AG Results Y/End January 2017

[El Diablo]

A long post which could have been longer - so I apologise and suggest if interested you do your own research !

The AG stores results for the year ending 22nd January 2017 have been published which is the first set since the Double Trade in Promo.

Not that you can interpret the real impact of this at such a high level however there are some interesting comments and potential indicators/metrics.

The company structures through holding companies and profit/losses reside at different levels, loans, mgt charges etc The stores side shows a profit, but look where the debt (some at 18%) is in the holding company and they make a loss once consolidating more parts of the group (AGDC Holdings). Plus then you look at shareholders in AGDC Holdings and look at their results - can sometimes be a myriad of companies up the chain !

If you are sad and like reading these things go to Companies House Beta and search for the company name and view filings and work the linkages out !

Anyway just for American Golf Discount Centres Ltd which is the stores they applaud their 13% growth in revenue YOY (£110.7m vs £98.2m), significant footfall increase against a UK participation in golf that decreased by 8.9% in 2016.

"American Golf attributes it's impressive performance in a declining market to a number of factors including heavy investment in store improvements and additional staff training; providing customers with a friendly, expert-heavy environment that is conducive to customer engagement; the availability of PGA professionals in every store; a busy promotional calendar; sales initiatives and a rise in online sales.

"American Golf's recent 'Double Value Trade In" promotion has also had a direct impact on the sales performance of the business. This promotion has generated significant interest within the golf retail industry, and has stimulated both the sale of new clubs and created a vibrant second hand market, encouraging regular and lapsed golfers to either trade up or get started, extremely cost-effectively."

A few highlights for the stores:-

Profit Before tax excluding exceptionals fell vs prior yr (£2.46m vs £2.92m) despite the increase in turnover - key exceptional to ignore was £1m one off received to walk away from a site that was wanted for redevelopment and offset of restructuring costs in each year.

Gross Margin down to 38% (39.4% prior yr) - could be pricing lower, fx, higher costs etc.

Staff turnover rose to 44.8% - 31.4% prior year and looking at past accounts generally in low 30%'s

Stock - grew by nearly 1/3rd to £20.4 m vs prior year of £15.7m and only a net 2 new stores. Second hand trade in's or is it a build up of new stock ?

 

[Dasit]

Thanks for that.

I can't imagine holding that much stock is good for American Golf, new stock must depreciate in value massively as every manufacture brings out new gear constantly.

If they value the second hand stock at what they paid for it on the double value offer, they must be in a bad place once they actually have to re-evaluate.


Interesting, I am never sure how so many golf stores can be sustained in my area. Most people I play with seem to not change clubs often, use second hand balls etc

 

[Maninblack4612]

Looking at this with my retired Chartered Accountant's hat on I would say that AG can effectively decide what their annul profit is by valuing the stock accordingly. If, say, the stock increase of £7m is attributed to the double value trade in offer & the stock is actually only saleable at two thirds of the valuation, this would effectively wipe out the whole year's profit.

No doubt they have convinced the auditors that the stock is properly valued, at cost, but time will tell. As it becomes more & more obsolete there will be a time when it will have to be written down. This, together with lower sales in the absence of the offer, could affect future profits badly.

 

[Jensen]

I'm a great fan of AG and hope they're here to stay for a long time

 

[JohnnyDee]

Perhaps I'm being somewhat cynical, but the only time I used the double discount trade-in the actual valuation I was given before doubling was little better than an insult quite honestly. The 'double' value then was more in line with the true value.

This idea strikes me as being a slight variation to the retail model of DFS and other retailers, who seem to have a sale on which is continually ending on the Monday following that week's advertising campaign, only for it to be replaced by a new and identical campaign once the Tuesday comes.

The only benefit that I can see in the initiative is that enables us to get rid of some slightly older gear without having to go through the hassle of putting it on Fleabay or Gumtree etc.