Angling Direct PLC (ANG.L) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Angling Direct PLC Half Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself; however, the company can review all questions submitted today. And we will publish our responses when it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll. I would now like to hand you over to the executive management team from Angling Direct PLC. Steve, good morning, sir.

Good morning, everyone. Welcome to Angling Direct's Half Year 2026 Interim Results. I'm with my colleague, CFO, Sam Copeman, will take you through our short presentation and then look forward to taking some questions at the end of that. So first up, a copy of our RNS, some extracts from that. In terms of the half from a financial perspective, record revenues, substantial margin growth, and we're trading, as we set out later on, so we're -- comfortably ahead of market expectations. And the group for the first time is signposting a full year revenue ahead of GBP 100 million. Group earnings now, we're looking to upgrade those by about 14% to just over GBP 4.3 million. And again, the business demonstrating its capability in terms of margin expansion and substantial earnings growth. Operationally, in the half, we've continued with substantial strategic delivery, in particular, leveraging MyAD, our loyalty and repeat purchase program, and the benefits of the insights from our customers coming through in terms of our customer growth and the revenues we're driving from that customer base. Alongside that, we've continued to invest in the business in terms of looking to develop further efficiencies alongside investing for growth, in particularly around technology and new space. On the slide now is our 6 medium-term objectives that we set out in May '24, and we continue to look at how we track against those medium-term objectives. I'll just briefly run through our progression of each of those, and then we'll cover off as we go through the financials a little bit later in some more detail. So we set out back in May '24 an ambition to grow the U.K. business to over GBP 100 million revenues. So that was about the time we set that ambition out. That was sort of an ambition of over 30% growth in the revenue line. Right now, we're tracking to be a just shade below GBP 100 million for the year to January '26. And so we're signposting for the year to '27, we're well placed to deliver that objective, which would be just about -- just a smidge over 2 years in terms of delivering that, demonstrating that we're continuing to take share as we're becoming the consolidator of choice in the market. Not only is our new space in terms of new stores playing a role, but more importantly, our like-for-like growth from our existing customer base and existing locations is continuing to demonstrate real strength, like-for-likes in the period showing substantial growth for the whole of the U.K. of around just over 14%. In terms of the earnings, adjusted EBITDA growth for the half of over 27% in the U.K. to just over GBP 4 million, GBP 4.1 million. Again, demonstrating our capability to improve both the pound notes as well as the ratio, a 60 basis points improvement to just 8% at the half year. And we're signposting for the full year now, that U.K. earnings adjusted EBITDA around sort of GBP 4.8 million. Clearly, there's a little bit of work still to do to get us to the GBP 6 million ambition, but bridging from that GBP 4.8 million to the GBP 6 million, there's sort of 3 key building blocks to that. Firstly, leveraging our existing customer base and the investment we've made in our customer insights platform and MyAD. The new space that we've executed in terms of both in 2025 and in '26, we're sort of signposting around sort of 14 new locations across those 2 years, which will deliver sort of substantial earnings growth for us. And alongside some of the investments we've made in the business, particularly around technology, continue to leverage that provides a clear platform for further efficiencies in the business to help bridge back to that GBP 6 million ambition. We're signposting that to be in 2028. Clearly, as we move through the next few months, in particularly the autumn statement, we'll review that again when we're clear on the cost landscape. In terms of growing -- creating Europe's largest fishing club, MyAD and leveraging its value, 21% growth in our members in the half up to just a shade under 500,000 again, demonstrating the appeal of MyAD, why wouldn't I join concept in terms of what it offers members. But more importantly, it's giving increasing insight into way our customers shop and behave and interact with us. In particular, we continue to look at our omnichannel customer being the most valuable customer to us. And you can see there on the slide, our omnichannel customer participation was up 160 basis points in the half as we start to leverage that new investment in the customer insights platform. In Europe, our -- sort of our fledging European business, our ambition is to move that through to a breakeven position. And we continue to look at how we only pursue profitable sales in Europe in a more challenging market landscape. And we made strong progress in the half with a 40% reduction in the losses in that business down to only GBP 200,000. And over the last 3 years, we've reduced the drag of those losses by around 3x, and it continues to sort of offer a longer-term growth prospect for the business against an appropriate amount of risk capital being deployed at this point in time. Deployment of surplus liquidity to grow the business. Again, cash deployment in the half. We both backed new space and technology investment. Sam will come on to that when we go through our sort of capital spend later on in the presentation, but we're very much still in the mindset of investing for growth and using that strong balance sheet that we continue to have in line with our capital allocation policy to have sort of primacy of growth of the business whilst being mindful in terms of how we deploy that surplus liquidity just to ensure that the stock remains an attractive investment in terms of -- relative to its screen price. Lastly, Angling's largest retail responsible employer was still around 500 colleagues. And we're continuing to sort of develop our offer both to our colleagues and our wider community. We launched the AD Community Fund in the 6 months, which was around us having a more structured way of supporting both environmental and community initiatives in terms of the retail population -- sorry, the Angling population. And at the same time, we've continued to sponsor the Angling Trust work on water quality and the testing of that. And that's becoming increasingly important as folks have seen in the news flow that continues to be a hot topic. In terms of operational highlights, we've got some good detail in the pack that folks can read. I'll just pull out a few. In the U.K. customer space, that implementation of our customer data and insights platform sort of in the middle of the year was a real sort of milestone for the business. We've got behind that as a team very quickly. And we're increasingly seeing the benefits of that, both in terms of our digital conversion rate, our e-mail traffic open rates, the way we're able to automate traffic based on previous behaviors and indeed, the way we've contemporized the sort of the on-site experience in terms of search and recommend. In the half, we've increased the spend that comes from our MyAD population who are omnichannel customers by over 370 basis points, and those omnichannel customers continue to spend around GBP 500 a year with us. And so the importance of growing that community to engage with us both physically and digitally is increasingly important. In the retail space, the middle bullet there, we've got an investment program of just around GBP 2 million in terms of digital shelf edge labeling. Again, as the cost [ winds ] particularly around the living wage and the well signposted national insurance increases, that becomes an increasing component of how we look at driving efficiencies in the business. We've made some initial rollout of that just before the half, and we're on course to have fully rolled out across the estate before Christmas this year. The bottom bullet there, we've continued to invest outside of digital shelf edge in the technology stack for the store estate. In particular, we've sort of updated our store handheld technology. That's around giving colleagues the capability to be on the shop floor rather than out the back. And that's really helped us look at how we go for our [indiscernible], how we look at when we want the colleagues to be available and how we see we can sort of deal with sort of run-of-the-mill tasks within the store in a more efficient fashion. The colleague ratio to sales improved 20 basis points in the half, which we think is a particular standout given the cost headwinds from the near 10% coming from the living wage and national insurance. Digitally, on the right-hand side there, we launched something in the half across the whole estate, we call it shop the range. That gives an in-store customer the capability to interact with us digitally and access the full range that we offer digitally from having it delivered either to their house the next day or back to the store. We've seen that be a real success in terms of sort of engagement from the customer base, and we're trading over GBP 200,000 a month already through that technology and that capability. That sort of conflates with the way we're looking at the customer data about how we're looking for customers to engage with us both digitally and physically and prove a bridge sort of as the first step of someone having an omnichannel experience with us. Over the page, Europe, as I said, the strategy is very much one of only pursuing profitable sales. We've set out that we want to reduce the losses, and we've reduced, as I said, that drag by threefold now over the last 3 years. We continue to balance profitability against the optionality of those markets, particularly Germany and the Netherlands, offering some real long-term growth prospect to the group as we see the returns in those markets right now, potentially providing the same landscape as the U.K. a number of years ago in terms of the platform for consolidation and more commercial returns in the sector. In terms of the sort of key self-help we've done in the 6 months, we have put in place a revised distribution model, third-party distribution model, and that's helped reduce our [ PIC ] cost by over 40 basis points in the half, and alongside that from a capital deployment aspect, we've scaled up what we call just-in-time stock capability with a number of our suppliers, where we've increased our range by over 25% without any further working capital investment into the business. That's got the capability to expand further and test how we look at whether we can change the economics of the basket without materially investing further at this point. In the middle section there, commercially, we've always set out that our own brand strategy is a key leg of how we see margin development. We moved north of 38% in the U.K., 38.4% gross margin at the half, again, demonstrating we can grow the sales line alongside the margin at the same time. Our own brand grew its gross profit by 55% and the sort of the cash penetration of the business is just close to 14% at the half, again, where we've set ourselves a short-term ambition of reaching 50%, and we've achieved -- virtually achieved that within a 2-year period. In terms of communities and sustainability, just down on the bottom right-hand side there, we talk about protected colleague roles through a targeted pay review. The living wage continues to be a challenge for our sector. And we're having to look at increasing options around technology deployment, increasingly AI adoption in terms of how we give colleagues more capacity in their day-to-day role to engage in value-add activity as opposed to turning the handle on rudimentary sort of non-value-add tasks. At the bottom, we continue to reshape our Board. Our founder at the end of January will step down from the Board as we continue to sort of look to refresh how we're bringing sort of new ideas and new focus into our boardroom. At that juncture, I'll let Sam take you through the financials, and then I'll come back to talk about the focus for the remainder of the year and our outlook.

Thanks, Steve. So as usual, just a few headlines, and then we'll get into a bit more detail on the next few slides. So starting in the U.K. So we've maintained the revenue and adjusted EBITDA growth momentum that we started building that really accelerated over the second half of FY '25. And we've also now delivering progression in the adjusted EBITDA margin in the first half year-on-year. In terms of sales, the strength of the like-for-like sales performance in the store estate and the online business in aggregate has resulted in the like-for-like revenue growth of 14.2%. And just as a reminder, that was 12.6% in the second half of last year versus 2.2% in the first half last year. Alongside that, the accelerated FY '25 new space is also scaling in line with what we expected, along with this -- the one new store in the first half, leaving overall U.K. revenue growth at 17% with that growth transaction volume driven. In terms of the read-through of that then into the adjusted EBITDA, U.K. adjusted EBITDA growth again outstrips U.K. sales growth, meaning the adjusted EBITDA margin grew by 60 basis points year-on-year in the half. And that's largely through the gross margin development of 130 basis points, as Steve said, to 38.4% and that now represents a circa 600 basis point improvement over the last 6 years. The 130 basis points in the half has been primarily through improved supplier terms, range architecture and own brands, and I'll come and talk a bit more about that shortly. But going into this year, we always knew we needed around circa 80 basis points of gross margin progression to offset the cost headwinds in terms of the national living wage increases and particularly the national insurance changes for employers. So 50 basis points of the 130, i.e., 130 less the 80 have then flowed through to the adjusted EBITDA margin along with a further 10 basis points through further leveraging the cost base and results in that 60 basis points gain in the half year-on-year. Then moving to Europe. The focus continues to be on earnings accretive growth to deliver the lower losses year-on-year. So it reduced the earnings drag whilst retaining optionality over that growth market. For the like-for-like European business, which is the total European business less the Utrecht store, this primary focus on the loss reduction has delivered a circa 40% improvement in the losses year-on-year and now represents just 6% of U.K. adjusted EBITDA. And for the store, the revenues continue to scale year-on-year with the store now at breakeven in H1, which is a key milestone as we continue to learn and prove out the unit economics of that opportunity. And then finally, on cash, we're GBP 5.5 million lower year-on-year at the end of the half, reflecting the continued investment in the medium-term objectives, particularly around the CapEx and working capital and also in terms of the return of excess liquidity through the buyback to shareholders in line with our capital allocation policy. So moving into a bit more detail around revenue and gross profit and again, starting in the U.K. So the U.K. total like-for-like growth metric is now a really key metric for us in the business as we become increasingly omnichannel through MyAD, a stockpile that's leveraged across both the channels and as we continue to leverage the cost base. And as I said, that strengthened U.K. like-for-like revenue growth we saw in the second half of last year has really been maintained in the first half and is volume driven with store growth underpinned by footfall, which was up circa 14% on a like-for-like basis and online growth driven by higher conversion, which was up 160 basis points or 23% on a ratio basis. The FY '25 space continues to scale in line with expectation along with the additional new store in H1. And that sort of reflects the opportunity pipeline in terms of -- at the moment, we have more greenfield versus acquisition opportunities. So external planning time lines come into play a bit more and become a key factor. But we still remain keen on both -- and agnostic on acquisition and greenfield opportunities being broadly stacking up to the same model in terms of how we're evaluating those opportunities, and we've got a very strong pipeline for H2. As I said before, gross margin has progressed 130 basis points in the U.K., and that's against 140 basis points in FY '25 versus FY '24. So we're very much keeping up our momentum in that area. And just to sort of talk through the key bridging components of the 130 basis points. So 50 basis points is through improved supplier terms, 70 basis points through optimizing the range architecture in terms of the supplier mix and 30 basis points through own brand progression with that gross profit growth of 55% in the first half, alongside then an additional 10 basis points to what we call service revenue. The classic examples there being commercial marketing, such as when a supplier may sponsor a gondola and in-store or where we have -- now have in-store services around real spooling and real servicing. Then we come down the snake by 20 basis points on additional MyAD promotional activity to help drive frequency, but also to ensure we're still acquiring the valuable MyAD data through compelling offers and 10 basis points down the snake through improved shrink -- sorry, slightly worse shrinkage. Moving to the U.K. and start with the Utrecht store. So revenue continues to scale, and we still benchmark this performance versus a cohort of similar U.K. stores, and it continues to operate at the lower end of the expected corridor but still within that corridor. And that's primarily linked to the category mix where if it had a similar mix to a U.K. store between consumable categories and the more capital-intensive categories, we would see higher sales. But conversely, because we see higher consumable category mix in Europe, we're seeing a slightly higher gross margin. So if we were then, as I say, to rightsize the category mix against what we see in the U.K., we would see a lower margin. And therefore, the store would show a similar structural position to the European online business in terms of the competitive pricing environment. So really, that pricing continues to be the key factor in terms of proving out the unit economics of the store. In terms of the like-for-like business, excluding Utrecht, the focus is -- as I say, is really reducing the losses. And a key component of this has been deprioritizing the French business where the unit economics are better on a gross margin basis, but erode at a contribution level, hence, the focus of what we're -- in terms of focusing on Germany and the Netherlands. And they've gone modestly forward, Germany at 0.3% and Netherlands at 0.4%, and we carefully and dynamically participate in those markets given the competitive pricing structure and paid search landscape to make sure we're delivering sales and unit economics that make sure they are delivering our loss reduction ambitions. We've also further managed the fixed cost within the European business, particularly some of the initiatives we drove in the second half of last year, for example, the third-party logistics agreement, which is also helping to underpin that year-on-year loss progression. And so overall, the EU gross margin is up 60 basis points, but the focus really is on the bottom line effort around the EBITDA and driving the loss ambitions there. So we're now, as I said before, seen a 40% improvement in the EU like-for-like business losses in the first half. Moving on to just a little bit more on adjusted EBITDA. And as I've already said, slightly in the U.K., but as I've already said, just to briefly reiterate, the 60 basis points is a combination of 50 basis points through the improved gross margin progression and the flow-through of that into EBITDA alongside 10 basis point improvement through the leveraging of the cost base to give that 60 basis points improvement. And in Europe, the store -- the focus has very much been going first on getting the store to breakeven, which is done in H1 and reducing those losses, as I say, by 40% for the like-for-like business and 46% for the overall European business to just leave it now just 6% of the U.K. adjusted EBITDA. And then finally, on cash and just working through some of those key components of the bridge there that we haven't already touched upon. So starting with working capital. At this point in the year, we'd expect a circa GBP 3 million working capital inflow at the summer working capital low in a steady-state business. So if we, for the purposes of this slide, assume that GBP 3 million hits us in July, it probably is more likely in August at the peak trading point. But against that frame of reference, we've got GBP 0.5 million of cash held by our broker to execute the buyback that we're unable to report in cash is reported in that working capital movement there on the screen, alongside around GBP 1 million of new space stock, which includes some of the stores we've done in H2 as we started to build those stockpiles in the first half. We've got GBP 1 million of own brand stock, which underpins that 55% own brand gross profit growth in the first half, with the balance representing higher levels of deal stock and depth as we go into the August peak trading period and ahead of the Black November proposition. Moving across the bridge to CapEx. So our CapEx investment is firmly focused on new space in terms of developing the store estate, but also increasing the efficiency and scale of the web fulfillment operation. And the standouts kind of making up that GBP 2.1 million we've deployed, GBP 900,000 is the first tranche of cash on the digital shelf edge labeling solution that we'll be rolling out in the second half of the year. We've got GBP 400,000 on new space in terms of Chester that we opened in the first half and most of Bradford that opened up very -- in very early August. We've got GBP 300,000 on the refit of Waltham Cross and the resite of Leicester where we had rent increases that meant we even needed to drive incremental sales or resite of the store. And finally, GBP 200,000 on the scaling of the Rackheath web fulfillment hub, where the projects will be delivered in H2, but that improves both our goods in and pick efficiencies, and it also allows us to link up our automated picking and packing technology to drive additional efficiencies as well. And then just finally, the buyback also continues to run with GBP 1.7 million deployed to date and GBP 1.1 million since the 31st of January, and that's shown there on a net of cash received basis from the exercise of some options. So just to briefly summarize this before I hand back to Steve. So we continue to progress against our medium-term objectives in terms of, firstly, strong progression in the U.K., underpinned by the 14.2% total like-for-like sales growth and the gross margin progression of 130 basis points, delivering that 60 basis points improvement in adjusted EBITDA margins, continuing to reduce the European losses and getting that store to breakeven being a key milestone. And then thirdly, continuing to deploy cash into CapEx and working capital to underpin the delivery of the medium-term objectives as well as then returning excess liquidity through the buyback to shareholders in line with our capital allocation policy.

Thanks, Sam. I'll just go through some focus areas we've got for the remainder of the second half of full year '26 and as we progress into half 1 FY '27. Again, we've provided a good amount of detail on the next couple of slides that sort of folks can read at their leisure. I'll just pull out a few of the key points on these slides. So firstly, on the U.K. customer, the real focus is around how we increasingly personalize the use of MyAD in terms of targeting customers and looking at how they behave, how they shop and how we increasingly use our shopper marketing to make sure we're putting offers and product in front of the customer who's got high buying intent and the most likely to convert. Secondly, the final bullet down there, we don't have a full click and collect capability right now. Our shop the range technology that I referenced earlier on doesn't have that embedded within it. We see that as another string to the bow that we can add. And we're going to focus our technology team on that over the next quarter as we look to sort of update our infrastructure and be able to offer that as we move into the first half of financial year '27. In the retail column, in the middle there, one of the challenges to us as we continue to take more of the U.K. market share is there are catchments that we are finding challenging with our existing either scale model or smaller scale model to be able to look at unit economics that are compelling, and we've challenged ourselves to have a look at a model that could perhaps offer a different experience in terms of the shopper and how we could look at a different format in terms of accessing those smaller catchments that still form a reasonably material component of the U.K. market. In the U.K. digital space, whilst MyAD obviously forms a key component of the customer acquisition strategy, outside of that, we continue to look at ways to improve the efficiency of that operation. And in particular, we're focused on how we increasingly join up both our picking automation capability and our packing automation, both of which we've previously invested in with some further investment being able to join up those 2 capability offers the capability to get ahead of potential changes in the national living wage being signposted for April in 2026. Over the page, Europe, as Sam said, it is very much about us being on the loss reduction path whilst maintaining the optionality of being able to pivot back in and reinvest in that market. At the point we see more structural change coming, particularly in the gross margin landscape. We're balancing our business-wide resource allocation against that whilst ensuring that we can maintain optionality as we increasingly have the data points to establish when might be a more appropriate time for wider participation, firstly, in the Netherlands and then more laterally into Germany. On the commercial front, data-driven customer engagement has been a theme, I've been talking about throughout this presentation. We're increasingly driving that into our supply chain engagement, particularly as we're seeing our key partners are sort of contemporizing the way they look at data exchange between parties, and we see that as a real sort of differentiator as ourselves in the market versus our competition in terms of the way we can plan and trade with that supply chain. It isn't just about terms. It is about efficiency and availability, and we're sort of increasingly focused on that triangle of those 3 points to bring us better value into our supply chain. On the right-hand side, community sustainability, just the last bullet there. We are increasingly engaging in an AI adoption process. How can we use that in our customer service offer, how can we use that in our procurement offer. We do see ourselves, again, from an industry standpoint, being the best place to extract value from the use of our sort of AI adoption, and we'll increasingly focus into that into the next 6 months and provide a more fulsome update as we come into May next year of the full year trade. Finally, our outlook statement there on the screen that we put up. As I mentioned at the front of the presentation, we have upgraded both our revenue forecast and our EBITDA forecast. Just to reiterate, group revenue, we are now signposting past GBP 100 million for the first time with the U.K. sort of just slightly beneath the GBP 100 million mark and an adjusted EBITDA forecast sort of increasing around 14% up to GBP 4.35 million for the group. We see those as sort of further demonstration of the strategic progress we've made and leaves us well placed to deliver against those medium-term objectives that I set out at the front of the presentation. That concludes our formal presentation.

We'll now move on to Q&A. And we've got some pre-submitted questions, which I'll -- Sam and I will go through, and then we'll answer any further ones that have come in during the presentation. So I'll read -- I'll go first, Sam, and you can take over. So firstly, what's a realistic goal for the total number of MyAD subscribers? How big a number is possible? So we have moved past the 0.5 million mark now. So post the 6-month period, we're continuing to gain new members. The U.K. license sales are around 750,000. We know from discussions with the environment agency that isn't the same 750,000 people each year. There is a reasonable amount of churn in there. We haven't set out a formal ambition, but clearly, there's several hundred thousand members left to go in terms of how we move into those smaller catchments, I talked about earlier on in the focus for sort of the latter part of FY '26 and FY '27 that we see as a cohort that we can attract and then sort of work with their data and work with them in terms of offering them product and offers that's appealing to them. Number two, and generally, how much more growth potential is there in the U.K. in terms of store numbers and online market share participation? So the total U.K. market based on the most contemporary data, which is back in 2018, it was north of a GBP 500 million market. Clearly, that's got some aspects in that we're not targeting as a business right now in terms of game fishing, secondhand and other elements. We remain convinced there's a material sort of component of the market still for us to left to go at, and we need to look increasingly at how we use that sort of store format option to go at those smaller catchments. In May, when we're in a position having fully evaluated that, we'll clearly come out with a number that is north of GBP 100 million given where we are right now. But again, our focus is on delivering that GBP 100 million and setting out a clear landscape for where we're going to go beyond the GBP 100 million when we come around to May next year.

I'll take the next one. This is quite a long question, so bear with me. Please, can you help us understand the move in inventories in 1H better? You mentioned in your prepared remarks that you have invested GBP 1.5 million in the new stores, but there was still substantial further investment in inventory. Which areas of the business was this investment made, own brand? And will each -- such substantial investment be required on an ongoing basis? Or should we expect stronger free cash flow generation? So if we look at the stockholding year-on-year at the half at 31st of July, we're just a smidge over GBP 4 million high year-on-year. And if you take out the cocktail of new space and own brand of that, which is the thick end of GBP 2 million, the rest of that stock growth is really linked to the like-for-like growth in the underlying business. Now what that does point towards is our sort of relatively flat stock turn at the moment, which is an area we're increasingly focused on as we look to sort of get our ROCE ambition, particularly for the U.K. towards that sort of double digits to sort of low teens, which is our sort of stated aspiration there. And at the moment, we're doing a good job in terms of work in the numerator, but we want to make some more progress on the denominator of that. And really to get that stock turn moving, the key -- big nut for us to crack there is in terms of what we call trade packs. And that's where we might only want one of something, but a supplier will stock them in, say, a 10 pack, and we've got to commit to the full 10 and somewhere around 60% of our 17,000 core SKUs in the U.K. are in trade packs. So that's the big opportunity there in terms of managing inventory and improving our operating cash flow generation.

Number four, please, can you discuss your views on buyback versus dividend? Shares continue to suffer from a lack of liquidity and despite incredibly strong operational performance continue to derate. Given the strong cash flow generation, cash balance sheet and manageable investment needs, would you consider a dividend as a means of attracting a new investor base and providing a clear mark of how undervalued the company is? As you'd imagine, we're in continued dialogue with our broker and sort of our substantial shareholders on this. We remain of the view investment in the business growth is the key driver for this. We have got a live buyback in place. That buyback was put in place where the shares were valued at what we believe was a substantial discount to their fair value. We continue to sort of review that on an ongoing basis, and we're only deploying capital into that buyback where we believe it represents sort of substantial value to the shareholder in terms of buying that back at a discount. We continue to review the dividend option. We are not of the belief right now that the sort of the level of yield we would be paying on a dividend would attract a substantial new shareholder base relative to what we have today. And again, we continue to -- we'll continue to look at that. We've got a refresh of our buyback on the 9th of December, and that will form a component of that discussion again. But right now, we're mindful of the liquidity of the stock relative to the buyback program and the need to demonstrate increased growth from our investment. Number five, why have you been so timid in your approach to buybacks given the stock valuation disconnect on shares? Operating performance is very strong. And this is probably one of the most undervalued companies globally. I'm not going to comment on whether it's the most undervalued globally. What I would say is I don't think we have been timid. I think we've clearly demonstrated and tested ourselves around the Board table around the buyback is there to do -- to provide shareholders with real value and where we've seen it at a substantial discount, we have participated in the buyback, and we continue to review that cap and we'll continue to review that cap where we believe it offers value. We think clearly, our shares have rerated. We're up to 55p towards the back end of last week. And if we take ourselves back 2 years, there have been substantial accretion in the price, which reflects the strength of the operational performance. And obviously, the buybacks played a role in sort of ensuring that share price has a little bit of stability.

I'll take the next one. Please, can you discuss the competitive dynamics in Europe? You're a company operating at less than 30% gross margin, which is below the lowest levels you've achieved in the U.K. even when the market was at peak competitiveness. Clearly, you're a smaller player in Continental Europe, but do you feel the challenge is lack of brand awareness? Or is there a structural reason your competition in the Netherlands and Germany are able to make an economic return at circa 25% gross margins, which makes this a harder market to operate within? So I think the first thing I'd just add there is actually in the U.K. online business at peak competitiveness, we did see margins below 30%. So we have seen this before. So we do feel that the European market is showing some of the signs of what we saw back in the U.K. kind of pre-2020. Now I think none of -- or our opinion would be none of our competitors in Germany and Netherlands are making what we would consider a commercial return at the gross margins being achieved in Europe at the moment. And nobody -- I don't think anybody could make really good economic returns at a circa 25% to 30% gross margin. And what -- so we very much see as a structural challenge in the market, which is really driven by the competitive pricing environment. And we believe that has to change at some point and that some point is coming sooner rather than later. And so that's why we're really keen to retain the optionality over that growth opportunity, but whilst reducing the earnings drag on the overall group profits in the meantime. Next question is, please can you discuss U.K. growth? One, please can you share the like-for-like performance for current trading? And two, given the strong growth in the first half, have you won market share? And has this come from mom-and-pop operators or larger competitors? So I think we're not going to get into sort of giving out the like-for-like sort of month by month, blow by blow. But what -- I think it's fair to say that it's sort of over that August, September period where we released the sales numbers in our RNS. We definitely saw the back end of August and into -- and through September a softening in our sales, which, on the one hand, would be expected as we come off the seasonal peak, that would be fairly normal for us. It's made it slightly more challenging such in that sort of August into September last year was very strong. So it's a very tough comparative we're now coming into, and we are seeing some of that. In terms of then the relative performance against the mom-and-pop or large competitors. So yes, we think we have outperformed those. We do think that based on some of the data suppliers have shared with us, that the competitors are probably sort of -- have seen some growth year-on-year in the sort of low to mid-single-digit sort of sales growth year-on-year. So we're of the belief though, obviously, with our U.K. 17% sales growth, we're very much over-indexing and have benefited from that improved year-on-year position sort of more than our fair share, so to speak.

Okay. Please, could you discuss MyAD in more depth? What benefit does joining MyAD provide your customers? So there's 3 key components to MyAD. So the first is being a member gets you access to prices on products that nonmembers can't access. So we will differentiate on a price ticket in terms of what a member's price is versus a nonmember's price. Clearly, that is only on a cohort of the products. It doesn't span all of our products. And we dynamically change those each month. So we sort of target different Angler sort of communities as we move through the seasons. That obviously is a sort of a key attraction. When you do transact with us at the till in the store, if you're not a member, it will tell you on the saving you're missing out from. And does -- and we can evidence now with suppliers that having that differentiated pricing can drive more cash for ourselves and for themselves by actually using MyAD as the mechanism to sort of drive customers into that product. Secondly, we've got a number of other components. So money can't buy competitions being a great example of where those sort of things really resonate with the Angling community, access to notorious Anglers and experiential-based sort of concepts. And then thirdly, we've got member-only benefits, which are free in terms of sort of complementary products and categories, be that access to discounted fishery tickets or stuff you're going to take on the bank, so coffee, et cetera, and holidays and such like. So those 3 components form what we call it, why wouldn't I join basis because it's free to join. And we're obviously seeing that resonate really well with the customer base with our increased numbers. And I think we will review in time whether there is a cohort of population where we could offer a sort of paid solution in terms of further benefits beyond the sort of the free members-only benefits right now. And we're going to work on that in the next 12 months. But right now, the data acquisition that we get from the customer base is the real key differentiator we see for the business in terms of how we drive value from it.

The next question is, is there scope for margin improvement? How will this be achieved? So in our sort of high-level model of how we would get to the GBP 100 million revenue and GBP 6 million adjusted EBITDA medium-term target for the U.K., we always built that around having to get the margin to something beginning with a 4%, so getting to that magic 40% milestone. And we still see that as sort of the near-term target in terms of being able to deliver on a 6% adjusted EBITDA margin. In terms of how we'll achieve that, I think if we were sort of looking at what components make up the bridge like what I talked through before, I think the 3 standouts in the bridge will be supplier terms and continuing to sort of optimize that range architecture and also continuing our own brand aspirations alongside then sort of small supporting factors around -- particularly around what I referred to earlier as our service income in terms of where we are sort of monetizing our commercial marketing efforts and sort of the in-store servicing opportunities. So they'll sort of be supporting factors, but really mostly around terms, range architecture and own brand.

We'll just go and try and find the ones that have come in during the session. So here we go. So next one, well done on excellent momentum reported in the half 1 results. Looking ahead to the next 5 years, what is the single overriding strategic vision for the group and how with the core pillars of U.K., European market penetration, MyAD data leverage and gross margin development combined to solidify Angling Direct as the undisputed leader in the European fish and tackle market, i.e., what will the business look like in 5 years' time? So a lot in that one. I think -- again, as I said, we're really shooting our medium-term objectives right now. There's plenty of addressable market to go at, particularly in Europe, and we've still got tens of millions to go at in the U.K. We are of the view that we can continue to take share in the category. Clearly, GBP 6 million in the U.K. is not the limit of our ambition. What will it look like? We would very much see it as a replication of our U.K. model further afield in Europe and giving us the potential to sort of scale the business increasingly and that earnings number looking to move up towards double-digit EBITDA numbers. Clearly, more info on that coming in May as we look to then review our medium-term targets for the U.K. Do you want to take that one, like-for-like?

Yes, like-for-like growth is amazing. Can you dig deeper where this growth is coming from and what is impacting this growth? So in terms of the like-for-like growth in the first half, so the stores were just shy of 10% and the web was a smidge over 21% in terms of its like-for-like growth. As I said before, they were transaction volume driven with footfall being the key standout driver in-store and conversion online. The footfall in-store, we think, is a testament to our consolidation in the market where we're entering new catchments and successfully sort of taking catchments and maturing those newer catchments as well as then incrementally growing the existing catchments. And online, we feel is a mix of -- that conversion is really a mix of how we're more using a different approach for our bidding strategy to make sure that we invest our money smartly there to find the right customers that come on to the site and convert alongside a [ metric ] of the data platform helping with conversion in terms of making sure we've got compelling offers on the screen for the customer.

Next one, could you speak to third-party logistics in the U.K., specifically whether you use one or more logistics companies? So just for clarity on that. So we've got one U.K. customer fulfillment shed here in Rackheath in Norfolk, and we've got one own brand distribution center in the Midlands. Both of those are self-operated in terms of pick, pack. Obviously, we use 2 different organizations in terms of our customer fulfillment for different size of parcels. And then our own brand fulfillment from the Midlands distribution center to our stores is with a third distribution partner. Clearly, we continue to review those rates with those distribution partners, but it is our own, if you like, logistics operation in terms of the pick and pack. It's in Europe where we have pivoted and used a third party given our relative scale and our capability to plumb into the sort of wider operation and use their economies of scale in terms of that pick and pack capability. Next one, are you looking for potential shops in Scotland, the Southwestern Wales to fully cover the U.K.? So we've got a data-led strategy in terms of how we pick catchments and locations, that is increasingly sophisticated in terms of third-party data sources that we sort of lean on to identify those, what I call, what 3 words of where the location needs to be. So it isn't -- we are deselecting Wales, Scotland and the Southwest. That is clearly where the data points us to where we've got the most concentration of engaged customer base that we believe we can leverage. I will just refer you back to there are catchments with a smaller number of license sales and other factors that we need to look at how we engage and that might need to be in a different sort of experiential way than we offer the customer today.

I'll take another one here. You mentioned an increase in shrinkage. Are there plans to reduce this? So you're right, we did have a minus 10 basis points movement in shrinkage in the gross margin bridge. There are 2 sides to that. We actually saw some sort of green shoots in store where we've got a 10 basis point improvement in shrinkage, which we're actually pretty pleased about because actually that I would describe as a sort of worsening landscape in terms of what we're seeing in-store. Online had a worsening shrinkage position, but we think that will unwind over the second half. We very prudently account for returns by providing for them in our accounts in full and upfront, whereas actually we'll then work through a warranty process with some of our suppliers. And as we come off the seasonal peak, we'll catch back up on those. We expect that to sort of unwind over the second half depending on what other factors come into play. I'll take another one here as well. Please, can you give us a high-level view of how we should expect working capital to move in the second half? So for those who have access to some of the analyst guidance notes, you'll see in there that we -- our working capital in our cash flow statement for the year is effectively to only have an outflow for new space. And I think as we go through the second half, that's still our current expectation is the working capital movement will be that outflow on new space. Clearly, what I'm signposting as we move through '27 and into '28 to sort of improve the stock turn is we should see some of that new space getting offset by an underlying improvement in performance and which will also then help with that generation of the improvement in the operating cash flow.

Can you -- where was it? The one about the capacity on the U.K. distribution, you got to go down. There was one -- sorry, I was just struggling to find the one about the -- yes, here we go. No, the one about the distribution center. There was one that said can you talk about the scale of the U.K. distribution center and its capability to go beyond the GBP 100 million mark. So just again, for clarity on that, we've got one U.K. customer distribution center. Right now, obviously, with signposting, we're coming up towards a GBP 40 million digital business here in the U.K. We're increasingly investing in that, particularly around, as I said, joining up the automated pick and the automated packing. We did last year separate our own brand logistics out to a separate warehouse on a shorter-term lease. That's proved an increasingly smart move and underpinned our 55% gross profit increase in the own brand. So we're increasingly confident we've got a business that can scale above GBP 100 million in the U.K. and the digital component sort of play its role in that. And right now, we're not signposting any volume constraints within either of those sort of operational hubs we've got here in the U.K. Next one, do you track the number of active MyAD members and what plans are there to increase the number of active members? I think as we said, we're over 0.5 million now. There is an opportunity to scale that substantially further as we look at that sort of churn in terms of license holders and what plans have we got to increase the active members. We are -- we work with our colleagues in terms of making sure that the benefits are really clear to folks joining that. And we'll increasingly push that because we see it as the gateway in terms of that data acquisition, which is what's helping drive our omnichannel participation. Very conscious time. Last one, are there any plans in the immediate future to expand into the U.S. as the largest retail and fishing angling market? Right now, we remain focused on scaling the U.K. and then looking at more laterally how we scale the European business in a closer and more approximate addressable market. Never say never, but not in the short to medium term. And that with a couple of minutes to go concludes all the Q&A.

Perfect, guys. If I may just jump back in there. Thank you for your presentation and for being so generous of your time and addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Steve, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes. No problem. Look, thanks for everyone's time. We wanted to demonstrate this morning that we are making the strategic progress that we committed to back in May '24. We believe we're doing that. We're clear on where our focus areas are, and we're clear what the opportunity is, and we've got a really strong balance sheet and management team that underpins those ambitions. So we're looking forward to coming back and talking to shareholders again in May and looking forward to setting out further road map for this business.

Perfect. That's great, Steve, Sam, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of management team of Angling Direct PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.