Gear4music shares fall amid Brexit supply chain woes

Shares of York-based online musical equipment retailer Gear4music fell about 15% on Tuesday after it saidBrexit related supply chain challenges are persisting for longer than we had previously anticipated” and that results for the financial year “will be lower than recently upgraded consensus market expectations.”

For the six months ended September 30, 2021, Gear4music said revenue fell 8% to £64.7 million.

The company reported first-half EBITDA (earnings before interest, taxes, depreciation and amortization) of £4.8 million — £3.7 million lower than an “exceptional FY21 H1 as expected due to the impact of Covid” but £2.8 million higher than the more comparable period in FY20 H1.

The company said FY22 Q3 revenue to date has been slower than expected “due to on-going Brexit related supply chain challenges” leading the board to revise FY22 full year EBITDA guidance to not less than £12 million (FY21 EBITDA: £18.9m, FY20: £7.8m).

Gear4music CEO Andrew Wass said: “I am pleased to report that following the exceptional period of trading during FY21, group financial performance during FY22 H1 was in-line with the board’s expectations, retaining strong margins and achieving significantly improved profitability compared with the more comparable FY20 H1 trading period.

“FY22 Q1 sales were stronger than expected, which provided the basis for the board to upgrade its expectations on 22 June 2021.

“However, Brexit related supply chain challenges are persisting for longer than we had previously anticipated, and European Q3 sales to date have been slower than previously expected.  

“As a result, the group is trading below FY22 consensus market expectations, with the board now expecting that FY22 EBITDA will be not less than £12m.

“As our new hubs in Ireland and Spain scale-up to build upon our existing European infrastructure, we are confident that the remaining Brexit related challenges will be resolved by FY22 Q4 and our European customer proposition will be significantly strengthened.

“With the acquisition of AV Distribution Ltd due to complete in December 2021 followed by the launch of AV.com in January 2022, which will significantly increase our addressable market size, alongside multiple planned upgrades to our E-Commerce platform during FY23, we remain confident in our profitable growth strategy.”

Gear4music believes consensus market expectations for the year ending March 31, 2022, prior to Tuesday’s announcement had been revenue of £156.6 million and EBITDA of £14 million.

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Mark McSherry
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