RNS Number : 2225D

Gear4music (Holdings) PLC

20 June 2023

20 June 2023

Gear4music (Holdings) plc

Audited results for the year ended 31 March 2023

"Laying the foundation for long-term success"

Gear4music (Holdings) plc, ("Gear4music" or "the Group") (LSE: G4M), the largest UK based online retailer of musical instruments and music equipment, today announces its financial results for the year ended 31 March 2023.

FY23 Highlights (1) :

 GBPm            Year ended   Year ended   Year ended   Change on     Change 
                   31 March     31 March     31 March        FY22    on FY20 
                       2023         2022         2020 
                   ("FY23")     ("FY22")     ("FY20") 
                -----------  -----------  ----------- 
 Revenue              152.0        147.6        120.3         +3%       +26% 
 Gross profit          39.0         41.1         31.2         -5%       +25% 
 Gross margin         25.7%        27.9%        25.9%     -220bps     -20bps 
 EBITDA                 7.4         11.2          7.8        -34%        -5% 
 (LBT)/PBT            (0.4)          5.0          3.1      (5.4m)     (3.5m) 

-- FY23 revenues were 3% ahead of FY22 in a difficult consumer environment, and 26% ahead of FY20

-- Gross margin of 25.7% reflects a significant reduction in inventory through a challenging period for discretionary retail

   --    Reported EBITDA of GBP7.4m is 34% below FY22 and 5% below FY20 
   --    Net debt at year end of GBP14.5m reduced from GBP24.2m at 31 March 2022 
   --    Committed borrowing facility renewed with HSBC at GBP30m for a further 3 years 
   --    Active customers of 0.81m is 6% behind FY22 and 7% ahead of FY20 
   --    Conversion decreased to 4.0% from 4.1% in FY22, and 70bps ahead of 3.3% in FY20 

(1) FY20 shown for comparison as FY21 was exceptional due to the positive impact of Covid lockdowns.

Commenting on the results, Andrew Wass, Chief Executive Officer said:

"I am pleased to be reporting FY23 full year results that are in line with guidance provided in April, with the business generating revenues of GBP152m and EBITDA of GBP7.4m.

Throughout what has been a challenging year, we continued to make good progress in building the technical and operational infrastructure required for our long-term success as the UKs leading retailer of musical instruments and equipment. A particular recent highlight has been the launch of our second-hand system, which whilst still in 'soft launch' stage, has traded over 1,000 products within the first three months.

We have continued to make good progress in reducing our bank debt and to provide certainty and headroom for the medium term, we have renewed our committed borrowing facility with HSBC at GBP30m for a further three-years.

Market conditions have continued to be challenging since our last update in April, and we are taking the appropriate and necessary actions to ensure our business is correctly configured, resourced and positioned strategically for long term success. To ensure the Group can return to profitability during FY24 H2, we will focus on product margins, efficiency and overhead cost reduction ahead of revenue growth, whilst we continue to develop new growth initiatives for the longer term."



  Andrew Wass, Chief Executive Officer 
  Chris Scott, Chief Financial Officer         +44 (0)20 3405 0205 
 Singer Capital Markets - Nominated Adviser 
  and Sole Broker Peter Steel/Sam Butcher, 
  Corporate Finance 
  Tom Salvesen, Corporate Broking              +44 (0)20 7496 3000 
 Alma PR - Financial PR                        +44 (0)20 3405 0205 
  Rebecca Sanders-Hewett                        Gear4Music@almapr.co.uk 
  David Ison 
  Joe Pederzolli 
  Josh Royston 

About Gear4music (Holdings) plc

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

Chairman's Statement

The year ended 31 March 2023 was a difficult period for many retailers, with high levels of inflation and increasing interest rates impacting consumer confidence and disposable income. Whilst our drive for long-term growth remains unchanged, in response to these macro-economic challenges our focus has been on debt reduction and disciplined cost-management to provide the platform for the Group to return to profitable growth.

Operational and Commercial progress

Whilst the last 12 months have been challenging, the Group has increased its addressable market, and refocused on operational efficiency and the customer journey. Taking a longer term view the Group has made significant progress and we believe we are well positioned to deliver our long-term profitable growth ambitions. Since FY20, the Group has:

- increased revenue by 26% to GBP152m led by a 70bps increase in conversion and 7% increase in active customers;

- added three new distribution centres including operations in Spain and Ireland to further enhance our localised customer proposition in mainland Europe, creating an operational infrastructure capable of delivering revenue in excess of GBP250m;

- extended our target addressable market through strategic acquisitions in the AV-market, in particular, through the purchase of AV.com, opening up an estimated additional addressable market of GBP2.7bn;

- leveraged our significant software development capability to deliver several growth and efficiency focused projects, including various Brexit mitigations, the launch of AV.com and most recently the launch of our second-hand platform; and

- navigated periods of worldwide supply chain disruption, cost price inflation, and weakening consumer confidence, underlining the Group's resilience.

Having successfully reduced net debt by GBP9.7m to GBP14.5m at 31 March 2023, since the year-end the Group has renewed its committed Revolving Capital Facility ('RCF') at GBP30m for a further three-year period, enabling the Group to plan into the medium term with certainty and take advantage of opportunities as and when they arise.

Environmental, Social and Governance

As a business and Board, we are committed to having a positive impact on our society, the environment, and our team. We acknowledge there is increasing interest from a wide range of stakeholders on the various positive impacts that the business has and what we are doing to improve outcomes. We will report under TCFD in the financial year ending 31 March 2024.

The launch of our second-hand platform in March 2023 is our timely advancement into recycling and the circular economy, offering customers the opportunity to sell their pre-loved musical instruments and equipment quickly and easily.


Customer demand across our markets remains volatile and difficult to predict, reflecting the continuing impact of geo-political and macro-economic uncertainties affecting consumer confidence across Europe. Nevertheless, having delivered several development-led growth initiatives in FY23 and markedly reduced net debt, the Board is confident that the Group's customer proposition, enhanced operational infrastructure and balance sheet will enable the Group to achieve its long-term business objectives, namely taking market share and delivering operational efficiencies providing the platform for profitable growth.

Ken Ford


19 June 2023

Chief Executive's Statement

Financial KPIs

                                  FY23         FY22        FY20      Change      Change 
                                                                    on FY22     on FY20 
 Revenue *                   GBP152.0m    GBP147.6m   GBP120.3m         +3%        +26% 
                           -----------  -----------  ----------  ----------  ---------- 
 UK Revenue *                 GBP82.1m     GBP82.6m    GBP61.8m         -1%        +33% 
                           -----------  -----------  ----------  ----------  ---------- 
 International Revenue 
  *                           GBP70.0m     GBP65.0m    GBP58.5m         +8%        +20% 
                           -----------  -----------  ----------  ----------  ---------- 
 Gross margin                    25.7%        27.9%       25.9%     -220bps      -20bps 
                           -----------  -----------  ----------  ----------  ---------- 
 Gross profit                 GBP39.0m     GBP41.1m    GBP31.2m         -5%        +25% 
                           -----------  -----------  ----------  ----------  ---------- 
 Total Admin expenses 
  *                           GBP38.7m     GBP35.9m    GBP27.7m         +8%        +40% 
                           -----------  -----------  ----------  ----------  ---------- 
 European Admin expenses 
  *                            GBP5.0m      GBP4.6m     GBP2.5m         +9%       +100% 
                           -----------  -----------  ----------  ----------  ---------- 
 EBITDA                        GBP7.4m     GBP11.2m     GBP7.8m        -34%         -5% 
                           -----------  -----------  ----------  ----------  ---------- 
 (Loss)/profit before        (GBP0.4m)      GBP5.0m     GBP3.1m   (GBP5.4m)   (GBP3.5m) 
                           -----------  -----------  ----------  ----------  ---------- 
 Net debt **                (GBP14.5m)   (GBP24.2m)   (GBP5.5m)     GBP9.7m   (GBP9.0m) 
                           -----------  -----------  ----------  ----------  ---------- 
   *             See note 2 of the Financial Information 
   **           See notes 13 and 14 of the Financial Information 

Commercial KPIs

                           FY23      FY22      FY20     Change     Change 
                                                       on FY22    on FY20 
 Website visitors         26.5m     28.8m     28.4m        -8%        -7% 
                       --------  --------  --------  ---------  --------- 
 Conversion rate          3.95%     4.06%     3.29%     -11bps     +66bps 
                       --------  --------  --------  ---------  --------- 
 Average order value     GBP150    GBP125    GBP117       +20%       +28% 
                       --------  --------  --------  ---------  --------- 
 Active customers       865,000   921,000   807,000        -6%        +7% 
                       --------  --------  --------  ---------  --------- 
 Products listed         64,200    62,400    54,200        +3%       +18% 
                       --------  --------  --------  ---------  --------- 

Note: Change on FY20, three years ago, compares current trading to the pre-pandemic period to give a better understanding of performance when compared to the growth and characteristics of trade which continued to be distorted by pandemic-related factors in FY22.

Business review

During FY23 we made good progress with our long-term objective of making musical instruments and equipment accessible and affordable for as many people as possible, delivering a wide range of customer centric improvements throughout the business.

Progress has included improving our consumer finance proposition, upgrading our digital downloads sales platform, launching AV.com in Europe, alongside what has been our largest and most ambitious development project to date - our second-hand system.

Our second-hand system simplifies the process for consumers of selling used musical instruments and equipment and provides value and peace of mind for our customers when buying second hand products. It ensures the lifespan of products is maximised, whilst enabling enhanced margin opportunities for the business.

These new growth initiatives will strengthen our position as the UK's leading retailer of musical instruments and equipment. However, due to the current environment of squeezed discretionary consumer spending, FY23 proved to be a commercially challenging year for Gear4music and across the industry.

Reducing our net debt and inventory level has been a priority, and achieving these objectives in challenging market conditions is testament to the tenacity of our teams, whilst still generating revenue growth and limiting the impact on margin.


Whilst FY23 was a period of rapid unwinding of inventory, our focus for FY24 will be to improve efficiency and product margins.

We intend to leverage our operational infrastructure to launch our second-hand system across Europe, increasing the number of markets we trade in, expanding the products available and launching the system on AV.com later in the year.

In addition to the second-hand system, we have a wide range of further initiatives planned to support product margins, including significant own-brand product launches, licencing agreements and system improvements.

Whilst we continue to develop and launch longer term growth initiatives, our short-term focus will be on overhead cost reduction, efficiency, and improving productivity by adopting the latest technologies. Further net debt reduction will be targeted by optimising inventory, reducing development costs and limiting capital expenditure, as we diversify our sales and fulfilment channels.


Anticipating the persistence of challenging market conditions throughout FY24, we continue to take proactive measures to ensure the business is well configured to withstand further economic headwinds and remain well positioned for the future.

With a new three-year banking facility agreed, we are confident in our strategic vision, making the most of recent acquisitions and new initiatives, alongside an emphasis on optimising inventory, product margins, and implementing efficiency and cost reduction strategies.

As consumer confidence returns in the UK and mainland Europe, we look forward to capitalising on the opportunities in our markets, serving our customers and continuing our journey of long-term profitable growth.

Andrew Wass

Chief Executive Officer

19 June 2023

Chief Financial Officer's statement


The financial year ended 31 March 2023 was a difficult period for many retailers of discretionary products, and against a backdrop of cost-led inflation and increasing interest rates it was important we delivered on our stated ambition of bringing down our net debt and taking a disciplined approach to cost management. Until the macro-economic climate and consumer confidence show sustained signs of recovery, cost control will continue to be a priority through FY24.

FY23 profitability was impacted by our active reduction in stock levels during a period of weak demand contributing to a lower than planned gross margin, and by cost-base inflation across marketing, labour and energy. Relative to FY20, the last normal trading period unaffected by the pandemic, our results show good revenue growth at a comparable gross margin, but lower operating profits and profitability reflecting the increased size and scale of the business reinforced by the aforementioned inflationary factors.

Since the year-end we have renewed our banking facilities with HSBC to provide a GBP30m committed facility to 2026, giving us certainty and confidence to plan into the medium term.


                           FY23    FY22    FY20 
                           GBPm    GBPm    GBPm 
                         ------  ------  ------ 
 UK revenue                82.0    82.6    61.8 
                         ------  ------  ------ 
 International revenue     70.0    65.0    58.5 
                         ------  ------  ------ 
 Revenue                  152.0   147.6   120.3 
                         ------  ------  ------ 

Revenue increased GBP4.4m (3%) on FY22 and GBP31.7m (26%) relative to a more normal trading period in FY20, equating to compound growth of 8.1% per annum.

UK revenue of GBP82.0m was GBP0.6m (1%) behind FY22 and GBP20.2m (33%) ahead of FY20, reflecting cost-of-living challenges impacting sales of discretionary products. This takes our estimated UK market share to 9.1% (FY22: 9.2%; FY20: 7.2%).

International revenues of GBP70.0m were GBP5.0m (8%) ahead of FY22 and GBP11.5m (20%) higher than FY20 reflecting the distribution centres we opened in Ireland and Spain last year becoming increasingly well-established and offering an improved localised customer proposition in those and adjacent markets.

Revenues from sales outside of Europe accounted for 2.0% of total revenue in FY23 compared to 1.4% in FY22 and 1.3% in FY20.

                                 FY23    FY22    FY20 
                                 GBPm    GBPm    GBPm 
                               ------  ------  ------ 
 Other-brand product revenue    106.2   102.5    79.4 
                               ------  ------  ------ 
 Own-brand product revenue       38.9    38.1    35.4 
                               ------  ------  ------ 
 Carriage income                  6.2     6.3     4.9 
                               ------  ------  ------ 
 Other                            0.7     0.7     0.6 
                               ------  ------  ------ 
 Revenue                        152.0   147.6   120.3 
                               ------  ------  ------ 

Own-brand revenue of GBP38.9m was up GBP0.8m (2%) on FY22 and GBP3.5m (10%) on FY20, and accounted for 25.6% of total revenue from 8% of total SKUs, which is a lower proportion than has historically been the case (FY20: 29.4%). This is in part due to a post-Covid slow-down in demand for entry-level products, and secondly due to increased competition from Far East manufacturers selling direct into Europe through Amazon. We have responded by increasing own-brand SKU count from 4,200 to 4,900 including revamped entry level and premium ranges, and the expansion of Premier branded-products.

Other brand revenue was GBP3.7m (4%) ahead of FY22 and GBP26.8m (34%) ahead of FY20.

Carriage income was broadly flat on FY22 and GBP1.3m ahead of FY20, representing 4.1%, 4.3% and 4.1% of sales in FY23, FY22 and FY20 respectively, reflecting the Group offering more localised, cheaper delivery options and less cross UK-EU border shipments in FY23 and FY22 than was possible in FY20.

Other revenue comprises paid for extended warranty income, and commissions earned on facilitating point-of-sale credit for retail customers. The proportion of revenues coming from these sources was 0.5% of total revenue in FY23, FY22 and FY20.

Gross profit

                                  FY23    FY22    FY20 
 Product sales (GBPm)            145.1   140.6   114.8 
                                ------  ------  ------ 
 Product profit (GBPm)            43.6    45.2    35.1 
                                ------  ------  ------ 
 Product margin                  30.0%   32.1%   30.5% 
                                ------  ------  ------ 
 Carriage costs (GBPm)            10.5    10.3     8.8 
                                ------  ------  ------ 
 Carriage costs as % of sales     6.9%    7.0%    7.3% 
                                ------  ------  ------ 
 Gross profit (GBPm)              39.0    41.1    31.2 
                                ------  ------  ------ 
 Gross margin                    25.7%   27.9%   25.9% 
                                ------  ------  ------ 

In FY22 we built-up a high level of stock for precautionary and opportunistic reasons. In FY23 with a return to reliable supply, higher interest rates and against a backdrop of weaker customer demand, our focused moved to reducing stock to a more appropriate level through resetting re-ordering levels and involved targeted price reductions. These factors contributed to a 210bps decrease in product margin to 30.0%.

In a similar vein to FY22, product margin in FY23 was impacted by sales mix with relatively lower sales of higher margin own-brand products (26% of total sales) than has historically been the case (FY20: 29%).

The Group benefits from buying scale relative to its UK competitors, and its ability to source other-branded products in Swedish Krona and Euros and receive product directly into its European distribution centres is a point of differentiation. The Group purchases its own-brand products in US Dollars and product margin can be impacted by exchange rate fluctuations.

Administrative expenses and Operating profit

Operating profit of GBP1.3m is GBP4.8m below FY22 and GBP2.8m below FY20, reflecting a low gross margin and a larger cost base reflecting the size and scale of the business.

                                       FY23     FY22     FY20 
                                       GBPm     GBPm     GBPm 
                                    -------  -------  ------- 
 UK Administrative expenses          (33.7)   (31.3)   (25.2) 
                                    -------  -------  ------- 
 European Administrative expenses     (5.0)    (4.6)    (2.5) 
                                    -------  -------  ------- 
 Total Administrative expenses       (38.7)   (35.9)   (27.7) 
                                    -------  -------  ------- 
 Other income                           0.9      0.8      0.6 
                                    -------  -------  ------- 
 Operating profit                       1.3      6.1      4.1 
                                    -------  -------  ------- 
 Depreciation and amortisation          6.1      5.1      3.7 
                                    -------  -------  ------- 
 EBITDA                                 7.4     11.2      7.8 
                                    -------  -------  ------- 

Total administrative expenses increased by GBP2.8m (8%) on FY22 relative to a revenue increase of 3%, including a GBP1.3m (10%) increase in labour costs, GBP0.9m (18%) increase in depreciation and amortisation, and a GBP0.5m (24%) increase in card processing costs.

Admin expenses have increased from 23.0% of sales in FY20 and 24.3% in FY22, to 25.5% in FY23.

Combined marketing and labour costs of GBP25.0m (FY22: GBP23.9m) accounted for 65% of total administrative expenses (FY22: 67%):

- Marketing expenditure decreased in FY23 to GBP10.6m (FY22: GBP10.8m) equating to 7.0% of revenue compared to 7.3% last year and 7.7% in FY20, as the business targeted a higher return on investment; and

- Labour costs increased 10% in FY23 to GBP14.4m (FY22: GBP13.1m) reflecting a 3% increase in average headcount. Labour costs accounted for 9.5% of revenue (FY22: 8.9%).

FY23 EBITDA of GBP7.4m was GBP3.8m lower than FY22 and GBP0.4m lower than FY20.

Other expenses and net profit

Financial expenses of GBP1.7m (FY22: GBP1.1m) include GBP1.1m bank interest (FY22: GBP0.5m) reflecting higher interest rates, GBP0.4m of IFRS16 lease interest (FY22: GBP0.4m), and a GBP0.2m net foreign exchange loss (FY22: GBP0.1m loss).

The Group reports a small loss before tax of GBP0.4m (FY22: profit before tax of GBP5.0m) that after tax translates into a basic and diluted loss per share of 3.1p (FY22: 17.8p basic profit per share; 17.3p diluted profit per share).


                                          FY23     FY22    FY20 
                                          GBPm     GBPm    GBPm 
                                       -------  -------  ------ 
 Opening cash                              3.9      6.2     5.3 
                                       -------  -------  ------ 
 (Loss)/profit for the year              (0.6)      3.7     2.6 
                                       -------  -------  ------ 
 Movement in working capital              13.0   (16.2)   (0.9) 
                                       -------  -------  ------ 
 Depreciation and amortisation             6.0      5.1     3.7 
                                       -------  -------  ------ 
 Financial expense                         1.7      1.1     1.0 
                                       -------  -------  ------ 
 Tax and Other operating adjustments     (0.4)    (1.3)     1.0 
                                       -------  -------  ------ 
 Net cash from/(used in) 
  operating activities:                   19.7    (7.6)     7.4 
                                       -------  -------  ------ 
 Net cash used in investing 
  activities:                            (6.7)   (16.5)   (3.9) 
                                       -------  -------  ------ 
 Net cash (used in)/from financing 
  activities:                           (12.4)     21.8   (1.0) 
                                       -------  -------  ------ 
 Increase/(decrease) in cash 
  in the year                              0.6    (2.3)     2.5 
                                       -------  -------  ------ 
 Closing cash                              4.5      3.9     7.8 
                                       -------  -------  ------ 

Post year-end the Group renewed its RCF at GBP30m for three more years with its bankers, HSBC, providing the headroom to invest in opportunities as and when they arise.

Group indebtedness decreased by GBP9.7m to GBP14.5m (40%) largely down to the deliberate and planned GBP11.1m reduction in stock. Net debt of GBP24.2m at 31 March 2022 was a peak year-end figure reflecting an GBP11.4m investment in acquisitions in FY22, and a GBP17.1m investment in stock that was largely unwound in FY23.

Reported net cash outflow in investing activities of GBP6.7m includes GBP5.3m of capitalised software development costs (FY22: GBP4.4m) and GBP1.0m property, plant and equipment additions (FY22: GBP1.8m). Depreciation and amortisation of GBP4.4m (FY22: GBP3.7m) is added back in 'net cash from operating activities' with respect to these asset categories.

Net cash outflow from financing activities of GBP12.4m (FY22: GBP21.8m inflow) represents a GBP9.0m lower RCF drawdown (FY22: GBP24.6m net inflow), GBP1.7m payment of lease liabilities (FY22: GBP1.9m), and GBP1.7m interest paid (FY22: GBP0.9m).

Balance sheet

                                  31 March 2023   31 March 2022   31 March 2020 
                                           GBPm            GBPm            GBPm 
                                 --------------  --------------  -------------- 
 Property, plant and equipment             11.9            13.0            11.2 
                                 --------------  --------------  -------------- 
 Right-of-use assets                        7.3             8.2             9.0 
                                 --------------  --------------  -------------- 
 Software platform                         12.8            10.5             7.1 
                                 --------------  --------------  -------------- 
 Goodwill                                   5.3             5.3             1.8 
                                 --------------  --------------  -------------- 
 Other intangible assets                    3.9             4.0             0.2 
                                 --------------  --------------  -------------- 
 Total non-current assets                  41.2            41.0            29.3 
                                 --------------  --------------  -------------- 
 Stock                                     34.4            45.5            22.0 
                                 --------------  --------------  -------------- 
 Cash                                       4.5             3.9             7.8 
                                 --------------  --------------  -------------- 
 Other current assets                       4.5             3.9             2.5 
                                 --------------  --------------  -------------- 
 Total current assets                      43.4            53.3            32.3 
                                 --------------  --------------  -------------- 
 Trade payables                           (9.3)           (9.5)          (10.1) 
                                 --------------  --------------  -------------- 
 Loans and Borrowings                         -               -          (10.0) 
                                 --------------  --------------  -------------- 
 Lease liabilities                        (1.1)           (1.2)           (1.1) 
                                 --------------  --------------  -------------- 
 Other current liabilities                (8.4)           (6.7)           (4.3) 
                                 --------------  --------------  -------------- 
 Total current liabilities               (18.8)          (17.4)          (25.5) 
                                 --------------  --------------  -------------- 
 Loans and Borrowings                    (19.0)          (28.0)           (3.4) 
                                 --------------  --------------  -------------- 
 Lease liabilities                        (7.5)           (8.5)           (9.5) 
                                 --------------  --------------  -------------- 
 Other non-current liabilities            (2.1)           (2.3)           (1.6) 
                                 --------------  --------------  -------------- 
 Total non-current liabilities           (28.6)          (38.8)          (14.5) 
                                 --------------  --------------  -------------- 
 Net assets                                37.2            38.0            21.6 
                                 --------------  --------------  -------------- 

Capital expenditure on property, plant and equipment totalled GBP1.0m spread across all eight sites.

The Group capitalised GBP5.3m (FY22: GBP4.4m) of software development costs relating to our bespoke e-commerce platform, including projects linked to AV.com, third-party fulfilment, and the launch of our second-hand platform. Platform amortisation in the year was GBP3.0m (FY22: GBP2.3m) taking net book value to GBP12.8m (31 March 2022: GBP10.5m).

Other intangible assets include GBP5.3m goodwill and GBP3.0m domain names.

Stock of GBP34.4m is GBP11.1m (24%) lower than at 31 March 2022 reflecting planned reductions. The Board considers this to be a good level to take into FY24, providing breadth and depth across categories across our distribution centres.

The Group carried net debt of GBP14.5m at the year-end (31 March 2022 net debt: GBP24.2m), having reduced stock by GBP11.1m (24%) over FY23.


The Board is confident in the prospects for the business and recognises the importance of generating and retaining cash reserves to support future growth, and as such the Board does not consider it appropriate to declare a dividend at this time but will continue to review this position on an annual basis.

On behalf of the Board

Chris Scott Chief Financial Officer 19 June 2023

Consolidated Statement of Profit and Loss and Other Comprehensive Income

                                                                              Year ended         Year ended 
                                                                                31 March           31 March 
                                                Note                                2023               2022 
                                                                                  GBP000             GBP000 
Revenue                                                                          152,039            147,630 
Cost of sales                                                                  (112,996)          (106,500) 
Gross profit                                                                      39,043             41,130 
Administrative expenses                          3,4                            (38,705)           (35,881) 
Other income                                       3                                 949                820 
Operating profit                                                                   1,287              6,069 
Financial expenses                                 6                             (1,694)            (1,055) 
(Loss)/profit before tax                                                           (407)              5,014 
Taxation                                           7                               (237)            (1,291) 
 (Loss)/profit for the year                                                        (644)              3,723 
  Other comprehensive income 
  Items that will not be reclassified 
  to profit or loss: 
 Revaluation of property, plant 
  and equipment                                                                    (550)                  - 
 Deferred tax movements                                                              147              (109) 
  Items that are or may be 
  reclassified subsequently 
  to profit or loss: 
 Foreign currency translation 
  differences - foreign operations 
                                                                                       -               (23) 
  Total comprehensive (loss)/income 
  for the year 
                                                                                 (1,047)              3,591 
Basic (loss)/profit per 
 share                                                  5                         (3.1p)           17.8p 
Diluted (loss)/profit 
 per share                                              5                         (3.1p)           17.3p 

The accompanying notes form an integral part of the consolidated financial report.

Consolidated Statement of Financial Position

                                        Year ended  Year ended 
                                          31 March    31 March 
                                              2023        2022 
                                  Note      GBP000      GBP000 
Non-current assets 
   Property Plant and Equipment    8        11,934      12,958 
   Right-of-use assets             9         7,288       8,235 
   Intangible assets               10       22,049      19,812 
                                            41,271      41,005 
Current assets 
   Inventories                     11       34,381      45,516 
   Trade and other receivables     12        3,434       3,409 
   Corporation tax receivable                1,066         432 
   Cash and cash equivalents       13        4,460       3,903 
                                            43,341      53,260 
Total assets                                84,612      94,265 
Current liabilities 
   Trade and other payables        15     (17,647)    (16,183) 
   Lease liabilities               16      (1,130)     (1,229) 
                                          (18,777)    (17,412) 
Non-current liabilities 
   Interest-bearing loans 
    and borrowings                 14     (19,000)    (28,000) 
   Other payables                  15         (83)        (64) 
   Lease liabilities               16      (7,470)     (8,455) 
   Deferred tax liability                  (2,048)     (2,298) 
                                          (28,601)    (38,817) 
Total liabilities                         (47,378)    (56,229) 
Net assets                                  37,234      38,036 
   Share capital                   17        2,098       2,098 
   Share premium                    17      13,286      13,286 
   Foreign currency translation 
    reserve                         17        (74)        (74) 
   Revaluation reserve              17       1,203       1,606 
   Retained earnings                17      20,721      21,120 
Total equity                                37,234      38,036 

The notes 1 to 18 form part of the consolidated financial report.

Company registered number: 07786708

Consolidated Statement of Changes in Equity

                                        Share     Share   translation  Revaluation   Retained    Total 
                                      capital   premium       reserve      reserve   earnings   equity 
                                       GBP000    GBP000        GBP000       GBP000     GBP000   GBP000 
Balance at 31 March 2021                2,095    13,165          (51)        1,640     17,463   34,312 
Comprehensive income for 
 the year 
Profit for the year                         -         -             -            -      3,723    3,723 
Other comprehensive income                  -         -          (23)            -      (109)    (132) 
Deferred tax adjustment                     -         -             -            -       (46)     (46) 
Share based payments charge                 -         -             -            -         55       55 
Depreciation transfer                       -         -             -         (34)         34        - 
Total comprehensive income 
 for the year                               -         -          (23)         (34)      3,657    3,600 
Transactions with owners 
Issue of shares                             3       121             -            -          -      124 
Total transactions with 
 owners                                     3       121             -            -          -      124 
Balance at 31 March 2022                2,098    13,286          (74)        1,606     21,120   38,036 
Comprehensive loss for the 
Loss for the year                           -         -             -            -      (644)    (644) 
Other comprehensive income                  -         -             -            -          -        - 
Freehold property revaluation               -         -             -        (550)          -    (550) 
Deferred tax impact of revaluation          -         -             -          147          -      147 
Share based payments charge                 -         -             -            -        245      245 
Total comprehensive loss 
 for the year                               -         -             -        (403)      (399)    (802) 
Transactions with owners 
Issue of shares                             -         -             -            -          -        - 
Total transactions with                     -         -             -            -          -        - 
Balance at 31 March 2023                2,098    13,286          (74)        1,203     20,721   37,234 

The accompanying notes form an integral part of the consolidated financial report.

Consolidated Statement of Cash Flows

                                         Note                      Year ended              Year ended 
                                                                     31 March                31 March 
                                                                         2023                    2022 
                                                                       GBP000                  GBP000 
Cash flows from operating 
(Loss)/profit for the year                                              (644)                   3,723 
Adjustments for: 
Depreciation and amortisation               3                           6,081                   5,138 
Financial expenses                          6                           1,694                   1,055 
Loss/(profit) on sale of property, 
 plant and equipment                                                       17                    (12) 
Share based payment charge                                                282                      55 
Taxation                                    7                           (208)                   1,243 
                                                                        7,222                  11,202 
(Increase)/decrease in trade 
 and other receivables                     12                              14                     302 
Decrease/(increase) in inventories         11                          11,135                (14,195) 
Increase/(decrease) in trade 
 and other payables                        15                           1,865                 (2,187) 
                                                                       20,236                 (4,878) 
   Tax paid                                 7                           (530)                 (2,709) 
Net cash from operating activities                                     19,706                 (7,587) 
Cash flows from investing 
Proceeds from sale of property, 
 plant and equipment                                                       31                      95 
Acquisition of property, plant 
 and equipment                              8                           (989)                 (1,773) 
Capitalised development expenditure        10                         (5,319)                 (4,439) 
Acquisition of a business, 
 net of cash acquired                      10                               -                 (7,360) 
Business combinations: Deferred 
 consideration                             10                           (419)                       - 
Acquisition of domains                     10                             (8)                 (3,023) 
Net cash from investing activities                                    (6,704)                (16,500) 
Cash flows from financing 
Cash from share issue                                                       -                   124 
Proceeds from new borrowings               14                               -                28,000 
Interest paid                                                         (1,694)                 (917) 
Repayment of borrowings                    14                         (9,000)               (3,445) 
Payment of lease liabilities               16                         (1,713)               (1,952) 
Net cash from financing activities                                   (12,407)                21,810 
Net increase/(decrease) in 
 cash and cash equivalents                                                595               (2,277) 
Cash at beginning of year                                        3,903                   6,203 
Foreign exchange movement                                         (38)                    (23) 
Cash at end of year                        13                    4,460                   3,903 

The accompanying notes form an integral part of the consolidated financial report.

Notes to the consolidated financial statements

(forming part of the financial statements)

General Information

Gear4music (Holdings) plc is a public limited company, is incorporated and domiciled in the United Kingdom, and is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange.

The group financial statements consolidate those of the Company and its subsidiaries (collectively referred to as the "Group"). The parent company financial statements present information about the Company as a separate entity and not about its group.

The principal activity of the Group is the retail of musical instruments and equipment.

The registered office of Gear4music (Holdings) plc (company number: 07786708), Gear4music Limited (company number: 03113256), Cagney Limited (dormant subsidiary; company number: 04493300), and AV Distribution Ltd (dormant subsidiary; company number: 05385699) is Holgate Park Drive, York, YO26 4GN.

At the financial year-end the Group has four trading European subsidiaries: Gear4music Sweden AB, Gear4music GmbH, Gear4music Europe Limited (formerly known as Gear4music Ireland Limited), and Gear4music Spain SL. The Group has one dormant European subsidiary, Gear4music Norway AS. All five are 100% subsidiaries of Gear4music Limited.

   1              Accounting policies 
   1.1          Basis of preparation 

The financial information set out in this announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006.

It has been prepared in accordance with the recognition and measurement principles of UK-adopted International Accounting Standards, including IFRIC interpretations issued by the International Accounting Standards Board, and in accordance with the AIM rules and is not therefore in full compliance with IFRS. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2022 annual report. The financial statements have been prepared under the historical cost convention with the exception of land and buildings which are accounted for at fair value.

The results for the year ended 31 March 2023 have been extracted from the full accounts of the Group for that year which have not yet been delivered to the Registrar of Companies. Grant Thornton UK LLP has reported on those accounts and their report is (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial information for the year ended 31 March 2022 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. Grant Thornton UK LLP reported on those accounts and their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group.

The announcement will be published on the Company's website. The maintenance and integrity of the website is the responsibility of the directors. The work carried out by the auditors does not involve consideration of these matters. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Accounting period

The financial statements presented cover the years ended 31 March 2023 and 31 March 2022 .

Measurement convention

The financial statements have been prepared on the historical cost basis except for land and buildings that are stated at their fair value.

Monetary amounts are expressed in Sterling (GBP) and rounded to the nearest GBP1,000.

   1.2          Adoption of new and revised standards 

Various new or revised accounting standards have been issued which are not yet effective.

The following new standards, and amendments to standards, have been adopted by the Group during the year ending 31 March 2023, and the impact was not material:

   -     Amendments to IFRS 3: Business Combinations 
   -     Amendments to IAS 16: Property, Plant and Equipment 
   -     Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets 
   1.3          Going concern presumption for the period to 30 June 2024 

The Group's business activities and position in the market, and principal risks, uncertainties and mitigations are described in the Strategic Report.

The Group sets an annual budget against which performance is compared, and operates a monthly reporting and rolling forecasting cycle, which the board uses to ensures that the profitability, cash flow and capital requirements of the business are sufficient to ensure its ongoing viability. Management relies on weekly and monthly financial, commercial and operational reporting to monitor, assess and control performance through the financial year. These reports form the basis upon which the board satisfies its requirements to update stakeholders with relevant financial performance and prospects.

In FY22 the Group secured a GBP35m three-year committed Revolving Credit Facility ('RCF') with its bankers, HSBC, to make acquisitions and invest in stock for precautionary reasons during a period of potential supply chain disruption, and early in a period of inflationary cost price increases.

As supply chain pressures eased in FY23, the Group focused on reducing its investment in stock, thereby significantly reducing its net debt by GBP9.7m to GBP14.5m at 31 March 2023. On 16 June 2023, and well ahead of the 21 June 2024 renewal date, the Group renewed its RCF with HSBC at GBP30m for a further three-year period. This facility provides a good and appropriate level of headroom that has been factored into the Directors going concern assessment.

The Group has conducted reverse stress tests where revenue was assumed to decrease 21% on a six-month basis and 13% on a 15-month basis below a reasonable base case, and the Group was able to rely on cost reduction and working capital mitigations to continue to trade. The Group has therefore concluded that there is no plausible scenario where the Group breaches its covenants, re-affirming the assessment of the Group as a going concern.

The Directors have considered the Group's position and prospects in the period to 30 June 2024 based on its offering in the UK and improved proposition in Europe and concluded that potential growth rates remain strong. There is a diverse supply chain with no key dependencies.

The Group's policy is to ensure that it has sufficient facilities to cover its future funding requirements. At 31 March 2023 the Group had net debt of GBP14.5m (31 March 2022: GBP24.2m), with GBP4.5m cash (31 March 2022: GBP3.9m cash).

Having duly considered all of these factors and having reviewed the forecasts for the period to 30 June 2024, the Directors have a reasonable expectation that the Group has adequate resources to continue trading for the foreseeable future, and as such continue to adopt the going concern basis of accounting in preparing the financial statements.

   2              Segmental reporting 

The Group's revenue and profit was derived from its principal activity which is the sale of musical instruments and equipment.

In accordance with IFRS 8 'Operating segments', the Group has made the following considerations to arrive at the disclosure made in these financial statements. IFRS 8 requires consideration of the 'Chief Operating Decision Maker ('CODM') within the Group, which in the Group's case is the Executive Board. Operating segments have been identified based on the internal reporting information and management structures with the Group. Based on this information it has been noted that the CODM reviews the business as one segment and receives internal information on this basis. Therefore, it has been concluded that there is only one reportable segment.

Revenue by Geography

                       Year ended  Year ended 
                         31 March    31 March 
                             2023        2022 
                           GBP000      GBP000 
UK                         82,084      82,639 
Europe                     66,967      62,843 
Rest of the World           2,988       2,148 
                          152,039     147,630 

Administrative expenses by Geography

            Year ended  Year ended 
              31 March    31 March 
                  2023        2022 
                GBP000      GBP000 
UK              33,678      31,253 
Europe           5,027       4,628 
                38,705      35,881 

The majority of Group assets are held in the UK except for local right of use assets and property, plant and equipment, and cash in Sweden (31 March 2023: GBP3.5m; 31 March 2022: GBP4.0m), Germany (31 March 2023: GBP2.3m; 31 March 2022: GBP2.2m), Ireland (31 March 2023: GBP0.6m; 31 March 2022: GBP0.7m) and Spain (31 March 2023: GBP1.5m; 31 March 2022: GBP1.7m).

Revenue by Product category

                          Year ended  Year ended 
                            31 March    31 March 
                                2023        2022 
                              GBP000      GBP000 
Other-brand products         106,189     102,473 
Own-brand products            38,860      38,121 
Carriage income                6,187       6,266 
Warranty income                  452         483 
Other                            351         287 
                             152,039     147,630 
   3              Expenses and other income 

Included in profit/loss are the following:

                                                       Year ended  Year ended 
                                                         31 March    31 March 
                                                             2023        2022 
                                                           GBP000      GBP000 
Rentals - short-term rentals 
 of plant & machinery                                          41          21 
Equity-settled share-based 
 payment charges                                              208          55 
Depreciation of property, plant 
 and equipment                                              1,414       1,254 
 Depreciation of right-of-use 
  assets                                                    1,577       1,466 
Amortisation of Intangible 
 assets                                                     3,090       2,385 
Amortisation of government 
 grants                                                         3           7 
Loss/(profit) on disposal of 
 property, plant and equipment                                 17        (12) 
R&D expenditure recognised 
 as an expense                                                280         230 
Auditor remuneration - audit 
 of these financial statements                                 65          65 
Auditor remuneration - this 
 year's audit of financial statements 
 of subsidiaries                                               74          74 
Auditor remuneration - non-audit 
 fees - Other audit related 
 services                                                       5           5 
                      Year ended  Year ended 
                        31 March    31 March 
                            2023        2022 
                          GBP000      GBP000 
Other income 
RDEC tax credits             445         365 
Rental income                239         247 
Other                        265         208 
                             949         820 

Rental income relates to our freehold Head-office in York. 'Other' includes income from on-site café at York Head-office, grants, marketing support.

   4              Staff numbers and costs 

The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:

                              Year ended  Year ended 
                                31 March    31 March 
                                    2023        2022 
                                    Nos.        Nos. 
Administration                       255         242 
Selling and Distribution             318         316 
                                     573         558 

The aggregate payroll costs of these persons were as follows:

                                           Year ended  Year ended 
                                             31 March    31 March 
                                                 2023        2022 
                                               GBP000      GBP000 
Wages and salaries                             11,840      10,982 
Social security costs                           1,474       1,236 
Contributions to defined contribution 
 plans                                          1,111         928 
                                               14,425      13,146 

Wages and salaries, social security costs, and staff pension costs of GBP5,205,000 (2022: GBP4,400,000) relating to software developers are capitalised and not included in the figures above.

Directors' remuneration

                           Year ended  Year ended 
                             31 March    31 March 
                                 2023        2022 
                               GBP000      GBP000 
Directors' emoluments             717         680 

The three Executive Directors are paid through Gear4music Limited, and the three Non-Executive Directors are paid through Gear4music (Holdings) plc. The remuneration of all six Directors is included above.

The aggregate remuneration of the highest paid director was GBP232,000 during the year (2022: GBP229,000), including company pension contributions of GBP9,000 (2022: GBP8,000) that were made to a money purchase scheme on their behalf.

There are five directors (2022: five) for whom retirement benefits are accruing under a money purchase pension scheme.

On 3 August 2021 and further to confirmation all performance conditions relating to the conditional share awards granted under the Long-Term Incentive Plan were fully met, Gareth Bevan received 6,825 shares, Chris Scott received 5,850 shares, and Andrew Wass received a GBP55,575 cash equivalent.

   5              Earnings per share 

Diluted profit per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of CSOP and LTIP dilutive potential ordinary shares into ordinary shares. In FY23 the diluted loss per share has been restricted to the basic loss per share to prevent having an anti-dilutive effect.

                                        Year ended  Year ended 
                                          31 March    31 March 
                                              2023        2022 
(Loss)/profit attributable to 
 equity shareholders of the parent 
 (GBP'000)                                   (644)       3,723 
Basic weighted average number 
 of shares                              20,976,938  20,967,831 
Dilutive potential ordinary shares         549,269     570,440 
Diluted weighted average number 
 of shares                              21,526,207  21,538,271 
Basic (loss)/profit per share               (3.1p)       17.8p 
Diluted (loss)/profit per share             (3.1p)       17.3p 
   6              Finance expenses 
                               Year ended  Year ended 
                                 31 March    31 March 
                                     2023        2022 
                                   GBP000      GBP000 
Bank interest                       1,127         524 
IFRS16 lease interest                 375         403 
Net foreign exchange loss             190          97 
Unwinding of discount on 
 deferred consideration                 2          31 
Total finance expense               1,694       1,055 
   7             Taxation 

Recognised in the income statement

                                                                  Year ended  Year ended 
                                                                    31 March    31 March 
                                                                        2023        2022 
                                                                      GBP000      GBP000 
Current tax expense 
UK Corporation tax                                                         -         574 
Overseas Corporation tax                                                  66          55 
Adjustments for prior periods                                            277           7 
Current tax expense                                                      342         636 
Deferred tax expense 
Origination and reversal 
 of temporary differences                                               (79)         326 
Deferred tax rate change 
 impact                                                                    -         345 
Adjustments for prior periods                                           (26)        (16) 
Deferred tax expense                                                   (105)         655 
Total tax expense                                                        237       1,291 

The corporation tax rate applicable to the company was 19% for the year ended 31 March 2023, and 19% for the period ended 31 March 2022. At the Budget announcement on 3 March 2021 the UK government has stated its intention to raise the corporation tax rate to 25% from 1 April 2023. The deferred tax assets and liabilities at 31 March 2023 have been calculated based on that rate.

Reconciliation of effective tax rate

                                        Year ended  Year ended 
                                          31 March    31 March 
                                              2023        2022 
                                            GBP000      GBP000 
(Loss)/profit for the year                   (644)       3,723 
Total tax charge                               237       1,291 
(Loss)/profit before taxation                (407)       5,014 
Current tax at 19% (2022: 19.0%) 
Tax using the UK corporation tax 
 rate for the relevant period:                (61)         943 
Non-deductible expenses                        120        (73) 
Deferred tax rate change impact                  -         345 
Adjustments relating to prior year 
 - deferred tax                                 36        (16) 
Adjustments relating to prior year 
 - current tax                                 214           7 
Impact of overseas tax rate                      1           2 
Deferred tax assets not recognised               1           1 
R&D credit                                    (11)          12 
Difference between current and 
 deferred tax rates                           (19)         100 
Impact of capital allowances super 
 deduction                                    (44)        (31) 
Total tax charge                               237       1,291 
   8              Tangible fixed assets 

Property, Plant and Equipment

                                  Plant                                                   Land           Total 
                                    and        Fixtures      Motor    Computer   and Buildings 
                              equipment    and fittings   Vehicles   equipment 
                                 GBP000          GBP000     GBP000      GBP000          GBP000            GBP000 
Cost or Valuation 
At 1 April 2021                   1,847           5,699         30       1,094           7,500            16,170 
Additions                           460           1,101          -         212               -             1,773 
Additions through business 
 combinations                        29              13         68           6           1,251             1,367 
Disposals                          (61)            (14)       (30)           -               -             (105) 
Balance at 31 March 2022          2,275           6,799         68       1,312           8,751            19,205 
Additions                           163             717          -         109               -               989 
Revaluation decrease                  -               -          -           -           (550)             (550) 
Disposals                                         (124)       (29)           -               -             (153) 
Balance at 31 March 2023          2,438           7,392         39       1,421           8,201            19,491 
Depreciation and impairment 
At 1 April 2021                  1,222     2,820        19             769      150           4,980 
Depreciation charge for 
 the year                          326       625        15             166      155           1,287 
Disposals                         (13)       (9)         -               -        -            (22) 
Balance at 31 March 2022         1,536     3,437        34             935      305           6,247 
Depreciation charge for 
 the year                          331       736         2             170      175           1,414 
Disposals                            -     (101)       (3)               -        -           (104) 
Balance at 31 March 2023         1,867     4,072        33           1,105      480           7,557 
Net book value as at 
 31 March 2023                     571     3,320         6             316    7,721          11,934 
Net book value as at 31 
 March 2022                        739     3,362        34             377    8,446          12,958 
Net book value as at 31 
 March 2021                        625     2,879        11             325    7,350          11,190 

Freehold property valuation - Holgate Park Head Office

At 31 March 2023 the freehold office premises at Holgate Park were revalued at market value using information provided by an independent chartered surveyor. The valuation was carried out in accordance with the provisions of RICS Appraisal and Valuation Standards ('The Red Book'). The appraisal was carried out using level 3 inputs observable inputs including prices for recent market transactions for similar properties and incorporates adjustments for factors specific to the property in question, including plot size, location, encumbrances and current use.

Market value at 31 March 2023 was confirmed at GBP6.5m compared to a book value at 31 March 2023 of GBP7.05m, and market value at 31 March 2020 of GBP7.5m.

If the property had not been revalued the net book value would have been GBP5.0m.

Freehold property valuation - Bacup distribution centre

On 1 December 2021 the Group acquired a 25,145 sq. ft freehold warehouse property in Bacup, Lancashire as part of the acquisition of AV Distribution Ltd. The property was valued on 10 August 2021 at GBP1.26m by an independent chartered surveyor on behalf of HSBC Bank plc for loan security purposes.

Management have reviewed the fair value as at 31 March 2023 and concluded that this would not be materially different.


The Group's bank borrowings are secured by fixed and floating charges over the Group's assets.

   9              Right-of-use assets 

Leasehold properties

The Group has six leased properties comprising Distribution Centres and Showrooms in York, Sweden and Germany, Distribution Centres in Ireland and Spain, and a software development office in Manchester.

In September 2022 the Group vacated the previous software development office and moved into a smaller office on flexible terms.

The associated right-of-use assets are as follows:

At 1 April 2021                 10,305 
Additions                        1,830 
Balance at 31 March 2022        12,135 
Modifications                      567 
Additions                           63 
Balance at 31 March 2023        12,765 
At 1 April 2021                    2,434 
Depreciation charge for the year   1,466 
Balance at 31 March 2022           3,900 
Depreciation charge for the year   1,577 
Balance at 31 March 2023           5,477 
Net book value as at 31 March 
 2023                              7,288 
Net book value as at 31 March 
 2022                              8,235 
Net book value as at 31 March 
 2021                              7,871 
   10           Intangible assets 

FY23 Software platform additions comprise GBP5,205,000 of internally developed additions being 95% of software developer wages and salaries, GBP87,000 of capitalised interest, and GBP27,000 of software licences for tools used in development.

The amortisation charge is recognised in Administrative expenses profit and loss account.

                                                Software                                              Other 
                              Goodwill           platform         Brand             Domains            Intangibles      Total 
                              GBP000            GBP000            GBP000            GBP000                      GBP000  GBP000 
At 1 April 2021                       1,848           15,247              657              -                 -                17,752 
Additions                     -                 4,439             -                 3,023             -                 7,462 
Additions through 
 business combinations        3,476             -                 715               -                 149               4,340 
Balance at 31 
 March 2022                   5,324             19,686            1,372             3,023             149               29,554 
Additions                     -                 5,319             -                 8                 -                 5,327 
Balance at 
 31 March 2023                           5,324  25,005            1,372             3,031             149               34,881 
At 1 April 2021                       -               6,846               511              -                 -                7,357 
 for the year                 -                 2,321             52                -                 12                2,385 
Balance at 31 
 March 2022                   -                 9,167             563               -                 12                9,742 
 for the year                 -                 3,050             -                 3                 37                3,090 
Balance at 
 31 March 2023                -                 12,217            563               3                 49                12,832 
Net book value 
 as at 31 March 
 2023                         5,324             12,788            809               3,028             100               22,049 
Net book value 
 as at 31 March 
 2022                         5,324             10,519            809               3,023             137               19,812 
Net book value 
 as at 31 March 
 2021                         1,848             8,401             146               -                 -                 10,395 

Other intangibles

Other intangibles comprise customer relationships, trademarks, and domain names acquired on acquisition of AV Distribution Limited.


On 19 March 2012 goodwill arose on the acquisition of the entire share capital of Gear4music Limited (formerly known as Red Submarine Limited).

On 1 January 2017 goodwill arose on the acquisition of a software development business from Venditan Limited, which effectively brought development of the group's proprietary software platform in-house

On 21 June 2021 goodwill arose on the acquisition of the business and assets of Premier Music International Limited and High House 123 Limited Liability Partnership for GBP1.685m.

On 1 December 2021 goodwill arose on the acquisition of the entire share capital of AV Distribution Ltd trading as 'AV Online', an online retailer of Home Cinema and HiFi equipment, for total consideration of GBP6.05m (on a cash free, debt free basis).

Goodwill balances are denominated in Sterling:

                                   Year ended  Year ended 
                                     31 March    31 March 
                                         2023        2022 
                                       GBP000      GBP000 
Gear4music Limited                        417         417 
Software development business           1,431       1,431 
Premier business                          960         960 
AV Distribution Ltd                     2,516       2,516 
                                        5,324       5,324 

Impairment testing

In accordance with IAS 36 Impairment of Assets, the Group reviews the carrying value of its intangible assets. A detailed review was undertaken at 31 March 2023 to assess whether the carrying value of assets was supported by the net present value in use calculations based on cash-flow projections from formally approved budgets and longer-term forecasts.

Intangible assets include the proprietary software platform, the Gear4music and Premier brand names, the AV.com domain, goodwill and 'other intangibles'. Goodwill and the AV.com domain have an indefinite useful life.

A Cash Generating Unit ("CGU") is defined as the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups thereof. The Group has considered its operational and commercial configuration at 31 March 2023 and concluded it has a single CGU to which all intangibles are allocated. The carrying value of these intangibles, the Bacup freehold, the right-of-use assets, and all other PPE was GBP35.9m. An impairment review has been performed on this CGU. The recoverable amount of this CGU has been determined based on value-in-use calculations. In assessing value in use, a two-year forecast to 31 March 2025 was used to provide cash-flow projections that have been discounted at a pre-tax discount rate of 13.22% (2022: 9.55%). The cash flow projections are subject to key assumptions in respect of revenue growth, gross margin performance, overhead expenditure, and capital expenditure. Management has reviewed and approved the assumptions inherent in the model:

-- FY24-26 annual forecast revenue growth of 7% based on growth by geographical market, based on market size and estimate of opportunity, trends, and Management's experience and expectation.

   --    FY27-28 and into perpetuity revenue growth of 2%; 
   --    Gross margins are forecast to improve on FY23; and 

-- Wage increases are a function of recruitment and review of current staff, with a range of % increases.

No impairment loss was identified in the current year (2022: GBPnil). The valuation indicates significant headroom and a number of reasonable revenues, profitability and capital expenditure-based sensitivities were put through the model, and the results did not result in an impairment.

   11           Inventories 
                    Year ended  Year ended 
                      31 March    31 March 
                          2023        2022 
                        GBP000      GBP000 
Finished goods          34,381      45,516 

The cost of inventories recognised as an expense and included in cost of sales in the period amounted to GBP102.6m (2022: GBP96.9m).

Management has included a provision of GBP50,000 (31 March 2022: GBP55,000), representing a 100% provision against returns stock subsequently found to be faulty, that is retained to be used for spare parts on the basis there is no direct NRV value, and a provision based on the expected product loss on dealing with returns stock.

   12           Trade and other receivables 
                         Year ended  Year ended 
                           31 March    31 March 
                               2023        2022 
                             GBP000      GBP000 
Trade receivables             1,243       1,772 
Social security and 
 other taxes                    260         122 
Prepayments                   1,931       1,515 
                              3,434       3,409 

Corporation tax asset of GBP1,066,000 (31 March 2022: GBP432,000) has been disclosed separately on the face of balance sheet in both years, in accordance with IAS 1.54(n).

Credit risk and impairment

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of trade receivables represents the maximum credit exposure. The Group does not take collateral in respect of trade receivables.

Trade receivables comprise balances dues from schools and colleges, and funds lodged with payment providers.

Customer receivables

The Group faces low credit risk as customers typically pay for their orders in full on shipment of the product, with the only exception being a small number of education accounts with schools and colleges that have 30-day terms (2.9% of 2023 revenues; 2.4% of 2022 revenues).

Funds lodged with payment providers

Funds lodged with Amazon, Digital River, Klarna and V12 Retail Finance totalled GBP581,000 on 31 March 2023 (31 March 2022: GBP378,000) and are included in Trade debtors. Credit risk in relation to cash held with financial institutions is considered very low risk, given the credit rating of these organisations.

   13   Cash and cash equivalents 
                               Year ended  Year ended 
                                 31 March    31 March 
                                     2023        2022 
                                   GBP000      GBP000 
Cash and cash equivalents           4,460       3,903 

Cash-in-transit to the Group at 31 March 2023 was GBP354,000 (31 March 2022: GBP336,000) and is included above, representing uncleared lodgements where money providers have notified transfers pre-year-end.

   14   Interest-bearing loans and borrowings 

This note contains information about the Group's interest-bearing loans and borrowing which are carried at amortised cost.

                           Year ended  Year ended 
                             31 March    31 March 
                                 2023        2022 
                               GBP000      GBP000 
Non-current and Total 
Bank loans                     19,000      28,000 
                               19,000      28,000 

Revolving Credit Facility

At 31 March 2023 bank loans were drawn loans under the Group's three-year GBP35m Revolving Credit Facility ('RCF') with HSBC. This facility was due to expire in April 2024 and is secured by a debenture over the Group's assets.

On 15 June 2023 the Group renewed its banking facilities entering into a three year GBP30m RCF with HSBC. This facility expires in June 2026 and is secured by a debenture over the Group's assets.

Loans incur interest at variables rates linked to SONIA, with a margin non-utilisation fee.

Changes in interest-bearing loans and borrowings

                                                                   Year ended 31 March 2023   Year ended 31 March 2022 
                                                                                     GBP000                     GBP000 
 Opening balance                                                                     28,000                      3,476 
 Changes from financing cash flows 
 Proceeds from loans and borrowings                                                       -                     28,000 
 Repayment of borrowings                                                            (9,000)                    (3,507) 
 Total changes from financing cash flows                                            (9,000)                     24,493 
 Other changes 
 Interest expense (note 7)                                                            1,127                        524 
 Interest paid                                                                      (1,080)                      (413) 
 Movement in interest accrual (included in accruals and deferred 
  income - note 18)                                                                    (49)                      (111) 
 Fair value movement on loans                                                             2                         31 
  Total other changes                                                                     -                         31 
  Closing balance                                                                    19,000                     28,000 

Other bank facilities

Gear4music has a number of guarantees in relation to VAT, and issues letter of credits to its suppliers. At 31 March 2023 the Group had guarantees of GBP654,000 in place (31 March 2022: GBP1,011,000) and letters of credit of GBP63,000 (31 March 2022: GBP317,000).

   15           Trade and other payables 
                               Year ended  Year ended 
                                 31 March    31 March 
                                     2023        2022 
                                   GBP000      GBP000 
Trade payables                      9,300       9,472 
Accruals and deferred 
 income                             5,099       3,164 
Deferred consideration                 23         424 
Government grants                       -           3 
Other taxation and social 
 security                           3,225       3,119 
                                   17,647      16,182 
Accruals and deferred 
 income                                61          25 
Deferred consideration                 22          39 
                                       83          64 

Year-end accruals and deferred income included:

   -    GBP1,907,000 (31 March 2022: GBP710,000) relating to customer prepayments; and 

- GBP61,000 (31 March 2022: GBP24,000) relating to the estimated cash bonuses accrued relating to the CSOP schemes.

The Directors consider the carrying amount of other 'trade and other payables' to approximate their fair value. The interest expense of GBP2,000 (2022: GBP31,000) in relation to the unwinding of the discount is disclosed in note 6.

Deferred consideration

In March 2021 the Group acquired the Eden brand and associated assets from Marshall Amplification plc for GBP140,000 of which GBP100,000 was deferred and payable in four equal instalments of GBP25,000 on the anniversary of the completion date. At 31 March 2023 two instalments remain unpaid. These amounts are valued in the accounts at fair value and subsequently amortised.

In December 2022 the Group acquired AV Distribution Ltd for GBP6,050,000 on a cash-free debt-free basis of which GBP400,000 was deferred for six months whilst final tax matters were resolved. On 1 June 2022, GBP388,000 was paid in full and final settlement.

   16   Lease liabilities 

Short-term leases and leases of low value of GBP41,000 (31 March 2022: GBP21,000) are included in administrative expenses.

The Group has leases for motor vehicles, and six properties (31 March 2022: six). Each lease is reflected on the statement of financial position as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment.

The table below describes the nature of the Group's leasing activities by type of right-of-use asset:

 Right-of-use                No of         Range of       Average      No of leases    No of leases       No of leases 
  asset               right-of-use        remaining     remaining    with extension    with options   with termination 
                            assets             term    lease term           options     to purchase            options 
 Property                        6   8 to 65-months     45-months                 -               -                  1 
 Motor vehicles                  2   7 to 18-months     13-months                 -               2                  - 

Future minimum lease payments due at 31 March 2023 were as follows:

                      Within 1 year   1-5 years   More than 5 years 
                             GBP000      GBP000              GBP000 
 Lease payments               2,093       7,634                 117 
 Finance charge               (223)     (1,021)                   - 
 Net present value            1,870       6,613                 117 

Future minimum lease payments due at 31 March 2022 were as follows:

                      Within 1 year   1-5 years   More than 5 years 
                             GBP000      GBP000              GBP000 
 Lease payments               2,102       7,926               1,178 
 Finance charge               (435)     (1,056)                (31) 
 Net present value            1,667       6,870               1,147 

Lease liabilities are presented in the statement of financial position as follows:

                31 March 2023   31 March 2022 
                       GBP000          GBP000 
 Current                1,130           1,229 
 Non-current            7,470           8,455 
  Total                 8,600           9,684 

Changes in lease liabilities:

                             Year ended 31 March 2023   Year ended 31 March 2022 
                                               GBP000                     GBP000 
 Opening balance                                9,684                      9,414 
 Cash flow lease payments                     (1,713)                    (1,952) 
 New leases                                        63                      1,812 
 Modifications                                    566                        410 
 Total changes                                (1,084)                        270 
 Closing balance                                8,600                      9,684 
   17           Share capital and reserves 
                         Year ended  Year ended 
                           31 March    31 March 
                               2023        2022 
Share capital                Number      Number 
Authorised, called 
 up and fully paid: 
Ordinary shares of 
 10p each                20,976,938  20,976,938 

The Company has one class of ordinary share and each share carries one vote and ranks equally with the other ordinary shares in all respects including as to dividends and other distributions.

Share premium

                     Year ended  Year ended 
                       31 March    31 March 
                           2023        2022 
                        GBP'000     GBP'000 
Opening                  13,286      13,165 
Issue of shares               -         121 
Closing                  13,286      13,286 

Proceeds received in addition to the nominal value of the shares issued have been included in share premium, less registration and other regulatory fees and net of related tax benefits.

Foreign currency translation reserve

                      Year ended  Year ended 
                        31 March    31 March 
                            2023        2022 
                         GBP'000     GBP'000 
Opening                     (74)        (51) 
Translation loss               -        (23) 
Closing                     (74)        (74) 

The foreign currency translation reserve comprises exchange differences relating to the translation of the net assets of the Group's foreign subsidiaries from their functional currency into the parent's functional currency.

Revaluation reserve

                           Year ended  Year ended 
                             31 March    31 March 
                                 2023        2022 
                              GBP'000     GBP'000 
Opening                         1,606       1,640 
Freehold revaluation            (550)           - 
Deferred tax                      147           - 
Depreciation transfer               -        (34) 
Closing                         1,203       1,606 

The revaluation reserve represents the unrealised gain generated on revaluation of the freehold office property in York on 28 February 2018, 31 March 2020 and 31 March 2023. It represents the excess of the fair value over historic net book value.

Retained earnings

                           Year ended  Year ended 
                             31 March    31 March 
                                 2023        2022 
                              GBP'000     GBP'000 
Opening                        21,120      17,463 
Share based payment 
 charge                           245          55 
Deferred tax                        -       (155) 
Depreciation transfer               -          34 
(Loss)/profit for the 
 year                           (644)       3,723 
Closing                        20,721      21,120 

Retained earnings represents the cumulative net profits recognised in the consolidated income statement.

   18          Related parties 

Transactions with key management personnel

The compensation of key management personnel is as follows:

                                         Year ended  Year ended 
                                           31 March    31 March 
                                               2023        2022 
                                             GBP000      GBP000 
Key management emoluments including 
 social security costs                          711         674 
Short-term employee benefits                      6           6 
Company contributions to money 
 purchase pension plans                          31          21 
                                                748         701 

Key management personnel comprise the Chairman, CEO, CFO, CCO and NEDs. All transactions with key management personnel have been made on an arms-length basis.

Five directors are accruing retirement benefits under a money purchase scheme (2022: five).

Compensation includes share-based payments of GBP110,000 (2022: GBP118,000) in relation to the two LTIPs.

Share based payments

LTIP (2018)

On 31 July 2022 and further to confirmation the performance conditions relating to the conditional share awards granted under the Plan were not met, awards of 7,350 shares to Gareth Bevan, 6,300 shares to Andrew Wass and 6,300 shares to Chris Scott lapsed.

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(END) Dow Jones Newswires

June 20, 2023 02:00 ET (06:00 GMT)

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