A £289,300 drop in pre-tax profit at fishing tackle retailer Fishing Republic (FISH:AIM) sends shares in the £8.6 million cap down 4.7% to 30.5p, despite its double-digit revenue growth.

Pre-tax profit has slumped to £5,700 a result of the £299,000 it spent on its June 2015 initial public offering (IPO) as well as increased marketing expenditure.

Excluding IPO costs, pre-tax profit increased by 3% to £305,000 in 2015 following a reduction in finance charges payable.

FISHING REPUBLIC - Comparison Line Chart (Rebased to first)

Sales rose 22% to £4.12 million, in line with market expectations, with sales in the second half increasing 45% year-on-year after it spent more on online sales and marketing activity and improved its stock availability.

This appears to be paying off, as online sales are up 30% year-on-year and sales via its own website more than doubled in the second half.

Fishing Republic raised £500,000 via a share placing in December, which it used to acquire Cotswold Angling near Swindon and sign leases on three stores in Hull, Birmingham and Crewe, which opened in the first quarter of 2016.

This puts it in a good position for the start of the new fishing season.

House broker Northland Capital forecasts adjusted pre-tax profit of £663,000 in 2016, 117% higher than 2015’s profit of £305,000. It says there’s an opportunity for Fishing Republic to increase its scale in the highly fragmented market and capture additional margin by selling its own-branded products.

Fishing Republic chief executive Steve Gross says there are 2,500 independent fishing tackle shops in the UK but it will only look at very large sites when expanding.

‘There are no other fishing tackle chains so we’re taking a first mover advantage and intend to be the number one player,’ he says.

Having physical stores is necessary because anglers like to feel and test a rod before buying it. Additionally, the major brands won’t sell through online-only retailers because their rod will look like any other rod when viewed online, Gross says.

Fishing Republic’s share price has soared 81% since its June IPO, but Northland reckons it can travel further. Its target price is 36p, implying 18% upside.

Issue Date: 12 Apr 2016