Gear4music Holdings — Update 5 July 2016

Gear4music Holdings — Update 5 July 2016

Gear4music Holdings

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Gear4music Holdings

European sales even stronger post-Brexit

European sales update

Retail

5 July 2016

Price

111p

Market cap

£22m

Net cash (£m) at end February 2016

2.6

Shares in issue

20.2m

Free float

35%

Code

G4M

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Gear4music is the largest dedicated, UK-based online retailer of musical instruments and music equipment. It sells branded instruments and equipment, alongside its own-brand products, to customers ranging from beginners to professionals, in the UK and into Europe.

Analysts

Paul Hickman

+44 (0)20 3681 2501

David Stoddart

+44 (0)20 3077 5700

Gear4music Holdings is a research client of Edison Investment Research Limited

European sales, already strong, have become even more competitive following the UK’s Brexit vote, with like-for-like growth increasing from 120% in the week leading up to the vote to 191% in the week to 3 July. This creates a tailwind for the company’s strategic focus on international expansion in the current year. There will be a more detailed update at the AGM on 29 July.

Year end

Revenue (£m)

EBITDA
(£m)

PBT*
(£m)

EPS*
(p)

P/E
(x)

EV/EBITDA
(x)

02/15

24.2

0.8

(0.6)

(4.1)

N/A

N/A

02/16

35.5

1.7

0.6

3.1

35.8

11.4

02/17e

48.7

2.5

1.6

6.5

17.1

7.8

02/18e

60.3

3.8

2.7

10.8

10.3

5.1

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and share-based payments

Gear4Music has updated on its European sales following the UK’s EU referendum vote. European sales have been supported by favourable exchange rates and responsive pricing. The company saw a 191% increase in European like-for-like sales in the first full week following the UK’s EU referendum vote, from Monday 27 June to Sunday 3 July. That compared favourably to a 120% increase in European like-for-like sales in the previous week, and comes on top of 73% growth in FY16.

International expansion, in both existing and new geographical markets, is an area of strategic focus: Gear4music has developed fully responsive design websites covering 19 countries, and has invested into its multilingual teams, marketing, website localisation and fulfilment systems, as well as its European payments platform.

Today’s brief snapshot of European sales, albeit for two weeks only, indicates international growth running well above our forecast assumption of around 70% for the year to February 2017. International sales were 27% of total revenue in FY16. However, some costs are also likely to increase, with around 25% of the company’s products sourced in the Far East. The company will be giving a more detailed trading update at the AGM on 29 July 2016. We will review our forecasts at that time.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Medigene — Update 5 July 2016

Medigene

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