Gear4Music Holdings LON:G4M, the York-based, AIM-listed musical instrument retailer will publish its interim results for the six month period to the end of September next Tuesday (14th November).
The company was founded in 2003 and 12-years later it listed on AIM, at an IPO price of 80p. The company was trading on 7th November at 110p and over the year-to-date has offered a 3.8% return and over one-year has returned 4.8% and although the share price has at times been volatile, G4M has given a total return of 44% since IPO. The company has a market cap of GBP24.1m and has seen its shares range from 68.7p to 170p over a 52-week period.The company has grown to become the UK’s largest retailer of musical instruments and equipment, and has had an international presence since 2012, selling in 15 languages. Revenue has grown from GBP24m in 2015 to GBP152m for the latest financial year.
The company mainly sells online, but also has a showroom in York as well as walk-in shops in Sweden and Germany and markets its own brand of instruments alongside well-known brands including Fender, Yamaha and Roland.
Last month Gear4Music published its results for the six months to the end of September, reporting UK revenues of GBP36.5m, up 3% year-on-year in its home market. However its international sales were 15% down, leading to a fall in total revenues of 6% y-o-y, to GBP62.6m.
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The company explained that the fall in revenues was a result of its strategy to prioritise gross margins ahead of sales, and management said that it was expecting gross margins to be y-o-y 80 basis points higher at 27.1% for 1H24 and this would lead to gross profits of GBP17m, down marginally on the GBP17.4m profit line for the same period in 2022.
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As interest rates have been rising globally, Gear4Music said it had been prioritising the reduction of net debt, which it cut from GBP21.8m at the end of September 2022 by GBP3.7m to GBP18.1 at the end of the last reporting period. It will be interesting to see how the debt reduces in the rest of the year. As well as cutting debt, the company cut headcount by 20% y-o-y and pared another GBP1m off its remaining wage bill.
Gear4Music banking on a robust UK market
Management sees the UK as its market-leader and anticipates domestic sales to remain robust for the rest of the year, ahead of its European sales, and is expecting an upturn in revenue as the year moves into the Christmas shopping period. The company says it remains on track to hit full-year market expectations of revenue of GBP161.7m and profit before tax of GBP1.2m for the full-year to end-March 2024.
Things are looking a lot rosier for the musical instrument retailer this side of the summer. It was forced to issue a profit warning in April as consumer demand crumbled. However, the firm has worked hard during the last six months to cut its costs and extract more revenue and expects a much better 2024.
Time will only tell if Gear4Music is singing all the way to the bank, or whether it is still hitting those bum notes.
