Science in Sport PLC Firm Placing and Open Offer (3805W)

TIDMSIS

RNS Number : 3805W

Science in Sport PLC

14 November 2017

14 November 2017

SCIENCE IN SPORT PLC

("SiS" or the "Company")

Firm Placing and Open Offer to raise up to approximately GBP15.0 million

Notice of General Meeting

Science in Sport plc (AIM: SIS), a leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts, is pleased to announce a conditional Firm Placing and Open Offer to raise up to approximately GBP15.0 million before costs through the issue of up to 21,425,420 new Ordinary Shares at the Offer Price of 70 pence per share.

Highlights

-- Oversubscribed Firm Placing of 20,000,000 Ordinary Shares at the Offer Price of 70 pence per Ordinary Share to raise GBP14.0 million before expenses. The Transaction has received strong support from both existing shareholders and new institutional investors.

-- Open Offer for an aggregate of 1,425,420 Offer Shares on the basis of 1 New Ordinary Share for every 32 Existing Ordinary Shares, at 70 pence each to raise up to approximately GBP1.0 million before expenses.

-- The Offer Price of 70 pence per share represents a discount of 2.1 per cent. to the closing mid-market price of 71.5 pence on 13 November 2017, being the last business day prior to this announcement.

-- The net proceeds will be used by the Company to invest within the following markets/regions in order to increase brand awareness, support working capital requirements and to develop distribution in online and traditional sales channels:

   -    the US sports nutrition market, specifically to support online distribution; 
   -    the football market; and 
   -    the Italian sports nutrition market. 

-- In addition to the above, the balance of the net proceeds will be used to fund working capital needs of the Company, as well as supporting further investment in brand awareness and development of our e-commerce platform in the core UK and EU business.

-- The Firm Placing and Open Offer are conditional, inter alia, upon Shareholders approving the Resolutions at a General Meeting. A circular containing a Notice of General Meeting will be sent to Shareholders today.

Science in Sport Chief Executive, Stephen Moon commented:

"Science in Sport has quickly grown to become a leader in endurance sports nutrition for elite athletes, but our ambition is to capture a much bigger market share and to expand internationally beyond our now profitable core business. The US market and football present highly compelling growth opportunities and the new funds will allow us to implement our plans to increase our position and brand awareness in these markets, as well as invest in the development of our e-commerce platform.

"We are delighted with the level of support from existing shareholders and new investors, which has been demonstrated by the significantly oversubscribed placing. We believe this is a great endorsement of our strategy and path to profitability and we look forward to updating the market on our progress in due course."

For further information:

 
 
    Science in Sport PLC                             [phone] 
  Stephen Moon, CEO 
  Elizabeth Lake, Finance Director 
 
    Cenkos Securities - NOMAD and Broker             [phone] 
  Bobbie Hilliam, Harry Hargreaves - NOMAD 
  Nick Searle - Sales 
  Yellow Jersey - Financial PR                      [phone] 
  Georgia Colkin 
  Charles Goodwin 
 
 
 

Introduction

The Company has today announced a conditional Firm Placing to raise GBP14.0 million (before fees and expenses) by the issue and allotment by the Company of 20,000,000 Ordinary Shares at the Offer Price of 70 pence per Ordinary Share.

In addition, in order to provide Shareholders who have not taken part in the Firm Placing with an opportunity to participate in the proposed issue of New Ordinary Shares, the Company is providing all Qualifying Shareholders with the opportunity to subscribe at the Offer Price for an aggregate of 1,425,420 Offer Shares, to raise up to approximately GBP1.0 million (before fees and expenses), on the basis of 1 New Ordinary Share for every 32 Existing Ordinary Shares, at 70 pence each, payable in full on acceptance.

The Firm Placing and Open Offer are conditional, inter alia, upon Shareholders approving the Resolutions at the General Meeting that will grant to the Directors the authority to allot the New Ordinary Shares and the power to disapply statutory pre-emption rights in respect of the New Ordinary Shares. The Resolutions are contained in the Notice of General Meeting at the end of the circular being sent to Shareholders today. Admission is expected to occur no later than 8.00 a.m. on 4 December 2017 or such later time and/or date as Cenkos Securities and the Company may agree. The Firm Placing and Open Offer are not underwritten.

The Open Offer provides Qualifying Shareholders with an opportunity to participate in the proposed issue of the New Ordinary Shares on a pre-emptive basis whilst providing the Company with additional capital to invest in the business of the Group.

Set out below are the background to and reasons for the Firm Placing and Open Offer, the use of proceeds, details of the Firm Placing and Open Offer and a recommendation from the Directors of the Company that Shareholders vote in favour of the Resolutions.

Background to and reasons for the Firm Placing and Open Offer

In October 2015, the Company raised GBP8.7 million via a placing and open offer as it pursued a growth strategy focussed on accelerating the revenue growth of the Company. This accelerated growth strategy was based upon, inter alia, pursuing multiple growth opportunities in e-commerce and new international markets.

During 2016, and using the placing and open offer proceeds raised in October 2015, the Company grew revenue by 30 per cent. to GBP12.3 million (2015: GBP9.5 million). In addition, for the 6 months ending 30 June 2017, the Company reported a further period of strong revenue growth, with revenue up 28 per cent. to GBP8.3 million (H1 2016: GBP6.5 million). International and e-commerce sales growth was particularly strong, reflecting the Company's continued investment in its e-commerce platform and brand awareness. The Company reported cash and cash equivalents on 30 June 2017 of GBP3.9 million.

The Directors believe the Transaction will provide further funding to the Company to continue its accelerated revenue growth strategy. As part of this strategy, the Company intends to further invest in its existing e-commerce infrastructure and its international operations.

To date, the Company has successfully grown its Australian operations so that the SiS brand has significant brand awareness in that region. The Company intends to further establish, test and grow similar local country operations in both Italy and the US following receipt of certain net proceeds of the Transaction. The Company intends to grow its international operations in these countries via increased brand awareness and channel distribution gains.

The Company also intends to broaden its consumer and brand awareness to new endurance sports, outside of SiS's traditional cycling and running market. Specifically the Directors believe there is demand for the SiS product range within the football sports market, where there is a significant level of athlete participation. The Directors' belief in the opportunity for SiS in football is based upon a number of discussions the Company has had with various professional football clubs, who are keen to enter into nutrition partnerships and supply agreements, and the professionalism and number of grass root athletes who participate in the sport. SiS currently works with 48 leading professional clubs, including 4 national associations and 8 English Premier League Clubs. Shortly after the Transaction, SiS intends to enter into a multi-year nutritional sponsorship agreement with one of the largest football clubs in the world to drive awareness of the SiS brand. The football club is an English based Premiership team. The nutritional sponsorship agreement is expected to grant the Company certain rights related to advertising, promotion and general marketing as well as allowing the Company access to elite athletes. The Company also expects to provide nutritional products to both the football club and its players.

The Directors believe the above new markets will allow the Company to target a significantly greater number of athletes and therefore assist in the continued growth of the Company both within the UK and internationally.

Use of proceeds

The Company intends to raise GBP14.0 million before expenses by the conditional Firm Placing and up to a further GBP1.0 million before expenses under the Open Offer. The expenses for the Transaction are expected to be up to approximately GBP1.0 million dependent on the proceeds from the Open Offer.

The net proceeds will be used by the Company to invest within the following markets/regions in order to increase brand awareness, support working capital requirements and to develop distribution in online and traditional sales channels:

-- approximately GBP3.9 million will be invested to target the US sports nutrition market, specifically to support online distribution;

   --      approximately GBP2.8 million will be invested to target the football market; and 

-- approximately GBP0.6 million will be invested to target the Italian sports nutrition market.

In addition to the above, the balance of the net proceeds will be used to fund working capital needs of the Company, as well as supporting further investment in brand awareness and development of our e-commerce platform in the core UK and EU business.

Current trading and prospects

The Company published its unaudited interim report for the 6 months to 30 June 2017 on 20 September 2017. Within the interim report the Company reported a period of strong revenue growth, with sales up 28 per cent. at GBP8.3 million (H1 2016: GBP6.5 million) for the 6 months to 30 June 2017. International and e-commerce sales growth was particularly strong, reflecting the Company's continued investment in its e-commerce platform and brand awareness.

Gross profit of 58.8 per cent. (H1 2016: 58.9 per cent.) reflects the Company's low-cost manufacturing facility in Nelson which remains a strategic advantage. Investment has driven further efficiencies at the facility which has enabled the business to absorb increases in raw material costs and the growth of protein products within the overall product mix.

The underlying operating loss of the Company was in line with management expectations at GBP(1.1) million (H1 2016: GBP(0.4) million) given accelerated investment in all markets in marketing, sales and e-commerce of GBP4.7 million (H1 2016: GBP3.0 million). The core UK and EU business broke even in the first half of 2017 and with marketing expenditure phased heavily to the first half, is on track to be profitable at EBITDA level for the full year, in line with management expectations.

Overheads excluding sales and marketing were GBP2.4 million (H1 2016: GBP1.6 million) for the six months to 30 June 2017. Share-based payments were higher during the period by GBP0.5 million, as the first half of 2016 had no Long Term Incentive Plan (LTIP) charge given no share schemes were in place. Management continue to seek to limit underlying overheads to single-digit percentage increases in the future, currently achieving 11.8 per cent. excluding the share-based payments charge. The increase over the targeted single-digit growth rate was due to one-off costs related to a significant upgrade in our world-class banned substance programme, and investment in project management skills to ensure delivery of a range of major commercial and operational strategic projects.

Cash and cash equivalents at the period end were GBP3.9 million (H1 2016: GBP6.6 million). Cash outflow during the first half of 2017 represents continued operational investment to support the Company's strongly growing international and e-commerce businesses. In addition, significant investment has continued in the e-commerce platform to accelerate customer conversion, investment in systems to further support international expansion with the integration of third party logistics in Italy and the US, as well as the introduction of SAP to support finance and operations across the whole business.

The Directors can confirm the Company continues to trade in line with market expectations and view the future with confidence.

The Firm Placing and Open Offer

Details of the Firm Placing

The Company has conditionally raised GBP14.0 million before expenses by the conditional Firm Placing of 20,000,000 Firm Placing Shares at the Offer Price to the Firm Placees.

The Firm Placing is conditional, inter alia, upon:

   --      the passing of all of the Resolutions at the General Meeting; 

-- the Firm Placing and Open Offer Agreement becoming or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Admission; and

-- Admission becoming effective by no later than 8.00 a.m. on 4 December 2017 or such later time and/or date (being no later than 8.00 a.m. on 29 December 2017) as Cenkos Securities and the Company may agree.

If any of the conditions are not satisfied, the Firm Placing Shares will not be issued and all monies received from the Firm Placees will be returned to them (at the Firm Placees' risk and without interest) as soon as possible thereafter.

The Firm Placing Shares are not subject to clawback and are not part of the Open Offer.

The Firm Placing Shares (and the Offer Shares) will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of their issue.

Application will be made to the London Stock Exchange for the Admission of the Firm Placing Shares to trading on AIM. It is expected that Admission will occur and that dealings will commence at 8.00 a.m. on 4 December 2017 at which time it is also expected that the Firm Placing Shares will be enabled for settlement in CREST.

Details of the Open Offer

The Company is proposing to raise up to approximately GBP1.0 million before expenses through the Open Offer. A total of 1,425,420 New Ordinary Shares are available to Qualifying Shareholders pursuant to the Open Offer at the Offer Price, payable in full on acceptance. Any Offer Shares not subscribed for by Qualifying Shareholders will be available to Qualifying Shareholders under the Excess Application Facility. The balance of any Offer Shares not subscribed for under the Excess Application Facility will not be available to Firm Placees under the Firm Placing.

Qualifying Shareholders may apply for Offer Shares under the Open Offer at the Offer Price on the following basis:

1 Offer Share for every 32 Existing Ordinary Shares

and so in proportion for any number of Existing Ordinary Shares held on the Record Date. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Offer Shares. Fractional entitlements which would otherwise arise will not be issued to the Qualifying Shareholders but will be made available under the Excess Application Facility. The Excess Application Facility enables Qualifying Shareholders to apply for Excess Shares in excess of their Open Offer Entitlement. Not all Shareholders will be Qualifying Shareholders. Shareholders who are located in, or are citizens of, or have a registered office in Restricted Jurisdictions will not qualify to participate in the Open Offer. Overseas Shareholders should review paragraph 6 of Part 3 of the circular for further details.

Valid applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements as shown on the Application Form. Applicants may apply for less or more than their entitlements under the Open Offer but the Company cannot guarantee that any application for Excess Shares under the Excess Application Facility will be satisfied as this will depend in part on the extent to which other Qualifying Shareholders apply for less than or more than their own Open Offer Entitlements. The Company may satisfy valid applications for Excess Shares of applicants in whole or in part but reserves the right not to satisfy any excess above any Open Offer Entitlement. The Board may scale back applications made in excess of Open Offer Entitlements on such basis as it reasonably considers to be appropriate.

Application has been made for the Offer Shares to be admitted to CREST. It is expected that such Offer Shares will be credited to CREST on 15 November 2017. The Offer Shares will not be enabled for settlement in CREST until or at the earliest opportunity after 8.00 a.m. on 15 November 2017. Applications through the CREST system may only be made by the Qualifying CREST Shareholder originally entitled or by a person entitled by virtue of bona fide market claims. The Offer Shares must be paid in full on application. The latest time and date for receipt of completed Application Forms or CREST applications and payment in respect of the Open Offer is 11.00 a.m. on 30 November 2017. The Open Offer is not being made to certain Overseas Shareholders, as set out in paragraph 6 of Part 3 of the circular.

Qualifying Shareholders should note that the Open Offer is not a rights issue and therefore any Offer Shares which are not applied for by Qualifying Shareholders will not be sold in the market for the benefit of the Qualifying Shareholders who do not apply under the Open Offer. The Application Form is not a document of title and cannot be traded or otherwise transferred.

Further details of the Open Offer and the terms and conditions on which it is being made, including the procedure for application and payment, are contained in Part 3 of the circular and on the accompanying Application Form (if relevant).

The Open Offer is conditional on the Firm Placing becoming or being declared unconditional in all respects and not being terminated before Admission (as the case may be). The principal conditions to the Firm Placing are:

   --      the passing of all of the Resolutions at the General Meeting; 

-- the Firm Placing and Open Offer Agreement having become or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Admission; and

-- Admission becoming effective by no later than 8.00 a.m. on 4 December 2017 or such later time and/or date (being no later than 8.00 a.m. on 29 December 2017) as Cenkos Securities and the Company may agree.

Accordingly, if these conditions are not satisfied or waived (where capable of waiver), the Open Offer will not proceed and the Offer Shares will not be issued and all monies received by Equiniti from applicants will be returned to such applicants (at the applicants' risk and without interest) as soon as possible thereafter. Any Open Offer Entitlements admitted to CREST will thereafter be disabled.

The Offer Shares (and the Firm Placing Shares) will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of their issue.

Application will be made to the London Stock Exchange for the admission of the Offer Shares to trading on AIM. It is expected that Admission will occur and that dealings will commence at 8.00 a.m. on 4 December 2017 at which time it is also expected that the Offer Shares will be enabled for settlement in CREST.

Firm Placing and Open Offer Agreement

Pursuant to the Firm Placing and Open Offer Agreement, Cenkos Securities has agreed to use its reasonable endeavours as agent of the Company to procure subscribers for the Firm Placing Shares at the Offer Price.

The Firm Placing and Open Offer Agreement provides, inter alia, for payment by the Company to Cenkos Securities of commissions based upon the number of Firm Placing Shares placed by Cenkos Securities and the Offer Shares applied for respectively, multiplied by the Offer Price.

The Company will bear all other expenses of and incidental to the Firm Placing and Open Offer, including printing costs, Registrar's and Receiving Agent's fees, all legal and accounting fees of the Company and all stamp duty and other taxes and duties payable.

The Firm Placing and Open Offer Agreement contains certain warranties and indemnities from the Company in favour of Cenkos Securities and is conditional, inter alia, upon:

   --      Shareholder approval of the Resolutions at the General Meeting; 

-- the relevant Firm Placing Shares and Offer Shares having been allotted, conditional only on Admission;

-- the Firm Placing and Open Offer Agreement not having been terminated in accordance with its terms prior to Admission; and

-- Admission becoming effective not later than 8.00 a.m. on 4 December 2017 or such later time and/or date as the Company and Cenkos Securities may agree, being not later than 29 December 2017.

Cenkos Securities may terminate the Firm Placing and Open Offer Agreement in certain circumstances, if, inter alia, the Company is in material breach of any of its obligations under the Firm Placing and Open Offer Agreement; if there is a material adverse change in the condition, earnings, business, operations or solvency of the Company; or if there is a material adverse change in the financial, political, economic or stock market conditions, which in their respective reasonable opinion makes it impractical or inadvisable to proceed with the Firm Placing and Open Offer.

Related Party Transaction

Downing LLP, a 14.9 per cent. Shareholder, has agreed to subscribe for 2,142,850 Firm Placing Shares as part of the Firm Placing, equivalent to approximately GBP1.5 million. The Firm Placing Shares for which Downing LLP are subscribing, represent 10.7 per cent. of the total number of Firm Placing Shares.

Downing LLP is a Substantial Shareholder under the AIM Rules for Companies and therefore the participation of Downing LLP in the Firm Placing constitutes a related party transaction under Rule 13 of the AIM Rules for Companies. The Directors consider that, having consulted with Cenkos Securities, the terms of Downing LLP's participation in the Firm Placing are fair and reasonable insofar as Shareholders are concerned.

Director Dealing

As part of the Firm Placing, Stephen Moon, a director of the Company, has agreed to purchase 107,143 Firm Placing Shares, subject to the passing of the resolutions at the General Meeting. Following Admission, Stephen Moon's beneficial interest in the Company will increase to 843,456 Ordinary Shares, which representing approximately 1.3 per cent. of the Enlarged Share Capital (assuming the Open Offer is fully subscribed).

None of the Directors currently expect to take up their entitlement to subscribe for New Ordinary Shares under the Open Offer.

Transaction Considerations

As set out in the Recommendation section below, the Directors believe the Transaction to be in the best interests of the Company and its Shareholders as a whole. In making this statement the Directors have spent time, and have taken appropriate advice, in considering the Transaction and the method by which the Company will raise the net proceeds. The Directors have concluded that the Firm Placing accompanied by the Open Offer is the most appropriate structure to raise funding for the following reasons:

-- the Firm Placing enables the Company to attract a number of new investors to its shareholder register, which the Directors expect will improve liquidity going forward, and will also provide an element of funding certainty within the Transaction;

-- the Directors believe the Firm Placing enables a number of blue chip institutions, who are already shareholders in the Company, to obtain a more meaningful shareholding in the Company therefore providing a greater level of funding certainty if the Company decided to raise funds in the future to support an acquisition and/or further revenue acceleration. Shareholders should be aware that the Directors have no current intentions to raise further finance following the Transaction but the Company has an ongoing strategy of assessing strategic opportunities which the Board believes may increase shareholder value; and

-- the Open Offer of up to approximately GBP1.0 million enables all Shareholders to participate in the Transaction on the same terms as institutional and new investors but without the time and costs associated with a full pre-emptive offer. A full pre-emptive offer, either via a rights issue or open offer, above GBP4.4 million (EUR5 million) would have required the Company to have produced a prospectus which would have taken significant time and cost. In setting the amount that can be raised from the Open Offer, the Directors have taken into account the level of acceptances received in the open offer undertaken by the Company in October 2015.

The Offer Price represents a discount of 2.1 per cent. to the closing mid-market price of 71.5 pence per Ordinary Share on 13 November 2017, being the latest practicable date prior to this announcement. The Directors can confirm the Offer Price, and therefore potential dilution for Shareholders, has been a consideration in setting the amount to be raised as part of the Transaction and the decision to undertake an Open Offer in conjunction with the Firm Placing. The Offer Price was established as part of a book building process undertaken by the Company's advisors and also following consultation with certain substantial Shareholders and incoming investors.

General Meeting

The Directors do not currently have authority to allot all of the New Ordinary Shares and, accordingly, the Board is seeking the approval of Shareholders to allot the New Ordinary Shares at the General Meeting.

A notice convening the General Meeting, which is to be held at 4th Floor, 16-18 Hatton Garden, Farringdon, London EC1N 8AT at 10.00 a.m. on 1 December 2017, is set out in a circular sent to Shareholders today and which will be available on the Company's website (www.scienceinsport.com).

Recommendation

The Directors believe that the Firm Placing and Open Offer and the passing of the Resolutions are in the best interests of the Company and Shareholders, taken as a whole. Accordingly the Directors unanimously recommend that Shareholders vote in favour of the Resolutions.

The Firm Placing and Open Offer are conditional, inter alia, upon the passing of the Resolutions at the General Meeting. Shareholders should be aware that if the Resolutions are not approved at the General Meeting, the Firm Placing and Open Offer will not proceed.

Expected Timetable of Principal Events

 
                                                      6.00 p.m. on 9 November 
 Record Date for the Open Offer                                          2017 
 Announcement of the Firm Placing and                        14 November 2017 
  Open Offer, publication and posting 
  of the circular, the Application Form 
  and Form of Proxy 
                                                     8.00 a.m. on 14 November 
 Ex-entitlement Date for the Open Offer                                  2017 
 Open Offer Entitlements and Excess CREST                    15 November 2017 
  Open Offer Entitlements credited to 
  stock accounts of Qualifying CREST Shareholders 
 Recommended latest time and date for                4.30 p.m. on 24 November 
  requesting withdrawal of Open Offer                                    2017 
  Entitlements from CREST 
 Latest time and date for Depositing                 3.00 p.m. on 27 November 
  Open Offer Entitlements in CREST                                       2017 
 Latest time and date for splitting Application      3.00 p.m. on 28 November 
  Forms (to satisfy bona fide market claims                              2017 
  only) 
 Latest time and date for receipt of                10.00 a.m. on 29 November 
  completed Forms of Proxy to be valid                                   2017 
  at the General Meeting 
 Latest time and date for acceptance                11.00 a.m. on 30 November 
  of the Open Offer and receipt of completed                             2017 
  Application Forms and payment in full 
  under the Open Offer or settlement of 
  relevant CREST instructions (if appropriate) 
                                                     10.00 a.m. on 1 December 
 General Meeting                                                         2017 
 Announcement of result of General Meeting                    1 December 2017 
  and the Open Offer 
 Admission and commencement of dealings               8.00 a.m. on 4 December 
  in the New Ordinary Shares on AIM                                      2017 
 Firm Placing Shares and Offer Shares                         4 December 2017 
  credited to CREST members' accounts 
 Expected despatch of definitive share                within 10 business days 
  certificates in certificated form                              of Admission 
 
 

If any of the details contained in the timetable above should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.

Certain of the events in the above timetable are conditional upon, amongst other things, the passing of the Resolutions to be proposed at the General Meeting.

All references are to London time unless stated otherwise.

Capitalised terms used, but not defined in this announcement shall have the same meaning as set out in the circular.

This announcement contains inside information.

This information is provided by RNS

The company news service from the London Stock Exchange

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November 14, 2017 02:01 ET (07:01 GMT)