Following the equity fund-raising via a new share placing on 22 April 2020, Science in Sport has announced a new debt financing facility. The equity placing raised gross proceeds of £4.5m, and the group has now secured a new £8m invoice financing facility from HSBC for an initial one-year term. This latest undrawn facility provides further headroom to the company’s liquidity position during the COVID-19-related uncertainty and gives it the financial flexibility to continue with its strategy of pursuing strong sales growth.
The COVID-19 pandemic has caused sports events in all Science in Sport’s major markets to be cancelled, and gyms remain closed in many markets. Consumption of Science in Sport’s products is therefore likely to have declined since lockdowns began, and the return to normal levels of consumption could be slow, as sports events and gyms are currently perceived to be high-risk environments. That said, we believe the long-term trend of increased consumption of premium sports nutrition by fitness enthusiasts and the gym lifestyle community is unlikely to be affected.
The additional headroom of up to £12.5m provided by the share placing and new debt financing facility will help the business should the effects of the COVID-19 pandemic persist over several quarters. The long-term growth profile remains attractive, in our view, with FY19 sales rising to £50.6m from £41m , and EBITDA loss declining from £2.7m to £0.3m.
Peer group analysis is not straightforward, as there are few direct peers. On an EV/Sales basis, Science in Sport trades at consensus 0.7x for FY20e, compared to its peers on 4.1x. FY21e EV/Sales falls to 0.6x on the back of the anticipated double-digit revenue growth. Consensus expects the company to break even at the net profit level in FY20, with an FY21e P/E multiple of 27.2x.