Gear4music (holdings) Share Discussion Threads

[saracen3] 26/1/2023 14:06

Competitor in trouble after poor xmas sales ?

Short term pain, long term gain.

[rp19] 26/1/2023 13:49

I think it can be inferred that way. Which, if the case, is a pretty poor way of communicating by management.

[dros1] 25/1/2023 21:43

G4M will need to grow rev in Q4 by 10% to get brokers forecast rev for the year of £155M
Also brokers forecast of £1m pre tax profit for the year also going to be a miss i think as H1 was a loss of £1.1m so they will need to make a profit of £2.1m in H2

[sbb1x] 25/1/2023 17:15

If a director buys down here that would be a buy signal

[volsung] 25/1/2023 14:58

Bought some more for 95p
Blood on the streets and all that

[volsung] 25/1/2023 14:21

This is taking one hell of a beating

[volsung] 25/1/2023 11:44

If it double bottoms I’ll add

[cirlbunting1] 20/1/2023 12:23

I've sold out. Fed up with this stock to be frank. As glavey mentioned - nothing within that trading update excited me. No comment on strategy put in place to offer us a peace of mind (i.e., cutting costs to improve profitability perhaps?). I'm not waiting around for another 4 months. I have to look at the opportunity cost. I wish the holders great fortune & i hope someday this stock pushes beyond £2.

[dixi] 19/1/2023 16:06

Tend to agree kael, against Andertons, GAK, PMT, GuitarGuitar, Bax etc G4M are always the most expensive for gear. I bought a junior own brand drum kit from them, that was good value and of good enough quality. But all the desirable brands are just too expensive here v the competition.

[scepticalinvestor] 19/1/2023 16:02

Target 29p

[scepticalinvestor] 19/1/2023 16:02

Bargepole - avoid!!!

[kael] 19/1/2023 15:58

I've been a customer for many years and will only buy their branded products if the reviews back it up (one purchase last year). Big brand names are cheaper elsewhere -@10-20% more expensive than other sites on other branded products. Need to pay back the debt, reduce spend and ultimately cut the payroll bill. Trying to pass these cost increases on to the consumer is not going to fair well in this environment, worked when there was ample credit available and people were at home doing sod all.Likely a fair further to fall if status quo is maintained. Sales will evaporate as the consumer tightens even further this year and shops around.

[brucie5] 19/1/2023 15:33

Smacked down smartly. Sometimes it pays to wait before confirmed BO of the 200sma. On the watch list, but markets are taking no prisoners atm.

[hydrus] 19/1/2023 13:31

Seems overkill to me as I think their prospects look decent and it was a creditable performance. Happy to hold and see how they progress.

[saracen3] 19/1/2023 08:03

Singers 220p target

Gear4music (Buy, TP 220p) - has reported a solid Q3 putting it on track to hit FY expectations, with key growth oriented initiatives for FY24 on track. Sales grew 5%. The UK was flat against a strong comp, an improvement on the 3% decline in H1. This included the adverse effect of Mail strikes, which hampered December trading given longer delivery times and an earlier cut-off date for deliveries. Growth in Europe of 11% was a slight improvement on +10% in H1. This reflects the ongoing enhancements to G4M’s local proposition following investment in infrastructure and improved choice/customer delivery. There remains a significant opportunity for share gains. Gross margin reduced 280bps due to the targeted reduction of inventory, mix and some extra carriage/P&P costs due to the strikes. These influences are expected to be temporary. Freight rate costs have fallen and £/$ headwind is easing too. Labour efficiency and lower marketing costs largely compensated for this margin drag. Along with progress on inventory reduction, net debt is reducing to plan. It is on track to meet Y/E forecasts (cons. £17.5m/SCMe £15.3m) and well within its covenants. As we have noted previously, G4M has headroom within its RCF and scope to generate cash from w/c and property, if needed. There is room for re-rating as belief in the debt reduction grows, on just 4x Mar’24 EV/EBITDA (10x P/E, or 0.25x EV/sales) vs its 5-year average of 12.5x. Our 225p target price is based on 6x EV/EBITDA, a 50% discount to its average - modest in context with its growing scale, capabilities/competitive advantages and pipeline of incremental growth initiatives to take share.

[glavey] 19/1/2023 08:00

A trading update probably more notable for what it doesn't advise than for what it does.

[wh1spa] 19/1/2023 07:50

The note I'm looking at has a 220p target.

[saracen3] 19/1/2023 07:42

Singers reaffirms 210p target.

Growth of 5% over peak includes the adverse effect of Royal Mail strikes in the UK in Dec, offset
by expansion in Europe. A temporary margin fall, in part due to targeted stock reduction which
supports ND reduction, has been offset by labour efficiencies and lower marketing costs. It
remains on track to meet FY EBITDA and lower ND, concerns about which have weighed on the
rating despite significant balance sheet flexibility. Growing confidence here is helpful.
Event – Q3 update (3 months ended 31 December)
Revenue growth. Sales grew 5% in Q3. Within that, the UK was flat against a strong comparative, an
improvement on the 3% decline in H1. This performance included the adverse effect of Royal Mail
strikes, and knock-on disruption with other couriers, which hampered December trading given longer
delivery times and an earlier cut-off date for Christmas deliveries. Growth in Europe of 11% was a
slight improvement on the +10% in H1 albeit against a weak prior year comp. This reflects the ongoing
enhancements to G4M’s local proposition following the investment in infrastructure and improved
product choice/customer delivery options. There remains a significant opportunity for share gains.
Profit guidance. Gross margin reduced 280bps to 25.6%, equating to a c30% product margin excl.
carriage/P&P costs which G4M includes in COGS. This reflects the targeted reduction of inventory,
which was strategically elevated at the start of the year to mitigate global supply chain disruptions,
mix and some extra carriage/P&P costs due to the strikes. These influences are expected to be
temporary. Freight rate costs have reversed and the £/$ headwind is easing. Tight cost control, in
particular labour efficiency and lower marketing costs, has largely compensated for this margin drag.
As a result, management has re-iterated FY EBITDA expectations, which were reduced in Sept’22.
Cashflow/ND. Along with progress on inventory reduction, net debt is reducing to plan. It is on track
to meet Y/E forecasts (cons. £17.5m/SCMe £15.3m) and well within its covenants. As noted previously,
G4M has headroom in its RCF and scope to generate cash from w/c and property, if needed.
Positive outlook. G4M has continued to make good progress with its new growth projects during
FY23 Q4 and into FY24, and remains confident in its long-term profitable growth strategy. It is well
resourced and well placed to make the most of opportunities as they arise. With a pipeline of growth
initiatives , G4M looks well placed to deliver share gains in its addressable product markets,
musical instruments/ accessories and audio-visual products, both in the UK and Europe.
Impact on earnings & valuation
We make no changes to headline estimates, which assume a return to traditional H1/H2 seasonality
this year (H2 EBITDA almost flat YoY vs. H1 -50%) and a return to growth next year (EBITDA +43%,
margin +140bps). The stock trades on 4x Mar’24 EV/EBITDA (equating to 10x P/E, or 0.25x EV/sales)
compared to its 5-year average of 12.5x. Our unchanged 225p target price is based on 6x EV/EBITDA,
which is a 50% discount to its average and, in our view, modest in context with its growing scale,
capabilities/competitive advantages and pipeline of incremental growth initiatives.
Company Comment

[darrin1471] 18/1/2023 13:54

Online in general has not done well recently but G4M were expecting a return to a more normal Christmas heavy trading pattern. A recovery stock and several growth opportunities. Await tomorrow with interest.

[sbb1x] 13/1/2023 16:45

Dripping back down, could 120s be seen again....

[jackson83] 11/1/2023 18:36

500p later this year folks

[darrin1471] 11/1/2023 08:44

Sentiment on retail has abruptly changed.

[saracen3] 11/1/2023 08:35

The fund manager at Aberdeen sold out at the bottom. Looking good now.

Wonder if Andrew Vass has considered taking the company private.