Sports nutrition giant Science in Sport has delivered an adjusted EDITDA profit of £1.1 million for the year leading to December 31st 2020.
Completing a turnaround on last year’s £300,000 loss, the swing to profitability comes on the back of years of steady investment in acquisitions (PhD), overseas expansion and investment in online sales, among other things.
It was online sales growth that in part helped turn the nutrition business to a profit in 2020, with 50% of the firm’s revenues stemming from such sales, versus 38% in FY19. This represented a 39% year-on-year growth, taking the online revenue to £25 million.
There was a further improvement in gross margin in 2020, peaking at 50% for the second half of the year and rising five percentage points to 49% for the year as a whole. Science in Sport suggest that supply chain efficiencies, paired with a sales channel shift to its Digital platform and improved pricing contributed to the margin improvement.
Having added £4.2 million in cash via a shareholder placing in April the firm’s cash at hand is now sat at £10.5 million over last year’s £5.4 million giving the business room to navigate choppy conditions attributed to Covid.
Online aside, Australian, Italian and U.S. trade contributed alongside a growth in sales within the football market. In the USA revenues grew to £3.6 million, up 35% and the investment’s maturity in the marketplace has apparently seen cash burn “significantly reduced”.
Covid did predictably have an impact, though mostly at a physical retail level and mainly in the UK. Revenues declined to £16.1 million from FY19’s £21.8 million.
Sales of new lines were likewise muted, though still achieved 4% of overall revenues at £2.2 million. A further flow of new product releases is expected to land this year.
In the final quarter of 2020 a sting of new hires were made to bolster online, technology, and customer experience to support strategic growth initiatives in online and international.
Supply chain investment
A new lease commences from December 2021 on a new 160,000 square foot supply chain facility in Blackburn, which is expected to be operational in Q1 2022. This will consolidate the group’s operations under one roof and is projected to “give the headroom to grow to more than £150 million in revenue.”
As part of the fit out a new eight-lane gel manufacturing plant is to be set up to bolster the firm’s profit on a top-seller.
Of the £4.3 million total costs, £2.2 million is for works related to the new site, and £2.1 million for the gel blending, filling and packing line. £2.1 million is to be funded from cash reserves, together with £2.2 million of equipment leasing finance. The project is expected to contribute to EBITDA in FY22, and to deliver cash payback in FY23, through increased operating efficiencies.
Stephen Moon, Science in Sport’s Chief Executive Officer, commented: “Delivering a robust EBITDA profit was a key goal for the year, and this was achieved through a focus on developing our fundamental building blocks of long-term profitable growth. We have realised all expected synergies from the PhD acquisition and saw a strong performance in all supply chain dimensions. This, together with our strategic shift to online, saw a step change in gross margin.
“Our online business’s very strong momentum in all markets is exciting, and this has carried into the new year. While retail took the pandemic’s brunt, there are promising signs of recovery in this cash generative channel, and we remain optimistic.
“Building brand equity and having a strong innovation pipeline remains central to our strategic platform. I am pleased to say we continue to make consistently good progress in both of these areas.
“Our long-term and proven profitable growth strategy remains unchanged. To that end, we have commenced investment in technology to drive our online business, together with securing a new supply chain site, as we look to the next strategic growth phase.
“Whilst it is too early to reinstate market guidance, given the current COVID-19 lockdown, we are well funded and remain very optimistic about the long term growth prospects for the Group.”