Angling Direct trims guidance amid volatile recent trading

Fishing tackle and equipment retailer Angling Direct reported a 1.3% improvement in first-half group revenue on Wednesday, to £38.9m, while it trimmed its full-year expectations amid unprecedentedly volatile recent trading.

The AIM-traded firm said its store estate experienced another strong period of growth in the six months ended 31 July, with total store sales increasing 9.8% year-on-year, aided by a period free from Covid-19 restrictions, while like-for-like store sales increased by 4.6%.

Online sales decreased 7.9% to £17m against a strong first half comparative, but UK online sales at £15.3m remained 61% above pre-Covid levels.

In Europe, online sales grew 36.9%, with online sales to key European territories via its German, French and Dutch websites growing 55%.

The company said its gross margin decreased by 280 basis points, however, to 34.6%, as a result of “considered competitive trading” both in the UK and Europe, combined with “inevitable” cost price inflation, although it remained “comfortably above” historic levels.

Pre-IFRS 16 EBITDA tumbled 58.2% to £1.9m, which the board put down to the lack of prior-year £0.9m government Covid-19 support, and £0.5m in increased European start-up losses.

Operating cash flow remained positive at £2.4m, which was down from £5.8m a year earlier.

Angling Direct described its balance sheet as “strong”, with group net cash totalling £17.1m as at 31 July, down from £19.6m year-on-year.

The board said the firm was “well-capitalised” and “securely positioned” to meet its short-term challenges, as it remained focussed on gaining market share both in the UK and Europe, with the current uncertain consumer environment coupled with its strengths leading to a “significant opportunity” to gain market share in a weakening competitor landscape.

As a result, the company was planning to keep investing to drive market share growth “where prudent”, leveraging its market-leading position in the UK and strong balance sheet to ensure it was best placed competitively for the return of consumer confidence.

As flagged in its recent trading update, post-period end sales were impacted by “unusually hot” temperatures, which caused some fishery closures and led to sales in the peak trading month of August being down 7% on last year.

Total sales returned to modest year-on-year growth in September, but like many consumer-facing businesses, Angling Direct said it had recently seen “volatile, unprecedented and unpredictable” trading conditions both in-store and online, which were changing “significantly” week-by-week.

The general market outlook had deteriorated further in recent weeks, creating a “heightened degree of uncertainty”, and making short term forecasting extremely challenging.

Its board said it was still optimistic on the group’s long-term prospects, underpinned by its “leading” omni-channel proposition and strong balance sheet.

Due to the “challenging and highly volatile trading conditions, however, and the difficulty in short-term forecasting and trading, the board said it was “prudent” to reduce its expectations for both revenue and pre-IFRS 16 EBITDA for the 2023 financial year.

The directors said they were “confident” that revenue and EBITDA for the year ending 31 January would be no less than a respective £73.8m and £2.2m.

“Despite the uncertain macroeconomic environment, our strategy remains unchanged as we continue to focus on gaining market share both in the UK and Europe over the medium to long term,” said chief executive officer Andy Torrance.

“Sales in August were disrupted by the unusually hot weather in the UK and Europe.

“Despite trading improving in September, further adverse economic news flow and political uncertainty has resulted in volatile and unprecedented trading conditions which is making short-term forecasting challenging.

“As a result of these factors and the board's decision to continue its strategic investment, the board believes it is prudent to revise downwards its forecasts for 2023 accordingly.”

Torrance said the board was still “optimistic” about the long-term growth prospects of the group, and believed that continued strategic investment now would leave its best-placed competitively when consumer confidence returned.

“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.”

At 1040 BST, shares in Angling Direct were down 14.58% at 27.34p.

Reporting by Josh White at Sharecast.com.