15th May 2018 11:11
LONDON (Alliance News) - Gear4Music Holdings PLC said Tuesday its full-year profit dropped amid rising costs, as it ramped up investment and said it expects to deliver "strong" revenue and profit growth in the new year.
For the financial year that ended in February, pretax profit dropped to GBP1.5 million from GBP2.6 million the year prior. This was despite revenue rising 43% to GBP80.1 million from GBP56.1 million the year before.
Profit performance was hurt by a sharp rise in the cost of sales - holding back gross profit - and administrative expenses. Cost of sales rose 46% to GBP59.8 million from GBP41.0 million the year before, administrative expenses by 47% to GBP18.4 million from GBP12.5 million.
"This has been a transformational year of investment for Gear4music," Gear4music Chief Executive Officer Andrew Wass said. "During the year we raised an additional GBP4.2 million of growth capital, our European distribution centres became fully operational, and we moved into our new head office. We accelerated investment in our employees, systems, marketing and customer proposition, to firmly establish ourselves as one of Europe's leading online retailers of musical instruments and music equipment."
"In my report last year," Wass added, "I explained that financial 2018 would be a period of targeted investment, and that would have short-term profitability implications. Financial 2019 will be focused on achieving returns resulting from these investments, with the objective of delivering strong and sustainable revenue and profitability growth."
In light of the level of investment, Gear4music decided not to pay a dividend in financial 2018. It will, however, review its dividend policy in financial 2019.
"Whilst still early in the financial year," Wass continued, "I am pleased to say that trading to date is in line with expectations and we are confident of achieving our objectives and hitting expectations for financial 2019."
Shares in Gear4music were 1.5% lower at 715.32 pence on Tuesday.
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