Angling Direct PLC

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&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 it received in 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.

Good morning, everybody. Thank you for taking the time to join us today. Given the current trading 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 between myself 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 highlights and operational highlights are picked, they're lifted directly from our R&S. There's a few things I'd just like to pull out here, though, to emphasise. Despite all the very difficult consumer news 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 fish and 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, in terms of value for money for our customers, suggests that whilst we are clearly finding trade tough at the moment, it's as tough, if not tougher for our competitors, which gives the board confidence that 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 suggests that our strategy remains strong indeed and that is something we'll continue to invest in given the strength of our balance 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 is all very focused on being the best in town and taking share locally. Total store sales growth of 9.8%, like-for-like store growth in the period of 4.6%. Our online sales did decrease in the period by 7.9%. However, our UK business with sales of 15.3 million, 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, recognising in the prior year, our stores were partially closed on the tail end of lockdown three. European sales grew by 36.9%. Although within our target key European 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 territories from Germany and perhaps a bit further east, even more influencing on the state of trade out there at the moment. A gross margin did decrease by 200 basis points in the period. Steve will elaborate on the reasons behind that in a bit more, but that was partially anticipated because of our desire to remain price competitive. It is a key one of our strategic pillars is to make sure that our customers can be certain of getting the very best value. in the marketplace from Angling Direct, it is important as market leaders in a consolidated market that we don't hesitate to invest margin to make sure we protect that position. Positive cash flow, operating cash flow in the period of 2.4 million pounds, a strong balance sheet with net cash at the end of the period of 17.1 million, 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 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 1st of March. to our new or from our new Dutch distribution center. It's been fully operational. It opened, 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 got it successfully opened. In terms of our own brand sales, something we regularly talk about, they grew by a very pleasing 34.6%. We did have the opportunity because of the margin of our own brand 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. Bates, this is an approach that we took the opportunity to train all of our store colleagues in towards the end of the last 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 importantly, encourages our customers to recommend to their friends and family. We've opened three stores recently, only one in this period, and it was actually in the last week of the period up in Washington. It's our most northerly store. We've opened since then at the very beginning of half two in both Coventry in August, another site we've been very keen to get into for some time, and indeed Stockton on Tees, another fairly northerly store. All three of those are catchments where Angling Direct currently isn't represented, Briggs and Mortarwise, 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 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 FY22 the tackle industry's first web trading app. We've subsequently deployed our second phase of app development, which has given us the confidence to now start actively incentivizing the download and use of the app. We started that early in the half. App usage just 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 now of about 5% of all web sales, which for a new launch, we're very pleased with. 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 are actually there phishing. It also provides some opportunity to refine even further our advertising ratios because obviously any transactions through our web app don't attract Google ad or any sort of digital advertising spend. 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 quarters. 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 latest slides. The gross margin point there, you can see we went back to 34.6, so a 280 basis point reduction half on half. There's around 40 basis points of gearing from our Europe startup business, which again, I'll touch on over the page. We've given more segmental information for investors for 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 23. And also around the Europe EBITDA loss is about a £500,000 drag, half on the half. Over the page, we've given the segmental analysis I've 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 the 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 sort of margin has gradually improved as we've moved through the half, dipped at 19%, starting to recover. You know, we short-term target on that, getting it back to 30% broadly gets us to a neutral position against our variable costs 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 discreet 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 annualising against lockdown periods, where the stores were only able to trade on a call and collect basis. 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 light for light 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 we'll talk about August and September later on when we come to the outlook statement. Trading KPI, so there's full suite here. for folks to analyse. 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 the gearing of the capital items has had a relatively moderate or a reasonably sizable drag on the margin in the period um and also we have had small amount of range change clearance that we've pushed through those those have been offset to some degree by 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. 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 and 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 re-rotering 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. The income statement there, you can see from a net profit basis, we remain positive despite the drag set out previously. From a sector perspective, the PBT for stores remained just shy of 12% and the PBT for the UK online business around 12%. 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 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 centre that we've put in place. We have in the statements, as folks will see, have given segment analysis, both at an EBITDA level and a PBT level, so folks can see the relative gearing of those depreciation charges across the channels. 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 got it on a pre and a post basis around the 1.1, 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 are 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 that headline profitability. You can see the UK stores and the UK online business still, 4.9, nearly 5 million pounds. So we're able to absorb those European losses with a still very sort of a relatively strong UK position against a pre-COVID position where we were only generating 2.2 from those two channels. On the right hand side is just the reconciliation again. So it's able to see how the 4.4 drops through to the 1.9. 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. The balance sheet on 12. Half on half, the inventory has grown to shy of 2 million. It is worth noting on that at the half last year, we had no inventory in Europe. We are carrying just over 2 million. in our European distribution center right now. So on a light for light 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 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 22, there was only around 300,000 pounds 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 22. From a cash perspective, we've got 17.1 in the balance sheet at the end of July. Our current market guided cash number for the year end is around 14 million. There is 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. the cash flow so this bridge is from the year-end position so the 16.6 so a modest increment over the half largely driven by this is on a post IFRS 16 basis you can see there the EBITDA outstripping the work the modest working cap consumption the two facets of that being a further circa two two million investment into europe net of a positive um position in the uk stock file capex the right hand box largely focused on our continuing store rollout with three stores um being in the fixed assets additions for the first half and i will hand back to andy for the business report

Thank you, 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 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, whilst I've been here, very pleasing to be able to report that underneath the trading situation we find ourselves in, we do continue to make solid progress, contemporising, getting return on the infrastructure investments we're making within the business. 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 mainland Europe is experiencing. Just to remind everybody, the whole purpose of this particular work stream was to overcome the bump in the road that Brexit brought us. Now that we have a distribution centre within the EU, we can trade far more competitively in that our lead times, we now have next day delivery to the whole of the Netherlands, the whole of Germany, the vast majority of France and indeed 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 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 NL, 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 paying at one point around six euros 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 to Europe. 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 engagement at the moment, particularly with the Dutch and German fishing organisations through more traditional customer outreach and engaging them on our sustainability ambitions. And we have high hopes 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 this second half in the margin, which will go some way to stemming those fully anticipated first year losses on this project. Digitally, we've mentioned the app already we do continue to refresh our products and 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 personalized utilization 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 encourage repeat purchase. We've invested in the web trading team. We have a new web trading manager who's joined us in the period. Him, along with his team, spending significant amount of efforts now optimizing the EU site customer experience in particular as 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 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. When we first started measuring it in January this year, it was around 52-53%. And we've currently got that up to around 57, varies 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 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 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 trade has improved somewhat in recent months. We now have the, 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 pole experts within each of our stores. 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 with those colleagues. And another point of difference that sets us out and sets us apart from 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 slowdown in some of the growth, the quality of our stock file is improving all the time. The proportion of our stock file associated with the upper quartile of our sales is improving all the time. with much less drag from discontinued products at the other end. 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 Advanta Reels. We now stretch that brand into Advanta 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, their national fishing months. We are making good progress towards PPN 0621, the carbon standard and active supporters of anglers against pollution. We've held some live Get Kids Fishing events at several regional fisheries this summer, which have gone down exceptionally well. They've been very well attended, 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 live stream 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 various skills designed to improve their fishing, such as rig tying 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 they are green dots, two up there in the northeast, one in Coventry, the new stores we've opened most recently, our distribution centre out here in Norfolk on the eastern side. of the map there. We will probably open one more store this year, potentially, possibly two, depends on the planning situation. 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 one million pound plus store catchment opportunities available to us. If we were to change that to a sort of a 750,000 turnover target, we believe there's a further 30 to 40 store potential 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, 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. Slide 17. is that our UK digital stats, they're sort of dominated, if you like, by that top left-hand corner statistic of website growth having reduced in the period. That is all to do with the annualisation of lockdown in the prior period. That reduction in growth rate flows its way down through the bulk of those stats in the left-hand column. I would point out, though, that obviously, despite a lot less browse, 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 we're very pleased with. You can see our database and social media followings also continuing to grow really quite healthily. Same slide over the page, but based on Europe, a very different story. You can see our growth rate having started to grow very healthfully. The number of active unique customers, the decline there, the Brexit bought about being significantly reversed and 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 kickstart the business, get some volume through the new distribution centre. And indeed, that is something that in the second half, Steve alluded to the fact that our losses, given the slower uptake than we'd hoped for on trade, our first year losses in Europe are going to be slightly more than we anticipated. Its margin and advertising spend that we've been working on to mitigate those losses and improve the profitability of the European business in this second half. I've made a point of reminding investors that three years ago, this business had margins of some 30%, was growing like Billy Owen, 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, and 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 as we do grow, we can demonstrate quite quickly some sustainable profit there. So over the page, In summary, I think the summary slide speaks for itself. We still have continued significant opportunities to grow both in 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 serve. We clearly have opportunities to continue to grow online in the UK and also in Europe. Given the strength of our balance sheet and the resilience of our business model, I think we've shown throughout COVID, throughout Brexit, that we are responsive to opportunities and we sort of take these challenges head on and show that the business can be flexible. 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're 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 proposition that more and more customers are clearly telling us that they enjoy and they're very happy to engage upon. Probably we can't really avoid current trading and our current view on the outlook of the business at the moment. We are focused on growing share, risk of repeating myself, I think that is important to say. 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 taking share from our competitors. So we will continue to invest. We've suffered particularly with the, well, we struggle with the volatility of trade at the moment. We had a very strong quarter one. May was very difficult with us with all the news flow. 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 had a poor May. June and July returned to growth, which was very encouraging to end 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 drought conditions meant that our business was particularly impacted. The whole trade was impacted in August with fisheries being forced to close because of low water levels, low oxygen levels, fish not feeding, et cetera, et cetera. 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&L. So whilst trading did improve in September, not enough to make up for the difficulty we encountered. in August. The general market outlook, I think, has deteriorated further in recent weeks. 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. We do think that that is causing consumers to be very cautious. We think that is actually magnified in Europe, given the energy issues in Germany in particular, such that it is very hard to predict with confidence when consumers are going to feel able to start spending again. Angling is a pretty resilient pastime. 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 reduce people's propensity to travel to fish. and some of our customers do travel 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 rods and 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. With that in mind and due to the challenging and highly volatile trading conditions, we have reduced our expectations for both revenue and pre IFRS 16 EBITDA for the balance of the year. However, we are confident that by between now and the end of our financial year, 31st of January 2023, Sales will be no less than 73.8 million and our pre-IFRS 16 EBITDA of 2.2 million respectively. And that brings the end, certainly the formal page turning bit of the presentation. Thank you very much.

Andy, Steve, thank you very much for your presentation. And ladies and gentlemen, please do continue to submit your questions just using the Q&A tab situated on the top right corner of your screen. And we received a number of pre-submitted questions from investors, and I wanted to start off the Q&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. As Andy said, there is no official sort of audited data on this. The best view we hold dating back sort of two or three years ago is the UK market is worth around 550 million. If you take that on a what share have we got of that 550, so around sort of 140 million is viewed to be the online business, the total market online business. 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 there for the stores and our stores is somewhere around sort of the 10% mark that blends all up to around a sort of a 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 total business scale.

Thanks very much for that. You mentioned M&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?

We're certainly not contemplating raising any further equity to invest in any sort of M&A. We're very confident that 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. This business in the UK has been built sort of 50-50 through acquisition and through opening brand new sort of greenfield fishing tackle shops. Having said that, there are some reasonable businesses in the UK that we have very good relationships with and should the appropriate time come, we will obviously have constructive dialogues with them. I think the question is far more interesting in Europe. Angling Direct is committed to an omni-channel customer offering. We have pretty good evidence that when we open stores in the UK, there is still large swathes 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 our customers shop with us. In fact, we're very happy for them to switch between the two. The fact is, in Europe, we won't be able to bring the full benefits of Anglin Direct to consumers until we are omnichannel. That then raises the question of potential M&A. Our absolute focus at the moment is optimising our digital online business. Having said that, we are being approached by several potential businesses for us to acquire over within our target territories. We're not in any formal discussions with them. We've had various informal meetings and exchanges of information. I think the issue for us at the moment is with trade as volatile as it is, 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 vanity. So I think M&A within Europe is likely. The point is, we need to work hard to make sure we get the right deal. That might mean that that deal is not going to come to fruition 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. The next question here says, head office costs increased by circa £500,000 in H1. 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 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 the net of the cyber claim is what's in the segmental analysis in the statements moving part. So the definition in the accounting policy of what goes into group cost does include those. So that's what's sort of fettering the year-on-year movement.

I think it's really important to just, sorry to interrupt there, but just to really state, we've been investing ahead of a very healthy growth curve in the last few years. The business has absolutely transformed in the last three years. And I think it's important that we don't do anything to put that strength at risk. Obviously we, 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 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. Thank you.

Thank you very much. The next question here is, please, can you provide more details on the £243,000 insurance gain in H1? What was it? Is it a 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. And 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.

Thank you very much, Steve. 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. we'd be able to protect cash flow and margins in H2 given this situation?

Yeah, I think, again, it's worth just disaggregating that inventory book. So if you work on the basis that Europe inventory is just a smidge over 2 million, you know, 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 depth 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, 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's looking,

much cleaner than we certainly would have been a couple of years ago perfect thank you very much steve um the next question here asks what is the rollout plan for physical stores in the european operation over the next 12 to 24 months

I think I largely answered that one in the M&A question. We do believe there's a role for bricks and mortar stores within Europe to complement 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 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 no headlong rush to do it.

Perfect. Thank you very much, Andy. And Andy, question for you. Andy, please could you expand on what you mean by the group will only 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 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. 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. So I think what we're trying to say here is we're not about to stop investing in all of those things to make sure 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 inappropriate. I think we have a responsibility to maintain that balance. We raised five million pounds 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 organisation, we would indeed start to invest it to grow. As it happens, I think Anglin was a net beneficiary of the pandemic. 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 race to do so, especially whilst there is so much weakness 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 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 pre-submitted questions there. But as you can see, we've actually received 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.

Could we just scroll to the top of the questions? We're not able to scroll. We are. We're doing our text slightly early.

We should be able to scroll to the top.

I'll read the question. I'm not sure if you can see them. Given tough trading conditions, are there plans to launch a loyalty program? to understand 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 to customers and generate income from suppliers similar to Amazon. We used to have a loyalty program. We stopped it just 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. 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 we will clearly act on and use that to drive our development of our proposition and our marketing going forward. We have no plans to start a marketplace. Some people have tried in the past, I believe. I'm not too familiar with those details, but 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 S, obviously lots of moving parts there, but is it your expectation that the international business can reach break even in FY24?

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 million to get the European business based on what we see as its sort of run rate operational footprint to a break even position. Given our launch point out of this year, we're going to be around sort of three and a half. million pound of revenue. Our expectation is in 24, it won't get close to that 16 million to be breakeven. In the original business case, we hadn't predicted breakeven for 24. We'd said that breakeven position would come in 25. You know, that subject's still to review as we travel through the next few months.

Do you want to take one about our own brand margins?

How do margins in our own brand compare with branded margins? Just a rough average. You know, We usually talk to investors around own brand being at least 10%, i.e. if a branded product's 35 and own brand is 45, But that in a more stable trading position, you'd usually look for about 20 bits 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, you know, we still remain committed to around that sort of 10 percent difference between the two, if not better.

Next question, thank you, from William S. It's this thing that JD Sports owns, Fishing Republic, how much of their range competes with yours? JD Sports obviously owns Go Outdoors. Go Outdoors owns an old brand, Fishing Republic, that I think was on the market but came off and had some significant difficulty some time ago. The correct answer to that question is some of their range does overlap with ours, although not a high proportion. We are a specialist fishing tackle business and I think it's up for me to comment on the challenges for Fishing Republic but obviously being part of a 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 we are. And I don't believe they are all seen as by many of our customers as things stand. Opening a typical new store and payback.

Yeah. 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 CapEx. As you can imagine, CapEx costs are under pressure. On average, a store is anywhere between 210 and 220 now, but the ingoing stock, as we've sort of modified the ranges, sub 200,000 now. with a colleague rotoring position and still clear parameters on rent, etc. Less than four years on payback, target at three and a half is where we continue to look.

The next three questions that I can see on the screen at the moment are 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 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 trade was brisker and more positive at the moment, if the consumer environment was a lot more positive. I think we would be moving to spend that cash more quickly. We don't have any plans at the moment to return the dividend. We never have. We aren't short of ideas for continuing to invest in the business and indeed to grow in 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 business at any degree of risk at all. There was some question there about acquisition, which I think we've also covered. 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 angling license. The angling ice and stats have been roughly flat in this last year. They peaked quite dramatically during the first phases 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 12 months on 12 months, angling licence stats have been about flat. I'm not too sure how legitimate it is to track share by measuring revenue per licence because actually quite a bit of fishing does not involve the need for a licence. Sea fishing, for example, you don't need a licence for. But that isn't something 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, you know, we put a lot of effort into promoting those particular customer sectors and making angling accessible to everybody. And we take a fair bit of comfort from that. Next one is about hedging.

How much of your stocks are required in non-GBP? Do you hedge? How far ahead? So the answer to that is the own brand stock is the only stock that is not bought in sterling. It's primarily bought in US dollar. That US dollar requirement is less than 5 million US. Yes, we do hedge it on 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 it is not speculation. It's sort of step hedging. And as you can imagine, right now, on a blend, it's less than 120 now on a blend from where we have been.

Next one's 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, 17 million. What pound and when would be trough for cash? What's your peak and what's your Russ average? So I think I've said in our guided numbers, our year end cash position is around 14 million. That's got a reversal of working cap of about a further one and a half, a bit north of one and a half. There is further capex to come in the second half, as Andy's pointed out. And obviously we were tax paying last year, I anticipate being tax paying this year. In terms of the curve, it is an upturned source. So 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 the 14 million is around a period where you get the low point. The swing in working cap in a normal sales parameter should be less than 5 million swing on working cap.

The next one, sorry, they're all good questions. This is a great question from Peter C. Thank you. Does your claim to be eight times nearest competitor include 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 I think it's really important that Angling Direct is a specialist. It differentiates itself in the marketplace by deepening that specialism. So no, I couldn't claim that that includes non-specialists 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? There's a general point here. I joined the business, well, 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 the last three years has been around contemporizing, modernizing and putting the business on the best footing as it continues to take share across the UK 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. 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 worst of that effect. We are still opening new stores, as I've mentioned earlier, in unserved catchments, which gives us an opportunity to take share locally, but also grow the quantum and profitability of our bricks and mortar size 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 overriding cost of carriage, for example, with fuel supplements and things that we have to pay for our carriers. But 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 obviously, profit will be a function of the two. Notwithstanding, as Scott M said, demand is very hard to predict. Stirling weakness impact your current thoughts on European acquisitions and what impact is FX having on the business?

No. So euro sterling is pretty stable. If you're on a 12 month basis, I think sterling, euro sterling is up. So the view on whether it's medium term, maybe 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 fettering our thoughts on what we would do in Europe. european business sells in euros pays in euros so it's got a natural hedge on it the only real effects angle for us directly as i've talked about is buying own brand you know 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 uh the last one i think but it's conscious of time what would be your minimum cash holding position i have no acquisitions in mind you know If February's the floor and you weren't going on a continued store rollout program, you know, sort of one month's purchases around 4 million quid, you know, we'd always want to buffer against one month's purchases. Plus you can have a capex piece. Plus we're paying tax and installments. So somewhere around the 6 million mark is probably a fair analysis of where you'd go on a minimum.

Andy, Steve, thank you very much for that. I think you've addressed all those questions from investors. And of course, the company will review all questions submitted today and publish their responses on the Investor Meet Company platform. But just before redirecting, investors provide you with their feedback, which I know is particularly important to you both. Andy, can I just ask you for a few closing comments?

Yes, again, thank you for everybody for taking the time to join us today. And thank you for the sort of very insightful 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 emphasise 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's infrastructure has been well invested in. The business's governance goes from strength to strength. We're actually in a more secure position as a business, I think, than we've ever been. We're a well-stocked business now. We have access to a good and healthy amount of cash. And all of those things, I think, the Board having debated at length our approach to this ongoing situation, and it's quite hard to see the end to at the moment, is that as long as we 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 continue to invest. on setting Angling Direct even further apart from its competitors such that when consumer confidence does return, this highly fragmented market will continue to consolidate and Angling Direct will be in the very best position to be the net beneficiary of that. Thank you, everybody, for your time this morning.

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 will 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.