Gear4music, the largest UK based online retailer of musical instruments and music equipment, said it continued to see significant opportunities to increase its market share across the UK and Europe
Sales increased by 36 per cent over the 13 months from March 1 2018 to March 31, the company said.
The statement added: “As previously reported, during the period the group was impacted by lower gross margins than has historically been the case. In addition, our York distribution centre reached maximum capacity during our peak Christmas trading period which affected anticipated sales growth and also resulted in higher than expected distribution costs.
“While decisive management action has been taken and product margins have improved during H2, as a result of a combination of the additional distribution costs, some short-term courier cost inflation and a clean-up of overstocked and slower moving inventory in recent months, the board now expects EBITDA in the period to be not less than £2m.
“However, the board is confident that having undertaken a thorough review of the business, including a strong emphasis on margin growth, the group will return to a more profitable growth trajectory during the new financial year.”
Gear4music’s revenues have grown from £12m to £110m in just six years, the statement said.
The statement added: “The momentum in sales growth has continued both in the UK and Europe, against a backdrop of consumer uncertainty and notwithstanding the impact of the unexpected capacity constraints during the peak Christmas trading period.”
Commenting on outlook, the company said: “We continue to see a significant opportunity to win market share in the UK and across Europe. Although profitability for this financial period has been impacted by a combination of growth-related factors, we have taken decisive action to address the underlying causes, and we are confident that these will not recur in the new financial year. Consequently, we will continue to focus on growing margins and believe our long-term growth strategy remains firmly on track.
“With over £5m cash on hand at March 31 2019, the directors are confident the group has the financial resources required to achieve its business objectives.
“Net debt at the period-end is expected to be below the board’s previous expectations with adequate headroom against our asset-backed banking facilities supporting the funding requirements of the business. Despite the challenges of FY19 (full year 2019), the board remains confident the group will continue to quickly grow revenues and return to more profitable growth in the new financial year.”