Gear 4 Music finishes extraordinary year with final guidance raise

Musical instrument retailer Gear4music Holdings released a strong year-end trading update on Friday, saying that it is expecting 58% total revenue growth to £56m in its audited full-year results. This guidance raise is 3% above the guidance given by the company in January, and tops off an extraordinary year for the retailer.

The AIM-listed firm said this included 34% growth in the UK and 124% growth in Europe, including 186% growth in Scandinavian sales between November 2016 and February 2017,  after its Swedish distribution centre had opened.

A darling of the Alternative Investment Market, G4M has had an extraordinary year, with several guidance raises and 484% share price growth between July and the end of February. Its shares shot up to 725p as the market opened on Friday, before retreating to 650p.

Despite solid results, the shares were down 3.7% by 9 am, due to the fact that it was a marginal profit surprise and because since the 55% growth was announced in January, shares have increased 27%, baking in considerable expectations.

Broker Panmure Gordon had similar sentiments in its report published on Friday, saying that the trading update delivered a marginal but nevertheless pleasing positive profit surprise. Panmure had raised its profit expectations by 20% less than 2 months ago:

"This new positive profit surprise is driven principally by strong cost control despite significant ongoing investment into G4M’s infrastructure ahead of future growth, whilst G4M’s sales continued their strong growth in both the UK and Europe/RoW in the seasonally quiet January and February.

 

As flagged previously, the company’s ethos of investing in infrastructure ahead of future growth will be a key feature particularly in FY18 but also beyond. We note therefore that two such pivotal investments in FY17, namely the two local European logistics hubs in Sweden and Germany, are operational with early signs that G4M’s move to replicate its best-in-class delivery and services proposition to non-UK markets is already supporting top line growth internationally."

Speaking about the results, CEO Andrew Wass said the Board was extremely pleased with the firm's trading performance during the year, with 58% sales growth being well ahead of its expectations at the start of the year.

"As expected, we have achieved especially strong growth in Europe and with our Swedish distribution centre opening in November last year and our German distribution centre commencing operations during the last few weeks, we look forward to building on our success on the continent...

...Whilst continuing to invest in the future growth of the business, we have closely managed our costs and the Board is now confident of delivering profits for the year marginally ahead of our increased expectations signalled in January."