Angling Direct Regulatory News (ANG)

14 May 2024

Angling Direct PLC

('Angling Direct', the 'Company' or the 'Group')

Final Results

Innovation and resilience driving continued sales growth across UK & Europe

Angling Direct PLC (AIM: ANG), the leading omni-channel specialist fishing tackle and equipment retailer, is pleased to announce its financial results for the twelve months ended 31 January 2024 (FY24).

Financial highlights

Operational highlights

Current trading and outlook

Medium-term financial objectives

We are pleased to set out our medium-term financial objectives reflecting our growth plans for the business as follows:

1 Includes £0.1m of third party marketplace income

2 Excluding the Reading store which hasn't materially traded in the period after it suffered a fire in the first week of February. Total like for like stores grew 1.1% including Reading.

3 Pre IFRS 2

Steve Crowe, CEO of Angling Direct, said:

"The last twelve months have seen Angling Direct further expand its market share and grow sales, despite the continued industry headwinds. Supported by our omni-channel business model, we are pleased to have achieved record UK revenues of £77.4m and delivered growth across our markets. This stellar performance reflects the dedication and exceptional customer service provided by Angling Direct colleagues.

Throughout the period, we have made good progress against our strategic objectives. Through a prudent and considered investment strategy, we have continued our store rollout plans in the UK and, for the first time, into mainland Europe. The opening of our store in Utrecht marks a significant milestone for Angling Direct, and we are pleased that our European customers can now participate in the full omni-channel proposition.

Now with over 220,000 members since launch in June 2022, our MyAD customer proposition bridges the gap between our physical stores and online offering, unlocking further marketing efficiencies across the business and giving our customers access to differentiated pricing, targeted offers and promotions. I am excited by the significant progress since the launch of MyAD and the opportunity this creates to build Europe's largest and most engaging fishing club, harnessing the passion of a thriving angling community.

The Board remains optimistic about the long-term growth prospects of the Group, and despite the challenges we have seen in consumer confidence, inflation, and sub-optimal weather, the angling market remains resilient. We are excited to set out our medium term objectives which outline our strategy of continued growth both in the UK and Europe in the years ahead. Our core objectives remain in place, and I am confident that with our agile business model and strong fundamentals, we are well positioned to navigate the period ahead as we fully capitalise on the significant opportunities available to us. Angling Direct has a compelling product and service offering for our passionate and loyal customer base, and it is with these foundations that I remain optimistic in the Group's outlook."

Investor Meet Company presentation - 20 May 2024

Management will provide a live presentation via the Investor Meet Company platform at 11.00 a.m. BST on 20 May. The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9.00 a.m. the day before the meeting or at any time during the live presentation. Investors can sign up to Investor Meet Company for free to meet Angling Direct plc via: https://www.investormeetcompany.com/angling-direct-plc/register-investor. Investors who already follow Angling Direct on the Investor Meet Company platform will automatically be invited.

For further information please contact:

About Angling Direct

Angling Direct is the leading omni-channel specialist fishing tackle retailer in the UK, with an established and growing presence in Europe. Headquartered in Norfolk UK, the Company sells fishing tackle products and related equipment through its network of approximately 50 UK retail stores, as well as through its leading digital platform (www.anglingdirect.co.uk) and the MyAD Fishing Club app. The Company has three further native language websites in its key European territories (www.anglingdirect.de, .fr, .nl), with orders fulfilled by its international distribution centre in The Netherlands.

Angling Direct's purpose is to inspire everyone to get out and enjoy an exceptional fishing experience, regardless of background or ability, in the great outdoors. Angling Direct's active digital channels and its 450 colleagues contribute to the Company's ethos of care for the wider community and the environment (www.anglingdirect.co.uk/sustainability). Angling Direct currently sells over 25,000 fishing tackle products from industry leading brands alongside its own brands 'Advanta', and entry level offering 'Discover'.

Chairman's Statement

Introduction

I am delighted to present my first Chair's statement having moved from my Chief Executive role in June 2023 following the Annual General Meeting. Angling Direct has once again achieved record sales, winning new customers attracted by the continued development of a market leading, contemporary, omni-channel consumer proposition. We are pleased to have achieved this performance despite ongoing pressure on consumer discretionary spend in a sustained inflationary environment.

Amid strong signs that fishing tackle markets in both the UK and Europe continue to consolidate, Angling Direct maintains its strategy of appropriately and prudently investing where the opportunity exists to increase market share. We remain focused on our strong purpose of 'Getting Everyone Fishing', as we believe everyone should have the opportunity to get out by the waterside and experience the proven wellbeing benefits of angling.

Staying true to our rigorous investment criteria, we progressed our UK store roll-out with the opening of two new stores in the year.

We maintained our considered and prudent approach to investing in our European business, with our focus on improving trading margins and operational efficiencies, while also achieving good growth and share gain in the key territories of this large and attractive market.

Digitally, the launch of MyAD, our new omni-channel customer loyalty scheme, exceeded our expectations with over 220,000 customer sign ups in its first year. MyAD is unique in our market, allowing customers to access a range of benefits and content, including differentiated pricing as well as increasingly targeted offers and promotions. We have made considerable effort to introduce and leverage retail AI technology into several areas of our offering including paid advertising, product recommendations and customer services.

Finally, I am delighted that we have our strong executive leadership team in place, as Steve Crowe, previously CFO, replaced me as CEO in June 2023 and Sam Copeman joined as the Group's new CFO in June, working alongside Steve. The Board is very pleased with how well Steve and Sam have transitioned into their new roles and look forward to them leading the Company through its next exciting phase of profitable growth.

Financial overview

The Group achieved a record revenue of £81.7m in the financial year to 31 January 2024 (2023: £74.1m, up 10.2%).

Store sales increased by 7.6% to £44.4m (2023 £41.3m) and online sales increased by 13.5% to £37.2m from £32.8m. Within this, UK online sales increased by 11.1% to £32.9m, achieving a return to growth. Significantly, UK online sales are now 62.8% above pre-Covid levels, illustrating the advancements we have made in that area of our business.

As a result of our continuing focus on realising operational efficiencies, and despite a number of headwinds facing the broader market, the Group delivered pre-IFRS 16 EBITDA of £2.7m (2023: £2.2m) and a pre-tax profit of £1.5m (2023: £0.7m). The Group ended the year with a strong balance sheet and net cash of £15.8m as at 31 January 2024 (2023: £14.1m).

People & community

One of our strong founding principles is that we should help improve the angling experience for everyone who engages with us. Our continued focus on 'Getting Everyone Fishing' is important to everyone at Angling Direct as we want to ensure that the Group has a positive impact on the sustainable health of angling as a pastime with all the associated benefits for our employees, suppliers, shareholders, local communities, and the environment.

Our success is in no small way due to the dedication and enthusiasm of our superb colleagues who share our vision and are passionate in delivering the very best experience to our angling community. Our outstanding colleagues are key to all we do, and we endeavour to support them with our ambition to be the best employer in our sector, not only in terms of reward but also in caring for wellbeing and fulfilment.

We continue to support the Angling Trust as lead sponsors for the "Get Fishing" campaign, which last year engaged over 27,000 new participants.

We endorse the wide-ranging evidence that fishing can be a great way to improve all round wellbeing and we support bodies set up to encourage and enable those with disabilities, of any kind, to benefit from fishing. We have been particularly focused on supporting Tackling Minds, a rapidly growing Community Interest Company focused on using fishing to help improve mental health.

Looking ahead

Since the year end, we have opened 3 stores in the UK and our first European store, being a mix of new stores as well as acquiring, smaller footprint existing fishing tackle stores in new catchments. This takes our total to 50 UK stores and one European store, with further UK openings in the pipeline through the year.

I am particularly pleased that we have opened our first store in Utrecht, the Netherlands, following the establishment of our European distribution centre which commenced deliveries in March 2022. The opening of this store is a significant milestone for Angling Direct, enabling our European customers to participate in the full Angling Direct omni-channel proposition. We know from our experience in the UK that our physical stores and amazing colleagues act as great ambassadors for our brand, and we expect the new store to complement our digital business within the EU.

For Angling Direct the last four years have seen a period of significant growth and a return to profitability. After a huge amount of organisational change, we are now firmly embedded as the clear UK market leader and have established a growing strategic presence within key markets in Europe. For consumers, the challenging economic environment will continue into this year, and we are not immune to greater than anticipated UK government policy driven cost inflation.

However, our strength lies in being laser focused on providing the very best for our customers, in the most cost-efficient way. Whilst rates of market consolidation are difficult to forecast, we anticipate that opportunities will arise for those businesses, such as Angling Direct, that are prepared and capable of seizing and delivering upon them. With our strong balance sheet and experienced management team, we are well placed and ready to progress our growth strategy by capitalising on such opportunities, benefiting our colleagues, our shareholders, the angling community, the wider society and, not least, the environment.

Board changes

Following my move to Chair and the aforementioned CEO and CFO changes in the year, I would like to offer my heartfelt thanks to our founder, Martyn Page, who stepped down from his role as Non-Executive Chairman to become a Non-Executive Director. As a Board and on behalf of the Group, we are delighted that Martyn has remained on the Board, continuing to offer wisdom and guidance, in turn helping the business to stay firmly on course with our strategic aims, our beliefs, purpose and culture. There were no other Non-Executive Director changes in the year, providing continuity to the board.

The current year has already got off to an exciting start and we look forward to updating shareholders on strategic progress as we continue to grow our market share in the UK and Europe, both in store and online.

Yours sincerely,

___________________________

Andy Torrance

Non-Executive Chairman

13 May 2024

Chief Executive's Review

'Focused on our clear purpose to inspire everyone to get out and enjoy an exceptional fishing experience, we are building Europe's most engaging fishing club through MyAD. Despite industry headwinds, we have taken market share and built further innovation and resilience into our business.'

Building Europe's Biggest Fishing Club

We have a strategy to become Europe's largest fishing club by inspiring and delighting increasing numbers of customers, focusing on sustainable profitable growth and enhancing local fishing communities. This will generate sustainable value for all stakeholders as we create a better world for anglers, fisheries, supply partners and all those who love the pastime. We are now the largest, and most trusted fishing retailer in the UK, and we continue to take share in a substantial retail category, underpinning resilience and further growth potential in our revenues.

The recent launch of our MyAD proposition brings together our complete offer under one banner, bridging the gap between our physical stores and our digital offering. MyAD launched in June 2023 as an omni-channel customer loyalty scheme, the cornerstone to building Europe's largest fishing club. MyAD reached a membership in excess of 220,000 at the period end. This unified positioning will significantly enhance our marketing efficiency and effectiveness across the business. The proposition has allowed us to harvest, for example, early stage insights on cross-channel customer behaviour and the impact of targeted customer offers and promotions. This gives us confidence around the development roadmap for MyAD in the coming year. It has reinforced our belief in the strategic benefits this can provide for Angling Direct and our partners, as well as our valued members.

We are the only UK angling business which has successfully brought together digital and retail services at scale, operating as the UK's market leading business with record in year UK revenues of £77.4m representing 9.0% growth and mid-teen UK market share.

Our European ambitions remain strong, with attractive addressable markets that are approximately three times the size of the UK market. We have made risk appropriate steps to trial an omni channel offer in the coming year in the Netherlands, with the signing of a retail lease in January 2024, in an existing angling catchment and the store now trading. The digital business continues to take share across all its key markets, balancing growth and profitability to ensure that, as markets recalibrate, Angling Direct is well placed to deliver value for all stakeholders.

As the UK market leader with a purpose of 'Getting Everyone Fishing', Angling Direct is uniquely placed to deliver further profitable growth both within the UK and the significant European fishing tackle markets as people of all backgrounds discover the restorative pleasure, challenge and wellbeing benefits of angling.

Omnichannel seamlessly connected for the customer

Our network of stores, across 47 UK sites at the period end, gives us scale and reach that brings us closer to anglers and enables us to offer greater flexibility and convenience than our competitors, under one consistent operating platform and brand. We will continue to invest in the opportunity for new angling stores in the UK, rolling out at pace in attractive catchments, particularly where we observe the need for an increasingly contemporary retail offer. During the year, we established two new catchments for the UK business (opening stores in Cardiff in February and Goole in April), and we continue to seek out new catchments which present the opportunity to deliver scalable revenues and accretive returns.

In our UK stores, we continued to optimise operating processes against the backdrop of increasing colleague and premises costs. We achieved stronger customer conversion (up 250 bps to 61.4%) through digital price and promotion labelling deployment, and continued refinement of store colleague hours against customer footfall intensity windows. Further work on a digitised central returns model also commenced in Q4.

We remain committed to utilising innovative contemporary digital technologies as part of providing our customers with market leading advice, engagement, service and inspiration. Our in-house web development team has continued to progressively deploy our digital customer journey functionality, to improve speed and resilience, alongside improved onsite search relevance. Q4 saw the team deploy new AI retail technology to drive improved product recommendations and subsequent conversion into the customer journey, seamlessly integrated with our digital paid marketing campaigns.

We will continue to leverage our category authority and expertise to lead choice, innovation and value, making it easier for anglers to access the best products and services. Our ongoing development of our own brand offer through the Advanta and the new entry level Discover brands provides a key area of competitive advantage and supply resilience. We will continue to focus on cash generation from these brands, positioning them where supply partners' alternative products have margins which undervalues their products or there is inconsistency of supply. Own brands gross profit grew 16.0% in FY24, with further substantial headroom for development in the coming year.

Consumer headwinds and inflationary cost pressures for suppliers and competitors have made trading conditions increasingly volatile. We remain agile in our trading, continuing to balance the trajectory of taking further market share against maintaining resilient gross margins. In addition, in FY24 we developed two new revenue streams: in-store services (reel spooling) and income from selling digital and physical promotional space for our brand partners. Further opportunities exist in FY25. The UK business is demonstrating success with revenue increasing by 9.0% while improving bought in margins by 40 bps.

Both our UK and European distribution centres continue to explore and test improved ways of operating. Despite strong wage and energy headwinds, both operations delivered carriage and colleague ratios below FY23.

Our medium-term objectives - on a positive journey to deliver sustainable value for shareholders

We continue to scale the Group, growing the UK business at pace, with the medium-term target of growing to £100m revenue and earnings in excess of £6m now within sight. The European business continues to scale, balancing the longer-term opportunity against the current market economics. Our medium-term priority here is to move the European business through the early stages of its development to break-even.

Our Group EBITDA ratio increased 30 bps to 3.3%, with the UK EBITDA growth of 15.6%[1] over indexing against its sales growth at 9.0% and the European EBITDA losses improving as a ratio of Group EBITDA by c1800 bps to 35.9%.

The UK business is starting to demonstrate both progressive gross margins, which have evolved from 31.2% in FY20 to 35.4% in FY24 and leveraging the UK Group central fixed cost base. Both these facets represent clear opportunities for further value creation.

Macro headwinds on market pricing (driven by faltering competition) and store theft were greater challenges than anticipated in FY24, presenting real opportunity for improvements in FY25 and beyond. We continue to adapt trading protocols to manage risks around increased levels of theft, an issue affecting the whole retail sector as reported elsewhere. The stores suffered £0.5m of shrinkage in the year (FY23: £0.3m); as a ratio of UK sales this represents a 30 bps drag on the UK EBITDA margin.

The Group generated positive cashflows both at an operating performance level and post investment of further capital deployment. Operating cash flow increased £6.5m against the prior year of £1.5m. Capital deployment increased in the year to £2.9m as we sought to accelerate activities that would drive enhanced EBITDA metrics for the Group in FY25.

As a result of our strong cash management, the Board remains focused on evaluating and delivering opportunities to drive returns beyond our medium-term targets by deploying surplus funds and accelerating our organic and M&A growth strategy. The investment of surplus funds would be weighted towards the UK business. Given the current market backdrop, we are seeing an increased pipeline of relevant M&A opportunities, however, in many cases vendor pricing expectations are incompatible with our overriding objective of ensuring that deployment of surplus funds is value accretive for our shareholders.

Growth opportunities

European markets

Our clear strategy is to become Europe's first choice fishing club through which all anglers can shop with confidence, seek advice, and be inspired.

In the period we continued to develop our European business, underpinned by our belief in the clear opportunity to establish a market leading, contemporary, omni-channel proposition in mainland Europe, significantly growing our addressable market. We were pleased to identify and sign the lease for our first store in mainland Europe, in the Netherlands in January. This followed a thorough search for a suitable site to act as a test-case for our omni-channel model which is designed to enhance returns for all stakeholders.

Overall, the European market, due to its significant size and fragmented nature, remains very attractive to Angling Direct in order to significantly expand its addressable market and develop a significantly larger business over the long term. The Board believes that our omni-channel customer offering is the appropriate model to deliver profitable growth.

The European consumer landscape is currently more uncertain than the UK with intense pricing competition continuing. The Group will continue to focus on margin discipline and adopting a prudent approach to developing both the existing digital business and an adaptable physical trading presence in Europe in light of the prevailing conditions. Key areas of focus include optimising ranging, marketing and pricing strategies, with our work to date in these areas resulting in year-on-year improvements in the gross and EBITDA margins by +410 bps and +1550 bps respectively. Whilst the competitive market is creating opportunity for the Group, we will keep EU trading progress under continual evaluation and, ahead of any potential significant cash investment, maintain our rigorous review of the likely returns in this area of the business. In summary, we believe that the current intense levels of price competition are unsustainable and will create opportunity for the Group alongside a disciplined approach to expansion. We remain confident in the significant longer term growth opportunity.

UK markets

The MyAD fishing club and insight this brings will continue to be developed to support both suppliers and customers, and ultimately to deliver incremental shareholder value.

We remain confident the UK has over 80 catchments which can be served by Angling Direct and in H2 commenced the search programme for the "smaller" store format. More latterly in the year, elements of the market started to exhibit increasing levels of distress with a number of single premises retailers shutting their doors. This presents opportunity for the Group, as evidenced by two store acquisitions completing in February 2024 and April 2024 respectively. UK store catchments of scale offer the ability for the Group to deliver attractive returns on capital and leverage the Group's UK cost base.

Our own brand product development has gained momentum during the year, and we see increased opportunities for broadening this range further, including through potential new brand acquisitions, as we deploy further capital into the UK market.

Our values underpin how we operate - maintaining our commitment to a sustainable future

Our colleagues remain the face of Angling Direct to our customers and are key to delivering an excellent service, both in store and online. They also play an important role in the angling community. We differentiate ourselves by providing expert help, trusted advice and inspiration for customers to get the most from their fishing.

As the exclusive retail sponsors of the Angling Trust's Get Fishing campaign, designed to attract new and lapsed anglers through a bankside coaching collaboration with Sport England and the Environment Agency, we are delighted that the programme reached over 27,000 individuals through 1,500 events during 2023. The campaign's digital communications had a reach of over 3m, all sign-posting the collaboration with Angling Direct. We continue to work closely with the Angling Trust to improve this reach and attract and retain anglers through tailored marketing journeys and product offers. Our ambition remains to support the health of the pastime and industry through collaboration. 

Coarse fishing licence sales remain broadly flat against those of the pre COVID landscape but with over 20% increases in young people and disabled licence sales pointing to increasing engagement from people new to the pastime.

Underpinned by our belief in the general wellbeing benefits of fishing, we are very supportive of moves to include fishing as part of a programme for NHS social prescribing. Working with Anglia Ruskin University (ARU) we have previously co-funded significant research in this area, the resultant data having now been peer reviewed and published, further raising awareness of not just the health benefits of angling but also the need to broadly invest in order to improve access for more people to fish.

We continue to work closely with Tackling Minds, a pioneering mental health organisation which uses fishing as therapy. We promote, sell and fulfill their merchandise through 14 of our physical stores as well as through our webstore with all proceeds being returned to Tackling Minds. During the period this returned £26k to Tackling Minds.

We have refreshed our approach to developing a culture where "everybody can contribute", aligned with our objective to become the leading employer within our market. We have increased the focus on our annual leadership survey, driving clear action plans from leaders with the primary focus being on driving one team with the opportunity to all win together. In addition, we have introduced "benefits statements for all store colleagues" so we mutually reflect on the total value of the colleague offer and continued to offer additional well-being days for all colleagues over and above historic annual leave entitlements.

We continued to extend our social media and YouTube reach. In the period, our YouTube subscribers exceeded 60,000 for the first time. We have seen particular success with our "Masterclass" and 'how to' style, 'Quick Bites' skills development features. Building on our inclusive approach, we have featured various articles with colleagues of a broad range of ages, genders, fishing abilities and disciplines, designed to appeal to an ever more diverse customer base.

We take our ESG responsibilities seriously and that extends to ensuring Angling Direct is continually working towards enhancing sustainable business practices across the areas of environmental protection, economic viability, and social diversity.

Current trading, this year's road map and beyond

We have a clear ambition to continue to scale the UK business in the next 12 months and beyond. Our MyAD proposition will continue to take market share through leveraging our physical and digital infrastructure to serve new and existing customers as market consolidation reduces the number of other retail outlets in the market. Alongside this we will increase the pace of our UK physical estate roll out to acquire existing retailers or reach new unserved catchments where we believe we can make accretive returns. The UK digital business will continue with its journey, accessing and developing new retail AI technologies to maintain its competitive advantage.

In Europe we will continue to responsibly grow our digital business, balancing ambition in a highly attractive addressable market, set against the current softer market conditions. Alongside this we will look to learn at pace from our first European store, to be well placed ahead of the FY25/26 fishing season to evaluate further roll out if appropriate.

Against these ambitions in Q1 the overall Group grew revenue 4.0%. Two new UK trading locations have been secured through acquisition and opened in FY25 thus far, alongside opening in one new catchment. In addition, we have signed an agreement with a leading UK retailer to trial retail space within its existing estate where it is mutually beneficial to both parties.

In Europe, the Netherlands store has commenced trading in May 2024, giving us the opportunity to trial and learn about the omni-channel model in Europe.

We continue to focus on gross margin development, and at the same time, our operational grip continues to mitigate ongoing cost headwinds.

With significant cash on the balance sheet, the Group will continue to strategically invest in UK market share gains, scaling the Angling Direct own brand opportunity and operational efficiencies. In Q4 FY24, the UK business committed to a seven-figure capital investment in an automated UK packaging solution, to drive further efficiencies and reduce exposure to further significant living wage inflation.

The changing competitive landscape in the UK presents us with the opportunity to deploy capital, take market share and reduce surplus liquidity. Vendor expectations on valuation and timing continue to be a persistent challenge to our M&A strategy, however the Board remains committed to delivering growth while retaining both strong liquidity and a robust balance sheet.

We remain vigilant to the external headwinds facing the sector, including inflationary pressures, and believe that our experienced management team and agile business model position us well to navigate any challenges in the period ahead as we fully capitalise on the significant opportunity available to us in the UK and European markets.

With the continued support of our outstanding colleagues, I look forward to sharing further success with shareholders through 2024 and beyond.

___________________________

Steve Crowe

Executive Director and Chief Executive Officer

13 May 2024

Chief Financial Officer's statement

Continuing to deliver record revenues, strengthening EBITDA margins and generating cash to execute our strategy

The Group has continued to deliver on its strategic priorities throughout FY24, despite the competitive pricing environment, the challenging consumer landscape, increased cost headwinds facing the business and the weather impact on angling conditions in H2 of FY24. The Group delivered record revenues, strengthened EBITDA margins and enhanced its strong balance sheet and liquidity position. The UK financial performance continued to underpin the investment in Europe. The Group remains well positioned to capitalise on opportunities as further market consolidation occurs and a more favourable consumer dynamic returns.

Financial highlights

In FY24 the Group delivered record revenues, with 10.2% growth to £81.7m (FY23: £74.1m). This was delivered in the UK, both online and within the store portfolio, in terms of both the existing store footprint and the new space effect of new and prior year store openings. This was set alongside growth in the second full year of trading in Europe from the distribution centre in the Netherlands.

Pre-IFRS16 EBITDA grew 21.0% to £2.7m (FY23: £2.2m) which equates to 36.9% growth on a comparable basis, when excluding the cyber security insurance proceeds reported in FY23 that related to an FY22 event. This performance was underpinned by margin progression through improved own brand customer engagement, upside from the FY23 range review driven by supplier mix, improving supplier terms and the roll out of new revenue streams in terms of both in-store services (e.g. spooling) and commercial marketing. This was then partially eroded through higher levels of retail shrinkage and store theft (consistent with the wider retail industry news flow) and higher out of season promotional activity in H2. The EBITDA growth was also supported by a number of operational initiatives and efficiencies delivered within the cost base. Profit before tax grew 126.8%, underpinned by the EBITDA growth as well as the higher interest income, as cash balances are optimised in the higher interest rate environment.

The discussion of our financial performance and position in this section is primarily on an IFRS 16 basis for all years presented. We have also included an analysis of pre- IFRS 16 EBITDA as an alternative performance measure that we consider as a key measurement of performance internally as well as within our covering Broker's market forecasts.

Note 6 to the consolidated financial statements provides more information and reconciliations relating to EBITDA on both a pre and post IFRS 16 basis. An explanation of the difference between the reported operating profit figure and adjusted EBITDA is shown below:

Adjusted financial measures are defined in the Annual Report and reconciled to the financial measures defined by International Financial Reporting Standards ("IFRS"). Management uses EBITDA on a pre IFRS16 basis for assessing the financial performance of the Group. These terms are not defined by IFRS and therefore may not be directly comparable with other companies adjusted profit measures.

Another year of revenue growth

Revenue grew 10.2% year on year, with the UK business growing at 9.0% and the European business growing at 36.3%.

UK store revenues were resilient and rose 7.6% to £44.4m, underpinned by stronger conversion and new store openings (Cardiff in February and Goole in April), increasing the Group's store footprint from 45 to 47. These new stores, alongside those stores opened in FY23, contributed £3.6m of revenue in the year. Like for like store revenue was £40.7m[2], representing 3.1% growth underpinned by improved conversion, and demonstrating strength against FY23 where the growth rate was flat. UK online revenue increased 11.1% to £32.9m driven by strong average transaction value growth. The UK business also did not benefit from any inflationary tailwinds, with this broadly flat year on year. Overall the UK business delivered 60.6% growth versus the pre-Covid FY20 year, with further scope for expansion.

The European business continued to be a purely online offering during FY24, based from our European distribution centre in The Netherlands. This delivered revenue growth of 36.3% to £4.3m, with the Group continuing to focus on European territories with the market size to deliver both strong revenue growth and promising levels of profitability. Our key territories of Germany, France, and The Netherlands increased revenue year on year by 40.0% and these territories now represent 96.9% of total international revenue (FY23: 94.3% and FY22: 84.4%). These European markets were materially impacted by the competitive pricing environment and the challenging consumer landscape in FY24, so from a medium-term upside perspective these markets remain attractive as they normalise.

Gross profit

Total gross profit increased by 10.5% to £28.5m (FY23: £25.8m). Total gross margin increased by 10 bps to 34.9% (FY23: 34.8%).

In the UK, gross margins increased by 10 bps to 35.4%. This progression was delivered through: improved own brand customer engagement; upside from FY23 range review driven by supplier mix, improving supplier terms, and the roll out of new revenue streams in terms of both in-store services (e.g. spooling) and commercial marketing. This was then partially eroded through higher levels of retail shrinkage and store theft, consistent with the wider retail industry news flow, and higher out of season promotional activity in H2. In Europe, the gross margin improved by 410 bps to 27.4%, primarily driven by range optimisation and mix.

Own brand product ranges (Advanta, alongside the new entry level Discover brand introduced in FY24) contributed 8.8% (FY23 8.3%) of total gross profit, £2.5m, during the year (FY23: £2.1m). This was an increase of 16.0% on the prior year and over indexed against total gross profit growth (10.7%) by 540 bps.

Other income

The Reading store did not materially trade in the period after it suffered a fire in the first week of February 2023. This was an insured risk and the Group has received payments on account in respect of the insurance policies which are reflected in the accounts along with a prudent provision for the remaining amounts, as the claim position is not yet finalised.

FY23 includes insurance proceeds in respect of the malicious cyber-attack during Q4 FY22 that was subject to an insurance claim with the Group's insurers, successfully settled in FY23 (FY23: £0.3m).

Administrative expenses

Total administrative expenses increased by 9.1% to £23.7m (FY23: £21.7m) compared to a 10.2% increase in revenue.

In the UK, head office administrative expenses increased 6.7% year, excluding cyber income recognised in FY23 but relating to an FY22 event, against UK revenue growth at 9.0%, as the Group continued to challenge itself to ensure its growth leveraged its central fixed cost base. This represented 6.8% as a percentage of revenue; a 20 bps improvement year on year. In UK retail, administrative expenses increased by £0.5m, of which £0.4m relates to the investment timing of new space and increased energy costs. In UK online, administrative expenses increased by £0.7m of which over £0.6m relates to variable costs that flex with revenue.

In Europe, administrative expenses have stayed broadly flat despite the 36.3% increase in revenue, as we continue to leverage the existing cost base while climbing the growth curve.

Distribution expenses

Total distribution expenses increased by 6.1% to £3.5m (FY23: £3.3m) compared to a 10.2% increase in revenue. These costs are variable based on revenue so highlight some of the strong cost focus in the year, with the UK improving by 30 bps as a percentage of revenue. Europe costs also had a slight reduction as a percentage of revenue (20 bps).

Segmental Analysis

The UK stores segment delivered pre-IFRS16 EBITDA growth of 9.1% (£0.5m), over indexing against revenue growth of 7.6% (£3.1m), including the EBITDA drag of the new space effect as it builds up to maturity. This highlights the progress in the year beyond the headline revenue growth, in terms of the gross profit and cost base outturn, despite the retail shrinkage and cost headwinds and continuing to invest in growth.

The UK online segment delivered pre-IFRS16 EBITDA growth of 11.9% (£0.4m), also over indexing against revenue growth of 11.1% (£3.3m). This again highlights the progress in the year beyond the headline revenue growth in terms of the gross profit and cost base outturn, despite the cost headwinds and continuing to invest in growth..

The European segment delivered revenue growth of £1.1m (36.3%) and pre-IFRS16 EBITDA growth of £0.2m, reducing the EBITDA losses by 19.3% to -£1.0m. This highlights the progress in the margin and the leveraging of the cost base as we continue to prudently grow the European business. Overall, this resulted in the European pre-IFRS16 EBITDA losses improving as a percentage of Group EBITDA by c1,800 bps to 35.9%.

The UK head office segment saw a modest decrease in pre-IFRS EBITDA of £0.3m (5.0%), excluding the £0.3m FY22 cyber claim income recognised in FY23 that related to an FY22 event. As set out above, this is against the backdrop of UK revenue growth at 9.0%, as the Group continued to challenge itself to ensure its growth leveraged its central fixed cost base. To demonstrate the progress, this represented 6.8% of revenue, a 20 bps improvement year on year.

Profit before tax and EBITDA

Profit before tax increased 126.8% to £1.5m (FY23: £0.7m) with the ratio to revenue increasing to 1.9% from 0.9% in FY23, gross margin representing 0.1% of the movement, the cost base 0.4% and increased interest income 0.5% (from £0.1m to £0.5m).

Post IFRS 16 EBITDA increased 16.7% to £5.3m (FY23: £4.6m) and as a ratio of revenue improved to by 30 bps to 6.5% (FY23: 6.2%). When excluding the £0.3m cyber security insurance proceeds reported in FY23, but relating to an FY22 event, the EBITDA growth improved to 23.7% and as a ratio of revenue grew 70 bps to 6.5% (FY23: 5.8%).

On a pre IFRS 16 basis, EBITDA increased 21.0% to £2.7m (FY23: £2.2m) and as a ratio of revenue improved to by 30 bps to 3.3% (FY23: 3.0%). When excluding the £0.3m cyber security insurance proceeds reported in FY23, but relating to an FY22 event, the EBITDA growth improved to 36.9% and as a ratio of revenue grew 60 bps to 3.3% (FY23: 2.7%).

Tax

The Group's effective tax rate was 19.7% (FY23: 19.4%). A reconciliation of the expected tax charge at the standard rate to the actual charge is shown below. All the Group's revenues and the majority of its expenses are all subject to corporation tax. Tax relief for some expenditure, mainly unapproved share options is received over a longer period than that for which the costs are charged to the financial statements. Headline corporation tax rates in the UK (c24% for the full year, 19% to 31 March 2023, then 25% for the remainder of FY24) and the Netherlands (25.8%) are comparable and therefore no material difference arises from the differential in headline corporation tax rates.

Returns and dividends

Basic earnings per share ('EPS') were 1.58p (FY23: 0.70p) increasing 125.7% year on year, comparable with the rate of increase in profit before tax. The lower diluted earnings per share reflects the current LTIP share options in issue which would dilute the basic earnings per share.

There were no dividends paid, recommended, or declared during the current and prior financial year. As discussed in the Directors' report, the Group is focused on delivering a strategy of profitable growth and will reinvest all surplus cash resources back into the business, and continue to evaluate accretive growth opportunities, including M&A activity. Accordingly, in the short term, the Directors do not recommend a dividend payment to be distributed for the year ended 31 January 2024. The dividend policy will be kept under review as strategic expansion plans progress.

Statement of financial position 

The consolidated statement of financial position remains robust. As at 31 January 2024 the Group had a net asset position of £38.5m (FY23: £37.3m) and a net current asset position of £24.3m (FY23: £23.7m). The Group includes £0.3m of net assets and liabilities of its wholly owned subsidiary ADNL B.V.

The Group continued to have no external borrowing as at the reporting date and closed FY24 with a cash and cash equivalents position of £15.8m (FY23: £14.1m). Net debt (representing the Group's IFRS16 lease liabilities less the cash position as at the reporting date) decreased to (£4.2m) from (£2.6m) in FY23, (£0.0m) reflecting the broadly flat (+£20k) lease obligations in the UK stores with the remainder largely reflecting the improved working capital position (also see the statement of cashflows section below).

The table below shows the key components of the statement of financial position. Property, plant and equipment grew by £1.2m with the continued investment in the store portfolio, notably with two new stores in the year (Goole and Cardiff) and one re-fit (Guildford). Right of use assets (ROU) have reduced modestly by £0.2m, with the two new stores being added into the estate alongside the new store in Utrecht (lease signed in January 2024 and opened in May 2024) with the remaining movement including new leases in Guildford (plus early exit of the previous lease), Lincoln and Chelmsford. Offsetting this growth in the gross ROU asset, the depreciation charge grew to £2.1m (FY23: £2.0m). The Group continues to evaluate its dilapidation obligations and associated restoration provision for its growing physical store and distribution centre footprint. The average length of lease remaining for the Group has reduced to 5.1 years (FY23: 5.6 years). Additional investment in our software and IT platforms of £0.3m was largely offset by a corresponding depreciation charge as the business reaches a relative level of maturity in its investment profile. Working capital improved by £1.0m, underpinned by stock levels reducing £0.8m despite the additional new space impact (£0.5m, includes some stock build for Cannock, not opened until FY25), reflecting a comparable £1.3m improvement year on year driven by further improvements in our stock ranging and fulfilment processes. The stock holding in the European distribution centre remained broadly flat. Stock turn for the Group marginally increased to 2.9x from 2.8x with a higher year on year stock, particularly over H1, due to the timing of forward orders and securing availability in the seasonal peak. Similarly, stock turn for the UK modestly increased to 3.1x from 3.0x.

Cashflow and funding

During FY24 the Group increased its cash generated from operating activities increased by £5.0m to £6.5m (FY23: £1.5m). Operating cash generation was improved as a result of increased profit before tax as set out above (£0.8m), lower tax (£0.6m) and a year on year working capital inflow improvement (£3.4m).

The lower tax payments (£0.6m) were driven by a £0.5m UK tax payment in FY23 that was made up of the FY22 tax due (£0.4m) and a single quarterly payment on account that was made towards FY24 (£0.1m). The business had no tax to pay in respect of the FY23 year (taxable losses) so it fell outside of the quarterly payment regime and as such the quarterly payment on account was refunded in FY24 (£0.1m).

In FY23 the working capital outflow was £2.4m as a result of higher stock (£1.5m - driven by new space and the initial investment into the European distribution centre) and lower creditors (£0.9m) as more stock paid for at year end driven by supplier mix. In FY24 this trend reversed with a working capital inflow of £1.0m driven by lower stock at year end (£0.9m, as set out above despite additional new space).

The Group has pursued its growth strategy by continuing to deploy available cash resources into further development of our e-commerce platforms both in the UK and internationally, alongside investment in our technology and inventory management systems, with the Group investing £0.3m in FY24. The Group also deployed £2.5m on property plant and equipment, largely reflected the continued investment in the retail estate (as set out above).

Total cash generated in the period was £1.7m (FY23: £2.5m cash utilised). 

__________________________

Sam Copeman

Chief Financial Officer

13 May 2024

Consolidated statement of profit or loss and other comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

1. Basis of preparation

These financial statements have been prepared in accordance with UK adopted international accounting standards.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 January 2024 and 31 January 2023. Statutory accounts for the years ended 31 January 2024 and 31 January 2023 have been reported on by the Independent Auditors. The Independent Auditors report on the Annual Report and Financial Statements for the years ended 31 January 2024 and 31 January 2023 is unqualified.

Statutory accounts for the year ended 31 January 2023 have been filed with the Registrar of Companies. The statutory accounts of the year ended 31 January 2024 will be delivered to the Registrar of Companies in due course.

2. Going concern including liquidity

The Group has considerable financial resources together with long-standing relationships with a number of key suppliers and an established reputation in the retail sector across the UK and Europe.

The Directors have considered the Group's growth prospects in the period to 31 January 2026 based on its customer proposition and online offering in the UK and Europe and concluded that potential growth rates remain strong. The Group has no external finance outside of its right-of-use lease liabilities. The Group has conducted various stress tests, none of which resulted in a change to the assessment of the Group as a going concern.

In making this judgement, the Directors have reviewed the future viability and going concern position of the Group for the foreseeable future.

The Group's policy is to ensure that it has sufficient facilities to cover its future funding requirements. At 31 January 2024, the Group had cash and cash equivalents of £15.8m (2023: £14.1m). This significant headroom has been factored into the Directors' going concern assessment.

Having duly considered all of these factors and having reviewed the forecasts for the coming year, the Directors have a reasonable expectation that the Group has adequate resources to continue trading for the foreseeable future, and as such continue to adopt the going concern basis of accounting in preparing the financial statements.

3. Segmental reporting

 Segment information is presented in respect of the Group's operating segments, based on the Group's management and internal reporting structure, and monitored by the Group's Chief Operating Decision Maker (CODM).

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly own brand stock in transit from the manufacturers, group cash and cash equivalents, taxation related assets and liabilities, centralised support functions salary and premises costs, and government grant income.

Operating segments

Management has made a judgement that there are three operating segments (Stores, UK Online and Europe Online). The business operated predominantly in the UK, also operating three native language web sites for Germany, France and the Netherlands, being the European segment. 

Each of these operating segments is managed separately as each segment requires different specialisms, marketing approaches and resources. Head Office includes costs relating to the employees, property and other overhead costs associated with the centralised support functions.

Where the customer contract is fulfilled by an operating segment other than the segment to which the customer order was placed, the revenue is recognised in the operating segment to which the order originates, and the profit attributable to that transaction is recognised in the operating segment fulfilling the order. In 2024, Revenue of £683,000 (2023: £937,000) was recognised in the UK Online and fulfilled by the Stores, and profit of £44,000 (2023: £38,000) was transferred to the Stores from the UK Online segment.

The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation) pre IFRS 16. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements, save for IFRS 16. A full reconciliation of pre IFRS 16 EBITDA to post IFRS 16 EBITDA performance is provided to the CODM.

The information reported to the CODM is on a monthly basis.

At 31 January 2024, £24,965,000 of non-current assets are located in the UK (31 January 2023: £24,066,000) and £1,086,000 of non-current assets are located in the Netherlands (31 January 2023: £946,000).

There are no major customers in the current year and prior year that contribute more than 10% of the Group's revenue.

Operating segment information

4. Revenue from contracts with customers

Disaggregation of revenue

The disaggregation of revenue from contracts with customers is as follows: