Gear4music (Holdings) PLC Half Year Trading Update (5813Q)

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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.

 
  GBPm                      6m to 30 Sept   6m to 30 Sept      % Change 
                                     2023            2022    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 GBP17.0m (FY23 H1: GBP17.4m) 

- Net debt reduced by GBP3.7m to GBP18.1m at 30 September 2023 (FY23 H1: GBP21.8m, FY22 H1: GBP24.2m), reflecting normal seasonal build of inventory ahead of peak

Cost saving initiatives:

   -     GBP4.0m annualised cash savings implemented during FY24 H1 that will benefit FY24 H2 onwards: 

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

-- GBP2.5m reduction in software development team annual salaries

-- GBP1.0m reduction in other annual wages and salaries

-- One-off non-recurring cost of GBP0.5m

o GBP0.5m 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 GBP161.7 million, EBITDA of GBP9.8 million and profit before tax of GBP1.2 million.

ENDS

Enquiries:

 
 Gear4music 
  Andrew Wass, Chief Executive Officer 
  Chris Scott, Chief Financial Officer          [phone] 
 
 Singer Capital Markets - Nominated Adviser 
  and Sole Broker 
  Peter Steel/Sam Butcher, Corporate Finance 
  Tom Salvesen, Corporate Broking               [phone] 
 
 Alma - Financial PR                            [phone] 
  Rebecca Sanders-Hewett                         Gear4music@almas trategic 
  Joe Pederzolli                                 .co.uk 
  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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END

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October 19, 2023 02:00 ET (06:00 GMT)