F Y18 Re sults & I nve sto r upda te Ma y 2017 Ma y 2018 02 - PowerPoint PPT Presentation

F Y18 Re sults & I nve sto r upda te Ma y 2017 Ma y 2018

02 Ove rvie w  Robust revenue growth and significant increases across all operational metrics  Revenue growth of 43%, from £56m in FY17 to £80m in FY18  International growth of 69%  Significant, planned investment during FY18 to position the business for further growth  Investment in European hubs and customer proposition, to gain market share  Profitability reflected investment during FY18  Confident outlook for the period ahead  FY19 YTD trading in line with expectations  Confident of delivering revenue and profit growth in FY19

03 Gro wth Stra te g y 1) E - COMME RCE E XCE L L E NCE 2) BE SPOKE PL AT F ORM DE VE L OPME NT   Accelerate innovation Market leading websites   Intelligent digital marketing Grow in‐house development team   Increase efficiency, traffic & conversion Evolving customer experience   Reduce operational costs Build customer trust 3) INT E RNAT IONAL E XPANSION 4) SUPPL Y CHAIN E VOL UT ION   Continuous product range extension Country specific websites  Advance own‐brand proposition  Localised customer experience  Factory direct where possible  Local procurement options   Evolve logistics capability Reduce delivery timescales & costs

04 F Y18 Hig hlig hts We b site s Pro fita b ility Sa le s TOTAL REVENUE GROWTH EBITDA WEBSITE VISITORS FY18 16.9m FY18 £3.5m £80.1m FY18 12.6m FY17 FY17 £56.1m FY17 £3.6m 10.1m FY16 FY16 £35.5m FY16 £1.7m* £80.1m 16.9m £3.5m +43% +34% ‐4% INTERNATIONAL GROWTH UNDERLYING OPERATING PROFIT WEBSITE CONVERSION FY18 FY18 FY18 3.3% £35.8m £2.0m FY17 FY17 2.7% FY17 £2.6m £21.3m FY16 FY16 £9.5m FY16 £0.9m* 2.3% 3.3% £35.8m £2.0m +50 BPS +69% ‐24% *Adjusted taking into account IPO costs of £606k in FY16

Section 2 Bac kgr ound Informa tion Se c tion 4

06 Dire c to rs Andr e w Wa ss Ga r e th Be va n Chris Sc ott CE O CF O CCO    Launched Gear4music.com in 2003 Joined Gear4music in October 2012 Joined Gear4music in July 2012    Set up a recording studio business in 1992 after Chartered Accountant & Executive MBA graduate Previously at DV247, the largest music equipment studying popular music and sound recording at  retailer at that time, where he was responsible for 11 years with KPMG: eight in the advisory practice Salford  purchasing, sales & marketing Previous industry experience: Barclays Bank & CFO   Began selling IT systems for the audio recording 16 years’ experience in music equipment retail of Officers Club market in 1998   Responsible for Purchasing, Pricing & Supplier Responsible for Finance, HR & compliance;  Responsible for Strategy, Operations & Growth, relationship management Company Secretary with a focus on systems development & customer experience Ke n F or d De a n Mur r a y Cha irma n Non- E xe c utive Dir e c tor   Joined Gear4music in March 2012 Joined Gear4music’s board in June 2015  Chairman of Neville Johnson Group & Construction  Previously Chief Executive of Teather & Materials Online Greenwood & Former Chair of the QCA  Former CFO & COO of Myriad Childrenswear  Currently a director of System1 Group PLC, and of Group Scientific Digital Imaging plc   Former Director of French Connection Previously a director of AAM and Morgan Grenfell  Chartered Accountant

07 Stro ng Co mpe titive Adva nta g e FRONT END PRODUCTS BACK END MARKET LEADING STRONG OWN‐BRAND BESPOKE, FLEXIBLE OFFERING LOCALISED WEBSITES PLATFORM High quality range of 2,600 SKUs at Robust integrated systems developed in Responsive design, multilingual, very competitive prices house over 12 years multicurrency, range of delivery options STRONG ONLINE IN‐HOUSE LOGISTICS LARGE BRANDED PRODUCT RANGE PRESENCE CAPABILITY Over 42,100 products from 780 Awareness through effective SEO & 235,000 sq ft total distribution space manufacturers, including major digital marketing in UK, Sweden & Germany brands

08 Ope ra tio ns L o c a tio ns SWEDEN  Located near Stockholm  Distribution hub & Showroom UK  Fulfilment throughout Scandinavia  Head Office, York  UK Distribution Centre, York  Development Office, Manchester GERMANY  Located near Düsseldorf  Distribution hub & Showroom  Fulfilment throughout Central Europe

09 Pla tfo rm F e a ture s Cloud Multi‐hub Anti DDoS based warehouse technology platform management Delivery Global CITES & Data Multi‐ Advanced to 190 stock ROHS “encryption currency Reporting countries visibility compliance at‐rest” Global Capacity WMS Security Advanced Advanced Localised Multi‐ Returns PCI DSS inventory fraud purchasing lingual management compliant management prevention Zonal Dispatch GDPR pricing management compliant END‐END BESPOKE INTEGRATED UNIQUE Single European Responsive customer courier design view integrations Consumer Automated Delivery 1000’s of Mobile Fully finance customer date delivery optimised integrated integrated messaging calculation options Website CRM Fulfilment 160 Advanced Email Delivery Optimised payment content POS marketing cost dispatch methods Management platform calculation locations Data Intelligent Personalised driven service content selection search

10 K e y Mile sto ne s £90,000,000 £80,000,000 £4.2m equity Original Gear4music Moved into new fundraising website launched 135,000 sq ft premises, £70,000,000 and website update First European hub launched £60,000,000 Multilingual European Moved into new websites launched premises with distribution facilities Sales £28m IPO £50,000,000 £3.4m investment £40,000,000 by Key Capital Bespoke operating Partners platform launched with website design upgrades £30,000,000 £20,000,000 £10,000,000 £0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

11 E uro pe a n Ma rke t Oppo rtunity £749m UK mar ke t Ge a r4music in E urope  Highly fragmented market  European revenues hit £35m in FY18   Market growing at c.2% FY18 European sales growth of 69%  Gear4music market share c.5.9%  15 languages & 8 currencies   Ongoing shift: high street to online Distribution hubs in Sweden and Germany   Estimated UK online market c.£178m Additional hubs under consideration COMPETITORS TOP EUROPEAN MARKETS Estimated Est. Euro Competitor Country Change Country Estimated Market Size (£m) Revenue (£m) Market Share Germany 1,194 Thomann Germany 700 +19% 16.4% France 863 Musicstore Germany 112 +5% 2.6% UK 749 Italy 578 MRH/4 Sound/Luthman Sweden 92 +7% 2.2% Netherlands 202 Bax Shop Netherlands 96 +25% 1.8% Austria 181 Gear4music UK 80 +43% 1.3% Spain 166 Switzerland 142 Woodbrass France 48 +26% 0.9% Sweden 107 Andertons UK 36 +20% 0.6% Norway 83 Total Size 4,265 S&T Audio (PMT) UK 34 +10% 0.7% Competitor revenue source: Music Trades Market size data source: Key Capital Partners DD 2012, Market growth Music Trades

12 I nte rna tio na l Gro wth Global Market sizes*: Expansion strategy:  $16bn Worldwide ① Enable delivery destination  $7.8bn USA ② Launch market specific website  $3.8bn Asia ‐ Translate if required  $5.8bn Europe ‐ Localise currency & payment options  $1bn UK ③ Establish local distribution if viable  $400m Scandinavia ‐ Localised next day delivery options Current activities A bespoke distribution platform  Delivery available to over 190 countries  Any distribution hub can deliver to any country  Scandinavia delivering fastest growth following launch  System decides which delivery options to present of Swedish distribution hub in November ‘16  ‘Split Basket’: Multiple line orders can be dispatched from  USA delivering highest revenues outside Europe multiple countries if necessary  Local buying operational in Sweden and Germany  Local courier integrations provide enhanced services *Source: Worldwide = Music Trades, Europe = Gear4music research (2012)

13 UK Distrib utio n & Sho wro o m  Relocated in November 2013  135,000 square feet on the outskirts of York  Facilities include storage, dispatch, returns, showroom, video production & photography  Capacity to handle annual revenues of £65m  7‐day operation

Section 3 Busine ss FY18 H1 • Section 3 Re vie w Business Review