Fishing Republic Regulatory News (FISH)

27 September 2018

AIM: FISH

FISHING REPUBLIC PLC

("Fishing Republic" or "the Group")

Interim Results

For the six months ended 30 June 2018

KEY POINTS

Summary

Financial

Operational

James Newman, Chairman, said:

"Fishing Republic is in a year of transition. Following a comprehensive review of the Group's operations, we have taken firm action in the first six months of the financial year to stabilise the business and to implement changes to improve its performance.

"The restructuring of the business was undertaken against very difficult trading conditions - so it has been a particularly challenging period. While the sales environment continues to be tough, with strong competitive pressures, our major shareholders have supported our plans, and we remain confident of the prospects for the business as we navigate through the current challenges. 

"We are pleased to welcome Dan Quinn as Chief Executive Officer. He shares the Board's vision that there is a significant opportunity for the Group to build its presence as a multi-channel retailer of fishing tackle and equipment."

Enquiries:

CHAIRMAN'S STATEMENT

Introduction

The Company is in a year of transition, as we have previously reported. Following changes to the Board in November 2017, and a comprehensive review of the Group's operations, we have taken firm action in the first six months of the financial year to stabilise the business and to implement changes to improve its performance. These changes have included significant organisational and operational initiatives, including key senior management appointments, the closure of underperforming stores and overhead cost reductions.

The restructuring of the business was undertaken against very difficult trading conditions and so it has been a particularly challenging period for the Group. Nevertheless, we have remained focused on re-establishing a sound base for the Group's future development. Our major shareholders have supported our plans and we remain confident of the prospects for the business as we navigate through the current challenges.

I am particularly pleased to report that our recruitment process for a new Chief Executive Officer has concluded very successfully and that Daniel Quinn will be joining the Board in that role, with effect from 17 October 2018. Daniel has over 26 years' experience in the retail sector, including in senior commercial roles at Tesco PLC, and, latterly, at GO Outdoors, one of the UK's largest retailers of outdoor clothing and equipment, where he was Commercial Director.

Financial Results

The Group's revenues in the first six months to 30 June 2018 were lower than the same period last year at £3.4m (H1 2017: £4.1m). Overall store sales reduced by £0.5m to £2.7m (H1 2017: £3.2m), with like-for-like store sales decreasing by 22% (H1 2017: up 21%). Online sales over the six months decreased by £0.2m to £0.7m (H1 2017: £0.9m).

As anticipated, gross margin in the first quarter was well below last year's level, reflecting our actions to clear old product lines and surplus stock, but there was also downward pressure as a result of the competitive environment, which meant that, while second quarter margins improved, overall gross margin was 27% (H1 2017: 35.3%).

The significant scaling of the Group's operations in 2017, including adding additional resources, meant that selling, distribution and administration expenses were higher year-on-year at £2.5m (H1 2017: £1.6m). However, our restructuring programme has included measures to redress these costs, which should benefit the second half.

LBITDA (loss before exceptional items, interest and taxation, depreciation and amortisation) for the half year was £1.4m (H1 2017: £0.0m).

Exceptional costs incurred in the period totalled £0.9m and are mainly accounted for by reorganisation and store closure costs of £0.5m, and an additional write-down of stock values totalling £0.4m.

Reflecting the reduction in gross profit and the higher cost base, the Group incurred an operating loss, after exceptional items, of £2.5m (H1 2017: loss of £0.1m). The reported loss for the period was £2.5m (H1 2017: loss of £0.1m), and basic loss per share was 5.05p (H1 2017: loss of 0.25p).

Inventories at the half year end, which typically represents the high point in the fishing season, stood at approximately £2.7m at 30 June 2018 (30 June 2017: £5.3m and £3.3m at 31 December 2017). Cash in the bank at 30 June 2018 was £0.5m (30 June 2017: £0.7m).

Placing of Shares

At the end of January 2018, the Company raised £1.3m (gross) through a placing of 13,000,000 new ordinary shares at a price of 10p per share. The placing was supported by existing shareholders, including Directors, as well as by a number of new shareholders. The Company also issued 1,350,000 ordinary shares at 10p per share as part-payment for consultancy services in respect of the review of the business and operations.

Loan

On 29 June 2018, the Company agreed a secured loan of £0.5m from existing shareholders. The loan bears an interest rate charge of nine per cent. per annum and is repayable after one year.

Review of Operations

The trading environment remained tough over the period, affecting both store and online sales, with competitive pressures exacerbated by the exceptionally hot weather, which typically drives a reduction in angling activity.

Stores

As previously reported, after undertaking a thorough examination of the performance of our 19 stores, we took decisive action to reconfigure the Group's network in order to generate more acceptable returns.

As a result, in early January 2018, we closed our store in Clavering, Essex and, subsequently, in April and May, closed four further stores, in Ipswich, Mildenhall, Swindon and Huntingdon.

We also implemented a number of initiatives to address store performance, improving branding and layout, and have introduced new store management incentives. Some of the benefits of these changes were shown in an improvement in like-for-like sales in the latter part of the period, and further initiatives to stimulate sales are being implemented.

Online

A major focus in the period was the relaunch of the Group's core website and the rationalisation of our specialist websites, in line with our decision to refocus the Group's product range. 

We launched the Group's new upgraded website in mid-May, and this has significantly enhanced our online presence, which should help to drive future growth. We are also continuing to move away from third party online sales.

In August, we appointed a new Head of E-commerce, who is working on further initiatives to maximise the potential of this important sales channel. 

Logistics and Customer Service

We opened a new distribution centre in mid-March 2018, which became fully operational from the beginning of April, receiving and making all deliveries from suppliers and onwards to the stores. This has improved our costs and operational efficiencies and will help to support our high customer service ratings.

Merchandising and Inventory

We have instigated a new policy of centrally-controlled buying and also rationalised the Group's product range. As a result, we have refined our offering, including refocusing on premium brands. This has resulted in a further write down of inventory in the period.

These changes, together with the new distribution centre, place the Group in a stronger position as we look towards the buying season for 2019, which commences in the autumn.

Staff

I would like to thank all our staff for their hard work and commitment during a challenging period. We have many talented and knowledgeable people within the Group and their collective skills and energy will help to move the business forward as we make progress with our turnaround initiatives. 

Board Appointments

We are delighted to welcome Dan Quinn to the Board as Chief Executive Officer with effect from 17 October 2018. For the last six years, Dan has been the Commercial Director of GO Outdoors, which became part of the JD Sports Group plc in 2016. Prior to this, he worked for Tesco PLC for over 20 years where he held a number of senior commercial positions, both in the UK and overseas in Asia and Central Europe. We look forward to working with him to realise the opportunities that exist for the business. Following Dan's appointment, I will resume my role as Chairman in a non-executive capacity. 

As previously announced, in early March 2018, we were very pleased to appoint Stephen Kyriacou to the Board as Chief Operating Officer.

Outlook

We have made significant structural and organisational changes to the Group over the course of the last 10 months, which puts the business in a better position to resume its growth path.

Sales have continued to be affected by strong competitive pressures, especially online, although we have seen a small improvement in like-for-like store sales in the third quarter. Further cost savings have been made to help mitigate the shortfall in sales.

We welcome Dan Quinn as Chief Executive Officer. He shares the Board's vision that there is a significant opportunity for the Group to build its presence as a multi-channel retailer of fishing tackle and equipment.

We would like to thank our shareholders for their continuing support as we continue to implement our turnaround plans.

James H Newman, OBE

Executive Chairman

Income Statement

for the six months ended 30 June 2018

Statement of Comprehensive Income

for the six months ended 30 June 2018

Company Registration Number 09196822

Statement of Financial Position

at 30 June 2018

Statement of Changes in Equity

For the six months ended 30 June 2018

Statement of Cash Flows

for the six months ended 30 June 2018

Notes to the Interim Statement

1. Basis of preparation

The interim financial information has been prepared in accordance with the accounting policies that are expected to be adopted in the Company's full financial statements for the year ending 31 December 2018. These policies are not expected to be significantly different to those set out in Note 1 of the Group's audited financial statements for the year ended 31 December 2017. They are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 30 June 2018. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34.

The financial information in this statement relating to the six months ended 30 June 2018 and the six months ended 30 June 2017 has neither been audited nor reviewed by the Auditors, pursuant to guidance issued by the Auditing Practices Board. The financial information presented for the year ended 31 December 2017 does not constitute the full statutory accounts for that period. Full audited financial statements for the year ended 31 December 2017 are available on the company's website.

The Directors prepare annual budgets and cash flow projections that extend beyond the date of this report. These projections take account of the timing of expected cash inflows and financial commitments over that period. Based upon these projections and the availability of financial resources as required over this period, the Directors have a reasonable expectation that the company will meet its future obligations as they fall due and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.

2. Exceptional Costs

3. 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.

Basic

The (loss)/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

Because a loss is reported in the period, the calculation of diluted earnings per share using the share options in issue would be anti-dilutive. Therefore, diluted EPS has not been calculated.

4. Share capital

During the six months to 30 June 2018 the following share issues took place:

An issue of 13,000,000 ordinary shares on 1 February 2018 at a price of 10p per placing share to new and existing shareholders.

An issue of 1,000,000 ordinary shares on 1 February 2018 at a price of 10p per share as part-payment for consultancy services provided in relation to a review of the business and operations completed in January 2018.

An issue of 350,000 ordinary shares on 8 March 2018 at price of 10p per share as payments for eCommerce consultancy services provided to the Company

5. Interim report

Copies of this interim report are available from Fishing Republic plc, Vulcan Works, Chesterton Road, Eastwood Trading Estate, Rotherham, South Yorkshire S65 1SU and on the company's website at: www.fishingrepublic.com