Angling Direct PLC

Good morning and welcome to the Angling Direct PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And then I'd like to hand you over to Steve Crow, CEO. Good morning, sir.

Good morning, everyone. Welcome to our 2024 financial results. And pleased for the first time as CEO to present those results. And also for the first time, we're going to set out our medium term ambitions for the company. And again, we're pleased to do that given we've not previously entertained that. And for the first time, we're going to give some transparency over the way we see the future developing. Excellent. The headlines. So for the 2024 results, delivered record revenues and again strengthened our margins and our cash position and executed our strategy of taking market share and underpin that by continuing to invest in the business. Particularly pleasing is we've reinvigorated the UK growth. Last year, the 2023 year was relatively soft at 1.6%. We're really pleased to deliver 9% growth in the UK business in the 2024 year. That was across both channels, stores and online. The online business returning to growth with the previous year where we regressed. And again, that was a particularly strong performance of 11% growth. In Europe, we've made tangible progress in a challenging market. We've closed the gap on the UK trading metrics and materially reduced the drag on the group EBITDA. In total for the whole group, we've strengthened the margins, the gross and the operating margins. And despite well-publicized headwind on theft, we've continued to move the overall gross margin percentage forward. Operationally, our key success has been around the deployment of our MyAD, which is our repeat purchase and loyalty offer. Again, at the period end, we had about 220,000 members of that, and I'll cover some more detail of that as we move further through the presentation. As I said for the first time, we've set out our medium term objectives for the company, and I'll just cover those in a little bit more detail on this in the next slide. The UK business, we've now got a clear flight path to move that UK business to over 100 million of revenue. We had record revenues in the year of over 77 million in the UK, and we've got a strong pipeline of opportunity to develop that 100 million progress. Against that, we're setting out against that 100 million, at least 6 million of pre IFRS 16 EBITDA. That's over an 85% increase in earnings using the 2023 launch point when Sam and I engaged together in the business. The key component of that is the third objective, where we are going to create Europe's largest fishing club, using my AD as the cornerstone of that. Again, I'll cover in some later slides how we're developing that further in this year. We've had a particularly strong start, as I say, in terms of membership and engagement from that. Fourthly, developing a sustainable European business. The European business, as I said, continues to be a drag on the overall earnings of the group. We still see that as a key opportunity in terms of accessing a scale market that is equally as fragmented as the UK. And to do that, we'll do that with our omni-channel approach, both stores and online. And I'll cover some more detail of that in a moment, how we're looking to do that. Objective five, importantly, deploying the surplus liquidity on the balance sheet, clearly is a suboptimal balance sheet as we sit here today. However, we have got some clear plans in terms of deployment for that cash. crucial to recognise the deployment of that cash is additive to the £6 million ambition that we've set out above in objective two. Objective two can be delivered by self-financing itself over the medium term. The excess liquidity on the balance sheet today in excess of the minimum working capital requirements is there to develop the business beyond the £6 million. And lastly, continuing to grow us as the most responsible employer in the fishing tackle industry. We've made good strides in terms of employee progress, employee engagement and progress in terms of other metrics around carbon intensity and other environmental projects that we're engaging in. the top of the page just to give a bit more color about the uk you know the 100 million revenue the way we're seeing that is roughly a 60 40 split depending on how the market evolves in terms of that engagement from the customer be it digitally or physically we haven't seen a drift towards the digital channel if anything the drift is back towards physical retailing but we retain a a flexible model in terms of how we can scale up and scale down relative to those sort of two channel mixes, but we do see it primarily being in the 60-40 blend between those two channels. EBITDA growth, the 6 million, we see that sort of substantially indexing over the sales growth. Again, I'll let Sam talk later on about how we viewed that in year, but it's important to recognize how the EBITDA ambitions will substantially scale above those of the sales growth ambitions. Overall, that should deliver ex-cash a compelling sort of UK return on capital employed that moves us comfortably into double digits. Europe, as I said, it's about delivering a break-even position for Europe as quickly as possible. In 2025, we will have opened our first store in Utrecht. We need to take the learnings from that store, deploy MyAD into that store, and then review the capacity to roll out that physical store and omnichannel offering more quickly alongside the progress we're making in our digital business, which again, I'll cover a bit more in detail in a moment. Lastly, the surplus cash above the minimum capital working capital requirement. Again, we've got 15.8 million on the balance sheet at the year end. Our house view is we need around 5 million of cash for a sort of flexible approach to our working capital, which leaves over 10 million of excess liquidity that we need to deploy materially into the UK business. That deployment needs to primarily focus on how we're going to move our own brand participation, be that within our own brand or more importantly, partnering with other brands from working capital restructuring and or at the extreme paying goodwill to exclusively access those brands. Finally, we will retain a small element of flexibility around European deployment as the test and learn on the omnichannel approach develops over the next 18 to 24 months. For the first time, now we've published those objectives. We've set out how we're tracking against those and we'll continue to do that at each of the meetings moving forward. So folks can see how we're reviewing our progress against each of those six objectives. You can read there on the screen how we're viewing it. We have got a strong flight path towards the 100 million. As I said, our revenue CAGR 12.6% and a good pipeline of opportunities to continue to develop that. I think it's worth recognising that won't be a linear journey. There's some things we're working on operationally that may accelerate that and we may, you know, we may see some flat spots that then move up again as we develop those opportunities. EBITDA, again, you know, 15.6% improvement on an adjusted EBITDA basis and an improvement in the EBITDA ratio, 550 bits improvement over the last five years. Again, we see a good flight path in terms of how we're moving towards that ambition. MyAD, 220,000 members, as I said, and again, 75% of our revenues are now being transacted by those members through that club. I've got a slide over the page where I'll just explain a bit more about MyAD in terms of what it is and how we're developing it. European business model, headline growth, 36%. We were pleased with that. We continue to balance sales growth with improvement in profitability. The contribution ratio, i.e. sales, less variable costs, improved 750 basis points. And we're closing the metrics on the UK business. And most importantly, the scale of the losses relative to the EBITDA profits of the group continue to move in the right direction with those dropping down to 35% of the group EBITDA from 53 the year before. Cash. We've continued to review how we're going to deploy that. I'll talk later on when I come to the FY25 priorities, how we're spending some of that in the UK on an automated packing solution. That's a seven figure commitment. And post year end, we've completed two small scale acquisition of single site stores. Again, we're... continue to review in detail the supply chain opportunities in terms of working capital or goodwill deployment and we'll look to report further on that as we move through the interims into this time next year. And angling's retail's largest responsible employment, you know, good engagement in terms of store colleagues. We've reduced our lever rate by over three times year on year as we continue to focus on that employee engagement. And, you know, and a particularly pleasing point is the improvement in our carbon intensity ratio where we're continuing to focus on usage and actually we've dropped 14% despite us continuing to roll out the physical estate. Sam? On this slide, we've sort of pictorially set out where we are on MyAD. MyAD is a free to join subscription. It enables anyone who subscribes to access over 600 daily deals where there is preferential pricing relative to what a non-MyAD member would pay for that product. some particularly pleasing statistics around how we how we've deployed that sort of 70 uplift if a product is in my id in terms of sales revenue and similarly around a 60 uplift in the in the cash margin we generate as a as the retailer i think that's a pretty compelling proposition to the suppliers and we continue to work with the supply chain to get them to engage in this And we've had a real success this year and for the first time we've generated around six figures of value from our brand partners paying for physical and digital space to support the MyAD proposition. Alongside that, we continue to deploy monthly Money Can't Buy prizes, which are particularly engaging for the customer base, monthly giveaways and the exclusive MyAD deals and bundles, where we're primarily now running all of our promotional activity through MyAD as the test and learn on that has helped get the engagement in terms of increasing numbers of customers who are looking to sign up to MyAD. How we're going to move that proposition forward later in the year is we are looking at how we personalize the offer of MyAD in terms of using the data points we've got from existing customer transactions and look so that we can actually target individual customer cohorts and then more latterly, individual customers with offers that are sort of contemporary to the way that they're approaching their angling. We're also looking at how we add what we call sort of round benefits package beyond the free subscription. Can we partner with other organizations in terms of them accessing our database in terms of that number of customers and ancillary and products that they'd look to access as well? 24, we've set out the key things that we've delivered in 24. I'll not repeat, I've covered a number of them. On the left-hand side, the customer was primarily around the MyAD proposition that I've just talked about. And the bottom bullet there, we are increasingly focused on this development of new commercial marketing revenues, both selling that digital and physical space and joining that with MyAD. In the UK retail estate, we've had a very successful year in terms of maximizing any customer that comes to us. Our conversion rate in the stores increased by 250 basis points year on year. That was driven by a number of factors which we saw on the slide. The key one being how we've approached our on-shelf labeling, consistency of promotion and consistency of merchandising in the store through a technology solution that we've deployed. And we'll continue to leverage that in 2025. We're also particularly pleased to roll out for the first time in-store services, where again, we've delivered a six-figure number that is very supportive to the growth margin progression in terms of customers being able to access some services, real spooling for any anglers out there, has been a real success for us. The bottom point, retail theft shrinkage has been a challenge for us. That's widely publicized. It's not just a feature that's only impacting Anglin Direct. We've taken a lot of action on that in terms of protocols, in terms of shop layout. cctv customer protocols in terms of having a basket but we also approached it from the flip side which is ensuring that we pick up the gaps from shrinkage very quickly such that we can replenish and not have empty pegs where our stock system may have been telling us we still had one in stock so we don't lose on both sides of the coin UK Digital, really pleased with the return to growth. A number of factors supporting that. We've had a point upgrade of our Magento platform, site speed and search capability. We've moved into some more technology space where we've looked at our recommend and also bought, where we work with a third party to bring that in the second half of the year to look to drive items per basket progression. And finally, as the digital business in terms of the market, the digital market isn't scaling as we perhaps thought it might, there is more aggression in competitors who are digital only in terms of the way they approach their marketing spend. We've again employed some technology solution whereby we look to optimise, real-time optimise, our paid advertising bidding campaigns. For Europe, this continues to be a challenging market. That's primarily from a consumer pricing aspect. There is more intense price competition. And so we've continued to balance our sales progression against our profitability and looking to maximize the metrics that we know we can work on from our experience from the UK business. And again, deploy those technologies that we've successfully managed to embed within our UK digital estate back into our European business. For instance, the German conversion rate is now within two basis points of the UK and NL and France is only 50 basis points behind. Average basket in Germany is now only a euro behind where the UK is and the items per basket are broadly proximate with each other. about a 35% increase in unique customer numbers. So we've looked to scale our customers at the same time we're scaling our revenue ambitions and our advertising ratio in Europe is down by 200 basis points year on year again, looking at how we deploy technology, look how we take the learnings from the UK business back into the European business. In 2024 January, we signed the lease on the Utrecht store, as I mentioned earlier on. We're now trading that store and we're looking to do a grand opening of that later as we move through this month. The key on the European store is to look at the way that we can develop the gross margin of the business to ensure that that gives us a sustainable platform to get confidence to trade out from that store and more widely develop the omnichannel proposition. again we see my ad being a key lever that will deploy my ad into the dutch store and the dutch website later this month commercially We've done a great job in terms of developing our own brand proposition. We've increased the gross margin on that own brand around 16% year on year. We've increased the SKU count and we're looking to engage in more categories where we're confident we can take share and provide a more compelling offer in terms of price versus value and economics back to our own business. outside of own brand we've made some some some particularly impressive progress in terms of how we've managed the working capital focusing on availability through reducing the core skew count down by about 16 but at the same time developing the bought-in margin i'll let sam talk to the margin bridge as we come through the financials in a moment And finally, we are seeing more alignment with some of our key supply partners where we continue to trade together to maximise the returns for both organisations. Communities and sustainability. We've covered the sort of the colleague aspect to that. Outside of that, we're continuing to work with Tackling Minds, who are a organisation who look to support folks who are having some challenges in life through the pastime of angling. We sell all of their merchandise through our web offer in 14 of our stores, and that's returned about £26,000 back to them. And again, we're looking at all of the work we're doing with some of our brand partners around line recycling and other aspects of packaging where we see we are able to lead the charge in terms of having a more environmentally sustainable offer around the packaging of angling equipment. I'll hand back over to Sam for the financials and then I'll cover the FY25 key priorities after we've done the numbers.

Thanks, Steve. Good morning, everyone. So just starting on the first slide there in terms of some financial headlines, we've got a bit more segmental detail on the next couple of slides. But a few headlines just to pull out on this slide. Firstly, being the UK revenue with growth up at 9% versus the previous year at 1.6% in the UK. So really reinvigorating that UK growth. alongside the European sales growth at 36.3%, with the standouts in there being Germany at 48.6% and the Netherlands at 52.2%. Then from an EBITDA perspective, we're seeing strengthening EBITDA margins with UK EBITDA growth on the adjusted basis in the blue box. And just to be clear, the adjusted basis there, the FY23 numbers have been restated to remove the cyberclaim insurance money out of FY23 because it related to an FY22 event. So you can see that we've grown UK EBITDA at 15.6%, over-indexing then against that UK sales growth at 9%. And that's driven by both the gross margin progression, which I'll come on to on the next slide, but then leveraging the lean cost base as well. And European EBITDA has also improved by 19.3%, reducing the losses whilst we continue to take market share. We've also generated cash in the period, despite the continued investment in CapEx and working capital. And as I'll come on and explain, that's through more optimized use of working capital and also building an interest income stream as well. So, As Steve's talked about the medium term targets, I hope this shows we're already delivering against those ambitions in FY24. So just moving then on to a bit more segmental detail. We've introduced here a five-year picture just to show really that we continue to grow out of COVID in terms of sales and gross profit. And you can see in the top chart, particularly shows the reinvigorated UK growth I was just talking about. In terms of UK revenue growth in year, that's obviously underpinned by both new space, but also conversion, which was up 250 basis points in the year. UK online was up, again, underpinned by ATV growth at 7.3%. And that's through optimization of search functionality on the website through the, as Steve said, the upgrade of Magento. And we've also seen an improving IPB picture over H2 as we deployed additional recommend functionality. European growth is underpinned by growth in both active unique customers alongside also improved customer frequency. Moving on to the gross profit, the margin in the UK is up 10 basis points. And so just to kind of talk through the constituent items of that 10 basis points. So first of all, we moved up progression of 70 basis points being own brand at 20 basis points. seeing some upside from the FY23 and early FY24 range review work that was undertaken at another 20 basis points. We've got improved supply terms from the kind of autumn 2022 annual review with suppliers, adds on another 10 basis points. And then we've got two new elements in the margin bridge relating to kind of service-based revenue. Firstly, the commercial marketing, which Steve's already touched on, adding 10 basis points. And then similarly, the new in-store service model, the example being real spooling there, adding on another 10 basis points. So that takes us up 70 basis points, but then is partially offset by higher out-of-season promotional activity in H2, reduced the margin by 30 basis points when trading was tougher, primarily driven by the weather, and higher levels of retail shrink in FY24, again, eroding by 30 basis points to leave us up at 10 basis points year-on-year against the sales growth of 9%. Europe progressed 410 basis points, and that was driven by range optimization and a more gross margin favorable mix. So the growth in both revenue and gross profit on a pound note basis to record levels demonstrates we continue to win market share, both in our core UK business, but also as we continue to build our European presence. Moving on to a bit more depth on EBITDA, and again, you can see here we've introduced a five-year picture to show that as well as continuing to grow sales and gross profit out of COVID, this has also resulted in a delivery of an increasingly robust and sustainable EBITDA return. UK EBITDA growth is over indexed against sales growth in both of the UK trading segments as set on the slide and that's a really important feature as we move forward against the medium term ambitions to make sure that our bottom line growth is over indexing against the top line growth both as discussed before both through the margin progression but also continuing to have a focus on leveraging on the fixed costs. And also, again, excluding the cyber claim, UK central overheads have reduced as a percentage of UK revenue, again, as we stay really focused on leveraging that cost base to support the growth in the business. In Europe, losses improved, as I said before, year on year. And the key measure for us being then how much of our group EBITDA. And we've reduced that by 1,800 basis points to 35.8. So continuing to make some good progress in there, both through the margin, as I've already talked about, but also through improving the variable operating costs, as well as reducing the fixed overheads within the business. So at group level, the growth in sales gross profit has been complemented by the careful cost management and a strong focus on leveraging the existing cost base to grow the EBITDA margin in the year and underpin a sustainable forward path for EBITDA towards our medium term objectives. And finally, just in the financial review section, just on cash flow. So alongside the strengthened EBITDA picture, we continue to generate cash, despite continuing to also invest in CapEx and working capital, particularly around new space. with the key generators within that cash being the increasingly efficient use of working capital, as well as, as I said before, building an interest income stream of around about half a million pounds in H2, which is negated in the bridge by the FRS16 interest charge. The 1 million of working capital generation is largely driven through stock efficiency with our stock holding at year end being 800,000 pounds lower, which actually when you adjust on a like flight basis for the new space impact is actually a 1.3 million pounds improvement year on year. And that's whilst at the same time improving the availability by circa 200 basis points year on year. So we've built sustainable improvement to working capital. You can see we also continue to deploy CapEx investment, most notably in FY24 in terms of new space for the two new stores and one refit. But included in the 2.6 in the bridge there, we've also got around 1.1 million of CapEx where we'll really see the return in FY25 in terms of the early commitment to our store rollout pounds for FY25 alongside the initial CapEx deployment on the automated packaging solution for the UK. So alongside the improved EBITDA picture, our strong cash management has delivered an even stronger balance sheet from which to execute our medium term objectives, as well as giving us a good position from which to deploy the surface liquidity to go beyond those medium term objectives.