REG - Gear4music - Half Year Trading Update

Gear4music (HOLDINGS)Announcement

19/10/2023 07:00

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RNS Number : 5813Q  Gear4music (Holdings) PLC  19 October 2023

19 October 2023

 

Gear4music (Holdings) plc

Half Year Trading Update

 

Gear4music (Holdings) plc ("Gear4music" or "the Group"), the largest UK based
online retailer of musical instruments and music equipment, today announces a
trading update for the six months to 30 September 2023.

 

 £m                                       6m to 30 Sept 2023  6m to 30 Sept 2022  % Change on FY23 H1

                                          (FY24 H1)           (FY23 H1)
 UK revenues                              36.5                35.5                +3%
 European and Rest of the World revenues  26.1                30.8                -15%
 Total revenues                           62.6                66.3                -6%

 

FY24 H1 Highlights:

 

-     Revenues reflect the previously announced focus on prioritising
gross margins ahead of sales growth, in what continues to be a challenging
market

-     FY24 H1 gross margin expected to be 27.1%, 80bps higher than last
year (FY23 H1: 26.3%)

-     Gross profit expected to be £17.0m (FY23 H1: £17.4m)

-     Net debt reduced by £3.7m to £18.1m at 30 September 2023 (FY23 H1:
£21.8m, FY22 H1: £24.2m), reflecting normal seasonal build of inventory
ahead of peak

Cost saving initiatives:

 

-     £4.0m annualised cash savings implemented during FY24 H1 that will
benefit FY24 H2 onwards:

o  Team size reduced by 20% compared with September 2022:

§ £2.5m reduction in software development team annual salaries

§ £1.0m reduction in other annual wages and salaries

§ One-off non-recurring cost of £0.5m

o  £0.5m annualised reduction in other Administrative expenses

Trading Outlook:

 

-     UK revenues continue to be stronger than European revenues

-     Expectation of a 'normal' H2 weighted trading seasonality

-     Well prepared ahead of peak seasonal trading period

-     Second-hand continues to perform well and show signs of being a
long-term growth driver

-     Full-year outlook remains in-line with consensus market
expectations*

 

Gear4music's Chief Executive Officer, Andrew Wass, said:

"We have continued to make good progress with our strategic objectives in what
we anticipated would be challenging market conditions. We are pleased to have
achieved growth in the UK, whilst our European markets have been impacted by
lower consumer demand.

Mindful of the current trading environment, we have retained our pricing
discipline and focused on improving gross margins. In addition, we have taken
decisive action to drive further efficiencies and ensure our cost base is
appropriately configured to deliver our profitable growth strategy.

As we look to leverage the potential of AI driven technologies and further
reconfigure the business into a lower cost operation, we will continue to
invest into future growth projects such as our second-hand system, ensuring
the Group is well positioned to quickly and profitably scale further as
economic conditions improve."

The Group will report Interim results for the six months ended 30 September
2023 on 14 November 2023.

* Gear4music believes that current consensus market expectations for the year
ending 31 March 2024 are revenue of £161.7 million, EBITDA of £9.8 million
and profit before tax of £1.2 million.

ENDS

Enquiries:

 

 Gear4music                                                  +44 (0)20 3405 0205

 Andrew Wass, Chief Executive Officer

 Chris Scott, Chief Financial Officer

 Singer Capital Markets - Nominated Adviser and Sole Broker  +44 (0)20 7496 3000

 Peter Steel/Sam Butcher, Corporate Finance

 Tom Salvesen, Corporate Broking

 Alma - Financial PR                                         +44 (0)20 3405 0205

 Rebecca Sanders-Hewett                                      Gear4music@almastrategic.co.uk

 Joe Pederzolli

 David Ison

 

About Gear4music (Holdings) plc

Operating from a Head Office in York, Distribution Centres in York, Bacup,
Sweden, Germany, Ireland & Spain, and showrooms in York, Bacup, Sweden
& Germany, the Group sells own-brand musical instruments and music
equipment alongside premium third-party brands including Fender, Yamaha and
Roland, to customers ranging from beginners to musical enthusiasts and
professionals, in the UK, Europe and the Rest of the World.

 

Having developed its own e-commerce platform, with multilingual, multicurrency
websites delivering to over 190 countries, the Group continues to build its
overseas presence.

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