Science in Sport raises and may sell to hedge against economic downturn

Science in Sport has this morning announced its intention to raise up to £5 million via the allocation of new ordinary shares in a bid to hedge against an economic downturn.

Having just invested big in a new Blackburn production headquarters, the company has looked to steady itself, anticipating that the current economic situation will lead to reduced sales and increases to material costs.

“Whilst the Board believes the Company has sufficient cash headroom under its existing debt facilities, the net proceeds from the Placing of approximately £4.6 million will be used to strengthen the Company’s balance sheet with a view to providing sufficient liquidity and flexibility in the event there is any further downturn in the economy impacting sales or any unexpected increases in input material costs or other costs,” says the RNS, outlining why it is felt necessary to bolster the balance sheet.

The placing of 33,333,333 new ordinary shares at the price of 15 pence per share represented a significant discount to last week’s share price, which hovered closer to 24 pence. The result today is a 27% decline in the share price at the time of writing.

The CEO, Stephen Moon will demonstrate his faith in the business by subscribing to 221,574 of the shares in the placing, which will be carried out by Liberum Capital, the nominated adviser, broker and sole bookrunner.

The raise comes in the face of pressure son the business associated with the closure of all Russian operations, supply chain issues in the USA, plus a hold up for the supply of PhD Smart Bars. All combined, the company says it has seen revenues reduce by £4.2 million in the year to date.

Added to this, unbudgeted and sharp raw material price increases on ingredients like whey and soy protein, plus fuel costs to get those goods to Science in Sport have brought further costs. Restructuring costs will add £2.9 million in outgoings in 2022.

Further down in the RNS is a section dubbed ‘strategic review’, within which the company says this “may or may not result in a sale of the Company or of certain Group assets.

“The Company confirms that it is not in talks with any potential offeror at this time and is not in receipt of any approach with regard to a possible offer.

“As a consequence of this announcement, an ‘offer period’ has now commenced in respect of the Company in accordance with the rules of the Code and the attention of shareholders is drawn to the disclosure requirements of Rule 8 of the Code.”

The economic outlook has materially worsened in recent weeks, with intervention on Government policy coming from the Bank of England to stabilise markets. Prime Minister Liz Truss is to hold emergency talks with the Office for Budget Responsibility today. Following the Chancellors’ mini budget the Pound crashed to decade long lows and near parity to the Dollar.