19 January 2023

Gear4music (Holdings) plc

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 three months to 31 December 2022.

FY23 Q3 Highlights

-     +11% European sales growth reflects successful execution of infrastructure investment during FY22 to improve European customer proposition

-     UK revenues affected by continued weak consumer sentiment and consequences of the Royal Mail strikes through December

-     Gross margins of 25.6% (FY22 Q3: 28.4%, FY20 Q3*: 26.2%) reflecting targeted stock reductions of slower moving product lines

-     Gross profit of £12.7m is 6% lower than FY22 Q3 and 20% higher than FY20 Q3*

-     Improving labour efficiencies and lower marketing costs largely offset lower gross margin

-     FY23 EBITDA and net debt reduction in-line with consensus market expectations**

Gear4music's Chief Executive Officer, Andrew Wass, said:

"We are pleased to report that, despite several external challenges, financial performance during our FY23 peak seasonal trading period was in line with the Board's expectations.

UK revenues during December were impacted by Royal Mail strikes and the knock-on disruption of other couriers, which led to longer delivery times and an earlier pre-Christmas cut-off date than we would expect under normal trading conditions.

A continuing targeted reduction of both on-hand inventory and net debt, combined with a period of weaker consumer sentiment and lower own-brand sales led to subdued gross margins, although tight control over marketing and labour costs largely compensated for this and we expect margins to recover during FY24.

As we continue to make good progress with new growth orientated projects, we remain confident in our long-term profitable growth strategy, and that the Group is appropriately resourced and well placed to make the most of opportunities as they arise."

* Last pre-Covid comparator

** Gear4music believes that current consensus market expectations for the year ending 31 March 2023 are revenue of £155.1 million, EBITDA of £8.9 million, profit before tax of £1.0 million, and pre-IFRS16 net debt of £17.5 million.

ENDS

Enquiries:

About Gear4music (Holdings) plc

Operating from a Head Office in York, Distribution Centres in York, Sweden, Germany, Ireland & Spain, and showrooms in York, 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.