Gear4Music Holdings: Market Share Gains And Margin Boost
Edison | Jan 08, 2017 05:09AM ET
Gear4music Holdings PLC's (LON:G4M) Christmas trading statement shows it continuing to take share in its niche markets to generate revenue growth far above the level of general consumer demand. We expect the company to over-achieve our margin expectation, and upgrade our FY17e earnings per share forecast by 20%, although we expect margins to normalise in FY18. While the share price has risen by a factor of four since we initiated in May 2016, it still stands at a discount to larger UK pure-play e-tail peers.
Strong pre-Christmas trading
G4M has reported strong trading in the pre-Christmas period, with September to December revenue growing by a robust 55% year-on-year. This was against a much stronger H2 base than in H1, where growth had been 73%. We forecast H217 revenue at £34.4m, which is 97% of the preceding full year. Both sales and margins were boosted by a significant investment in stock at pre-referendum rates, and margins benefited from an increasing mix of own-brand products, while overheads were controlled below expected levels. As a result, we upgrade our FY17 EPS forecast by 20%.
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