Gear4music (holdings) Share Discussion Threads

[rizler] 23/7/2020 08:31

Brilliant update. And by the looks of it, next tu will be just as positive.Well done holders.

[saracen3] 23/7/2020 08:25

many thanks. Long way to go with only 6% UK market share and 2% Bigger European market. .

[edmonda] 23/7/2020 08:12

Another stellar update today from #G4M who continue to show that not only are sales going well, but that they are able to translate that into improved operational efficiency and more profit. New note here:

[hastings] 23/7/2020 07:55

The growth in sales is pretty phenomenal and given the prevailing climate and ongoing shift, then we should see G4M on for a sizeable beat on previous raised guidance.

[davro] 23/7/2020 07:41

This one really is on a roll, still lots of upside ahead...

[saracen3] 23/7/2020 07:26

Agree, chart now looking for 550p. Tightly held so there will be few sellers around.

[hastings] 23/7/2020 07:04

Another excellent TU this morning trading ahead of previous upgraded expectations!

[rathlindri] 17/7/2020 11:54

A very timely post hastings and right on que up she goes!

[hastings] 17/7/2020 11:09

No problem Davro.
Like you I’m a little surprised, but not bothered. I feel we will hear further positive news in due course and will see another lift.

[davro] 17/7/2020 10:25

Thanks for sharing Hastings, I’m surprised that the share price rise hasn’t continued given the extremely positive backdrop, guess we’ll have to wait for a trading update with the agm likely at the end of August...

[hastings] 17/7/2020 07:12

Interesting sector read here with specific comments from the CEO. Like the reference to trading having been more like Christmas!Https://www.google.co.uk/amp/s/amp.ft.com/content/dfdd70c3-8402-4e8d-8680-c4d061c191fc

[spurslegend1] 26/6/2020 16:03

Gear4music was up 35 per cent to the tune of 414p after announcing April and May have seen exceptionally strong trading as people explore their musical talents during lockdown.

[cooltools] 24/6/2020 12:14

Just bought 2000 at 416.4999, lower than mid-price, so will show as a sell.

[hastings] 24/6/2020 09:10

The penny had dropped Alphabeta4!!

[saracen3] 24/6/2020 09:08

UK market share is 7.2% but European market share is only 1.5% so huge growth potential. Cash held is 7.8m with no major capex planned. Outstanding growth situation from a company that has learned from its mistakes.

[alphabeta4] 24/6/2020 08:52

Thanks Marty, personally not much new there but did make a good point on management which even in 2016 used to just use the bog standard 'exceed expectations' when revenue was breaking projections rather than "exceptionally strong".

Management at G4M are not given to hyperbole, having a good track record of telling it like it is. Hence when they describe current trading as "exceptionally strong", then I sit up & take notice, and so has the market by the looks of it.

Hastings, I have read your post (and the broker notes themselves as I have Research Tree). It was me who gave you the coins!

[ryanc106] 24/6/2020 08:24

Looking really good here!
The futures very very bright!

[saracen3] 24/6/2020 08:15

First resistance is 465p but likely to power through

[hastings] 24/6/2020 07:29

Good read from yesterday Https://www.google.co.uk/amp/s/www.yorkshirepost.co.uk/business/gear4music-hits-top-note-during-lockdown-2892154%3famp

[martywidget] 23/6/2020 19:06

Alphabeta4, see here:

Small Cap Value Report (Tue 23 June 2020) - SHOE, G4M, SCPA, RMV/OTMP



From the above Google cache:
Gear4Music

Share price: 390p (up 22% today, at 10:29)
No. shares: 20.95m
Market cap: £81.7m

(at the time of writing, I hold a long position)

Final Results

Gear4music (Holdings) plc, ("Gear4music" or "the Group") (LSE: G4M), the largest UK based online retailer of musical instruments and music equipment, today announces its financial results for the year ended 31 March 2020.

The company gave a year end trading update, which I reported on here on 23 April 2020. Comparing the actual results today, with the previous trading update goes as follows;

Revenue: as expected at £120.3m (NB. this is up 2% against prior year, which was a 13-month period. It's actually up 9% on a properly comparable 12-month time frame)

Gross margin: as expected at 25.9% (up 310bps on LY, as the company's stated strategy is to increase margins, rather than chasing low margin sales growth - this strategy has clearly worked well, kudos to the team!). Note from the commentary that G4M absorbs £8.8m of delivery costs into cost of sales. By my calculations, stripping out delivery costs means that the product margin rises to a more respectable 33.3%. Average basket size is quite high too (compared with, say higher margin online fashion), at £117.

EBITDA: looks like a beat, with £7.8m reported today, versus "not less than £7.0m" expected.

Current trading & outlook - this is probably the main reason for today's sharp share price rise. This sounds excellent;

... we have experienced exceptionally strong trading at the beginning of the current financial year.

With the shift from high street to online consumer shopping continuing to accelerate, we remain confident that our business is appropriately configured to achieve long term profitable growth, and that we are in a strong position to build upon the excellent progress we have made during FY20.

Management at G4M are not given to hyperbole, having a good track record of telling it like it is. Hence when they describe current trading as "exceptionally strong", then I sit up & take notice, and so has the market by the looks of it.

Broker upgrade - many thanks to a friend who flagged up a large increase in forecasts this morning from the house broker, very helpful. The existing forecast for FY 03/2021 is 10.6p. This has been almost doubled today, to 20.4p

EBITDA comparisons - the only thing I don't like about these figures, is how the EBITDA comparison doesn't compare like with like. The impressive-sounding £7.8m EBITDA for FY 03/2020 isn't comparable with the £2.3m last year number, because this year is boosted by IFRS 16, and last year suppressed by IAS 17. The real comparison (as shown in a footnote, to be fair) is £7.8m TY, £3.7m LY. Still good, but as a general rule, I feel that tables should only ever be presented with truly comparable numbers, not numbers distorted by anything.

My opinion - this is very pleasing indeed, to hear that the company is trading so well. The only potential issue, is that trading may not remain quite so exceptional once schools go back, it must have benefited from kids being stuck at home during lockdown. that said, I hope the surge in interest in making music continues. We severely undervalue the big social benefits from teaching music to children. Making music gives people (adults and children) pleasure, self-esteem & a sense of achievement, better mental health (hence better behaviour), confidence (from performing in front of audiences), and cooperation/teamwork (from playing in a band or orchestra). Hence I really hope this trend continues, not just for selfish share-price-related reasons!

I've printed off the full results, and will read them in the sunshine now, so will post any further bullet points below once I return.

Some time later: this isn't working, I've got completely bogged down in the detail. The best thing to do is just read the note from N+1 Singer, which is available on Research Tree. It makes many excellent points. I think the bull case has got much stronger today, because of the broker forecast EPS doubling. Therefore I shall probably be increasing my position size here. Obvioously DYOR, this is only one person's opinion, and I may have missed something important.

It's one of only a few shares where we can actually rely on the latest broker forecasts. Also note that the 100% rise in forecast EPS, combined with today's 22% rise in share price, means that the forward PER will actually come down substantially, from 30 to about 20. For that reason, I think this is a bullish development, and am happy to continue holding, and increase my position size. It's good to see the sceptics proven wrong!

[hastings] 23/6/2020 16:08

I subscribe, he likes and intends increasing his position, suggests people look at the Broker note!Or you could read my piece from earlier which contains the key broker points;

[alphabeta4] 23/6/2020 15:24

Paul Scott report was due out at 3, anyone subscribe?

[netcurtains] 23/6/2020 13:44

well done guys

[masurenguy] 23/6/2020 12:56

Thanks Hastings for some excellent feedback. I particularly liked the following comment.

Wass sounds a very positive note on both current and future prospects where he says “we were always confident of turning it around from the previous warning and ultimately the investment we made into high margin growth has delivered”. With a move away from volume and low margins which has clearly delivered the CEO also adds “It is very much about driving profit, its all about growing the profit and we are absolutely going to retain that growth”. Looking ahead Wass sees plenty of further growth opportunities across the market space and highlights the companies bespoke digital platform which was built from scratch and is now poised for further and potentially significant progress.

The emphasis on driving profit, expanding higher margin own label business and strengthening the moat by developing their digital platform, augurs well for the future.