Sustaining a run of positive news
Gear4music, which reported positively on FY2020 profits in its recent 23rd June 2020 results announcement, released further good news today. The company already stated that FY2021 had started on an exceptionally strong note for sales revenue. But profitability – an upgraded priority in the past 18 months – now looks to be ahead of expectations. We raise our forecasts on this report.Gear4music reconfirmed very rapid first quarter sales growth in today’s release. Total sales in the three months to end-June 2020 increased by 68% to £37.3m as UK sales advanced by a very fast 80% to £21.2m and Europe and Rest of the World also advanced quickly, recording 55% growth to £16.1m. At this stage, we are leaving our full year FY2021 revenue forecast at £143.5m, which represents a 19% growth rate. However, we note the company’s increased confidence after a brisk Q1 that these arguably ambitious expectations will be met comfortably.
The EV/sales ratio looks modest at 0.6x while EV/EBITDA of 7.6x looks unusually low by the standards of successful online retailers. In our view, the shares are likely to enjoy further rerating. We reiterate that Gear4music looks well placed as a company to thrive, both mid and post pandemic.
Gear4music (Holdings) is an e-commerce retailer of musical instruments and music equipment. The products are sourced from over 710 manufacturers, and range from kazoos to digital pianos, drum kits and guitars.
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