Profitability narrows by more than 40% as Gear4music invests
Gear4music has seen profits narrow by more than 40% after a ‘transformational’ year of investment while revenues soared to £80m, a 43% increase on the previous year.
The largest UK based online retailer of musical instruments and music equipment saw pre-tax profit drop 43% to £1.5m, down from £2.6m in the year to the end of February, which it attributed to major investment including the launch of its European distribution centre, relocating to a £5.3m head office in York, as well as investing in its staff and systems.
Andrew Wass, chief executive, said: “This has been a transformational year of investment for Gear4music. During the year we raised an additional £4.2m of growth capital, our European distribution centres became fully operational, and we moved into our new head office. We accelerated investment in our employees, systems, marketing and customer proposition, to firmly establish ourselves as one of Europe’s leading online retailers of musical instruments and music equipment.
“In my report last year, I explained that FY18 would be a period of targeted investment, and that would have short-term profitability implications. FY19 will be focused on achieving returns resulting from these investments, with the objective of delivering strong and sustainable revenue and profitability growth.
“As a result of the significant efforts of our team, and the investments we have made during FY18, we move into the new financial year with a market leading e-commerce platform, infrastructure and customer proposition. Whilst still early in the financial year, I am pleased to say that trading to date is in line with expectations and we are confident of achieving our objectives and hitting expectations for FY19.”
The company said international growth represents a “major opportunity” for the group, with revenue of £35.8m representing growth of 69%, which followed 124% growth in the prior year.
“We only have an estimated 1% share of the European market and will continue to invest significant effort and resources in order to improve and increase our global reach,” the company said.
Gear4music said that, given the investments scheduled for FY19 to support continued growth, the board has decided not to declare a dividend for the 2018 financial year.
“Future success will come from a strong and continuously improving customer proposition. This will be achieved by investing in our technology, our infrastructure and our people. A lot has changed in the business during the period and we have much more planned. We are looking into FY19 and beyond with confidence,” the company said.
