24 Apr 2017 07:00
AIM: FISH
Fishing Republic plc
("Fishing Republic" or "the Company" or "the Group")
One of the largest fishing tackle retailers in the UK
Final results
for the year ended 31 December 2016
KEY POINTS
· A year of strong progress in line with Board's goal of building a significant position in the fishing tackle marketplace
· Revenue up by 41% to £5,799,000 (2015: £4,124,000) - reflecting store expansion programme and organic growth
· Profit before tax and exceptional items (see reconciliation in the Financial Review) up by 32% to £403,000 (2015: £305,000)
Reported profit before tax up to £403,000 (2015: £6,000)
· Reported earnings per share of 0.99p (2015: loss per share of 0.16p)
Underlying earnings per share before exceptional items of 0.99p (2015: 1.36p)
· Store network significantly increased - expansion into new trading regions
- five new stores added (in Hull, South Birmingham, Crewe, Lincoln and Mildenhall in Cambridgeshire), taking store network to 12 at 31 December 2016
- total store sales rose by 82% to £4,143,000; like-for-like growth (which measures the sales performance of stores operating for 12 months in FY2015 with same stores operating for 12 months in FY2016) of 16%
- three further stores opened in Q1 2017, in Milton Keynes, Ipswich and Reading, with an additional three to open over the coming months
· Online sales strategy is progressing well
- major focus is on transitioning sales away from historic model of third party platforms to own website sales
- own website sales rose by 132% to £662,000 and accounted for 40% of total online sales (2015: 16%)
· Share placing in June 2016 raised £3,750,000 (gross) to support expansion plans
- new shareholders include Bill Currie, Iain McDonald and Sir Terry Leahy
· Group remains well placed for further expansion and main fishing season has started well
James Newman, Chairman, said:
"Fishing Republic has made strong progress over the year as we continued with expansion plans to build a significant position in the fishing tackle marketplace. Results show very encouraging growth with revenues up by 41% to £5.8m and profit before tax and exceptional items up by 32% to £0.40m.
"The outlook for the Group remains very positive. The fishing tackle marketplace is large but highly fragmented, with over 2,000 mainly owner-operated businesses and we continue to see a substantial growth opportunity for the Group and our multi-channel model."
Steve Gross, Chief Executive, said:
"It has been another encouraging year of progress. The new funds we raised in late June 2016 helped to support the continuing development and expansion of our store network and have also enabled us to accelerate our plans to develop the Group's online platform and digital strategy, and transition online sales to our own websites, away from our historical model of third party platforms.
"Our store expansion is progressing very well and we have a further three stores earmarked for opening over the coming months which will take the total number of our outlets to 18. The main fishing season, which typically starts in the second quarter of the year, has begun well and we view prospects for ongoing growth very positively as we capitalise on our 'first mover' advantage."
Enquiries:
Fishing Republic plc Steve Gross, Chief Executive |
| T: 01709 722590
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Russell Holmes, Finance Director |
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KTZ Communications Limited |
| T: 020 3178 6378 |
Katie Tzouliadis / Emma Pearson |
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Northland Capital Partners Limited |
| T: 020 3861 6625 |
Nominated Adviser and Broker |
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Matthew Johnson / David Hignell (Corporate Finance) |
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John Howes (Corporate Broking) |
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About Fishing Republic plc
www.fishingrepublic.net
Fishing Republic is one of the largest fishing tackle retailers in the UK by floor space. Established in 1985, the Company caters for all types of anglers: coarse, carp, game and sea fishing. It operates a chain of 'destination' retail outlets and has an online presence both through third party online retailers and its own websites (www.fishingrepublic.net and www.yorkshiregameangling.co.uk). Its comprehensive product offering includes own-brand ranges, such as Klobba and Theseus.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that the Group has made very good progress over the last year as it has continued with its growth plans to build a significant position in the fishing tackle marketplace. Results show strong revenue growth accompanied by a significant increase in profit before tax and exceptional items, in line with market expectations. The Group's encouraging results reflect both our store expansion programme and organic growth across the existing store network.
The second half of the year was especially active as we began to deploy the funds raised in a major share placing in June 2016. A key area of investment of the proceeds was in the Group's online platform and digital strategy as well as in the ongoing expansion of our store network. Historically, the majority of the Group's online sales have derived from third party websites and the new funds have enabled us to accelerate our strategy to transition sales to our own websites, where margins are higher and where we 'own' the customer relationship. This transition is progressing well and I am pleased to report that our own website sales in the second half more than doubled over the same period in 2015.
The fishing tackle marketplace is large but highly fragmented, with over 2,000 mainly owner-managed operators. Consequently, we see a substantial growth opportunity for the Group, and believe that our multi-channel model, which combines 'destination' stores, offering an extensive product range, and a leading online offering, is well suited to our customers' buying habits. Over the coming year and beyond, we anticipate adding further 'destination' stores to build geographical coverage and investing in the development of our technology platform and digital customer acquisition model.
Financial Results
It should be noted that in the comparative period, the business was in private ownership until 4 June 2015, when the Company joined AIM.
Revenue for the year to 31 December rose by 41% to £5,799,000 (2015: £4,124,000), with the major part of this increase reflecting new store openings. On a like-for-like basis (which measures the sales performance of stores operating for 12 months in FY2015 with same stores operating for 12 months in FY2016), store sales increased by 16% over 2015, benefiting from our investment in increasing the product range and in marketing. Including online sales, like-for-like revenues increased by 4% to £4,175,000 (2015: £4,014,000), which reflected the transition away from third party websites.
Gross profits rose by 47% to £2,760,000 (2015: £1,881,000), helped by our improved purchasing power. Profit before tax and exceptional items (see reconciliation in the Financial Review) increased by 32% to £403,000 (2015: £305,000) even after the increase in resource across the business as we invested in growth. Reported profit before tax rose to £403,000 (2015: £6,000). Basic earnings per share before exceptional items was 0.99p (2015: 1.36p) and reported basic earnings per share was 0.99p (2015: loss per share of 0.16p).
Capital expenditure over the year, excluding business combinations, totalled £833,000, with the major part of this investment focused on new store fit-outs, upgrades to existing stores, website development and new management and operating systems.
Share Placing
At the end of June 2016, we raised £3,750,000 (gross) through a placing of new ordinary shares. The net proceeds are supporting the Company's continuing expansion, both digitally and via further store openings. We were delighted to welcome a number of new shareholders, who participated in the placing, including Bill Currie, Iain McDonald and Sir Terry Leahy. Their combined holding represents approximately 15.9% of the Company's issued share capital.
Dividend
The Board is focused on increasing the scale of the Group and is reinvesting all its surplus cash resources back into the business. In the short term, therefore, the Directors do not recommend dividend payments. However, the dividend policy will be kept regularly under review.
The Board
On 1 January 2016, we were very pleased to appoint Russell Holmes, FCCA, as Finance Director. Russell has been working with Fishing Republic since 2008 and succeeded Robert Tippett in the role. We would like to thank Robert for his contribution to the business, especially at the time of the AIM flotation.
After the year end, on 1 March 2017, we were also very pleased to welcome Iain McDonald to the Board as a Non-executive Director. Iain has over 20 years' experience in investment, particularly in retail and e-commerce. He has been investing directly in the online and technology sectors for over a decade, and a number of his long-term investments have been into some of the most successful e-commerce businesses in Europe.
Outlook
Prospects for the Group are very positive. Since the start of the new financial year, we have opened three stores, in Milton Keynes, Ipswich, and Reading, and plan to open a further three stores, in King's Lynn, Huntingdon and Essex, over the coming months. These new stores will take the Company's network of outlets to 18.
Our model is to offer an unrivalled range of product, catering for all fishing disciplines, from typically out-of-town, easy to access, light-industrial locations. Customer service is important to us and we aim to employ staff who share our customers' passion for angling and can offer expert advice on both products and fishing techniques.
The main fishing season, which typically begins in the second quarter of the year, has started well, helped by the recent warm weather, and the Board looks forward to reporting on further progress in due course.
James Newman OBE
Chairman
CHIEF EXECUTIVE'S REPORT
Introduction
The Group has grown significantly since it joined AIM in June 2015 and we are pleased to report on another encouraging year of progress. The new funds we raised in late June 2016 have helped to support the continuing development and expansion of our store network, and have also enabled us to accelerate our plans to transition online sales to our own websites, away from our historical model of third party retailers.
Review of Operations
Stores
We opened three new stores in the first quarter of 2016, in Hull, South Birmingham and Crewe. The new store in Hull replaced a much smaller outlet in the city. Later in the year, in September and November, we added two further stores, in Lincoln and Mildenhall, Cambridgeshire, respectively.
These new stores expanded our geographic footprint from our North of England base into the West and East Midlands and further south into East Anglia. They also took the number of Fishing Republic outlets to 12 by the end of the year. In the first quarter of 2017, we opened three stores, in Milton Keynes, Ipswich and Reading. We have also signed leases on three further stores, in King's Lynn, Huntingdon and Clavering in Essex, which we expect to open over the coming months.
The new stores follow our 'destination' store format, catering for all types of anglers - coarse, carp, game and sea fishing - from large sites, typically on light-industrial locations, with ample car parking facilities and offering easy access. Our extensive product range is a key sales driver, with customers prepared to travel significant distances to our stores, which stock the leading brands as well as our own-brand products.
The new store openings in the year, as well as the addition of Cotswold Angling, in Swindon, in December 2015, helped to drive a significant increase in the Group's store revenues. These rose by 82% year-on-year to £4,143,000 (2015: £2,272,000). Like-for-like store sales (which measures the sales performance of stores operating for 12 months in FY2015 with same stores operating for 12 months in FY2016) also grew strongly, increasing by 16% over 2015. This significant increase in like-for-like store sales reflects our investment in broadening our product range as well as increased marketing activity. Store revenues accounted for 71% of the Group's total revenues (2015: 55%) and the full benefits of the new stores added in 2016 will come through in 2017 and beyond as the stores firmly establish themselves in their localities.
Online
The potential to develop the Group's online sales is significant. To date, online revenues have been driven from third party websites. In the second half of the year, we accelerated our investment in our digital strategy in order to transition sales to our own websites, where margins are higher and where we can develop a direct relationship with the customer. We are pleased with the results so far and the continuing development of our online platform and digital strategy will remain a major focus in the year to come.
Sales from the Group's own websites over the year increased by 132% to £662,000 (2015: £286,000). As anticipated, overall online sales decreased to £1,656,000 (2015: £1,835,000) as we transitioned from third party platforms.
As we further develop our online presence and with the continuing expansion of our store network, we expect to see online sales accelerate.
Own-brand products
Own-brand sales increased by 24% to £770,000 (2015: £619,000) and accounted for 13% of Group sales (2015: 15%). We continue to focus on our key brands, including Klobba for clothing and Theseus for carp fishing products, both of which will benefit from our ongoing store expansion programme.
Staff
We would like to welcome all new staff, who have joined the Fishing Republic team over the last twelve months and to thank all our employees for their hard work and dedication, over what has been a tremendous year of progress for the Group.
Outlook
We are very positive about the outlook for the Group. There remains a significant opportunity to scale the business and capitalise on our 'first mover' advantage. We have a further three store openings planned over the coming months in complementary geographic locations to existing outlets. We will continue to consider further suitable locations as well as drive our online and digital sales strategy.
Steve Gross
Chief Executive
FINANCIAL REVIEW
Income Statement
In the year ended 31 December 2016, sales increased by 41% to £5,799,000 (2015: £4,124,000) as the Group continued its expansion. Gross profit margin also increased to 48% (2015: 46%), with the Group leveraging its improved buying power. This helped to deliver a 47% rise in gross profit to £2,760,000 (2015: £1,881,000).
Administrative costs rose, partly reflecting a first full year of costs as a quoted company but also investment in additional resources to implement the Group's growth strategy, with particular areas of focus on new store marketing and our digital platforms.
Operating profit before exceptional items increased to £420,000 (2015: £321,000). The comparative 2015 operating profit, after the exceptional costs of the IPO in June 2015, was £22,000. There were no exceptional items in 2016.
After finance costs of £17,000 (2015: £16,000), profit before tax and exceptional items increased by 32% to £403,000 (2015: £305,000), which equates to earnings per share of 0.99p (2015: 1.36p). Reported profit before tax was £403,000 (2015: £6,000) and reported basic earnings per share was 0.99p (2015: loss per share of 0.16p). A reconciliation of profit before tax and exceptional items is shown below:
| 2016 | 2015 |
Profit before taxation | 402,901 | 5,718 |
Exceptional items (see below) | - | 299,040 |
Profit before tax and exceptional items | 402,901 | 304,758 |
Statement of Financial Position
Total equity at 31 December 2016 more than doubled to £6,837,000 against the same point in the prior year (2015: £2,929,000). Investment in working capital has played a key part in the Group's expansion throughout 2016, and inventories (carried at the lower of cost and net realisable value) at the year-end totalled £4,257,000, an increase of £1,810,000 on the value at 31 December 2015.
The Group repaid its bank loan of £268,000 in the year, leaving it debt free. Total liabilities increased to £921,000 (2015: £708,000) reflecting the Group's expansion.
Cash Flow
At the year end, the Group's net cash position (being cash and bank balances less loans and borrowings) was £2,056,000 (2015: £379,000).
Proceeds from the shares issued in the year totalled £3,786,000 gross. Net proceeds amounted to £3,588,000 after costs of £198,000.
£1,262,000 has been invested in working capital in the year (2015: £956,000) and a further £833,000 (2015: £135,000) has been invested in fixed assets (excluding business combinations) to support the continued growth of the Group.
Russell Holmes FCCA
Finance Director
Consolidated Income Statement
Year ended 31 December 2016
| Notes | 2016 £ |
2015 £ |
Revenue |
| 5,799,065 | 4,124,257 |
Cost of sales |
| (3,038,895) | (2,243,036) |
Gross profit |
| 2,760,170 | 1,881,221 |
Other income |
| 5,155 | 2,057 |
Selling and distribution expenses |
| (1,303,721) | (1,050,066) |
Administration expenses |
| (1,041,638) | (512,415) |
Operating profit before exceptional items |
| 419,966 | 320,797 |
Exceptional costs of IPO treated as an expense |
| - | (299,040) |
Operating profit after exceptional items |
| 419,966 |
21,757 |
Finance costs |
| (17,065) | (16,039) |
Profit on ordinary activities before taxation |
| 402,901 | 5,718 |
Taxation |
| (82,130) | (37,176) |
Profit/(loss) after taxation |
| 320,771 | (31,458) |
Other comprehensive income |
| - | - |
Total comprehensive income attributable to the equity owner |
| 320,771 | (31,458) |
Basic earnings per share (pence) | 2 | 0.99 | (0.16) |
Diluted earnings per share (pence) | 2 | 0.96 | (0.16) |
Consolidated Statement of Financial Position
As at 31 December 2016
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| 2016 £ |
2015 £ |
Non-current assets |
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Property, plant & equipment |
| 795,495 | 181,291 |
Intangible assets |
| 445,283 | 84,987 |
Investments |
| - | - |
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| 1,240,778 | 266,278 |
Current assets |
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Inventories |
| 4,256,630 | 2,446,905 |
Trade and other receivables |
| 205,678 | 236,323 |
Deferred tax asset |
| - | 40,743 |
Cash and cash equivalents |
| 2,055,699 | 646,303 |
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| 6,518,007 | 3,370,274 |
Total Assets |
| 7,758,785 | 3,636,552 |
Non-current liabilities |
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Interest bearing loans and borrowing |
| - | 243,677 |
Current liabilities |
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Trade and other payables |
| 880,056 | 440,108 |
Deferred tax liability |
| 41,389 | - |
Loans and borrowing |
| - | 24,000 |
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| 921,445 | 464,108 |
Total Liabilities |
| 921,445 | 707,785 |
Equity |
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Share capital |
| 378,268 | 268,750 |
Share premium |
| 5,052,933 | 1,574,649 |
Retained earnings |
| 1,406,139 | 1,085,368 |
Total Equity |
| 6,837,340 | 2,928,767 |
Total Equity and Liabilities |
| 7,758,785 | 3,636,552 |
Consolidated Statement of Changes in Equity
Year ended 31 December 2016
| Share capital £ | Share premium £ | Retained profit £ £ £ | Total equity £ |
Balance at 1 January 2015 | 1,375,000 | - | (120,674) | 1,254,326 |
Loss after taxation for the financial year | - | - | (31,458) | (31,458) |
Capital reduction in subsidiary undertaking | (1,237,500) | - | 1,237,500 | - |
Issue of shares | 131,250 | 1,868,750 | - | 2,000,000 |
Share issue costs deducted from equity | - | (294,101) | - | (294,101) |
Balance at 31 December 2015 and brought forward at 1 January 2016 | 268,750 | 1,574,649 | 1,085,368 | 2,928,767 |
Profit after taxation for the financial year | - | - | 320,771 | 320,771 |
Issue of shares | 109,518 | 3,676,108 | - | 3,785,626 |
Share issue costs deducted from equity | - | (197,824) | - | (197,824) |
Balance at 31 December 2016 | 378,268 | 5,052,933 | 1,406,139 | 6,837,340 |
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Consolidated Statement of Cash Flows
Year ended 31 December 2016
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| 2016 £ | 2015 £ |
Operating activity |
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Total profit before tax |
| 402,901 | 5,718 |
Depreciation charge |
| 70,962 | 15,078 |
Interest expense |
| 17,065 | 16,039 |
Profit on disposal of plant and equipment |
| - | - |
(Increase)/decrease in inventories |
| (1,809,725) | (538,239) |
(Increase)/decrease in receivables |
| 30,645 | (23,850) |
(Decrease)/increase in payables |
| 517,339 | (393,607) |
Net cash outflow/(inflow) from operating activity |
| (770,813) | (918,861) |
Investing activity |
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Purchase of property, plant and equipment |
| (612,100) | (58,872) |
Acquisition of intangible assets |
| (220,901) | (76,406) |
Outflows in respect of business combinations |
| (212,462) | - |
Net cash (outflow) from investing activity |
| (1,045,463) | (135,278) |
Financing activity |
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Loan repayments in year |
| (267,677) | (8,077) |
Interest paid |
| (17,065) | (16,039) |
Repayment of amount due to directors |
| (77,388) | (33,057) |
Proceeds from share issue net of costs |
| 3,587,802 | 1,705,899 |
Net cash inflow/(outflow) from financing activity |
| 3,225,672 | 1,648,726 |
Cash and cash equivalents at start of year |
| 646,303 | 51,716 |
Cash and cash equivalents at period end |
| 2,055,699 | 646,303 |
Notes to the Accounts
1. Basis of Preparation
The financial statements have been prepared in accordance with IFRS as adopted by the EU issued by the International Accounting Standards Board ("IASB"), including related Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.
The Directors have reviewed the potential impact of the introduction of these new accounting standards and interpretations (including the consequential amendments) and consider that they will either be not relevant or immaterial to Fishing Republic plc's operations. In particular, it is considered that IFRS 15 Revenue from Contracts with Customers will not have an impact upon a straightforward retail business. In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17. Under the new requirements, lessees will be required to recognise assets and liabilities arising from both operating and finance leases on the balance sheet. The expected effective date is 1 January 2019. The EU has not yet adopted this standard.
The Group's financial statements consolidate the financial statements of Fishing Republic plc and its subsidiary undertakings, Fishing Republic Trading Limited and Fishing Republic Retail Limited.
On the basis that the main objective of the effective Group reconstruction and AIM listing was to facilitate raising finance for the future expansion of the business, and that the ultimate equity holders and their rights were unchanged following the transaction, it is deemed appropriate to adopt the merger method of accounting.
There is no guidance within IFRS in relating to merger accounting and therefore the principles set out in UK GAAP, FRS 102 section 19.27 to 19.33 have been adopted:
· the carrying values of the assets and liabilities of the parties are not adjusted to fair value;
· the results and cash flows of all the combining entities are brought into the consolidated financial statements from the beginning of the financial year in which the combination occurred;
· in the prior period's accounts, the comparative information was restated by including the total comprehensive income for all combining entities for the previous reporting period, and their statement of financial position for the previous reporting date; and
· the difference, if any, between the nominal value of the shares issued plus the fair value of any other consideration given, and the nominal value of the shares received in exchange is shown as a movement on other reserves in the consolidated financial statements.
The Directors have reviewed the future viability and going concern position of the Group for the foreseeable future, based upon forecasts and anticipated cash flows extending for a period of at least 12 months from the date of approval of the financial statements. The Directors have accordingly prepared the financial statements on the going concern basis.
2. Earnings per share
Earnings per share has been calculated on the attributable profit for the period and the weighted average number of shares in issue during the period.
Comparative year ended 31 December 2015
Earnings per share before the exceptional IPO costs have also been disclosed on the basis that these are "one-off" costs of the flotation and the result after deducting these expenses does not reflect the operating result of the business.
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| 2016 | 2015 |
Profit/(loss) for the year (£) |
| 320,771 | (31,458) |
Profit before IPO costs charged to income statement (£) |
| 320,771 | 267,582 |
Weighted average shares in issue - Number |
| 32,473,108 | 19,623,288 |
Basic earnings/(loss) per share (pence) |
| 0.99 | (0.16) |
Earnings per share before exceptional IPO costs expensed; |
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Basic earnings per share (pence) |
| 0.99 | 1.36 |
Diluted earnings per share (pence) |
| 0.96 | 1.36 |
The earnings attributable to ordinary shareholders is profit/loss after tax. The weighted average number of ordinary shares in issue during the period is used for the purpose of calculating basic earnings per share. Diluted earnings per share takes into account share options in issue throughout the period as follows:
Approved EMI share options for 1,099,975 shares
Unapproved share options for 496,122 shares
Diluted earnings per share has been calculated using the Treasury Method.
3. Changes in share capital
237,500 1p ordinary shares were issued on 10 May 2016 upon the exercise of options held in the company for a total consideration of £35,625.
A placement on 29 June 2016 of 10,714,288 1p ordinary shares raised consideration of £3,750,001, net £3,552,177 after attributable costs of £197,824.
Total proceeds from shares issued in the year were therefore £3,587,802.
4. Business combinations
On 1 September 2016, as part of the Company's strategy to increase its geographical spread of sales, 100% of the trade and assets of Fantackletastic in Lincoln were acquired. The consideration paid was £166,616 (all cash) which included the trading stock, fixtures and fittings and goodwill of the business. The identifiable assets of the business have been valued by the Directors at £79,154 (including fixed assets of £50,000 and trading stock of £29,154), leaving a goodwill valuation of £87,462. The acquired business contributed revenue of £130,576 between the acquisition date and 31 December 2016, included in the Income Statement. As part of the Group, the profitability of the acquired business is not considered to be a meaningful measure and as such has not been disclosed separately.
On 19 September 2016, as part of the Company's strategy to increase its geographical spread of sales, 100% of the trade of Tackle Warehouse in Cambridgeshire was acquired for consideration of £75,000 (all cash). In the opinion of the Directors, no material identifiable assets were acquired and the transaction has therefore been recorded as the purchase of goodwill. The acquired business began to contribute revenue in November 2016 and contributed revenue of £32,744 by 31 December 2016, included in the Income Statement. As part of the Group, the profitability of the acquired business is not considered to be a meaningful measure and as such has not been disclosed separately.
The business combinations resulted in total purchased goodwill of £162,462.
5. Fishing Republic's Annual General Meeting will be held on 29 June 2017 at 10am at the Group's offices at Vulcan Works, Chesterton Road, Eastwood Trading Estate, Rotherham, S65 1SU.
6. The full financial statements will be posted to shareholders in May 2017. Further copies will be available on its website (www.fishingrepublic.net) and from the company's registered office at Vulcan Works, Chesterton Road, Eastwood Trading Estate, Rotherham, S65 1SU.