Gear4music (holdings) Share Discussion Threads

[debz3] 06/1/2019 19:14

Hi slzematters they do have tight margins.Lets hope this can be improved upon.The drop is overdone.A big seller has appeared.Everyone is here to try make a profit or why are here.

[s1zematters] 06/1/2019 17:58

Or possibly even advfn users employing a shares discussion board to actually talk about a share??
debz3, this is a discussion board not a Gera4music fan club subsidised by advfn for their shareholders.

Noted, how you don't rebuke or acknowledge any of the points from my post?

debz,why not set out to us all and articulate why this such a great buy at these levels on a p/e of 35 with falling earnings!

[debz3] 06/1/2019 17:48

Herd arriving to deramp all new or old investors should know what to do here.Not be swayed by others views.I am buying first thing.

[philjeans] 06/1/2019 15:23

Quite agree- sell before the next warning.

[s1zematters] 06/1/2019 15:10

"We have seen high levels of consumer demand alongside positive margin momentum,"
"This capacity limitation means that sales growth during the Period has not fully compensated for the lower product margins as we hoped"

Quite a contradiction there!

I think most people can see through this, if 'high levels of demand' is so, why didn't they lift the margins on those low margin products or concentrate on selling the higher margin goods over the peak periods? (because they could not, no extra demand for higher margin goods all sales growth was low margin ?)

I think the share price tells the story here, Turnover is vanity, profit is sanity but cash is reality.
They are struggling to sell goods at a decent margin, however to keep the show on the road are selling goods at extremely low margin or even at a loss after plc and admin costs!

A profits warning, first of many i would envisage. May have a suckers rally before probably halving again and adjusting to a more reasonable p/e now it's clearly not a high growth stock..
With a p/e of 35 a hell of a lot of profits growth is factored in here and clearly it isn't materialising!

[tsmith2] 06/1/2019 14:59

This is Paul Scott's view of the update, I happen to agree with it. There must have been a large position being liquidated on Friday. Expecting a very strong bounce next week.The next year end is 31 March 2019 - NB this is a 13 month period, as the accounting year end was recently extended by a month, for operational convenience.Key points;Continued strong organic revenue growth at +41% (up from 36% in H1)Europe & RoW sales growth higher than UK (+47% and +36% respectively) - overseas sales are now close to overtaking UK sales - important, as a global sales opportunity deserves a higher rating for the share than just a UK businessCapacity constraints reached in York distribution centre - implies sales growth could have been higher. Plans to increase capacity in 2019FY2019 EBITDA to be slightly below FY2018 - this is not likely to go down well in current stock market conditionsSwedish distribution centre expanded - now have good spare capacity headroom at both European centresOutlook - strong sales expected for the rest of this financial year.Competitive pressures on margins are mentioned;Our focus has been on gaining market share in what has been a highly competitive environment, and in support of this target and following a period of planned investment, margins during the Period began to return towards historical levels. We are confident of further improvements as we progress through FY20.That sounds as if margins should improve going forwards.My opinion - I see the share price has fallen 30% in early trading, which looks a ridiculous over-reaction.The business model at G4M is to grow as fast as possible. Then the profit taps can be turned on later, because marketing spend as a percentage of revenues can be reduced. The market probably doesn't understand, or isn't even interested in this point right now.Long-term this share is a winner, in my view. However, at the moment, growth stocks get clobbered so badly if they put a foot even slightly wrong.Update: since writing the above, the share price has fallen by 50% on the day, on very heavy two-way volume. That is pretty astonishing, for an update that probably would have trimmed the share price by about 10%, in more normal markets.To reiterate, the key point to understand is that G4M's marketing spending being 8.4% of revenues last year, and that this is discretionary, and is being used to drive growth. The point is that when the business is, say 5 times its current size, then marketing will drop to a much lower % of revenues. That fall will drop straight through to profits. Hence it's nonsensical to try to value the business at this rapid growth stage, on a multiple of current earnings. We need to look forwards, and value it on a multiple of future earnings, once the net margin has gone up to something more like 5-10% of revenues.If you get that point, and are prepared to hold for the long-term, then I am pretty sure that today's price plunge to 255p makes a very nice entry point. Time will tell.

[tsmith2] 06/1/2019 14:52

errm..Shale producers are drowning in ever increasing amounts of debts because they can't pay existing debts and to maintain production levels which continually fall away.as to how you equate a mortgage to acquire a freehold to that is beyond, as to how you compare a fast growing online retailer with excellent prospects and first rate costumer service, that's grabbing an increasing market share is even more beyond me

[extrader] 06/1/2019 13:47

Hi tsmith2.

Yes.... But they seem to have outgrown these premises as well....and not realised that they were going to !

G4M seems a bit like the shale oil phenomenon : having to recycle all FCF + + just to keep going...

ATB

[tsmith2] 06/1/2019 13:26

errm that's what you do when expanding - buy trading premises if you've put out grown the previous one..

[staverly] 06/1/2019 12:49

One of the key reasons for going public was to pay down the ~£6m balance sheet debt. The fact that business has since amassed additional debt of £9m, whilst generating no meaningful FCF is instructive. Admittedly around half of the current BS debt exposure came about from an apparently attractive real estate deal, nevertheless it raises another question mark as to management's competence.

[aimingupward2] 04/1/2019 23:10

Well, the company will need to be a ‘ten bagger’ from here over the next 5-6 years if these thresholds are to be met.

Let’s hope the management really are incentivised to be able to reap the benefit of the scheme rather than switched off by feeling that it is no longer achievable. That would be a very sad outcome. On the other hand, if they ‘go for it’ this is now a very good opportunity to get on board, isn’t it?

[buywell3] 04/1/2019 21:37

I wonder if Octopus will be buyers or sellers after the latest news ?




New Long-Term Incentive Plan

NOVEMBER 13, 2018Source: RNS

The Board of Gear4music (Holdings) plc ('Gear4music, the 'Company', or the 'Group'), the largest UK based online retailer of musical instruments and music equipment, today announces a new long-term management incentive plan (the 'Plan') to incentivise senior employees in a manner that aligns with the interests of the Company's shareholders.



The Plan involves the issue of 210,000 'B' Ordinary shares in Gear4music Limited, a subsidiary of the Company. These 'B' shares vest from 2021-26 and can be exchanged on a one-for-one basis for new ordinary Company shares subject to meeting specified criteria, including reaching a specified target share price for 75% of the award, and pre-determined revenue and profitability targets for 25%.



Financial year ending:

Share Price hurdle (being the average closing mid-price in the 30-day period following announcement of preliminary results)

Maximum nos. of shares vesting (including 25% performance related shares)

31 March 2021

£13

27,300

31 March 2022

£16

29,400

31 March 2023

£20

33,600

31 March 2024

£24

35,700

31 March 2025

£29

39,900

31 March 2026

£35

44,100



Certain of the Company's directors are participating in the Plan as detailed below, along with members of the Group's senior management team.



Name

Position

Number of shares

Andrew Wass

Chief Executive Officer

45,000

Gareth Bevan

Chief Commercial Officer

52,500

Chris Scott

Chief Financial Officer

45,000



Ken Ford,

The Company's Non-Executive Chairman and Remuneration Committee Chairman, commented

"We wish to retain and incentivise key employees and to ensure that the interests of those individuals are closely aligned to the interests of our shareholders.

The Company has enjoyed great success since coming to market, and has ambitions for long-term, sustained growth and this scheme reflects this by encouraging management to invest in future growth.

The Company has introduced the Plan to play a central role in the achievement of these aims and demonstrates Andrew, Gareth, Chris and the other senior management's commitment to and belief in the long-term success of the Group."

[fairlight] 04/1/2019 21:11

I don't have specific rules, but if a stock drops over 50% on a slightly bad trading update it's a buy for me, (turnover increased margins a bit down - that's better than most online retailer right now)- OK it may drop a bit? £2 but the market is moving up a bit and all the negativity about Brexit has been done IMO (unless we get a hard one.

I am in for the next few weeks - let's see may drop, but in 3 months it will be up - IMO

[davr0s] 04/1/2019 19:57

Rule#1 for me is don't buy stocks in downtrends - not remotely interested at the moment

[crystball] 04/1/2019 19:56

Further analysis......

hxxps://www.ii.co.uk/analysis-commentary/why-gear4music-shares-just-crashed-50-ii507418

I've given G4M a lot of thought today and although tempted to take an initial stake have decided to wait until things become clearer with Brexit/possible UK general election change of government etc.

[tsmith2] 04/1/2019 18:04

Not seen any massive trades being reported after hours

[onjohn] 04/1/2019 16:23

if yhou say so sickthetech

[smokybenchod] 04/1/2019 16:20

onjohn its obvious youre opodio using another name as you both spout the same rubbish on all BB's where there has been a warning. Gets tiring after a while.

[onjohn] 04/1/2019 16:15

going under 200p on monday


bad press coming

[toffeeman] 04/1/2019 16:11

The volume today is indicative of at least one Institution getting out.

[clocktower] 04/1/2019 16:03

Oversold imo.

[king 786] 04/1/2019 16:01

NO IT WON'T

[onjohn] 04/1/2019 15:43

may go under 200p on monday