Back in 1992 when Tim Lawson founded Science in Sport (SIS) from his mother's kitchen, sports nutrition was a market in its infancy. More than two decades of sporting improvement has changed that. Today it matters what an athlete eats; take for example Laura Trott who claims that changes to her diet made the crucial difference between a silver medal at the world championships in 2015 and a gold at the Olympics a year later. This attention to nutrition has fed through to a rise in demand for supplements from amateur sports people as exercise and fitness has become more fashionable. Today the global sports nutrition market is valued at an estimated $10bn (£8.2bn) and growing at a rate of 10 per cent a year.
- Strong brand
- Market growth
- Partnerships with many elite athletes and sports teams
- Healthy balance sheet
- Loss making with no imminent forecast profit
- Competitive products include some well established brands
SIS is growing faster than the wider marketplace. In recent half-year results, the group reported a 24 per cent increase in revenue to £6.5m. Chief executive Stephen Moon thinks that is down to the group's scientific expertise in making high-quality sports supplements which really make a difference to performance. It's also about how the company uses its links with elite and amateur sports people to direct research and development and build its brand. For example, sports people wanted a ready to consume protein product to aid recovery, so SIS launched its REGO rapid recovery range of protein pouches. Such new lines contributed around a third of the revenue growth in the first half of 2016.
More impressive, however, is the group's ability to attract the endorsement of elite athletes. SIS products are used by Tour de France winner Chris Froome and Team Sky, 38 premiership and championship football clubs and 'fuelled' 34 Olympic medallists in Rio. Chris Hoy is a long-standing brand ambassador while Mark Cavendish acts as an elite consultant. That gives SIS's products more kudos among elite sports people than rival products such as GlaxoSmithKline's (GSK) MaxiMuscle or My Protein (owned by e-commerce company The Hut Group) which draws in the amateur sports people.
Financially, SIS doesn't carry the same weight as competitors and pre-tax losses are forecast for at least the next two years. But a focus on efficiencies, especially in the Lancashire manufacturing facility, helped improve gross margins by 70 basis points to 58.9 per cent in the first six months of the current financial year. The group has also invested heavily in its e-commerce platform which is performing well and contributed to an increased first-half marketing spend up 30 per cent to £3m. Following the group's share placing at 59p a share, to raise £8.2m a year ago, the balance sheet looks healthy in comparison with forecast cash outflows of about £2m in each of the next two years.
International sales in the first half grew strongly and now contribute just over a fifth of overall revenue. Late in 2015 the group launched its Australian subsidiary and has recently appointed a US country manager, having established an online retail presence stateside. A partnership with USA Cycling is expected to enhance brand awareness across the pond.
SCIENCE IN SPORT (SIS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 61.5p | MARKET VALUE: | £27m | |
| TOUCH: | 61-62p | 12-MONTH HIGH: | 76p | 47p |
| FORWARD DIVIDEND YIELD: | nil | FORWARD PE RATIO: | na | |
| NET ASSET VALUE: | 26.7p | NET CASH: | £6.6m | |
| Year to 30 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 8.0 | -0.5 | 0.2 | nil |
| 2015 | 9.4 | -0.6 | -1.4 | nil |
| 2016* | 12.0 | -1.2 | -2.7 | nil |
| 2017* | 15.0 | -1.2 | -2.7 | nil |
| % change | +25 | - | - | - |
Normal market size: 3,000 Market makers: 5 Beta: 0.6 *Cenkos forecasts, adjusted PTP and EPS figures | ||||
