TIDMG4M
RNS Number : 1906L
Gear4music (Holdings) PLC
09 September 2021
9 September 2021
Gear4music (Holdings) plc
AGM Statement, Trading and Acquisitions Update
Gear4music (Holdings) plc, ('Gear4music' or 'the Group') (LSE:
G4M), the UK's largest retailer of musical instruments and music
equipment, will hold its Annual General Meeting at 10.30am
today.
Trading Update
- UK revenue returned to growth during July and August 2021
- Slower European revenue impacted by post-Brexit challenges
- New distribution centres in Ireland and Spain on track to open in September 2021
- Trading remains in-line with the Board's expectation
Acquisitions
- Contracts exchanged for acquisition of AV Distribution Ltd, to complete in Q3 FY22
- 'AV.com' domain name acquired separately
- Aggregate consideration GBP9.2m* represents a combined adjusted EBITDA multiple of 7.1x
- AV.com to launch by Q4 FY22, selling Home Audio and Visual equipment
* - on a cash free, debt free basis and assuming normalised
levels of working capital
At the AGM Gear4music's Chief Executive Officer, Andrew Wass,
will make the following statement:
"As previously announced, trading during Q1 FY22 was stronger
than the Board had expected although, as anticipated, behind the
exceptional period of trading during FY21. UK sales have pleasingly
returned to growth during July and August. European sales have
remained behind last year, primarily as a result of post-Brexit
cross border shipping challenges creating a less competitive
delivery proposition in some of our European markets.
Our two new distribution centres in Ireland and Spain will be
operational by H2 FY22 as planned, and should eliminate most of the
remaining post-Brexit challenges, significantly improving our
European delivery proposition to provide a platform for further
growth in our European markets by Q4 FY22.
In-line with our stated growth strategy, we are very pleased to
announce that the Group has exchanged contracts for the acquisition
of AV Distribution Ltd trading as AV Online ('AV Online'), an
online retailer of Home Cinema and HiFi equipment and, separately,
the acquisition of the website domain name 'AV.com'. AV Online
increased revenues by 54% to GBP8.6m during the last financial year
to 31 March 2021, generating adjusted EBITDA of GBP1.3m.
Operating in a GBP400m UK audio video market that is currently
dominated by high-street based retailers, the Board believes that
AV Online will greatly benefit from being transferred onto the
Group's highly scalable European e-commerce platform and being
rebranded to 'AV.com'.
Trading to date remains in-line with the Board's expectations,
although we remain mindful of ongoing uncertainties around COVID-19
and the potential for supply chain disruption during H2 FY22. As a
result of the operational and commercial actions we are taking, and
the acquisitions we are making, the Board retains a high level of
confidence that the Group is well positioned to deliver on its
long-term growth strategy."
Acquisition details
Gear4music today announces that the Group has exchanged
contracts for the acquisition of AV Distribution Ltd trading as AV
Online and, separately, the acquisition of the website domain name
AV.com. The completion of the AV Online acquisition is dependent
upon receiving approval from the FCA under Change of Ownership
provisions, which is expected in or around December 2021.
Founded in 2003 by Carl Pickles, AV Online operates from a
26,000 sq ft warehouse, offices and showroom in Bacup, Lancashire,
and is an online retailer of audio-visual equipment, including home
cinema systems, HiFi systems, speakers, cables, headphones and
accessories.
AV Online has 21 members of staff, and generates sales
principally from its main website audiovisualonline.co.uk, with
further sales channels including Amazon, the showroom in Bacup, and
several smaller websites operated by the business, including
hificables.co.uk.
In the financial year ended 31 March 2021 ('FY21'), AV Online
reported unaudited revenues of GBP8.6m (FY20: GBP5.6m), adjusted
EBITDA of GBP1.3m (FY20: GBP0.6m) and profit before tax of GBP1.2m
(FY20: GBP0.4m). Net assets at 31 March 2021 were GBP4.2m (FY20:
GBP3.3m).
The consideration of GBP6.2m for AV Online ( on a cash free,
debt free basis and assuming normalised levels of working capital
), and GBP3.0m for the AV.com domain name will be settled in cash
drawn from the Group's GBP35m Revolving Credit Facility with HSBC,
and represents a combined adjusted EBITDA multiple of 7.1 times.
The purchase of AV Online will include GBP2.5m of inventory, and a
freehold warehouse property recently valued at GBP1.3m.
The AV.com domain name was not owned by AV Online and was
purchased by the Group separately.
The Board notes that these acquisitions will significantly
increase the Group's addressable market size and believes there are
significant synergies between the market in which Gear4music
operates, and the closely related but separate AV market, which is
currently dominated by high-street based retailers such as Richer
Sounds.
The Board is confident that by moving the AV Online business
onto Gear4music's highly scalable bespoke e-commerce platform,
rebranding the business to AV.com, developing its product ranges,
and expanding into Europe, AV.com can quickly grow its revenues and
profits. The Board expects that the acquisitions will be earnings
per share enhancing from FY23 onwards.
ENDS
Enquiries:
Gear4music
Andrew Wass, Chief Executive Officer
Chris Scott, Chief Financial Officer +44 (0)20 3405 0205
Singer Capital Markets - Nominated Adviser
and Joint Broker
Peter Steel/Amanda Gray, Corporate Finance
Tom Salvesen, Corporate Broking +44 (0)20 7496 3000
Investec Bank plc - Joint Broker
David Flin
Alex Wright
Harry Hargreaves +44 (0)20 7597 5970
Alma PR - Financial PR +44 (0)20 3405 0205
Harriet Jackson Gear4music@almapr.co.uk
Josh Royston
Faye Calow
About Gear4music (Holdings) plc
Operating from a Head Office in York, and Distribution Centres
and showrooms in York, Sweden and 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, more recently, into 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.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
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END
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