REG - Gear4music - Half Year Trading Update

Gear4music (HOLDINGS)Announcement

22/10/2024 07:00

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RNS Number : 0098J  Gear4music (Holdings) PLC  22 October 2024

22 October 2024

 

Gear4music (Holdings) plc

Half Year Trading Update

Good progress in executing our Growth strategy announced in June, with
full-year outlook in-line with consensus market expectations

 

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 2024.

 

 £m                                       6m to 30 Sept 2024  6m to 30 Sept 2023  % Change on FY24 H1

                                          (FY25 H1)           (FY24 H1)
 UK revenues                              38.0                36.5                +4%
 European and Rest of the World revenues  23.7                26.1                -9%
 Total revenues                           61.7                62.6                -1%

 

FY25 H1 Financial Highlights:

 

-     Returned to revenue growth in FY25 Q2 (Q1: -4%, Q2: +1%) following
the launch of our updated Growth Strategy in June 2024

-     Gross margin expected to be 26.7%, a small decrease on FY24 H1
(27.1%) and an improvement on FY23 H1 (26.3%)

-     Gross profit expected to be £16.5m (FY24 H1: £17.0m)

-     EBITDA expected to be £2.9m (FY24 H1 reported EBITDA £2.4m, FY24
adjusted EBITDA £2.9m*)

-     Net debt further reduced by £3.6m to £14.5m at 30 September 2024
(FY24 H1: £18.1m, FY23 H1: £21.8m), reflecting the normal seasonal build of
inventory ahead of peak trading

-     Reported Loss Before Tax expected to improve by £0.7m to £1.2m
compared with FY24 H1*

 

Commercial and Operational highlights

 

-     Acquired the brand, IP and other assets of Studiospares Europe
Limited for £150,000, further expanding our own-brand portfolio

-     Significant traction of the second-hand sales platform in FY25 H1,
which is expected to continue into H2 and beyond

-     Early-stage challenges with the implementation of a new outsourced
AI-based marketing system, which impacted own-brand revenues, European
revenues, and overall marketing efficiency, have now been resolved

-     New experienced Marketing Director appointed, and started in
September 2024

 

Trading Outlook:

 

-     Stronger growth achieved during October FY25 trading to date

-     Well-positioned and prepared for the upcoming peak seasonal trading
period

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

 

 

Gear4music's Executive Chair, Andrew Wass, said:

"We are pleased to report good progress in executing the Growth strategy we
announced in June, with a return to growth in FY25 Q2 and further growth
momentum during October trading to date. We are also pleased to have further
reduced our Net Debt, and improved our overall profitability compared with the
same period last year.

This performance comes despite initial challenges with the rollout of a new
AI-based marketing system during H1, which temporarily increased marketing
costs and impacted the sales mix between our own-brand and other-brand
products and our European sales. These issues have now been resolved, and our
marketing investments have stabilised. I am also pleased to report the recent
appointment of a new experienced Marketing Director.

Additionally, we recently acquired the brand and certain assets of
Studiospares, a business established in 1983 with a strong reputation for
high-quality studio equipment and accessories. We are excited to integrate
Studiospares's brand offering into our existing own-brand portfolio, which
will support our long-term objective of product margin growth.

Our second-hand sales platform gained significant traction during FY25 H1, and
we anticipate continued growth in this area as we build upon our unique
offering.

As we enter our peak trading season, which has historically been a key driver
of our profits and revenues, the Board is confident that our full-year outlook
remains in-line with consensus market expectations."

The Group will report Interim results for the six months ended 30 September
2024 on 19 November 2024.

* In FY24 H1, adjusted EBITDA and LBT excluded £0.5m one-off redundancy
costs.

** Gear4music believes that current consensus market expectations for the year
ending 31 March 2025 are revenue of £154.7 million, EBITDA of £11.7 million
and profit before tax of £2.8 million.

ENDS

Enquiries:

 

 Gear4music                                             +44 (0)20 3405 0205

 Andrew Wass, Executive Chair

 Gareth Bevan, Chief Executive Officer

 Chris Scott, Chief Financial Officer

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

 Peter Steel/Sam Butcher, Corporate Finance

 Tom Salvesen, Corporate Broking

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

 Rebecca Sanders-Hewett                                 Gear4music@almastrategic.com

 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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