Angling Direct – nothing makes a fish bigger than almost being caught
“Get your tackle out” – is probably a joke cast every day in any one of the 32 Angling Direct (LON: ANG) shops around the country.
However, I am actually suggesting that you get in to tackle with investing in the company’s shares.
It is currently loss-making but give it time and I do believe that, through its significant expansion across the UK, the margins that are possible will see good numbers dropping to the bottom line.
Did you know that angling is the UK’s sixth most popular sport? Carp fishing is the largest sector of the fishing tackle trade market, followed by general coarse fishing, game fishing and sea fishing.
Talking about line’s, the group has a very active and effective online business, which it started in May 2000. In fact, it is the largest online tackle retailer in the UK, stocking over 21,500 products from some 200 of the leading brands in the industry.
The company’s product categories include reels, terminal tackle, rods, bait and additives, and bivvies and shelters. Its fishing tackle products, include capital items, consumables, luggage and clothing. It also sells its own Chinese-made products under its own ‘Advanta’ brand name.
The market to supply anglers is valued at some £600m, however, it is a highly fragmented market. There are some 2,150 angling-oriented retailers out there, with the average annual turnover for each retailer being estimated to be just over £250,000.
Angling Direct, which started way back in 1986, is the largest specialist fishing tackle retailer in the UK. It now has over 8% of the market and is aiming on taking a very much bigger share in the near future.
And that expansion is continuing at quite a pace. This time last year it had just opened its 24th store in Peterborough, last week the company announced that it had just opened a new 5,500 sq.ft store in Rotherham, that takes its tally up to 32 stores, with another couple planned before the end of the year.
The group has its own 30,000 sq.ft. central distribution centre and head office at Rackheath in Norfolk.
Its expansion progress is helped largely by a big number of the independent retailers, from single-unit owners to larger multi-store operations, seeking to sell out to the company.
Immediately upon acquisition of any new store, the company seeks to re-brand that of previously to its own in-house styling. The group has quite an ambitious store opening programme ahead of it, both organic and by acquisition.
Not only is the UK retail store portfolio growing, but also the online side is doing similar. It now has Dutch, German and French websites, which were launched last year.
The company helps to create a culture of supporting anglers and the future of angling, through a number of initiatives including employing in-store qualified angling coaches providing advice and lessons at local angling destinations.
Furthermore, the website has been developed to not only sell fishing tackle, but also to assist anglers catch more fish and feel part of a community. Articles and videos are published online on a regular basis, which offer instruction, advice on new products and reviews of rivers and lakes.
Those initiatives are aimed at increasing the anglers’ enjoyment and success, thereby helping to generate even more business both in its shops and online.
There are 64,621,693 shares in issue, of which Martyn Page, the group’s executive chairman, owns 11,385,000 representing 17.6% of the equity. Other large holders include the chief executive Darren Bailey (3.92%), John Hunter the finance director (0.7%), William Hill (14.3%) and Richard Beaumont (5.34%).
Professional investors include: BlackRock Investment Management (14.30%), Hargreave Hale (11.80%), Business Growth Fund (8.36%), Livingbridge VC (5.52%), and Otus Capital Management (3.99%).
Last year to end January 2019 the e-commerce side reported £22.26m, some 53% of total turnover, while retail was £19.74m, some 47% of the group total.
The interim results to end July this year saw revenue rise 21% to £26.5m, while pre-tax profits fell from £480,000 to just £323,000, impacted by both higher distribution and administrative costs.
Retail revenue was 41.4% higher at £14m, while like-for-like sales were up 14.9% on the back of just a 9.6% increase in its footfall. Already the second half year has started well, with record sales being reported in August.
Estimates for the current year suggest sales of £55m, with a pre-tax loss of £400,000. However, next year to end January 2021, brokers are going for a massive rise in sales to £66m and a turn-around into some £300,000 in pre-tax profits.
The company only floated in July 2017, with a value of £27.4m, placing its shares at 64p each as its raised £7.4m net for working capital. Since then its shares have peaked out at 113p in January last year.
They are now trading at around 58p, valuing the company at £39.7m.
Taking a two-year view I easily see them rising back towards its peaks, and I now set a Target Price of 100p to be achieved before the end of next year.