Angling Direct PLC

Good morning, ladies and gentlemen, and welcome to the Angling Direct PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen. Please just 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 will publish those responses where it's appropriate to do so. And before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Angling Direct PLC. Steve, good morning, sir.

Good morning. Good morning, everybody. Welcome to Angling Direct's interim results for the year ended January 25. We'll take you through a short presentation and then take some questions later on and look to use the full hour if we can. we move on to our FYI, half year 25 overview. So this is the extract from the R&S that we published last week. I think thematically, continued strategic progress for us in the six months to July, margin and revenue progression and underpinned by some strong EBITDA growth outstripping our sales growth. Alongside that, some key operational changes, both in UK and Europe, which I'll cover as we go through the slides later on. Here we've set out a reminder of our purpose, our ambition and our medium term objectives. We set these objectives out around four and a half months ago for our final year results for January 24. And just a reminder of those six medium term objectives for those who've not seen these before. We've said that we'll deliver a UK business with 100 million of revenues in the medium term and associated with that 100 million pounds. The second objective is an adjusted EBITDA delivery of over six million pounds Underpinning that, we will create Europe's largest fishing club, MyAD, and leverage its value. We're a year on from starting that, and I'll cover in more detail later on how we're progressing. Fourthly, a sustainable European business. We're a couple of years into our European journey from in-country fulfillment, and we're starting to get increasing confidence that we can move that through to a sustainable business that isn't consuming capital within the overall group. Fifth, we've got a very strong balance sheet with some surplus liquidity. We have ambitions to deploy that liquidity to deliver earnings and revenues above the 6 million and the 100 million in the UK, respectively. And sixth, we do take our wider responsibilities very importantly. And again, we've made some strong progress in some of those areas, which I'll set out later on. Slide five, we've set out how we're tracking against those objectives for the first time in terms of the progress we've made in the first six months since we set out those objectives. The UK business on a flight path for 100 million, despite a very soggy start to the year with a wet first quarter of the year, six wettest on record, I believe. We've made some good progress in the UK, both in terms of our underlying business with growth from our like-for-like estate and digital business, alongside adding new space and accelerating the growth of that new space. We've set out for the first time where we believe we'll hit that 100 million target. And based on our delivery in the first six months, we believe that by financial year 28, we'll have achieved that 100 million pound target. Aligned with that, the 6 million earnings. So again, we've sort of delivered 12.7% increase in the EBITDA in the UK, outstripping the sales growth by about two times. When we put those two together, you know, with strengthening gross margins and leveraging our fixed cost space, we believe that sort of cocktail brings us to, again, on a flight path to financial year 28 for delivery of the 6 million. And again, that's the first time we've set out where we believe we're pacing to deliver those earnings my ad from a standing start in june last year we're now up to around 330 000 members and we continue to scale that out of the season at the end of september we were around 368 000 members and around 75 of our revenues are now being transacted through that sort of loyalty and repeat purchase scheme We're increasingly building insights from that. And we've got a flight path on how we develop that further. And I'll set that out over the page, some thoughts about how we do that further in the second half. Europe, you can see from the RAG status on there, we are making progress in Europe. We've reduced the like-for-like losses by about 20%, just over. And for the first time, we've reached a basket contribution, i.e. the cost of the product, the sales, less the cost of the products, less the variable costs of shipping, carriage, and colleague cost to picket. It's the first time we've moved that through to a positive contribution. We've opened our first store in Utrecht in the Netherlands to trial our omnichannel proposition. And that's 18 weeks since we opened that and that's continuing to scale and grow. We'll learn at pace from that. Deployment of liquidity. So at the half, we've got around 17 million pounds. Clearly, that is in excess of the liquidity the business needs to run in a way that deploys working capital in a sensible way. We have set out a strategy four and a half months ago that we will increasingly move into M&A to spend that surplus liquidity where those deals make sense and those deals will accrete the earnings above the 6 million and above the 100 million that we've set out in the first two boxes, first two objectives at the top of this slide. We made some good progress in the first half on that, completing three small scale acquisitions with a strengthening pipeline. And again, we'll continue to work on that and deliver on that in the second half of the year. We've also committed some additional capital in terms of opening an own brand only logistics facility up in the West Midlands. And again, we're looking at further CapEx projects in the second half, which Sam will cover later on in the deck. Finally, our six objectives about responsible employment. We're increasingly working with the Angling Trust where we're looking at water quality testing. We've done some early work in the first half of the year, put some publicity out around that, and we're trying to tighten our grip on contributing towards actually the health of the sport in terms of water quality and what it means for fish and fisheries. alongside that in our eye line as we roll out new space we are conscious of how much waste we potentially create and we're looking to beat the government target of five less than five percent to landfill and we've made a really strong start in the year with less than one percent of our waste going to landfill in the first half myad so for those who aren't familiar with what myad is myad is our sort of repeat purchase and loyalty scheme that we launched last june it it's a free to join membership scheme and it has a number of components around daily deals money can't buy prizes and my myad exclusive deals and bundles We are building out the offering and continue to see some good underlying metrics as a result of this scheme. So, for instance, you can see in the middle of the page there, 35% higher average transaction value for a MyAD customer. And indeed, that's underpinned by 27% higher items per basket. As we've annualized the June launch last year, we're getting increasing insights in terms of customer behavior. And our challenge as set out the bottom of the slide is to sort of in the second half of the year, develop our year round member benefits package alongside building some personalized offers that sit alongside that. So we can target individuals based on their buying and engagement behavior. Onto the business review. So again, there's some slides here setting out the sort of the key aspects of the business development in the first half. I won't cover every point on the slide. I'll sort of pick out the key highlights that I've not covered previously. So if we start with UK customer, sort of the bottom, if we step past my ad the bottom bullet there's something called shop the range technology that's a piece of technology we've built in store which is a tablet based technology that enables a store customer to get out the whole of our range that angling direct has to offer and have that delivered either in store or to their home the next day um you know traditionally in a store we'd range about six thousand skews you know our digital offer is well in excess of twenty thousand skews we've trialed that in one store uh late in the first half of the year and we've got plans to roll that out more widely as we take the learnings from looking at average transaction value customer engagement on on repeat purchase etc that's a modest capex commitment of around a hundred thousand pound that could see us enhance our customer baskets in store and take folks away from leaving the store and hitting their Google bar to transact digitally. UK retail, the middle block, the top bullet, the accelerated store openings is something I wanted to highlight. Historically, this business has done around two new locations a year. We see the pace of consolidation in this UK market increasing. There is wider competitive failure in terms of small one man, one site operations. We're looking to leverage that, deploy our working capital model, deploy our range, deploy our operational model and turn those catchments into a success. And we've done three acquisitions in the first half. one location which was an existing site where we simply took the lease from the landlord and then rearranged and refitted and one which was a greenfield space which has been the traditional model for the last three or four years of Anglin Direct. Over on the right hand side UK Digital What we're doing is increasingly using technology to enhance the sophistication of our digital bidding landscape. Amazon and Timu continue to push up the cost of digital marketing spend, and we've got to react to that with looking at more innovative and contemporary ways. of differentiating our bidding and differentiating the specificity of what we're prepared to bid for. We've made some modest investment in the first half of the year around £50,000 and we're seeing that sort of yielding us results that are maintaining our ability to bid and competitively acquire customers. Alongside that, we're deploying increasing technology on the actual website where conversion against that digital pay landscape is increasingly important, whereby if you've paid for the click, you need to actually leverage the traffic. Again, you'll see later on in the pack, there is some very good progression around conversion stats in the first half. And that's largely attributable to some technology, some on-site technology we've deployed around looking at also bought some recommended items. Into Europe. We continue to try and balance growth with reducing the losses. The competitive landscape remains as challenging. And again, it's displaying as a market the characteristics that the UK displayed around five years ago. Five years ago, the UK digital business was making margins less than 30% and incurring incremental losses. That was a result of predominantly pure play retailers with single site store operations looking to garner market share through deploying pricing that isn't sustainable for a number of the key brands. That's playing itself out in Europe now. And we're increasingly confident that the market will follow the course of the UK, whereby those who can deploy working capital discipline, operational discipline and pricing discipline will ultimately win. We made a number of other changes in Europe. One of the key operational changes is we have now secured a third party logistics operation for our parcel picking and shipping. That takes a rump of fixed cost out of our operation and gives us some flexibility in terms of the remain or progress decision in Europe as we look to learn from how we've deployed the omni-channel model with our first store in Utrecht. Onto the commercial leg, own brand. We've always talked in this business about own brand needing to play a larger role. We've been particularly successful this first half. We were braver with our ranging decisions. We were braver with our pricing decisions. And those have proved to be successful with own brand coming up considerably in terms of over 40% gross margin progression in terms of the pound notes it contributes year on year. Alongside that, we've used increasing data analytics around how we make our availability decisions and our ranging decisions. And as we've traded through the peak season, we've run with availability around 100 basis points above we've seen in the prior year. And that's largely due to the way that we're increasingly using that sophistication of data evaluation to drive our buying. And finally, on the right-hand side, communities and sustainability. One closest to my heart is around the water quality and how we ensure that the lifeblood of fisheries, the quality of the water is appropriate and sustainable. And as I said, we're working increasingly with the Angling Trust and looking to help over the 200 fishing clubs that are currently taking water samples and submitting those to the Environment Agency so we can get more contemporary data points and better understanding of

of where the challenges lie on that note i'll hand over to sam on the financial review morning everybody so just a summary slide to start off with here and i won't dwell on this one too long as we'll get into some more of the segmental detail on the next couple of slides But from a revenue perspective, as Steve said, revenue continues to grow and is pacing in line with delivering the medium-term objective in FY28. And that obviously sits alongside European sales being broadly flat, but that's as we focus on earnings accretive revenue streams in Europe. From an EBITDA perspective, again, strengthening EBITDA margins with EBITDA growth over indexing against sales growth at the rate we need to deliver the medium term objective of 6 million EBITDA. And the two key building blocks being the gross margin and continuing to leverage the cost base, both of which we'll come on to in more detail. But those two being the building blocks to delivering the 6 million in the UK in the medium term, we continue to make progress there. And the like-for-like European EBITDA loss has been improved 20% year on year. Again, focusing on those. Earnings are creative revenue streams, but also again, building towards a sustainable European business within the medium term. And then just finally on cash, net cash generation, H1 is down over 60% year on year as we accelerate the store rollout program and invest and commit capital in scaling both the capacity of our web operation and our own brand offering. So moving into a bit more of the segmental detail, starting with the UK. So H1 delivered UK revenue growth of 6.2. As Steve said, we had a stronger Q2 than Q1, with Q2 also being slightly dampened by the European Football Championships. And the store growth was primarily driven by new space with a light for light growth being underpinned by both footfall and average transaction value, which was underpinned by items per basket. Online in the UK, the growth was really underpinned by conversion as we continue to invest in technology, particularly around recommend functionality. And then that then resulted in the gross margin seeing 160 basis points of progression in the half year on year with five kind of key components in there. The first one being on own brand where the margin that's 50 basis points of the 160 bps. And we've taken a stronger position across a number of the key categories in there, which has helped us grow our overall gross profit on our own brand by 40% year on year. The second component being improved terms, adding on a further 50 basis points. And this just reflects the increasingly strong partnerships we're building with the supply chain and the key brands as we kind of, I guess, look to work more closely with a select group of suppliers. We've also got a 30 basis point contribution from lower promotional activity. Again, as we continue to optimize the stock file and manage the tail. We also continue to see some upside from the two new revenue streams we had last year in terms of commercial marketing and the in-store services such as real spooling and real servicing, which again, we'll look to continue to grow and build upon. And then finally, to complete the bridge, we've got a 10 basis point upside from lower levels of shrink, particularly in the retail business, which is really underpinned by the proactive action we took in the second half of last year and the first half of this year to reduce the impact we're seeing there with our shrink to sales ratio falling by about 25% in H1 versus last year's full year numbers. Moving on to Europe, European digital revenues were down 3.2%. Again, as we focus on those earnings accretive revenues, but Germany did as the biggest key target market in Europe did go forwards year on year and a half. We continue to optimize the range to get that cocktail of the gross margin and the variable costs around the carriage, the pick cost, and the advertising that then, as I say, kind of reduces those losses year on year. In terms of then the new store in Europe, after four full months of trading, as we sit here now with two of those in the half, the sales flight path continues to build, momentum month on month. We've got a strong strengthening footfall trend, but we continue to optimize the range in store to deliver the gross margins we need to make that store a success. Then just moving on to the EBITDA. So, again, starting in the UK, EBITDA growth at 12.7% continues to over-index against the sales growth at 6.2%. And this feature of this over-indexing is a real key building block in the medium-term objectives. And as I said before, this is really about continuing that margin progression and leveraging the cost base. So in the UK, we've managed to deliver the leverage, the cost-based leg, particularly through the central UK group overheads, which are broadly flat on a pound note, spend year on year, despite the increase in operational pace within the business. And then in the UK stores, the EBITDA progression does have some over indexing when you adjust for the timing impact of the new space. And that's really impacted by cost pressures facing the segment in terms of national living wage and premises costs with rent and energy being the standouts within premises costs year on year. And in the UK online business, it reflects the continued investment in technology that's underpinned the growth in the conversion, as well as the more competitive landscape we're seeing around advertising ratios. But overall, as I say, UK is over indexing EBITDA versus sales growth 100%. And that's the level we really need to achieve to deliver those medium term objectives. And as I say, we're pacing towards that FY28 level at the moment. So European losses, as well as reducing 20% on a like-for-like basis, have also reduced as a percentage of group EBITDA to 14.2% from 20.8% year-on-year. And obviously in there, the key driver being the contribution in terms of getting to the profitability of the basket, that has improved £100,000 year-on-year, as Steve said, to just get into that break-even position where it now starts to contribute towards a fixed overheads. And then finally onto cash. So as I said before, half one net cash generation was 1.3 million H1, which is down 2.2 million year on year. And that's really as we now start to invest more cash in delivering those medium term objectives in terms of the new space, as well as scaling capacity and fulfillment in a web business and our own offering. And so just to talk through then the key movements in the bridge below the bits in the blue dashed boxes. So you can see they've got a net working capital inflow of half a million in the first half. So in a steady state business with a summer working capital low, you'd expect about 3 million inflow at this point in the year. So against that frame of reference, there's kind of three standouts, which reduce the three down to the half a million. So first of all, there's an extra round about 1 million in new space in terms of the stock file associated with those. There's also an additional million pounds of timing impact where we've secured stock a bit earlier in the season than what we would normally would, just to make sure we've got that availability going into August and September, which is really underpin that growth we're seeing year on year in August and September. And then additionally, there's about a half a million pounds of extra stock on the balance sheet in terms of our own brands, which again has supported that 40% year-on-year growth in the own brand gross profit. Moving across then to net interest. So whilst it shows us a zero on here, we have got broadly double the amount of interest income in the half at about £300,000. But that's then netted off in this bridge against the IFRS 16 interest charge. And then finally in the blue bracket, in the blue box, sorry, you can then see the deployment of capital here into new space in terms of the six new stores, that being the three acquisitions in the UK, the two Greenfields in the UK and the Utrecht store, as well as then the deployment of CapEx into the automated packaging line, which will come on in the next few weeks here in the Norfolk Distribution Centre. So if you can see that we're committing investing cash then into the delivery of the medium term objectives.

Thanks, Sam. That takes us on to the remaining six months of FY25. What are our operational priorities? And again, over the next couple of slides, we've set out in detail what those priorities are. Just to give you a flavour of the key aspects. Firstly, UK customer and UK retail together. We are trialing at the moment some digital shelf edge technology, which enables us to price our shelf edges digitally without the need to deploy colleague labor to do that. That's got two aspects in terms of benefits. One is the living wage. It sort of increases and is set to increase again. And particularly in the most recent Labour manifesto was signposted towards £14 in the medium term. As a business, we believe we've got to get ahead of that. and reduce our dependency on labour to do tasks that can be automated. We're trialling three different technologies in three different stores currently and we're looking in the winter to make a decision on how that business case can be evaluated and whether we are therefore in a position to commit substantial capital into rolling that across the whole of our estate. And if you conflate that back with the UK customer leg, one of the benefits of being able to price all of our physical estate real time is we can then move to price optimization for our digital business. Currently, we're constrained digitally from changing our prices twice a week, which aligns with how we change our prices within our physical estate. a digital shelf edge capability would give us much more flexibility and the capability to leverage further third party data to enable us to change those prices real time to optimize margin and sales. On the right-hand side, UK Digital, Sam mentioned the top bullet. We have invested or committed over a seven-figure sum in terms of the automated packing machine for the UK. That has been delivered. It is physically here in the distribution centre in Norfolk today. Over the next few weeks, we are installing that and integrating that in our technology stack with a view to be able to operationalise that within November. and that should give us in excess of £200,000 per year EBITDA contribution from the deployment of that capital in FY26 and beyond. Over the page, as Sam talked about, we can remain focused on that balance in the growth agenda alongside delivering earnings that only contribute towards reducing losses and ultimately move the business into a profit trajectory. The store, we are continuing to learn at pace. We have got a stated strategy. We will not materially commit more capital to Europe beyond the current losses being incurred until we have a much clearer set of unit economics on the store and the digital business that give us the confidence to invest further in Europe. We remain attracted to Europe. It is a substantial addressable market. Germany, France and the Netherlands being three times the market of the UK. And as I mentioned earlier, the markets are increasingly displaying the characteristics of the market in the UK over around five years ago, whereby we've been able to sort of adapt and reshape the UK digital business. And now that's something of scale and contributing significantly to our group EBITDA. Finally, we're exploring to manage working capital, some dropship options with suppliers. We've got three or four suppliers right now who are eager to do that, and that enables us to, with confidence, range without taking the tail on any skews that subsequently prove not to be at the sales velocity we anticipated them to have. In the middle block, you know, commercial, as Sam mentioned, we are increasingly working with those partners who are more disciplined in terms of their capital allocation policy, in terms of how we see sustainable returns for both parties. And we're enjoying some increasingly sort of fruitful conversations around those where it can deliver value for both the supplier and Angling Direct. And on the right hand side, communities and sustainability, we are increasing our efforts around carbon reduction, around waste reduction. But again, water quality is something that we're going to sort of push to the top of the agenda and look to work on to deliver some real value and messages back into the market. Finally, that takes us on to the outlook statement. We were sort of modestly disappointed with our 7.6% in quarter two, the European Football Championships. One was hoping for England to get knocked out to turbocharge our sales again. We then moved into August and September and we're particularly pleased with the trading, 19.8% group progression in those remaining key weeks of the fishing season. And I think to underpin some of the decisions we've made around availability and ranging, That leaves us well-placed to invest in those projects. We've referred to the UK logistics facility in the West Midlands around Own Brand and also the automated packing solution, which will incur incremental one-off costs as we embed those in our operation. And those two factors together give us the confidence that we remain on point in terms of delivering our forecast revenues and earnings that we've stated in the market. Overall, beyond that, we're increasingly confident we've got a proposition in the UK market that resonates with customers. And we've got the sort of the colleagues and the operations to take advantage of that and grow that. And Europe remains a realistic market to take value from. And again, we're increasingly confident that market displays signs that follow the UK where we've successfully moved into a earnings accretive position. That concludes our formal presentation. We'll have a short break and then we'll move into Q&A.

Perfect, Steve, Sam, that's great. And thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. But just while the company takes a few moments just to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboard. Sam, Steve, we did receive a number of questions that were both pre-submitted ahead of today's event, as well as those that have made their way through during your presentation this morning as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that'd be great. Thank you.

Brilliant. Well, I'm going to take the first question, which is, please, can you explain why you are only comfortable meeting market expectations of FY25 EBITDA of 3.15 million, having delivered 2.8 million in H1 2025? Why are you expecting such weak second half margin performance? So I think we've already briefly touched on this, but just to, I guess, just to recap. So against our own internal planning, we'd want it to be a bit further ahead from an EBITDA perspective at the end of the half. So we need to make that up in the second half. And we'd also alongside that plan for some additional costs in the second half, both in terms of ongoing costs, such as the new own brand distribution center in the Midlands that will underpin the further development of our own brand offering. but then also some one-off incremental cost to establish both that new logistics capability but then also alongside the installation and and some of the adjustments we're making in the rat keith distribution center in norfolk around the automated packaging line to help scale the web business So our stronger trading over August and September is kind of helping, I guess, to give us a bit more confidence to go forward with some of those new investments alongside also then delivering the market guided financials. Next question is, you spent £740,000 on acquisitions in the first half. Please can you detail the multiples paid and the expected payback on this investment? Should we expect any further cash out due to deferred consideration stroke earnouts? How does this pay back compared to organic growth? So I don't think it'd be right if I get into talking about specific deals here, but essentially we've done all these deals being structured as trade and asset style deals where we bought stock and then a few kind of fixed assets alongside that and then paid some modest levels of goodwill. And when we paid goodwill, it's been linked to the pre-acquisition earnings of the business, like on a pre synergies, whether that be revenue, margin, cost base, whatever that looks like. So, just for context, collectively over those three deals, of the £740,000 headline we've paid, around 200 of that will relate to Goodwill with the majority being stock, as I say, a small level of purchases of assets in there. But in that stock, just again for context, there'd roughly be a sort of 80% crossover with our own stock file. In terms of any deferred consideration, if there are any elements of deferred consideration, I think firstly, it's just make clear they would be performance linked against a successful investment case and any deferred consideration is immaterial. So as we sit here today, based on those three acquisitions in the first half, there's only 20,000 pounds of deferred consideration available. And then just finally on the payback dynamic. So the payback dynamic of these acquisitions is similar to a greenfield site. So traditionally we've kind of talked about targeting a four year payback period, but with these particular acquisitions, what we've tried to do is sit those below that four years closer to a three and a half year horizon in terms of the payback period as we get up the curve a bit quicker in terms of the maturity of sales. The next question is, please, can you discuss the jumping capex spending in the first half and provide guidance for FY25? You've looked at a 3PL in Europe, which would help reduce the capex burden in the short term and reduce lease liabilities. Would you consider something similar in the UK? So again, I think we've probably covered some of this, but again, just to recap, So the capex spend in the first half is high year on year, primarily driven by the accelerated store rollout program with six new sites, as well as investment in scaling the capability, the web channel in terms of the automated packaging line. I think we'll see the pace of CapEx deployment continue into the second half. We've got more new stores targeted for the second half of the year. And obviously that we've committed to the additional own brand distribution center into the West Midlands, which has a modest CapEx requirement as well. So I think by the time we get to the end of the year, I think our guidance on sort of CapEx deployment for FY25 will be in the sort of 3.3 to 3.5 million pounds capex range. In terms of then just moving on to the element, the question about the 3PL in Europe. So that entering into that 3PL agreement wasn't about reducing the CapEx burden. That was primarily about giving us optionality in Europe as it removed this cliff edge we've talked about before in terms of having a break day in December 26, but having to either break or extend and commit to that in December 25. Whereas with the 3PL agreement now, it's given us that flexibility on what we do after that December 26 date. And then alongside that, giving us that optionality, it also gives us some P&L relief with the 3PL partner, in effect, subleasing some of our space through to that break from us to reduce our fixed overheads. But we also then get the added benefit of a more flexible cost base in terms of the pick and put away cost. So the next question is, when you look at the strong current trading, is it possible to disaggregate it into UK store, UK online, European performance? And a similar question is, you've got a strong start to half to 2025 at 20% growth. How much is Europe growing? So I think we're not going to kind of get into giving channel breakdowns of kind of, you know, one or two month periods. But I think we can say for context that both the UK and the Europe progressed significantly above the H1 performance in that August and September period where we delivered the 19.8% year-on-year sales. Next question is, it is pleasing to see stronger interest income year-on-year given the cash on the balance sheet and potentially lower interest rates. Please, can you discuss how you've worked to improve intra-period cash efficiency? So, Maximising our interest income remains a focus for us. We're not resting on our laurels while we've got cash on the balance sheet, but we are looking to optimise our cash and working capital deployment. But equally, we also, as I showed in the cash bridge earlier, we're also looking to deploy the working capital to support the trade in flight path, as we did in H1, where we went a bit earlier in terms of securing availability ahead of the seasonal peak across the summer months. which has then, as I said before, underpinned the strong trading period through August and September. And then alongside that, just to kind of give you a flavour of the underlying working capital efficiency, we have delivered all of that whilst improving stronger availability year on year. Steve referred to it earlier on in terms of roughly 100 basis points improvement year on year in terms of availability.

Okay, that takes us to, do you see an increasing or decreasing competition in Europe? I think, so take the Netherlands and Germany as our sort of two key focus markets. The pricing of key brands remains as volatile as we saw 12 months ago. The pricing of those key brands is not sustainable. And as I mentioned earlier, is very much replicating the behaviors in the UK around five years ago. The flip side of ever increasing cost base and sophistication is it puts even further pressure on the competitors to manage their working capital more carefully and deploy more resource into sort of advancing technology to mitigate some of the wider challenges in the business. Primarily, most of our competition is pure play digital business with a one or two store operation. And those dynamics that I've mentioned are putting increasing pressures on their operating margin and operating resilience. In the UK, we've seen substantial failure in terms of businesses in the first half of the year. And we're starting to see similar signs occurring in our key target markets of Netherlands and Germany. We remain confident those markets will align with how the UK has progressed and therefore still remains a key opportunity for the group to deliver beyond its medium term objectives in terms of revenue growth and longer term EBITDA performance. We have been increasingly clear that our capital deployment model is we will not deploy further capital into Europe until we have some further confidence around unit economics of the store and a payback model aligned with the UK where we look for a payback around four years. And once we see those and more stability in the price, it'll give us confidence to deploy further capital into Europe and take advantage of what we believe is a unique proposition in terms of both a physical retail estate alongside a digital retailing estate. We are of the belief that the omnichannel model is one that the customer ultimately will gravitate towards. And we think the UK market is increasingly demonstrating that to be the case.

The next question is, the prudent approach to growth in Europe is appreciated. Is it possible to discuss the mid-term growth ambitions in this region, disclose the growth rate in Germany and the Netherlands, presumably positive, but offset, but contraction in other regions? So in the first half, as I said before, we focused on earnings accretive growth. But the standout there is Germany has continued to grow despite the overall modest contraction in the digital business. There's been a little bit of contraction in the Netherlands, but the most meaningful reduction is in France. But that was planned for, I think we've talked about this before, where in France, we typically see less contribution in the basket. So if you think sales, less cost of goods sold, less the variable costs around advertising, pick cost, carriage, etc., you know after that we see france being the the weaker market mainly driven by the carriage ratio and the advertising ratio so that was kind of a lower priority territory for us in the current year so that that um uh reduction year on year in in the in the french revenue was planned for Obviously, delivering a positive contribution in Europe is a key building block of our medium term objectives in terms of building sustainable business in Europe. So Germany and the Netherlands will continue to be the focus areas of growth in that medium term horizon as we move forwards. Next question is administration costs increased by 8% in H1. Can a similar level of increase be expected in H2 compared with H2 in the previous year? So just broadly here, the 8% is roughly a sort of £900,000 increase on a pound note basis year on year. Now, roughly 50% of that will be volume driven by the variable cost of the basket in terms of, as I said before, the advertising ratio, the pick and put away cost, the carriage cost of doing the additional volume. And the other half is coming from particularly around the new space in terms of new investment there, but then alongside continuing to invest in the technology in the online business that has underpinned the conversion improvement. And then the more general inflationary cost pressures we're seeing in the business, particularly around payroll and national living wage. But then, as I said before, around premises costs with rent and energy being the standouts year on year. I think, again, just worth reiterating here that the central cost in terms of how we're managing the UK business have stayed flat year on year on a pound note basis, despite the increased organisational pace. In terms of how that will play out over H2, I think the sort of dynamic we've seen in the first half will pretty much roll forward into the second half. We've got ambitions to deliver more new space in the second half. We've also, you know, the pressure in terms of payroll costs, premises costs, you know, that looks to be pretty similar over H2 as to H1. So I think we'll broadly see a sort of similar dynamic across the two. Next question is, do you expect the improvement in gross margin to 36.7% seen in H1 to be maintained or increased in H2? So our current target is to broadly maintain the current level of gross margin over H2, which has some challenge in there, given the seasonality of the business. And that's both in terms of the mix of the basket we'll deliver over the out of season period as you kind of go into the winter months, where there's less consumables, which tends to be kind of, you know, slightly higher margin product. And also H2 kind of covers a period of generally high promotional activities such as Black November. So, you know, our current expectation is to try and kind of hold the current level of margin over the second half of the year. And then beyond that, I mean, as I said before, to continue to deliver EBITDA growth, that over-indexes the sales growth by roughly 100%. You know, the gross margin progression is going to be the key component alongside leveraging the cost base. So continuing the journey in terms of improving year-on-year improvement, gross margin is a key focus area for us as a business.

okay next question can extra measures be taken to further reduce product theft from stores so the answer on that is yes we've made some good progress in the first half i think you know that your double digit basis point reduction in terms of playing through to the gross margin progression you know there's further to come from that in the second half we are trialing other initiatives around body cameras for colleagues and also looking around how we how we distribute and book in our own brand product to reduce internal losses you know we have got a keen eye on that we remain sort of uh nimble in the way we're trading the stores ranging cameras all all of the the usual disciplines and we're increasingly talking to other retailers sort of outside of our sector around you know anything that they've learned other practices we should be deploying you know so we're we're we're seeing the impact on the business abate We don't believe that's because these are the wider macro impact is softening. We think that is a result of the actions we're taking and we're increasingly confident we can play some more of that through in the second half. There's a number of questions in the tab around cash and rather than take them all in turn, I think it's probably easier for me to just summarise where the group is in terms of its capital allocation policy and where it is in terms of its surplus liquidity. As I said earlier, four and a half months ago, we set out those medium term objectives. One of those medium terms objectives is to deploy that surplus liquidity. As I've mentioned earlier, we have and are building an increasingly sort of robust M&A pipeline. We have got sufficient in the pipeline that gives us confidence to deploy that surplus liquidity. But at the same time, we are cognizant of our screen valuation and the need to deploy that and or return that to shareholders if we're unable to execute that M&A. We don't believe as a board it's the right time for that inflection point in terms of returning capital to shareholders whilst we've got the strength of the M&A pipeline. Folks may have seen in our AGM we gave ourselves the capacity to have the capability to do a buyback if we believe it were the right thing to do and we remain sort of highly focused on at the point the M&A pipeline isn't robust, that we then need to return some value to shareholders. And in terms of someone, one of the questions is, is it special divvy or is it buyback? We haven't formed a view as a board yet on what the most appropriate mechanism is for returning that cash. Clearly, with the screen price around 38 pence, The buyback face value appears more attractive, but again, we'll retake that decision at the point that we get to a space where the M&A pipeline isn't robust. Final question, just around how do we view investments in the UK in terms of, you know, incremental Rocky contribution? There's three or four of those that go together. I think, you know, we do look at those around what is an incremental Rocky that is in the low 20%. How can we look at that cash return, you know, four-year payback? How does that play through to that 20% Rocky? We are increasingly fixated on that. As I said earlier, the UK packing machine is a million pound investment. We're looking to leverage. in excess of £200,000 of incremental value back to the group from the deployment of that. And that's increasingly the lens that Sam and the finance team are sort of presenting back to the board, those choices on investment. I think that concludes all of the questions. Thematically, I think I've covered most of the ones we're able to answer today. So thanks very much for all those questions. And I'll just hand back to the guys.

Perfect. Steve, Sam, that's great. Thank you very much indeed for being so generous with your time and addressing all of those questions that came in from investors. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended, just for you to review to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the platform. But Steve, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that'd be great.

Yeah, sure. I think what I want folks to take away from this morning is we are delivering on our UK agenda. We are increasingly seeing a consolidating market. We are the ones who are taking advantage of that consolidation and starting to deliver some compelling financials around the UK. And increasingly, Europe is becoming a market that's following the UK and that gives us optionality to deploy capital at the right time alongside that UK growth agenda. So overall, we believe we're well placed to deliver those medium term objectives and beyond as we move through the next six to 12 months.

Perfect, Steve. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really 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 would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.