TIDMG4M
RNS Number : 6231C
Gear4music (Holdings) PLC
22 June 2021
22 June 2021
Gear4music (Holdings) plc
Audited results for the year ended 31 March 2021
"Transformational performance has established a broader platform
for further growth"
Gear4music (Holdings) plc, ("Gear4music" or "the Group") (LSE:
G4M), the largest UK based online retailer of musical instruments
and music equipment, today announces its financial results for the
year ended 31 March 2021.
FY21 Highlights:
GBPm Year ended 31 Year ended 31 Change
March 2021 March 2020
-------------- --------------
Revenue 157.5 120.3 +31%
Gross profit 46.4 31.2 +48%
Gross margin 29.4% 25.9% +350bps
EBITDA 19.8 7.8 +154%
Net profit 12.6 2.6 +488%
-- Exceptional financial performance, delivered alongside continued organic growth
-- EBITDA up by 154% to GBP19.8m, ahead of consensus market expectations
-- Net cash at year end of GBP2.7m (31 March 2020 net debt: GBP5.5m)
-- Active customers up 32% to 1.06m
-- Strategic acquisitions of two brands:
o Premier, a Drums and Percussion brand; and
o Eden, a Bass guitar amplification brand
-- New distribution hubs to be opened in Ireland and Spain
-- Trading in April and May 2021 stronger than the Board's previous expectations
Commenting on the results, Andrew Wass, Chief Executive Officer
said:
"FY21 has been a transformational year for the Group, during
which we have delivered an exceptional financial performance whilst
rising to the unprecedented operational challenges presented by
COVID-19 and Brexit.
As previously reported, we had an exceptional period of trading
during FY21, particularly during the initial COVID-19 lockdown in
Q1. The number of potential customers in our market significantly
increased, as traditional high street retailers were unable to
operate as normal and people sought activities in which to
participate whilst spending more time at home.
The Group is in a strong position to build upon the significant
success of FY21, as we accelerate the development of our bespoke
e-commerce platform and strengthen our European distribution
network by launching new operational hubs in Ireland and Spain.
As recently reported, we have started to consider acquisition
opportunities, and we are very pleased to have recently acquired
two brands that will become part of the Gear4music own-brand
portfolio: Premier, a Drums and Percussion brand with a rich
musical heritage dating back to 1922, and Eden, a Bass guitar
amplification brand previously owned by Marshall Amplification.
Given that the FY21 exceptional financial performance was driven
by the initial COVID-19 lockdowns during H1, the Board does not
expect to meet the same level of trading during H1 FY22, and as
previously guided, does not currently expect to achieve the same
level of full year profitability during FY22 that the Group
achieved during FY21.
However, trading in Q1 FY22 has been stronger than the Board
previously expected and, having retained a good proportion of the
gross margin gain achieved during FY21, financial results for FY22
are likely to be ahead of the Board's previous expectations.
The outlook and general demand for musical instruments and
equipment remains positive, and with the strategies and actions we
are taking, we remain confident of delivering sustainable and
profitable growth in the long-term."
S
Enquiries:
Gear4music
Andrew Wass, Chief Executive Officer
Chris Scott, Chief Financial Officer +44 (0)20 3405 0205
N+1 Singer - 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 (as retained in UK
law).
Chairman's statement
I am pleased to report another successful year but do so with
mixed emotions as I reflect on the hardships that COVID-19 brought
to so many over the year.
From the outset of the COVID-19 outbreak, our priority has been
to safeguard the health and safety of our employees and to provide
an uninterrupted service to our customers. We took the necessary
precautions to keep our staff safe, including facilitating remote
working and implementing extensive measures in our warehouses to
enable social distancing, whilst ensuring our operations could
continue with minimal impact.
The collective effort of our hardworking and dedicated teams has
kept the operation running with minimal disruption to order
processing and fulfilment throughout the various lockdown periods
and, as a result, the significantly heightened customer demand has
been met. I am pleased to report that we took the opportunity to
recognise these momentous efforts and pay a one-off employee bonus
in March 2021 as a token of our thanks.
Operational and Commercial progress
Whilst COVID-19 has undoubtedly positively impacted the results
in FY21, it is clear to me that the business continued to make
operational and strategic improvements in the Group's stated
ambitions of accelerating market share growth, improving gross
margins and operating expense management. In addition, we
successfully and safely increased operational capacity to meet an
unexpected significant increase in demand in Q1 FY21 and ahead of
the FY21 peak trading period. The results reported today bear
testament to success on each front.
We believe that the competitive retail landscape in musical
instruments and equipment will look different post COVID-19, as
physical store operators struggle with the well reported
accelerated channel shift to online.
The FY21 financial performance has been transformative in terms
of strengthening the balance sheet and moving into a net cash
position at the year-end, and provides evidence and further
confidence in terms of results that can be achieved when the market
and internal efficiencies allow. The addition of a committed
three-year GBP35m Revolving Credit Facility will open up further
opportunities such as acquisition and accelerated investment for
the Group as we progress through FY22.
This year has seen a step change in the opportunity for our
business and, as a result, we have been able to commence new
initiatives which will enable us to drive growth alongside our core
business, whilst also launching and delivering on our acquisition
strategy.
Achieving these results through challenging times, unlike
anything we have seen before, reflects well on the significant
efforts of the Executive and Senior Management team, and these
results would not have been possible without the hard work, passion
and dedication of all our colleagues across the business.
Environmental, Social and Governance
In Q1 FY22 we launched an updated 'Supplier Code of Conduct'
that formally commits our own-brand manufacturing partners to our
extended and deepened expectations in relation to labour related
areas, health and safety, environmental and anti-corruption
measures.
We are pleased to have supported several charities during the
year, including York based Jessie's fund, which works all over the
UK helping children who are seriously ill, disabled, or have
special educational needs to express themselves through music.
I was delighted to welcome Harriet Williams to the Board in
January 2021, and her e-commerce experience and expertise is
already helping the business to further develop its strategy. This
appointment takes the number of Non-Executive Directors on the
Board to three, thereby matching the number of Executives.
The Operational Board has been further strengthened with the
addition of Eleni Buras, who joined the Group in 2015 and her
knowledge and skills in Performance Marketing will benefit Board
level management.
Outlook
The Board remains confident that our customer proposition,
operational infrastructure, strengthened balance sheet and access
to capital will enable the Group to achieve its business
objectives, namely accelerating market share gains and delivering
operational efficiencies, during the current financial year and
beyond.
Ken Ford
Chairman
21 June 2021
Chief Executive's Statement
Financial KPIs
Financial KPIs
FY21 FY20 Change
========================= ========== ========== =========
Revenue * GBP157.5m GBP120.3m +31%
---------- ---------- ---------
UK Revenue * GBP78.7m GBP61.8m +27%
---------- ---------- ---------
International Revenue
* GBP78.8m GBP58.5m +35%
---------- ---------- ---------
Gross margin 29.4% 25.9% +350bps
---------- ---------- ---------
Gross profit GBP46.4m GBP31.2m +48%
---------- ---------- ---------
Total Admin expenses
* GBP30.9m GBP27.1m +14%
---------- ---------- ---------
European Admin expenses
* GBP3.8m GBP2.5m +52%
---------- ---------- ---------
EBITDA GBP19.8m GBP7.8m +154%
---------- ---------- ---------
Net profit GBP12.6m GBP2.6m +385%
---------- ---------- ---------
Net cash/(debt) ** GBP2.7m (GBP5.5m) +GBP8.2m
---------- ---------- ---------
* See note 2 of the Financial Information
** See notes 12 and 13 of the Financial Information
Commercial KPIs
FY21 FY20 Change
===================== ========== ======== =======
Website visitors 36.0m 28.4m +27%
---------- -------- -------
Conversion rate 3.69% 3.29% +40bps
---------- -------- -------
Average order value GBP116 GBP117 -1%
---------- -------- -------
Active customers 1,064,000 807,000 +32%
---------- -------- -------
Products listed 57,900 54,200 +7%
---------- -------- -------
Business review
It is a strong testament to the commitment, talent and
flexibility of our teams, that we have been able to overcome many
of the difficulties and complexities associated with COVID-19 and
Brexit, and deliver record order volumes whilst maintaining high
levels of service for our new and returning customers.
Q1 FY21 saw exceptional sales volumes as customers sought to
take on new skills or enhance existing musical talent, in addition
to using music to improve health and mental wellbeing. With high
street shops also being closed, it became necessary for us to
deliberately restrain marketing spend during Q1 to ensure our
logistics operation was able to cope with heightened demand, whilst
ensuring our operating environment remained safe for staff. This
situation contributed to a one-off exceptional level of
profitability during Q1.
Demand remained strong throughout Q2 and Q3, during which time
we focused much of our development resource on preparing for
Brexit. As a result of our preparations and ability to satisfy a
good level of EU-based demand locally, trading during Q4 remained
relatively strong despite the new challenges of a UK-EU customs
border, which would have otherwise significantly disrupted order
fulfilment and revenues.
Revenues were driven throughout FY21 by very strong growth in
our studio and recording category, with guitar products also
continuing to sell well, alongside digital keyboards and pianos.
Own-brand sales have been particularly strong as customers sought
excellent value intermediate and beginner products, with new niches
developing such as Sound Therapy instruments.
Building upon the excellent progress made with margins and
operational efficiency during FY20, the Group has proven to be well
positioned to deal with the challenges of FY21, achieving record
sales and profitability whilst laying the foundations for future
growth.
Growth Strategy & Acquisitions
Development of our bespoke platform remains central to our
digital growth strategy. During FY21 our in-house team of 67
developers made 1,396 deployments, launching new features including
the ability to allow the sale and immediate download of digital
software products, Apple Pay integration, and additional warehouse
management and dispatch tools to support increasing order volumes.
In addition, we began to lay the foundations for several
significant growth orientated features to be launched during
FY22.
Brexit related software projects and preparations required a
significant amount of development resource during FY21, and having
had the opportunity to fully understand and evaluate the impact of
Brexit since 1 January 2021, our European growth strategy will now
include the strengthening of our European distribution network,
with the addition of two new logistics hubs during FY22.
Our new Irish hub in Dublin will serve the domestic and Northern
Ireland markets, and our new Spanish hub in Barcelona will,
importantly, provide an improved customer experience by
significantly reducing the delivery costs and timescales of orders
being delivered across Southern Europe. Both hubs will be fully
operational by H2 FY22, and will help to further reduce UK-EU cross
border administration costs whilst increasing our overall capacity
for holding additional inventory to further help mitigate any
supply chain disruption.
Developing and expanding our own-brand product ranges is a key
part of our ongoing strategy to support gross margins, and we are
very pleased to have added the Premier and Eden brands into our
portfolio, to accelerate our product range development and widen
our geographical reach.
As a result of the change in market dynamics, our increased
financial strength and the new GBP35m bank facility, we expect to
consider further acquisition opportunities during FY22, building
upon the recent acquisitions of the Premier and Eden brands.
Attractive acquisition opportunities may include existing brands
already sold by Gear4music that could be integrated into our
own-brand portfolio, or profitable retailers operating in
compatible parallel markets that would allow the Group to increase
its reach and addressable market.
Trading outlook
We are confident that a high proportion of new customers
acquired during FY21 will continue to recognise the benefits that
playing, creating and recording music can bring. As lockdowns
across Europe begin to ease, live gigs and performances can
hopefully be enjoyed at music venues again, creating demand for
product categories such as PA systems and stage lighting that have
slowed during the pandemic. We expect that alongside the
accelerating shift to e-commerce, these factors will ensure the
trading environment for the Group remains favourable.
I am proud of where we have taken the business over the last six
years, growing revenues by over 550% between 2015 and 2021, and
being able to meet customer demand during the last year so that our
customers could enjoy music at a time when they needed it the
most.
Having delivered on our core strategic objectives for FY21, we
are now in a strong position to begin the next phase of our growth
journey. We continue to see significant opportunities in both our
UK and European markets for further growth, which in addition to
establishing new sales verticals and considering further
acquisition opportunities, provides the board with a high level of
confidence the Group will continue to deliver long term value for
its stakeholders.
Andrew Wass
Chief Executive Officer
21 June 2021
Chief Financial Officer's statement
Overview
As an online retailer operating in a niche sector where physical
stores temporarily closed during COVID-19 lockdowns, coupled with
the benefits of playing musical instruments and equipment on mental
health and wellbeing which came to the fore, we benefited from
unusually high demand, particularly in Q1.
Our priority throughout the pandemic has been to ensure the
safety of our colleagues by following government guidelines, and we
were able to keep our distribution centres largely open through the
lockdown. COVID-19 has undoubtedly impacted our FY21 reported
results in a number of ways.
The good progress and momentum generated in FY20 has been
carried into FY21, and amplified by COVID-19 related factors,
leading the business to deliver an exceptionally strong financial
performance including record sales (GBP157.5m), profits (EBITDA of
GBP19.8m) and cash generation (cash from operating activities of
GBP14.9m).
Revenue
FY21 FY20
GBPm GBPm
------ ------
UK revenue 78.7 61.8
------ ------
International revenue 78.8 58.5
------ ------
Revenue 157.5 120.3
------ ------
Revenue increased by GBP37.2m (31%) on last year, to GBP157.5m,
with growth of 42% in H1 as COVID-19 restrictions across Europe led
to very high customer demand, and 23% in H2. Given the impact of
COVID-19 on the FY21 results, it will be important to consider
two-year revenue growth as a relevant benchmark for H1 FY22.
UK growth of 27% takes our UK market share to an estimated 8.9%
(FY20: 7.2%). International growth of 35% took international sales
to over 50% of the Group total for the first time, and continues to
represent a significant opportunity. Revenues from sales outside of
Europe accounted for 1.3% of total revenue in both FY21 and
FY20.
FY21 FY20
GBPm GBPm
------ ------
Other-brand product revenue 104.2 79.4
------ ------
Own-brand product revenue 45.4 35.4
------ ------
Carriage income 7.1 4.9
------ ------
Other 0.8 0.6
------ ------
Revenue 157.5 120.3
------ ------
We continue to make progress in our own-brand business with
revenues of GBP45.4m accounting for 29% of total revenue (FY20:
29%) from just 3,800 SKUs representing 7% of the total range (FY20:
3,400 SKUs).
Other brand revenue growth in FY20 was impacted by our cutting
out less profitable sales, and growth in FY21 accelerated to
31%.
Carriage income increased by 45% to GBP7.1m as more customers
were willing to pay for value-added upgraded delivery services.
Other revenue comprises warranty revenue, and commissions earned
on facilitating point-of-sale credit for retail customers. The
proportion of revenues coming from these sources was 0.5% of total
revenue in FY21 and FY20.
Gross profit
FY21 FY20 Change
Product sales (GBPm) 149.6 114.8
------ ------ --------
Product profit (GBPm) 50.9 35.1 +45%
------ ------ --------
Product margin 34.1% 30.5% +360bps
------ ------ --------
Carriage costs (GBPm) 11.7 8.8 +33%
------ ------ --------
Carriage costs as % of sales 7.4% 7.3% +10bps
------ ------ --------
Gross profit (GBPm) 46.4 31.2 +48%
------ ------ --------
Gross margin 29.4% 25.9% +350bps
------ ------ --------
In FY20 we focused on cutting out lower margin sales and
focusing our efforts and resources on higher margin products, and
this discipline and momentum continued into FY21. In Q1 FY21, the
COVID-19 lockdown brought very high demand in certain product
categories, and where stock levels were low and supply was limited,
prices were increased to manage demand.
We invested in stock throughout the year to support the strong
revenue growth, and as a precautionary measure against supply chain
disruption coming out of COVID-19 and Brexit.
Strong revenue growth and a material step-up in gross margin
combined to generate a GBP15.2m (48%) increase in gross profit in
the year. Gross margin improved 350bps as a result of a 360bps
improvement in product margin, driven by marked improvements in
both own and other-brand margins.
The Group benefits from increasing buying scale relative to its
UK competitors, and its ability to source other-branded products in
Swedish Krona and Euros, and receive product directly into our
growing network of European distribution centres which has been and
will continue to be an important Brexit mitigation measure.
The Group purchases its own-brand products in US Dollars and
product margin can be impacted by exchange rate fluctuations. The
Group has various mitigating tools and own-brand margins improved
in FY21.
Gear4music includes 'costs of delivery' within cost of sales
which is a different accounting treatment to some other e-commerce
retailers. Delivery costs were GBP11.7m in the period and
represented 7.4% of total revenue (FY20: 7.3%). Taking into account
carriage income as stated above, net delivery cost represented 2.9%
of total revenue (FY20: 3.2%).
Administrative expenses and Operating profit
Operating profit of GBP15.4m represents an GBP11.3m (279%)
improvement on FY20 (FY20: GBP4.1m).
FY21 FY20
GBPm GBPm
------- -------
UK Administrative expenses (27.1) (24.6)
------- -------
European Administrative expenses (3.8) (2.5)
------- -------
Total Administrative expenses (30.9) (27.1)
------- -------
Operating profit 15.4 4.1
------- -------
Total administrative expenses increased 14% on FY20 relative to
a revenue increase of 31%.
Combined marketing and labour costs of GBP21.5m accounted for
69% of total administrative expenses (FY20: 70%):
- Marketing expenditure reduced in FY21: Marketing costs of
GBP9.2m (FY20: GBP9.3m) equated to 5.9% of revenues (FY20: 7.7%) as
the business made further progress on improving return on
investment. Marketing investment, particularly in Q1, was
restricted to manage demand whilst we ensured our distribution
centres were COVID-19 secure, and as a result there was higher
efficiency in marketing expenditure in H1 (5.3% of revenue) than in
H2 (6.3%);
- Labour costs in FY21 increased to GBP12.3m representing a 27%
increase on FY20, reflecting an 11% increase in headcount, and
COVID-19 related inefficiencies particularly in our distribution
centres. Labour costs accounted for 7.8% of sales (FY20: 8.1%).
FY21 EBITDA of GBP19.8m is GBP12.0m (154%) higher than last year
reflecting a continuation of the commercial progress made in FY20
and a COVID-19 impact.
Other expenses and net profit
Net financial expenses of GBP0.8m (FY20: GBP1.0m) include
GBP0.4m of IFRS16 lease interest (FY20: GBP0.4m), GBP0.2m bank
interest (FY20: GBP0.4m), and a GBP0.2m net foreign exchange loss
(FY20: GBP0.1m loss).
The Group reports a profit before tax of GBP14.6m which is an
GBP11.5m improvement on FY20, and after tax translates into a basic
EPS of 60.3p (FY20: 12.4p) and diluted EPS of 59.7p (FY20: 12.2p),
the highest reported since IPO in 2015.
Cash-flow
FY21 FY20
GBPm GBPm
------- ------
Opening cash 7.8 5.3
------- ------
Profit for the year 12.6 2.6
------- ------
Movement in working capital (4.9) (0.9)
------- ------
Depreciation and amortisation 4.4 3.7
------- ------
Financial expense 0.8 1.0
------- ------
Tax and Other operating adjustments 2.0 1.0
------- ------
Net cash from operating activities: 14.9 7.4
------- ------
Net cash from investing activities: (4.5) (3.9)
------- ------
Net cash from financing activities: (12.0) (1.0)
------- ------
(Decrease)/increase in cash
in the year (1.6) 2.5
------- ------
Closing cash 6.2 7.8
------- ------
Cash decreased by GBP1.6m over the year as surplus cash
generation was used to pay down debt, putting the Group in a
GBP2.7m net cash position at the year-end (31 March 2020: net debt
of GBP5.5m).
The business actively invested in stock throughout the year to
support the strong sales growth, mitigate any COVID-19 supply chain
issues, and build stock in European distribution centres ahead of
the UK leaving the EU.
Net cash outflow from investing activities of GBP4.5m includes
GBP3.2m of capitalised software development costs (FY20: GBP2.8m)
and GBP1.2m of tangible fixed additions (FY20: GBP0.7m).
Depreciation and amortisation of GBP3.2m (FY20: GBP2.5m) is added
back in 'net cash from operating activities' with respect to these
asset categories.
Net cash outflow from financing activities of GBP12.0m (FY20:
GBP1.0m outflow) includes GBP9.9m repayment of borrowing (FY20:
GBP0.5m) and GBP1.4m payment of lease liabilities (FY20:
GBP1.2m).
Balance sheet
As a result of the performance in the year, the Group has a
strong year-end balance sheet, with net assets of GBP34.3m (FY20:
GBP21.6m), and net cash of GBP2.7m (FY20 net debt: GBP5.5m).
31 March 2021 31 March 2020
GBPm GBPm
-------------- --------------
Property, plant and equipment 11.2 11.2
-------------- --------------
IFRS16 Right-of-use asset 7.9 9.0
-------------- --------------
Software platform 8.4 7.1
-------------- --------------
Other intangible assets 2.0 2.0
-------------- --------------
Total non-current assets 29.5 29.3
-------------- --------------
Stock 28.4 22.0
-------------- --------------
Cash 6.2 7.8
-------------- --------------
Other current assets 3.6 2.5
-------------- --------------
Total current assets 38.2 32.3
-------------- --------------
Trade payables (11.4) (10.1)
-------------- --------------
Loans and Borrowings (0.6) (10.0)
-------------- --------------
Lease liabilities (1.1) (1.1)
-------------- --------------
Other current liabilities (7.5) (4.3)
-------------- --------------
Total current liabilities (20.6) (25.5)
-------------- --------------
Loans and Borrowings (2.9) (3.4)
-------------- --------------
Lease liabilities (8.3) (9.5)
-------------- --------------
Other non-current liabilities (1.6) (1.6)
-------------- --------------
Total non-current liabilities (12.8) (14.5)
-------------- --------------
Net assets 34.3 21.6
-------------- --------------
Capital expenditure in property, plant and equipment of GBP1.2m
partly related to making our properties as COVID-19 secure as they
can be, and supporting our colleagues in homeworking.
We capitalised GBP3.2m (FY20: GBP2.8m) of software development
costs relating to our bespoke e-commerce platform, including a
number of Brexit-related deployments and projects focusing back on
growth. Platform amortisation in the year was GBP1.9m (FY20:
GBP1.5m) taking net book value to GBP8.4m (31 March 2020:
GBP7.1m).
The Group had net cash of GBP2.7m at the year-end (31 March 2020
net debt: GBP5.5m) having used surplus cash to fund own-brand stock
increases rather than drawing import loans, to reduce the interest
cost. Year-end debt of GBP3.5m includes commercial loans of GBP3.4m
relating to and secured by our freehold head office (45% loan to
value).
Dividends
The Board is confident in the prospects for the business and
recognises the importance of retaining cash reserves to support
future growth, and as such the Board does not consider it
appropriate to declare a dividend at this time but will continue to
review this position on an annual basis.
On behalf of the Board
Chris Scott Chief Financial Officer 21 June 2021
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
Year ended Year ended
31 March 31 March
Note 2021 2020
GBP000 GBP000
Revenue 157,451 120,326
Cost of sales (111,097) (89,170)
Gross profit 46,354 31,156
Administrative expenses 2,3 (30,945) (27,089)
Operating profit 15,409 4,067
Financial expenses 5 (770) (989)
Profit before tax 14,639 3,078
Taxation 6 (1,998) (488)
Profit for the year 12,641 2,590
Other comprehensive income
Items that will not be reclassified
to profit or loss:
Revaluation of property, plant
and equipment 7 - 309
Deferred tax movements 8 (93)
Items that are or may be reclassified
subsequently to profit or
loss:
Foreign currency translation
differences - foreign operations (17) (37)
Total comprehensive income
for the year 12,632 2,769
Basic profit per share 4 60.3p 12.4p
Diluted profit per share 4 59.7p 12.2p
The accompanying notes form an integral part of the consolidated
financial report.
Consolidated Statement of Financial Position
Year ended Year ended
31 March 31 March
2021 2020
Note GBP000 GBP000
Non-current assets
Property Plant and Equipment 7 11,190 11,219
Right-of-use assets 8 7,871 8,962
Intangible assets 9 10,395 9,084
29,456 29,265
Current assets
Inventories 10 28,430 22,015
Trade and other receivables 11 3,647 2,501
Cash and cash equivalents 12 6,203 7,839
38,280 32,355
Total assets 67,736 61,620
Current liabilities
Interest-bearing loans
and borrowings 13 (575) (9,949)
Trade and other payables 14 (18,938) (14,442)
Lease liabilities 15 (1,099) (1,148)
(20,612) (25.539)
Non-current liabilities
Interest-bearing loans
and borrowings 13 (2,901) (3,439)
Other payables 14 (110) (107)
Lease liabilities 15 (8,315) (9,519)
Deferred tax liability (1,486) (1,407)
(12,812) (14,472)
Total liabilities (33,424) (40,011)
Net assets 34,312 21,609
Equity
Share capital 16 2,095 2,095
Share premium 16 13,165 13,152
Foreign currency translation
reserve 16 (51) (34)
Revaluation reserve 16 1,640 1,674
Retained earnings 16 17,463 4,722
Total equity 34,312 21,609
The notes 1 to 18 form part of the consolidated financial
report.
Company registered number: 0778670.
Consolidated Statement of Changes in Equity
Foreign
currency
Share Share translation Revaluation Retained Total
capital premium reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31 March 2019 2,095 13,152 3 1,424 2,033 18,707
Comprehensive income for
the year
Profit for the year - - - - 2,590 2,590
Other comprehensive income - - (37) - (34) (71)
Freehold property revaluation - - - 309 - 309
Deferred tax impact of
revaluation - - - (59) - (59)
Share based payments charge - - - - 133 133
Total comprehensive income
for the year - - (37) 250 2,689 2,902
Balance at 31 March 2020 2,095 13,152 (34) 1,674 4,722 21,609
Comprehensive income for
the year
Profit for the year - - - - 12,641 12,641
Other comprehensive income - - (17) - 10 (7)
Deferred tax adjustment
- timing difference - - - - (8) (8)
Share based payments charge - - - - 64 64
Depreciation transfer - - - (34) 34 -
Total comprehensive income
for the year - - (17) (34) 12,741 12,690
Transactions with owners
Issue of shares - 13 - - - 13
Total transactions with
owners - 13 - - - 13
Balance at 31 March 2021 2,095 13,165 (51) 1,640 17,463 34,312
The accompanying notes form an integral part of the consolidated
financial report.
Consolidated Statement of Cash Flows
Note Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Cash flows from operating activities
Profit for the year 12,641 2,590
Adjustments for:
Depreciation and amortisation 7,8,9 4,372 3,687
Financial expense 5 770 989
(Profit)/loss on sale of property,
plant and equipment (4) 11
Share based payment charge 64 133
Taxation 6 1,998 488
19,841 7,898
Increase in trade and other receivables 11 (1,181) (844)
Increase in inventories 10 (6,415) (3,354)
Increase in trade and other payables 14 2,687 3,273
14,932 6,973
Tax (paid)/received 6 (37) 501
Net cash from operating activities 14,895 7,474
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 14 50
Acquisition of property, plant
and equipment 7 (1,166) (740)
Capitalised development expenditure 9 (3,186) (2,820)
Acquisition of a business 9 (200) (400)
Net cash from investing activities (4,538) (3,910)
Cash flows from financing activities
Cash from share issue 13 -
Proceeds from new borrowings 13 29 1,565
Interest paid (692) (806)
Repayment of borrowings 13 (9,948) (546)
Payment of lease liabilities 15 (1,379) (1,205)
Net cash from financing activities (11,977) (992)
Net (decrease)/increase in cash
and cash equivalents (1,620) 2,572
Cash and cash equivalents at
beginning of year 7,839 5,304
Foreign exchange movement (16) (37)
Cash and cash equivalents at
end of year 12 6,203 7,839
The accompanying notes form an integral part of the consolidated
financial report.
Notes
(forming part of the financial statements)
General Information
Gear4music (Holdings) plc is a public limited company, is
incorporated and domiciled in the United Kingdom, and is listed on
the Alternative Investment Market ('AIM') of the London Stock
Exchange.
The group financial statements consolidate those of the Company
and its subsidiaries (collectively referred to as the "Group").
The principal activity of the Group is the retail of musical
instruments and equipment.
The registered office of Gear4music (Holdings) plc (company
number: 07786708), Gear4music Limited (company number: 03113256)
and Cagney Limited (dormant subsidiary; company number: 04493300)
is Holgate Park Drive, York, YO26 4GN.
The Group has two trading European subsidiaries: Gear4music
Sweden AB and Gear4music GmbH, and one dormant European subsidiary,
Gear4music Norway AS. All three are 100% subsidiaries of Gear4music
Limited.
On 20 April 2021 the Group incorporated an Irish subsidiary,
Gear4music Ireland Limited.
1 Accounting policies
1.1 Basis of preparation
The financial information set out in this announcement does not
constitute statutory accounts as defined by section 434 of the
Companies Act 2006.
It has been prepared in accordance with the recognition and
measurement principles of International accounting standards in
conformity with the Companies Act 2006, including IFRIC
interpretations issued by the International Accounting Standards
Board, and in accordance with the AIM rules and is not therefore in
full compliance with IFRS. The principal accounting policies of the
Group have remained unchanged from those set out in the Group's
2020 annual report. The financial statements have been prepared
under the historical cost convention with the exception of land and
buildings which are accounted for at fair value.
The results for the year ended 31 March 2021 have been extracted
from the full accounts of the Group for that year which have not
yet been delivered to the Registrar of Companies. Grant Thornton UK
LLP has reported on those accounts and their report is (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The financial information for the year ended 31 March 2020 is
derived from the statutory accounts for that year, which have been
delivered to the Registrar of Companies. Grant Thornton UK LLP
reported on those accounts and their report was (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
Selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the
changes in financial position and performance of the Group.
The announcement will be published on the Company's website. The
maintenance and integrity of the website is the responsibility of
the directors. The work carried out by the auditors does not
involve consideration of these matters. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Group's accounting policies are set out below and have been
applied consistently in the consolidated financial statements.
Accounting period
The financial statements presented cover the years ended 31
March 2021 and 31 March 2020 .
1.2 Adoption of new and revised standards
Various new or revised accounting standards have been issued
which are not yet effective.
The following new standards, and amendments to standards, have
been adopted by the group for the first time during the year ending
31 March 2021, and the impact is not material:
- Amendments to References to the Conceptual Framework in IFRS Standards
- Amendments to IFRS 3: Business Combinations
- Amendments to IAS 1 and IAS 8: Definition of Material
- Amendments to IFRS 9, IAS 39 and IFRS7: Interest Rate Benchmark Reform
- Amendment to IFRS 16: COVID-19-Related Rent Concessions
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform - Phase 2
1.3 Going concern
The Group's business activities and position in the market are
described in the Strategic Report.
In FY21 the Group invested significant time and effort
successfully managing the challenges of operating distribution
centres through the COVID-19 pandemic, and as a result and as
reported in these financial statements, the Group reports a
significant increase in profits and profitability, a stronger
balance sheet, and net cash at the year-end. The evolving COVID-19
situation is kept under regular review.
The Directors have considered the Group's growth prospects in
the period to 31 March 2023 based on its customer proposition and
online offering in the UK and Europe, and concluded that potential
growth rates remain strong as the reported channel shift to online
accelerated during COVID-19. The Group has conducted various
stress-tests, none of which resulted in a change to the assessment
of the Group as a going concern.
There is a diverse supply chain with no key dependencies.
The Group's policy is to ensure that it has sufficient
facilities to cover its future funding requirements. At 31 March
2021 the Group had net cash of GBP2.7m (31 March 2020: net debt of
GBP5.5m), with GBP6.2m cash (31 March 2020: GBP7.8m cash). On 21
April 2021 the Group secured a GBP35m three-year committed
Revolving Credit Facility with its bankers, HSBC. This significant
headroom has been factored into the Directors going concern
assessment.
Having duly considered all of these factors and having reviewed
the forecasts for the coming year, the Directors have a reasonable
expectation that the Group has adequate resources to continue
trading for the foreseeable future, and as such continue to adopt
the going concern basis of accounting in preparing the financial
statements.
2 Segmental reporting
The Group's revenue and profit was derived from its principal
activity which is the sale of musical instruments and
equipment.
In accordance with IFRS 8 'Operating segments', the Group has
made the following considerations to arrive at the disclosure made
in these financial statements. IFRS 8 requires consideration of the
'Chief Operating Decision Maker ('CODM') within the Group.
Operating segments have been identified based on the internal
reporting information and management structures with the Group.
Based on this information it has been noted that the CODM reviews
the business as one segment and receives internal information on
this basis. Therefore, it has been concluded that there is only one
reportable segment.
Revenue by Geography
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
UK 78,690 61,821
Europe and Rest of the World 78,761 58,505
157,451 120,326
Administrative expenses by Geography
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
UK 27,109 24,562
Europe 3,836 2,527
30,945 27,089
The majority of Group assets are held in the UK except for local
right of use assets and property, plant and equipment, and cash in
Sweden (31 March 2021: GBP4.3m; 31 March 2020: GBP4.5m) and Germany
(31 March 2021: GBP2.5m: 31 March 2020: GBP2.7m).
Revenue by Product category
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Other-brand products 104,199 79,416
Own-brand products 45,368 35,432
Carriage income 7,135 4,930
Warranty income 545 337
Other 204 211
157,451 120,326
3 Staff numbers and costs
The average number of persons employed by the Group (including
directors) during the year, analysed by category, was as
follows:
Year ended Year ended
31 March 31 March
2021 2020
Nos. Nos.
Administration 196 179
Selling and Distribution 323 287
519 466
The aggregate payroll costs of these persons were as
follows:
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Wages and salaries 10,105 7,736
Social security costs 1,451 1,167
Contributions to defined contribution
plans 691 659
12,247 9,562
Directors' remuneration
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Directors' remuneration 641 507
Company contributions to money
purchase pension schemes 19 16
660 523
The three Executive Directors are paid through Gear4music
Limited, and the three Non-Executive Directors are paid through
Gear4music (Holdings) plc. The remuneration of all six Directors is
included above.
The aggregate remuneration of the highest paid director was
GBP228,000 during the year (2020: GBP174,000), including company
pension contributions of GBP7,000 that were made to a money
purchase scheme on their behalf.
There are four directors (2020: 4) for whom retirement benefits
are accruing under a money purchase pension scheme.
4 Earnings per share
Diluted profit per share is calculated by dividing the net
profit for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
period plus the weighted average number of ordinary shares that
would be issued on the conversion of CSOP and LTIP dilutive
potential ordinary shares into ordinary shares.
Year ended Year ended
31 March 31 March
2021 2020
Profit attributable to equity
shareholders of the parent (GBP'000) 12,641 2,590
Basic weighted average number
of shares 20,948,595 20,945,328
Dilutive potential ordinary shares 218,033 228,119
Diluted weighted average number
of shares 21,166,628 21,173,447
Basic profit per share 60.3p 12.4p
Diluted profit per share 59.7p 12.2p
5 Finance income and expenses
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Fair value movement - 5
Total finance income - 5
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Bank interest 196 389
IFRS16 lease interest 403 442
Net foreign exchange loss 161 144
Unwinding of discount on
deferred consideration 10 19
Total finance expense 770 994
Total net finance expense 770 989
6 Taxation
Recognised in the income statement
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Current tax expense
UK Corporation tax 1,201 (77)
Overseas Corporation tax 94 45
Adjustments for prior periods 625 91
Current tax expense 1,919 59
Deferred tax expense
Origination and reversal
of temporary differences 989 266
Deferred tax rate change
impact - 82
Adjustments for prior periods (903) 81
Deferred tax expense 86 429
Total tax expense 2,005 488
The corporation tax rate applicable to the company was 19% for
the year ended 31 March 2021, and 19% for the period ended 31 March
2020. The Budget of 11 March 2020 reversed the expected reduction
in corporation tax rate to 17% from 1 April 2020. The corporation
tax rate has therefore remained at 19% and was substantively
enacted on 17 March 2020. The deferred tax assets and liabilities
at 31 March 2021 have been calculated based on that rate.
At the Budget announcement on 3 March 2021 the UK government has
stated its intention to raise the corporation tax rate to 25% from
1 April 2023 although this has yet to be substantively enacted in
legislation.
Adjustments for prior period include an GBP138,000 deferred tax
credit in respect of carried forward tax losses resulting from the
recognition of a previously unrecognised deferred tax asset in
respect of losses where utilisation was previously deemed too
uncertain in Gear4music (Holdings) plc and recognition of a
GBP765,000 deferred tax asset on c.GBP3.75m of losses brought
forward in Gear4music Limited arising from the company's FY19
R&D claim. These losses were previously surrendered for a tax
credit at 14.5% in the company's original tax filing, which has led
to a corporation tax charge in of GBP621,000.
Reconciliation of effective tax rate
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Profit for the year 12,641 2,590
Total tax charge 1,998 488
Profit excluding taxation 14,639 3,078
Current tax at 19% (2020: 19.0%)
Tax using the UK corporation tax
rate for the relevant period: 2,781 584
Non-deductible expenses (27) 22
Deferred tax rate change impact - 82
Adjustments relating to prior year
- deferred tax (903) 81
Adjustments relating to prior year
- current tax 624 91
R&D claim additional deduction (470) (420)
Impact of overseas tax rate (1) 2
Deferred tax assets not recognised 1 46
Total tax charge 2,005 488
7 Tangible fixed assets
Property, plant and equipment
Plant and Fixtures Motor Computer Land and Total
equipment and fittings Vehicles equipment Buildings
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost or Valuation
At 1 April 2019 1,259 4,384 62 778 7,350 13,833
Additions 435 558 - 122 - 1,115
Disposals (62) - - - - (62)
Revaluation - - - - 150 150
Balance at 31 March 2020 1,632 4,942 62 900 7,500 15,036
Additions 215 757 - 194 - 1,166
Disposals - - (32) - - (32)
Balance at 31 March 2021 1,847 5,699 30 1,094 7,500 16,170
Depreciation and impairment
At 1 April 2019 656 1,744 28 480 159 3,067
Depreciation charge for
the year 252 520 8 129 - 909
Disposals - - - - - -
Revaluation - - - - (159) (159)
Balance at 31 March 2020 908 2,264 36 609 - 3,817
Depreciation charge for
the year 314 556 5 160 150 1,185
Disposals - - (22) - - (22)
Balance at 31 March 2021 1,222 2,820 19 769 150 4,980
Net book value as at 31
March 2021 625 2,879 11 325 7,350 11,190
Net book value as at 31
March 2020 724 2,678 26 291 7,500 11,219
Net book value as at 31
March 2019 603 2,640 34 298 7,191 10,766
Freehold property valuation
At 31 March 2020 the freehold office premises at Holgate Park
were revalued at market value using information provided by an
independent chartered surveyor. The valuation was carried out in
accordance with the provisions of RICS Appraisal and Valuation
Standards ('The Red Book'). The appraisal was carried out using
level 3 inputs observable inputs including prices for recent market
transactions for similar properties and incorporates adjustments
for factors specific to the property in question, including plot
size, location, encumbrances and current use. Management have
reviewed the fair value as at 31 March 2021 and concluded that this
would not be materially different.
If the property had not been revalued the net book value would
have been GBP5,211,000.
Right of use assets
Included in motor vehicles at 31 March 2021 is a right of use
asset with a net book value of GBP45,000 that has not been
reclassified on immateriality grounds.
Security
The Group's bank borrowings are secured by fixed and floating
charges over the Group's assets.
8 Right of use assets
Leasehold properties
The Group has four leased properties: Distribution Centre and
Showrooms in York, Sweden and Germany, and a software development
office in Manchester. The associated right-of-use assets are as
follows:
Short leasehold
properties
GBP000
Cost
Transition on adoption of IFRS16
on 1 April 2019 10,177
Additions -
Balance at 31 March 2020 10,177
Additions 128
Balance at 31 March 2021 10,305
Depreciation
At 1 April 2019 -
Depreciation charge for the year 1,215
Balance at 31 March 2020 1,215
Depreciation charge for the year 1,219
Balance at 31 March 2021 2,434
Net book value as at 31 March
2021 7,871
Net book value as at 31 March
2020 8,962
Net book value as at 31 March
2019 10,177
9 Intangible assets
Software
Goodwill platform Brand Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 April 2019 1,848 9,241 564 11,653
Additions - 2,820 - 2,820
Balance at 31 March 2020 1,848 12,061 564 14,473
Additions - 3,186 93 3,279
Balance at 31 March 2021 1,848 15,247 657 17,752
Amortisation
At 1 April 2019 - 3,427 399 3,826
Amortisation for the year - 1,507 56 1,563
Balance at 31 March 2020 - 4,934 455 5,389
Amortisation for the period - 1,912 56 1,968
Balance at 31 March 2021 - 6,846 511 7,357
Net book value as at 31
March 2021 1,848 8,401 146 10,395
Net book value as at 31
March 2020 1,848 7,127 109 9,084
Net book value as at 31
March 2019 1,848 5,814 165 7,827
The amortisation charge is recognised in Administrative expenses
profit and loss account.
Goodwill
On 19 March 2012 goodwill arose on the acquisition of the entire
share capital of Gear4music Limited (formerly known as Red
Submarine Limited).
On 1 January 2017 goodwill arose on the acquisition of a
software development business from Venditan Limited, which
effectively brought development of the group's proprietary software
platform in-house. This transaction is detailed in the FY17 Annual
Report.
Goodwill balances are denominated in Sterling:
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Gear4music Limited 417 417
Software development business 1,431 1,431
1,848 1,848
Impairment testing
In accordance with IAS 36 Impairment of Assets, the Group
reviews the carrying value of its intangible assets. A detailed
review was undertaken at 31 March 2021 to assess whether the
carrying value of assets was supported by the net present value in
use calculations based on cash-flow projections from formally
approved budgets and longer-term forecasts.
Intangible assets comprise Goodwill, the Gear4music brand name,
and the proprietary software platform.
A Cash Generating Unit ("CGU") is defined as the smallest group
of assets that generate cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups
thereof. The Group is deemed to have a single CGU to which the
goodwill, the software platform and the brand are allocated. The
carrying value of these intangibles, the proportion of the freehold
property occupied by Gear4music (5/6) and all other PPE was
GBP20.4m. An impairment review has been performed on this CGU. The
recoverable amount of this CGU has been determined based on
value-in-use calculations. In assessing value in use, a three-year
forecast to 31 March 2024 was used to provide cash-flow projections
that have been discounted at a pre-tax discount rate of 10% (2020:
10%). The cash flow projections are subject to key assumptions in
respect of revenue growth, gross margin performance, overhead
expenditure, and capital expenditure. Management has reviewed and
approved the assumptions inherent in the model:
- FY22-24 Revenue forecasts based on growth by geographical
market, based on market size and estimate of opportunity, trends,
and Management's experience and expectation.
- FY25-26 and into perpetuity revenue growth of 2%
- Gross margins are forecast to improve on 2020, albeit not
reach the levels attained in 2021; and
- Wage increases are a function of recruitment and review of
current staff, with a range of % increases.
No impairment loss was identified in the current year (2020:
GBPnil). The valuation indicates significant headroom and a number
of reasonable sensitivities were put through the model, including
changes to the discount rate and the results did not result in an
impairment of the related goodwill or other intangible assets.
10 Inventories
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Finished goods 28,430 22,015
The cost of inventories recognised as an expense and included in
cost of sales in the period amounted to GBP101.5m (2020:
GBP81.6m).
Management has included a provision of GBP143,000 (31 March
2020: GBP80,000), representing a 100% provision against returns
stock subsequently found to be faulty, that is retained to be used
for spare parts on the basis there is no direct NRV value, and a
provision based on the expected product loss on dealing with
returns stock.
11 Trade and other receivables
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Trade receivables 1,579 1,651
Prepayments 2,068 850
3,647 2,501
Credit risk and impairment
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The carrying amount of trade
receivables represents the maximum credit exposure. The Group does
not take collateral in respect of trade receivables.
Trade receivables comprise balances dues from schools and
colleges, and funds lodged with payment providers.
Customer receivables
The Group faces low credit risk as customers typically pay for
their orders in full on shipment of the product, with the only
exception being a small number of education accounts with schools
and colleges that have 30-day terms (1.3% of 2021 revenues; 1.9% of
2020 revenues).
Funds lodged with payment providers
Funds lodged with Amazon, Digital River, Klarna and V12 Retail
Finance totalled GBP331,000 on 31 March 2021 (31 March 2020:
GBP215,000) and are included in Trade debtors. Credit risk in
relation to cash held with financial institutions is considered
very low risk, given the credit rating of these organisations.
12 Cash and cash equivalents
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Cash and cash equivalents per
balance sheet and cash flow
statements 6,203 7,839
13 Interest-bearing loans and borrowings
This note contains information about the Group's
interest-bearing loans and borrowing which are carried at amortised
cost.
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Non-current liabilities
Bank loans 2,901 3,439
2,901 3,439
Current liabilities
Bank loans 575 9,949
575 9,949
Total liabilities
Bank loans 3,476 13,388
3,476 13,388
As at 31 March 2021
Bank loans comprised an Import Loan facility, and term loans all
provided by the Group's bankers, HSBC, secured against the by fixed
and floating charges over the Group's assets.
The interest rate on 140-day import loans drawn under the Import
Loan agreement was 2.45% per annum over HSBC's Sterling Base Rate,
and on an overdraft if and when drawn, was 3.25% over base.
Interest on import loans was paid at the maturity of the relevant
loan. Interest on an overdraft would be paid monthly in
arrears.
There were two term loans drawn around the time of the freehold
property acquisition in 2017:
- The first loan was for GBP3.73m and is a five-year loan with
capital repayments scheduled over 20-years, and interest is 2.04%
over LIBOR, and capital outstanding of GBP3.03m at 31 March 2021;
and
- The second loan was for GBP1.80m and is a five-year loan with
interest of 2.85% over LIBOR, and capital outstanding of GBP0.45m
at 31 March 2021.
All borrowings are denominated in Sterling.
From 21 April 2021
On 21 April 2021 the Group entered into a Revolving Credit
facility of GBP35m with HSBC. This replaces the bank loans and
import loan facility outlined above. The facility expires in April
2024 and is secured by a debenture over the Group's assets.
Changes in liabilities from financing activities
Year ended 31 March 2021 Year ended 31 March 2020
GBP000 GBP000
Opening balance 13,388 12,374
Changes from financing cash flows
Proceeds from loans and borrowings 29 1,565
Repayment of borrowings (9,948) (546)
Total changes from financing cash flows (9,919) 1,019
Other changes
Interest expense (note 6) 196 380
Interest paid (289) (355)
Movement in interest accrual (included in accruals and
deferred income - note 17) 93 (25)
Fair value movement on loans 7 (5)
Total other changes 7 (5)
Closing balance 3,476 13,388
Other bank facilities
Gear4music has a number of guarantees in relation to VAT, and
issues letter of credits to its suppliers. At 31 March 2021 the
Group had letters of credit of GBP315,000 and guarantees of
GBP415,000 in place .
14 Trade and other payables
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Current
Trade payables 11,390 10,090
Accruals and deferred
income 3,033 1,686
Deferred consideration 24 197
Government grants 7 8
Other taxation and social
security 4,484 2,461
18,938 14,442
Non-current
Accruals and deferred
income 38 99
Deferred consideration 69 -
Government grants 3 8
110 107
Accruals at 31 March 2020 include GBP38,000 (2020: GBP97,000)
relating to the estimated cash bonuses accrued relating to the CSOP
schemes (see note 21).
Government grants are being spread over the useful economic life
of the associated asset, and relate to Regional Growth Fund and
Leeds City Enterprise Partnership grants towards the acquisition of
various capital items. Grant conditions exist and are linked to job
creation, and these criteria have been satisfied.
The Directors consider the carrying amount of other 'trade and
other payables' to approximate their fair value. The interest
expense of GBP10,000 (2020: GBP19,000) in relation to the unwinding
of the discount is disclosed in note 6.
Deferred consideration
Deferred consideration as at 31 March 2020 of GBP197,000 related
to the acquisition of a software business in January 2017 for 15
quarterly instalments of GBP100,000. The consideration was settled
in full in 2021.
On 10 March 2021 the Group acquired the Eden brand and
associated assets from Marshall Amplification plc for GBP140,000 of
which GBP100,000 is deferred and payable in four equal instalments
of GBP25,000 on the first, second, third and fourth anniversary of
the completion date. These amounts are valued in the accounts at
fair value and subsequently amortised.
15 Lease liabilities
The Group has leases for plant and machinery and four
properties. Each lease is reflected on the statement of financial
position as a right-of-use asset and a lease liability. The Group
classifies its right-of-use assets in a consistent manner to its
property, plant and equipment.
The table below describes the nature of the Group's leasing
activities by type of right-of-use asset:
Right-of-use asset No of right-of-use Range of Average No of leases No of leases No of leases
assets leased remaining remaining with extension with options with termination
term lease term options to purchase options
Property 4 1-8yrs 5.5yrs - - 1
Plant and equipment 10 0.5-2yrs 1yrs - 10 -
Future minimum lease payments due at 31 March 2021 were as
follows:
Within 1 year 1-5 years More than 5 years
GBP000 GBP000 GBP000
Lease payments 1,549 6,065 2,902
Finance charge (359) (895) (143)
Net present value 1,190 5,170 2,759
Lease liabilities are presented in the statement of financial
position as follows:
31 March 2021 31 March 2020
GBP000 GBP000
Current 1,099 1,148
Non-current 8,315 9,519
Total 9,414 10,667
Changes in lease liabilities:
Year ended 31 March 2021 Year ended 31 March 2020
GBP000 GBP000
Opening balance 10,667 453
Adoption of IFRS16 - 10,983
Cash flow lease payments (1,379) (1,205)
Other items 126 436
Total changes (1,253) (769)
Closing balance 9,414 10,667
16 Share capital and reserves
Year ended Year ended
31 March 31 March
2021 2020
Share capital Number Number
Authorised, called
up and fully paid:
Ordinary shares of
10p each 20,950,176 20,945,328
The Company has one class of ordinary share and each share
carries one vote and ranks equally with the other ordinary shares
in all respects including as to dividends and other
distributions.
On 29 July 2020, the Company issued and allotted 4,848 new
Ordinary shares of 10p each on exercise of options under the
Company's 2017 CSOP Scheme (see note 21). This took the number of
Ordinary shares in issue from 20,945,328 to 20,950,176,
representing dilution of 0.02%.
Share premium
Year ended Year ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Opening 13,152 13,152
Issue of shares 13 -
Closing 13,165 13,152
Proceeds received in addition to the nominal value of the shares
issued have been included in share premium, less registration and
other regulatory fees and net of related tax benefits.
Foreign currency translation reserve
Year ended Year ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Opening (34) 3
Translation loss (17) (37)
Closing (51) (34)
The foreign currency translation reserve comprises exchange
differences relating to the translation of the net assets of the
Group's foreign subsidiaries from their functional currency into
the parent's functional currency.
Revaluation reserve
Year ended Year ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Opening 1,674 1,424
Freehold property revaluation - 309
Deferred tax on revaluation - (59)
Depreciation transfer (34) -
Closing 1,640 1,674
The revaluation reserve represents the unrealised gain generated
on revaluation of the freehold office property on 28 February 2018
and 31 March 2020. It represents the excess of the fair value over
historic net book value.
Retained earnings
Year ended Year ended
31 March 31 March
2021 2020
GBP'000 GBP'000
Opening 4,722 2,033
Share based payment
charge 64 133
Deferred tax 2 (34)
Depreciation transfer 34 -
Profit for the year 12,641 2,590
Closing 17,463 4,722
Retained earnings represents the cumulative net profits
recognised in the consolidated income statement.
17 Related parties
Transactions with key management personnel
The compensation of key management personnel is as follows:
Year ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Key management emoluments including
social security costs 597 474
Company contributions to money
purchase pension plans 18 15
615 489
Key management personnel comprise the Chairman, CEO, CFO and
CCO. All transactions with key management personnel have been made
on an arms-length basis.
Four directors are accruing retirement benefits under a money
purchase scheme (2020: 4).
Share based payments
CSOP and Director Cash Plan - lapsed in year ended 31 March
2021
In July 2020 CSOP awards of 2,288 shares to Gareth Bevan, 2,288
shares to Chris Scott, and an equivalent discretionary cash bonus
plan for Andrew Wass lapsed as the vesting conditions were not
met.
LTIP - amended in financial year ended 31 March 2021
In October 2020 the scheme was amended to re-base the share
price hurdles to ensure that the LTIP continued to provide
appropriate incentivisation. The subscription cost was covered by
way of bonus in FY21 and Andrew Wass, Chris Scott, and Gareth Bevan
received bonuses of GBP2,334, GBP2,334 and GBP2,490
respectively.
18 Post balance sheet events
New Banking facilities
On 21 April 2021 the Group entered into a Revolving Credit
facility of GBP35m with HSBC. This replaces the bank loans and
import loan facility outlined above. The facility expires in April
2024 and is secured by a debenture over the Group's assets.
Brand acquisition
On 21 June 2021 the Group completed the acquisition of the
'Premier' drum and percussion brand, business and certain assets
from Premier Music International Limited and High House 123 Limited
liability partnership, for GBP1.685m.
Fair values of the assets and liabilities acquired, intangible
assets recognised and the associated goodwill arising from the
acquisition are still under review as the accounting for the
business combination is ongoing at the point of signing these
financial statements. The information required to be disclosed
under IFRS 3 will be included in the 2022 Financial statements.
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END
FR SEIEEFEFSEEM
(END) Dow Jones Newswires
June 22, 2021 02:00 ET (06:00 GMT)
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