Angling Direct (LSE:ANG) — Half year results for the six months ended 31 July 2022

0:01 Good morning, and welcome to the ANGLING DIRECT PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Andy Torrance, CEO. Good morning to you, sir.

0:32 Good morning. Good morning, everybody. Thank you for taking the time to join us today. Given the current environment, we have put together quite a full presentation deck. It will be available on our website. It's up there on our screen. We probably haven't got enough time this morning to go through every page in detail, but the same between myself and and our CFO, Steve Crow, we will obviously pick out the salient points and be very happy to pick up questions, try and leave enough time for your questions towards the end of the presentation. The first couple of slides in the deck in terms of financial financial highlights and operational highlights are picked they're lifted directly from our our r and s. There's a few things I'd just like to pull out here, though, to emphasize.

1:20 Despite all the very difficult consumer news and and and very low consumer confidence at the moment, the macroeconomic environment we find ourselves in, we are, as a group, very pleased to have actually grown our revenues by 1.3% in the first half. All of the information we received from our suppliers and our own market and competitor intelligence suggests that as a group, we do continue to take share. There isn't, unfortunately, any audited market share information I can share with you around the fishing tackle market. But as I say, based on the ever increasingly close relationships we get with our key suppliers and from what we observe in the market ourselves and various bits of intelligence, it does suggest that our strategy of being the very best we can in terms of our customer offer, in terms of the way we approach the market commercially for in terms of value for money for our customers suggests that whilst we are clearly finding trade stuff at the moment, it's as tough, if not tougher for our competitors, which gives the board confidence that we we continue to take share in The UK. We're clearly starting from a very low base but taking share within Europe, all of which suggest that our strategy remains strong indeed, and that is something we'll continue to invest in given the strength of our balance

2:51 sheet and our healthy cash balance. You can see there that stores remain pivotal to our omnichannel growth. The mantra in store at the moment in terms of local markets is to be the best in town. Our store team's all very focused on being the best in town and taking share locally. Store total store sales growth of 9.8%, like for like store growth in the period of four point six. Our online sales did decrease in the period by 7.9%. However, our UK business with sales of 15,300,000, just to illustrate how that's transformed in the last three years, are 61% now above pre COVID levels. There was a slight channel switch in the period recognizing in the prior year, our stores were partially closed on the tail end of lockdown lockdown three.

3:48 Europe's European sales grew by 36.9%. Although within our target key Europeans territories that are served by our German, French, and Dutch websites, they grew by 55%. That is growing, admittedly not growing by as fast as we'd have initially hoped for. However, all these macroeconomic difficulties that we're experiencing here in The UK are clearly at least as bad, and if not, certainly in the territory sort of from Germany and perhaps a bit further east, even more influencing on the state of trade out there at the moment. Our gross margin did decrease by 200 basis points in in the period. Steve will elaborate on the reasons behind that in a bit more, but that was partially anticipated because of the our desire to remain price competitive. It is a key one of our strategic pillars is to make sure that our customers can be sort of getting the very best value in the marketplace from ANGLING DIRECT. It is important as market leaders in a consolidated market that we do don't hesitate to invest margin to make sure we protect that that position.

5:04 Positive cash flow, operating cash flow in the period of £2,400,000. A strong balance sheet with net cash at the end of the period of 17,100,000, I think, says that despite the pandemic, despite Brexit, and even though we're obviously facing some challenges beyond our ability to influence at the moment, the business is actually in in in pretty good shape and certainly the very best placed in its marketplace to continue to take share. Over the page, in terms of operational highlights, we have been dispatching parcels to The EU since the March 1 to our new or from our new Dutch distribution distribution center. It's been fully operational. It opened. It it sounds a bit corny, but it opened on time, and it opened to budget. We have no operational difficulties in Europe at all now. That was a very big project for a business of our size, and we're very pleased to have

6:03 have got it successfully opened. In terms of our own brand sales, something we regularly talk about, they grew by very pleasing 34.6%. We did have the opportunity because of the margin of our own brand project products being considerably more than the average margin for our branded offering. It does give us the opportunity to trade those quite aggressively, promote those products, and achieve at least the average. 170 basis point increase in penetration. Our own brand products now accounted for 6.9, nearly 7% of overall sales. Probably worth mentioning that we're very pleased with the progress our store teams are making with our assisted selling model.

6:52 Bates, this is an approach that we took the opportunity to train all of our store colleagues in the end of the last final financial year. It is all about making sure that customers get very bespoke and specific sales and service advice for their own fishing objectives to make sure that what they do buy for us actually does achieve those objectives and get the most out of their fishing. It's not hard sell, but we do find that it grows. It improves conversion. It grows the basket and and, importantly, encourages our customers to recommend to their to their friends friends and family. We opened we've opened three stores recently. Only one in this period, and and it was actually in the last week of the period up in Washington. It's our most northerly store.

7:41 We've opened since then at the very beginning of of half '2 in both Coventry in in August, another site we've been very keen to get into for some time, and indeed Stockton On Tee's, another fairly northerly store. All three of those are catchments where ANGLING DIRECT currently isn't represented, bricks and mortar wise, and all three have got off to a really good start. I would have liked to have got them opened earlier in the year, but, unfortunately, planning regulations and and the occasional legal issues held that up. But I'm very pleased that we've got those three open so early in the second half, and they're all getting off to a pretty good start. The only other point I think to pull out at this stage on this slide is we did launch in late f y twenty two the tackle industry's first web trading app. We've subsequently deployed our second phase of of app development, which has given us the confidence to now start actively incentivizing the download and use of the app.

8:46 We started that early in the half. App usage has sort of peaked at around 8% while we were incentivizing downloads when we've taken the incentive away. That's sort of running at a steady state of about 5% of all web sales, which for a for a new launch, we're very pleased to start with. We We hope to push that up to over into low double digits in the not too distant future. And whilst that's a great point of differentiation from our competitors in that it allows our customers to take all of our digital capability directly onto the bank with them as they as they are actually there fishing. It also provides some opportunity to refine even further our advertising ratios because, obviously, any transactions through our web app don't attract Google Ads or or any sort of digital advertising spend.

9:42 I'll hand over now. Steve's got a section here on the financial overview with a bit more detail as he goes through. Thanks, Andy. Happy to take any questions, put them in the comments field, and I'll pick that up as we go along. As Andy said, on the sales front, we did grow in the period 1.3% that was a relative contrast between the quarter. So Q1 was a 5.4% growth with a mild reduction of around just over 1.5% in the second quarter. That second quarter had obviously some sort of some consumer news dynamics in it and a little bit of a channel mix, which I'll talk about later on as we come to one of the later slides. The gross margin point there you can see we went back to 34.6%, so two eighty basis point reduction half on half.

10:34 There's around 40 basis points of gearing from our Europe start up business, which again I'll touch on over the page. We've given more segmental information for investors the first time around now we're formally running Europe as a standalone business. On the right hand side is the pre IFRS 16 EBITDA you can see there is a 58% reduction that has got two sort of major legs to that reduction one of them being a removal of any direct government support that was received during the pandemic that was around £900,000 primarily relating to property restart grants that didn't persist into 2023. And also around the Europe EBITDA loss is about GBP 500,000 drag half on the half.

11:25 Over the page we've given the segmental analysis I said so you can see The UK in the top left hand corner. We did very modestly grow The UK in the period and I'll talk about a channel switch in a moment. The European growth you can see there 36.9% at the bottom left as we started to grow back towards where we were on a pre Brexit basis. Again the margin in central column, The UK at 35.1%. So we've always set out that we've got a medium term target of a minimum of 36% for The UK. So there was some anticipated drag in the margin year on year. We still managed to hold that margin north of 35%. The European margin below you can see 23% reflects the aggressive nature of the trading we set about doing as we started up the business around March time and that margin has gradually improved as we've moved through the half dipped at 19 starting to recover.

12:25 We need with short term target on that getting it back to 30% broadly gets us to a neutral position against our variable cost for that operation. EBITDA on the right hand side you can see The UK business and then just setting out the drag from the European business. So The UK business that does reflect all group central costs. So is reflective of the sort of the ongoing operation. Europe is only those costs that are fully discrete to the European operation. We'll come on to talk about other profit measures as we go through onto the next couple of slides. Seven, this is where we sort of I'll touch on the channel switch. So if you look at the bottom left hand corner on the graph, you can see the dynamic in terms of how the whole UK business moved through the half, where we started off the period where we were annualizing against lockdown periods where the stores were only able to trade on a call and collect basis.

13:24 Notwithstanding that, you can see obviously that the transaction volumes were higher. We were able to fully trade the shops, the stores. As we moved into April, the comparative was more of a like for like with May being a very difficult month from a consumer news flow and a quite tough comp. So we bottomed out in May in terms of negative ATV growth bordering on negative transaction growth and obviously the sales value being beneath the prior year. And then that trend reversing back in June and July as some of the consumer news softened. On the right hand side, we've drawn out in particular what went on in the online business where you can see as we were going through June and July, The UK business was doing sort of mid double digit growth in terms of unique customers as well as transaction volume. So a much more buoyant middle of the year, which is we'll talk about August and September later on when we come to the outlook statement.

14:23 Trading KPIs, so there's full suite here for folks to analyze. I think the two pieces I'd draw out, so The UK margin, which you can see there the 35.1% I talked about, that's got a number of facets within it. So competitive pricing, we have seen a landscape whereby cost rises from suppliers on capital items has proved much more challenging to push through into the retail price. We've had much more success in terms of the smaller consumable items, but the gearing of the capital items has had a relatively modest or a reasonably sizable drag on the margin in the period. And also we have had small amount of range change clearance that we've pushed through. Those have been offset to some degree by we obviously some positive impact from the own brand penetration story that Andy referenced as well as we've started to see some progress on terms from our suppliers.

15:22 The other one I'll just draw out is the employee numbers. So we have increased, you can see around 20 folks. That's largely what is all in the new stores that we've deployed. Our people cost as a percentage of sales has incremented as we've not been able to fully offset the wage inflation pressures from some of the initiatives we've deployed around, particularly rerotoring in stores where we've used our new footfall counter technology to look at when we've got most customer intensity to deploy colleagues against those times.

15:54 The income statement there, you can see from a net profit basis, we remain positive despite the drags out previously. From a sector perspective, the PBT for stores remained just shy of 12% and the PBT for The UK online business is around 12%. So the two channels in The UK, both being double digit PBT ratio, both being broadly proximate in terms of when you put those capital charges through. You can see the depreciation and amortization charge on a post IFRS 16 basis continues to scale and that reflects largely the rollout of the store operation, a modest amount relating to Europe from the new distribution center that we've put in place.

16:40 We have in the statements as folks will see have given segment analysis both at EBITDA level and the PBT level. So folks can see the sort of the relative gearing of those depreciation charges across the channels.

16:56 That's everyone's favorite subject IFRS 16 reconciliation. I think the key takeaway from that is it remains a relatively immaterial adjustment at the PBT level. So we've gone on a pre and a post basis around the 1.1% to 1.2% mark. 11, I've just set out more clearly here what's going on with the various segments. It is worth noting that the group costs in the segment analysis in the statements includes the government grants, so the read through is slightly more difficult. I've presented here how those group costs excluding those government grants. So you can see the group costs, we've held those like for like on a year basis against a drop off in headline profitability.

17:45 You can see The UK stores and The UK online business still GBP 4,900,000, nearly GBP 5,000,000. So we're able to absorb those European losses with a still very sort of a relatively strong UK position against the pre COVID position where we were only generating GBP 2,200,000 from those two channels.

18:06 On the right hand side is just the reconciliation again. So it's able to see how the GBP4.4 million drops through to GBP1.9 million. I talked about the two, the facets of the government support and the European loss drag. There is a green blob there for the cyber claim. We did have a cyber attack in November 2021 in the period we were successful with our business interruption claim with our insurers and the cash for that was settled after the half year.

18:38 The balance sheet on GBP 12. So half on half, the inventory has grown just shy of GBP 2,000,000. It is worth noting on that at the half last year, we had no inventory in Europe. We are carrying just over GBP 2,000,000 in our European distribution center right now. So on a like for like basis, we are managing that inventory more tightly in terms of The UK position and we'll examine the working cap drag over the page. So on a face value, a much higher level of inventory, but that does

19:09 reflect a broader operational footprint from that, that we had both at the half year last year and at the full year. So in January 2022, there was only around GBP 300,000 of stock that related to the European business. We're more confident the quality of our stock and the availability of our stock is improving as we've moved through 2022. From a cash perspective, we've got GBP 17,100,000 in the balance sheet at the end of July. Our current market guided cash number for the year end is around GBP 14,000,000. There a negative working capital drag in the second half as folks would expect as we are a seasonal business where May, June, July and August are our strongest months.

19:54 The cash flow, so this bridge is from the year end position, so the 16,600,000, so a modest increment over the half largely driven by this is on a post IFRS 16 basis. You can see that the EBITDA outstripped in the work, the modest working cap consumption, the two facets of that being a further circa

20:16 2,000,000 investment into Europe net of a positive position in The UK stockpile. CapEx, the right hand box, largely focused on our continuing store rollout with three stores being in the fixed assets additions for the first half. And I will hand back to Andy for the business review. Thanks, Steve. This Slide 15 sets out some of the progress we've made in the first half versus the key priorities we set ourselves for for the entire year. It's very pleasing. The business is working hard, very hard at the moment, very focused on short term trading. But what is always been the case actually in the whilst I've been here, very pleasing to be able to report that underneath the trading situation we find ourselves, and we do continue to make solid progress contemporizing, getting return on the infrastructure investments we're making within within the business.

21:17 So under those five headings and internationally, as we've already mentioned, we do continue to grow in all key territories despite some of the difficulties that the consumer in in Mainland Europe is is experiencing. Just to remind everybody, the the whole purpose of this particular work stream was to overcome the bump in the road that Brexit bought us. Now that we have a distribution center within the EU, we can trade far more competitively and that our lead times, we have now have next day delivery to the whole of The Netherlands, the whole of Germany, the vast majority of France, and and and indeed a good a good number of other EU countries we can deliver next day too for the first time. We have extended the ranges within Europe. We have

22:04 about 8,000 products from various new suppliers that are only loaded onto our EU websites. So the range and appropriateness, the range tailoring for our European customers is now greater than it's ever been before. The fact that we have our own wholly owned entity, ANGLING DIRECT and L. It's a wholly owned subsidiary of the business, allows us to avoid all of the frictional export costs post Brexit into the EU. We were we were paying at one point around €6 per parcel to dispatch from The UK to consumers. In Europe, that's clearly all gone away. So a lot more efficient, a lot more competitive offering than ever before into Europe.

22:57 As well as investing very heavily in our price matching functionality for Europe to make sure that we acquire customers and rapidly grow our share within Europe. We're also investing very heavily in digital marketing. And what I wanted to highlight on this slide was that we're also having some good results of some encouraging engagements at the moment with particularly with the Dutch and German fishing organizations through more traditional customer outreach and engaging them on our sustainability ambitions.

23:34 And we we have high hopes and and good confidence there that this business will continue to grow. And indeed, its profitability as we continue to tailor ranges, as we continue to get more sophisticated with country by country price matching, we've seen some recent very encouraging improvements in the second half in the margin, which will go some way to to stemming those annual fully anticipated

24:01 first year losses on this project. Digitally, we've mentioned the app already. We do continue to refresh our product to basket pages on all of our websites. Everything that we develop for the customer experience within The UK, we roll as a matter of policy very quickly through to our French, German, and Dutch websites. We've, through using, AI enabled personalization and browsing technologies, we have increased site speed. We've increased search relevance. We now do a lot more trigger based customer bespoke email post transaction journeys, all of which designed to improve conversion and and encourage repeat purchase. We've invested in the web trading team.

24:51 We have a new web trading manager who's joined us in the period. He, along with his team, is spending significant amount of efforts now optimizing the EU site customer experience, in particular, as

25:02 we go into the second half. In terms of stores, we probably mentioned most things on here already. The Bates assisted sales model is driving conversion. We invested in footfall counters, store by store in the towards the latter end of the previous financial year. We can now use that to get a far better understanding of our footfall to transaction conversion rate. It was when we first started mentoring it in January this year, it was around 52, 53%, and we've currently got that up to around 57, very slightly with the seasons, but good evidence to see that our store colleagues through their colleague rotors and through this assisted sales model are actually converting more customers than

25:48 ever before. The three new stores we've opened recently, I've already mentioned, we now use an outsourced store development team, which allows us to open those stores in record time and indeed with the best opening availability for for as long as anybody can remember, partly because of the investment we've made in our own supply chain, partly because the general stock availability situation within the within the trade has improved somewhat in recent months. We now have the and and those of you that follow us on social media might have seen this in the last few weeks. We now have the ability for customers to be able to go online and book specific one to one time with our ANGLING DIRECT coaches. Those coaches are all certified and trained by the ANGLING Trust. We also have designated poll experts within each of our stores.

26:40 And, again, our customers have given some really good encouraging feedback at the moment that they enjoy the opportunity to be able to have some one to one time, specifically booked booked with those colleagues and another point of of difference that sets us out

26:56 and sets us apart from our our competitors. Commercially, as I think I've just mentioned, we have record levels of product availability within the business at the moment. Our new head of supply has definitely got his feet under the table. Our improved stock forecasting, our improved methods of replenishing out to our stores mean that whilst we haven't made the progress on our stock term perhaps that we'd like, which is partly because of a a slowdown in some of the growth. The quality of our stock file is improving all the time. The the proportion of our stock file associated with the upper quartile of our sales is improving all the time with with much less drag from discontinued products at at the other end.

27:45 Our own brand penetration has improved, as I mentioned, up to just shy of 7%. Now we have, in particular, good sales at the moment from recent new product introductions, particularly our advance of reels. We now stretch our brand into advance of pro. There's a lot more new products with some exciting new ranges on the way, which we'll have there on their way, and we'll be launching this spring. In terms of communities and sustainability, as you'd expect, we continue to work with the ANGLING Trust. We are their exclusive retail partner. We're an active member of the Angling Trades Association, get very much involved in their get fishing campaigns, the national fishing months. We are making good progress towards PPN zero six twenty one, the carbon standard, and active supporters of of ANGLES against pollution. We've held some live Get Kids fishing events at at several regional fish fisheries this summer, which have gone down exceptionally well. They've been very well attended.

28:48 Superb feedback and real customer pressure to now actually hold more of those. We're particularly excited by the fact that we can actually now livestream our hands on skills development sessions that our videography team do. We can live stream those into all of our stores as well as onto our social media, allowing our customers to actually visit and work alongside the store based coaches on on various skills designed to improve their fishing such as rig tying and and and what have you in store. More of that to come certainly as we get into next year. Slide 16 is a little bit more detail about the stores. You can see there are green dots to up there in the Northeast, one in Coventry, the the new stores we've opened most recently, our distribution center out here in Norfolk on on the eastern side of of the map there. We'll probably open one more store this year, potentially possibly two, depends on the the planning situation.

29:49 We we're opening an average of four a year at the moment. We believe there's a healthy pipeline of unserved catchments you can see from the map there, the South Coast Of England, the South Coast Of Wales, South London. There are still many £1,000,000 plus store catchment opportunities available to us. If we were to change that to sort of a 750,000 turnover target, we believe there's a further 30 to 40 store potential in in The UK. We have invested in new on shelf labeling, pricing promotion technologies, which allows us to be a lot more fleet of foot, a lot more reactive, shortening the lead time and indeed the cost of mounting new promotions that is all being installed in stores at the moment, which will improve the customer experience. It will be a lot sharper and cleaner and clearer on pricing and promotions as well as being able to move a little bit more quickly.

30:44 Slide 17 is The UK digital stats that sort of dominated, if you like, by that top left hand corner statistic of of website growth having reduced in the period. That is all to do with the annualization of of lockdown in in the prior period. That reduction in in growth rate flows is about it it's it's way down through the bulk of those stats in the left hand column. I would point out, though, that, obviously, despite a lot less pricing now given that channel shift, we still have a very healthy conversion rate up there at 5.93. Our return on advertising spend at over £13 as well, something we're still very we work very hard on, and and we're very pleased with. You can see our database and social media followings also continuing to grow really quite healthily.

31:40 Same slide over the page, but based on Europe, a very different story. You can see our growth rate having started to grow very healthily. The number of active unique customers, the decline there, the Brexit bought about, you know, being significantly reversed and in indeed, hugely improved on. Conversion rate there, 2.5 behind The UK, but growing very rapidly. We use The UK web metrics as our sort of short term objectives in terms of our European digital business, so we're making good progress in that direction. Return on advertising at £6.50, much lower than in The UK, but, again, indicative of what we've been spending in the first half in order to kick start the business, get some volume through the new distribution center.

32:32 And indeed, that is something that in the second half, as Steve alluded to the fact that our losses, given the the slower uptake than we'd hoped for on trade, our first year losses in Europe are gonna be slightly more than we anticipated. It's margin and advertising spend that we've been working on to mitigate those losses and improve the profitability of the European business in the second half. I I've made a point of reminding investors that sort of three years ago, this business had margins of of sub 30%, was growing our bill. And losing losing money. I don't want the business to make that same mistake in terms of how we grow in Europe. We have got to grow Europe quite quickly. We will invest margin. We will invest pricing. We will invest marketing spend to do that. But I think it's important that we get the core profitability of the European business set right from the get go such that whereas we do grow, we can demonstrate some quite quickly some sustainable profit there.

33:32 So over the page, in summary, I think the summary slide speaks speaks for itself. We still have continued significant opportunities to grow both in the The UK. Importantly, we probably have 12 to 14% market share in The UK, plenty more to go for there. And that's borne out, I think, by the success of the new stores we open in catchments we don't currently currently serve. We clearly have opportunities to continue to grow online in The UK and and also in Europe. Given the strength of our balance sheet and the resilience of our our business model, we've I think we've shown throughout COVID, throughout Brexit that we are responsive to opportunities, and we sort of take these challenges is head on and shown that the business can be flexible.

34:18 We have, as a board, obviously debated what our approach should be during sort of quite difficult economic times at the moment, and we're really quite clear that, you know, as a consolidator, as a clear market leader in The UK, and we are probably eight or nine times larger than our nearest competitor, it's important we do stick with our strategy. It's important we continue to invest because whilst clearly trading is tough for us, an awful lot of our highly fragmented and independent competition doesn't have the strength of our balance sheet, doesn't have the cash resources that we have, and they certainly don't have the customer customer proposition that more and more customers is clearly telling us that they they enjoy and they're very happy to engage upon.

35:08 Probably, we we can't really avoid current trading and and our our current view on the outlook of the of of the the business at the moment. We are focused on growing share. Risk of repeating myself, I think that is important to say we we are in a position to be able to invest to grow share. The evidence that our strategy is working, all the intelligence we get from our suppliers, from our competitors, from what we see around the marketplace suggests that they are finding it particularly tough. And indeed, any sort of growth at the moment suggests that we're we're we're taking share from our competitors. So we will continue to invest. We we've suffered particularly with the well, we struggle with the volatility of trade at the moment.

35:58 We we had a very strong quarter one. May was very difficult with us with all the news flow. It was it was quite a difficult month to annualize given the prior reopening of stores, but also the amount of adverse news flow about energy bills for consumers. I think like a lot of other retailers and consumer businesses in general, we we had a had a poor May. June and July returned to growth, which is was very encouraging to to end the the half in that way. August, unfortunately, bearing in mind, August is one of our most profitable months. The lack of rain in July and then the extreme high temperatures in August and the widely reported dry conditions meant that our our business was particularly impacted.

36:44 The whole trade was impacted in in August with fisheries being forced to close because of low water levels, low oxygen levels, fish not feeding, etcetera, etcetera. September gave us some cause for optimism after a very poor August. September came back. But August, you know, every month now, bearing in mind, we've gone through our peak sales season every month becomes less and less important to the p and l. So whilst trading did improve in September, not enough to make up for the the difficulty we encountered in August. The general market outlook, I think, has has deteriorated further in recent weeks. It it doesn't seem like a day goes by without some consumer concerning news flow, whether it's people's energy bills, whether it's the cost of their mortgages, whether it's their pensions, or indeed the ongoing sort of general political turmoil.

37:41 We we do think that that is causing consumers to be very cautious. We think that is actually magnified in Europe given the the energy issues in Germany in such that it it is very hard to predict with confidence when consumers are gonna feel able to start spending again. Angling is a pretty resilient past time. History tells us in times of recession, people do continue to fish because it is actually quite low cost to access, but I think we'd be unrealistic to think that people's frequency of fishing isn't likely to to reduce people's propensity to travel to fish. And some of our customers do travel, you know, considerable distances within The UK and across Europe to certain fisheries. That is likely also to reduce, and there's bound to be some delay in people's decision making to replace the higher value capital items such as reels and and and rods or what have you. And indeed, those people that still do replace those reels and rods are likely to become even more price sensitive than they were in the past.

38:54 So with that in mind and sort of due to the sort of challenging and highly volatile trading conditions, we we have reduced our expectations for both revenue and pre IFRS 16 EBITDA for the for the balance of the year. However, we are confident that that between now and the end of our financial year, 01/31/2023, sales will be no less than 73,800,000 and our pre IFRS 16 EBITDA of 2,200,000, respectively. And that brings the end. The the certainly, the formal page, certainly, bit of the presentation. Thank you very much. Andy, Steve, thank you very much for your presentation.

39:41 And ladies and gentlemen, please do continue to submit your questions just using the q and a tab situated on the top right hand corner of your screen. And we received a number of pre submitted questions from investors, and I wanted to start off the Q and A session with these. The first one reads as follows. What is the split in the value of The UK market in physical and online? What is your estimated share and key competitors in each? I'll take that one. So as Andy said there is no official sort of audited data on this. The best view we hold dating back to two or three years ago is The UK market is worth around GBP $550,000,000. If you take that on a what share have we got of that GBP $550,000,000, so around sort of GBP 140,000,000 is viewed to be the online business, the total market online business.

40:33 So we'd be ANGLING DIRECT would be sort of currently holding around 20% of that UK online market. And then obviously from a store the balance is therefore the stores and our stores is somewhere around sort of the 10% mark that blends all up to around a sort of 13 of the total UK market. In terms of competitors, again transparency is very difficult online. It's a little bit easier for us to find those substantial players. In terms of the nearest to us, our view is that something like around eight times smaller than our current online sorry, our current total business scale. Thanks very much for that. You mentioned m and a in the release. Can you provide any quantum of size of deal you may consider? And do you have the cash resources to complete it without further equity being raised?

41:25 We're certainly not contemplating raising any further equity to to invest in any sort of of m and a. We're very confident that we any any appropriate deals that do come along, we can resource from within our own current cash. In terms of quantum, there are no particular acquisition targets that we see in The UK at the moment. The this business in The UK has been built sort of fifty fifty through acquisition and through opening brand new sort of greenfield fishing tackle shops. Having said that, there are some some reasonable businesses in The UK that we we have very good relationships with and and should the appropriate time come, we will obviously have constructive dialogues with them. I think the question is far more interesting in in Europe.

42:20 ANGLING DIRECT is committed to an omnichannel customer offering. We have pretty good evidence that when we open stores in The UK, there is still large ways of the of our customer base that are more comfortable to interact with us on a bricks and mortar basis. We're agnostic as to which channel customers shop with us. In fact, we're very happy for them to switch between the two. So I think the fact is in Europe, we won't be able to bring the full benefits of ANGLING DIRECT to consumers until we are omnichannel. That then raises the question of of of potential m and a. Our absolute focus at the moment is is optimizing our our digital online business.

43:05 Having said that, we are being approached by several potential businesses for us to acquire over within our within our target territories. We're not in any formal discussions with them. We've had various informal meetings and and exchanges of information. I think the issue for us at the moment is with traders volatile as it is. It's it's not clear where people's steady state EBITDA is likely, what their underlying state of EBITDA is likely to be. And I'm very conscious that it's really, really important that we're not tempted to overpay for sake of of of vanity. So I think m and a within Europe is is likely. The the point is we need to work hard to make sure we get the right deal.

43:52 That might mean that that deal isn't so it's not gonna come to fruition any anytime soon. But if and when it does, we certainly can we're not considering anything that wasn't within the realms of our own cash. And by that, I mean, to specifically answer the question, low single digit millions. Thank you very much there. And the next question here says, head office costs increased by circa 500,000 in h one. Please clearly explain the main moving parts of this. Is this level of cost creep appropriate for a business not growing in revenue? I'll take that one. I think I touched on it earlier in my sort of analysis. If you go back to Slide 11 of the presentation, you can see that the group costs are actually flat year on year. The dynamic of those government grants and this and sort of net of the cyber claim is what's in the segmental analysis in the statements moving parts. So the definition in the accounting policy of what goes into group cost does include those. So that that's what's sort of fettering the year on year movement.

45:04 I I think it's really important to just just sorry to interrupt there, but just just to really state, you know, we've been investing ahead of a of a very healthy growth curve in the last few years. The business has absolutely transformed in in in the last three years. And it's I think it's important that we don't do anything to pull that strength at risk. Obviously, we and and thanks to some of the financial rigor that Steve, in particular, has brought to the business, we do demand value for money in every penny that we spend, but actually starting to temporarily unwinding some of the investments we've made, I think, would actually run the risk of stalling the business. So, you know, we we will continue to invest to make sure that when consumer confidence returns, the business is in the best possible place to take advantage of it.

45:57 Thank you. Thank you very much. The next question here is, please, can you provide more details on the £243,000 insurance gain in h one? What was it? Is it one off, and did it impact cash flow? Sure. I did touch on it earlier. It was a one off. It related to the cyber attack that we experienced in November 21. It was a loss of profits claim under our cyber policy, that was obviously subject to a forensic accounting review from the insurers in terms of the qualification of that loss. That loss was agreed pre the end of the half and that value has been paid in cash to us after the end of the half. Thanks very much, Steve.

46:42 How do you feel about inventory levels? These are up year on year, while you seem to be anticipating a decline in sales in H2. Will you be able to protect cash flow and margins in H2 given this situation? Yes. I think, again, it's worth just disaggregating that inventory book. So if you work on the basis that Europe inventories just a smidge over EUR 2,000,000, Clearly, that is a high level of inventory relative to the current sales velocity. We ranged that consciously to give it enough oxygen that such when we started up, it wasn't going to be that the stock debt or the stock range prevented that business from growing at a pace that we wanted it to. On the flip of that, The UK business, as Andy said, we have invested in some more supply chain capability and that is proving sort of crucial in terms of both delivering our best stats on availability since certainly since pre COVID position and having clear reviews of where our slow turning and if you like overstock sit within The UK business. So on a like for like basis, it it's looking much cleaner than we certainly would have been to to a couple of years ago.

48:00 Perfect. Thanks very much, Steve. The next question here asks, what's the rollout plan for physical stores in the European operation over the next twelve to twenty four months? I think I largely answered that one in the m and a question. We we do believe there's role for bricks and mortar stores within Europe to complement the the digital offering. It's important we get the digital offering right. It's important we don't do anything rash that we make well considered steps towards moving towards that omnichannel offer. If we don't purchase anything, as I I think I mentioned, we're sort of half and half in The UK acquired versus own build. We do have the confidence and the experience actually to just to start to open in the right territories, our own bricks and mortar stores if we don't achieve a suitable acquisition, but we're certainly in in no headlong rush to do it.

48:59 Perfect. Thank you very much, Andy. And, Andy, question for you. Andy, please, could you expand on what you mean by the group learning continue to strategically invest in a controlled manner and only to the extent that it retains both strong liquidity and its robust balance sheet? In particular, could you indicate the numbers that define strong liquidity? I'm not sure I can answer the second half of the question, but I think, you know, we take a lot of comfort from the strength of our balance sheet. We take a lot of comfort from the amount of cash that we have and the feedback from all of our investors recently in the circumstances we find ourselves in that so do they. I I we have a lot of confidence internally. We have a lot of external support to continue with our strategy as a consolidator, as a market leader to make sure that we maintain our edge of innovation. We maintain our edge of customer service. We maintain our edge of offering value to our customers.

50:04 So I think what we're trying to say here is we're not about to stop stop investing in all of those things to maintain the to make sure we we maintain that market leading position. However, that doesn't mean that we are going to burn through a lot of cash doing anything rash or or inappropriate. I think we have a responsibility to maintain that balance. We raised £5,000,000 in July 20 from our investors, initially as a safety net to the pandemic. That was very early on during the first lockdown period. We were very clear with investors at the time that if we didn't need to use that for the security of the of the organization, we would indeed start to invest it to grow. As it happens, I think, ANGLING was a net beneficiary of the pandemic.

50:56 We haven't had to call on that cash. It is still sat there. We are conscious we need to use it, but use it wisely and not be in a in a in a race to do so, especially whilst there is so much weakness in the in the consumer sector at the moment. I think all of our investors have acknowledged that we sort of stand apart from a lot of other retailers, from a lot of other consumer businesses by having that that that strength, which indeed gives us some optionality and some flexibility as to how we respond. Andy, thank you very much. And you've actually taken care of the presubmitted questions there. But as you can see, we've actually received a a number of questions throughout today's live event, and thank you to all the investors for submitting those. Could I just ask you to read out the questions where it's appropriate to do so and then provide your responses? I'll pick up from you both at the end.

51:46 Could we just scroll to the top of the questions? We're not able to scroll to We are struggling with our text slide here. Scroll to the top. No. Okay. Guess we did decide everything. Perfect. Thank you. Do you I'll read the question. So I'm not sure if you can see them. Given tough trading conditions, all their plans to launch loyalty program to understand and incentivize in store online customers, a marketplace to allow more suppliers and customers to transact on a wider product range, and retail media to enable sponsored ads, which will make things more relevant customers and generate income from suppliers similar to Amazon. We we used to have a loyalty program.

52:33 It wasn't we stopped it just under under three years ago. It had quite a large membership, but with very, very poor quality data, it was a source of margin erosion for us. We through the next phase of the development of our app, we will be doing a lot more user generated content. There will be a lot more personalization of content and a lot more interaction with customers' local stores, which will, we believe, give us an awful lot of improved customer data that that we will clearly act on and use that to drive our sort of development of our proposition and our marketing going forward. We have no plans to start a marketplace.

53:18 Some people have tried in the past, I believe. I'm not too familiar with those details, but but they they didn't get very far with it. Certainly not on our agenda at the moment. And that's probably everything I would say on that question. Thank you, Steve. G, William, so obviously lots of moving parts there, but is it your expectation that the international business can reach breakeven in FY '24? So right now, we haven't put any guided numbers out in the market for '24, obviously, the volatility. What I can say is we need a revenue number north of 16,000,000 to get the European business based on what we see as its sort of run rate operational footprint to a breakeven position.

54:08 Given our launch point out of this year, we're going be around sort of GBP 3,500,000 of revenue. Our expectation is in 2024, it won't get close to that GBP 16,000,000 to be breakeven. In original business case, we hadn't predicted breakeven for 2024. We'd said that breakeven position would come in 2025. That's subject still to review as travel through the next few months. Do you want to take one of our own brand margins? How the margins on our own brand compare with branded margins, just a rough average. We usually talk to investors around own brand being at least 10% I. E. If a branded products 35 and own brand is 45 that in a more stable trading position, you'd usually look for about a 20 bps increment on the overall UK margin from own brand. That's slightly softened this year because we've used our own brand to give us more promotional capacity through this year. But but, you know, we we still remain committed to around that sort of 10% difference between the two, if not better.

55:15 Next question. Thank you. From William s. I was on the market, but but but came off with and had some significant difficulty some time ago. The correct answer to that question is some of their range does overlap with us, although not a high proportion. We are a specialist fishing tackle business. And I think one of the it's tough for me to comment on the challenges for Fishing Republic, but, obviously, being part of a big big camping shop, an awful lot of our suppliers, I think, are reluctant to perhaps participate in their ranges because they see the benefits of those products being sold and marketed by specialists which which we are.

56:11 And I I don't believe they are or or seen as by many of our customers as things stand. Opening a typical new store and payback? Yep. So, you know, historically, we'd have been sort of north of 200,000 on stock and sort of a smidge below 200,000 on on CapEx. As you can imagine, CapEx costs are under pressure. On average, a store is anywhere between $2.10 and $2.20 now. But the ingoing stock as we've sort of modified the range is sub 200,000 now with a with a, you know, a colleague rotary position and and and still clear parameters on on rent, etcetera. You know, less than four years on payback target of three and a half is where we we continue to to look.

57:01 The next three questions is that can see on the screen at the moment about cash, the company holds significant cash balances. What's the plan for using the cash? When can sustainable dividend payouts be expected? And then from a different author, given that your operating cash flow seems to cover a typical CapEx spend and working cap, why do you hold so much cash? Why no dividends? Or might there be a a big acquisition? I think we've probably sort of touched on this. We, as indeed, do most of our investors, I think, take some comfort from the fact that we do hold a significant amount of cash. I think if if trade was briskier and more positive at the moment, if the consumer environment was was was a lot more positive.

57:46 I think we would be moving to to spend that cash more quickly. We don't have any plans at the moment to to return the dividend. We never have. We aren't short of ideas for for continuing to invest in the business and indeed to grow the business. However, that is tempered at the moment by the need to protect some liquidity in order to absolutely make sure that the business is best placed for when consumer confidence returns and indeed not to do anything that might put the the business at any degree of of risk at all. There was a there was a sub question there about acquisition, which I think we've also covered. No no large scale acquisitions that would involve us having to raise any more cash for sure on the horizon at the moment. The next question, one way to track share is to measure revenue per issued annual license.

58:43 The annual license starts have been roughly flat in in this last year. They they peaked dramatically during the first phases of of COVID, during lockdown, during staycation. A lot of people came back to fishing that had perhaps let it lapse. A lot of people started fishing for the first time. There was a slight reversal in 2021. We did see that go backwards, but actually not back as far as it had grown. And in this last sort of twelve months, on twelve months, indeed, ANGLING license stats have have have been about flat. I'm not too sure how it is legitimate it is to track share by measuring revenue per per per license because actually quite a bit of fishing does not involve the the need for a license. Seafishing, for example, you don't need a license for.

59:30 But that that isn't something that that we do. We take comfort from the fact that overall, the number of licenses is flat. The number of licenses issued for young people that have a 16 to 25 year old category is up. The number of licenses they're issuing to females is up, all of which are are you know, we put a lot of efforts into promoting those particular customer sectors and and making ANGLING accessible to everybody, and we take a fair bit of comfort from that. Next one is about hedging. So How much how much of your stocks are required in non GBP? Do you hedge how far ahead? So the answer on that is the own brand stock is the only stock that is not bought in sterling. It's primarily bought in US dollar.

1:00:17 That that US dollar requirement is less than 5,000,000 US. Yes, we do hedge it on a, what I call, a structured program, I. E, we're looking at all fixed orders placed and then sort of blending that back to today. So is not speculation. It's sort of step hedging. And as you can imagine, you know, right now, you know, on a blend, it's less than one less than $1.20 now on a blend from where we have been. Next one is about cash and working cap. Please can you talk us through how cash working cap moved through the year, e. G. At the halfway point of the financial year are GBP 17,000,000. What pound and when would be troughed for cash? What's your peak and what's your rough average. So I think I've said in our guided numbers, our year end cash position is around GBP 14,000,000.

1:01:10 That's got a reversal of working cap of about a further GBP 1,500,000, a bit north of GBP 1,500,000. There is further CapEx to come in the second half as Andy's pointed out. And obviously, we were tax paying last year, anticipate being tax paying this year. In terms of the curve, it is an upturn source. June, July, August is always the peak month for sales or has been traditionally until this year with the weather. So the working cap trough is usually sort of around the end of February, the end of January. So that the GBP 14,000,000 is around a period where you get the low point, the swing in working cap in a normal sales parameter should be less than GBP 5,000,000 swing on working cap. The next one, this is the this I'm sorry. They're all good questions. This is a great question from p to c. Thank you.

1:02:02 Does your claim to be eight times nearest competitor and could conclude competitors like Amazon? In fairness, no. It doesn't. That stat is derived from comparing our turnover with what we know of the turnover of our nearest specialist fishing tackle retail competitor. And it's think it's really important that, you know, ANGLING DIRECT is a specialist. It differentiates itself in the marketplace by deepening that that that that specialism. So so, no, that I I couldn't claim that that includes nonspecialists like Amazon or indeed eBay for that matter. Scott, I appreciate the demand is very hard to predict, but should it deteriorate further, what levers can you pull to maintain profits?

1:02:50 There's a general point here. I I joined the business while both of us will have been here nearly will have been here three years sort of by next February. I'm not an angler. My background is all in specialist resailing. Steve's in financial services, whilst he is a very passionate and very capable angler. An awful lot of the effort we've put into the business in in the last three years has been around contemporizing, modernizing, and and putting the business on the best footing as it continues to take share across The UK and and in Europe. And whilst we'd be lying to say we haven't probably taken the low hanging fruit, there's certainly a lot more fruit on the tree. So we're only partway through that journey. We see further opportunities for efficiency in our logistics, within our supply chain.

1:03:40 The profitability of our stores is improving all of the time. We are locked in on energy until September on our existing stores until September 2023. So we've managed to avoid some of the the the worst of of that effect. We are still opening new stores, as I've mentioned earlier, in in unserved catchments, which gives us an opportunity to take share locally, but also, you know, grow the the sort of quantum and profitability of our bricks and mortar size of of the business. And, again, through some efficiencies we see in the supply chain, our online business should continue to become more and more efficient, albeit we're not immune from the sort of overriding cost of carriage, for example, with with sort of fuel supplements and things that we have to pay pay for our carriers. But we're we're very cognizant of the need to continue to drive for efficiencies whilst at the same time continuing to look for opportunities to grow the business. And and and, obviously, profit will be a function of the two, notwithstanding, as as Scott said, demand is very hard to predict.

1:04:49 Sterling weakness impact your current thoughts on European acquisitions, and what impact is FX having on the business? No. So euro sterling is pretty stable here from a twelve month base. I think sterling euro sterling's up. So, yeah, the view on whether it's medium term, if you like, softness in sterling up for debate, But I think it's the strength of the dollar that is sort of overarching both of the currencies. So that's not bettering our thoughts on what we would do in Europe. The European business sells in euros, pays in euros, so it's got a natural hedge on it. The only real FX angle for us directly, as I've talked about, is buying our own brand. It is not transparent what our suppliers necessarily buy in their supply chains are largely Far East. You would expect them to have a reasonable exposure to the dollar. The amount of that they don't publish to us.

1:05:44 The last one I think, but I was conscious of time. What would be your minimum cash holding position? I have no acquisitions in mind. If February is the floor and you weren't going on a continued store rollout program, sort of one month purchases around GBP 4,000,000, we'd always want to buffer against one month purchases plus you can have a CapEx piece plus we're paying tax in installments. So somewhere around the 6,000,000 mark is probably a fair analysis where you go on a minimum cash balance. Andy, Steve, thank you very much for that. I think you've addressed all those questions from investors. Of And course, the company will review all questions submitted today and publish those responses on the Investor Meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, and if I just ask you for a few closing comments.

1:06:33 Yes. Again, thank you for everybody for taking the time to join us today, and thank you for the sort of very insightful and and and relevant questions. I think the things I'd just like to leave people with, trading is clearly tough. ANGLING DIRECT isn't immune from that. However, I would like to emphasize the point that as far as we can tell, we have every reason to believe we continue to gain share in a very difficult marketplace. That, I think, makes it clear that the strategy we have for developing and growing the business is very welcome with our customers both in store and online, both in The UK and in Europe. We take confidence from the fact that the business' infrastructure has been well invested in. The business' governance goes from strength to strength, and we're actually in a a more secure position as a business, I think, than we've we've ever been. We're a well stocked business now.

1:07:28 We have access to a good and healthy amount of of of cash. And all of those things, I think, the board having debated that length, our approach to this ongoing situation, it's quite hard to see the m two at the moment, is that as long as we are are demanding value for money for everything that we do and as long as we're not reckless with our cash, it is prudent to make continue to invest on setting ANGLING DIRECT even further apart from its competitors such that when consumer confidence does return, this this highly fragmented market will continue to consolidate, and ANGLING DIRECT will be in the very best position to to to to be the net beneficiary of that. And thank you everybody for your time this morning.

1:08:18 Andy, Steve, thanks once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of ANGLING DIRECT PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.