Gear4Music Holdings LON:G4M, the York-based, musical equipment retailer has published its results to end-March 2024.
As previously reported, Gear4 was on a cost-cutting mission and the AIM-listed musical instrument retailer successfully shaved GBP7.2m off its net debt – saving on those pesky interest payments and improving cashflow – reducing net debt to GBP7.3m, which was a notable GBP24.2 at the end of the financial year two years ago.
The company also cut its overheads while at the same time increasing its gross margin by 160 basis points to 27.3%, which helped the company deliver a GB1.5m improvement to adjusted profit before tax, which was in positive territory at GBP1.1m, after a GBP400,000 loss the year previously. This was despite falls in revenue in several markets, with improved margins making up the shortfall in revenue. Cuts were made to overall headcount, reducing the wage bill by 89 heads, and administrative expenses remained 4% lower than 2023.
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The company made swingeing changes at board level, which will be finalised in July, that saw Ken Ford step down as non-exec chair after nine years and retire from the board along with fellow director Dean Murray. The company’s current CEO Andrew Wass switched seats and replaced Ford as non-executive chairman, with the current chief commercial officer Gareth Bevan moving to CEO. Neil Catto, former finance officer for Revolution Beauty LON:REVB and BooHoo LON:BOO joins as CFO and is supported by Sharon Daly of Warpaint LON:W7l as NED.
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Although it’s a bit premature for the new management team to gain the plaudits for Gear4’s performance just yet, they come into a business that was looking a bit grim a few years ago and is now a lot healthier, with adjusted earnings up 34% year-on-year to GBP9.9m. It is in profit once again and in line with market expectations, anticipating for the year ending March 2025 revenues of near to GBP155m, earnings of GBP11.8m and profit of GBP2.8m.
Gear4Music was founded in 2003 and 12 years later it listed on AIM, at an IPO price of 80p. G4M is the UK’s largest retailer of musical instruments and equipment, and has had an international presence since 2012, selling in 15 languages. The company mainly sells online, but also has a showroom in York as well as walk-in shops in Sweden and Germany. It markets its own brand of instruments alongside well-known brands including Fender, Yamaha and Roland.
Delivering profitability improvements
Wass said: “We are pleased to report that the group’s financial performance during FY24 was in line with market expectations, having delivered both gross margin and profitability improvements. As a direct result of the affirmative actions taken to prioritise cash generation and reduce costs, we have almost halved the group’s net debt since 31st March 2023, down to GBP7.3m at 31st March 2024, being a reduction of GBP16.9m in two years.”
The company says having dealt with debt and overhead costs, it’s now on a track for growth, building out its online retailing business, integrating AI into its search engine, and diversifying its market channels. Although Wass admitted the company’s international expansion had been stymied due to localised issues in the countries its operates, international development was back on track and the retailer was having a measure of success in the second-hand retail market, which it highlighted as a growth area.
The company is also on the lookout for opportunistic acquisitions that could increase its market share or the areas it operates in. Wass said: “We are optimistic about our prospects for further profitable growth during FY25 and have launched our refreshed growth strategy with strategic priorities aligned to driving growth and continuing our commitment to driving innovation, expanding our market reach, and delivering exceptional value to our customers. Our strategic initiatives are beginning to bear fruit, and our efforts to strengthen our financial position and operational capabilities have set the stage for sustainable long-term growth.”
Progress has been broadly welcomed by the City, with David Jeary, an analyst for Progressive Equity Research saying: “G4M’s FY24 results were in line with the figures outlined at the full-year trading update in April. They clearly successfully reflected and delivered on the group’s stated intention to focus on product margins, overhead cost reduction, and efficiency ahead of revenue growth, along with further net debt reduction, in FY24. The FY24 results also unveiled a refreshed and updated strategy to drive profitable growth in FY25, alongside the completion of the constitution of the new board following the retirement of longstanding directors Ken Ford and Dean Murray.”
Gear4 opened trading at 140p on 25th June. The retailer’s shares are up 43.6% over one-year and down 2.4% over the year-to-date, with the company’s shares ranging between 86.27p and 170p over a 52-week period. The company has a market capitalisation of GBP28.1m.
