York-based Gear4Music takes ‘decisive action’ to return to profit as losses widen
In its latest results, covering the six months to 30 September, the firm posted operating losses of £900,000. It also posted a six per cent decline in total revenue, down to £62.2 million.
The group, which is the UK’s largest online musical equipment seller, fell into loss earlier this year citing challenging economic conditions and extra costs from reducing inventory levels.
The group's actions, however, which have included reducing its staff numbers by 20 per cent in the year, have led to a reduction in its debts. The firm announced a net debt of £18.1 million, down from £21.8 million in September of last year.
Average staff headcount fell by 73 to 434.
The group has also invested £2.4 million into its e-commerce platform during the period, including the launch of a second-hand online store in Europe, and a European third-party fulfilment system.
Andrew Wass, chief executive officer at Gear4Music, said: "We are pleased to have made good progress during the period against our strategic objectives of increasing gross margins, reducing our cost base, and further enhancing our customer proposition with the launch of our Second-Hand system in Europe
“The decisive actions we have taken will ensure the business can return to stronger profitable growth by the next financial year, as we leverage efficiencies driven by AI, build upon our platform for growth, and diversify our channels to market.”
Mr Wass added that although consumer demand remained subdued, half year revenues were 27 per cent higher than pre-covid levels, recorded before lockdown restrictions led to an increase in musical instument sales.
The group has, however, adjusted its full year revenue expectations to £144 million, down from the £152 million generated last year. It added that this was to reflect sales run rates and the actions taken to prioritise profits over growth.
Year-on year revenues for the UK arm of the group was up 3 per cent, rising to 36.5 million, while revenues for Europe and the rest of the world fell 15 per cent to £26.1 million.
The group noted that consumer confidence had remained low across the UK and many European markets, which had in some cases created a “highly price competitive” situation for certain products.
Gross profit for the firm remained flat, with a small, one per cent reduction to £17 million.
Shares in the firm fell 8.3 per cent following the announcement to a low of 110p.
Gear4Music operates from a head office in York, with distribution centres across Europe.