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Fishing retailer Angling Direct lists on AIM - but does it offer value?

By Gary Newman | Monday 17 July 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Following the successful floatation of Fishing Republic (FISH) a couple of years back, it was only a matter of time before one of the other large fishing tackle retailers followed the same route, and we’ve just seen Angling Direct (ANG) list on the AIM market.

This is a sector that I know very well as my day job is in this industry and I am very familiar with Angling Direct and its good reputation within the industry – it is certainly one of the biggest and most profitable retailers in the trade.

The company has been achieving consistent growth at a time when many other tackle shops have been struggling, and has also been expanding the business in recent years by opening new stores, as well as obtaining £1.25 million in bank funding last year for the purchase of Climax Fishing Tackle Limited.

As part of its listing the company raised a total of £9 million via an oversubscribed gross placing of shares at 64p. Of that, £1.6 million went to the selling shareholders in the business, with the remaining £7.4 million gross going into the company coffers, giving it an initial market capitalisation of £27.4 million.

Now whilst I am a big fan of the company and can see it using the funding to grow the business further, if we take away the cash in the bank generated from the placing, plus the amount that it had as at the last accounts up to the end of January 2017, then that leaves the business as it is being valued at around £20 million.

It is true that we are continuing to see rapid growth now that it has that amount to play with in terms of opening up new stores – in addition to the 15 that it already has - or making further acquisitions, as well as developing its own Advanta brand further.   

Revenue has been showing impressive growth, and was up over 28% for the full year up to the end of January 2017, at just over £21 million, and the company is forecasting that it will achieve its aim of building a business that can generate more than £50 million per annum.

Of that revenue, retail stores were still the largest contributor at £9.4 million, up 22% year-on-year, closely followed by a 61% rise in the online business to £8.8 million, and with the rest coming from third party websites and handling insurance claims.

That resulted in a net profit of £560,000, which was 53% higher than the previous year, which is an impressive amount of growth. The problem as I see it is that this means a PE ratio of in the region of 50 times which, even allowing for the growth we are seeing, is high. This is with you also having to wonder at what level it will reach a plateau as the market is only so big, and has in general not been performing that well in recent years, with less people taking up the sport. It is actually comparable to that of Fishing Republic, but then I think that is over-valued at this point.

Personally, although I like the company, I wouldn’t be rushing to buy the shares at the current ask price of 69p, especially with net assets as at the last accounts only having been listed as being around £2.4 million – although of course you now do have to add a large pile of cash to that, so somewhere close to £10 million.

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