Half Year Trading Update
Half-year revenues down 6% to £62.6m; gross margin improved to 27.1%; net debt reduced to £18.1m.
vs expectations: in line
- Total revenues £62.6m (prior £66.3m)
- UK revenues £36.5m (prior £35.5m)
- European and Rest of World revenues £26.1m (prior £30.8m)
- Gross margin 27.1% (prior 26.3%)
- Gross profit £17.0m (prior £17.4m)
- Net debt £18.1m (prior £21.8m)
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| £m | 6m to 30 Sept 2023 (FY24 H1) | 6m to 30 Sept 2022 (FY23 H1) | % Change on 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 £17.0m (FY23 H1: £17.4m)
- Net debt reduced by £3.7m to £18.1m at 30 September 2023 (FY23 H1: £21.8m, FY22 H1: £24.2m), reflecting normal seasonal build of inventory ahead of peak
Cost saving initiatives:
- £4.0m annualised cash savings implemented during FY24 H1 that will benefit FY24 H2 onwards:
o Team size reduced by 20% compared with September 2022:
§ £2.5m reduction in software development team annual salaries
§ £1.0m reduction in other annual wages and salaries
§ One-off non-recurring cost of £0.5m
o £0.5m 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 £161.7 million, EBITDA of £9.8 million and profit before tax of £1.2 million.
Cleaned text: letterheads, contacts and legal notices removed. View the original announcement ↗ · Company filings. Not investment advice.