus ensuring greater price certainty. A
hedging policy covering Euro purchases of
our key finished product is now in place to
reduce foreign exposure risk on purchases.
Delays at port may reduce availability of
raw materials and disrupt production,
and delay deliveries to the end
consumer therefore impacting revenue
and customer service. Tariffs may need
to be absorbed therefore impacting
profitability.
Although no single retailer accounts for
more than 9% of Group revenue, the
dominance of the large retail multiples
and third-party e-commerce retailers
could force an erosion of prices and,
subsequently, profit margins.
5 TRADEMARKS AND IP
The Group’s success will depend in
part on its ability to obtain and protect
its trademarks both in the UK and
internationally.
2019
2018
The Group cannot give definitive
assurance that pending or future
trademark applications will be granted
or that trademarks granted will not be
challenged or held unenforceable.
6 PHD INTEGRATION
Significant business-wide change
being implemented following the
acquisition of PhD.
7 FACTORY DISRUPTION
The landlord is proposing to carry out
remedial underpinning to rectify
subsidence, which will cause a two-
week break in gel production and
require sectioning of the facility whilst
work is completed.
8 LIQUIDITY
Ensuring the Group has sufficient cash
reserves to
2019
2018
2019
2018
Additional revenue and cost savings
expected following the acquisition and
will be impacted if there are delays in
the integration programme, for example
delay in PhD.com website launch.
There is a risk of overrun with building
works and further disruption to
production, which could result in supply
chain delays and subsequent missed
revenue.
2019
2018 n/a
Consequences of insufficient liquidity
could be severe if the group is not able
to pay key suppliers and employees on
time
9 COVID-19
2019
2018 n/a
We have assessed the business risk as
high due to significant uncertainties and
14
During 2019 a Brexit working group
identified the major risks associated with
leaving the EU. Where possible we put in
place mitigating actions to reduce the
potential impact to the business.
Consequently, we have assessed the risk
as medium (2018 High).
Significant resources are devoted to
forging strong relationships with customers.
The continued move to Online also
diversifies the revenue channels, and
reduces key customer reliance. With the
acquisition of PhD the relative size of the
largest customers has decreased reducing
risk.
To mitigate this, the Group enters into non-
disclosure agreements with employees,
consultants and prospective commercial
partners but cannot assure that such
agreements will provide complete
safeguards against unauthorised
disclosure of confidential information.
PhD integration has been successfully
completed with the powder line producing,
PhD.com transitioned to Magento platform,
Commercial teams merged and integrated
web fulfilment facility opened.
Contractual obligations on the landlord to
complete the works to plan, with liquidated
damages for delays.
Cashflow forecasts are prepared and
reviewed by senior management, with all
payments approved in advance. The Group
adjusts investment levels as appropriate to
maintain cash balances in line with
forecasts. Credit facilities are in the
process of being agreed with our banking
provider.
Preparations for COVID19 related
disruption have been in place for some
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
RISK
COVID-19 coronavirus presents a
significant global challenge
RISK
RATING
POTENTIAL IMPACT
MITIGATION CONTROLS
the potential high level of disruption to
our employees, customers and supply
chain at this early stage of the virus
outbreak.
weeks. Several months cover of certain
sensitive raw materials are secured. Our
Nelson manufacturing site and two third-
party logistics operations have been
isolated from each other and shift patterns
in both operational units have also been
separated, with cleaning processes taking
place between shifts. The manufacturing
operation is stock building fast moving
products such as SiS gels and PhD protein
powders, while our contract partners are
assisting us in stock building products such
as PhD Smart Bar. Our office based teams
in all functions, including e-commerce
operations and customer service, have
commenced a full work from home policy.
Key
Low
Medium
High
15
STRATEGIC REPORT
FINANCIAL REVIEW
This is the first full year reported following the acquisition of PhD Nutrition in December 2018.
Revenue
The Group has continued to grow strongly during the year ended 31 December 2019, with
revenue increasing 137% to £50.6m (2018: £21.3m) driven by the full year effect of the PhD
acquisition. Pro forma revenue growth was 23%.
Revenue growth was achieved through a particularly strong performance across e-commerce,
third-party online retailers and international channels and reflects the continued prioritised
investment in these strategic channels. This investment resulted in these channels delivering
83% of revenue growth in the year.
Gross margin
The Group generated a gross profit of £22.2m (2018: pro forma £18.4m, reported £12.0m)
achieving a gross margin of 44%, compared with 45% pro forma gross margin in 2018. Gross
margin was slightly lower due to one-off inventory impacts and whey global commodity prices.
The Group’s reported gross margin was 56% in 2018 however, this only included PhD results
for part of December. Gross margin improvement is a key opportunity for the combined
business through initiatives such as insourcing PhD protein manufacture and scale benefits in
areas including purchasing and logistics.
PhD Pro forma
Pro forma comparatives are based on the 2018 full year results for PhD and SiS brands. PhD
was acquired by SiS plc on 6 December 2018, consequently, results for PhD from acquisition
date only are consolidated in these accounts.
For comparability pro forma full year figures for 2018 and 2019 for both PhD and SiS are
shown below
£'000
Revenue
SiS
2019
PhD
2018 (unaudited)
Total
SiS
PhD
Total
24,601
25,972
50,573
19,813
21,161
40,974
Cost of goods
(10,702)
(17,664)
(28,366)
(8,287)
(14,245)
(22,532)
Gross Profit
13,899
8,308
22,207
11,526
6,916
18,442
Underlying operating loss
The underlying operating loss of £0.3m* (2018: loss of £2.7m) 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 market expectations. Loss from
operations was £5.0m (2018: loss of £6.0m)
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 believes that the
operating loss before items such as depreciation, amortisation, non-cash share based
payments and PhD acquisition related expenses provides additional useful information for
16
STRATEGIC REPORT
FINANCIAL REVIEW
Shareholders to assess cash profit performance. This measure is used for internal
performance analysis. A reconciliation of underlying operating loss to loss from operations is
presented in Note 1.
Working capital
As at 31 December 2019 the Group held inventory of £6.1m (31 December 2018: £7.1m).
Inventory levels decreased, despite 23% pro forma revenue growth, due to improved working
capital management. Trade and other receivables were £10.9m (31 December 2018: £8.9m).
Cash position
The cash balance as at 31 December 2019 was £5.4m (31 December 2018: £8.0m). During
the year cash use primarily relates to investment in brand, new product development, working
capital requirements, and the new in-house powder production line.
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 published in August 2013. A new LTIP scheme for financial years
2019-2021 is in place, though no options were granted in 2019 and consequently no charge
has been recognised in the year. The Company has recognised a share based payment
charge for the STIP scheme of £0.6m for the year (2018: £1.5m).
Taxation
The current tax charge is £Nil (2018: £Nil) due to the loss made in the year. The deferred tax
charge of £0.6m (2018: £0.1m credit) is primarily due to an unprovided deferred tax asset on
losses carried forward. The Group has estimated tax losses of £14.1m, which the Group will
look to use to cover future profits.
Losses and dividends
The loss attributable to equity holders of the parent for the year was £5.6m (2018: £5.9m) and
the basic and diluted loss per share was 4.6p (2018: loss of 8.2p). The payment of a dividend
cannot be recommended due to negative retained earnings.
Going concern
The Group made a loss after tax for the year attributable to owners of the parent of £5.6m
(2018: loss of £5.9m) and expects to make a further loss after tax in the year ending 31
December 2020.
The net decrease in cash and cash equivalents in the year ended 31 December 2019 was
£2.6m (2018: £8.6m increase). As at 31 December 2019 the Group had cash balances of
£5.4m (31 December 2018: £8.0m).
The Directors have prepared projected cash flow information for a period ending 31 December
2021.
We have enacted contingency plans to protect cash reserves as the priority in response to the
Covid-19 coronavirus outbreak.
17
STRATEGIC REPORT
FINANCIAL REVIEW
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.
JAMES SIMPSON
Chief Financial Officer
17 March 2020
18
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY
Acting responsibly is critical to our business performance and therefore, the Group takes its obligations
to act responsibly very seriously.
Employees
Our employees are key Stakeholders and assets within the business and the Board closely monitors
and reviews the results of employee engagement surveys as well as other feedback it receives to
ensure alignment of interests.
The Executive Directors keep staff informed of the progress and development of the Group on a regular
basis through formal and informal meetings.
Over the past year we have implemented a number of activities designed to enhance employee
engagement and wellbeing, these include an informal forum across all UK locations, group bike rides
and events for staff participation in sport.
We are Investor in People accredited and have a number of employees completing further education in
their areas of expertise, for example, MBA, finance and supply chain qualifications.
The Group does not discriminate between employees and prospective employees on grounds of age,
race, religion or gender. Every effort is made to provide the same opportunities to disabled persons as
to others.
The Board recognises its obligation towards employees to provide a safe and healthy working
environment. The Group complies with health & safety legislation conducting regular inspections and
risk assessments.
Gender diversity
We are proud of our diverse workforce and believe it is vital to our success as a leading international
sports nutrition business.
Directors
Senior Managers
All employees
Suppliers
Male
Female
5
21
92
-
5
69
Our suppliers are key business partners and we maintain an open dialogue with all of our key suppliers.
We aim to pay our suppliers on time according to our agreed credit terms.
During the year we have organised regular factory visits to foster understanding and collaboration. We
operate with mutual confidentiality agreements in place and conduct open and two-way conversations
with our biggest suppliers about our business and strategy.
The relationships we have with our European suppliers have played a key part in our Brexit planning.
Customers
As with any business, our customers are our key Stakeholders, and we work hard to improve our
offering and customer service.
Our continued investment in our website has enhanced the customer experience and we continually
collect and respond to customer feedback online. Customer feedback will play a key part in our Long
Term Incentive Plan from 2019 onwards.
19
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY
We have also broadened our contact with key trade and retail partners and have organised regular
factory visits for them, as well as visiting our International distribution partners around the world.
Preventing banned substances
The Science in Sport brand is trusted by professional and Olympic athletes in a range of sports across
the world. A key component of this trust is our approach to preventing banned substances entering its
supply chain and finished products. In line with this, Science in Sport is the only brand globally to hold
both Informed Sport Site Certification and Informed Product Certification. Each year an internal review
of the banned substance prevention regime takes place, and from January 2018 an upgraded system
was implemented to continually improve and evolve the controls and systems within the Company. The
Company regime is built on the following pillars:
- Every single batch of Science in Sport finished product which leaves the Company’s factory is
screened against the World Anti-Doping Agency (“WADA”) list. Banned substances including
steroids are tested to the level of 10 Nanograms per gram, and stimulants to 100 Nanograms
per gram.
- Batches (sampled at the beginning, during and end of each product batch) receive the
recognised and respected Informed Sport certificate. Finished product testing is the final and
most effective step that we have to ensure product assurance.
- Raw material batch testing, in addition to testing on finished goods, for any product deemed
‘high-risk’.
- Full trace management of all raw materials from raw material base and manufacturing supplier,
through to finished goods manufactured per production batch. This allows the Company to
demonstrate to athletes the source of ingredients and all parties involved in the manufacturing
process.
- Rigorous screening of all ingredient suppliers, including annual auditing. All suppliers are
required to be certified to a recognised Quality Management system that is approved by The
Global Food Safety Initiative.
-
In-house product screening within the Company’s production facility in Nelson, Lancashire,
including swab testing for banned substances, and surprise third-party inspections throughout
the year.
20
STRATEGIC REPORT
BOARD ENGAGEMENT WITH OUR STAKEHOLDERS
This section serves as our section 172 statement and should be read in conjunction with the Strategic
Report, the rest of the Company’s Corporate Governance Statement, and the Corporate Social
Responsibility Report.
Section 172 of the Companies Act 2006 requires a Director of a company to act in the way he or she
considers, in good faith, would be most likely to promote the success of the company for the benefit of
its members as a whole. In doing this, section 172 requires a Director to have regard, among other
matters, to: the likely consequences of any decision in the long term; the interests of the company’s
employees; the need to foster the company’s business relationships with suppliers, customers and
others; the impact of the company’s operations on the community and the environment; the
desirability of the company maintaining a reputation for high standards of business conduct; and the
need to act fairly with members of the company.
The Directors give careful consideration to the factors set out above in discharging their duties under
section 172.
Stakeholder engagement
Key stakeholder groups which we’ve identified are listed below, with why we focus on them and how
we engage them
Employees
The continued strength of the Group is the hard work and dedication of all the people who work for
PhD and Science in Sport. We have continued to invest in existing employees who are being
supported through professional training relevant to their functional areas, as well as other relevant
role-specific training.
The Executive Directors keep staff informed of the progress and development of the Company on a
regular basis through formal and informal meetings and regular communications. In addition, we fund
regular team events to encourage employee participation in sport.
Customers
As with any business, our customers are our key stakeholders, and our key strategic model investments
in product innovation and customer service are designed to improve our customers’ experience.
We constantly invest in our website to improve our customer proposition, and we collect and respond
to online customer feedback continually to improve our offer. We have also broadened our contact with
key trade and retail partners and have organised regular factory visits for them, as well as visiting our
International distribution partners around the world
Suppliers
Our suppliers are key business partners, and the quality of raw materials and services we receive are
essential to maintain our premium product position.
During the year we have organised regular factory visits to foster understanding and collaboration. We
operate with mutual confidentiality agreements in place and conduct open and two-way conversations
with our biggest suppliers about our business and strategy.
Investors
Investor are a key stakeholder for the future success of the Group, and consequently investor
relations are a key focus area for the Directors.
The Board regularly engages investors on Group performance following trading updates and results
announcements with face to face meetings and scheduled calls. Investors are kept regularly up to
date with strategy presentations, and an open invitation to visit the factory was accepted by several
investors during the year.
21
STRATEGIC REPORT
BOARD ENGAGEMENT WITH OUR STAKEHOLDERS
Decision making
We set out below two examples of how the Directors have had regard to the matters set out in section
172(1)(a)-(f) when discharging their duties under section 172 and the effect of that on certain
decisions taken by them. In addition to stakeholders discussed above, the impact on the Environment
and Community in which the group operates was considered, although, given the size and nature of
the Company’s operations, the ongoing impact of the Company’s operations on the local community
and the environment is not considered to be significant.
The board considered impacts and potential conflicts between these stakeholder groups in reaching a
decision and sought to act fairly by balancing these different agendas in the context of its duty to act
to the overall benefit of its members.
Web fulfilment centre
The decision was taken to improve the customer delivery experience by opening a dedicated
fulfilment centre. The additional employees required to run the facility were recruited from the local
community. An existing building located next to the factory was selected to reduce the environmental
impact from a greenfield site and to reduce the environmental impact of additional transportation. Key
investors were informed of the opening of the facility and given an opportunity to visit the site, which
some have already accepted.
Powder production
The decision was made to produce protein powder in-house as a source of competitive advantage in
line with the group strategy communicated in the Strategic Report. Training was provided in operating
the new machinery to employees who all live in the local area. Producing powder in-house reduces
road miles moving product from third party manufacturers to the warehouse with an associated
environmental benefit. The adverse impact on terminating the existing manufacturers relationship was
considered, however on balance the strategic advantage secured and cost savings from the decision
was assessed to benefit the members of the company as a whole. Key investors were kept updated
on project progress and given an opportunity to visit the line once operational which some have
already accepted.
The decisions reached by the board in both instances are considered consistent over both a short and
long-term perspective, and in line with the group’s communicated strategy to drive online revenue
growth and leverage manufacturing and as a competitive advantage.
22
GOVERNANCE
DIRECTORS’ REPORT
The Directors present their report together with the consolidated financial statements for the year
ended 31 December 2019.
Certain information that fulfils the requirements of the Directors’ report can be found elsewhere in this
document and is referred to below. This information is incorporated into this Directors’ report by
reference.
As at the date of signing this report, Science in Sport plc has five wholly owned subsidiaries. A complete
list is provided in Note 4 to the Parent Company financial statements on page 82.
Future developments
The Strategic report and the Chairman and Chief Executive reports cover the Group’s performance
during the year ended 31 December 2019, its position at that date and its likely future development.
Board of Directors
The Board of Directors has overall responsibility for the Company.
The Directors of the Company during the year and up to the date that the financial statements were
approved are shown below.
Executive Directors
S N Moon
EJ Lake (resigned 10th September 2019)
J L Simpson (appointed 26th September 2019)
Non-Executive Directors
J M Clarke
T Wright
R Duignan (resigned 31st January 2020)
R Mather (appointed 31st January 2020)
Details of Directors are included on pages 31 to 32.
A qualifying third-party indemnity provision as defined in Section 234 of the Companies Act 2006 is in
force for the benefit of each of the Directors in respect of liabilities incurred as a result of their office, to
the extent permitted by law. In respect of those liabilities for which Directors may not be indemnified,
the Company maintained a Directors’ and officers’ liability insurance policy throughout the financial
year.
Details of each Directors’ interests in the Company’s Ordinary shares and options over Ordinary shares
are set out in the Remuneration report on pages 34 to 37.
Dividends
No dividends were paid and none proposed (31 December 2018 – £nil).
Financial risk management
The Group’s risk management policies can be found in Note 2.
23
GOVERNANCE
DIRECTORS’ REPORT
Going concern
The Group’s business activities, together with the factors likely to affect its future development,
performance and financial position, are set out in the Strategic report. The risks that the business faces
in the coming year, including the current economic climate, Covid19, and the mitigating actions which
address these risks are set out in pages 13 to 15.
As at 31 December 2019, the Group had cash balances of £5.4m (2018: £8.0m). The net decrease in
cash and cash equivalents in the year ended 31 December 2019 was £2.6m (2018: £8.6m decrease).
The Group made a loss after tax for the year attributable to owners of the parent of £5.6m (2018: loss
of £5.9m) and expects to make a further loss after tax in the year ending 31 December 2020.
The Directors have reviewed the Group’s budgets and projected cash flow forecasts for the period to
31 December 2021 and in doing so considered reasonable, possible changes over the forecast period.
The review considered the forecast operating cash flows generated, cash flow implications of the
Group’s strategic plans and the forecast impact of the Covid-19 pandemic on demand. Management
have enacted contingency plans to protect cash reserves and have identified spend reductions to offset
reasonably possible reductions in revenue if needed.
Accordingly, the Directors have a reasonable expectation that the Company will have sufficient cash to
meet 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.
Employee Benefit Trust Shares
The Company issued no £0.10 Ordinary shares to the Employee Benefit Trust (2018: 342,129) to satisfy
the provision of the share scheme (see note 20).
Share Capital Structure
Details of changes in the Company’s share capital are disclosed in note 19 of the financial statements.
Substantial shareholdings
As at 31 December 2019, the following Shareholders own more than 3% of issued share capital of the
Company:
Shareholder
Tellworth Investments
Legal & General Investment Management
Aviva Investors
JO Hambro Capital Management
Otus Capital Management
Downing
PhD Acquisition Bidco Limited
River & Mercantile Asset Management
Premier MIton Investors
Baillie Gifford & Co
Number of
shares
16,736,985
13,229,475
13,000,032
10,130,000
7,554,693
6,819,809
5,833,334
5,220,000
4,251,481
3,788,336
Percentage holding
%
13.63
10.77
10.58
8.25
6.15
5.55
4.75
4.25
3.46
3.08
24
GOVERNANCE
DIRECTORS’ REPORT
Auditors
In the case of each of the persons who are Directors of the Company at the date when this report was
approved:
so far as each of the Directors is aware, there is no relevant audit information of which the
Company’s auditor is unaware; and
each of the Directors has taken all the steps that he/she ought to have taken as a Director to
make himself/herself aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
BDO LLP has indicated its willingness to continue in office and a resolution will be proposed at the
annual general meeting to reappoint BDO LLP as auditor for the next financial year.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under
Company law the Directors have elected to prepare the Group and Parent Company financial
statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
Under company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group and Company and of the profit or
loss of the Group for that period. The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies trading securities on the
Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether the Group financial statements have been prepared in accordance with IFRSs as
adopted by the European Union, subject to any material departures disclosed and explained in the
financial statements;
state whether the Company financial statements have been prepared in accordance with IFRSs
as adopted by the European Union and as applied in accordance with the provisions of the
Companies Act 2006, subject to any material departures disclosed and explained in the financial
statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial statements comply with the
requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual report and the financial statements are made
the Company’s website,
available on a website. Financial statements are published on
www.scienceinsport.com, in accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may vary from legislation in other
25
GOVERNANCE
DIRECTORS’ REPORT
jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements
contained therein.
By order of the Board
STEPHEN MOON
Chief Executive Officer
17 March 2020
26
GOVERNANCE
CORPORATE GOVERNANCE REPORT
Chairman’s introduction to Corporate Governance
It is the Chairman of the Board of Directors of Science in Sport plc responsibility to ensure that SiS has
both sound corporate governance and an effective Board. The Chairman’s principal responsibility is to
ensure that the Company and its Board are acting in the best interests of shareholders. This is done by
ensuring that Science in Sport is managed for the long-term benefit of all shareholders, with all members
of the Board able to contribute to discussions and decision-making. Corporate governance is an
important part of that role, reducing risk and adding value to our business.
Other responsibilities include leading the Board effectively, overseeing the Company’s corporate
governance model, making sure that good information flows freely between Executives and Non-
Executives in a timely manner, and for ensuring that all important matters, in particular, strategic
decisions, receive adequate time and attention at Board meetings.
Our values are based on science, innovation and quality, and translate into everything we do for our
customers, people, suppliers and shareholders. Our culture supports the Company’s objectives to grow
the business through athlete customer acquisition and retention in key strategic markets globally.
SiS adopted the Quoted Companies Alliance Corporate Governance (QCA Code) in September 2018.
This report follows the QCA Code guidelines and explains how we have applied the guidance.
The Board recognises the importance of good corporate governance and considers that a strong
corporate governance foundation is essential in delivering shareholder value through long-term success
and performance. The Board believes that corporate governance is more than just a set of guidelines;
rather it is a framework which underpins the core values for running our business, including a
commitment to open and transparent communications with stakeholders. The QCA Code has ten
principles that companies should look to apply within their business. SiS seeks to adhere to these
principles to the highest level possible.
Set out below is an explanation of how the Company currently complies with the principles of the QCA
Code and, to the extent applicable, those areas where the Company’s corporate governance structures
and practices differ from the expectations set out in the QCA Code. Further details can also be found
on the Company’s website (www.sisplc.com/about-us/corporate-governance/).
The Board believes that application of the QCA Code supports the Company’s medium to long-term
development whilst managing risks, as well as providing an underlying framework of commitment and
transparent communications with stakeholders. It also seeks to develop the knowledge shared between
the Company and its stakeholders.
Strategy and Risk Management
A description of the Company’s business model and strategy can be found on page 3, and the key
challenges in their execution can be found on pages 13-15.
27
GOVERNANCE
CORPORATE GOVERNANCE REPORT
Board of Directors
The Board is led by the Non- Executive Chairman, John Clarke, and comprises, two additional Non-
Executive Directors, both of whom are independent, and two Executive Directors.
The Non – Executive Chairman, John Clarke owns shares in the Company and is a participant in the
Group’s Long Term Incentive Plan as detailed in the Remuneration Report. The Board are satisfied that
he remains impartial.
The effectiveness of the Board is kept under review by the Chairman who has been assessing the
individual contributions of each of the members of the team to ensure that; their contribution is relevant
and effective, they are committed and where relevant, they have maintained their independence.
Board performance is reviewed on an ongoing basis as a unit to ensure that the members of the board
are collectively functioning in an efficient and productive manner.
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills
and experience, including in the areas of FMCG, finance, corporate finance, international trading, and
marketing. In addition to their general Board responsibilities, Non- Executive Directors are encouraged
to be involved in specific workshops, meetings or seminars in line with their individual areas of expertise.
All Directors are encouraged to challenge and to provide independent judgement on all matters, both
strategic and operational.
The Board seeks guidance from external advisors when appropriate such as financial and legal due
diligence on potential acquisitions. In addition, the Board consults regularly with its Nominated Advisors
and retained advisers for MAR and company secretarial support.
Changes to Board of Directors
On 1 October 2019, the Company announced that Raymond Duignan, Non‐Executive Director and the
Company's Audit Committee chair, intended to step down from the Board once a new Non‐Executive
Director had been appointed. Following the announcement of the appointment of Roger Mather as Non‐
Executive Director and the Company's Audit Committee chair on 31st January 2020, Raymond stepped
down from the Board with immediate effect.
In a further change to Board committees, existing Non‐Executive Director Tim Wright will become chair
of the Company's Remuneration Committee.
Board Governance Framework
The Board
Meets quarterly and at other times when required.
Comprises the Chairperson, 2 non- execs and 2 execs
Nomination Committee
This committee meets as and when
required.
Comprises the Chairperson and 2 non-
execs
Audit Committee
This committee meets bi- annually and
at other times when required.
Comprises the Chairperson and 2 non-
execs.
Remuneration Committee
This committee meets bi- annually and
at other times when required.
Comprises the Chairperson and 2 non-
execs
28
GOVERNANCE
CORPORATE GOVERNANCE REPORT
Board responsibility
The Board is responsible for maintaining a sound system of internal control to safeguard Shareholders’
investment and the Company’s assets, as well as reviewing its effectiveness. The system of internal
control is designed to manage rather than eliminate the risk of failure to achieve business objectives
and can only provide reasonable and not absolute assurance against material loss and misstatement.
Audit Committee
The Audit Committee consists of the Chairman and the non-executive Directors. It was chaired by
Raymond Duignan until 31st January 2020, when Roger Mather became Chair, and it meets at least
twice each year. Roger brings considerable experience to the role having been CFO of Mulberry plc for
8 years and in his current role as Audit Chair at another AIM listed business.
The Audit Committee is responsible for ensuring that the financial performance of the Company is
properly reported on and monitored and for meeting with the auditors and reviewing the reports from
the auditors relating to accounts and internal control systems. The audit committee meets at least once
a year with the auditors.
The Audit Committee report is on page 31.
Nominations Committee
The Nominations Committee consists of the Chairman and the Non-Executive Directors. It is chaired
by John Clarke and meets as required.
The Nominations Committee is responsible for reviewing the structure, size and composition of the
Board, making recommendations to the Board with regard to any changes and identifying and
nominating candidates to fill Board vacancies.
Remuneration Committee
The Remuneration Committee consists of the Chairman and the Non-Executive Directors. It was
chaired by John Clarke until 31st January 2020, when Tim Wright became Chair, and it meets as
required, at least twice during the year.
The committee reviews the performance of the executive Directors and sets and reviews the scale and
structure of their remuneration and the basis of their remuneration and the terms of their service
agreements with due regard to the interests of Shareholders. In determining the remuneration of
executive Directors, the remuneration committee seeks to enable the Company to attract and retain
executives of the highest calibre. The remuneration committee also makes recommendations to the
Board concerning the allocation of share options to employees.
The Remuneration Committee report is on page 34-37.
29
GOVERNANCE
CORPORATE GOVERNANCE REPORT
Attendance
Directors are required to devote such time and effort to their duties as required to secure their proper
discharge. For Non- Executive Directors, this typically entails one or two days of meetings per month
as well as reading and preparation time. A full pack of management information is provided to the Board
in advance of every meeting. Each Executive Director has a full- time service agreement.
Directors attendances at meetings of the Board and its Committees during 2019 were:
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
John Clarke
Raymond Duignan
Tim Wright
Stephen Moon
James Simpson
Elizabeth Lake
4/4
4/4
4/4
4/4
2/2
2/2
2/2
2/2
2/2
-
-
-
2/2
2/2
2/2
-
-
-
2/2
2/2
2/2
-
-
-
Key Board activities this year included:
Continued and open dialogue with the investment community;
Considering financial and non- financial policies;
Discussing strategic priorities;
Discussing internal governance processes;
Reviewing the Business Risk Register.
Relationship with Shareholders
The Directors seek to build a mutual understanding of objectives between the Company and its
Shareholders. The Company reports formally to Shareholders in its Interim and Annual reports, setting
out details of its activities. In addition, the Company keeps Shareholders informed of events and
progress through the issue of regulatory news in accordance with the AIM rules of the London Stock
Exchange. The Chief Executive seeks to meet with significant Shareholders following interim and final
results. The Company also maintains investor relations pages and other information regarding the
business, its products and activities on its website www.sisplc.com
The Annual report is made available to shareholders on the website at least 21 working days before the
Annual General Meeting. Directors are required to attend the Annual General Meetings of the Company
unless unable to do so for personal reasons or due to pressing commercial commitments. Shareholders
are given the opportunity to vote on each separate issue. The Company counts all proxy votes and will
indicate the level of proxies lodged on each resolution, after it has been dealt with by a show of hands.
Employees
Other statutory disclosures required by the Strategic report, as detailed on page 19, report on the
involvement of employees in the affairs, policy and performance of the Company.
Environmental, social and community matters
Given the size and nature of the Company’s operations, the impact of the Company’s operations on the
local community and the environment is not considered to be significant. Recycling of office supplies is
undertaken where possible.
30
GOVERNANCE
BOARD OF DIRECTORS
John Clarke
Independent Non- Executive Chairman
John Clarke became Non-Executive Chairman in June 2013. John has extensive experience of the
functional food and sports nutrition sectors, having worked at GlaxoSmithKline for more than 35 years.
John was global President of GSK Consumer Healthcare from 2006 to 2011, and was a member of
GlaxoSmithKline plc Corporate Executive Team until March 2012.
Under John’s leadership from 2006 to 2011 GSK Consumer Healthcare was the fastest-growing
business in the industry, growing by 60% and reaching revenue of £5 billion despite recessionary
environments in the majority of the business’ markets. The business added £2 billion in turnover from
2006. Mr Clarke was responsible for the Lucozade brand including strategy, innovation programme,
portfolio and global expansion for 15 years from 1996 to 2011, Lucozade achieved growth of 13%
CAGR throughout this period.
Tim Wright
Independent Non- Executive Director
Tim Wright, has spent much of his career with GlaxoSmithKline (''GSK''), working in the consumer
healthcare sector of the Company from 1982 to 2011. In his last 5 years at GSK, Tim was President of
GSK's Global Brands, where he drove market leading revenue growth through world class marketing
and innovation. After leaving GSK in 2011, Tim was appointed as President to Zarbee's Naturals, a
privately-owned natural medicine business. His role up to 2013 was to help establish the Company's
brand and quickly grow the newly formed business from $3 million to $18 million. In 2014, Tim set up
his own business, StepChange Strategy, which aims to create shareholder value for start-up and
multinational consumer healthcare companies, by focusing on brand strategy, innovation and
geographic expansion. In 2015 Tim acquired, and now runs, Embrace Hearing.
Roger Mather
Independent Non-Executive Director
Appointed 31st January 2020
Roger has broad business experience gained first in audit at PwC, in London and Hong Kong, and then
in executive positions in consumer and distribution businesses in the UK, Asia Pacific and North
America. He was Chief Financial Officer of Mulberry Group plc, the AIM‐quoted fashion brand and
manufacturer, from 2007 to 2016, a period of rapid growth at Mulberry during which time he established
international revenue channels and implemented the business's digital strategy. Prior to Mulberry, he
worked for more than 10 years at Otto Group, a privately owned multi‐ national distribution business,
first as Group Finance Director of the sourcing division based in Hong Kong and then as Managing
Director of a UK division. From 2017, Roger has focused on non‐executive and part‐time roles. He is
currently a Non‐Executive Director of Quiz plc, the AIM‐quoted omni‐channel fast fashion brand, and
chair of its audit and remuneration committees. He is also a pro bono director of The Berkshire Golf
Club Limited and of Beaudesert Park School Limited.
Stephen Moon
Chief Executive Officer
Stephen had an extensive corporate career with BP, Dalgety, Quaker and GlaxoSmithKline. He has
held a wide range of functional roles in his career including supply chain, strategic project
management, strategy planning, innovation and business development. At GSK he was Strategy
Planning and Worldwide Business Development Director for the Nutritional Healthcare Division. He
has an MBA from Ashridge Business School and a diploma in Clinical Organisational Psychology
from INSEAD. After founding a functional food start-up in 2003, he later became CEO of Provexis
PLC and Science in Sport PLC was spun-out from this company in August 2013.
31
GOVERNANCE
BOARD OF DIRECTORS
James Simpson
Chief Financial Officer
Appointed 26th September 2019
James is an experienced finance executive who qualified as a chartered accountant with Price
Waterhouse in 1998, he has a track record in the e-commerce and consumer sectors in international
branded businesses such as Cadbury Schweppes, L’Oreal and Shell, and has held senior finance roles
at Tesco, Britvic, and Asos.
Board diversity
Composition
40%
3 Non- execs
60%
2 Execs
Age
Non- Exec
Exec
60+
50 - 59
40 - 49
1
1
1
2
Tenure
Non- Exec
Exec
6+ years
3 - 6 years
3 years
1
1
1
1
1
32
GOVERNANCE
AUDIT COMMITTEE REPORT
Audit Committee: composition and terms of reference
The Audit Committee comprises two Non-Executive Directors and from 31st January 2020 has been
chaired by Roger Mather. It meets as required and specifically to review the Interim report and Annual
report and to consider the suitability and monitor the effectiveness of the internal control processes.
There were two Audit Committee meetings during the year. The Audit Committee reviews the findings
of the external auditors and reviews accounting policies and material accounting judgements.
Activities in the year
During the year, the Committee concluded that the Annual Report and Financial Statements, taken as
whole, were fair, balanced and understandable and provided the information necessary for
shareholders to assess the Group’s business model, strategy and performance. During the year, the
Committee considered the following key matters:
the adequacy of accounting and disclosures in respect of PhD Nutrition and in particular the
impairment review of goodwill and separately identifiable intangibles;
the implementation of IFRS 16 Leases;
the consistency of accounting policies on a year- on year basis and across the group following the
acquisition of PhD;
the appropriateness of the application of the going concern basis in preparation of the financial
statements following a review of forecasts to December 2021.
The Committee received and considered reports from the Auditor in respect of the audit plan for the
year and the results of the annual audit. These reports included the scope of the audit, the approach to
be adopted to address key audit matters, the basis on which the Auditor assesses materiality, the terms
of engagement for the Auditor and an on-going assessment of the impact of future accounting
developments for the Group.
Independence of Auditors and non- audit services
The independence of the Auditors is considered by the Audit Committee. The Audit Committee meets
at least twice per calendar year with the Auditors to discuss their objectivity and independence.
As well as providing audit-related services the Auditors have, provided taxation compliance, and share
option scheme advice and in the prior year corporate finance services. The fees in respect of the non-
audit services provided were £42,000 for the year (2018 – £144,000). 2018 non-audit fees included
£107,000 for corporate finance services on the acquisition of PhD Nutrition in December 2018. The
Audit Committee have considered the non-audit fees agreed with BDO LLP and are satisfied that the
objectivity and independence of the Auditors is safeguarded.
ROGER MATHER
Chairman of Audit Committee
17 March 2020
33
GOVERNANCE
REMUNERATION COMMITTEE REPORT
Remuneration Committee: composition and terms of reference
The Company’s Remuneration Committee since the date of Admission to AIM comprises at least two
Independent Non-Executive Directors and is chaired by Tim Wright who was appointed as Chairman
on 31st January 2020.
The purpose of the Remuneration Committee is to ensure that the Executive Directors are fairly
rewarded for their individual contribution to the overall performance of the Group. The Committee
considers and recommends to the Board the remuneration of the Executive Directors and is kept
informed of the remuneration packages of senior staff and invited to comment on these.
Policy on Executive Directors’ remuneration
Executive remuneration packages are designed to attract and retain executives of the necessary skill
and calibre to run the Group successfully but avoiding paying more than is necessary. Direct
benchmarking of remuneration is not possible given the specialised nature and size of the Group. The
Remuneration Committee recommends to the Board remuneration packages by reference to individual
performance and uses the knowledge and experience of the Non-Executive Directors and published
surveys relating to AIM Directors, and market changes generally. The Remuneration Committee has
responsibility for recommending any long term incentive schemes.
The full Board determines whether or not Executive Directors are permitted to serve in roles with other
companies. Such permission is only granted where a role is on a strictly limited basis, where there are
no conflicts of interest or competing activities and providing there is not an adverse impact on the
commitments required to the Group. Earnings from such roles are not disclosed nor paid by the Group.
There are three main elements of the remuneration package for Executive Directors and senior staff:
(i) Basic salaries and benefits in kind
Basic salaries are recommended to the Board by the Remuneration Committee, taking into account the
performance of the individual and the rates for similar positions in comparable companies. Benefits in
kind comprising private medical insurance are available to all senior staff and Executive Directors.
(ii) Share option scheme
The Company operates a Share Option Plan (“SOP”), which grants options over Ordinary shares to
certain Directors and senior employees. The purpose of the scheme is to incentivise key members of
the Management team and to align their interests with those of the Shareholders.
The SOP was approved by the Remuneration Committee in June 2014 as outlined in the AIM Admission
document. Further amendments to the SOP were approved in September 2016, introducing a new
three-year plan to replace the existing five-year plan
Under the SOP there are both short term and long term incentive arrangements. In both cases the
options granted are nil-cost options, meaning that the participants are not required to pay cash to
exercise the option. An Employee Benefit Trust has been established to purchase, hold and issue
ordinary shares when awards are exercised. Options must be exercised within a period of 10 years
after the grant date for that option otherwise the option will lapse.
The Remuneration Committee has been working with external advisors to create a new SOP to be
implemented during 2019, details will be published when finalised.
Short term incentive plan (“STIP”)
Awards are calculated as a percentage of base salary and are determined by reference to the
attainment of personal objectives or revenue growth or both. Management has agreed to have its annual
bonus paid in shares rather than take cash out of the business, which could be used to generate further
growth.
34
GOVERNANCE
REMUNERATION COMMITTEE REPORT
Long term incentive plan (“LTIP”)
The previous scheme for 2016-2018 has now ended and a new LTIP scheme for the financial years
2019 to 2021 is in place, though no options were granted in 2019 and consequently no charge has been
recognised in the accounts.
Options will be awarded for each year of the scheme on a sliding scale on delivery of revenue growth,
profit growth and brand reputation targets. The maximum value of the shares subject to these awards
is 200% of the basic salary of the CEO, 150% of the basic salary of the CFO and 100% of the basic
salary of other selected Senior Management. The non-Executive directors do not participate in the LTIP
scheme.
During the year under review the Remuneration Committee made awards under the STIP and LTIP as
follows:
In respect of the LTIP for the year ended 31 December 2019, no nil-cost options were granted
to senior employees 2019 (2018 – 218,579).
In respect of the STIP for the year ended 31 December 2018, 333,288 nil-cost options were
granted to senior employees on 20 March (2018 – 12,500), and 174,308 nil-cost options were
granted to EJ Lake on 20 March 2019 (2018 – 29,244) and 780,769 nil-cost options were
granted to SN Moon on 20 March 2019 (2018 – 81,806).
(iii) Pension contributions
The Company pays a defined contribution to the pension scheme of Executive Directors and
employees. The individual pension schemes are private and their assets are held separately from those
of the Company.
Service contracts
The Chief Executive is employed under a service contract requiring 12 months’ notice by either party.
Non-Executive Directors receive payments under appointment letters, which are terminable by six
months’ notice from either party.
Policy on Non-Executive Directors’ remuneration
John Clarke, Raymond Duignan and Tim Wright each receive a fee for their services as a Director,
which is approved by the Board, mindful of the time commitment and responsibilities of their roles and
of current market rates for comparable organisations and appointments. Non-Executive Directors are
reimbursed for travelling and other minor expenses incurred.
35
GOVERNANCE
REMUNERATION COMMITTEE REPORT
Details of Directors’ remuneration (Audited)
The emoluments paid to the individual Directors of the Company for the period were as follows:
Year ended 31 December 2019
Salary/
Fees
£’000
LTIP
£’000
STIP
£’000
Benefits
in Kind
Pension
£’000
£’000
Executive Directors
Stephen Moon
Elizabeth Lake
James Simpson
Non- executive Directors
John Clarke
Ray Duignan
Tim Wright
286
115
46
47
36
36
566
Year ended 31 December 2018
Salary/
Fees
£’000
Executive Directors
Stephen Moon
Elizabeth Lake
Non- executive Directors
John Clarke
Ray Duignan
Tim Wright
270
164
46
36
36
-
-
-
-
-
-
-
LTIP
£’000
326
86
73
-
-
416
-
19
-
-
-
435
STIP
£’000
406
91
-
-
-
552
485
497
Elizabeth Lake resigned on 10th September 2019
4
2
-
-
-
-
6
-
6
-
-
-
-
6
Benefits
in Kind
Pension
£’000
£’000
4
2
-
-
-
6
-
9
-
-
-
9
Total
£’000
706
123
65
47
36
36
1,013
Total
£’000
1,006
352
119
36
36
1,549
James Simpson was appointed on 26th September 2019 and remuneration included above is from this
date
The above fees and emoluments exclude reimbursed expenditure incurred in the conduct of Company
business.
36
GOVERNANCE
REMUNERATION COMMITTEE REPORT
Directors’ interests in shares
The Directors’ interests in the Ordinary shares of the Company, as recorded in the register maintained
by the Company in accordance with the provisions of the Companies Act 2006, were as follows:
Beneficial interests
S N Moon
J M Clarke
Directors’ interests in share options
Ordinary shares of
10p each
31 December 2019
Ordinary shares of
10p each
31 December 2018
843,456
178,500
843,456
178,500
The share options held by the Directors and not exercised at the period end date are summarised
below:
S N Moon
JM Clarke
EJ Lake
31 December 2019
31 December 2018
5,091,822
548,633
-
4,603126
614,087
653,009
Details of share options at 31 December 2019 of the Directors who served during the year are set out
below:
Date of grant
Exercise
price pence
Share price
on date of
grant
Number of
options
Earliest
exercise date
Expiry date
SN Moon
22 July 2014
SN Moon
26 March 2015
SN Moon
22 March 2016
SN Moon
26 Sept 2016
SN Moon
22 March 2017
SN Moon
22 March 2017
SN Moon
21 March 2018
SN Moon
20 March 2019
JM Clarke
22 March 2016
JM Clarke
26 Sept 2016
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
72.0p
68.0p
328,125
22 July 2014
21 July 2024
267,206
26 March 2015 25 March 2025
52.5p
1,089,675
22 March 2016 21 March 2026
68.75p
1,460.356
22 March 2019
25 Sept 2026
81p
81p
73p
52p
623,721
22 March 2017 21 March 2027
460,164
22 March 2018 21 March 2027
81,806
21 March 2018 20 March 2027
780,769
20 March 2019 20 March 2029
52.5p
221,360
22 March 2016 21 March 2026
68.75p
327,273
22 March 2019
25 Sept 2026
Other than as shown in the tables above no Director had any interest in the shares or share options of
the Company or its subsidiary company at 31 December 2019 or 31 December 2018.
TIM WRIGHT
Chairman of the Remuneration Committee
17 March 2020
37
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
Opinion
We have audited the financial statements of Science in Sport plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2019 which comprise the consolidated
statement of comprehensive income, consolidated statement of financial position, consolidated
statement of cash flows, consolidated statement of changes in equity, parent company statement of
financial position, parent company statement of cash flows, parent company statement of changes in
equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the Parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2019 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union ;
the Parent Company financial statements have been properly prepared in accordance with IFRSs
as adopted by the European Union and as applied in accordance with the provisions of the
Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
Group and the Parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Group’s or the Parent Company’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the date when
the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
38
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
Key Audit Matter How we addressed the key audit matter in our audit
Revenue recognition
The Group’s revenue recognition policy is included
within the accounting policies in note 1 and the
components of revenue are set out in note 4.
The Group’s reported revenue is a key performance
indicator for the market and is a key metric in the
Group’s short and long term incentive schemes used to
incentivise directors, key management personnel and
staff. Due to the incentive that exists to overstate
revenue we have considered a significant risk to be
present over the existence and accuracy of revenue, in
particular in relation to the correct cut-off around the
period end.
In addition, the Group enters into commercial
arrangements with its customers to offer promotional
discounts, rebates and customer loyalty programs. Due
to the potentially complex and varying nature of these
arrangements there is a risk that they are not
appropriately accounted for and as a result revenue is
misstated.
We reviewed the revenue recognition policies applied to
each of the Group’s revenue streams, in particular those
relating to volume rebates and discounts and considered
their compliance with relevant accounting standards.
We reviewed and challenged management’s
identification of performance obligations, transaction
price allocation and assessment of compliance through
checking a sample of sales transactions against the
Group’s terms and conditions of sale.
We performed a reconciliation of revenue recognised in
the year to cash receipts.
We tested a sample of revenue transactions in the year
to check that revenue was accurately recorded within the
accounting system The testing was performed through
agreement of recorded revenue to proof of delivery and
cash receipt.
We agreed a sample of items recognised around the
year-end to proof of delivery to check that revenue has
been correctly recorded in the period. This was
performed with reference to the Group’s terms and
conditions of sale.
We agreed a sample of transactions falling outside of the
normal revenue transaction cycle (which constitute
outliers from our expectation) to supporting
documentation.
We reviewed credit notes issued after the year end to
assess the completeness of the commercial accruals and
the existence of revenue recorded at year end.
We tested on a sample basis, the calculation of year end
promotional discount, product rebate and customer
loyalty program accruals, obtaining documentation (e.g.
contracts and supporting sales data) to support the
existence and measurement of the accruals balance.
Key observations
Based on the results of our work we consider that
revenue has been recognised in accordance with the
Group’s revenue recognition accounting policy and the
requirements of relevant accounting standards. .
39
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
Key Audit Matter How we addressed the key audit matter in our audit
Valuation of goodwill and intangibles
The valuation of the goodwill and intangible assets
recognised on the acquisition of PhD Nutrition in the
prior year was based on forecast performance of PhD,
that had in built growth targets and other key
assumptions such as the discount rate applied.
The Group’s accounting policy for intangible assets is
included within the accounting policies in note 1 and
the significant judgements are set out in note 1. The
components of intangible assets are set out in note 11.
In accordance with relevant accounting standards, the
Group performs annual impairment tests for CGU’s
(cash generating units) to which goodwill has been
allocated. The group has allocated all goodwill to one
CGU being PhD Nutrition.
Significant judgement is exercised when determining
the assumptions used to calculate the value in use
(“VIU”) of the CGU, which will be used to determine
whether there is any impairment of goodwill and
intangible assets. There is also considered to be
significant estimation uncertainty in the assumptions
selected.
Any input inaccuracies or unreasonable bases used in
the valuation judgements, such as revenue growth or
discount rate, could result in a material misstatement
of the financial statements.
Response
We obtained the impairment model prepared by
management and discussed the basis of valuations
with them. We confirmed that the basis of the
valuations was in accordance with the requirements
of accounting standards.
In respect of the PhD Nutrition CGU, we:
checked the arithmetical accuracy of the
impairment model prepared by management;
checked that the methodology used within the
impairment model was in accordance with
relevant accounting standards.
agreed underlying cash flow forecasts used in
the impairment model to those approved by
the board;
compared the actual results for the year
ended 31 December 2019 to forecasts used
in the prior year purchase price allocation to
validate the accuracy of forecasts used to
value intangible assets;
critically assessed management’s impairment
reviews which included discounted cash flow
forecasts. We agreed the underlying
assumptions, including predicted revenue
growth rates and gross profit margin
expectations, to supporting evidence and
explanations provided by management,;
used our own valuations specialists to
develop a discount rate expectation and
compared this to those used by management;
and
Re-performed management’s sensitivity
analysis calculations.
Key Observations
Based on the results of our work we consider it
appropriate concurred with management’s
assessment of the valuation of the goodwill and
intangibles, and that no material impairment to
goodwill and intangibles was required.
In the prior year we identified a Key Audit Matter in relation to inventory valuation primarily due to the
manual nature of the calculation. This is not considered to be a Key Audit Matter in the current year as
the expected solution for this risk, being the implementation of a new ERP system, has been
implemented.
40
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the
effect of misstatements. We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of
the financial statements. In order to reduce to an appropriately low level the probability that any
misstatements exceeded materiality, we use a lower level, “performance materiality”, to determine the
extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their effect on the financial statements as
a whole.
The materiality for the Group financial statements as a whole was set at £500,000 (2018: £266,000).
This was determined with reference to the Group’s revenue which is considered the most appropriate
measure in assessing performance of the Group as it is a key performance indicator for the market. As
a business at the current stage of its lifecycle, the main focus of the group is revenue generation. Whilst
underlying loss before tax is still a key metric, it is not considered to be an appropriate benchmark for
determining materiality as the Group continues to make losses as part of a strategic decision to invest
for revenue growth. The materiality used represents 1% (2018: 1.25%) of Group revenue. Performance
materiality was set at 75% (2018: 75%) of the Group materiality level, being £375,000 (2018: £199,500).
Where financial information from components was audited separately, component materiality was set
for this purpose at lower levels, varying between £200,000 and £255,000.
The materiality for the Parent Company was set at £250,000 (2018: £75,000). This was determined
with reference to the Parent Company’s net assets, which was considered the most appropriate as it
most accurately reflects the Parent Company’s status as a non-trading holding company. The
materiality used represents 0.4% (2018: 0.1%) of company Net Assets. Performance materiality was
set at 75% (2018: 75%) of Parent Company materiality, being £187,500 (2018: £56,250).
We agreed with the Audit Committee that we would report to them all individual audit differences in
excess of £10,000 (2018: £13,300). We also agreed to report differences below this threshold that, in
our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Revenue
11%
Audit
Specific audit procedures
89%
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each entity within the group. Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account the size, the risk profile of the
group, changes in the business environment and other factors such as output from discussion with
management when assessing the work to be performed on each component.
41
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
We analysed the key financial metrics of the group’s components to determine those we consider to be
financially significant to the group. Science in Sport plc, SiS (Science in Sport) Limited and Phd Nutrition
Limited were considered to be significant components. As such, these companies were subject to full
scope audits to their respective component materiality. All component audits were performed by BDO
LLP with no use of component audit teams.
The group includes subsidiaries based in Australia, the US and Italy. Based on their percentage
contribution to key financial metrics, our scoping deemed these components to be non-significant to the
group. As such, they were not in scope for a full component audit. However our approach included
performing specific audit procedures on revenue cut-off, inventory and overheads by the group audit
team.
We considered each key audit matter identified above in respect of the non-significant components,
however we determined that these risks were appropriately addressed through our work performed at
a group level.
We also addressed the risk of management override of internal controls, including assessing whether
there was evidence of bias by the directors that may have represented a risk of material misstatement
due to fraud.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the less likely we are to become aware of
it.
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report and accounts, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
42
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the Directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements in the
strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the Parent Company, or returns adequate
for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, within the Directors report, set out
on page 25, the Directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the
Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
43
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SCIENCE IN SPORT PLC
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the Parent Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Daniel Henwood (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Reading
United Kingdom
17 March 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered
number OC305127).
44
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year
ended
31 December
2019
£’000
Year
ended
31 December
2018
£’000
Notes
4
5
6
9
50,573
(28,366)
22,207
(27,252)
(5,045)
4
(23)
(5,064)
(554)
(5,618)
(181)
67
33
(5,699)
21,318
(9,363)
11,955
(17,950)
(5,995)
5
-
(5,990)
115
(5,875)
-
(125)
-
(6,000)
10
(4.6p)
(8.2p)
Revenue
Cost of goods
Gross profit
Operating expenses
Loss from operations
Finance income
Finance cost
Loss before taxation
Taxation
Loss for the year
Other comprehensive income
Cash flow hedges
Exchange differences on translation of foreign operations
Income tax relating to these items
Total comprehensive loss for the year
Loss per share to owners of the parent
Basic and diluted – pence
All amounts relate to continuing operations.
The notes on pages 49 to 77 form part of these consolidated financial statements.
45
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company number: 08535116
Assets
Non-current assets
Intangible assets
Right of use assets
Property, plant and equipment
Deferred tax
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Hire purchase agreement
Derivative financial liabilities
Total current liabilities
Non-current liabilities
Lease Liabilities
Hire purchase agreement
Deferred tax
Total non-current liabilities
Total liabilities
Notes
11
18
12
17
13
14
15
16
18
26
25
18
26
17
Net assets
Capital and reserves attributable to owners of the Parent company
Share capital
19
Share premium reserve
Employee Benefit Trust reserve
Other reserve
Foreign exchange reserve
Cash flow hedge reserve
Retained deficit
Total equity
As at
As at
31 December 31 December
2018
£’000
2019
£’000
33,066
689
1,771
919
36,445
6,141
10,927
5,371
22,439
33,742
-
1,033
1,430
36,205
7,102
8,939
8,002
24,043
58,884
60,248
(9,954)
(164)
(77)
(181)
(10,376)
(530)
(309)
(2,472)
(3,311)
(7,970)
-
-
(7,970)
-
-
(2,461)
(2,461)
(13,687)
(10,431)
45,197
49,817
12,282
48,829
(193)
(907)
(30)
(148)
(14,636)
45,197
12,197
48,464
(372)
(907)
(97)
-
(9,468)
49,817
These consolidated financial statements were approved and authorised for issue by the Board on 17
March 2020 and signed on its behalf by:
STEPHEN MOON, Director
The notes on pages 49 to 77 form part of these consolidated financial statements.
46
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Loss for the financial year
Adjustments for:
Amortisation
Amortisation of right-of-use asset
Depreciation
Taxation
Share based payment charge
Operating cash outflow before changes in working capital
Notes
11
18
12
9
Changes in inventories
Changes in trade and other receivables
Changes in trade and other payables
Total cash outflow from operations
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of subsidiary, net of cash acquired
Net cash outflow from investing activities
Cash flow from financing activities
Gross proceeds from issue of share capital
Principal repayments of lease liabilities
Interest paid on lease liabilities
Finance income
Share issue costs
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
15
Year
ended
31 December
2019
£’000
Year
ended
31 December
2018
£’000
(5,618)
(5,875)
2,129
156
489
554
1,165
(1,125)
961
(1,988)
2,072
(80)
(920)
(1,453)
–
(2,373)
–
(150)
(24)
(4)
–
(178)
(2,631)
8,002
5,371
555
–
371
(115)
1,922
(3,142)
(2,070)
(1,707)
503
(6,416)
(519)
(945)
(28,363)
(29,827)
27,920
–
–
(5)
(240)
27,675
(8,568)
16,570
8,002
The notes on pages 49 to 77 form part of these consolidated financial statements.
47
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital
Share
premium
£’000
£’000
Employee
Benefit
Trust
reserve
£’000
Other
reserve
Foreign
exchange
reserve
£’000
£’000
Cash
flow
hedge
reserve
£’000
6,683
22,339
(397)
(907)
28
–
–
–
–
(125)
57
368
4,840
24,197
–
(1,357)
583
2,917
34
–
–
–
–
–
–
–
–
–
(34)
59
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Retained
deficit
Total
equity
£’000
£’000
(4,938)
22,808
(5,875)
(6,000)
–
–
–
–
–
(59)
425
29,037
(1,357)
3,500
–
–
1,404
1,404
12,197
48,464
(372)
(907)
(97)
–
(9,468)
49,817
–
–
–
–
67
(148)
(5,618)
(5,699)
85
365
–
–
–
–
–
179
–
–
–
–
–
–
–
–
–
–
(450)
(179)
–
–
1,079
1,079
12,282
48,829
(193)
(907)
(30)
(148)
(14,636)
45,197
At 31 December
2017
Total
comprehensive loss
for the year
Transactions with
owners
Issue of shares:
- Issued in return
for sponsorship
services
- Placing
Transaction costs of
placing
- Consideration
shares issued on
acquisition of PhD
Issue of shares to
EBT
Issue of shares held
by EBT to
employees
Share based
payments
At 31 December
2018
Total
comprehensive loss
for the year
Transactions with
owners
Issue of shares:
- Issued in return
for sponsorship
services
Issue of shares held
by EBT to
employees
Share based
payments
At 31 December
2019
The notes on pages 49 to 77 form part of these consolidated financial statements..
48
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
1.1 General information
Science in Sport plc (the “Company” and together with its subsidiaries “SIS” or the “Group”) is a public limited
company incorporated and domiciled in England and Wales (registration number 08535116). The address of
the registered office is 2nd Floor, 16 - 18 Hatton Garden, Farringdon, London EC1N 8AT. The functional and
presentation currency is Pounds Sterling and the financial statements are rounded to the nearest £1,000.
The main activities of the Group are those of developing, manufacturing and marketing sports nutrition
products for professional athletes and sports enthusiasts.
1.2 Basis of preparation
The Company has elected to prepare its Parent company financial statements in accordance with International
Financial Reporting Standards, International Accounting Standards and Interpretations (collectively “IFRS”)
issued by the International Accounting Standards Board (“IASB”) as adopted by the European Union (“adopted
IFRS”) and as applied in accordance with the provisions of the Companies Act 2006, and these are set out on
pages 78 to 83.
The financial statements are prepared for the year ended 31 December 2019.
The Group’s financial statements have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively “IFRS”) issued by the
International Accounting Standards Board (“IASB”) as adopted by the European Union (“adopted IFRS”), and
those parts of the Companies Act 2006 that are applicable to financial statements prepared in accordance with
IFRS. The Group’s financial statements have been prepared on the historical cost basis except for financial
instruments that are measured at fair values, as explained in the accounting policies below. Historical cost is
generally based on the fair value of the consideration given in exchange for assets.
The accounting policies set out below have been applied to all periods presented in these Group financial
statements and are in accordance with IFRS, as adopted by the European Union and International Financial
Reporting Interpretations Committee (“IFRIC”) interpretations that were applicable for the period ended
31 December 2019.
1.3 New accounting standards, interpretations and amendments adopted by the Group
The Group has adopted the new interpretations and revised standards effective for the year ended 31
December 2019, notably IFRS 16 Leases. The nature and effect of these changes are discussed below.
IFRS 16 Leases
Effective 1 January 2019, IFRS 16 has replaced IAS 17 Leases and IFRIC 4 Determining whether an
Arrangement Contains a Lease.
IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all
leases, together with options to exclude leases where the lease term is 12 months or less, or where the
underlying asset is of low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17, with
the distinction between operating leases and finance leases being retained.
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional
adjustments on the date of initial application (1 January 2019), without restatement of comparative figures.
The Group elected to apply the practical expedient to not reassess whether a contract is, or contains a lease
at the date of initial application. Contracts entered into before the transition date that were not identified as
leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 was applied
only to contracts entered into or changed on or after 1 January 2019.
As permitted under IFRS 16 for leases previously classified as operating leases under IAS 17, The Group
elected to
49
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies (continued)
1.3 New accounting standards, interpretations and amendments adopted by the Group (continued)
IFRS 16 Leases (continued)
(a) Rely on previous assessments as to whether leases are onerous as opposed to preparing an
impairment review under IAS 36 as at the date of initial application; and
(b) Apply the exemption not to recognise right-of-use assets and liabilities for leases with less than 12
months of lease term remaining as of the date of initial application.
(c) Not to recognise lease liabilities for some leases of low value contracts.
1.4 New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards and interpretations which have been issued by
the IASB that are effective in future accounting periods that the group has decided not to adopt early. The most
significant of these is as follows, which are all effective for the period beginning 1 January 2020:
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors (Amendment – Definition of Material)
Revised Conceptual Framework for Financial Reporting.
The Group does not expect any of these accounting standards and amendments to have a material impact on
the group
1.5 Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the
Company and the Group have adequate resources to continue in operational existence for the foreseeable
future. As a result, they continue to adopt the going concern basis of accounting in preparing the financial
statements. Further detail is contained in the Directors’ report.
1.6 Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an
investee if all three of the following elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect those variable returns. Control is
reassessed whenever facts and circumstances indicate that there may be a change in any of these elements
of control.
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as
if they formed a single entity. Intercompany transactions and balances between group companies are therefore
eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition
method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations
are included in the consolidated statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control ceases.
1.7 Revenue
(i) Performance obligations and timing of revenue recognition
The group’s revenue is derived from selling goods with revenue recognised at a point in time when control of
the goods has transferred to the customer. Revenue from sales to external customers is recognised when
goods are despatched. There is limited judgment needed in identifying the point at which the performance
obligation is satisfied.
(ii) Determining the transaction price
Most of the group’s revenue is derived from fixed price contracts and therefore the amount of revenue to be
earned from each contract is determined by reference to those fixed prices. Variable consideration relating to
volume rebates has been constrained in estimating contract revenue in order that it is highly probable that
there will not be a future reversal in the amount of revenue recognised when the amount of volume rebates
has been determined.
50
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.7 Revenue (continued)
(iii) Allocating amounts to performance obligations
For most contracts, there is a fixed unit price for each product sold, with discounts given for bulk orders placed
at a specific time. Therefore, there is no judgement involved in allocating the contract price to each unit ordered
in such contracts (it is the total contract price divided by the number of units ordered). Where a customer orders
more than one product line, the Group is able to determine the split of the total contract price between each
product line by reference to each products standalone selling price. All product lines are capable of being, and
are, sold separately.
Sales rebate and discount reserves are established based on management’s best estimate of the amounts
necessary to meet claims by customers in respect of these rebates and discounts. A refund liability is made at
the time of sale and updated at the end of each reporting period for changes in circumstances.
1.8 Segment reporting
The Directors have determined that two operating segments exist under the terms of IFRS 8 ‘Operating
Segments’. The Group is organised between SiS and PhD Nutrition.
The prior year consisted of six segments and this has been restated to show the two segments for comparison.
Management does not review the assets and liabilities by segment.
1.9 Use of non-GAAP profit measure – underlying operating loss
The Directors believe that the operating loss before depreciation, amortisation, share based payments, IFRS
16 costs relating to the acquisition of PhD and the restructuring due to this acquisition 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 the underlying operating loss to statutory operating loss is provided below:
Loss from operations
PhD acquisition and integration costs
Share-based payment expense
Depreciation & amortisation
IFRS 16 lease payments
Foreign exchange variances on intercompany balances
Underlying operating loss
2019
(£’000)
(5,045)
637
1,165
2,774
(175)
297
(347)
2018
(£’000)
(5,995)
599
1,922
926
-
(161)
(2,709)
1.10 Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Foreign subsidiaries are retranslated using the closing rate method and foreign exchange gains and losses on
translation are recognised through other comprehensive income. The exchange differences are held in a
separate reserve and will be recycled to the profit or loss on disposal of the subsidiary.
51
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.11 Employee benefits
(i) Defined contribution plans
The Group provides retirement benefits to a number of employees and Executive Directors. The assets of
these schemes are held separately from those of the Group in independently administered funds. Contributions
made by the Group are charged to profit or loss in the period in which they become payable.
(ii) Accrued holiday pay
Provision has been made at the reporting date for holidays accrued but not taken at the salary of the relevant
employee at that date.
1.12 Interest income
Interest income is recognised on a time-proportion basis using the effective interest rate method.
1.13 Research and development
Expenditure on research and development activities of internal projects is written off as incurred unless the
criteria are met to recognise an intangible asset in accordance with IAS 38 ‘Intangible assets’. Development
costs that are directly attributable to the design and testing of identifiable and unique products controlled by
the Group are capitalised as intangible assets only when the following criteria are met: (i) it is technically
feasible to complete the product so that it will be available for use; (ii) the Directors intend to complete the
product and use it; (iii) there is an ability to use the product; (iv) it can be demonstrated how the product will
generate probable future economic benefits; (v) adequate technical, financial and other resources to complete
the development and use the product are available; and (vi) the expenditure attributable to the product during
its development can be measured reliably.
Directly attributable costs that are capitalised include relevant employee costs. Capitalised development costs
are amortised on a straight line basis over a period of five years from the date that the product is brought into
first use. The directors consider that five years represents the usual period over which the main benefits of a
new product are gained by the Group.
1.14 Taxation
Current tax is provided at amounts expected to be recovered or to be paid using the tax rates and tax laws
that have been enacted or substantively enacted at the reporting date. When research and development tax
credits are claimed, they are recognised on an accruals basis and are included as a grant and are taken above
the line as a credit to expenditure. Tax credits are included in underlying operating loss.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability differs from
its tax base, except for differences arising on:
The initial recognition of goodwill;
The initial recognition of an asset or liability in a transaction which is not a business combination and at
the time of the transaction affects neither accounting or taxable profit; and
Investments in subsidiaries where the Company can control the timing of the reversal of the difference and
it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will
be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively
enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). Deferred tax balances are not discounted.
52
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.15 Goodwill
Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value
of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given,
liabilities assumed and equity instruments issued. No contingent consideration has been paid. Direct costs of
acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the
consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated
statement of comprehensive income on the acquisition date.
1.16 Intangible assets
(i) Externally acquired intangibles
Externally acquired intangible assets are initially recognised at cost less impairment and subsequently
amortised on a straight line basis over their expected useful economic lives. Intangible assets are recognised
on business combinations if they are separable from the acquired entity or give rise to other contractual/legal
rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.
The significant intangibles recognised by the Group, their useful economic lives and the methods used to
determine the cost of intangibles acquired in a business combination are as follows:
Brands
Customer relationships
10 years
10 years
Useful economic life
Valuation method
Relief from royalty
Multi period excess earnings
(ii) Internally generated intangible assets
Expenditure on internally developed products is capitalised if it can be demonstrated that; it is technically
feasible to develop the product for it to be sold, adequate resources are available to complete the development,
there is an intention to complete and sell the product, the Group is able to sell the product, sale of the product
will generate future economic benefits, and expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods the Group expects to benefit from selling the
products developed. The amortisation expense is included within the administrative expenses in the
consolidated statement of comprehensive income. Development expenditure not satisfying the above criteria
and expenditure on the research phase of internal projects are recognised in the consolidated statement of
comprehensive income as incurred.
Website and software development
Product development
5 years
5 years
Useful economic life
1.17 Impairment of tangible and intangible assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken
annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events
or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying
value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to
sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried
out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows;
its cash generating units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that
are expected to benefit from a business combination that gives rise to the goodwill. Impairment charges are
included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive
income. An impairment loss recognised for goodwill is not reversed. All goodwill relates to the Group’s
acquisition of PhD Nutrition which forms an individual CGU.
53
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.18 Property, plant and equipment
Plant and equipment assets are stated at cost. Cost includes expenditure that is directly attributable to the
acquisition of the items. Depreciation is charged to profit or loss on all plant and equipment at rates calculated
to write off the cost or valuation, less estimated residual value, of each asset on a straight line basis over their
estimated useful lives, which is:
Leasehold improvements
Plant and machinery
Fixtures, fittings, computer equipment
Motor vehicles
Useful economic life
Over length of the lease
4 – 10 years
4 years
4 years
The assets’ residual values and useful lives are determined by the Directors and reviewed and adjusted if
appropriate at each reporting date in accordance with the Group policy for impairment of assets.
1.19 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated as follows:
Raw materials
- cost of purchase on a first in, first out basis.
Work in progress and finished goods
- cost of raw materials and labour, together with attributable
overheads based on the normal level of activity.
Net realisable value is based on estimated selling price less further costs to completion and disposal. A charge
is made to profit or loss for slow moving inventories. The charge is reviewed at each reporting date.
1.20 Financial Instruments
Financial instruments are classified according to the substance of the contractual arrangements into which the
Group enters.
Financial assets
On initial recognition, financial assets are classified as either fair value through profit and loss, fair value
through other comprehensive income or amortised cost. The classification depends on the purpose for which
the financial assets were acquired.
Fair value through other comprehensive income assets comprises of hedged assets. They are carried in the
Consolidated Statement of Financial Position at fair value with changes in fair value recognised in the
Consolidated Statement of Comprehensive Income. There are no other assets classified as fair value through
other comprehensive income.
Amortised cost assets are non-derivative financial assets with fixed or determinable payments that are not
quoted on an active market. They arise principally through the provision of services to customers (e.g. trade
receivables). But also incorporate other types of financial assets where the objective is to hold these assets in
order to collect contractual cash flows and the contractual cash flows are solely payments of principal and
interest.
The Group’s assets at amortised cost comprise trade and other receivables and cash and cash equivalents
including cash held at bank.
The Group applies the simplified approach under IFRS 9 for measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis,
trade receivables are grouped based on similar credit risk and ageing. Expected loss rates are based on
historical credit losses experienced and are then adjusted for current and forward-looking information on
factors affecting the Group’s customers.
54
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.20 Financial Instruments (continued)
Financial liabilities
Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual
provisions of the financial instrument. Financial liabilities are recognised initially at fair value plus directly
attributable transaction costs and subsequently measured at amortised cost using the effective interest
method.
A financial liability is de-recognised when the obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from the same party on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
de-recognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognised in the income statement.
1.21 Hedge accounting
Hedge accounting is applied to financial assets and financial liabilities only when the following criteria are met:
At the inception of the hedge there is a formal designation and documentation of the hedging
relationship, and the Group’s risk management objective and strategy for undertaking the hedge;
The hedged relationship meets all the hedge effectiveness requirements including that an economic
relationship exists between the hedged item and the hedging instrument, the credit risk effect does
not dominate value changes, and the hedge ratio is designated based on the actual quantities of the
hedged item and hedging instrument.
Cash flow hedges
The effective part of forward contracts designated as a hedge of the variability in cash flows of foreign currency
risk arising from firm commitments, and highly probable forecast transactions, are measured at fair value with
changes in fair value recognised in other comprehensive income and accumulated in the cash flow hedge
reserve, within other reserves. The Group uses such contracts to fix the cost of foreign currency transactions
in the functional currency of the Group entity concerned.
1.22 Cash and cash equivalents
Cash and cash equivalents compromise of cash at bank (PayPal included) and in hand.
1.23 Share capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the
definition of a financial liability or financial asset.
The Group's ordinary shares are classified as equity instruments.
1.24 Share based payments
Some employees are granted share options which allow these employees to acquire shares in the Company,
if certain performance conditions are met.
The fair value of share options is recognised as an employee expense in profit or loss with a corresponding
increase in equity. The fair values of options are calculated at the earlier of the date on which an expectation
of the share options arise and the date on which the options are granted. All options have a £nil exercise price
and no market based performance conditions, therefore the fair value has been calculated using the market
value of the shares at the date of grant adjusted for any non- entitlement to dividends over the vesting period.
The amount recognised as an expense is adjusted to reflect the number of equity instruments vested or
expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of shares that eventually vest.
Where equity instruments are granted to persons other than employees, the consolidated statement of
comprehensive income is charged with the fair value of goods and services received
The social security contributions payable in connection with the grant of the share options is considered an
integral part of the grant itself, and the charge will be treated as a cash settled transaction.
55
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.25 Employee Benefit Trust (“EBT”)
As the Group is deemed to have control of the EBT, it is treated as a subsidiary and consolidated for the
purpose of the Group accounts. The EBT’s investment in the Company’s shares is deducted from
shareholders’ funds in the Group statement of financial position as if they were treasury shares.
1.26 Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for Leases of low
value assets; and Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 January 2019 without restatement of comparative figures. For an explanation of the
transitional requirements that were applied as at 1 January 2019, see Note 18. The following policies apply
subsequent to the date of initial application, 1 January 2019.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease
term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the
case) this is not readily determinable, in which case the group’s incremental borrowing rate on commencement
of the lease is used. Variable lease payments are only included in the measurement of the lease liability if
they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes any penalties payable for terminating
the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives
received, and increased for lease payments made at or before commencement of the lease; initial direct costs
incurred.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate
on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on
a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if,
rarely, this is judged to be shorter than the lease term.
When the group revises its estimate of the term of any lease (because, for example, it re-assesses the
probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the
lease liability to reflect the payments to make over the revised term, which are discounted at the same discount
rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the
variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being
amortised over the remaining (revised) lease term.
56
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.27 Critical accounting estimates and judgements
The preparation of financial information in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires the Directors to exercise their judgement in the process of applying the accounting
policies which are detailed above. These judgements are continually evaluated by the Directors and
management and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
Judgements
(i) Lease recognition on manufacturing plant
The manufacturing site is currently under lease negotiation, with the lease having expired. Management or the
lessor can give 6 months’ notice for SiS to vacate the property. Management has chosen not to recognise an
IFRS 16 lease asset as this clause is in place and as such have determined that legally the lease currently
falls into a duration of 12 months or less. Judgements made in reaching this decision include: (1) whether the
group has a lease, and (2) What the enforceable period of the lease is by assessing whether the group (as
lessee) and the lessor would have more than an insignificant penalty in exiting the lease. This was determined
by considering the wider economic cost to both parties, including whether the lessor could find a new tenant
and whether the group could find an appropriate alternative location without significant cost, as well as whether
the installation of the new powder line would create a significant penalty with regards to the cost of moving.
Estimates
Estimates are continually made and are based on historic experience and other factors, including expectations
of future events that are believed to be reasonable in the circumstances.
As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. The
Directors believe the following to be the key areas of estimation:
(i) Intangible assets
Intangible assets were recognised on the acquisition of PhD Nutrition in relation to brands and customer
relationships. The fair value of these assets were determined by discounting estimated future net cash flows
generated by the assets. These were assessed based upon management forecasts. Key assumptions are
those regarding discount rates and revenue growth rates.
In the current year the intangible assets recognised on acquisition have been tested for impairment based on
the board approved cash forecast which includes a sales growth rate and gross margin estimates.
The discount rate used to calculate the present value of the cashflow is based on a WACC analysis which
takes into account estimates of the risk-free rate, equity risk premium and company size premium.
Further detail is given in note 11, which includes sensitivity analysis performed on managements estimates.
(ii) Recognition of deferred tax asset
The carrying value of deferred tax assets are disclosed in note 17. 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 are able to be generated in the
foreseeable future. PhD Nutrition continues to generate 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. We
have recognised a deferred tax asset of £0.76m in respect of gross unutilised tax losses of £4m. Based on
our forecast taxable profits over the next 2 years only we expect these tax losses to be used and the benefit
realised by the group. Total losses carried forward are £14.1m which we will look to use against future
profits.
57
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.Accounting policies (continued)
1.27 Critical accounting estimates and judgements (continued)
(iii) Fair value measurement
Assets and liabilities included in the Group’s financial statements that require measurement at, and/or
disclosure of, fair value.
The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market
observable inputs and data as far as possible. Inputs used in determining fair value measurements are
categorised into different levels based on how observable the inputs used in the valuation technique utilised
are (the ‘fair value hierarchy’):
- Level 1: Quoted prices in active markets for identical items (unadjusted)
- Level 2: Observable direct or indirect inputs other than Level 1 inputs
- Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a
significant effect on the fair value measurement of the item. Transfers of items between levels are recognised
in the period they occur. Currently only the hedging financial instrument is measured at Fair value, refer to note
25 for more detail.
2. Financial risk management
The Group’s activities inevitably expose it to a variety of financial risks: market risk (including currency risk,
cash flow interest rate risk and fair value interest rate risk), credit risk and liquidity risk.
It is Group policy not to enter into speculative positions using complex financial instruments. The Group’s
primary treasury objective is to minimise exposure to potential capital losses.
(a) Market risk
Foreign exchange risk
The Group operates globally with subsidiaries in the USA, Italy and Australia, and therefore there will be risks
around foreign exchange rates. Refer to note 15 for analysis of cash balances by currency.
The Group primarily enters into contracts which are to be settled in UK Pounds. However, some contracts
involve other major world currencies including the US Dollar, Euro and Australian Dollar.
PhD purchases some finished goods in Euro’s, The Groups hedging policy is to place forward contracts to
euro purchases to cover 100% of our 6month currency exposure, and 50% of our 7-12month currency
exposure based on management forecasts.
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from medium term and short term money market deposits. Deposits
which earn variable rates of interest expose the Group to cash flow interest rate risk. Deposits at fixed rates
expose the Group to fair value interest rate risk. The Group had no fixed rate deposits during the year. The
Group analyses its interest rate exposure on a dynamic basis throughout the year. The Group has no
variable borrowings and therefore no interest rate swaps or other forms of interest risk management have
been undertaken.
58
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of 31 December, the Group's net exposure to foreign exchange risk was as follows:
(b) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as
credit exposure in relation to outstanding receivables. Group policy is to place deposits with institutions with
investment grade A2 or better (Moody’s credit rating).
The Group does not expect any losses from non-performance by these institutions. Management believes that
the carrying value of outstanding receivables and deposits with banks represents the Group’s maximum
exposure to credit risk.
The top 10 customers account for 41.5% (2018– 39%) of the Group’s revenue and hence there is some risk
from the concentration of customers, however the largest single customer is only 9.2% (2018 – 13.3%) of
revenue and is a major international business. Further disclosures regarding trade and other receivables are
included in Note 26.
(c) Liquidity risk
Liquidity risk arises from the Group’s management of working capital; it is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due. Prudent liquidity risk management implies
maintaining sufficient cash and cash equivalents and management monitors rolling forecasts of the Group’s
liquidity on the basis of expected cash flow. The Group had trade and other payables at the reporting date of
£10.0 million (2018 – £8.0 million) as disclosed in note 16.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of
financial liabilities
Up to 3
months
£'000
5,680
19
42
53
5,794
Between 3
and 12
months
£'000
Between 1
and 2 year
Between 2
and 5 years
£'000
£'000
58
122
129
309
77
135
212
232
395
627
Trade Payables
Hire Purchase
Lease liabilities
Derivative liabilities
Total Financial
(d) Capital risk management
The Group considers its capital to comprise its ordinary share capital, share premium, other reserve and
accumulated retained earnings/deficit as disclosed in the consolidated statement of financial position.
The Group remains funded primarily by equity capital. The Group’s objectives when managing capital are to
safeguard the Group’s ability to continue as a going concern in order to provide returns for equity holders of
the Group and benefits for other Stakeholders and to maintain an optimal capital structure to reduce the cost
of capital. The companies debt and cash position is monitored weekly which ensures these objectives are
being met along with other internal metrics.
59
2019201820192018201920182019201820192018£'000£'000£'000£'000£'000£'000£'000£'000£'000£'000GBP----------AUD $2527------2527Euro €5341,544------5341,544USD $2491------2491Total5612,062------5612,062GBP £AUD $Euro €USD $Total
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 have been split into the two brands, SiS and PhD Nutrition. Operating
segments are reported in a manner consistent with the internal reporting provided to the CODM as described
above. The reportable segments have changed from prior year (the segments in the prior year being Core,
USA, Italy, Australia and Football are now shown as part of the SiS Segment disclosed below). In 2020 the
Group’s segments are customer channel. The single largest customer makes up 9.2% of revenue and is not
separately identified in segmental reporting.
The Board uses revenue, reviewed regularly, as the key measure of the segment’s performance.
Sales
Gross profit
Advertising and promotions
Carriage
Trading contribution
Other operating expenses
Loss from Operations
SiS
£'000
24,601
13,899
(5,978)
(3,279)
4,642
2019
PhD
£'000
25,972
8,308
(1,961)
(1,273)
5,074
Total
£'000
50,573
22,207
(7,939)
(4,552)
9,716
(14,761)
(5,045)
SiS
£'000
19,813
11,526
(5,391)
(1,988)
4,147
2018
PhD
£'000
1,505
429
(90)
(75)
264
Total
£'000
21,318
11,955
(5,481)
(2,063)
4,411
(10,406)
(5,995)
60
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Revenue from contracts with customers
The group operates four primary sales channels, which form the basis on which management monitor revenue.
UK Retail includes domestic grocers and high street retailers, e-Commerce is sales through the phd.com and
scienceinsport.com platforms, Export relates to retailers and distributors outside of the UK and Market place
relates to the Amazon and eBay platforms.
E-Commerce
Export
Retail
Marketplace
Total sales
SiS
£'000
8,657
5,252
8,044
2,648
24,601
2019
PhD
£'000
1,513
7,069
13,802
3,588
25,972
Total
£'000
10,170
12,321
21,846
6,236
50,573
SiS
£'000
6,362
3,941
7,926
1,584
2018
PhD
£'000
37
436
973
59
Total
£'000
6,399
4,377
8,899
1,643
19,813
1,505
21,318
Turnover by geographic destination of sales may be analysed as follows
United Kingdom
Rest of Europe
Australia
Rest of the World
Total sales
5. Operating expenses
Sales and marketing costs
Operating costs
Depreciation and amortisation
Share based payment charge (1)
Costs associated with integration of PhD (2)
Administrative expenses
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
32,751
9,174
1,416
7,232
50,573
14,062
3,849
755
2,652
21,318
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
17,527
5,149
2,774
1,165
637
9,725
10,813
3,690
926
1,922
599
7,137
Total operating expenses
27,252
17,950
(1)
(2)
Includes associated social security costs of £87,000 (31 December 2018 – £93,000) and consideration
in respect of sponsorship services of £450,000 (31 December 2018 – £425,000).
Integration costs of PhD Nutrition into the Group amounted to £637,000 (2018 £599,000) this relates
mainly to restructuring and the powder production line installation.
61
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Loss from operations
Loss from operations is stated after charging:
Amortisation of intangible assets
Amortisation of right-of-use assets
Depreciation of property, plant and equipment
Research and development costs
Grant income in respect of research and development tax credits
A&P/Marketing costs
Foreign exchange differences on intercompany balances
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
2,129
156
489
232
(215)
7,939
297
555
-
371
320
(60)
5,481
(161)
Auditor’s remuneration
The total fees for services provided by the Group’s Auditor are analysed below:
Audit services
- Audit fees in respect of the parent company and consolidation
- Audit fees in respect of the subsidiary accounts
Non- audit services
- Corporation tax compliance
- Other taxation advisory
- Corporate finance fees
Total fees
7. Wages and salaries
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
23
67
10
32
-
132
43
44
7
30
107
231
The average monthly number of persons, including Directors, employed by the Group was:
Sales and marketing
Manufacturing
Administration
Directors
Year ended
31 December
2019
Number
Year ended
31 December
2018
Number
58
72
21
5
156
45
64
11
4
124
62
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. Wages and salaries (continued)
Their aggregate emoluments were:
Wages and salaries
Directors’ fees
Social security costs
Pension and other staff costs
Total cash settled emoluments
Share based payments – equity settled
Share based payments – social security costs
Total emoluments
8. Directors’ and Key Management Personnel remuneration
Amounts paid to the Directors of the Parent company:
Directors
Aggregate emoluments and fees
Benefits in kind
Pension contributions
Total emoluments
Share based payment remuneration charge: equity settled
Total Directors’ emoluments
Year ended
31 December
2019
£’000
Year ended 31
December
2018
£’000
7,065
120
909
233
8,327
623
87
9,037
4,723
118
542
160
5,543
1,404
93
7,040
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
566
6
6
578
435
1,013
552
6
9
567
982
1,549
Directors’ fees of £36,000 (2018 – £36,000) for one Director are paid through a Limited Company.
During the year, one Director participated in defined contribution pension schemes (year ended 31 December
2018 – one).
The number of Directors who participated in the long term incentive programme was 2 (2018 – 3). Share
options were exercised by one Director in the current year (2018 – none).
The highest Director was paid £706,000 which was made up of salaries, STIP and benefits in kind, the
Remuneration committee calls this out in more detail.
Directors’ emoluments include amounts attributable to benefits in kind comprising private medical insurance
on which the Directors are assessed for tax purposes. The amounts attributable to benefits in kind are stated
at cost to the Group, which is also the tax value of those benefits. Further details of Directors’ emoluments are
included in the Remuneration report.
The aggregate remuneration of members of Key Management Personnel (which includes the Board of
Directors and other Senior Management Personnel) during the year was as follows:
Amounts paid to Key Management Personnel.
Remuneration and short term benefits
National insurance costs
Post-employment benefits
Share based payments
63
Year ended
31 December
2019
£’000
1,430
181
40
678
2,329
Year ended
31 December
2018
£’000
1,059
130
30
1,404
2,623
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Taxation
Current tax income
United Kingdom corporation tax
Adjustment in respect of prior period
Total current tax income
Deferred tax
Effect of change in tax rates
Origination and reversal of temporary differences
Tax on loss for the period
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
–
–
–
(100)
(454)
(554)
–
(4)
(4)
–
119
115
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
Loss before tax multiplied by the standard rate of corporation tax
in the UK of 19% (2018 – 19%)
Effects of:
Expenses not deductible for tax purposes
Unprovided deferred tax asset on losses carried forward
Additional deduction for R&D expenditure
Share scheme deduction
Effect of changes in tax rate
Adjustment in respect of prior periods
Other
Total tax credit for the period
5,064
962
(6)
(1,482)
98
(33)
(100)
-
7
(554)
5,990
1,138
(7)
(575)
(34)
(147)
(31)
(229)
-
115
Tax on each component of other comprehensive income is as follows
2019
Tax
Before
tax
After
tax
Before
tax
2018
Tax
After
tax
£'000
£'000
£'000
£'000 £'000
£'000
Loss recognised on hedging instrument
(181)
33
(148)
-
Exchange gains on the translation of foreign
operations
Total
67
-
67
(125)
(114)
33
(81)
(125)
-
-
-
-
(125)
(125)
At 31 December 2019 UK tax losses of the Company available to be carried forward are estimated to be
£14,117,000 (31 December 2018 – £10,100,000). In the deferred tax note (17) the recoverability of the
deferred asset against future profits is assessed.
Deferred tax balances are valued at the rate of 19% in these accounts to the extent that timing differences are
expected to reverse after this later date.
64
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. 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
2019
Year ended
31 December
2018
Loss for the year attributable to owners of the parent – £’000
(5,618),
(5,875)
Weighted average number of shares
122,716,318,
71,422,400
Basic and diluted loss per share – pence
(4.6p)
(8.2p)
The number of vested but unexercised share options is 6,080,901 (2018 – 5,428,949).
11. Intangible assets
Cost
At 31 December 2017
Additions
Acquisitions
Goodwill
£’000
–
–
17,398
At 31 December 2018
17,398
Additions
–
Brands
£’000
Customer
relationships
£’000
Website and
software
development
£’000
Product
development
£’000
–
–
8,957
8,957
–
–
–
5,638
5,638
–
1,645
787
–
2,432
959
357
158
–
515
494
Total
£’000
2,002
945
31,993
34,940
1,453
At 31 December 2019
17,398
8,957
5,638
3,391
1,009
36,393
Amortisation
At 31 December 2017
Charge for year
At 31 December 2018
Charge for year
At 31 December 2019
–
–
–
–
–
–
75
75
896
971
–
47
47
564
611
564
329
893
515
1,408
79
104
183
154
337
643
555
1,198
2,129
3,327
Net book value
At 31 December 2019
17,398
At 31 December 2018
17,398
7,986
8,882
5,027
5,591
1,983
1,539
672
332
33,066
33,742
65
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Intangible assets (continued)
At 31 December 2019, the Group had no capital commitments whereby agreements had been entered into for
both scope and amount for 2020 projects (31 December 2018 £133,000 relating to website development and
SAP development costs).
The brand and customer relationships recognised were purchased as part of the acquisition of PhD Nutrition
on 6 December 2018. They are considered to have finite useful lives and are amortised on a straight line basis
over their estimated useful lives of 10 years. The intangibles were valued using an income approach, using
Multi-Period excess earnings Method approach for customer relationships and Relief from Royalty Method for
brand valuations.
Goodwill impairment
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The
recoverable amount is determined based on value in use calculations. The use of this method requires the
estimation of future cash flows and the determination of a discount rate in order to calculate the present value
of the cash flows.
The Group has estimated the value in use of PhD based on a discounted cashflow model which adjusts for
risks associated with the assets. The pre- tax discount rate used to measure the CGUs value in use was 15%.
The recoverable amount of the CGU has been determined from value in use calculations based on cash flow
projections covering a period to 31 December 2025. The forecasts are based on a 3 year, board approved,
strategic plan, which forecasts revenue growth ahead of the forecast market growth rate. For the period from
2023 to 2025 revenue growth rates have been reduced to the forecast average growth rate for the sports
nutrition market. After 2025 a long term annual growth rate of 1.5% has been applied. The SiS brand has
grown at a compound annual growth rate of 25% over the last six years.
The Board approved cash forecast uses a growth rate of 18% for 2020 and above 20% for 2021 and 2022. A
growth rate of 8% for 2023-2025 has been used in line with the sports nutrition market growth rate. From 2026
an annual growth rate of 1.5% is applied into perpetuity.
The key assumptions used in the discounted cashflow model were the discount rate, sales growth, gross
margin and EBITDA. Gross margin and EBITDA percentages were based on 2019 actuals adjusted for known
improvements to the manufacturing cycle as well as extra costs around headcount and carriage that are
appropriate with the future revenue growth rate. We have enacted contingency plans to protect cash reserves
as the priority in response to the Covid-19 coronavirus outbreak, and are monitoring the situation daily.
The discount rate used in the discounted cashflow is based on a WACC analysis which takes into account
estimates on the:
- Risk-free rate (rate used is higher than the long-term UK government bond)
- Equity risk premium (this is higher than the average equity risk premium in the UK)
- Size premium (the same value as prior year has been used)
Sensitivity analysis
With regard to the assessment of value in use, a change in any of the above key assumptions could have a
material impact on the carrying value of the cash-generating unit
If any of the following changes were independently made to the key assumptions the carrying amount and
recoverable amount would be equal:
6% increase in the discount rate or
7% decrease in the current growth rate (years 1 -6)
35% decrease in EBITDA (years 1-6)
66
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. Property, plant and equipment
Leasehold
improvements
£’000
Plant and
machinery
£’000
Fixtures,
fittings and
computer
equipment
£’000
Motor
vehicles
£’000
461
45
506
97
603
342
66
408
41
-
449
154
98
1,237
146
1,383
821
(6)
841
420
1,261
310
2,198
1,571
796
161
957
222
(5)
1,174
1,024
426
624
137
761
222
-
983
588
500
Cost
At 31 December 2017
Additions
At 31 December 2018
Additions
Disposals
At 31 December 2019
Depreciation
At 31 December 2017
Charge for the year
At 31 December 2018
Charge for the year
Disposal
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
13. Inventories
Raw materials
Finished goods
Total
£’000
2,555
611
3,166
1,228
(6)
4,388
1,762
371
2,133
489
(5)
16
-
16
–
16
–
7
7
4
-
11
2,617
5
9
1,771
1,033
31 December
2019
£’000
31 December
2018
£’000
1,551
4,590
6,141
2,164
4,938
7,102
There is a provision of £131,000 included within inventories in relation to the impairment of inventories (31
December 2018 – £116,000). During the period inventories of £28,236,000 (year ended 31 December -2018
£9,094,000) were recognised as an expense within cost of sales.
67
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. Trade and other receivables
31 December
2019
£’000
31 December
2018
£’000
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Other receivables
Total financial assets other than cash and cash equivalents
classified as amortised cost
Prepayments and accrued income
Total trade and other receivables
9,415
(51)
9,364
517
9,881
1,046
10,927
7,513
(43)
7,470
480
7,950
989
8,939
Trade receivables represent debts due for the sale of goods to customers.
Trade receivables are denominated in local currency of the operating entity and converted to Sterling at the
prevailing exchange rate as at 31 December 2019. The Directors consider that the carrying amount of these
receivables approximates to their fair value. All amounts shown under receivables fall due for payment within
one year. The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables and contract assets. To measure expected credit losses
on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging.
The expected loss rates are based on the Group’s historical credit losses experienced over 2019, this is due
to SiS using SAP which has provided more visibility over debtors. PhD has also looked at credit loss over the
2019 year as this is the first full year under SiS plc ownership. The historical loss rates are then adjusted for
current and forward-looking information affecting the Group’s customers.
At 31 December 2019 the lifetime expected loss provision for trade receivables is as follows:
31 December 2019
Expected loss rate (%)
Gross carrying amount (£’000)
Loss provision (£’000)
31 December 2018
Expected loss rate (%)
Gross carrying amount (£’000)
Loss provision (£’000)
More than
60 days
past due
More than
90 days
past due Total
2%
224
10%
463
5 46
51
2%
501
10
7%
475
33
43
68
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. Cash and cash equivalents
Cash at bank and in hand
Cash at bank and in hand is made up of the following currency balances
British Pound
Euro
US Dollar
Australian Dollar
New Zealand Dollar
31 December
2019
£’000
31 December
2018
£’000
5,371
8,002
4,069
722
135
332
113
5,371
5,418
1,587
619
259
119
8,002
The directors consider that the carrying amount of cash approximates to its fair value.
16. Trade and other payables
Trade payables
Accruals
Total financial liabilities measured at amortised cost
Other taxes and social security
31 December
2019
£’000
31 December
2018
£’000
5.680
3.354
9.082
920
9,954
4,661
2,631
7,292
678
7,970
The Directors consider that the carrying amount of these liabilities approximates to their fair value.
All amounts shown fall due within one year.
17. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19%
(year ended 31 December 2018 – 19%). 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 2019:
Asset
Liability
Net
£’000
£’000
£’000
(Charged)/
credited to
profit or
loss
£’000
(Charged)/
credited to
equity
£’000
Accelerated capital allowances
Available losses
Other temporary and deductible differences
Business combinations
Cash flow hedges
Tax assets/ (liabilities)
Set-off of tax
-
761
507
-
33
1,301
(382)
(382)
-
-
(2,472)
-
(2,854)
382
(382)
761
507
(2,472)
33
(1,553)
-
(63)
(564)
84
(11)
-
(554)
-
Net tax assets/ (liabilities)
919
(2,472)
(1,553)
(554)
-
-
-
-
33
33
-
33
69
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Deferred tax (continued)
Year ended 31 December 2018:
Asset
£’000
Liability
£’000
Accelerated capital allowances
Available losses
Other temporary and deductible differences
Business combinations
Tax asset/ (liabilities)
Set-off of tax
–
1,325
424
–
1,749
(319)
Net
£’000
(319)
1,325
424
(2,461)
(319)
–
–
(2,461)
(2,780)
(1,031)
319
–
(Charged)/
credited to
profit or
loss
£’000
(206)
558
(254)
21
119
–
119
Net tax assets/ (liabilities)
1,430
(2,461)
(1,031)
Recoverability of deferred tax asset:
SiS (Science in Sport) Limited has a cumulative assessed tax loss of £14.1m as at 31 December 2019 , this
has increased by £4m from 2018. The losses are split into pre 1 April 2017 losses of £4.2m and post 1 April
2017 losses of £9.9m. SiS can utilise its assessed tax losses in the coming years against future expected
profits. Assessed losses from before 1st April 2017 can only be used against SiS (Science in Sport) Limited
profit whereas assessed tax losses from after 1st April 2017 can be used to offset the future profits from SiS
(Science in Sport) Limited and PhD Nutrition Ltd profits.
Tax losses have been recognised to the extent that they are considered recoverable based on short term
forecast taxable profits.
18. Leases
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional
adjustments on the date of initial application (1 January 2019), without restatement of comparative figures.
The group leases several properties in the jurisdictions from which it operates. In all jurisdictions the rates are
fixed over the lease term.
The group also leases vehicles, which comprise only of fixed payments over the lease terms.
In determining the right to use asset and lease liability at the date of initial application, the weighted average
incremental borrowing rate of 4% was used.
Right-of-use Assets
At 1 January 2019 (being initial recognition)
Additions
Amortisation
As at 31 December 2019
Land and
buildings
£’000
399
411
(136)
674
Vehicles
£’000
35
-
(20)
15
Totals
£’000
434
411
(156)
689
70
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Leases (continued)
Lease liabilities
At 1 January 2019 (being initial recognition)
Additions
Interest expense
Lease payments
As at 31 December 2019
Land and
buildings
£’000
399
411
23
(151)
682
Vehicles
£’000
35
-
1
(24)
12
Totals
£’000
434
411
24
(175)
694
As at 31 December 2019
Lease liabilities
Up to 3
months
£’000
(42)
Between
3 and 12
months
£’000
(122)
between 1
and 2 year
£’000
(135)
Between 2
and 6 years
£’000
(395)
One property lease has not been recognised as a lease asset and liability under IFRS 16, as the lease contract
has expired and current rolling terms are 6 months’ notice.
Short term lease expense is £170 000 for 2019, which relates to rental property in UK, Italy and the USA where
the lessor retains substantially all the risks and benefits of ownership, and the asset are classified as operating
leases. Rentals applicable to operating leases are charged against profits on a straight-line basis over the
period of the lease.
The following table presents the impact of adopting IFRS 16 on the statement of financial position as at 1
January 2019:
Assets
Right-of-use assets
Liabilities
Lease Liabilities
ref
(a)
(b)
31 December
2018
£'000
IFRS 16
£'000
01 January
2019
£'000
-
-
434
434
(434)
(434)
(a) None of the leases were previously classified as finance right to use assets under property plant
and equipment.
(b) The adjustment to right-of-use assets was from operating lease in the prior year.
71
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Leases (continued)
The following table reconciles the minimum lease commitments disclosed at 31 December 2018 to lease
liabilities recognised on 1 January 2019.
Minimum operating lease commitment at 31 December 2018
Less: short term leases not recognised under IFRS 16
Plus: effect of extension options reasonably certain to be exercised
Undiscounted lease payments
Less: Effect of discounting using the incremental borrowing rate at date of
initial application
Lease liability as at 1 January 2019
1 January 2019
£’000
473
(83)
140
530
(96)
434
As the modified retrospective approach was adopted there was no effect on retained earnings
19. Share capital
Ordinary
10p shares
number
Ordinary
10p shares
£’000
Authorised share capital
221,000,000
22,100
Allotted, called up and fully paid
At 31 December 2018
Sponsorship consideration 11 January 2019
Sponsorship consideration 4 March 2019
Sponsorship consideration 27 March 2019
At 31 December 2019
Ordinary
10p shares
number
121,967,803
416,667
194,174
240,385
122,819,029
Ordinary
10p shares
£’000
12,197
42
19
24
12,282
The Company has one class of Ordinary shares which carry no rights to fixed income.
On the dates shown above the Company issued new Ordinary shares of 10p each respectively, as
consideration for sponsorship related services. The fair value of these shares at the date of issue was
£450,000, this represented the market price for the sponsorship services provided.
At 31 December 2019 the Employee Benefit Trust held in reserve 1,938,182 new Ordinary shares of 10p each
to be issued as share options (2018 – 3,726,036 new Ordinary shares of 10p each).
72
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Share options
In June 2014 the Company adopted a Share Option Plan (“SOP”). The key terms of the SOP are substantially
the same as set out in the AIM Admission Document which is available on the Group’s website. Under the
SOP, options to purchase Ordinary shares may be granted by the Remuneration Committee to Directors,
Senior Executives and potentially other employees at nil-cost.
To enable the Company to grant nil-cost options it has established an Employee Benefit Trust to purchase,
hold and transfer the Ordinary shares pursuant to the options.
The SOP is managed by the Remuneration Committee on behalf of the Company. The Company will grant
each participant an option subject to the terms and conditions of each participant’s individual option agreement
(including performance conditions) and the SOP rules. Each participant may be granted either annual or long
term (three- or five-year vesting period) options or both. Annual options may be settled in either cash or shares
at the sole discretion of the Remuneration Committee. As at 31 December 2019 1,938,182 (2018- 3,726,036)
shares were held by the Employee Benefit Trust in respect of options awarded to the Directors in respect of
previous years. All other annual options have been treated as equity settled options.
In the event that the option holder’s employment is terminated before vesting, the option may not be exercised
unless the Remuneration Committee so permits. Options expire 10 years from date of grant.
The Board approved an LTIP element of the SOP on 22 September 2016 which relates to revenue growth
achievement. This award replaces the existing five-year LTIP, the three-year revenue growth phase of this
scheme vested in March 2016 and was then planned to be a profit plan for two years thereafter. Following the
raising of additional capital in October 2015, the strategy has continued to be focussed on revenue growth
following the completion of the first three years of the previous LTIP:
Revenue incentive motivates Management to grow revenue in years one to three, where year three ends
December 2018.
The Options were awarded each year on a sliding scale for revenue growth between 15% and 30% per annum
over the three years. The maximum value of the shares subject to these awards is 200% of the basic salary of
the Chairman and CEO, and 100% of the basic salary of the Finance Director and other Senior Management.
A new LTIP scheme for 2019-2021 is in place, further information on the scheme can be found in the
Remuneration report.
The total charge for the year relating to employee share based payment plans was £628,000 (2018 –
£1,404,000), all of which related to equity settled share based payment transactions. Total social security costs
of £87,000 (2018 – £93,000) have also been recognised and included in the share based payment charge of
£1,165,000 (2018 – £1,922,000).
Options granted during the period
During the year ended 31 December 2019 options were granted under the short term incentive plan with regard
to performance in the year ended 31 December 2018. All options have a nil exercise price and no market
based performance conditions, therefore the fair value has been calculated using the market value of the
shares at the date of grant. As the expected dividend yield for the life of the option is assumed to be nil no
adjustment is required for non-entitlement to dividends.
Date of grant
20 March 2019
19 September 2019
Exercise
price
pence
Share
options
number
Share price at
date of grant
pence
nil
nil
1,288,365
337,560
52p
55p
73
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Share options (continued)
Movements in the number of share options outstanding and their related weighted average exercise prices
are as follows:
Options at 1 January 2018
Granted during year
Exercised
Forfeited during year
Outstanding at 31 December 2018
Granted during year
Exercised
Forfeited during year
Outstanding at 31 December 2019
Weighted
average
exercise
price
pence
Weighted
average
share price
at date of
exercise Share options
Number
pence
nil
nil
nil
nil
nil
nil
nil
nil
nil
–
–
73p
–
–
55p
–
7,360,912
342,129
(589,079)
(271,423)
6,842,539
1,625,925
(1,787,854)
(599,709)
6,080,901
The exercise price of all options outstanding at the end of the year was nil. The average remaining contractual
life for these options as at 31 December 2019 was 6.9 years (31 December 2018 – 7.6 years).
21. Reserves
Share premium
Amount subscribed for share capital in excess of nominal value less costs
directly attributable to the issue of shares
Employee Benefit Trust
reserve
Shares in the Company held by the Employee Benefit Trust which will be
used to settle options held by employees under the SOP
Cash flow hedge reserve
Gains/losses arising on the effective portion of hedging instruments carried
at fair value in a qualifying cash flow hedge
Other reserve
Arose as a result of applying the principles of reverse acquisition accounting
following the demerger of SIS (Science in Sport) Limited from Provexis plc
in August 2013 and represents the difference between the capital reserves
of Science in Sport plc (the legal acquirer) and those of SIS (Science in
Sport) Limited (the legal acquiree).
Retained deficit
Cumulative net gains and losses recognised in the consolidated statement
of comprehensive income
Foreign exchange reserve
Arises on the translation of foreign subsidiaries into Sterling at the year-end
date. For the year ending 31 December 2019 a profit of £67,000 was
recognised (2018 – £125,000 loss) to this reserve.
22. Pension costs
The pension charge represents contributions payable by the Group to independently administered funds which
during the period ended 31 December 2019 amounted to £233,000 (period ended 31 December 2018 –
£160,000). Pension contributions payable but not yet paid at 31 December 2019 totalled £33,149 (31
December 2018 – £22,000).
74
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Operating lease commitments
Future minimum rentals payable under operating lease(to note this is the earlier of lease expiry or notice period
served where there is no defined period on the lease.)
Expiring:
Due within 1 year
Due between 2 years and 5 years
31 December
2019
£’000
31 December
2018
£’000
128
-
128
147
326
473
Operating lease payments primarily represent rentals payable by the Group for properties for which a ROU
asset has not been recognised under IFRS 16, as the leases have been determined to be short term.
24. Related party transactions
IAS 24 ‘Related Party Transactions’ requires the disclosure of the details of material transactions between
reporting entities and related parties. Transactions and balances with Group companies are eliminated on
consolidation and therefore do not need to be disclosed.
Details of Directors’ remuneration are within the Remuneration Committee report
25. Financial instruments
Financial instruments at amortised costs
Financial assets measure at amortised cost
Financial liabilities measure at amortised cost
31 December
2019
£’000
31 December
2018
£’000
15,252
15,952
9,082
7,292
Financial assets comprise cash and cash equivalents trade and other receivables. Financial liabilities
comprise trade payables and accruals.
Derivative Financial liabilities
31 December
2019
£’000
31 December
2018
£’000
Derivatives designed as hedging instruments
Forward foreign exchange contracts- cash flow hedges
181
-
75
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Financial instruments (continued)
The only financial instrument measured at fair value are derivatives, designated as hedging instruments. These
are classified as level 2 in the fair value hierarchy (see note 1.27).
There were no transfers between levels during the period.
Derivative financial assets and liabilities
Forward exchange rates at the reporting date used to
determine fair value.
Valuation technique
All derivatives held by the Group are designated as hedging instruments. The Group has elected to adopt the
hedge accounting requirements of IFRS 9 Financial Instruments. The Group enters hedge relationships
where the critical terms of the hedging instrument and the hedged item match, therefore, for the prospective
assessment of effectiveness a qualitative assessment is performed.
Hedge effectiveness is determined at the origination of the hedging relationship. Quantitative effectiveness
tests are performed at each period end to determine the continued effectiveness of the relationship.
The fair value of the derivative financial assets and liabilities are split between current and non-current
depending on the remaining maturity of the derivative contract and its contractual cash flows.
The fair value of foreign currency forward contracts are based on observable information on exchange and
interest rates. The hedged forecast transactions denominated in foreign currency are expected to occur at
various dates within the next 12 months.
Gains and losses on foreign currency forward contracts which have been recognised in the hedging reserve,
within other reserves in equity as at 31 December 2019, will be recognised in the Consolidated Statement of
Comprehensive Income in the periods during which the hedged forecast transaction occurs.
The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the
Consolidated Statement of Financial Position.
The gross contractual cash flows for the forward contracts as at 31 December 2019 was £6,795,000 (31
December 2018: £nil). The movement in the fair value on forward contracts in the period of £181,000 loss
(2018: £nil) has been included within other comprehensive income in the Consolidated Statement of
Comprehensive Income.
76
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Hire purchase agreement
A hire purchase agreement was entered into on 12 December 2019 with HSBC Equipment Finance. This
was to fund the new powder production line completed in November 2019, with the first powder products
being produced in the same month. The Group’s obligation is to repay the financing over 60 months, with
the first repayment occurring on 18th January 2020.
Current portion of Hire purchase obligation
Long term portion of Hire purchase obligation
Total Hire purchase obligation
31 December
2019
£’000
(77)
(309)
(386)
31 December
2018
£’000
-
-
-
27. Post balance sheet events
Subsequent to the balance sheet date, the COVID-19 outbreak has escalated to a global pandemic. The impact
of this has been considered on the financial statements up to the date of signing. The impact on the going
concern assessment has been considered and detailed in the Directors report on page 24, with further
discussion of the steps being taken by the company detailed in the strategic report on page 12. No further
adjustments are deemed necessary as a result of this matter.
77
FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
Company number 08535116
Assets
Non-current assets
Investments
Other receivables
Total current assets
Current assets
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total current liabilities
Net current (liabilities)/assets
Total net assets
Capital and reserves attributable to
owners of the Parent company
Share capital
Share premium reserve
Share options reserve
Employee Benefit Trust reserve
Retained deficit
Total equity
As at
As at
31 December 31 December
2018
2019
Notes
£’000
£’000
4
5
6
7
48,295
18,310
66,605
47,216
16,429
63,645
-
6
6
90
2,185
2,275
66,611
65,920
(37)
(37)
(31)
(493)
(493)
1,782
66,574
65,427
12,282
48,829
6,847
(193)
(1,191)
66,574
12,197
48,464
6,218
(372)
(1,080)
65,427
As permitted by Section 408 of the Companies Act 2006 no separate Parent company profit and loss account
has been included in these financial statements. The Parent company profit for the period was £68,000 (period
ended 31 December 2018 – £597,000).
The Company Statement of Financial Position for 2018 has been adjusted for the classification of the loan to
its subsidiary, see note 9.
These financial statements were approved and authorised for issue by the Board on 17 March 2020 and signed
on its behalf by:
Stephen Moon
Director
The notes on pages 81 to 83 form part of these Parent company financial statements.
78
FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit/(Loss) after tax
Operating cash outflow before changes in working capital
Changes in trade and other payables
Total cash outflow from operations
Cash flow from investing activities
Acquisition of subsidiary
Changes in other receivables and investments
Interest received
Financing operations of subsidiary
Net cash outflow from investing activities
Cash flow from financing activities
Proceeds from issue of share capital
Expenses paid on share issues
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
Year
ended
31 December
2019
£000
Year
ended
31 December
2018
£000
68
68
(456)
(388)
-
-
4
(1,795)
(1,791)
-
-
-
(2,179)
2,185
6
(597)
(597)
215
(470)
(31,106)
(88)
4
(8,013)
(39,115)
27,920
(240)
27,680
(11,905)
14,090
2,185
The notes on pages 81 to 83 form part of these Parent company financial statements.
79
FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Share
capital
£’000
Share
premium
£’000
Share
option
reserve
£’000
Employee
Benefit
Trust
reserve
£’000
Retained
deficit
£’000
Total
equity
£’000
At 31 December 2017
6,683
22,339
4,814
(397)
(424)
33,015
Total comprehensive loss for the year
–
–
–
–
(597)
(597)
Transactions with owners
Issue of shares:
- Issued in return for sponsorship services
- Placing
Transaction costs of placing
- Consideration shares issued on acquisition of
PhD
Issue of shares to EBT
Issue of shares held by EBT to employees
Share based payments
368
(425)
57
4,840
–
24,197
(1,357)
583
2,917
34
–
–
–
–
–
–
–
–
–
–
1,829
–
–
–
–
(34)
59
–
–
–
–
–
–
(59)
–
–
29,037
(1,357)
3,500
–
–
1,829
At 31 December 2018
12,197
48,464
6,218
(372)
(1,080)
65,427
Total comprehensive loss for the year
–
–
–
–
68
68
Transactions with owners
Issue of shares:
- Issued in return for sponsorship services
Issue of shares held by EBT to employees
Share based payments
85
–
–
365
(450)
–
–
–
1,079
–
179
–
–
–
(179)
-
–
1,079
At 31 December 2019
12,282
48,829
6,847
(193)
(1,327)
66,574
The notes on pages 81 to 83 form part of these Parent company financial statements.
80
FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
1. Accounting policies
To the extent that an accounting policy is relevant to both SiS Group and Company financial statements , refer
to the Group financial statements for disclosure of the accounting policy.
The Parent company financial statements have been prepared in accordance with International Financial
Reporting Standards, International Accounting Standards and Interpretations (collectively “IFRS”) issued by
the International Accounting Standards Board (“IASB”) as adopted by the European Union (“adopted IFRS”)
and applied in accordance with the Companies Act 2006.. The accounting policies are consistent with those
of the Group which are disclosed in note 1 to the consolidated financial statements.
Intercompany loans
Intercompany loans are measured in accordance with IFRS 9 and as the loan is payable on demand and
interest free, the loan has been measured at amortised cost. The estimated credit losses are calculated
using the general approach. If at the reporting date it is determined that the loan cannot be repaid
immediately on request, we will consider the most appropriate way to maximize recovery. Where this is
considered to be by allowing the counterparty time to pay, we model a number of expected recovery
scenarios based on underlying forecasts of the counterparty to calculate the expected credit loss.
Employee Benefit Trust Reserve (“EBT”)
The shares held in the EBT are included in the company accounts, as it is considered that the company (as
sponsor) retains the majority of the risks and rewards relating to the funding arrangement with the EBT trust.
Going concern
The going concern basis has been applied in preparing the Parent company financial statements for the
reasons identified and disclosed in note 1 to the consolidated financial statements.
Valuation of investments
The investment in SIS (Science in Sport) Limited is recorded at the nominal value of shares issued for the
purposes of the demerger in accordance with Section 615 of the Companies Act 2006. Accordingly, no
premium on the issue of shares has been recognised. The investment in PhD Nutrition is held at cost.
2. Profit attributable to Shareholders
As permitted by Section 408 of the Companies Act 2006 no separate Parent company profit and loss account
has been included in these financial statements. The Parent company profit for the period was £68,000 (period
ended 31 December 2018 loss – £597,000).
The auditors remuneration for audit and other services is disclosed in Note 5 to the consolidated financial
statements
3. Employee costs
All salary costs of employees of the Company are borne by subsidiary companies, and are disclosed in note
6 of the consolidated financial statements.
4. Investments
At 31 December 2017
Capital contribution
Acquisition of subsidiary – PhD Nutrition
At 31 December 2018
Capital contribution
At 31 December 2019
£’000
10,578
1,829
34,809
47,216
1,079
48,295
Capital contribution relates to share based payment transactions settled by the Company on behalf of SIS
(Science in Sport) Ltd.
81
FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
4. Investments (continued)
At 31 December 2019 the Company owned the following subsidiary undertakings:
Share of issued
ordinary share
capital, and voting
rights
Registered office
Business activity
SIS (Science in Sport)
Limited
SIS (APAC) Pty Limited
Science in Sport Inc
Science in Sport (Italy) Srl
PhD Nutrition Limited
100%
100%
100%
100%
100%
2nd Floor, 16-18 Hatton Garden, Farringdon, London, EC1N
8AT
United Kingdom
Sports Nutrition
Level 3, 41-43 Stewart St, Richmond, VIC 3121
Australia
Sports Nutrition
C/o USA Corporate Services Inc., 3500 S Dupont Hwy,
Dover, DE 19901
USA
Via Bernadino Telesio 25, 20142, Milan
Italy
2nd Floor, 16-18 Hatton Garden, Farringdon, London, EC1N
8AT
United Kingdom
Sports Nutrition
Sports Nutrition
There are no significant restrictions on the ability of the subsidiary undertaking to transfer funds to the parent,
other than those imposed by the Companies Act 2006.
5. Other receivables
Amounts falling due within after more than one year
Amounts owed by SIS (Science in Sport) Limited
Total other receivables
Total other receivables are carried at amortised cost.
31 December
2019
£’000
31 December
2018
£’000
18,310
18,310
16,429
16,429
There has been no change in the credit risk comparison of the loan and as such has stayed in stage 1 of the
general approach. The ECL has been calculated assuming the loan will be repaid over a future period of
continued trading. This has been calculated based off the board approved plan for SIS (Science in Sport)
Limited. The cash flow includes internal and external forward-looking information. The Growth rate from 2023
has been at 8% which is just below the growth rate of the nutritional market. No material estimated credit
losses were identified.
6. Other payables
Amounts falling due within one year
Trade payables
Accruals
Total other payables
82
31 December
2019
£’000
31 December
2018
£’000
-
37
37
155
338
493
FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
7. Share capital
Details of the share capital of the Company are included in note 19 to the consolidated financial statements,
details of share based payments are in note 20 to the consolidated financial.
8. Related party transactions
Amounts owed by and to subsidiaries are disclosed in Notes 5 of the Company financial statements. There
are no other related parties other than the subsidiaries listed in note 4 and no other transactions other that
than the loan to SIS (Science in Sport) Limited.
There are no employees during either period. The remuneration of the Directors of the Company is disclosed
within the Remuneration Committee Report on pages 34 to 37.
9. Prior year adjustment
The company has a receivable due from its subsidiary SIS (Science in Sport) Limited. This is a zero interest,
on demand loan. However as at the year end the intention of the company is not to request payment within 12
months and therefore the loan has been disclosed as a non-current receivable. It is considered that the loan
should have also been classified as non-current as at 31 December 2018 and therefore the prior year balance
of £16,519,000 has been restated as non-current
83
COMPANY INFORMATION
Company number
08535116
Directors
Audit committee
J M Clarke
T Wright
R Duignan
S N Moon
J L Simpson
R Mather (Chairman) Appointed 31 January 2020
R Duignan (Chairman) Resigned 31 January 2020
J M Clarke
J L Simpson
Remuneration committee
T Wright (Chairman) Appointed 31 January 2020
J M Clarke (Chairman) Resigned 31 January 2020
Registrars
Registered office
Nominated adviser and broker
Principal solicitors
Auditors
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
2nd Floor
16-18 Hatton Garden
Farringdon
London EC1N 8AT
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Dentons
One Fleet Place
London
EC4M 7WS
Reading
Berkshire RG1 1SH
BDO LLP
2 Blagrave Street
Reading
RG1 1AZ
84
NOTES
85