REG - Kelso Group Holdings - Angling Direct Plc new investment

Kelso groupAnnouncement

29/11/2023 07:00

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RNS Number : 9746U  Kelso Group Holdings PLC  29 November 2023

Kelso Group Holdings Plc ("Kelso" or the "Company")

Angling Direct Plc new investment

Mello conference

Kelso, the main market listed investment company, is pleased to announce that
it will be speaking on Thursday 30 November at the Mello conference at the
Clayton Hotel Chiswick, Chiswick High Road, London, W4 5RY Chiswick, where the
Company will be outlining its views on current market conditions and its
investment case.

In the year to date over 30 companies, with a market capitalisation between
£50 million and £1 billion have exited the UK market via acquisition to
trade or private equity, in many cases yielding high exit premiums. This
highlights the current low valuations and the short-term opportunity for
investors, but if the lack of investor interest in UK listed companies is
unabated, we see this trend continuing. Kelso will benefit from this current
extreme under-valuation but, as a strong supporter of the UK listed market,
believes there will continue to be attractive investment opportunities for the
medium term, particularly at the smaller end of the market.

New investment in Angling Direct Plc ("Angling")

Kelso is pleased to announce that it purchased 2.32 million ordinary shares in
Angling, at an average price of 35.1p, representing 3.0% of the total issued
share capital in the company.

 

Angling is the largest specialist fishing retailer in the UK with an estimated
UK market share of 12%, according to the company, being approximately 8x
larger than any other UK competitor. From IPO in 2017 to today, Angling has
grown its stores from 15 to 46, with revenue growth from £21 million1 to £83
million1 expected for the year ending January 2024, with EBITDA growth from
£0.8 million1 to an expected £2.7 million1. Despite the fact that revenue is
expected to have grown 4x since IPO and EBITDA is expected to grow c.2.4x to
the current year end, Angling's current share price of 40p is less than two
thirds of the issue price of 64p. Its current market cap, of which c.60%
(£17.6m) is in net cash, is almost exactly the same market cap as on IPO, and
lower than the capital raised since IPO. Angling has also grown their online
revenue to c.40% of total revenue creating an effective omni channel
distribution model. Angling is currently trading on a 5.0x EV/EBITDA to
January 2024 (pre IFRS 16) and 4.2x for the following year to January 2025
(pre IFRS 16).

 

                                              At IPO      Current
 Number of stores                             15          46
 Share price (pence)                          64          40
 Number of issued shares (million)            42.8        77.3
 Market cap (£m)                              27.4        31.0
 Capital raised (£m)                          7.5         33.0
 Revenue (£m)1                                21.0        83.0
 EBITDA (£m) 1                      Pre-IFRS  0.8         2.7
 Net (debt)/cash2                   Pre-IFRS  (1.4)       17.6
 EV                                 Pre-IFRS  28.8        13.4
 EV/EBITDA1                         Pre-IFRS  36.0x       5.0x

 

1At IPO: year ended 31 January 2017, Current: year ending 31 January 2023

2At IPO: as at 31 January 2017, Current: as at 31 July 2023

 

 

Since IPO, Angling has successfully grown its portfolio and there continues to
be significant opportunity for Angling to grow its UK business towards 20% of
the UK market. The European business is early stage and approaching
break-even; despite Europe being a potential opportunity, the commitment to
this part of the business, particularly given its own shares trade on such a
low multiple, needs to be reviewed before further significant capital
investment.

 

Kelso also believes that Angling has surplus capital and that some of the
£17.6 million of net cash, being c.60% of the market cap, should be used to
buy back a portion of its equity whilst the shares are at or close to the
current level.

 

John Goold commented:

 

"Kelso is delighted to become a small shareholder in Angling Direct whilst
acknowledging that the top 4 holders control 66% of the company. Given the
potential growth of the business and current low valuation, a sustained
investor relations strategy along with a buy back would, in our view,
significantly enhance value for shareholders."

 

For further information please contact:

 Kelso Group Holdings plc                      +44 (0) 75 4033 3933
 John Goold, Chief Executive Officer

 Mark Kirkland, Chief Financial Officer

 Jamie Brooke, Chief Investment Officer
 Zeus (Broker)                                 +44 (0) 20 3829 5000
 Nick Cowles, Ed Beddows (Investment Banking)

 Ben Robertson (Corporate Broking)

 

About Kelso

Kelso was established in 2022 to identify, engage and unlock trapped value in
the UK stock market. Kelso's strategy is to invest in situations where there
is an anomaly between the intrinsic value and prospects of a company and its
stock market valuation. Kelso will, in particular, look for situations where
it believes the sum of the parts of a business is greater than the current
value.

 

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