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Fishing Republic PLC (FISH)

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Wednesday 30 May, 2018

Fishing Republic PLC

Final Results

RNS Number : 5922P
Fishing Republic PLC
30 May 2018
 

 

30 May 2018

AIM: FISH

 

Fishing Republic plc

 

("Fishing Republic" or the "Company")

 

Audited Final Results

for the year to 31 December 2017

 

KEY POINTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 will be a year of transition as the new management team continues to implement changes to the business model

 

       

  

 

James Newman, Executive Chairman of Fishing Republic, said:

 

"We are taking firm action to address the Group's disappointing performance and have made significant changes to the Group's management and organisational structure.

 

"Our comprehensive review, started at the end of 2017, has already resulted in positive steps forward, and we are working on further initiatives to improve the Group's position and create firmer foundations to take advantage of the market opportunity that exists. The fundraising of £1.3m in a share placing in January 2018 will support our actions.

 

"2018 is going to be a year of transition with competitive market conditions, changes to our business model and a new and strengthened management team."

 

Enquiries:

 

Fishing Republic plc

James Newman, Executive Chairman

T: 020 3178 6378 (today)

 

 

 

KTZ Communications Limited

T: 020 3178 6378

Katie Tzouliadis, Emma Pearson

 

 

 

Northland Capital Partners Limited

T: 020 3861 6625

Nominated Adviser and Broker

 

Matthew Johnson, Jamie Spotswood, David Hignell (Corporate Finance)

 

John Howes (Corporate Broking)

 

 

 

 

Executive Chairman's Statement 

Introduction

The Group's trading results for 2017 were very disappointing. However, the Board has taken a number of actions to address the current challenges, and it remains focused on establishing a sound base for the Group's ongoing development.

As we have previously reported, in mid-November, we initiated a comprehensive appraisal of the Group's operations and made a number of changes to the Group's Board and management. Following the completion of this review, we are in the process of carrying out a number of organisational and operational changes, which are being implemented by a new and strengthened senior management team.  In addition, as announced in January 2018, we have commenced a recruitment process for a new Chief Executive.  This process is approaching its final stages and we will provide a further update in due course.

In the interim period, I have assumed the role of Executive Chairman and we recently appointed Steve Kyriacou as Chief Operating Officer to lead the management team on a day-to-day basis and to co-ordinate the initiatives that we are putting in place following our review.  The Company's major shareholders are supportive of the changes we are making.   

A review of the Group's performance over the year, and the new measures we are taking to establish a stronger platform for the next stage of the Company's development, are set out in this report.

Financial Results

Revenues for the year to 31 December 2017 increased to £9.153m (2016: £5.799m), a rise of 57.8% year-on-year. This growth reflected the store opening programme, with seven stores opened during the year, taking the number of outlets to 19 at the year end.  Accordingly, stores sales increased to £6.743m and accounted for 74% of Group sales.  Like-for-like store sales (which measures the sales performance of stores operating in both financial years for the same weeks in those years), were 12.4% up year-on-year.  

Online sales increased to £2.410m from £1.656m in 2016, with 66% of sales generated by our own websites (2016: 40%) as opposed to third party sites.  While online sales grew, the level of growth was significantly below management expectations.  Online margins were also adversely affected by aggressive competitive pricing, particularly in the final quarter of the year, and by our decision to complete a major stock clearance exercise in the last two months of the year.

The overall impact of the sales underperformance, and the increased competitive environment, is evidenced by the significant decrease in gross margin to 32.6% from 47.6% in 2016. Gross profit, before exceptional inventory write-down of £0.568m, was £2.983m (2016: £2.760m).

Selling, distribution and administration expenses increased substantially to £3.961m from £2.345m last year.  This reflected the increase in the scale of the Group's operations, including additional resource taken on to support our growth initiatives. 

LBITDA (loss before exceptional items, interest and taxation, depreciation and amortisation) for the year was £0.710m (2016: profit of £0.491m). 

We also incurred substantial exceptional costs in 2017 amounting to £1.276m. These are accounted for mainly by reorganisation costs of £0.394m and our decision to write-down the value of our product lines by a total of £0.568m following a review of the Company's inventory.

As a result of the deterioration in gross profit and a much higher cost base, the Group incurred an operating loss, after exceptional items, of £2.235m (2016 profit of £0.420m). The reported loss for the year is £2.256m (2016: profit of £0.403m), and basic loss per share is 5.85p (2016: earnings of 0.99p).

 

Placing of Shares

At the end of January 2018, we raised £1.3m (gross) through a placing of 13,000,000 new ordinary shares at a 10p placing price.  The placing was supported by existing shareholders, including Directors, as well as by a number of new shareholders. 

The net proceeds are being used to further advance and develop the Company's e-commerce operations, logistics and merchandising activities, as well as providing additional working capital to accelerate the rate of growth of online sales.  The Company also issued 1,350,000 ordinary shares at the 10p placing price as part-payment for consultancy services in respect of the review of the business and operations.

Board and Senior Management Changes

On 13 November 2017, we announced that Steve Gross had stepped down from his role as Chief Executive.  At the same time, Zoe Gross and Paul Hagerty, who held the roles of Operations Director and IT Director respectively, relinquished their Board positions and have subsequently left the business.

In mid-February 2018, Russell Holmes, our Finance Director, tendered his resignation in order to take up another position.  His responsibilities have passed to Christopher Rigg as Head of Finance.

In early March 2018, we were pleased to announce the appointment of Stephen Kyriacou to the Board as Chief Operating Officer.  Steve joined the Company in December 2017 and has over 20 years' experience in delivering change management programmes.  He is leading the implementation of our plans to improve the Group's operations.

While we complete the recruitment of a new Chief Executive, I continue to act as Executive Chairman, working closely with Steve Kyriacou and the wider management team.

We have also made a number of important changes at senior management level aimed at strengthening the business. These changes involved the creation of new roles and responsibilities, including a Head of Digital, Head of Retail, Head of Merchandising and Buying, and Head of Logistics. We believe that the additional expertise and experience that we have brought into the business will greatly assist us as we move the business forward.

Review of Operations

Stores

Fishing Republic operates "destination" stores, which cater for all types of anglers, coarse, carp, game and sea. Typically located in out-of-town, light industrial sites, our stores offer a wide range of product, and our knowledgeable staff can provide customers with advice on products and local fishing conditions. 

By the end of August 2017, the Company had opened seven new stores in the year, taking our store network to 19 at that time, and extending the Company's geographic reach. 

As mentioned above, store sales for the year overall were disappointing, with new stores not performing as well as expected.  Whilst like-for-like store sales were up 12.4%, there was a significant deterioration in trading towards the end of the main fishing season.  We believe that this was the result of a number of factors, including severe price competition as major competitors and independent stores aggressively sought to maintain their market share and offload excess stock.

In the new financial year, in early January 2018, we closed our store in Clavering, Essex, following a review of its likely future performance, and undertook a thorough examination of store performance across our network.  As a result, we closed four further stores, in Ipswich, Mildenhall, Swindon and Huntingdon, in April and May. Our objective is to ensure that the store network is configured to generate more acceptable returns. The new retail team is currently implementing a number of initiatives to address performance, including the introduction of a new store management incentive scheme. I am glad to report that the loyalty card scheme has progressed well since its introduction in July 2017.

Online

Sales from our own websites more than doubled in the year to £1.588m from £0.662m.  However, this was behind management expectations.  Sales from third party websites decreased, as expected, from £0.994m in 2016 to £0.822m in 2017.

Our previous website and platform, introduced in March 2017, was a first key step in accelerating our online sales growth strategy.  Our operational review has identified further initiatives, which has led to the recent launch of an enhanced website, developed by a combination of the new in-house team and outside agencies.

This new website combines the best of the latest technology with complementary promotional and social media programmes. We believe that this will greatly enhance the customer experience and market positioning.

Logistics

Another direct action following our review was the establishment of a central distribution centre to improve operational efficiency and facilitate greater control over stock levels.  It will also generate benefits as we increase our online sales activity.  The new distribution centre became operational from the middle of March 2018, with direct-to-stores deliveries by suppliers ceasing from the beginning of April. Further initiatives to improve our operational efficiency are also underway. 

The new distribution centre represents an expansion of the Group's existing warehousing and distribution facilities at Rotherham, and, in order to accommodate the additional space required, we have relocated most of the Head Office functions from the Rotherham site to a new office nearby.

Merchandising and Inventory

We have created a new buying and merchandising team and have reviewed stock purchasing strategies and processes.  The changes we are making, supported by the new distribution centre, represent a shift in our business model, with buying now controlled centrally.  We have been working with our suppliers as we developed our new logistics and merchandising activities and are focusing on premium fishing brands to support the commencement of the new fishing season.

Staff

I would like to thank all staff for their hard work and commitment. The second half of the year became progressively more challenging, but I hope that all employees will benefit from the improvements we have introduced so far, including new training initiatives.  

Outlook

We have made significant additional structural and organisational changes to the Group since the beginning of the new financial year and remain focused on implementing further initiatives to improve the Group's position and create firmer foundations to take advantage of the market opportunity that exists.  

We therefore expect this year to be a period of transition as the new team implements and embeds further changes. While the current financial year has continued to feel the impact of very competitive market conditions, our focus remains on improving working capital efficiency and developing our online platform in terms of technology and service levels, with the benefits to come through in 2019 and beyond. 

 

James H Newman, OBE                                                                                                                                         

Executive Chairman

 

Financial Review

Income Statement

During the year ended 31 December 2017, sales increased by 58% to £9.153m (2016: £5.799m) as the Group continued its expansion.  Gross profit margin fell to 32.6% (2016: 47.6%). Gross profit grew by 8% to £2.983m (2016: £2.760m). 

Selling, distribution and administrative expenses rose, reflecting investment in additional resources to implement the Group's growth strategy, with investment focused on new store openings and the marketing and development of our digital platforms.

Operating losses before exceptional costs were £0.960m (2016: profit £0.420m). Operating losses after exceptional items were £2.235m. There were no exceptional items in 2016.

After finance costs the reported loss on ordinary activities before taxation was £2.256m (2016: profit £0.403m). Reported loss per share was 5.85p (2016: earnings per share 0.99p).

Statement of Financial Position

Total equity at 31 December 2017 decreased by 32.4% to £4.627m. Working capital has reduced, with inventories (carried at the lower of cost and net realisable value) at the year-end totalling £3.306m, a reduction of £0.950m on the value at 31 December 2016.

Total liabilities increased to £1.402m (2016: £0.921m) 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 £0.360m (2016: £2.056m).

Proceeds from the shares issued in the year totalled £5,000 gross and net.

£1.460m has been taken out of working capital in the year (2016: invested £1.262m) and £1.162m (2016: £0.833m) has been invested in fixed assets (excluding business combinations) to support the continued growth of the Group.

Key Performance Indicators

The Directors consider the following to be the KPIs of the Group:

 

2017

2016

Group sales

£9.153m

£5.7990m

Gross profit percentage

26.4%

47.6%

Gross profit percentage before exceptional items, consisting of provision for inventory write down, £568,079 (note 3)

32.6%

47.6%

Net (loss)/profit before tax and exceptional items percentage*

(10.7)%

6.9%

*Net loss, £980,673 is calculated as follows; Loss before taxation (£2,256,216), add; exceptional costs (note 3) £1,275,543. This is then expressed as a percentage of turnover.

 

 

 

 

Average customer baskets

 

 

Own website platforms               

£70.38

£56.28

Third party website platforms

£14.40

£14.02

In store               

£29.99

£25.68

The "average customer basket" is a metric used frequently in the retail sector to provide an indication of the average total spend per customer visit.

FISHING REPUBLIC PLC
CONSOLIDATED INCOME STATEMENT

Year ended 31 December 2017

 

Notes

2017

£

 

 

2016

£

Revenue

2

9,153,169

5,799,065

Cost of sales

 

(6,170,127)

(3,038,895)

Gross profit before exceptional charges

 

2,983,042

2,760,170

Exceptional provision for inventory write down

3

(568,079)

-

Gross profit after exceptional charges

 

2,414,963

2,760,170

Other income

 

18,630

5,155

Selling and distribution expenses

 

(2,183,123)

(1,303,721)

Administration expenses

 

(1,778,298)

(1,041,638)

Operating (loss)/profit before exceptional costs

 

(1,527,828)

419,966

Exceptional costs

3

(707,464) 

-

Operating (loss)/profit after exceptional costs

 

(2,235,292)

419,966

Finance costs

 

(20,924)

(17,065)

(Loss)/profit on ordinary activities before taxation

 

(2,256,216)

402,901

Taxation

 

41,389

(82,130)

(Loss)/profit after taxation

 

(2,214,827)

320,771

Total comprehensive (loss)/income attributable to the equity owners

 

(2,214,827)

320,771

 

Basic (loss)/earnings per share (pence)

4

(5.85)

0.99

Diluted earnings per share (pence)

4

-

0.96

 

FISHING REPUBLIC PLC
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 December 2017

 

 

Group

2017

£

Company

 2017

£

 

Group

2016

£

 

Company

 2016

£

Non-current assets

 

 

 

 

 

Property, plant & equipment

 

1,589,109

-

795,495

-

Intangible assets

 

556,246

6,832

445,283

6,832

Investments

 

-

514,500

-

514,500

 

 

2,145,355

521,332

1,240,778

521,332

Current assets

 

 

 

 

 

Inventories

 

3,306,197

-

4,256,630

-

Trade and other receivables

 

218,000

4,223,244

205,678

3,110,694

Cash and cash equivalents

 

360,170

65,492

2,055,699

1,500,135

 

 

3,884,367

4,288,736

6,518,007

4,610,829

Total Assets

 

6,029,722

4,810,068

7,758,785

5,132,161

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

1,402,209

13

880,056

-

Deferred tax liability

 

-

-

41,389

-

 

 

1,402,209

-

921,445

-

Total Liabilities

 

1,402,209

13

921,445

-

 

Equity

 

 

 

 

 

Share capital

 

378,562

378,562

378,268

378,268

Share premium

 

5,057,639

5,057,639

5,052,933

5,052,933

Retained earnings

 

(808,688)

(626,146)

1,406,139

(299,040)

Total Equity

 

4,627,513

4,810,055

6,837,340

5,132,161

Total Equity and Liabilities

 

6,029,722

4,810,068

7,758,785

5,132,161

 

Company (loss)/profit after taxation

 

(327,106)

 

57

 

 

The financial statements were approved and authorised for issue by the Board on 30 May 2018 and were signed on its behalf by J H Newman OBE Executive Chairman

FISHING REPUBLIC PLC

STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2017

 

CONSOLIDATED

 Share capital

£

       Share premium

£

Retained profits

£

Total equity

£

Balance 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 and brought forward at 1 January 2017

378,268

5,052,933

1,406,139

6,837,340

Loss after taxation for the financial year

-

-

(2,214,827)

(2,214,827)

Issue of shares

294

4,706

-

5,000

Balance at 31 December 2017

378,562

5,057,639

(808,688)

4,627,513

 

 

 

 

 

 

COMPANY

Share capital

£

Share

Premium

£

Retained

Profits

£

Total

equity

£

Balance at 1 January 2016

268,750

1,574,649

(299,097)

1,544,302

Profit after taxation for the financial year

-

-

57

57

Issue of shares

109,518

3,676,108

-

3,785,626

Share issue costs

(197,824)

-

(197,824)

Balance at 31 December 2016 and brought forward at 1 January 2017

378,268

5,052,933

(299,040)

5,132,161

(Loss)/profit after taxation for the financial year

-

-

(327,106)

55

Issue of shares

294

4,706

-

5,000

Balance at 31 December 2017

378,562

5,057,639

(626,146)

5,137,216

FISHING REPUBLIC PLC

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS

Year ended 31 December 2017

 

 

 

 

Group

2017

£

Company

 2017

£

Group

2016

£

Company

 2016

£

Operating activity

 

 

 

 

 

(Loss)/profit before tax

 

(2,256,216)

(327,093)

402,901

71

Depreciation                                                

 

188,800

-

70,962

-

Amortisation

 

63,776

-

-

-

Impairment of goodwill

 

162,462

-

-

-

Interest expense                                                     

 

20,924

-

17,065

-

Loss on disposal of tangible assets

 

49,835

-

-

-

Loss on disposal of intangible assets

 

33,065

-

-

-

(Increase)/decrease in inventories                        

 

950,433

-

(1,809,725)

-

(Increase)/decrease in receivables                      

 

(12,322)

(1,112,537)

30,645

(2,357,134)

Increase/(decrease) in payables                           

 

522,154

(13)

517,339

(2,058)

Net cash (outflow) from operating activity

 

(277,089)

(1,439,643)

(770,813)

(2,359,121)

Investing activity

 

 

 

 

 

Purchase of property, plant and equipment          

 

(1,032,250)

-

(612,100)

-

Acquisition of intangible assets                             

 

(370,266)

-

(220,901)

(448)

Outflows in respect of business combinations

 

-

 

(212,462)

-

Net cash (outflow) from investing activity

 

(1,402,516)

-

(1,045,463)

(448)

Financing activity

 

 

 

 

 

Loan repayments in year

 

-

-

(267,677)

-

Interest paid

 

(20,924)

-

(17,065)

-

Repayment of loans from directors

 

-

-

(77,388)

-

Proceeds from share issue net of costs

 

5,000

5,000

3,587,802

3,587,802

Net cash inflow/(outflow) from financing activity

 

(15,924)

5,000

3,225,672

3,587,802

Cash and cash equivalents at start of year

 

2,055,699

1,500,135

646,303

271,902

Cash and cash equivalents at period end

 

360,170

65,492

2,055,699

1,500,135

1.   BASIS OF PREPARATION

The consolidated financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs), as adopted by the European Union.

Standards, amendments and interpretations not yet effective

The financial statements have been prepared on the historical cost basis, except for the revaluation of derivative financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Basis of consolidation

The Group's financial statements consolidate the financial statements of Fishing Republic plc and its subsidiaries ("the Group"), as they form a single entity.  Intercompany transactions and balances between group companies are, therefore, eliminated in full.

On the basis that the main objective of the effective Group reconstruction and AIM listing in 2015 was to facilitate raising finance for future expansion, and the ultimate equity holders and their rights were unchanged following the transaction, it was deemed appropriate to adopt the merger method of accounting in respect of the combination at that time.

 

In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities were not adjusted to fair values at the acquisition date. The results of acquired operations have been included in the Consolidated Income Statement from the beginning of the financial year in which control was obtained. The difference between the nominal value of shares issued, plus the fair value of any other consideration, and the nominal value of the shares received in exchange was shown as a movement on Other Reserves.

Presentation of company statement of comprehensive income

In accordance with section 408 of the Companies Act 2006, Fishing Republic plc is exempt from the requirement to present its own Statement of Comprehensive Income. The amount of profit for the financial year recorded within the financial statements of Fishing Republic plc was £55 (2016: £57).

Going Concern

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.        REVENUE              

Revenue represents the invoiced value of goods sold net of VAT and after allowances for returns and trade discounts:

 

2017

2016

 

£

  £

Retail store sales

6,743,482

 4,143,213

Online sales

2,409,687

 1,655,852

 

9,153,169

5,799,065

 

 

3.   EXCEPTIONAL COSTS

Following a downturn in results during the second half of the year, in December 2017 a complete review of business operations and re-structuring was implemented.  The resulting costs were:

 

Charged to cost of sales

 

2017

£

2016

£

Provision for inventory write-down

 

568,079

-

Charged to operating loss as overheads

 

 

 

Reorganisation costs

 

393,922

-

Aborted acquisition costs

 

86,472

-

Store closure costs

 

64,608

-

Goodwill written-off

 

162,462

-

 

Total exceptional costs

 

1,275,543

 

4.   EARNINGS PER SHARE

(Loss)/earnings per share has been calculated on the attributable (loss)/profit for the year and the weighted average number of shares in issue during the year.

 

 

 

2017

2016

(Loss)/profit for the year (£)

 

(2,214,827)

320,771 

(Loss)/profit after taxation (£)

 

(2,214,827)

320,771

Weighted average shares in issue - Number

 

37,841,776

  32,473,108

Basic (loss)/earnings per share (pence)

 

(5.85)

0.99

Comparative year ended 31 December 2016 only;

 

 

 

Diluted earnings per share (pence)

 

 

0.96

 

 

 

 

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 for 2017, the calculation of diluted earnings per share using the share options in issue would be anti-dilutive. Therefore, diluted EPS has not been calculated.

For the comparative year ended 31 December 2016, 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 is calculated using the Treasury Method.

 

5.   SUBSEQUENT EVENTS

At the end of January 2018, the Company raised £1.3m (gross) through a placing of 13,000,000 new ordinary shares at a 10p placing price. The placing was supported by existing shareholders, including Directors, as well as by a number of new shareholders. 

The net proceeds are being used to further advance and develop the Company's e-commerce operations, logistics and merchandising activities, as well as providing additional working capital to accelerate the rate of growth of online sales. 

 

Since the beginning of the new financial year, five stores have been closed, in Clavering in Essex, Ipswich, Mildenhall, Swindon and Huntingdon, due to poor trading performance.

 

6.   ANNUAL GENERAL MEETING

Fishing Republic plc's Annual General Meeting will be held at 10.00 am on Wednesday 11 July 2018, at the Group's offices at Unit 9, Ashley Business Court, Rawmarsh Road, Rotherham, S60 1RU.

 

7.   FINANCIAL STATEMENTS

The full financial statements will be posted to shareholders in June 2018. Further copies will be available of the Company's website, www.fishingrepublic.co.uk and from the Company's registered Office at Vulcan Works, Chesterton Road, Rotherham S65 1SU.

 

 

 

          


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