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Angling Direct increases revenue but profits fall after tough 2022


Angling Direct [AIM:ANG], the AIM-listed, retailer of fishing tackle and bait, will be hoping for a less extreme summer and the rain to continue as it tries to bounce-back on a poor summer in 2022.

The Norwich based retailer published its final results for the twelve months ended 31st January 2023 today (16th May).

As previously reported, the business is still very focussed on short-term trading, and needed a good summer to see it through the leaner months. However, last year was not good for fishermen or for Angling Direct, as a combination of record high temperatures and low rainfall meant that many waterways were closed due to oxygen depletion and environmental conditions, and anglers weren’t going to the canals and rivers in the numbers that they would usually do.

Moreover, a year of economic instability and a domestic cost of living crisis meant that anglers were delaying or cancelling large purchases such as new rods and reels and were opting to mend and make-do with their current kit instead.

The financial planning aspect of the bait and tackle retailer’s operations is high on the priority list for the newly installed chief financial officer, Sam Copeman, who’s appointment was also announced today. The company highlighted that it was focussing on tight cost controls and good cash management. Changes at the top didn’t stop there, as the company’s current CEO, Andy Torrance stepped down as lead man to be replaced by Steve Crowe, Angling Direct’s current CFO, whilst Torrance takes his rod and tackle off to the boardroom as non-executive chairman, replacing Martyn Page, the company’s founder, on his part of the river, whilst Page moves downstream to the role of NED.

Nevertheless, despite a rough 2022, Angling Direct managed to increase revenue year-on-year by around 2.2% to GBP74.1m. This was a record revenue. It seemed that anglers were still lured in by the high street offering – the company has 46 stores – over the digital offering, as online sales fell 3% to GBP32.8m; the biggest hit being in the UK online sales, which was down 4.8% against a 6.8% rise in UK high street sales. This might be a reflection of the demographic of angler in the UK. Digitally Europe was much better, with European online sales up 18.4%, albeit a small GBP3.1m slice of the pie.

Keeping prices down

The slightly higher sales did not translate into higher profits, which fell 3.1% year-on-year to GBP25.8m as the business of doing business got more expensive in 2002, the company noted that energy costs and interest rates had a negative effect on the company. Earnings were disappointing, falling 57.2% to GBP2.2m and the share price got a pummelling with basic earnings per share at 0.7p, 82.4% down on basic EPS of 3.98p this time last year. Margins were down 190 basis points to 34.8%, but this was a positive reaction to the cost of living crisis, with the retailer consciously trying to keep prices down for its customers and not pass on all of the rises in overheads it experienced during 2022.

Torrance said in a statement to the market this morning: “In a fragmented and consolidating market, with discretionary consumer spending under pressure, it is vital that Angling Direct continues to act responsibly whilst also remaining price competitive. To this end, whilst improving product supply terms, we consciously invested in customer pricing, the net effect on UK gross margin being a reduction of 170bps.”

The company opened a new distribution centre in Venlo, Netherlands and launched a number of commercial websites in several European languages, including German, French and Dutch, to expand and diversify its sales lines. The company also continued its UK store roll-out, opening three new stores last year. Since the year-end, Angling Direct also opened a new store in Cardiff, with further planned openings in the pipeline this year. The company has installed a number of Angling Trust-qualified staff to offer store visitors personalised coaching sessions.

Torrance said: “The last twelve months have seen Angling Direct continue to grow sales despite significant consumer headwinds, including inflation and cost of living pressures across all of the company’s key markets […] Throughout the period, we continued to make good progress against our strategic objectives – establishing our European Distribution Centre, continuing our store rollout strategy as well as improving our omni-channel proposition. Looking through the current uncertain macroeconomic backdrop, our strategy remains unchanged as we continue to focus on gaining market share both in the UK and Europe over the medium term.”

Building inventory

The company has worked to optimise its online presence, developing an Angling Direct app which saw 55,000 unique users in its first full year with sales participation peaking at 10.9% during promotional periods, supporting customer loyalty and repeat purchase. The fishing retailer also invested in its inventory, making sure that its bricks and mortar outlets were fully-stocked, and it experienced positive sales growth in its own brand range of equipment – where it can command a higher margin. The own brand products contributed 6.8%  of total sales, or GBP5.0m, during the year an increase of 24.2% on prior year.

Torrance said: “We set out to maintain our UK growth momentum while opening a new EU online distribution centre to accelerate European expansion. Against a difficult consumer backdrop, we were clear we needed to remain agile to navigate competitive challenges brought about by pressure on discretionary spend and rising cost inflation. We have continued to focus on developing operational excellence, return on capital, and improving our customers’ experience via whichever sales channel they choose.”

Management is not recommending a dividend this year, as the company says it is focused on: “delivering a strategy of profitable growth and will reinvest all surplus cash resources back into the business, and continues to evaluate accretive M&A opportunities as market pricing starts to reflect post COVID-19 trading.”

Angling Direct has no term debt and a net asset position of GBP37.3m at the year-end, with GBP14.1m in cash, down from GBP16.6m the year previously. The company has IFRS 16 lease liabilities, which are accounted for as net debt, appertaining to the lease of its UK stores of with non-current liabilities increasing to GBP11.4m in January 2023 from  GBP10.9m the year previously.

The company opened trading today at 26.75p and was up to 27.9p within the first few hours of trading. Angling Direct has offered a 2.2% year-to-date return and a -44.1% one-year return with shares ranging between 23p and 53p over a 52-week period. The company has a market capitalisation of GBP20m.

Bridgewise rates Angling Direct as ‘Underperform’. The analyst said: “Angling Direct has released disappointing financial statements, particularly highlighting the weakness in Net Change in Cash and Free Cash Flow Per Share which were notably weaker relative to its peers in the Consumer Discretionary sector. Furthermore, the company belongs to the Specialty Retail industry, thereby increasing its exposure to additional risks such as global supply chains disruptions, a drop in demand due to recessions and economic slowdowns, and a sharper than expected increase in inflation, which will make it difficult for the company to raise prices accordingly. Analysis of past performance in the Consumer Discretionary sector reveals a correlation of 45% and 38% between the income statement and the balance sheet outcomes in generating excess returns, thereby decreasing the probability that the company’s stock will outperform its peers.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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